Following mostly positive dynamics in Asia, European stocks surged early on Tuesday but trimmed intraday gains marginally. Still, equities remain elevated, extending the recovery after the recent sell-off. Investors continue to hope that global central banks and governments will introduce measures to support the economy amid the coronavirus outbreak. Global financial ministers and central bankers will hold a conference call today to coordinate their response to the outbreak. The G-7 is expected to issue a statement later today or tomorrow, but there are concerns that it may not mention any new government spending or coordinated interest rate cuts.
Against this backdrop, UK’s FTSE 100 gains 1.81 per cent to 6,775, Italy’s FTSE MIB is up 1.37 per cent to 21,950, France’s CAC 40 is rising by 1.60 per cent to 5,421, while German DAX 30 recovers by 1.97 per cent to 12,091. U.S. stock index futures point to a positive open ahead of the G7 event.
On the data front, the Eurozone headline consumer prices rose 0.2% on a monthly basis and 1.2% from a year earlier. Core CPI gained 1.2% over the last twelve months and rose 0.4% inter-month. Unemployment rate remained at 7.4%, in line with expectations. Anyway, the EURUSD pair has practically ignored the data, as traders are focused on the coronavirus developments.
Following a brief rally to fresh 8-week highs on Monday, the euro retreated and reached a local resistance at 1.11, where the 100-DMA lies. The pair sees some bearish bias today but stays close to the above mentioned highs and could resume the ascent as Trump called upon the Federal Reserve to make a big interest rate cut, siting the RBA’s decision to lower its policy rate to 0.5% earlier today. In contrast, the Governing Council member Robert Holzmann said that he would currently not support an interest rate cut to help curb the coronavirus effects on the economy.
Oil prices struggled to get back above the $53.70 area earlier in the day and is now attempting to hold above $53, as traders express a cautious optimism ahead of the G7 statement and the upcoming OPEC+ meeting due later this week. The futures managed to bounce from mid-2017 lows below $50 but the upside potential is still limited due to the lingering uncertainty surrounding the coronavirus and the potential efforts by the cartel members and their allies. In the short term, Brent needs a daily close at least above $53 in order to preserve the upside bias. In general, oil market remains vulnerable to further losses.
Nathan Lambert, Head of Global FX Analytical Department