European stocks opened in a mixed fashion on Thursday before turning positive, and it looks like the session will be quiet unless investors hear more from Biden's proposal. Earlier, there was a report suggesting a $2-trillion spending on the way. Upbeat Chinese export data boosted sentiment somehow, with the pan-European STOXX 600 index rising 0.38% early in the session.
Market focus is now on expectations of additional U.S. stimulus from the incoming Biden administration as well as comments from the head of the Federal Reserve on its policy outlook, while the news that Trump had been impeached for a historic second time appeared to have little immediate impact on investor sentiment.
Elsewhere, Germany RKI president said that they will have the pandemic under control by the end of this year. He also noted that the situation could get worse thanks to the new virus variant. Meanwhile, according to the preliminary gross domestic product figures, the German economy contracted by 5% in 2020. The headline is a little better than estimates of a 5.1% but still the poorest annual reading since the global financial crisis.
Against this backdrop, the FTSE 100 in London gains 0.66% to 6,790, Italy’s FTSE MIB adds 0.45 percent to 22,845, France’s CAC 40 is up by 0.32% to 5,680, while the German DAX 30 rises by 0.44% to 14,000. US stock index futures looked mixed ahead of speeches from Powell and Biden.
In currencies, the dollar is little changed during the European hours as traders keep a cautious tone ahead of the key events of the week. The USD index has settled around the 90.40 area, with focus remaining on yields and US politics. The renewed speculations of a potential Fed’s tapering at some point by year-end add to a mild bullish bias surrounding the greenback. Ahead of the participation of Fed’s Powell in a livestream event, the weekly jobless claims report will take centre stage. However, market reaction to the release will likely be limited this time.
In commodities, oil prices failed to settle above the $56 handle earlier in the day and retreated back to the flat-line in recent trading. Yesterday, Brent crude was rejected from nearly one-year highs around $57.40 and struggles to regain upside ground since then. Still, the futures remain within a strong uptrend, with downside risks looking limited as long as the prices stay above the ascending 20-DMA, today at $52.80. If risky assets receive a boost from Powell and Biden later today, Brent could resume the ascent and turn the $56 figure back into support.
Nathan Lambert, Head of Global FX Analytical Department