European stocks advanced, followed Asian markets higher on Monday after stronger-than-expected economic data out of Asia. Industrial output in China rose up 6.9% year-on-year in October, quicker than expected by analysts while retail sales recovered by 4.3%, marking the fastest annual rate of expansion this year. Japan’s GDP grew 5.0% in the third quarter, above the expectation of 4.4%, a turnaround from -7.9% in the previous quarter. Still, concerns about the second wave of the pandemic could cap further rally in equities as new cases continue to rise globally. In Germany, the authorities said they planned to decide about possible December restrictions next week. Against this backdrop, the UK FTSE 100 index adds 0.76% to 6,364, Italy’s FTSE MIB adds 1.16 percent to 21,145, France’s CAC 40 edges higher by 1.17 percent to 5,443, while the German DAX 30 recovers by 0.61% to 13,157. Meanwhile, the US stock index futures continue to rise after equities gained over 1% on Friday, when the S&P 500 index ended at a record closing high, adding 2.2% for the week.
In currencies, the dollar raped earlier losses in a sign that upbeat risk sentiment may be waning already. As such, EURUSD retreated from one-week highs registered around 1.1870 and was just a tad higher on the day as of writing. In part, the common currency came under local pressure after dovish comments from the European Central Bank Vice President Luis De Guindos who warned about downside risks amid the ongoing pandemic. Now, investors shift their focus to the speech by ECB’s Lagarde due later today. If the dollar extends the rebound, the pair could dip below the 1.1840 region and turn red on the daily charts in the near term.
Meanwhile, oil prices have settled above the $43 handle on Monday, having shifted into a recovery mode after three days of losses. The oil market was buoyed by a generally positive risk sentiment fueled by strong economic updates out of China and Japan. Strong figures helped to offset concerns over the rising drilling activity in the United States. According to Baker Hughes, the number of active U.S. rigs drilling for oil rose by 10 to 236 last week, following increases in each of the last seven weeks. In the near term, Brent crude needs to hold above the $43 figure in order to extend the recovery and overcome the $43.80 local resistance, a break above which could pave the way towards $45.
Nathan Lambert, Head of Global FX Analytical Department