European stocks advanced and hit a two-week high on Thursday despite the lingering election uncertainty in the U.S. the regional markets were fueled by upbeat quarterly earnings, a rally in Wall Street stocks seen overnight, and additional stimulus measures announced by the bank of England during the meeting earlier today. At that, the central bank left the interest rate unchanged despite the recent talks about negative rates, which played into the sterling’s hands. The Bank of England meanwhile extended the size of its quantitative easing program by £150 billion.
In individual stocks, Societe Generale reported a third-quarter profit of €862 million and lifted its capital ratio outlook for the year, sending the stock over 3% higher in recent trading. As a reminder, the French bank reported a net loss of 1.26 billion euros for the second quarter of the year. On the negative side, Commerzbank shares dipped more than 6% after the German lender reported a third-quarter net loss amid the pandemic crisis.
On the data front, Eurozone September retail sales contracted by 2.0% versus -1.5% m/m expected while the prior result was revised from +4.4% to 4.2%. Meanwhile, the European Commission has cut the Eurozone 2021 GDP forecast to +4.2% from +6.1% and added that that the technical assumption for the forecasts is that there will be no trade deal between the EU and UK once the Brexit transition period ends on 31 December.
Against this backdrop, the UK FTSE 100 index adds 0.30% to 5,760, Italy’s FTSE MIB sheds 0.06 percent to 18,974, France’s CAC 40 edges higher by 0.55 percent to 4,831, while the German DAX 30 edges higher by 0.27% to 12,121. U.S. stock index futures were higher as investors hoped that the winner of the U.S. presidential election would soon be determined.
In currencies, the selling pressure surrounding the greenback has intensified in recent trading as positive risk sentiment persisted. As such, EURUSD jumped above the 1.1800 handle for the first time since October 27, and it looks like the pair is ready to extend the rally despite the European Commission has cut its economic projections. If so, the euro could confirm a break above the mentioned barrier on a daily closing basis and challenge the 1.1860 resistance. The FOMC meeting could be a non-event for global markets as well as for USD pairs as the central bank is expected to leave its policy unchanged.
In commodities, oil prices reversed early losses and turned flat on the day as investor sentiment stays positive across the markets. Brent crude derived support from the 200-DMA and was flirting with the 20-DMA at the time of writing. A weaker dollar is also supportive of Brent after the prices rose in a reaction to upbeat industry data out of the US. As a reminder, the EIA report showed on Wednesday that US crude oil inventories contracted by 8 million barrels last week while production declined by 600,000 barrels per day.
Nathan Lambert, Head of Global FX Analytical Department