European stocks are trading in a cautious manner on Monday, as investors shift focus to the upcoming US-China trade talks due on Thursday. Late last week, global markets were buoyed by a generally positive US jobs report which helped to somehow ease fears of a slowdown in the world’s largest economy. The Chinese officials have narrowed the scope of issues they intend to discuss, with Vice Premier Liu He reportedly telling dignitaries that Beijing will not commit to reforms of industrial policies or government subsidies. There reports curbed investor optimism on Monday.
The lingering uncertainty on Brexit front adds to uncertainty in the markets as British Prime Minister Boris Johnson on Sunday reiterated his intention for the U.K. to leave the EU on October 31 and urged French President Macron to push forward to secure a deal. At the end of the week, the EU will decide whether a deal is going to be possible based on Johnson’s latest proposal.
Against this backdrop, UK’s FTSE 100 adds 0.35 per cent to 7180, Italy’s FTSE MIB gains 0.50 per cent to 21,578, France’s CAC 40 edges higher by 0.26 per cent to 5,502, and German DAX 30 gains 0.44% to 12,065. Meanwhile, US stocks index futures indicate a lower open after a report suggested Chinese officials were increasingly reluctant to agree to a broad trade deal pursued by Trump.
In currencies, EURUSD is trading marginally higher amid a mildly positive risk sentiment. The pair extends gains for a fifth day in a row but still struggles to overcome the 1.10 handle as the common currency lacks the bullish momentum these days. Today, the upside attempts are partially capped by another dismal economic report out of Eurozone. According to Sentix, investor confidence in the Eurozone deteriorated further in October, with gauge fell to -16.8 from -11.1 in September and against a reading of -13.0 expected. As such, the index dropped to the lowest in more-than six years. Moreover, investors' assessment of the current situation plunged to -15.5 from -9.5, the weakest reading since the end of 2014.
As for commodities, oil prices are showing some gains after a short-term consolidation earlier in the day. Still, Brent so far fails to challenge the $59 handle which is standing on the way to the $60 psychological resistance. The market is mildly buoyed by hopes of progress in U.S.-China trade talks, with officials meet in Washington on October 10-11. Also, the market is supported by the reports about an anti-government unrest in Iraq. Iraq’s oil exports of 3.43 million barrels per day from Basra terminals could be disrupted if instability lasts for weeks. Besides, Libya’s National Oil Corporation said it would close the Faregh oil field at Zueitina port for scheduled maintenance from Monday until October 14. Against this backdrop, prices could stay afloat in the short term but the downside risks still persist.
Nathan Lambert, Head of Global FX Analytical Department