European stock markets trimmed intraday gains but remain mostly in the positive territory on Monday, as positive economic updates out of major countries overshadow the trade-related uncertainty at the start of a new week and month. China's Caixin Markit manufacturing purchasing managers’ index rose to 51.8 in November from 51.7 in the previous month. This was the fastest expansion in three years and higher than 51.4 expected. Eurozone manufacturing PMI also beat expectations and came in at 46.9 in November from 46.6 previously. Similar indices out of Germany, France and Italy also beat forecasts. Amid these positive economic updates, investors shrugged off the lingering uncertainty over a phase one trade deal between the US and China, with the two countries have so far being unable to agree on terms of a preliminary agreement. In individual stocks, Deutsche Bank shares pared their losses during mid-morning trading and turned 0.6% higher despite the reports that the U.S. Department of Justice is stepping up its investigation into the lender’s role in the 200 billion euro Danske Bank money laundering scandal.
Against this backdrop, UK’s FTSE 100 adds 0.22 per cent to 7362, Italy’s FTSE MIB loses 0.51 per cent to 23,141, France’s CAC 40 has settled just below the flatline at 5,899, and German DAX 30 gains 0.32 per cent to 13,278. U.S. stock index futures are trading higher, cheering unexpectedly strong economic data out of China.
As for currencies, the greenback is mostly higher against major counterparts on Monday. EURUSD was rejected from daily highs around 1.1025 and continues to threated the 1.10 handle after a dip to 1.0980 on Friday. Despite strong European PMIs and generally positive risk sentiment, the euro struggles to regain a firm positive momentum and remains within a medium term downtrend as dollar demand still looks robust due to a pause in Fed’s rates cuts and fairly positive economic data out of the US. In the short term, should risk appetite wane, the selling pressure could intensify and bring the common currency back under the 1.10 support. As long as the pair remains above the 1.0980, there is a chance for a recovery in case of positive trade developments.
In commodities, Brent crude makes recovery attempts after a plunge to the $60.30 lows on Friday. The sell-off was triggered by a combination of trade uncertainty and investor concerns over the upcoming OPEC+ meeting. Traders expect the cartel and its allies to extend oil output cuts until June but for the market to see a rally in oil prices, investors will need to see additional cuts. Otherwise, a major disappointment will come into the market and could send Brent below the $60 handle. For now, the futures need to regain the $62 figure in order to trim losses further.
Nathan Lambert, Head of Global FX Analytical Department