26 January 2021

European Stocks Start Week Lower on Covid-19 Woes

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News shaping
the markets today

     

What’s happening: European stocks settled lower on Monday as investors assessed recent covid-19 related restrictions.

What happened: Investors in Europe turned cautious on the first trading day of the week, with stricter border restrictions being imposed around the world.

Although markets started the day on a strong note, they headed south later in the session on prospects of a third lockdown in one of the major European economies.

Why it matters: Talks of a third lockdown in France added to concerns around the record surge in covid-19 cases and hospitalisations, a slower-than-expected vaccine rollout and delays in supplies by pharma companies. Both Pfizer and AstraZeneca warned of failing to meet their delivery goals to the European countries in the upcoming weeks.

Investor sentiment was further hit by the US considering banning the entry of people from various countries, including France and Sweden, as cases were reported of the new variant of the virus that originated in the UK and South Africa.

Meanwhile, investors monitored the recent developments around the new economic relief package proposed by US President Joe Biden.

Economic data did nothing to lift the market mood. Germany reported a decline in the Ifo business climate index to 90.1 in January, from 92.1 in the prior month, with the economic conditions deteriorating. The German DAX 30 index tumbled sharply by 1.66% to end the day at 13,643.95 on Monday.

The pan-European Stoxx 600 index declined by 0.83% to close at 405.13 on Monday, after gaining more than 1.2% in the session. Travel and leisure were the among the worst performing sectors due to fresh covid-19 restrictions. Healthcare shares bucked the overall market trend, adding 0.7% in the previous session.

The French 40 lost 1.57%, while the UK’s FTSE 100 index fell 0.84% on Monday.

What to watch: With no major economic data scheduled for released by the Eurozone, investors will focus on reports from the region’s countries. Investors will also keep an eye on any news from France related to fresh covid-19 restrictions.

Rising covid-19 cases remain a major concern for the markets, with total worldwide cases approaching 100 million.

The Markets Today

     

The British pound will be in focus today ahead of a basket of economic reports from Britain.

Context: The British pound strengthened versus the euro on Monday with a heightened pace of covid-19 vaccine rollouts in the UK over the weekend.

Details: The sterling had recorded losses in the previous session, as recent lockdowns in the UK led to the sharpest decline in business activity in the country since May, with retail sales also coming weaker than expected.

The pound gained on Monday, with the euro coming under significant pressure on expectations of the reimposing of restrictions in various EU countries. Sentiment for the euro was also hurt by reports of Germany’s business morale tumbling to a six-month low in January.

The pace of the vaccine rollout in Britain accelerated on Saturday, with the number of people receiving their first shot hitting 5.9 million. Data from the UK also supported the pound, with shopper numbers in the country growing by 9% last week.

However, the GBP/USD forex pair tumbled on Monday, after hitting a 32-month high in the previous week.

What to watch: Markets await economic reports from the UK including claimant count change, unemployment rate, employment change and CBI distributive trade. The number of people claiming jobless benefits is expected to rise by 35,000 in December, while the unemployment rate is projected to rise to 5.1%, from the previous reading of 4.9%.

Investors will continue to assess daily covid-19 infections in the UK, with the death toll crossing 98,700.

Other Markets: US indices closed mixed on Monday, with the S&P 500 and Nasdaq 100 up by 0.36% and 0.87%, respectively. However, the Dow Jones index came under pressure and lost 0.12% in the session.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Spain’s producer prices, South Africa's SACCI business confidence index, Brazil’s FGV consumer confidence index and the central bank’s Copom meeting minutes, Mexico’s retail sales, Russia’s producer prices, Argentina's balance of trade and economic activity index as well as the US Redbook index, S&P CoreLogic Case-Shiller 20-city home price index, house price index, Richmond Fed manufacturing index and CB consumer confidence index.

 

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