European stocks are trading lower on Thursday as investors are focused on fresh corporate results and trade developments, with concerns reemerged after reports that progress on US-China talks has stalled amid an issue with the Chinese telecommunications giant Huawei. As such, global trade developments keep market participants nervous. As for earnings, Danske Bank’s second-quarter pretax profit came in below expectations due to low interest rates and higher costs which rose in the aftermath of a money-laundering scandal at its Estonian branch.
Meanwhile, technology stocks added to the negative pressure and sent the regional shares to three-week lows after software firm SAP reported poor results. The tech company said that investors would have to wait till next year for a major improvement in margins as the business software group reported a 21% fall in quarterly operating profit.
Against this backdrop, the UK’s FTSE 100 sheds 0.31 per cent to 7512, Italy’s FTSE MIB adds 0.43 per cent to 22,172, France’s CAC 40 declines by 0.17per cent to 5,562, while German DAX 30 loses 0.43 per cent to 12,287. US stock index futures point to a lower open amid escalation in the US-China trade tensions.
The dollar is mixed on Thursday, with EURUSD turned lower after a short-lived recovery. The pair struggled marginally below the 1.1250 intermediate resistance and slipped back to lows around 1.12. Euro bulls will need to move the price firmly above 1.1240 to change the short-term sentiment towards the pair. Interestingly, the pair fails to show a more robust and sustainable recovery despite USD demand remains subdued, which may point to rising expectations of additional stimulus from the ECB. The European currency is also nervous amid reports that the ECB has begun studying a potential revamp of its inflation goal, in a move that could potentially embolden policymakers to pursue monetary stimulus for a longer period. In the short-term, risk of a break below 1.12 remains.
Oil prices are relatively steady today, with Brent turned positive on the day recently. Earlier, the futures plunged amid reports that US Senator Rand Paul may soon sit down at the negotiating table with Iranian Foreign Minister Javad Zarif in an effort to smooth heightened tensions between the two nations. The market was also upset when US Secretary of State Mike Pompeo suggested that Iran was ready to sit at the negotiating table over the nuclear deal. Some local upside pressure on prices came from the G7 draft summary. The document states that global growth appears to be stabilizing with expected moderate pickup in 2020. Brent crude recovered above $64 and registered daily highs just below $64.50. Despite the latest pickup, the downside risks still persist, and the prices could get back below $64 should sellers reemerge on rally attempts.
Nathan Lambert, Head of Global FX Analytical Department