European stocks retreated on Tuesday with investors nervously waiting for earnings season to kick off in the U.S. Equities also lost some momentum after the pause of a key coronavirus vaccine trial. Elsewhere, European Union's chief Brexit negotiator Michel Barnier told EU ministers that there was some movement in Brexit talks but they were not sufficient so far. Earlier in the session, Germany's Europe Minister Michael Roth said they want a Brexit deal but are prepared for a no-deal outcome as well.
On the data front, the German ZEW report for October showed that the Economic Sentiment Index came in at 56.1 versus 73.0 expectations and 77.4 previously. The Current Conditions sub-index arrived at -59.5 in Oct versus -60.0 expected and -66.2 in the previous month. The Eurozone ZEW Economic Sentiment for October stood at 52.3 vs.70.5 expected and 73.9 last. In the US, September NFIB small business optimism index came in at 104.0 versus 100.9 expected.
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 fell marginally ahead of third-quarter earnings season that starts later on the day as some major banks are slated to report their results, including JPMorgan Chase and Citigroup. Later in the day, the US CPI data could affect market sentiment.
In currencies, the greenback turned slightly higher on Tuesday. The euro has barely reacted to the above-mentioned economic data out of the Eurozone and Germany, staying in the red below 1.18. Still, EURUSD is holding above the 20-DMA, suggesting downside risks are limited as well. The USD index managed to rebound from recent lows in the 93.00 area, trying to regain the 93.30 region today. However, further gains could be limited if the major banks deliver strong quarterly results and thus fuel risk-on mood during the upcoming session.
In commodities, Brent crude regained the $42 handle in recent trading but struggles to overcome the $42.50 intermediate resistance where the 100- and 200-DMAs converge. The recent selling pressure has eased today but the recovery potential is still limited as global supply is growing amid weak demand amid the pandemic. Later today, the API reveals its weekly reports. If the release points to an increase in crude oil inventories, Brent could come under renewed downside pressure.
Nathan Lambert, Head of Global FX Analytical Department