Following earlier gains in Asia, European stocks extended the recovery on Tuesday amid fresh signs of progress towards further U.S. stimulus after Biden discussed with a group of Republicans their proposal of a scaled-back stimulus package. On the data front, the Eurozone economy contracted 0.7% on quarter in the three months to December, beating -1.2% expected.
Elsewhere, Ursula Von der Leyen, President of the European Commission, confirmed today that 300 million doses of Pfizer, Moderna and AstraZeneca vaccines will arrive in Europe in the second quarter of 2021. On the negative side, the Japanese Economy Minister Yasutoshi Nishimura said that the government seeking an extension to the state of emergency. He also confirmed that the government would extend the state of emergency until March 7.
Against this backdrop, the FTSE 100 in London adds 0.72% to 6,513, Italy’s FTSE MIB gains 1.29 percent to 22,106, France’s CAC 40 is up by 1.88% to 5,564, while the German DAX 30 rises by 1.36% to 13,807. US stock index futures were higher ahead of the opening bell on Tuesday after "productive" stimulus talks between President Joe Biden and a group of Republican senators.
In currencies, the dollar regained upside bias after earlier corrective attempts. The greenback remains steady after yesterday’s rally that took the USD index to seven-week highs. In a large part, this was due to a sell-off surrounding the common currency. EURUSD extended the decline to the 1.2035 area in recent trading, threatening the 1.2000 figure for the first time since early-December. Of note, the common currency was unimpressed by the latest comments from Von der Leyen as well as by better-than-expected Eurozone GDP data. In the short term, the pair will likely stay in the defensive. However, a bounce could be expected somewhere around the 1.2000 support.
In commodities, Brent crude climbed to nearly one-year highs around $57.55 on Tuesday, retaining a bullish tone since yesterday’s breakout from the tight trading range. Oil prices are rallying amid a widespread recovery in risk demand while ignoring dollar strength at the moment. Also, the futures are supported by Saudi Arabia’s pledged production output cut, which came into force as of February 1. Optimism over the US economic stimulus package also adds to the upbeat tone in the oil market. Later today, the API report could affect prices.
Nathan Lambert, Head of Global FX Analytical Department