European stock markets continue to grind higher on Tuesday, with banks and miners leading gains. Now, investor attention has turned to the U.S. presidential election, with regional markets cheering the news that Donald Trump trails Democratic rival Joe Biden in national polls. A Biden win is considered supportive of European markets on expectations of better trade relations with the United States. Upbeat factory data from major economies added to the upbeat tone in the markets as well.
In individual stocks, BNP Paribas gained over 5% after the French bank beat market expectations while IWG shares rallied by more than 7% after the company reported an improvement in sales activity during the third quarter. on the negative side, Bayer stocks shed 0.65% after the firm said it took impairment charges of 9.25 billion euros.
Against this backdrop, the UK FTSE 100 index adds 1.87% to 5,760, Italy’s FTSE MIB gains 2.23 percent to 18,809, France’s CAC 40 edges higher by 1.98 percent to 4,783, while the German DAX 30 edges higher by 1.81% to 12,002. U.S. stock index futures are rising Tuesday as investors bet that Joe Biden will win the election.
In currencies, the dollar retreats nearly across the board in a downside correction after a rally witnessed on Monday. EURUSD has surged past the 100-DMA earlier in the day, extending the recovery to the 1.17 handle that caps further bullish attempts so far. Further dynamics in the pair will depend on the outcome of the US presidential election. Trump’s victory would be dollar-positive. In this scenario, EURUSD could reverse recent gains and plunge to fresh lows below 1.16. If Biden wins, the greenback could fall across the board and thus send the common currency above the 20-DMA, today at 1.1760.
Meanwhile, oil prices extend the rebound after a massive-sell-off seen at the start of the week. Brent crude is flirting with the $40 handle, trading marginally below the 200-DMA that acts as the immediate target for bulls. The sentiment in the market turned positive amid the reports that the top executives of Russia’s oil companies discussed the future of the OPEC+ deal with Russian Energy Minister Alexander Novak, including an option to extend the cuts for three months until March 2021 amid the second coronavirus wave across the United States and Europe. A weaker dollar also supports the ongoing rebound in oil prices. However, Brent could turn negative again if broad-based risk aversion reemerges any time soon as the market remains fragile amid rising global supply and a weaker outlook for demand recovery.
Nathan Lambert, Head of Global FX Analytical Department