After Wall Street closed marginally lower overnight, European stocks were a tad higher at the open on Thursday, with trading activity getting muted in the second half of the week as many countries in Asia-Pacific, including China, Japan and South Korea, shut for holidays. It looks like the market is taking a breather for the time being after the recent rally while risk sentiment continues to hold up these days. On the data front, Germany January wholesale price index came in at +2.1% versus +0.6% m/m prior.
Meanwhile, ECB's Villeroy said that the central bank’s balance sheet greening does not mean more easing, and the ECB should try to adjust value of corporate asset purchases based on climate risk. In Germany, Merkel noted that lockdown will not be maintained a day longer than necessary, and the goal is to lift restrictions only when justified. As a reminder, Germany has announced that they will extend lockdown until 7 March.
In corporate earnings, Credit Agricole reported net income of 124 million euros in the fourth quarter while indicating that the worst of the Covid-19 pandemic may have passed. German lender Commerzbank said that its revenue will probably shrink slightly this year. The bank reported a quarterly loss of 2.7 billion euros after writing down asset values.
Against this backdrop, the FTSE 100 in London adds 0.24% to 6,540, Italy’s FTSE MIB rises by 0.24 percent to 23,320, France’s CAC 40 is up by 0.01% to 5,671, while the German DAX 30 gains 0.32% to 13,976. US stock index futures look little changed ahead of the weekly jobless claims data due later today. On the negative side, a senior US administration official said that will be changes to the US trade policy with China. In particular, US will look at new targeted restrictions on sensitive technology exports to China while tariffs on China will remain in place while US review on trade policy takes place.
In currencies, the dollar is little changed versus its major counterparts, struggling for direction after the recent slide. Weaker-than-expected US CPI data added to the negative pressure surrounding the greenback yesterday. Now, the USD index needs to hold steady in order to avoid another sell-off in the short term. EURUSD continues to hold above the 20-DMA that arrives around 1.2100. The euro retains a modest bullish bias in the intraday charts while lacking the directional impetus to overcome the 1.2150 intermediate resistance.
Oil prices are trading flat on Thursday after finishing unchanged yesterday. Brent crude is clinging to the $61 handle after rejection from fresh January 2020 highs around $61.70. as the rally slows, a downside correction could take place in the short term as the futures look overbought at the current levels. The Energy Information Administration reported that U.S. crude inventories fell by 6.6 million barrels for the week ended February 5. The market derived some short-lived support from the report.
Nathan Lambert, Head of Global FX Analytical Department