European stocks are trading in a muted manner on Tuesday, weighed down by Airbus and its suppliers. The US is proposing tariffs on the EU as they claim that the bloc's subsidies to Airbus have repeatedly caused «adverse effects» to the US i.e. Boeing. The EU in turn said it is preparing its own retaliation over Boeing aid. The EU also said WTO unlikely to allow US tariffs on $11 billion of imports. Meanwhile, the general risk sentiment was somehow supported by reports that China foreign ministry spokesman said they made substantial progress in latest trade talks with US.
Against this backdrop, Britain’s FTSE 100 adds 0.03 percent to 7,454, France’s CAC 40 is up 0.15 percent to 5,480, while German DAX 30 sheds 0.01% to 11,961. US stock index futures point to a slightly lower open as investors are preparing for a corporate earnings season that starts this week.
EURUSD recovers further on Tuesday after the recent break to new lows attracted buyers, mainly on broader dollar weakness. The pair registered two-week highs around 1.1280 and looks set to challenge the 1.13 barrier should dollar demand remain subdued in the short term. The common currency also cheered the news that Istat announced no change to Italy’s 2018 GDP growth which stayed at 0.9%. Moreover, 2017 GDP growth revised up to 1.7% from 1.6% previously. By the way, according to a fresh report, Italy February retail sales rose 0.1% versus -0.2% m/m expected. In the short-term, the euro is unlikely to break above the 1.13 handle as the ECB meeting and FOMC minutes loom and could make traders more cautious.
Crude oil prices extend the rally that so far has stalled at $70.30. Brent broke above the $71 barrier yesterday and clings to the local tops awaiting fresh impetus. Renewed violence in Libya has sent the barrel higher these days as traders are getting worried about the potential supply crunch. By the way, Libya produced around 1.1 million barrels per day of crude in March. Also, the market is supported by the receding fears of global recession after strong US jobs report and improved manufacturing activity in China. Nevertheless, the threat of further slowdown in global growth continues to keep investors worried. As such, any positive reports from Libya could fuel a bearish correction from the current tops above $71. The immediate important support now comes at $70. Once above the $71.30 area, Brent could target the $71.85 handle.
Gold prices rose on Tuesday, trading close to a more than one-week high touched in the previous session amid a generally weaker dollar after weak US economic data and ahead of FOMC meeting minutes due in Wednesday. Orders for US-made goods declined modestly in February, while the manufacturing sector has slowed amid rising inventories. The bullion was also lifted by the reports that China raised its gold reserves by 0.6 per cent to 60.62 million ounces by end-March. The precious metal is challenging the key $1,300 figure once again. A daily close above this level is needed for further recovery after the latest series of losses to $1,280. A break above the $1,303 handle will help to improve the short-term technical outlook for the bullion.
Nathan Lambert, Head of Global FX Analytical Department