European stocks were lifted on Monday amid positive updates of U.S. President’s health while oil sector rose amid a bounce in oil prices due to reports about an expanding workers' strike in Norway, Western Europe's largest oil producer. Renewed stimulus hopes in the United States also boosted markets at the start of the week. On the data front, the UK Services PMI came in at 56.1 in September against the 55.1 preliminary estimate. Investor confidence in the Eurozone improved more-than-expected as the index arrived at -8.3 in October from -8.0 in September versus a reading of -9.8 expected. Eurozone retail sales activity also rebounded stronger-than-expected in August, as sales rose by 4.4% versus +2.5% m/m expected.
Against this backdrop, the UK FTSE 100 index edges higher by 0.84% to 5,951, Italy’s FTSE MIB gains 0.71 percent to 19,199, France’s CAC 40 rises by 0.86 percent to 4,866, while German DAX 30 adds 0.73% to 12,781. U.S. stock index futures bounced on Monday as doctors said President Donald Trump could be discharged from the hospital, while signs of progress with a new fiscal stimulus bill also lifted sentiment after House Speaker Nancy Pelosi said on Sunday that progress was being made in talks with Treasury Secretary Steven Mnuchin.
In currencies, the greenback is lower versus major counterparts except for the Japanese yen that is now the weakest amid positive risk sentiment. EURUSD climbed to the 1.1760 area where the 20-DMA caps upside attempts despite stronger-than-expected economic data out of the Eurozone and a weaker dollar. It looks like the common currency needs the additional catalyst to make a more decisive breakout and regain the 1.18 barrier. Apart from political developments in the US, the ECB and FOMC meeting minutes could affect the euro’s dynamics this week. Should risk aversion reemerge, the pair may retarget the 1.16 area that acted as support a week ago.
Meanwhile, oil prices bounced along with global equities amid renewed hopes for stimulus measures in the US, the improving health of Trump, and reports about workers' strike in Norway. Brent crude managed to recover above the $40 handle and was changing hands marginally below the $41 barrier as of writing. However, further gains could be limited as traders remain cautious amid a gloomy outlook for global oil demand recovery, especially as OPEC production increased in September. In the short term, the futures need to hold above the $40 support to confirm the latest breakout after an aggressive sell-off seen late last week.
Nathan Lambert, Head of Global FX Analytical Department