European stock markets turned positive on Tuesday, with investors cheering the news that the US President Trump would announce a delay to EU auto tariffs by six months. At the same time, market optimism looks limited as traders continue to express concerns over the US-China trade relations and the latest escalation of violence in Hong Kong. Markets felt unsettled at the start of the week, digesting the negative message from Trump who denied claims by the Chinese Commerce Ministry that the two countries had agreed to roll back existing tariffs on each other’s goods. Now, investors awaiting a speech from President Trump later today. Against this backdrop, UK’s FTSE 100 adds 0.35 per cent to 7354, Italy’s FTSE MIB gains 0.87 per cent to 23,694, France’s CAC 40 rises by 0.30 per cent to 5,911, and German DAX 30 adds 0.50 per cent to 13,264. Meanwhile, US stocks index futures are edging higher ahead of a widely expected Trump’s trade speech. According to the latest news, Trump will be making a constructive statement on China.
On the data front, German ZEW sentiment data beat expectations to print at -2.1 versus expected -13.2, while economic sentiment came an at -2.1 versus expectations of -13.2. European ZEW economic sentiment came in at -1.0 versus expectations of 11.5 in November. In its survey, ZEW noted that the improved outlook for Brexit, auto tariffs from the US and the US-China trade deal increase optimism among companies. Meanwhile, UK average earnings figures print at 3.6% missing expectations of 3.8%. Unemployment rate came in at 3.8% in September versus expected 3.9%.
After the data, GBPUSD stayed below mid-1.28 as dollar demand picked up ahead of Trump’s speech. In the latest move, the pair dipped below the 100-SMA in the hourly charts. Besides, US October NFIB small business optimism index came in at 102.4 versus 102.0 expected. The release added to the local strength for the greenback. In the short term, the pound needs to challenge the daily highs around 1.2865 in order to get back above the 1.29 figure. The chances for such scenario will depend on Trump’s rhetoric later today.
In commodities, Brent crude has settled above the $62 handle and has been challenging the $62.50 zone as traders switched into a wait-and-see mode, also ahead of the US President’s speech. Trump’s positive comments on China and the possible trade deal could fuel risk demand substantially and lift crude oil prices above the $63 handle on a daily basis. On the other hand, traders are beginning to express some concerns over a lack of positive signals from OPEC countries as markets expect the cartel and its allies to announce deeper output cuts in December.
Nathan Lambert, Head of Global FX Analytical Department