European stocks are trading higher on Thursday corporate earnings season gathers pace. At the same time, the upside is limited as investors remain in limbo over an expected delay to the U.K.’s departure from the European Union. Also, stocks briefly pared gains after worse-than-expected euro zone manufacturing and services data. The IHS Markit October flash services PMI estimate for October came in at 51.8, slightly below the expected 51.9, while the manufacturing PMI came in at 45.7 against a forecast of 46.0. Composite PMI flash estimate was 50.2, up from 50.1 in September but lower than the 50.3 forecast.
As for corporate news, the Royal Bank of Scotland reported an attributable net loss of £315 million for the third quarter on the back of a £900 million charge to settle claims relating to the payment protection insurance mis-selling scandal. Shares of the bank dipped 2.3%. German chemical maker BASF reported a fall in third-quarter net profit and sales, however shares edged 2% higher. Daimler announced a third-quarter net profit rise of 8%, stocks rose 4.6%. meanwhile, French IT consultancy Atos stock rallied 10% after the reports that its CEO Thierry Breton would step down to become France’s candidate for the next EU Commissioner. He will be replaced by CFO Elie Girard.
Against this backdrop, UK’s FTSE 100 adds 0.85 per cent to 7,322, Italy’s FTSE MIB gains 0.77 per cent to 22,523, France’s CAC 40 rises by 0.37 per cent to 5,673, and German DAX 30 adds 0.55 per cent to 12,868. Meanwhile, US stocks index futures are trading slightly higher after better-than-expected earnings from Microsoft. The tech giant reported earnings per share of $1.38 on revenue of $33.06 billion for the previous quarter. Overnight, Tesla shares spiked more than 18% after the electric car maker posted a surprise quarterly profit.
During today’s meeting, the ECB left its monetary policy unchanged as expected. In his last speech as the central bank governor, Mario Draghi noted that risks to the economic outlook remain on the downside, with headline inflation is likely to decline further but the underlying inflation to pick up over medium term. As the comments about downside risks weren't a surprise, the euro has edged higher, with EURUSD spiked briefly to the 1.1150 area and retreated partially afterwards. Also, the dollar edged down after uninspiring US data. New orders for manufactured goods in September decreased $2.8 billion, or 1.1%, to $248.2 billion. This reading came in worse than the market expectation for a decline of 0.8%.
In commodities, Brent crude pushed above the $61 handle for the first time in October amid positive risk sentiment across the board. The unexpected decline in the US crude oil inventories added to the upbeat tone yesterday, with hopes for extension in the OPEC+ deal also support prices. Brent needs to stage a daily close above the $61 handle in order to confirm a local bullish breakout.
Nathan Lambert, Head of Global FX Analytical Department