European stocks opened marginally higher on Wednesday, with regional investors digesting a slew of earnings reports. Deutsche Bank reported a $1.1-billion profit for the first quarter, its best quarterly profit since the first quarter of 2014. The bank’s stocks rallied over 6% following the report. Lloyds stock rose 4% and the U.K. bank also reported a strong quarterly result, with profit after tax of 1.4 billion pounds. London Stock Exchange stock rose over 1% after the group reported a 3.9% rise in total income in the first quarter.
On the data front, Germany’s GfK survey of consumer sentiment fell to -8.8 in May from -6.1 the previous month. Meanwhile, European Parliament voted in favour of Brexit trade agreement, adding to a slightly positive tone in the markets. Still, investors refrain from making big bets ahead of the U.S. central bank's policy announcement due later today. Policymakers are widely expected to reaffirm their stance to keep monetary policy loose while Powell’s tone could affect market sentiment.
Against this backdrop, the FTSE 100 in London adds 0.21% to 6,959, Italy’s FTSE MIB loses 0.22% to 24,418, France’s CAC 40 is up by 0.38% to 6,297, while the German DAX 30 is up 0.33% to 15,299. US stock index futures are slightly lower ahead of the opening bell on Wall Street.
In currencies, the USD index extends the recovery, posting gains for the third consecutive session on Wednesday amidst the rebound in US yields. Yields of the US 10-year note manage climbed to the vicinity of the 1.65% level ahead of the outcome of the Federal Reserve decision due later today. As such, EURUSD came back under some selling pressure today. However, the pair still remains above the 100-DMA that has been acting as support this week. If the Fed delivers a more hawkish tone than expected, the common currency could dip below this moving average to retarget the 1.2000 figure eventually.
In commodities, oil prices struggle for direction following modest gains seen yesterday. Overnight, the American Petroleum Institute announced its estimate of a rise of 4.3 million barrels in crude oil inventories. Now, traders await the official report from the EIA. If the data confirms a bearish figure, Brent crude could see some intraday losses. Furthermore, the greenback could stage a widespread rally if the Fed delivers a more hawkish message amid rising inflation and solid economic recovery. In this scenario, oil prices may stage a reversal to see decent losses in the short term.
Nathan Lambert, Head of Global FX Analytical Department