European stocks continue to advance on Wednesday, as investors cheer the reports that China recorded its lowest number of new coronavirus cases since January, which fuels hopes that the number of new cases could soon plateau. China’s National Health Commission reported 2,015 new cases of coronavirus and 97 deaths across the mainland today.
On the data front, Eurozone industrial production contracted 2.1% in December versus -2.0% expected. In general, the result came as no surprise for investors after dismal figures out of Germany revealed last week. Anyway, the data confirmed that the factory activity in the region remains fragile. In corporate news, Heineken Holding stocks rallied over 5% after the company exceeded expectations with a 14% rise in 2019 profit. Heineken also projects mid-single digit organic operating profit growth for the year. Energy companies are trading higher as oil prices are extending recovery for a second day in a row.
Against this backdrop, UK’s FTSE 100 adds 0.30 per cent to 7,522, Italy’s FTSE MIB adds 0.69 per cent to 24,859, France’s CAC 40 is up 0.43 per cent to 6,081, while German DAX 30 rises by 0.80 per cent to 13,737. US stock index futures pointing to a higher start and potentially fresh records after record closes for the S&P 500 and Nasdaq Composite on Tuesday.
In currencies, the dollar turned mixed after the recent ascent. As such, GBPUSD has been rising for a third consecutive day, challenging fresh local highs just below the 1.30 handle which could serve as a fairly strong resistance on the way north in the near term. EURUSD meanwhile struggles for direction after a modest recovery on Tuesday, threatening the 1.09 handle again. The technical picture in the daily charts remains bearish, and the common currency will likely remain under the selling pressure as long as dollar demand persists.
As for the oil market, Brent crude has been testing the $55 figure after being rejected from the $55.40 area earlier in the day. Oil prices struggle to see a more robust recovery despite risk sentiment continues to improve. In part, this is due to a bearish API report revealed overnight. According to the institute, crude oil stockpiles increased 6 million barrels last week. So, traders are now worried about the EIA report due later today. On the other hand, should the official estimate come less bearish, Brent may regain the above mentioned intermediate resistance and retarget the $56 handle. of note, the upside potential in the market will likely remain limited as long as OPEC+ keeps silent on its decision on additional production cuts.
Nathan Lambert, Head of Global FX Analytical Department