European stock markets opened higher on Wednesday and stay elevated ahead of the opening bell on Wall Street. Investors are cheering some recovery signs in the oil market and canceling strict curbs in Italy put in place to contain the coronavirus. Now, market participants are gradually shifting their focus to the European Union summit on Thursday where the regional authorities will discuss using a joint long-term budget to revive economic growth. Despite the current recovery in stocks, the uncertainty surrounding the coronavirus developments persists and caps the upside potential in the markets.
Against this backdrop, UK’s FTSE 100 adds 1.57 percent to 5,729, Italy’s FTSE MIB gains 1.14 percent to 16,637. France’s CAC 40 recovers by 0.43 percent to 4,376, while German DAX 30 rises by 0.82 percent to 10,335. U.S. stock index futures are pointing to gains at the open as crude oil prices attempted to stabilize. Meanwhile, the White House coronavirus adviser Dr. Deborah Birx warned overnight that Americans should prepare to see more deaths from the coronavirus pandemic, particularly in cities.
As markets have calmed down, dollar demand has abated. As a result, most currencies turned positive against the greenback. Still, the volatility remains low, with major pairs continuing to trade within limited ranges on Wednesday. EURUSD still struggles to overcome the 1.09 handle. GBPUSD has been trading shy of the 1.24 level, and USDJPY has settled below the key moving averages, sitting around 107.60. Of note, the common currency remains on the offensive despite the German Council of Economic Experts said the German economy to contract by 5.5% in 2020 while Germany's Health Minister Jens Spahn said it will take months for any vaccine to be fully tested and available.
Meanwhile, Brent crude has recovered from fresh record lows below $20 and have exceeded the $23 handle, targeting $24. As a result, the futures turned flat on the day but sentiment in the market remains bearish as traders continue to express concerns over the outlook for energy demand globally. The IEA chief Fatih Birol said the OPEC+ countries may want to consider further output cuts while Russia noted they need to analyze the situation after the global output cuts deal comes into effect. It looks like it won’t be easy for the cartel and its allies to agree on additional supportive measures, considering resistance from Moscow and a hard way to the recent deal to cut output.
Nathan Lambert, Head of Global FX Analytical Department