European stocks hit record highs on Friday, as investors are cheering China’s gross domestic product numbers that grew in line with expectations. The world’s second-largest economy grew by 6.1% in 2019, its slowest in 29 years but meeting analyst expectations even amid the protracted trade war with the U.S. Also, traders continue to digest yesterday’s economic data out of the United States which came in better than expected, further easing concerns over the state of the country’s economy.
Against this backdrop, UK’s FTSE 100 adds 1.02 per cent to 7,687, Italy’s FTSE MIB adds 0.67 per cent to 24,101, France’s CAC 40 gains 0.89 per cent to 6,092, while German DAX 30 rises by 0.59 per cent to 13,510. U.S. stock index futures point to higher open as market participants digest growth data out of China, after a rally to fresh highs on Thursday amid stronger-than-expected results from Morgan Stanley. Meanwhile, Microsoft rose to record levels and Alphabet reached a market cap of $1 trillion for the first time.
In currencies, the dollar received a boost from upbeat retail sales data on Thursday and preserves the upside momentum today. Against this backdrop, EURUSD had to extend the retreat from local highs around 1.1170 and got back below the 200-DMA. Moreover, the euro now threatens the 1.11 support, a break below which will signal deeper losses in the near term. in part, some downside pressure on the common currency came from comments by French Finance Minister Bruno Le Maire who said the European Union will retaliate if the US decides to impose sanctions on France over the French digital tax.
On the data front, Eurozone consumer prices came in at +1.3% on a yearly basis in December, matching the flash estimate of +1.3%. The core figure rose 1.3% versus +1.3% previous. On a monthly basis, CPI rose by 0.3% versus +0.3% expectations and -0.3% previous, while the core CPI arrived at +0.4% versus +0.4% expected and +0.4% last. The release fairly affected the pair, as the results were mostly in line with expectations. In commodities, oil prices struggle to regain a decent upside impetus despite positive economic updates from the world’s largest economies. Brent briefly jumped above the $65 handle and retreated afterwards, as traders still prefer to sell the futures on bullish attempts and refrain from buying at current levels. In other words, oil market is stuck in a consolidation mode now, awaiting fresh drivers that could send the prices in either direction. In the weekly charts, the prices nearly flat but with a small bearish bias. On the downside, the immediate key support comes around the 200-DMA just below the $64 handle. As long as the futures stay above this level, downside risks are limited.
Nathan Lambert, Head of Global FX Analytical Department