Following gains in Asia, European stocks opened little changed before turning mixed in recent trading as investors express caution ahead of US inflation data due later today. Risk sentiment has somehow deteriorated since yesterday’s evening as US Treasury yields started to rise again in anticipation of higher consumer prices in the United States.
On the data front, China reported earlier today that its March exports in dollar terms grew 30.6% year-over-year, while import growth surged 38.1%, exceeding expectations. In the UK, manufacturing output arrived at 1.3% in February versus -0.8% expectations and -1.8% booked in January while total industrial output came in at 1.0% versus 0.5% expected and -1.8% last. The German ZEW headline numbers for April showed that the economic sentiment index dropped to 70.7 versus 79.0 expectations and 76.6 last. Meanwhile, the Eurozone ZEW economic sentiment for April fell to 66.3 versus 73.2 expected and 74.0 last. US March NFIB small business optimism index arrived at 98.2 versus 98.5 expected.
Against this backdrop, the FTSE 100 in London sheds 0.04% to 6,885, Italy’s FTSE MIB gains 0.60% to 24,603, France’s CAC 40 is up by 0.39% to 6,185, while the German DAX 30 edges 0.32% higher to 15,263. US stock index futures a touch higher ahead of North American trading.
In currencies, the dollar continues to trade in a mixed manner, with all eyes being on US inflation data. If the figures come in higher than expected, the safe-haven greenback would receive a boost amid rising US Treasury yields. EURUSD was initially unfazed by ZEW data, hovering around the 1.1900 handle. However, the selling pressure reemerged in recent trading, sending the common currency to session lows around 1.1880. The 200-DMA remains in market focus, with the 20-DMA continuing to act as the key immediate support, today at 1.1840.
Elsewhere, oil prices are challenging the $64 figure during the European hours, trying to hold above the 20-DMA. The API inventory data could affect market sentiment later today. Also, the reaction to US inflation data will matter for Brent through dollar dynamics. Despite the current bounce, bearish risks continue to persist amid rising coronavirus cases in many countries. On the downside, the $62.50 area represents the immediate support at this stage. A daily close above the $64 level would somehow improve the technical picture in the short term.
Nathan Lambert, Head of Global FX Analytical Department