European stocks are marginally higher on Friday as investors are cheering strong Chinese export data while remain cautious ahead to U.S. earnings season that starts later today. Analysts are predicting S&P 500 earnings per share would fall by -2.5% year over year versus 2018. Dollar-denominated exports from China rose 14.2 percent for March from a year ago, topping expectations of a 7.3 percent rise from a year ago. Imports were down 7.6 percent, falling short of expectations of a 1.3 percent decline. In other data, the euro area industrial production declined by 0.2% in February versus -0.6% expected. The prior result was revised from +1.4% to +1.9%. Despite better-than-expected readings, the figures are still relatively soft, though revisions to the January figures are positive.
Against this backdrop, Britain’s FTSE 100 adds 0.41 percent to 7,448, France’s CAC 40 is up 0.36 percent to 5,505, while German DAX 30 adds 0.59% to 12,005. US stock index futures are slightly higher Friday morning, as investors awaiting the start of earnings season.
EURUSD jumped to two-week highs above the 1.13 figure as risk-on sentiment fueled broad dollar selling. The euro broke its consolidative mode to the upside and registered highs around 1.1320, where the rally has stalled. The pair cheered the euro zone industrial production data but also received a portion of bearishness. According to German government sources, Germany may halve its 2019 GDP growth forecast next week to 0.5% from the current 1.0% forecast. The economy minister Peter Altmaier expects the country to post economic growth of 1.5% in 2020. By the way, yesterday, Spiegel reported that the German government has already revised GDP growth for 2019 to 0.5% from 1.0%.
Despite the current rally, the common currency has yet to confirm its upside breakthrough as the impetus may be not sustained. Much will depend on risk sentiment and dollar dynamics. Should the US currency shrug off the current bearish pressure, EURUSD will retreat back below the 1.13 handle, with an important support comes at 1.1230. On the upside, the euro could target the 100-DMA if a break above 1.13 is confirmed.
Brent crude resumed the rally after a short-lived correction seen yesterday. Prices are back around the five-month highs and may target the $72 barrier should the upside pressure persist in the immediate term. The market ignored a Reuters poll that showed China’s 2019 GDP is expected to slow towards a 30-year low as traders are now focused on geopolitics. Involuntary supply cuts from Venezuela, Libya and Iran support perceptions of a tightening market, pushing prices higher. Today, the head of Libya’s National Oil Corporation warned that renewed fighting could wipe out crude production in the country. As long as the Libyan factor remains in play, Brent will remain elevated and could register fresh highs above $72.
Nathan Lambert, Head of Global FX Analytical Department