European stocks have opened lower in early trade on Wednesday as fear drives the markets. President Trump’s prediction that between 100,000 – 240,000 Americans could lose their lives, is truly horrifying and this is being reflected in the sell-off today. In the UK a 27% rise in daily deaths, even as measures are being taken to slow the spread is adding to the risk-off sentiment
A rebound in manufacturing in China, as shown by the Caixin Manufacturing PMI hitting 50.1 in March, was overshadowed by much weaker manufacturing activity data across the rest of the region. Power exporters Japan and South Korea saw a significant decline in manufacturing activity, with the latter recording the largest contraction in 11 years. With the US and Europe on lockdown demand will remain weak, meaning that any recovery in the region is likely to be slower and more drawn out than initially predicted.
Manufacturing data will remain in focus across the session, with final revisions from Europe. Italy is expected to record the biggest drop in its manufacturing PMI to 41 down from 48.7, after the industrial region of Lombardy has been the hardest hit by the coronavirus outbreak.
Despite the negative headlines driving the market, the movements are calmer than what we saw across the middle weeks of March, indicating that the market is coming to terms with events. The next two weeks will be key for assessing the landing that the global economy will have and the likelihood of a U -shaped recovery.
Levels to watch
The FTSE has slumped 2.1% lower on the open at 5408. On the 4 hour chart it is testing its 50 & 100 sma at 5420. A break through this level could see more bears jump in.
Immediate support can be seen at 5416/20 (today’s low, 50 & 100 sma), prior to 5440 (low 29th March) and 5115 (low 24th March).
Resistance can be seen at 5884 (today’s high) and 5707 (high 31st March) and 5831 (high 26th March)
