European stocks rise despite Trump’s threats to derail stimulus package
European stocks edged higher on renewed hopes of a Brexit trade deal being finally inked between the UK and the European Union after EU chief negotiator Michel Barnier made a statement about both sides making a “final push” to sign an agreement.
Market sentiment was also buoyed by France’s decision to ease UK travel bans, which had been enforced after a significantly more transmissible variant of the covid-19 was detected in parts of Britain. Investors chose to shrug off news of the new strain being detected in various other countries, including Italy, Australia, and South Africa.
Spain reported quarterly economic growth of 16.4% for the third quarter. Although this missed the preliminary estimate of 16.7%, it marked the steepest expansion since 1995 and followed a record contraction of 17.9% in the second quarter. Meanwhile, Italy’s consumer confidence improved to 102.4 in December, from November’s reading of 98.4, and surpassed expectations of 98.5. The country’s business confidence also rose to 95.9, from 90.9 in November, coming in ahead of the 90.5 forecasts.
Markets remained bullish even after US President Donald Trump threatened to derail the recently announced $900 billion stimulus package. Calling the package “a disgrace,” Trump said the current plan distributed funds to “wasteful” items and recommended increasing the cheques for individuals from $600 to at least $2,000 per person.
The STOXX Europe 600 index gained 0.47% in early trading, continuing its recovery after a massive sell off on Monday. The German DAX rose 0.82%, while the French CAC gained 0.77%. Italy’s FTSE MIB gained 0.64% and Spain’s IBEX 35 added 0.55%. Even as European stocks rose, UK stocks failed to gain momentum. The FTSE 100 declined by 0.19%, with shares of DS Smit, HSBC Holdings, Standard Chartered, Reckitt Benckiser and British American Tobacco among the biggest losers.
US stock futures also gained in morning trade, suggesting a slightly higher open on Wall Street. The DJIA, S&P and Nasdaq futures rose by 0.26%, 0.30% and 0.14%, respectively.
The EUR/USD has been highly volatile today, falling as low as 1.2177 and then achieving a high of 1.2197. Traders may be continuing to take profit ahead of the holiday season, especially after last week’s record gains in the euro which saw the pair breach the 1.2272 resistance level. Despite the pressure, the euro recorded slight gains this morning.
The EUR/USD is unlikely to continue a downtrend for too long, especially with the US dollar expected to remain under pressure due to rising risk appetite triggered by vaccine approvals and America’s stimulus package. The pair could find support at 1.1835 and resistance at 1.2270.
The GBP/USD rose 0.4% to 1.3419, after declining slightly from 1.3442, amid expectations of the UK and European Union announcing a Brexit trade deal later today. Speculations around the trade deal being signed before the Brexit transition period ends on December 31 has caused significant volatility in the sterling through last week and earlier this week.
The pound, which has also been impacted by a new strain of the covid-19 resulting in restrictions, is likely to find support at 1.2754 and face resistance at 1.3500.
The AUD/USD pair gained more than 0.53% to reach 0.7565, after having breached 0.7575 earlier in the session. Although a small covid-19 outbreak in Sydney and news of a new variant being detected in the country worried investors, rapid action to contain the situation lifted sentiment.
The pair also gained due to pressure on the US dollar, which has lost ground versus most major currencies, including its rival safe haven, the Japanese yen, as well as the Chinese yuan. The AUD/USD could find support at 0.7300 and face resistance at 0.7635.