European stock markets reversed early losses and turned mostly positive on Tuesday as investors are closely following developments in Britain, where the lawmakers are preparing to further discuss the Prime Minister Boris Johnson’s EU Withdrawal Agreement Bill. Ahead of another vote, UK PM spokesman warned that voting down programme motion would have serious implications and there’s no guarantee of the European Union granting an extension. Meanwhile, the MP Nick Boles tabled an amendment to stop no-deal Brexit "trapdoor". The amendment requires the government by default to seek an extension to the Brexit transition period to December 2022.
On the data front, UK October CBI trends total orders came in at -37 versus -30 expected. The headline reading fell to the weakest level since March 2010, with export orders balance fell to -41 from -32 in September - the lowest since December 2009. As for the trade, Chinese Vice Foreign Minister Le Yucheng said that progress was being made in talks between the world’s two largest economies, adding that resolutions to their trade dispute could be found if mutual respect was maintained. Earlier, Trump’s chief economic adviser Larry Kudlow said there is a possibility for planned tariff hikes on Chinese goods in December to be halted if trade talks advance.
Against this backdrop, UK’s FTSE 100 adds 0.44 per cent to 7,195, Italy’s FTSE MIB sheds 0.12 per cent to 22,475, France’s CAC 40 rises by just 0.01 per cent to 5,649, and German DAX 30 adds 0.19 per cent to 12,772. Meanwhile, US stocks index futures are mostly flat, fluctuating ahead of earnings from McDonald's, Procter & Gamble, United Technologies, Harley Davidson and Texas Instruments.
In currencies, the greenback shrugged off early weakness and turned green against major rivals as traders are getting more cautious ahead a vote in the UK. EURUSD, which was rejected from 1.1180 on Monday, extends the bearish correction, challenging the 100-DMA around 1.1135. Once below, the pair could threaten the 1.11 handle and nurse further losses as Brexit uncertainty weighs on the common currency. Later in the week, fresh economic updates could drive the momentum in the pair.
As for oil prices, Brent managed to recover from daily lows around $58.40 and turned slightly positive on the day. However, the sentiment remains weak as bulls are still unable to push the prices above the $60 handle as traders are still worried that growing signs of economic weakness will eventually hurt the demand for crude oil. Later today, the API will reveal its fresh report on crude oil inventories in the US, with contraction in stockpiles could take Brent marginally higher.
Nathan Lambert, Head of Global FX Analytical Department