As trade uncertainty reemerged following the recent optimism, European stocks turned lower on Friday, following a mostly bearish session in Asia. Despite Trump decided not to impose tariffs in the EU cars, investors prefer to sit on the fence after a decent rally, experienced earlier this week on a widespread trade-related euphoria. Now, a lack of details and timelines on the intermediate US-China trade deal, pushes market participants to a partial profit taking, though the selling pressure looks limited for the time being. In part, concerns reemerged after the reports that the phase one plan faced internal opposition in the White House. O the positive side, China's exports and imports contracted less than expected last month, while German exports rose more than expected in September.
Against this backdrop, UK’s FTSE 100 loses 0.37 per cent to 7378, Italy’s FTSE MIB adds 0.05 per cent to 23,515, France’s CAC 40 sheds 0.20 per cent to 5,878, and German DAX 30 declined by 0.21 per cent to 13,261. Meanwhile, US stocks index futures are trading marginally lower before the opening bell after a rise to fresh record highs on Thursday. Allianz, Duke Energy, and Honda Motor are set to report quarterly earnings soon.
In currencies, the greenback extends gains against its major counterparts, with EURUSD Hovering around fresh mid-October lows, threatening the 1.10 handle. The technical picture has deteriorated after a break below the 1.1050 intermediate support. The pair failed to gains support from positive German data. German exports rebounded by 1.5% in September, while he August numbers were revised upwards to -0.9%, from initially -1.8% on a monthly basis. Should the downside pressure persist in the short term, the pair could pierce the 1.10 handle and accelerate the decline. However, the euro will likely finish this week above this level as trading activity is getting more muted ahead of the weekend.
In commodities, Brent crude dipped below the 100-DMA which served as a local support zone this week. As a result, the futures registered one-week lows marginally above the $61 handle and remain under pressure. The contradictory signals from the trade front unnerve oil traders as well, and should the two countries fail to deliver some progress towards at least a partial deal any time soon, oil prices could extend losses and threaten the $60 level again. Also, the fact that Brent continues to attract sellers on bullish attempts, confirms that traders are not ready to push the prices above the $63 resistance at this stage. Later today, Baker Hughes will reveal fresh weekly data on US rig count.
Nathan Lambert, Head of Global FX Analytical Department