European stocks opened higher Thursday amid the persisting enthusiasm over the reopening of economies across the world. The regional markets were supported by the news that the European Union proposed a €750 billion rescue fund made up of grants and loans. In general, stocks continue to rise globally despite the Federal Reserve’s Beige Book reported growing pessimism by businesses over the economy.
Nevertheless, gains are limited amid rising tensions between the U.S. and China over Hong Kong. In another sign of the conflict escalation, U.S. Secretary of State Mike Pompeo noted that Hong Kong's autonomy had been undermined so fundamentally that the territory no longer warranted special treatment. Besides, oil prices are heading lower since yesterday, adding to investors’ cautious tone.
Against this backdrop, the UK’s FTSE 100 gains 0.68% to 6,186. Italy’s FTSE MIB edges higher by 1.37 percent to 18,155, France’s CAC 40 rises by 0.49 percent to 4,711, while German DAX 30 gains 0.24 percent to 11,685. U.S. stock index futures push higher after yesterday’s rally despite the increased friction between America and China.
In currencies, the dollar is nearly unchanged in most pairs. EURUSD is flat around 1.10 after a rejection from fresh early-April highs around 1.1035 marginally above the 200-DMA. However, considering the recent retreat, the common currency is yet to confirm the breakout as the upside momentum seems to be waning now. Also, traders express a cautious tone ahead of a series of fresh economic data out of the US that could affect short-term dynamics in USD pairs.
Meanwhile, GBPUSD is trading marginally lower on the day after comments from the Bank of England policymaker Michael Saunders who noted that the UK economy will continue to face other major uncertainties over Brexit and trade policies, and even strong rebound could still leave the UK economy well below pre-COVID level. As a result, the cable dipped to intraday lows around 1.2230 after another rejection from the 50-DMA. No, the pair needs to hold above the 1.22 handle in order to avoid deeper losses in the short term.
Elsewhere, oil prices have settled around $35 after yesterday’s retreat amid profit-taking. Brent crude was rejected from the levels above $37 earlier in the week, and the upside momentum has waned since then. On the one hand, oil traders continue to expect a recovery in global energy demand while on the negative side, rising geopolitical tensions between the world’s largest economies keep a lid on the upside momentum in prices.
Nathan Lambert, Head of Global FX Analytical Department