Europe attempts to recover from its worst one-day performance this year

European bourses are attempting a recovery after steep declines in the previous session. Stocks across Europe plummeted on Tuesday, booking their worst daily losses so far this year.

While the US and UK have done well to roll out Covid vaccines quickly and reopen their economies, this has not been the case in other significant economies. Covid cases globally increased by 12% throughout the past week, primarily due to a resurgence in India, Pakistan and South America. Japan’s numbers are also being watched closely.

Fears over the impact that rising Covid cases could have on global economic recovery hit risk appetite hard on Tuesday. Travel restrictions will likely act as a brake on the recovery. The markets’ performance yesterday served as a stark reminder that we still can’t draw a line under Covid risk.

Today, risk appetite is attempting to rebound as corporate earnings optimism overrides Covid concerns. ASML, Heineken and Kering have all released better-than-forecast numbers.

US futures are pointing to a softer start, with the tech-heavy Nasdaq underperforming its peers in the wake of Netflix’s results. Netflix shares are trading down over 7% pre-market.

The first big-tech company to report, investors were looking at these numbers to set the scene for the coming week as other big companies announce their earnings. Weaker subscriber numbers and poor projected customer growth ahead points to a sharp deceleration in the stay-at-home trade, which boosted tech across 2020.

US dollar picks up from seven-week low GBP, CPI falls short

The US dollar is picking up off seven-week lows struck overnight and has edged into positive territory. With treasury yields below the key 1.60% level, US dollar demand is likely to remain depressed. However, rising Covid cases in India and concerns over the impact on the global economic recovery is resulting in some safe-haven flows being brought into the equation.

The euro is a notable underperformer, failing to benefit from a brightening picture surrounding the EU’s vaccine programme. News that EU regulators have given the green light to the J&J vaccine has been shrugged off.

The pound is edging a few ticks lower as UK inflation rebounds in March but falls slightly short of forecasts. UK CPI rose 0.7% YoY, up firmly from 0.4% in February but short of the 0.8% expected. Prices started to pick up as business looked towards the reopening of the economy. While this is a move in the right direction, it’s still a very depressed level, historically speaking, so the pound is struggling to be excited by this.

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