European stock markets opened decently higher on Monday and maintain upside momentum during the day after the Bank of Japan announced more stimulus. The BOJ will now buy unlimited government bonds, in line with market expectations. Also, S&P didn’t downgrade Italian debt, which added to investor optimism. Italy is going to relax lockdown measures from May 4th while Spain has reported its lowest daily death toll in a month.
As for corporate earnings, Deutsche Bank reported better-than-expected profits and revenues in the first quarter but warned on loan defaults, citing the coronavirus outbreak. Fresh earning reports du еthis week could affect market sentiment further. The US and European central bank meetings this week are also in focus as further stimulus measures could be announced.
Against this backdrop, UK’s FTSE 100 gains 1.37 percent to 5,831, Italy’s FTSE MIB gains 2.48 percent to 17,274. France’s CAC 40 rises by 1.87 percent to 4,475, while German DAX 30 adds 2.41 percent to 10,581. U.S. stock index futures also received a boost after the Bank of Japan launched a new stimulus push and amid further signs that economies around the world slowly look to re-start activity.
In currencies, the selling pressure surrounding the US dollar has intensified during the recent trading, with EURUSD challenging the 1.0850 area. Despite a bounce from local lows, it’s too early to bet on further recovery as the upside momentum in the common currency remains limited as long as the pair stays below the 1.09-1.10 region. On the other hand, should the dollar index test the 99.30 support area, the euro may try to regain the 1.09 handle.
GBPUSD rallied on Monday on the news that coronavirus statistics have improved in the UK, with PM Johnson expressed satisfaction from the progress in battling the disease. At the same time, he called for staying patient amid the risk of a second wave of infections. Cable surged to one-week highs around 1.2455 and remains in the higher end of the local trading range. The pair needs to make a clear break above the 50-DMA around 1.2475 in order to regain the 1.25 key short-term hurdle.
Elsewhere, oil prices are back under pressure after failed attempts to cling to the $25 handle. Brent is holding below $24 and may threaten the $23 figure should traders continue to sell the futures. Traders further express concerns over the global economy, energy demand, and a second wave of coronavirus outbreak in some regions. As long as the market remains depressed, downside risks persist, with the $20 handle remaining vulnerable.
Nathan Lambert, Head of Global FX Analytical Department