European stock markets opened lower but managed to reenter the positive territory afterward though gains are limited as investors keep a relatively cautious tone amid the latest developments on the trade front. On Monday, Trump administration imposed another round of restrictions on China’s Huawei amid the renewed accusations that the company’s telecommunications equipment is used for spying.
In turn, China repeated that it firmly opposed the suppression of Huawei by the United States. Also, market participants continue to monitor the US pressure on Bytedance, the Chinese owner of the TikTok app after Trump last week signed an executive order giving the firm more time to figure out a sale of its U.S. TikTok business.
Against this backdrop, the UK’s FTSE 100 adds 0.34 percent to 6,148. Italy’s FTSE MIB edges higher by 0.96 percent to 20,142, France’s CAC 40 gains 0.36 percent to 4,989, while German DAX 30 rises by 0.59 percent to 12,996. U.S. stock index futures are mixed ahead of the opening bell as market participants await further developments in the US-China trade relations. Also, investors are cautious ahead of the US construction sector data dye later today.
In currencies, the selling pressure surrounding the US dollar has intensified as positive risk sentiment prevails in the global financial markets and Trump’s aggressive foreign policy continues to hurt the appeal of the American currency. As such, EURUSD climbed to two-year highs around 1.1915 and remains positive for the fifth day in a row. Once above this level, the pair could rally toward the 1.1960 area. A daily close above 1.19 will confirm the latest bullish breakout. The downside pressure surrounding the greenback could intensify if fresh economic data out of the US disappoints.
Meanwhile, oil prices continue to oscillate around $45 on Tuesday. Brent climbed to the $45.50 intermediate resistance earlier in the day but failed to extend gains and turned marginally negative. On the one hand, the market sentiment is relatively upbeat ahead of the meeting of the ministerial monitoring committee of OPEC and its allies due on Wednesday. On the other hand, the continuing US-China trade war continues to cap market optimism. Also, the recent reports that Russian Energy Minister Alexander Novak has tested positive for coronavirus add to a cautious tone in the oil market.
Nathan Lambert, Head of Global FX Analytical Department