At the end of a positive week, European equities trading mostly higher on Friday, as investors keep hopes for a US stimulus deal alive. President Donald Trump said yesterday that stimulus talks with Democrats have turned productive, adding to investor optimism across the board.
Also on the positive side, a private gauge of China’s services-sector activity showed faster-than-expected growth in September. Meanwhile, in the U.K., the economy grew just 2.1% in August versus growth of 4,6% expected. France reported a slowing pace of industrial production in August. Despite mixed data, the risk-on tone continues to prevail in the markets. On the negative side, virus cases surge in the U.K. and Germany.
Against this backdrop, the UK FTSE 100 index adds 0.70% to 6,020, Italy’s FTSE MIB sheds 0.29 percent to 19,525, France’s CAC 40 rises by 0.27 percent to 4,925, while German DAX 30 loses 0.16% to 13,021. U.S. stock index futures climbed on Friday as the White House signaled an openness to large-scale stimulus.
In currencies, the dollar is marginally lower versus major counterparts on Friday amid the prevailing risk-on sentiment. As such, the euro surged to the 1.18 handle in recent trading. However, the bullish momentum seems to be stalling at this stage as euro demand remains modest amid rising coronavirus cases across the continent. Furthermore, the current ascent in the common currency could be a selling opportunity amid positioning ahead of the weekend. If so, the pair may retreat fro the local highs amid profit-taking and turn the 20-DMA back into resistance.
Meanwhile, oil prices slipped from 2.5-week highs registered around $43.50 earlier in the day as the rally seems to be fading. As of writing, Brent was flirting with the $43 handle, a break below which could pave the way to a deeper bearish correction. On the other hand, downside risks are limited at this stage as the market continues to derive support from the declining production in the Gulf of Mexico and Norwegian oil fields. Besides, there are support levels on the way down in the form of the key moving averages. Still, the longer-term outlook for the oil market remains gloomy amid the ongoing pandemic that hurts energy demand across the globe. If the futures regain the upside momentum any time soon, the $43.50 resistance will be followed by the $43.80 intermediate resistance.
Nathan Lambert, Head of Global FX Analytical Department