European stock markets are trading mostly lower on Tuesday, as investors continue to express worries about Trump’s protectionism which in turn fuels concerns over global trade wars hurting the economy. The US President threatened re-introduction of U.S. tariffs on Brazil and Argentina. Also, the US introduced its plan to slap tariffs on $2.4 billion of French products, if the country goes ahead with a digital services tax aimed at big American tech companies. Besides, there is no any progress towards a phase one deal between the US and China and this makes markets nervous.
As for individual stocks, Italy’s biggest bank UniCredit rose over 1% and then trimmed intraday gains to 0.8% after the lender announced a buyback plan of its stock this year and shed 9% of staff under a new plan to 2023 to cut costs by 1 billion euros in Western Europe.
Against this backdrop, UK’s FTSE 100 sheds 0.94 per cent to 7218, Italy’s FTSE MIB adds 0.68 per cent to 22,883, France’s CAC 40 loses 0.36 per cent to 5,765, and German DAX 30 gains 0.53 per cent to 13,033. U.S. stock index futures were on the rise initially but turned mixed-to-negative after Trump said that a China trade deal may not happen until after the 2020 election.
In currencies, the dollar is mixed against the majors. After a spectacular rally on Monday, when EURUSD encountered a local resistance just below the 1.11 handle, the euro has been under some pressure but preserves most part of the previous gains today. The prevailing risk-off sentiment prevents further upside attempts in the pair, and the main goal for the common currency at this stage is to hold above the 100-DMA which now comes around 1.1070.
USDJPY was rejected from late-May highs registered yesterday around 109.70. The pair turned into a corrective mode and remains under pressure as the safe-haven yen demand has picked up amid protectionist tweets by Trump and growing concerns over a phase one trade deal between the US and China. Should the sentiment deteriorate further, the pair could extend losses to the 108/30 area and retarget the 108.00 handle. On the way down, the greenback broke below the 200-DMA which is a bearish technical signal for the pair in the short term.
In the oil market, Brent has been in decline for a third day in a row, with Brent getting below the 100-DMA, targeting the $60 handle once again. The sentiment in the markets looks bearish amid Trump-related developments amid increasing signs of the intensifying global wars initiated by the US leader. Later in the day, the API will reveal its traditional weekly report, and should crude oil stockpiles decline this time, the futures could get a marginal lift but it will hardly change the current technical picture substantially amid global uncertainty. Moreover, traders are cautious ahead of the upcoming OPEC+ meeting.
Nathan Lambert, Head of Global FX Analytical Department