Following a mixed start to the session, European stocks edged higher on Tuesday amid the persisting coronavirus vaccine hopes coupled with upbeat economic data. China reported its first rise in retail sales since the pandemic while industrial production grew 5.6% in August from a year ago. In Germany, the ZEW survey showed that investor sentiment in Europe’s largest economy rose unexpectedly in September. Investors’ economic sentiment rose to 77.4 from 71.5 in the previous month, versus 69.8 expected. A gauge of current conditions rose to -66.2 from -81.3 versus -72.0 expected.
Elsewhere, the Head of the German vaccine regulator said that the first COVID-19 vaccine approvals could be granted at end of 2020 or early 2021 and expressed hope that a vaccine can be administered within days or weeks after approval. Meanwhile, ECB's Panetta said the Governing Council was ready to adjust all policy instruments. Apart from upbeat statements and strong data, rising oil prices added to the positive sentiment in the regional markets.
Against this backdrop, the UK FTSE 100 index edges higher by 1.06% to 6,021, Italy’s FTSE MIB adds 0.79 percent to 19,949, France’s CAC 40 rises by 0.48 percent to 5,075, while German DAX 30 gains 0.32% to 13,235. U.S. stock index futures are rising ahead of the release of industrial production.
In currencies, the dollar remains weak against most rivals as the USD keeps losing its appeal amid positive risk sentiment and ahead of the Federal Reserve meeting outcome. The euro has settled around the 1.19 handle that caps bullish attempts in the pair despite upbeat German data. Later in the day, US economic reports including industrial production figures could affect EURUSD. However, the common currency will hardly be able to make a decisive break above 1.19 on a daily closing basis as traders prefer a cautious tone ahead of the FOMC decision.
Elsewhere, oil prices jumped unexpectedly during the European hours and exceeded the $40 handle. Interestingly, Brent rallied despite the IEA cut its 2020 crude oil demand by 200,000 barrels per day to 91.7mln barrels per day in its latest monthly report, joining OPEC in revising the crude oil demand lower. So, the futures will hardly be able to extend the local rally in the short term and could get back below the key figure as traders may opt to take some profit at the current levels. In a wider picture, downside risks continue to persist in the oil market.
Nathan Lambert, Head of Global FX Analytical Department