Following decent losses seen in Asia, European stocks opened little changed on Thursday, with the risk mood keeps flatter after recent gains. In corporate earnings, Deutsche Bank beat earnings expectations for 2020 as it emerges from the coronavirus crisis, while Royal Dutch Shell reported a sharp drop in full-year profit as the pandemic hit oil demand.
In the UK, investors keep an eye on the Bank of England’s latest monetary policy decision due later today. No change in the policy rate and no clear signal at negative rates are expected. However, the central bank could downgrade macro forecasts and update its thinking on negative interest rates.
Also later on Thursday, U.S. Treasury Secretary Janet Yellen will meet top financial regulators to discuss recent volatility in financial markets driven by trading in stocks, including GameStop Corp. amid the recent developments, market focus is shifting to the possibility of tighter U.S. trading regulations.
On the data front, Germany’s January construction PMI arrived at 46.6 versus 47.1 prior, pointing to a challenging start to the year for the constructor sector, not least because of the signs of increasing cost pressures resulting from emerging supply chain bottlenecks.
Against this backdrop, the FTSE 100 in London adds 0.40% to 6,533, Italy’s FTSE MIB sheds 0.07 percent to 22,511, France’s CAC 40 is up by 0.45% to 5,587, while the German DAX 30 rises by 0.47% to 13,999. US stock index futures keep near flat levels in a sign that positive risk mood from earlier in the week is moderating.
In currencies, the greenback keeps climbing against major rivals, sending the euro to fresh two-month lows below the 1.2000 psychological level. The fact that the common currency failed to derive support from this figure suggests the short-term technical picture could deteriorate further. Now, the EURUSD pair is nearing the 100-DMA (today at 1.1956), a break below which implies deeper losses as the greenback continues to benefit from the relative strengthening of the US economic recovery.
Meanwhile, oil prices rose to fresh one-year highs around $59 on Thursday. The Energy Information Administration reported a crude oil inventory draw of 1 million barrels for the last week of January while fuel inventories were mixed. In gasoline, the EIA reported a build of 4.5 million barrels. This compared with a decline of 300,000 bpd a week earlier. The outlook remains bullish, with the futures price trend suggesting tighter oil supply on global markets.
Nathan Lambert, Head of Global FX Analytical Department