After an earlier dip, European stock markets turned mildly positive on the day, with investors continuing to assess the chances for striking a partial trade deal between the US and China. It is reported that China is pressing the US to remove the tariffs imposed in September before a phase one deal is signed between the two countries. As such, market participants start to doubt further progress in resolving the trade dispute. In individual stocks, Société Générale rallied over 5% despite the bank reported a decline in its third-quarter profit, as the core tier one ratio rose to 12.5% in September from 12% in the previous quarter. On the data front, German industrial orders rebounded slightly in September, while the IHS Markit Eurozone Composite Purchasing Manager's Index came in at 50.6 for October, beating expectations of 50.2. Eurozone retail sales matched expectations at +0.1% on a monthly basis. Generally positive updates helped to lift the regional stocks marginally.
Against this backdrop, UK’s FTSE 100 gains 0.07 per cent to 7393, Italy’s FTSE MIB adds 0.16 per cent to 23,401, France’s CAC 40 rises by 0.34 per cent to 5,866, and German DAX 30 rises by 0.20 per cent to 13,175. Meanwhile, US stocks index futures little changed Wednesday morning after the Dow posted another all-time high yesterday. As the earnings season continues, Qualcomm, Expedia, TripAdvisor, Fox Corp, and Papa John’s are among the companies due to report later today.
In currencies, the dollar turned lower after the previous rally on strong PMI ISM US non-manufacturing data. EURUSD managed to recover from daily lows around 1.1066 but still lacked the upside momentum and failed to challenge the 1.11 figure. As such, positive economic updates were not enough to stir a more sustainable pullback in the common currency. It may signal that traders are not ready to push the euro higher despite weaker USD demand and more positive data out of the Eurozone. After two previous days of losses, the short-term technical picture for EURUSD has deteriorated significantly, with downside risks prevailing as long as the pair stays below the 100-DMA just below the 1.12 handle.
Brent crude struggled to hold above the $63 figure yesterday and turned into a consolidation mode above $62 on Wednesday. As risk-on sentiment has ebbed, oil traders decided to take a pause, with API data adding the negative pressure in the market. The API reported a crude oil inventory build of 4.26-million barrels for the week-ending October 31, compared to analyst expectations of a 1.515-million-barrel build. In general, oil prices show sideways dynamics now, with upside potential remains despite the local pullback seen today. Once above $63, Brent could test fresh highs around $63.50 and then target the 200-DMA at $64.40.
Nathan Lambert, Head of Global FX Analytical Department