Macro economics

Analytics on 12.10.2020. Equities modestly higher, still capped by uncertainties

European equities trading mostly higher on Monday, tracking gains in Asia on the back of the People’s Bank of China’s steps. The central bank announced a rule change that made it cheaper to short the yuan. Also, market attention continues to be focused on the prospect of a second U.S. stimulus package after both House Speaker Nancy Pelosi and Senate Republicans pushed back on a $1.8 trillion offer from the White House.

Meanwhile, rising coronavirus cases in Europe continue to cap investor optimism, with Spain’s government has imposed a state of emergency on Madrid and the U.K. government plans to announce further restrictions for the country later today. Also, market participants are expecting the ECB president Lagarde to speak later today.

Against this backdrop, the UK FTSE 100 index sheds 0.05% to 6,013, Italy’s FTSE MIB adds 0.32 percent to 19,657, France’s CAC 40 rises by 0.35 percent to 4,964, while German DAX 30 gains 0.20% to 13,076. U.S. stock index futures climbed as investors focused on the prospect for more stimulus and improving corporate earnings.

In currencies, the greenback is stable on Monday after a strong sell-off witnessed at the end of last week. EURUSD is flirting with the 1.08 handle after a rejection from two-week highs around 1.1830. The price action looks very muted ahead of Lagarde’s statement and further developments surrounding the stimulus talks in the United States. In a wider picture, upside potential in the pair is capped by rising coronavirus cases in Europe and concerns over the outlook for economic recovery. In the short term, the common currency could get back under the 1.18 level and turn red if risk sentiment continues to deteriorate.

Elsewhere, oil prices are holding above the $42 figure after a strong rejection from local highs around $43.55 seen last Friday. Market sentiment has deteriorated amid a combination of several bearish factors including rising production in Norway, Libya, and the United States. Now, the futures are stuck between the key moving averages, which implies that Brent could spend some time in a consolidation mode before deciding on a further direction. As risk demand has been waning since the start of the day, and rising global supply puts the pressure on prices, the path of least resistance for oil prices is to the downside at this stage. If the pressure intensifies, the immediate support is expected at $42 where the 20-DMA lies. On the upside, the futures need to overcome the $42.60 local resistance to shrug off the current pressure and regain the upside bias.

Nathan Lambert, Head of Global FX Analytical Department

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Interest rates

Country Rate Value
USA Federal Funds 0,25 %
Switzerland 3 Month LIBOR Range -0.75 %
United Kingdom Repo Rate 0,10 %
EU Refinancing Tender 0,00 %
Japan Overnight Call Rate -0,10 %
New Zealand Official Cash Rate 0,25 %
Australia Cash Rate 0,25 %
Canada Overnight Rate Target 0,25 %
All rates
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