European markets are rising on Monday, along with riskier assets as manufacturing rebound in China and hopes for U.S.-China trade boosted optimism. Markit/Caixin Purchasing Managers’ Index showed a modest expansion at 50.8 versus expectations of 50. Meanwhile, March’s Eurozone manufacturing PMI from Markit missed slightly at 47.5 compared with predictions of 47.6. As for the trade, Trump said on Friday that the talks with China were going very well. The talks are set to resume later this week in Washington.
Against this backdrop, Britain’s FTSE 100 adds 0.59 percent to 7,322, France’s CAC 40 is up 0.55 percent to 5,380, while German DAX 30 gains 1.04 percent to 11,646. US stock index futures are also edging up on the first day of the second quarter after better-than-expected Chinese data calmed some concerns over global growth.
The dollar is trading marginally lower against the majors. EURUSD received support just above 1.12 on Friday and registered a daily high around 1.1250 today but the recovery momentum looks shallow. Eurozone’s inflation fell slightly from 1.5% to 1.4% in March, with core inflation dropping to 0.8% versus 0.9% expected. Weaker-than-expected data capped the upside impetus, while weaker dollar is the main driver for the pair now. Should risk-on sentiment persist further, the common currency could challenge the 1.1250 intermediate resistance. Otherwise, the risk of a break below 1.12 will increase.
USDJPY was rejected from the levels above 111.00 earlier on the day and turned negative amid a general decline in the dollar appeal. Despite positive risk sentiment, the greenback struggles to show a more sustainable momentum and now holds relatively steady around 111.00. The Japanese data was mixed. The final Nikkei Manufacturing PMI improved to 49.2 in March from 48.9 in the previous estimate, while the Tankan Large Manufacturing Index slumped to 12 from 19 in the first quarter and fell short of the market expectation of 14.
Crude oil prices jumped to fresh early-November highs around $68.70 on Monday due to a number of bullish factors. First, the market is supported by widespread risk-on trades after another round of trade talks and strong Chinese data that eased concerns over oil demand in the second-world’s largest economy as the manufacturing activity rebounded. Second, traders cheered Baker Hughes report that showed the US drillers cut eight oil rigs in the week to March 29, bringing the total count down to 816, the lowest since April 2018. That is the first time the rig count declined for six weeks in a row since May 2016. Also, speculations about the effect from the US sanctions on Iran and Venezuela add to the bullishness in the market. In the short-term, Brent needs to confirm a break above the $68 handle to target the key $70 upside barrier.
Gold prices extend the decline after a decent plunge over the last week. The precious metal struggles to regain the $1,300 figure despite a muted dollar demand. The bullion’s appeal is lower due to the improved risk sentiment across the global financial markets on trade optimism. So the better the prospects of striking a deal between the US and China become, the more downside pressure could come on the yellow metal. Technically, as long as gold remains below the mentioned psychological level, the bearish risks prevail.
Nathan Lambert, Head of Global FX Analytical Department