The US-China trade hopes returned on Friday, after the White House economic adviser Larry Kudlow said the two countries are getting closer to a partial deal. Market sentiment has improved somehow on the news, but it has not been enough to spark an outright rally in global stocks. As such, European equities are posting mixed results during the last trading day of the week, with concerns over a potential escalation in the trade spat remaining.
On the data front, according to the preliminary report, Eurozone inflation slowed to 0.7% last month from 0.8%, while the region’s trade surplus widened to 18.7 billion euros from 12.6 billion euros. However, the economic updates failed to affect the sentiment in the block’s stocks substantially, as investors are still focused on trade developments.
Against this backdrop, UK’s FTSE 100 loses 0.60 per cent to 7249, Italy’s FTSE MIB gains just 0.08 per cent to 23,500, France’s CAC 40 adds 0.27 per cent to 5,916, and German DAX 30 rises by 0.09 per cent to 13,192. Meanwhile, US stocks index futures are higher ahead of the open, digesting a positive message from Kudlow.
In currencies, EURUSD is making further bullish attempts after a rejection from mid-October lows below 1.10. However, the upside potential looks limited as the greenback remains broadly steady due to the lingering uncertainty around the US-China trade discussions. Mostly positive economic updates out of the Eurozone gave some lift for the common currency but the effect is fairly weak.
In the short term, the pair will have a test by the US retails sales data. If the figures come better than expected, or at least meet expectations, the US currency could receive an extra boost before the trading week ends. In this scenario, the pair could challenge the key 1/10 psychological handle once again. In the weekly charts, EURUSD is trading nearly flat, and the inflation report will set the direction for the pair later today. As for commodities, crude oil prices are back under pressure after the previous bullish attempts were capped marginally above $63 on Thursday. Brent slipped to the $62 area and is now trying to decide on the direction. The market is still under pressure after the weekly EIA report which showed the crude oil inventories in the US rose by 2.2 million barrels last week. Moreover, production increased by 200K barrels per day, which added to the selling pressure in the market. Now, traders continue to monitor trade developments and also expect fresh signal from OPEC ahead of the December meeting. Also, the upside attempts are capped by the lingering trade uncertainty, as traders’ behavior suggests that the markets now want to see more actions from the US and China, and just words are not enough already.
Nathan Lambert, Head of Global FX Analytical Department