Resurgent hopes for some stimulus in the US sent European stock markets higher on Thursday after a widespread rally seen on Wall Street overnight after both President Donald Trump and House Speaker Nancy Pelosi indicated support for smaller relief bills. Meanwhile, the FOMC meeting minutes showed that Federal Reserve officials expressed concern during their latest meeting that the country’s economic recovery could stall if Congress didn’t pass more fiscal stimulus.
Also on the positive side, German exports rose for the fourth consecutive month, growing 2.4% in August after a 4.7% rise in July. Meanwhile, ECB's Schnabel noted in his recent statement that markets are quite resilient so far despite rising virus infections. Of note, coronavirus cases keep rising at a fast pace globally. This coupled with the looming US elections could prevent a long-lasting and sustainable rise in global stocks in the medium term.
Against this backdrop, the UK FTSE 100 index adds 0.47% to 5,974, Italy’s FTSE MIB gains 0.62 percent to 19,555, France’s CAC 40 rises by 0.48 percent to 4,905, while German DAX 30 rises by 0.63% to 13,009. U.S. stock index futures climbed ahead of fresh data on the number of Americans claiming unemployment benefits.
In currencies, the dollar steadies ahead of the North American session, trading little changed for the most part. EUR/USD edged a little higher to 1.1780 earlier in the session before retreating to 1.1753 and testing the 100-hour moving average around 1.1755. Later in the day, dovish European Central Bank comments could push the euro down, with the central bank’s meeting minutes are due out later on Thursday. The bullish potential in the common currency is capped by rising coronavirus cases in Europe. Today, Germany reported over 4,000 daily cases, the highest since April, while Germany's Health Minister said the infection numbers are worrying. Germany has already re-imposed restrictions, following France and Spain.
In commodities, Brent crude has been rallying for the fourth consecutive day on Thursday, with the oil market being supported by the ongoing strike in the Norwegian oil fields coupled with another hurricane in the Gulf of Mexico. According to the domestic operators, reports from the Norwegian labor strike could cut off almost a quarter of the country’s petroleum production by next week. The optimism over the US fiscal stimulus keeps traders’ sentiment underpinned as well. As a result, oil futures jumped to more than a one-week high of $42.78 where the 200-DMA lies, capping further bullish attempts. In the short term, this moving average could trigger some profit-taking after the decent gains seen these days.
Nathan Lambert, Head of Global FX Analytical Department