Following a rebound in US stocks, European markets are trading marginally higher on Wednesday, as investor concerns over a China coronavirus seem to be abating further. Still, market participants remain cautious and don’t rush to accelerate buying of risky assets, also in anticipation of the Federal Reserve decision. Traders are widely expecting to see the central bank opt to hold off on any drastic action during the meeting.
On the data front, German consumer confidence unexpectedly rose in January, GfK survey showed, while French consumer sentiment also saw a surprise boost. Meanwhile, the European Central Bank member Olli Rehn said Eurozone growth could beat expectations if global risks subside, which added to a slightly positive sentiment in the regional stocks.
Against this backdrop, UK’s FTSE 100 adds 0.17 per cent to 7,493, Italy’s FTSE MIB gains 0.50 per cent to 24,147, France’s CAC 40 rises by 0.43 per cent to 5,951, while German DAX 30 is up 0.20 per cent to 13,351. US stock index futures point to higher open on Wall Street as markets extend the recovery after a sell-off on Monday. Also, strong earnings revealed by Apple could give the additional lift to stocks. Apple shares rallied 1.7% Wednesday morning, signaling fresh record highs.
In currencies, EURUSD registered fresh two-month lows below the 1.10 handle, mainly due to a fairly robust dollar demand. The pair remains in a steady decline, extending losses following rejection from highs around 1.1240. German government raised 2020 GDP growth forecast to 1.1% from 1%. The country's economy ministry said the economy is gradually overcoming its weak phase, and industrial production is expected to recover slowly in the course of the year. Still, the remarks did little to help the common currency which remains under a decent selling pressure. Later in the day, the US economic data and the Federal Reserve decision will drive the sentiment in the pair. Hawkish statement by the US central bank could send EURUSD to fresh lows around 1.0980.
In commodities, Brent crude struggles to extend the recovery after a decent spike from lows yesterday. The prices are barely holding above the $59 figure and could resume the decline if the EIA report points to a rise in crude oil inventories later today. Also, the recovery is still capped by lingering concerns over global oil oversupply amid the risk of slowing oil demand amid the outbreak of a China coronavirus. From the technical point of view, Brent first needs to confirm a break above the $59 handle in order to retarget the $60 psychological level in earnest. Otherwise, the futures may slip back below $58 if market sentiment stays gloomy in the days to come.
Nathan Lambert, Head of Global FX Analytical Department