European stock markets are mostly higher on Thursday, refreshing one-month highs. Investor optimism resumed amid the reports that China and the US agreed to meet in early October for another round of negotiations, raising hopes that the two countries will make progress on the trade dispute. Signs of easing political tensions in Hong Kong also added to the positive sentiment globally. Hong Kong Chief Executive Carrie Lam fully withdrew the controversial extradition bill which caused months of violent protests in the city.
In other news, British Prime Minister Boris Johnson night failed in his bid to call a snap general election for October 15. A bill introduced by opposition parties to block the Prime Minister from taking the country out of the EU without a deal on October 31 was also passed. The bill is now expected to pass through the Lords and be presented for royal ascent tomorrow.
Tensions in Italy also eased after Prime Minister Giuseppe Conte unveiled his new cabinet, uniting a coalition between the anti-establishment Five Star Movement and the center-left Democratic Party.
Against this backdrop, UK’s FTSE 100 loses 0.60 per cent to 7267, Italy’s FTSE MIB rises by 0.56 per cent to 21,858, France’s CAC 40 gains 0.88 per cent to 5,580, while German DAX 30 adds 0.77 per cent to 12,117. US stock index futures extend gains as well, with Dow futures are rallying over 250 points after China confirmed it planned to hold trade talks with the US in early October.
In currencies, the greenback is under renewed pressure against the European counterparts after yesterday’s decline. As such, EURUSD surged to the 1.1060 area despite dismal data out of Germany, where industrial orders declined more than expected, fueling recession fears. The key driver behind the local rally in the common currency is a weaker dollar nearly across the board as risk sentiment continues to improve globally. Also, traders continue to digest the latest dovish comments from some Federal Reserve officials. Market participants are also cautious ahead of a major US jobs report including wages, as disappointing numbers will increase the odds of delivering more aggressive stimulus measures by the Fed.
In commodities, Brent crude struggles to hold above the $61 figure as the market lacks the bullish impetus to extend the rally witnessed on Wednesday. Trading volumes are lower now as market participants await the EIA inventory report due later today. Earlier, Brent derived support on reports that US and China agreed to meet in early October. Also, the bullish sentiment was fueled by the news that Washington has introduced additional sanctions against Iran. Technically, the downside risks in the market persist as long as Brent remains below the $61.60 area, which will act as the immediate resistance should the prices exceed the recent marginally above $61.
Nathan Lambert, Head of Global FX Analytical Department