The liquidity crisis at China’s Evergrande Group sent Asian markets lower
European stocks opened higher on Thursday even as Asian equities fell for a fourth consecutive day. Furthermore, Hong Kong’s Hang Seng index dropped to its lowest level so far this year. Concerns over the liquidity crisis at China’s Evergrande Group affected broader sentiment in the region.
Europe’s STOXX 600 was up 0.7% in recent trading after falling 0.8% on Wednesday. In his latest remarks, the European Central Bank Governing Council member Olli Rehn said that inflation above the target is temporary. He also noted that “rate hike not yet in sight but will one day happen”.
Relatively dovish comments added to the selling pressure surrounding the euro. EURUSD dipped to fresh weekly lows around 1.1766 and was last seen changing hands at the lower end of the range, down 0.37% on the day. Dollar demand reemerged today despite a more upbeat risk sentiment, suggesting the euro could stay on the defensive in the near term. European Central Bank head Christine Lagarde is due to speak later in the day. Her comments could affect dynamics in the common currency.
Meanwhile, US stock index futures are wavering between gains and losses in early pre-market trading, which implies that the indexes could fail to extend the ascent from yesterday. U.S. weekly jobs data and monthly retail sales due later in the session would set the tone both for Wall Street stocks and USD-pairs. Strong figures could push the greenback higher across the board.
Also, investor attention is gradually shifting towards the FOMC policy meeting due next week. Should the central bank confirm its readiness to start reducing asset purchases soon, stock markets will see solid losses while the safe-haven dollar would rally due to policy divergence.