Following gains in Asia, European stock markets are trending higher, oscillating around record highs on Tuesday, after China's top medical advisor said the coronavirus epidemic may plateau in the next few weeks. The death toll in mainland China climbed past 1,000 on Tuesday, but the number of new confirmed cases fell.
The additional support came from the travel sector that rallied as tour operator Tui showed how it has benefited from the collapse of a rival. The company’s stock jumped over 10% after the operator modestly narrowed its fiscal first-quarter loss and lifted its revenue outlook. Tui said it benefited from “the insolvency of a key competitor”, meaning Thomas Cook. Today, Fed Chair Jerome Powell appears before Congress to begin two days of testimony. He's expected to reiterate that the U.S. economy is doing well but that rates can stay low given the current low inflation environment.
Against this backdrop, UK’s FTSE 100 adds 0.79 per cent to 7,506, Italy’s FTSE MIB adds 0.57 per cent to 24,647, France’s CAC 40 is up 0.34 per cent to 6,035, while German DAX 30 rises by 0.71 per cent to 13,602. US stock index futures are pointing to a higher open on Wall Street Tuesday, with stocks looking to continue yesterday’s rally. Both the S&P 500 and Nasdaq Composite closed at fresh highs on Monday, while the Dow jumped more than 170 points.
In currencies, euro continues to suffer losses, refreshing four-month lows just around the 1.09 handle as dollar remains strong. The main driver behind the upbeat sentiment surrounding the greenback is the recent economic data out of the United States, suggesting the country’s economy is on strong footing and doesn’t need additional stimulus measures. The picture goes in contrast with the Asian region that suffers from the coronavirus and the Eurozone, where the latest fundamental updates point to a weakening regional economy. Later today, the EURUSD pair may trim some losses if Powell’s tone comes as more dovish, op pessimistic. Otherwise, the common currency will remain under the selling pressure and will likely challenge the 1.09 figure.
In commodities, Brent crude was rejected from fresh 13-month lows around $53 yesterday and since then, the prices managed to climb to the $54.50 area. Despite a local recovery, the market remains fragile, with bearish risks continue to prevail amid the uncertainty surrounding the OPEC+ decision and the consequences from the outbreak of a China coronavirus. Should the sell-off resume, Brent may challenge the above mentioned lows, especially as dollar demand remains robust. Later today, the API report may affect the dynamics in the futures, and the increase in crude oil stockpiles could dent the fragile rebound in the market.
Nathan Lambert, Head of Global FX Analytical Department