Positive statements from the trade front lifted European stock markets after a decent sell-off during the Asian session. In particular, Bloomberg reported that the US and China are moving closer to a trade deal before the 15 December tariffs deadline. However, the euphoria could be short-lived if the markets don’t see the actual progress as they’ve heard the word “close” many times before in the past but the issues remain unresolved.
Anyway, at this stage, these reports are enough to bring back risky traders to the markets, with additional support coming from better than expected services PMIs out of Germany and Eurozone. Meanwhile, the U.S. Commerce Secretary Wilbur Ross said the Trump administration has not ruled out imposing tariffs on imported European autos. However, investors shrugged of the statement and decided to focus on the US-China developments.
As for individual stocks, Italy’s Atlantia rose nearly 1,5% after J.P. Morgan raised its stock recommendation for the company to “overweight” from “neutral.” Meanwhile, France’s Orange tumbled 4,5% after the telecoms operator announced a plan to carve out its mobile towers in most European countries where it is present.
Against this backdrop, UK’s FTSE 100 adds 0.22 per cent to 7175, Italy’s FTSE MIB rises by 1.14 per cent to 22,996, France’s CAC 40 gains 1.37 per cent to 5,804, and German DAX 30 rallies by 1.12 per cent to 13,135. U.S. stock index futures rallied early morning on positive trade developments and look set to rebound after a three-day slide.
In currencies, the dollar is mixed against the majors. EURUSD turned negative after an earlier rejection from local highs around 1.11 despite upbeat European data and improvement in risk sentiment. The pair is trying to hold above the 100-DMA, having settled around 1.1070 on Wednesday. Once below the moving average, the euro could dip further and challenge the 1.050 intermediate support once again. Should the upcoming US economic data point to improvement in activity, the selling pressure around the common currency may intensify, while at this stage, the downside risks look limited so far.
In commodities, Brent crude jumped back to the $62 handle after a plunge to the $60.30 support yesterday. The developments on the US-China trade front continue to set the tone for the market but at the same time, traders are shifting focus to the upcoming OPEC meeting due tomorrow, followed by the OPEC+ summit on Friday. Depending on the outcome of this event, the futures will plunge below the $60 handle, or rally above the 200-DMA around $64. Considering the importance of the summit, a volatility pick up should be expected in the oil market these days.
Nathan Lambert, Head of Global FX Analytical Department