European stocks rally on Wednesday, extending gains for the third session in a row as investors continue to cheer a retreat in bond yields from recent peaks registered amid a broad-based sell-off in debt markets. Equities were also lifted by hopes of a strong economic rebound and expectations of relaxing coronavirus curbs in Germany. Now, investors await details of the UK’s new budget measures to support the economic recovery. The program includes a five-month extension of a generous jobs rescue plan.
On the data front, Spain’s February services PMI came in at 43.1 versus 43.0 expected while in Italy, the services PMI arrived at 48.8 versus 45.7 expected. Better-than-expected data added to the upbeat tone among investors.
Against this backdrop, the FTSE 100 in London adds 1.14% to 6,689, Italy’s FTSE MIB gains 0.89 percent to 23,288, France’s CAC 40 is up by 0.82% to 5,857, while the German DAX 30 gains 1.03% to 14,184. US stock index futures are pointing to recovery following yesterday’s losses.
In currencies, the dollar turned mixed on Wednesday after steep losses seen yesterday. EURUSD failed to preserve upside bias as the 20-DMA continues to act as resistance. As a result, the pair turned marginally negative on the day and could see more losses if the US service PMI and ADP employment data surprises to the upside later today. On the other hand, potential gains in the greenback will likely be limited ahead of Powell’s speech due tomorrow. The common currency now needs to overcome the 1.2100 barrier in order to see a more sustained recovery from one-month lows registered below the 1.2000 handle on Tuesday.
Meanwhile, oil prices turned marginally positive today following four days of losses. Brent crude has settled below the $63 figure, struggling to overcome the 20-DMA during the European hours. Later in the day, the EIS report could affect short-term dynamics in the futures, however, the reaction will likely be short-lived and muted as traders now shift their focus to the upcoming OPEC+ meeting due on Thursday. Brent crude was last seen trading around the mentioned mobbing average, today at $62.70.
Nathan Lambert, Head of Global FX Analytical Department