Europe Expected to Drift Lower As Reopening Optimism Fades
Fiona Cincotta June 24, 2020 7:01 AM
Reopening optimism is showing signs of fading with European stocks pointing to a lower open following a day of strong gains
Reopening optimism is showing signs of fading with European stocks pointing to a lower open following a day of strong gains. The same stubborn optimism that saw Asian stocks creep up to 4-month highs overnight is not being felt here in Europe. A quiet economic calendar will leave risk sentiment in the driving seat. However, the mixed performance of risk catalysts is confusing investors.
Coronavirus news has been far from good on a global scale. Several states in the US continue to see record daily rises, whist the death toll is South America has topped 100,000. Yet investors assume that there is a small chance of a second lockdown on the scale of what we have just experienced.
Data in the previous session has show that economies across Europe have been particularly resilient with business activity picking up across the board. PMI data for the UK showed that the contraction in service sector and manufacturing activity slowed as the sectors continued to rebound from the April nadir. France, outperformed showing that the easing of lockdown measures had resulted in business activity quickly returning to expansion.
The economic calendar in Europe is quiet today. German IFO business sentiment for June is under the spotlight. Optimism is seen recovering further this month to 85, fromb79.5 in May. The assessment of the current situation is also seen improving from 78.9 to 84. The market mood could suffer a setback should the figures disappoint. A strong reading could see EUR/USD test resistance at $1.1422.
Oil extends slide, EIA data in focus
Oil is extending losses from the previous session after US crude stockpiles grew by more than expected, fuelling concerns over oversupply. Crude inventories rose by a larger 1.7 million barrels last week, according to the American Institute of Petroleum, significantly ahead of the 300,000-build forecast. EIA data will be keenly awaited today.
Oil has had a good run, rallying over 4% in just 3 days prior to yesterday’s data. The significant build in inventories was seen as a good catalyst to book profits. On Tuesday oil had been trading at its highest level since prices collapsed in early March.
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