After the US stock finished off lows and Asian markets saw some gains, European equities extended gains on Thursday, with investors reacted quite calmly to the PBOC setting the reference rate on the yuan above 7, at the weakest level since April 21, 2008. Chinese data showed a surprise jump in the July exports despite the ongoing trade war with the US, which gave some relief to markets. Exports in China rose 3.3% from a year earlier, the fastest since March, exceeding forecasts for a 2.0% drop. In individual stocks, Adidas shares were down 1.5% amid disappointing second-quarter sales, while Lighting group Osram came as the biggest decliner on STOXX index after its top shareholder rejected a 3.4-billion-euro takeover offer from private equity firms Bain and Carlyle.
Against this backdrop, UK’s FTSE 100 adds 0.31 per cent to 7220, Italy’s FTSE MIB gains 0.66 per cent to 20,672, France’s CAC 40 rises by 1.26 per cent to 5,332, while German DAX 30 adds 0.85 per cent to 11,748. US stock index futures are inching higher as better-than-expected Chinese trade data and a steadying of its currency offered some relief to investors amid the recent escalation in trade tensions.
Meanwhile, the dollar is mixed against the majors, with latest comments from White House failed to affect the direction in the USD index which remains nearly flat on the day. Navarro reiterated that the Fed needs to lower interest rates to help the US economy continue to grow. Meanwhile, weekly jobless data came in better than expected but went unnoticed as markets are still focused on the trade war. EURUSD was once again rejected from the 100-DMA and turned lower on the day, trading below the 1.12 handle. Downside risks remain for the common currency and the bullish potential is limited.
GBPUSD remains in a tight range for a fourth day in a row, with the pair continues to oscillate around 1.2140 while the 1.21 level serves as a local support. Despite lack of USD demand, cable struggles to stage a recovery as persistent fears of a no-deal Brexit continue to weigh on the currency. Technically, the pair needs to overcome the 1.22 barrier to see a more directional move. So far, the pound will likely extend its consolidation in absence of fresh Brexit-related headlines.
Oil prices remain under pressure, trying to hold above the $57 figure after yesterday’s brief drop below $56. The market stays depressed by the escalation in the trade war, with fears of waning oil demand cap the bullish attempts. Meanwhile, an official for Saudi Arabia's oil ministry said that recent concerns about oil demand growth were overplayed and were reflecting poor macroeconomic sentiment. He also noted that production in September will be 700,000 barrels per day lower than August. The verbal interventions seem to have stemmed the decline but failed to spur Brent demand as demand-related worries remain in focus.
Nathan Lambert, Head of Global FX Analytical Department