European stocks are surging modestly on Thursday, led mainly by energy stocks amid a spike in oil prices after China unveiled plans to boost its reserves. As a result, Royal Dutch Shell shares were up nearly 7% while BP stocks rose 6.5%. However, the tone in general remains cautious as investors await key U.S. unemployment data later today. As a reminder, last week, U.S. initial jobless claims jumped to 3.28 million, blowing past the previous record of 695,000 set in 1982.
Meanwhile, coronavirus deaths in Spain surpasses 10,000 persons. The country is under a nationwide lockdown since the middle of March and it has tightened restrictions on March 30. Germany’s KfW state development bank said the economy is likely to contract by 10% to 15% in Q2 2020.
Against this backdrop, UK’s FTSE 100 adds 0.67 percent to 5,489, Italy’s FTSE MIB gains 1.18 percent to 16,738. France’s CAC 40 rises by 0.79 percent to 4,240, while German DAX 30 adds 0.34 percent to 9,577. U.S. stock index futures are pointing to a rebound from yesterday’s decline by nearly 4.5% but the upside momentum is modest and limited.
Meanwhile, the dollar has been trading in a mixed manner on Thursday. EURUSD remains under the selling pressure but manages to stay above the 1.09 handle so far. Further rise in coronavirus cases in Italy and Spain continues to weigh on euro’s appeal while the lingering USD demand caps the upside attempts in the common currency as well.
On the data front, Eurozone February PPI came in at -0.6% versus -0.4% expected. The previous result was revised from +0.4% to +0.2%. anyway, as this is a lagging indicator of price pressures and reflects the picture of pre-virus economic conditions, the euro’s reaction to the release was fairly muted. Also, traders are now switching their focus to the key US employment data due on Friday.
In commodities, Brent crude jumped higher today amid positive comments from major producers. In particular, Trump expressed optimism that a damaging price war between Saudi Arabia and Russia can be resolved. Meanwhile, Russia's Energy Minister Alexander Novak said that there were no plans to raise oil production due to oversupply in the market. Besides, the market was helped by the news that China is building its oil stockpiles. Still, the prices failed to extend gains above $28 and have settled around $27 after a brief knee-jerk reaction, suggesting the downside risks are still there.
Nathan Lambert, Head of Global FX Analytical Department