Major Wall Street indexed dipped overnight amid the renewed risk aversion as concerns mounted that the China virus may have a deeper negative effect on business activity and corporate earnings than previously estimated. Asian stocks turned lower as well, except for Chinese equities that bucked the trend as investors were digesting the latest stimulus measures from the domestic authorities. In Europe, stocks are also on the defensive after South Korea reported a rise of virus cases, with the UK’s FTSE 100 sheds nearly 0.5% since the start of the session as the pound shifted into a recovery mode.
GBPUSD received support around 1.2850 yesterday and turned positive on the daily charts on Friday, targeting the 100-DMA again. Still, the correction after four days of losses is looking unconvincing, with downside risks persist as long as the pair remains below 1.30.
Meanwhile, EURUSD regained the 1.08 level during the recent trading and turned green following the German PMI data pointed to a rise in manufacturing activity to a 13-month high of 47.8 versus 44.8 expected and 45.3 recorded in January. Meanwhile, the services PMI declined to 53.3, below 53.8 estimates. Eurozone February flash manufacturing PMI arrived at 49.1 versus 47.4 expected. In general, the data was decent enough to support the struggling common currency. Anyway, the pair remains deeply in a downtrend and it’s too early to call a bottom at this stage.
Risk aversion prevented further recovery in the oil market, with Brent extending the retreat from the $60 handle on Friday. Coronavirus concerns continue to drive the commodity markets that remain highly sensitive to any changes in risk sentiment. On the other hand, crude oil prices are supported by expectations of additional production cuts by OPEC+ countries in March and still low output levels in Libya. In the near term, Brent needs to hold above the $58 intermediate support in order to avoid deeper losses towards $56. Once the panic in the stock markets abates, the futures may resume the ascent and retarget the $60 handle.