After earlier losses, European equity markets turned positive on Thursday. As the ECB has indicated that it could deliver stimulus measures should inflation remain well below the target of nearly 2%, weak Spain’s CPI for August reinforced expectations that the European central bank will inject additional measures to support the struggling regional economy next month.
Elsewhere, the U.K. Prime Minister Boris Johnson will suspend Britain’s parliament for more than a month. This step weakens efforts from opposition parties to block a no-deal Brexit if the Prime Minister fails to secure a new deal with the EU before October 31. In Italy, the Five Star Movement and the opposition Democratic Party announced that they would try to form a coalition government. If they succeed, the Prime Minister Giuseppe Conte will return to power.
In general, investors remain relatively cautious amid Brexit-related issues, US-China trade war, and growing growth fears as bond yields continue to flirt with record lows across the globe. By the way, yields on the U.S. 30-year Treasury bond and the 10-year German bund both hit all-time lows overnight.
Against this backdrop, UK’s FTSE 100 adds 1.11 per cent to 7193, Italy’s FTSE MIB gains 1.95 per cent to 21,397, France’s CAC 40 rises by 1.50 per cent to 5,449, while German DAX 30 gains 1.20 per cent to 11,840. US stock index futures turned positive after China expressed willingness to resolve its trade dispute with the Unites States.
In currencies, EURUSD is back under a marginal pressure following some tepid recovery attempts. The pair has settled just below the 1.11 handle and could refresh local lows should fresh European data disappoint and the UD GDP comes in better than expected. Eurozone sentiment and optimism indicators came in mostly higher than expected but the data failed to spark euro demand as dollar remains steady. Technically, the longer the pair stays below the 1.11 figure, the higher the bearish risks for the common currency are. Should the US GDP growth exceed the 2.0% mark, EURUSD could challenge the 1.1060 support zone.
Crude oil prices struggle to resume the rally witnessed overnight. Brent registered local highs around $60.50 but failed to stay above the $60 barrier which continues to serve as the immediate resistance. The EIA was mixed, with crude oil stockpiles plunged by 10 million barrels but production unexpectedly jumped to a fresh record of 12.5 million barrels per day. Against this backdrop, the futures had to retreat. On the other hand, Brent remains around the $60 handle and could retest the recent highs should risk sentiment remain relatively robust.
Nathan Lambert, Head of Global FX Analytical Department