Europe's stock markets are relatively steady on Tuesday, struggling to extend gains as investors have quickly digested the reports that US President Donald Trump has returned to the White House following hospital treatment for COVID-19. Investor sentiment is partially supported by fresh hope for a new US stimulus package in the United States.
Elsewhere, ECB's Lagarde said today that the economic recovery is incomplete, uncertain, and uneven. She also repeated that the central bank doesn’t target the euro exchange rate. Meanwhile, ECB's de Cos pointed to a risk that the vaccine might not arrive by the middle of 2021. On the data front, UK September construction PMI arrived at 56.8 versus 54.0 expected while Germany September construction PMI came in at 45.5 versus 48.0 prior.
Against this backdrop, the UK FTSE 100 index edges lower by 0.33% to 5,923, Italy’s FTSE MIB gains 0.56 percent to 19,373, France’s CAC 40 rises by 0.05 percent to 4,874, while German DAX 30 sheds 0.05% to 12,820. U.S. stock index futures fell early Tuesday after a decent rally seen yesterday.
In currencies, major pairs remain nearly unchanged, struggling for direction amid a lack of drivers. EURUSD was rejected from the 1.18 barrier in recent trading and was trading flat as of writing. The common currency refrains from extending the ascent despite the European Central Bank policymaker and Irish Central Bank Governor Gabriel Makhlouf said that the Eurozone economy has recovered sharply from the trough seen in April. Meanwhile, the Bank of Spain governor Pablo Hernandez de Cos called for a broad political and social consensus to cope with the economic fallout from the COVID-19 disease amid a political spat. Later today, the pair could be affected by Federal Reserve Governor’s speech while Trump’s health and stimulus talks remaining in market focus.
Meanwhile, oil prices extend the bounce from mid-June lows after a rise by over 5% on Monday. Brent crude is now back above the 20-DMA but refrains from flirting with the $42 handle as traders keep a cautious tone amid waning risk demand globally. On the positive side, another hurricane in the Gulf of Mexico coupled with Trump’s recovery and recent weakness in the greenback help the futures to stay afloat after the recent sell-off. If the prices manage to preserve the current bullish bias, Brent could target the 100-DMA next.
Gold prices are flat on Tuesday, struggling to overcome the 20-DMA that continues to cap upside attempts these days. The precious metal could stage a more decisive ascent once above this moving average. The daily RSI is directionless in the neutral territory, suggesting the consolidative pattern will stay in play in the near term. In a wider picture, gold could appreciate amid rising political uncertainty in the US ahead of the looming election.
Nathan Lambert, Head of Global FX Analytical Department