11 March 2020

European Stocks Back in Negative Territory


What’s happening: European stocks ended trading in the red on Tuesday, reversing their earlier gains.

What happened: European markets opened higher on Tuesday, after recording strong losses the previous day. The gains were short-lived, as investors turned their attention to Italy, which is under lockdown to control the spread of coronavirus. Equities have also been under pressure due to lower oil prices amid a potential price war between Saudi Arabia and Russia.

Why it matters: There are widespread concerns of the coronavirus resulting in a massive slowdown in economic growth. Investor sentiment had improved slightly on reports of US President Donald Trump planning to provide a boost to the economy in the form of a payroll tax cut and hopes of additional stimuli as the prospects of a global recession escalate. The potential tax cuts will be in addition to a spending package of $8.3 billion signed last month.

Fears of the spread of COVID-19 returned to haunt the markets, with Italy putting the entire country under lockdown. The number of confirmed coronavirus infections in the country surged to 10,149.

The decline in European stocks yesterday followed the worst day for pan-European STOXX 600 since 2008 on Monday. With Britain and Germany also confirming a rise in the numbers of cases, investors fled from risky assets. Sweden also reported a surprise increase in coronavirus cases, which fueled greater uncertainty among investors.

The Italian FTSE MIB pared initial gains to settle at its lowest level in more than three years. The country’s government is expected to announce measures worth approximately €10 billion to offset the virus impact. The Italian Prime Minister placed the entire country under quarantine by implementing strict restrictions for all 60 million citizens. The ECB (European Central Bank) is also likely to provide more help to Italy and other European countries by lowering rates, which are already in the negative zone.

Shares of Italian company Atlantia tumbled to its lowest level in more than six years on a decline in travel due to COVID-19.

German 30 closed down more than 1%, with coronavirus cases surging past 1,100 in the country. Deutsche Bank economists expect Europe's largest economy to contract in 2020. Deutsche Post’s shares beat the trend by rising around 6% after the company reported a recovery in volumes in China and announced a strong annual dividend.

In other news, oil prices recovered following a sharp plunge of over 20% on Monday. WTI crude oil settled around 10% higher on Tuesday, after recording its worst day since 1991 the previous day.

What to watch: Investors would be keeping a close eye on announcements by the ECB, which is expected to provide some stimulus to the European economies. Markets would also be hoping for a decline in coronavirus cases worldwide.

The Markets Today


The British pound will be the currency to watch today, amid concerns of the COVID-19 impact on the economy and ahead of the UK budget announcement.

Context: As the coronavirus continues to spread, rising concerns of an economic recession are pushing investors towards “safe-haven” currencies. A recovery in the US dollar following President Trump’s spending package announcement also weighed on the sterling in the previous session.

Details: The pound plunged against the US dollar on Tuesday, as investors awaited the UK Chancellor Rishi Sunak’s Budget announcement scheduled for today. It was just a month back that Prime Minister Boris Johnson disclosed a government reshuffle, naming Rishi Sunak as Chancellor instead of Sajid Javid. However, market conditions have changed radically within the month. The pound fell around 1.5% versus the greenback on Tuesday.

The greenback was driven by an improvement in risk sentiment on prospects of a significant economic stimulus and a recovery in US Treasury yields from record low levels a day earlier. President Trump also announced plans to provide some relief from COVID-19 in the form of a payroll tax cut.

The GBP/USD pair was trading higher by 0.09% at 1.2918 in the Asian session. Investors are hoping for a big stimulus package from the UK government. Against this, a disappointing budget would exert pressure on the pound.

Why it matters: After the weak performance of the sterling in the previous session, all eyes are on the UK budget announcement. Positive economic data from Britain, including balance of trade, industrial production and GDP growth, will also help the pound.

What to watch: Industrial production, which rose 0.1% in December, is expected to increase 0.3% in January. Analysts expect the UK to post a trade deficit of £7 billion for January, versus a trade surplus of £0.85 billion in December. The UK economy is expected to grow by 0.2% in January, down from a prior reading of 0.3% growth.

Other Markets: Most European indices closed lower on Tuesday, with the UK 100, German 30 and French 40 down 0.09%, 1.41% and 1.51%, respectively.

Support & Resistances
for Today


market snapshot


Futures at 0400 (GMT)

News shaping
the markets today


What else to watch today


Turkey’s current account, Spain’s retail sales, Italy’s producer prices, Brazil's consumer prices, Canada’s capacity utilization as well as the US MBA mortgage applications, inflation rate, crude oil stocks change and government budget.




ADS Securities London Limited “ADSS” is an execution-only service provider. This material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or investment objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by ADSS that any particular investment, security, transaction or investment strategy is suitable for any specific person. To the extent that any content in this material is construed as investment research, you must note and accept that the content was not prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. This material may contain links to third party websites, and any content, or use of your personal data by any third party websites is not the responsibility of ADSS or any member of the ADSS Group.