After a mostly negative tone in Asia, European stock markets are trading in a mixed-to-positive manner on Monday. In general, markets are still supported by trade-related news but as the phase one deal has been priced in already, the upside pressure from this front abates. Also, the upcoming Christmas holidays suggest market conditions will get even thinner during this week, so stocks could settle in tight ranges and there is also a risk of some profit taking. Today, and Beijing’s finance ministry said that it plans to lower import tariffs on some U.S. products from January 1, while Donald Trump said on Friday that he had held a very good talk with Chinese leader Xi Jinping about the deal.
In individual stocks, shares in German chemicals maker Bayer rose over 3% after the U.S. government said that a $25 million glyphosate decision against the company should be reversed. On the negative side, bank stocks were leading the losses, with shares of Commerzbank declining nearly 2% and Credit Suisse Group sliding 1%.
Against this backdrop, UK’s FTSE 100 gains 0.45 per cent to 7616, Italy’s FTSE MIB loses 0.58 per cent to 23,863, France’s CAC 40 declines by 0.02 per cent to 6,020, while German DAX 30 sheds 0.18 per cent to 13,295. U.S. stock index futures are trading nearly flat after closing at record highs on Friday, registering a fourth-straight week of gains. As a reminder, Wall Street will trade a shortened Christmas Eve session tomorrow, and close on Wednesday.
European currencies remain under some pressure against the greenback as risk sentiment looks subdued and Brexit-related fears persist. Recovery attempts in the EURUSD pair are still capped by the 1.11 handle which serves as the immediate resistance now. The USD index is marginally off the two-week tops registered last Friday around 97.76, which caps the downside pressure for the common currency. Still, amid the lack of drivers, the pair looks indecisive, with many traders are leaving the market ahead а Christmas holidays, suggesting low liquidity in the days to come. The key support area for the pair comes at the 100-DMA around 1.1060.
In commodities, oil prices are making some bullish attempts after an earlier breakdown below the $65 handle. The market fell the victim to profit taking after a decent rally witnessed during the last two weeks. Now, the futures need to firmly regain the above mentioned level in order to stage a more vivid recovery. Still, the risk of a decline towards the 100-DMA just above $64 persists. A daily close above the $65 figure will partially improve the short-term technical outlook for Brent. Should dollar demand pick up any time soon, the futures may settle below this level.
Nathan Lambert, Head of Global FX Analytical Department