Following record closes for stocks on Wall Street, European markets turned mixed on Tuesday, with investor optimism gradually waning as markets have almost digested the latest positive developments on the US-China trade front. To extend gains, equities may need fresh upbeat signals on trade, where the two countries seem to be getting closer to at least a partial deal. In part, the bullishness abated after the report which showed that China’s services sector slipped to an eight-month low in October, while business confidence fell to a 15-month low. Meanwhile, the British Retail Consortium came in mixed. While sales growth over a 12-month period fell to a new low of 0.1%, consumer spending in the U.K. saw its strongest year-over-year increase in October for six months.
Against this backdrop, UK’s FTSE 100 gains 0.19 per cent to 7384, Italy’s FTSE MIB gains 0.17 per cent to 23,349, France’s CAC 40 rises by 0.15 per cent to 5,833, and German DAX 30 sheds just 0.01 per cent to 12,134. Meanwhile, US stocks index futures point to higher open amid signs that America and China are inching toward a trade deal. So, fresh all-time highs on Wall Street could be in store today.
In currencies, EURUSD turned negative after the earlier bullish attempts faced the selling pressure around 1.1140. as a result, the common currency slipped below the 100-DMA. The Eurozone September PPI came in line with expectations and failed to affect the pair’s short-term dynamics. The downside pressure intensified as the US dollar has bounced from an important technical support area.
The fact that the euro struggles despite the risk-on sentiment, points to a local weakness in the pair and its vulnerability to further losses, at least in the near term. From the technical perspective, EURUSD could see a more intense bearish pressure should it fail to hold above the 1.11 intermediate support. On the upside, the technical picture could improve somehow after a steady rise above the 1.1175-1.1180 area.
In commodities, Brent crude cheers trade-related optimism along with other risky assets. After some hesitation, the prices pushed higher, to fresh late-September highs marginally below the $63 handle. On the positive side, Brent has broken above the 100-DMA but it has yet to confirm this local breakout as the upside impetus still looks unsustainable at this stage. Today, OPEC has lowered its outlook numbers for global oil demand growth, to 104.8 million barrels per day by 2024, and 110.6 million per day by 2040. In its annual World Oil Outlook, the organization also noted that the last twelve months had been challenging for energy markets once again. The updated outlook may have some negative pressure on prices but as trade optimism prevails, Brent stays relatively elevated in the daily charts.
Nathan Lambert, Head of Global FX Analytical Department