European stocks opened mostly flat on Tuesday as investor enthusiasm over the vaccine trial by Pfizer started to wane. Still, after early signs of a bearish correction, most regional equities have settled in positive territory as optimism still prevails among investors. On the negative side, the group of German economic experts sees German GDP growing by 3.7% in 2021. Still, the decline of 5.1% this year is better than government forecasts back in September.
In individual stocks, Adidas delivered a cautious outlook for sales and operating profit in the fourth quarter, citing a resurgence of the coronavirus pandemic across the region. At the same time, the German sportswear company reported third-quarter earnings slightly above expectations.
Against this backdrop, the UK FTSE 100 index rises 1.29% to 6,265, Italy’s FTSE MIB gains 0.60 percent to 20,874, France’s CAC 40 edges higher by 1.09 percent to 5,394, while the German DAX 30 sheds 0.14% to 13,077. Meanwhile, futures on the Dow Jones Industrial Average edged higher after an earlier fall by more than 200 points. S&P 500 futures and Nasdaq 100 futures also reentered positive territory after an earlier dip.
In currencies, the USD index gave up part of yesterday’s gains and retreated to the 92.60 area after a plunge to recent lows in the 92.00 region. On the upside, gains look so far capped by the 93.00 zone. Further progress regarding vaccines against the COVID-19 should cap recovery attempts in the safe-haven greenback. The index needs to make a decisive break above the 93.00 handle in order to see a more sustainable bullish impetus in the short term.
EURUSD is making shallow recovery attempts after the sell-off seen on Monday. Despite the rejection from the levels above 1.19 and the subsequent retreat, the common currency remains managed to stay above the 20-DMA, suggesting downside risks are limited for the euro at this stage. In a wider picture, the further ascent in the pair could be capped by rising coronavirus cases in Europe and weak economic updates out of the Eurozone. In the immediate term, EURUSD needs to hold above 1.18 so that to regain the upside impetus and retarget the 1.20 barrier last seen in early-September.
In commodities, oil prices resumed the ascent after some hesitation seen at the start of the day. Brent crude regained both the 100-DMA and the $43 handle, targeting three-week highs registered in the $43.50 area on Monday. However, further gains in the market could be limited as there is heightened uncertainty regarding the OPEC+ deal and the outlook for energy demand recovery. On the downside, the immediate support is now represented by the mentioned 100-DMA that arrives at $42.70.
Nathan Lambert, Head of Global FX Analytical Department