European stocks are trading mostly in a positive territory on Tuesday, as investors are cautiously monitoring the latest U.S.-China trade developments, with US Treasury Secretary Steven Mnuchin said he and US Trade Representative Robert Lighthizer would hold their scheduled round of trade negotiations with Chinese Vice-Premier Liu He in two weeks’ time.
In other news, the U.K.’s highest court ruled that Prime Minister Boris Johnson’s suspension of parliament for five weeks until October 14 was unlawful. Meanwhile, Scotland's First Minister called for Boris Johnson to resign, which was no surprise to the markets.
On the data front, Germany’s Ifo business climate index rose to 94.6 points from 94.3 in August while companies’ expectations fell to 90.8 points from 91.3, hitting its lowest level since June 2009. Fresh figures confirmed that the Eurozone largest economy is on the verge of a recession and additional stimulus measures could be necessary from the ECB.
Against this backdrop, UK’s FTSE 100 sheds 0.50 per cent to 7289, Italy’s FTSE MIB adds 0.18 per cent to 21,939, France’s CAC 40 gains 0.28 per cent to 5,645, while German DAX 30 rises by just 0.05 per cent to 12,343. US stocks opened slightly higher as market participants were encouraged by some positive headlines on US-China trade talks. The Dow Jones Industrial Average 0.4%, the S&P 500 was up 0.4%, and the Nasdaq 100 added 0.5%.
In currencies, the greenback turned lower after the initial bullish attempts. The negative sentiment is due to softer US consumer confidence and manufacturing data. Consumer confidence was at 125.1 compared to 134.2. The Richmond Fed fell to -9 from +1, with both drops were unexpected and the drop in the 'expectations' component of the survey was particularly notable. Against this backdrop, EURUSD shifted into a recovery mode after two days of decline. The pair is trying to cling to the 1.10 figure but the upside momentum is limited despite dollar weakness as German economy continues to warn about a recession.
Brent crude continues to close the gap from the previous week. Brent dipped below the $62.50 and has settled around this support area. There are contradictory signals from the oil market as Saudi Arabia said it will be able to restore its production by next week already, which added to the selling pressure. Besides, weak economic data from major economies fuel worries about global oil demand amid the lingering recession fears. At the same time, the downside potential looks limited as tensions in the Middle East persist.
Nathan Lambert, Head of Global FX Analytical Department