After initial losses, European stock markets turned green and recovered from a weak start on Thursday after the European Union's Chief Brexit Negotiator, Michel Barnier, said that the Brexit deal is agreed by negotiators and will be presented at the EU summit. Despite the two sides have been working on the legal text of a deal, it will still need the approval of both the UK and European parliaments. Besides, the DUP has cast doubt on its success, saying they still cannot support it. As such, Brexit uncertainty persists despite the risk of a no-deal exit has decreased substantially.
In other news, regional stocks received a boost from earnings from Swedish telecoms gear maker Ericsson. The company beat quarterly earnings expectations and lifted its market forecast for this year and its sales target for 2020. The company’s adjusted third-quarter operating earnings rose to 6.5 billion crowns from 3.8 billion a year earlier, corresponding to an 11.4% margin and beating the 5.2 billion mean forecast. After the report, Ericsson shares jumped as much as 7.4%. On the data front, the UK retail sales were flat in September and annual sales growth picked up to 3.1% from 2.6% in August.
Against this backdrop, UK’s FTSE 100 adds 0.53 per cent to 7,206, Italy’s FTSE MIB adds 0.47 per cent to 22,533, France’s CAC 40 gains 0.22 per cent to 5,709, and German DAX 30 rises by 0.60% to 12,746. Meanwhile, US stocks index futures turned higher after mixed trading amid the news that the UK and the EU have agreed on a new deal for Brexit. Also, investors continue to monitor the ongoing earnings season, with Morgan Stanley, Honeywell, and Philip Morris will reveal their quarterly results later today. Upbeat figures from these giants could give the additional boost to US stocks.
The reports on striking a deal between the UK and the European Union fueled rally in the GBPUSD pair which registered fresh highs just below the 1.30 handle. After a knee-jerk reaction, the cable retreated below 1.29 as the DUP has slightly poured cold water on this optimism. Nevertheless, the pound remained firmly in the positive territory awaiting further developments. Now, market focus shifts to Saturday, when MPs will be voting on whether they back the new deal or not.
In commodities, Brent crude is trading marginally higher on the day. The futures have settled just above the $59 level after an earlier dip to $58.80. In general, trading activity is muted today as investors are cautiously monitoring trade and Brexit developments. The news about a deal on Brexit failed to inspire oil bulls as there is still uncertainty on this front. Besides, market participants express fears about the upcoming EIA report that could confirm a significant rise in the US crude oil inventories.
Nathan Lambert, Head of Global FX Analytical Department