European Market Open Coronavirus cases weigh on markets

• European indices are set to open slightly higher this morning.
• Fears over rising coronavirus cases are back in play as several countries tighten lockdown restrictions, including the UK, Germany, the Netherlands and parts of the US.
• Big US tech stocks are under the spotlight as both the UK and the EU prepare to unveil new rules for sector, while the US is also launching an inquiry into consumer privacy.
• In commodities, Brent has slipped back below the $50 threshold as surging cases revive fears over demand, while the hunt for safe-haven assets has pushed up the price of gold this morning.

FTSE 100 to open marginally higher

The FTSE 100 is set to open at 6517.5, up 0.04% from 6514.4 at the close on Monday.

European indices to open slightly higher

The Euro STOXX Index is called to open at 3499.5, 0.1% higher from 3498.3 at the end of play yesterday.

Germany’s DAX is set to open marginally higher at 13217.8 from 13211.1, while France’s CAC 40 is to edge 0.1% higher at 5519.0 from 5511.0.

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COVID restrictions tighten as new variant is found

London and areas in the south-east of England are to enter tier 3 restrictions on Wednesday as cases continue to rise, with health secretary Matt Hancock confirming over 1,000 cases of a new variant of the coronavirus have been identified. A mutation of the virus is normal, according to experts, and the concern remains rising case numbers. The tighter restrictions will be a blow to the Capital, shutting hospitality industries.

The UK is not the only country trying to stem a rise in cases. Germany is re-entering a national lockdown over Christmas, the Netherlands is introducing its strictest rules yet, parts of the US have reintroduced restrictions after seeing a spike after Thanksgiving, and some Asian countries like South Korea have also had to take action.

Big Tech under the spotlight

The European Union is expected to unveil new rules on Tuesday that aim to overhaul the way Big Tech companies are regulated. The Digital Services and Digital Markets Acts are expected to levy hefty fines on large tech companies that break the new rules, which are expected to try to limit the dominance of firms like Alphabet and Facebook.

The UK is also set to unveil its own new rules for the industry on Tuesday with plans to fine rule-breakers up to 10% of their global revenue if they fail to remove and limit the spread of illegal content, protect children online or break any other rules. 

Meanwhile, the US has ordered nine of the country’s biggest tech firms, including Amazon and TikTok, to provide details to help with a new inquiry into consumer privacy.

Australia-China coal tensions puts spotlight on miners

Chinese media outlets have reported the country has given the all-clear for countries to import coal without restrictions, apart from Australia. Australia, which has a huge natural resource market dependent on China, has asked for clarification, according to Reuters, and warned it would be a ‘lose-lose’ outcome for both sides.

The tensions will weigh on London-listed miners this morning, particularly those with significant exposure to Australia like Rio Tinto and BHP.

Airbus wants orderly Brexit and de-escalation of EU-US tensions

European plane maker Airbus, which has operations in the UK and the EU, has called for the two sides to strike an ‘orderly Brexit’, while simultaneously calling for the US and the EU to de-escalate tensions over how each side subsidises its aircraft industry. Brexit and the dispute of subsidies leaves Airbus vulnerable over the coming weeks, particularly as coronavirus continues to keep most airliners grounded.

Adidas considers selling Reebok

German sportswear maker Adidas is considering selling the Reebok brand. The company has launched a strategic review and expects to know the fate of Reebok in March, when it is expected to unveil its new strategy. The brand is seen as potentially attractive to private equity firms or a business looking to break into the US with a recognised brand, but it may also remain part of Adidas.

JD Sports buys US-based Shoe Palace

JD Sports said it has bought Shoe Palace Corp and Nice Kicks LLC for $325 million in cash, of which $100 million if deferred. The company said Shoe Palace generated $435 million in revenue and a pretax profit of $52 million in 2019.

SEGRO buys more of Sofibus ahead of squeeze-out

SEGRO has said it has bought a further 74.9% of Sofibus Patrimoine for EUR313.71 per share, having acquired 19.5% in 2018. SEGRO now owns 94.4% of the business and intends to carry a ‘squeeze-out procedure’ to delist Sofibus from Euronext Paris.

Forex: Dollar edges down against euro and pound

EUR/GBP traded at 0.91055 on Tuesday morning, up 0.06% from 0.91110 at the close of trade yesterday.

EUR/USD traded at 1.21497, up 0.04% from 1.21439. City Index analyst Christophe Chevalier discusses EUR/USD this morning following the release of eurozone industrial production data and looks at the chart from a technical point of view.

Meanwhile, GBP/USD was up 0.12% at 1.33427 from 1.33255.

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The most drastic movements in the currency markets in early afternoon trade, according to data from Reuters, are as follows:

Commodities: Brent slips back below $50

Oil prices slipped back on Tuesday morning as rising coronavirus cases and new restrictions prompted concerns about demand, with Brent moving back below the $50 threshold.

Brent trades at $49.94 per barrel this morning, slipping from $50.30 at the end of play on Monday, while WTI has nudged down to $46.80 from $47.11.

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Gold traded at $1840.0 per ounce from $1827.2, as the fears over coronavirus cases lifts the precious metal.  

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Market-moving events in the economic calendar

The economic calendar is light for most of the day before activity picks up this evening. US industrial production numbers are out at 1415 GMT. The governor of the Bank of Canada, Tiff Macklem, is scheduled to speak on ‘Trading for a Sustainable Recovery’ at 1930 GMT.

Later, attention turns to Australia as the Commonwealth Bank of Australia releases manufacturing and services data at 2200 GMT, followed by the Westpac Leading Index at 2330 GMT. The day is rounded off by the release of import and export data from Japan at 2350 GMT.

Central banks are the overarching theme this week, with the US Federal Reserve on Wednesday, the Bank of England on Thursday, and the Bank of Japan rounding off the week on Friday.

You can view all the scheduled events for today using our economic calendar, and keep up to date with the latest market news and analysis here.