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Europe Seen Lower as China Outbreak

15 June 2020

European stock markets are set to open sharply lower Monday, as a jump in reported Covid-19 cases in Asia over the weekend prompted fears of a second wave of infections and the potential economic damage this could cause.

At 2 AM ET (0600 GMT), the DAX futures contract in Germany traded 3% lower. France's CAC 40 futures were down 3.3%, while the FTSE 100 futures contract in the U.K. fell 2.1%.

China reported a new outbreak in Beijing’s Xinfadi wholesale food market over the weekend, prompting its closure as well as the locking down of nearby housing districts.

In Japan, Tokyo also reported Sunday its highest number of new cases in around a month, with the majority of cases traced back to recently re-opened nightclubs and bars. 

This all followed a spike in cases in the United States, where more than 25,000 new cases were reported on Saturday.

"Any new outbreak will be looked at very, very cautiously by investors. The market is putting into perspective that the COVID-19 issue has not been resolved yet. It's a reality check," said James McGlew, analyst at stockbroker Argonaut, reported by Reuters.

Stock markets had benefited from a strong rally since late March, fueled by central bank and fiscal stimulus and optimism as countries gradually lifted their lockdown policies put in place to curb the spread of the virus.

Economic data out of China earlier Monday did little to improve the mood, with industrial output rising only 4.4% in May from a year ago, while analysts had forecast a gain of 5.0%, and retail sales falling a deeper-than-expected 2.8%.

Back in Europe, EU Commission President Ursula von der Leyen is set to meet with British Prime Minister Boris Johnson on Monday in a bid to revive stalled talks on post-Brexit ties. So far there hasn’t been much progress on a free-trade agreement and there’s not much time left to extend the end-2020 deadline for a deal.

In corporate news, BP (LON:BP) said it it expects to take up to $17.5 billion of charges in its second-quarter earnings to reflect what it expects will be the "enduring" effects of the pandemic, in the form of lower oil prices.

Elsewhere, easyJet (LON:EZJ) aircraft will fly Monday for the first time since March 30, as the British carrier resumes a small number of mainly domestic flights after weeks of lockdown. Movie theater operator Cineworld will also be in focus after it pulled out of its deal to buy Cineplex, a move that will ease concerns about its debt levels.

Oil prices slumped Monday, extending losses from last week, as new coronavirus infections hit China and the United States, potentially hitting the already fragile recovery in fuel demand.

The oil benchmarks fell about 8% last week, their first weekly declines since April. 

At 2 AM ET, U.S. crude futures traded 4.9% lower at $34.50 a barrel. The international benchmark Brent contract fell 3.4% to $37.40.

Elsewhere, Gold futures fell 0.6% to $1,726.25/oz, while EUR/USD traded at 1.1237, down 0.2%.



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