European stocks are trading mostly in positive territory on Friday amid some more positive signals from the trade front and mixed economic data out of the Eurozone. On Thursday, Chinese Vice Premier Liu He had invited U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to Beijing for continue the negotiations. Today, Beijing signaled it wants a trade deal with the U.S, which helped to somehow ease investor concerns after recent doubts in resolving the trade dispute between the world’s two largest economies.
On the data front, the flash November reading of the European manufacturing PMI came in at 46.6, below the level of 50, indicating contraction in activity and stagnation in the regional economy. In the UK, flash PMI in services dropped to a 40-month low of 48.6 while the manufacturing index came in at 48.3 compared to 49.6 in the previous month.
Meanwhile, the ECB’s new governor Lagarde said that Europe faces a global environment that is marked by uncertainty. Also, she noted that monetary policy will continue to support the economy and respond to future risks in line with the central bank’s price stability mandate. On the positive side, Lagarde highlighted that accommodative policy stance has been a key driver of domestic demand during the recovery, and that stance remains in place.
Against this backdrop, UK’s FTSE 100 recovers by 1.22 per cent to 7326, Italy’s FTSE MIB gains 0.29 per cent to 23,347, France’s CAC 40 rises by 0.26 per cent to 5,896, and German DAX 30 gains just 0.07 per cent to 13,147. Meanwhile, US stocks index futures are slightly higher following three straight days of losses.
In currencies, EURUSD was once again rejected from the 100-DMA around 1.1085 and has settled close to the flatline, with mixed economic data failing to inspire the common currency. In a brief rejection from daily highs, the euro registered one-week lows just below the 1.1050 immediate support. The pair looks directionless in the short term charts. In general markets continue to focus on trade developments which set the tone for risky assets. Should the US or China refrain from negative statements today, EURUSD would finish the trading week above the mentioned support area. On the upside, the 100-DMA will likely to cap the upside attempts further, and the euro will need the additional impetus to challenge and break this line.
As for oil market, Brent crude remains close to the two-month highs around $64 and could rise above this level should risk sentiment remain positive in the short term. Oil traders cheered positive trade-related headlines from China and signs that OPEC+ countries could agree upon deeper production cuts in December. At the same time, Brent looks attractive for profit taking at current levels and any signs of waning optimism in the global markets could trigger a reversal in prices.
Nathan Lambert, Head of Global FX Analytical Department