European stocks climbed to start a new week amid renewed hopes for a U.S. stimulus package and a coronavirus vaccine after Pfizer said the company could apply for emergency federal approval of its vaccine as soon as late November. Also, Chinese growth data showed that the economy continues to recover from the pandemic as the country’s economy grew 4.9% in the third quarter as compared to a year ago while industrial production rose 5.8%, and retail sales increased 0.9% over a year earlier. However, after the initial ascent, some regional indexes turned negative during the session as risk sentiment started to deteriorate gradually.
Elsewhere, ECB governing council member, Robert Holzmann, said there is no need yet for more easing amid the virus crisis but more easing may be necessary if the crisis worsens. ECB's de Guindos noted that recent data shows loss of momentum in the recovery. As for the data, Eurozone August construction output came in at +2.6% versus +0.2% m/m previously.
Against this backdrop, the UK FTSE 100 index sheds 0.12% to 5,912, Italy’s FTSE MIB gains 0.26 percent to 19,441, France’s CAC 40 rises by 0.60 percent to 4,965, while the German DAX 30 recovers by just 0.09% to 12,748. U.S. stock index futures are pointing to gains for major indexes at the start of the week, boosted by hopes for a pre-election U.S. stimulus deal.
In currencies, the dollar came under pressure amid positive risk sentiment in the global financial markets. As such, despite some dovish comments from the ECB officials, EURUSD rise to local highs around the 1.1770 resistance that could prevent the common currency from further recovery towards the 1.18 initial target. The euro reversed the earlier decline to the 1.1700 support but bullish continuation will depend on the tone that Lagarde strikes during her statement later today. If risk sentiment continues to fade, dollar demand could reemerge and send the common currency lower.
Meanwhile, Brent crude is barely holding above the $43 handle on Monday after a rejection from local highs in the $43.55 area earlier in the day. Despite the selling pressure has eased in the market, traders continue to keep a cautious tone as concerns over surging coronavirus cases globally further dampen prospects for a demand recovery. Many European governments are tightening lockdowns now to curb the spread of the virus, which is adding to worries in the market. Later today, Brent could be affected by the OPEC+ oil producer group’s Joint Ministerial Monitoring Committee meeting.
Nathan Lambert, Head of Global FX Analytical Department