European markets wrap: FTSE 100 index poised to open lower on Friday

We examine how key European markets performed on Thursday and how the FTSE 100 is likely to open a touch lower on Friday as UK stocks post-Covid-19 recovery continues to flag.

European markets wrap:

  • European stocks lose ground to rising US-China tensions
  • FTSE 100 poised to end week in the red
  • European Central Bank opts to leave interest rates unchanged

European markets lost ground on Thursday and are likely to open lower on Friday amid rising US-China tensions, with Washington considering a travel ban on Chinese Communist Party (CCP) officials, according to a report by the New York Times.

The Euro Stoxx 600 closed marginally lower (-0.47%) on Thursday, with the UK FTSE 100 (-0.67%), German DAX (-0.43%) and the French CAC 40 (-0.46%) all seeing their post-Covid-19 recoveries show signs of stalling as investors fears of a second wave of cases grow as lockdown measures ease.

ECB opts to wait and see, leaving interest rates unchanged

Investors eagerly awaited to see what action the European Central Bank (ECB) would take to support the eurozone amid the economic fallout of the Covid-19 pandemic on Thursday, with it opting to leave interest rates and its emergency coronavirus stimulus program unchanged.

The ECB said that it wishes to adopt a wait and see approach to economic stimulus and interest rates changes while it assesses the economic health of the eurozone. However, it reiterated that there remains ample stimulus to support the European economy and help it navigate the challenges ahead.

‘Unless — and we don’t see it for the moment frankly — but unless there were significant upside surprises, our baseline remains that we will use the entire envelope of PEPP,’ ECB President Christine Lagarde said during a press conference on Thursday.

‘Clearly the second function of PEPP that I have mentioned, which is the monetary stance in order to respond to the shock of coronavirus, is still around and we still need to address that, so we will continue to use the envelope of PEPP and make sure that it helps us get back to the trajectory of inflation pace pre-Covid-19,’ she added.

FTSE 100 still climbing but poised to open lower on Friday

The blue-chip index continues to see its recovery labour amid a myriad of macroeconomic headwinds and is likely to open lower on Friday with FTSE 100 futures down 42 points at the time of publication, suggesting losses will continue in the final trading session of the week.

The FTSE 100 returned to the 6300 level yesterday, as it continues its rebound from last Friday’s low. The price is now firmly inside the zone of resistance that has been a barrier to any further upside since the middle of June, according to Chris Beauchamp, chief market analyst at IG.

‘While the price has pulled back from Wednesday’s high, it looks like it will create a higher low and push through 6300, targeting 6500 in the first instance,’ he added. ‘The bullish view remains in place unless we see a drop back below 6170.’

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