Renewed hopes for striking a phase one deal between the US and China lifted European shares on Monday. On Sunday, China vowed more protection for intellectual property, in a sign that Beijing wants to resolve one of the key issues in the trade spat with the United States. Moreover, U.S. National Security Advisor Robert O’Brien said a phase one deal with China could still be reached by the end of the year. In other news, Britain’s two main political parties have both launched their manifestos in separate bids to win over the public ahead of a December 12 election.
As for individual stocks, France’s LVMH shares rose by nearly 2% and Tiffany’s shares in Germany rallied over 6.5% after the report that LVMH confirmed that it has reached a deal to buy U.S. luxury jeweler Tiffany & Co. for $16.3 billion.
On the data front, the IFO survey showed that German business sentiment improved to 95.0 in November compared to an upwardly revised 94.7 in the previous month. The assessment of the current situation rose from 97.8 in October to 97.9. The IFO Institute also noted that it is now expecting the country’s DGP to rise 0.2% in the fourth quarter.
Against this backdrop, UK’s FTSE 100 recovers by 0.84 per cent to 7388, Italy’s FTSE MIB gains 0.56 per cent to 23,389, France’s CAC 40 rises by 0.37 per cent to 5,915, and German DAX 30 gains 0.41 per cent to 13,218147. Meanwhile, US stocks index futures are slightly higher on Monday amid signs that the US and China may be edging closer to a trade deal. Dow futures are indicating a positive open of nearly 100 points. In currencies, EURUSD turned flat after failed attempts around 1.1030. The pair still struggles to regain the upside momentum despite relatively positive data out of Germany and the improved risk sentiment across the board. As such, the euro now confirms the negative trend signals, suggesting further losses could be ahead in the short term. On Tuesday, traders’ focus will shift to Federal Reserve governor speech. Should Powell strike a more upbeat tone on the economy or monetary policy, the pair could threaten the 1.10 handle once again.
In commodities, Brent crude extends the decline after an abrupt rejection from two-month highs around $64.25, where the 200-DMA lies. To challenge this region, the market needs a clear bullish catalyst from the trade front or from the OPEC countries. Otherwise, Brent could see a deeper correction once the prices get back below the $62 figure. Despite positive risk sentiment, the futures struggle to regain the upside momentum as traders remain cautious, fearing another setback in trade negotiations. In the short term, Brent needs to regain the $62 handle in order to reestablish the recent upside bias.
Nathan Lambert, Head of Global FX Analytical Department