EUROPEAN SHARES-Investor sentiment is now being weighed down by tougher restrictions

European shares drifted significantly lower on Thursday, following the trend started at the end of the US trading session yesterday as investors switched to risk-off. The market euphoria of the past week is fading away as investor sentiment is now being weighed down by tougher restrictions, offsetting vaccine progress in many areas. Even if the long-term recovery isn’t really threatened yet, most investors expect a market correction due to mounting risk to economies from a very short-term perspective. Having said that, a bearish short-term correction would still be technically “healthy” for stocks as it would temper the powerful rally registered in November. Today’s session is likely to remain volatile as investors will keep their focus on major macro data (initial Jobless claims and existing home sales) as well as the EU summit. The Stoxx-50 Index has recently broken-out of a bearish rising wedge and can now find significant support at first 3,440pts, then 3,400pts and ultimately at 3,355pts.

GOLD-Increased percentage success of Pfizer’s vaccine

In the last few days a stream of positive updates about vaccines have pulled up stocks. The general risk on scenario hit the gold price, triggering a notable decline last week. Yesterday, bullion dropped a further 1% on the news of the increased percentage success of Pfizer’s vaccine. So far the price has managed to remain in the lateral trading range of the last few months between $1,850 and $2,070. We are just a few dollars above the lower edge of this channel and a fall below this mark would be seen as a negative signal. Investors, anyway, should not forget the strong dovish activity of central banks, which will last for a long time and are likely to be supportive for the yellow metal.

 

FOREX-Political tug-of-war between Brussels and a Polish-Hungarian coalition

After several days dominated by a vaccine-related optimism, which offered support to the euro, headwinds are now challenging the buoyancy of the single currency, causing losses versus other major currencies. The immediate reality presents record numbers of new infections and fatalities in several European countries, reminding investors that the return to normality still remains on the distant horizon. The second wave of the pandemic will surely add to the economic woes of the continent, particularly as any stimulus package continues to be blocked by a political tug-of-war between Brussels and a Polish-Hungarian coalition.

EUROPEAN SHARES-Investors were also glad to see President-Elect Joe Biden’s adviser oppose a national US lockdow

Stocks traded higher, from Tokyo shares to US futures contracts, buoyed by rising risk appetite from investors at the beginning of the week. While last week’s vaccine announcement renewed bullish sentiment on most stock markets, another boost has been given over the weekend with the signing of the Asian trade deal on Sunday. Of course, investors welcomed the news as this trade agreement will involve some of the world’s biggest economies and most densely populated areas in the globe, but that’s not all. Investors were also glad to see President-Elect Joe Biden’s adviser oppose a national US lockdown, despite surging virus cases. This announcement has been well received by most traders as it allows them to keep their eyes on the reopening of economies and, more generally, the end of the crisis. This bullish trading stance is likely to remain for a while yet as investors welcome reassuring macro data from China, Europe and the US. However, short-term price action sparked by rising volatility may still occur in Europe as Brexit talks get more fraught as we step ever closer to the latest deadline.

CRUDE OIL-Pulling up the price of both WTI and Brent

The general enthusiastic scenario is supportive for oil prices, which started the new week still in green. Markets are still in full risk on mode with investors betting on a vaccine and with it a relatively quick solution to the pandemic and this optimism is boosting oil. Sectors previously left behind, such as energy, are now enjoying time in the limelight and this is pulling up the price of both WTI and Brent.

From a technical point of view, WTI is again facing resistance at $41.50. A clear breakout above this level, could open space for a rebound to the peak of early September around $43.20-$43.50.

FOREX-Strong risk appetite dominates the sentiment of traders

Strong risk appetite dominates the sentiment of traders during early Monday trading, with the safe-haven US dollar losing ground to other major currencies. Investors feel encouraged by positive data released overnight in Asia, showing that Japan is no longer in a recession, and China also posting encouraging industrial and retail numbers for October. These good pieces of news come on the back of the boost to international trade provided by the deal signed on Sunday by 15 Asian countries. As we reach the final stretch of 2020, by any measure a very tough year, investors can start to see a light at the end of the tunnel, following last week’s vaccine announcement and now a string of encouraging data and announcements from Asia.   

EUROPEAN SHARES-CAC-40 index has seen one of the best performance so far

European markets slid lower at the open on Friday, continuing the corrective move registered yesterday on most benchmarks, as a risk-off mood prevails. Spikes in virus infections added to the lack of progress regarding the new stimulus package in the US is a perfect occasion for investors to take some profits ahead of the weekend. However, this bearish correction shouldn’t drive markets very deeply as they have already cleared major resistances at the beginning of the week -further evidence of the strong bullish sentiment on the long-term view. The French CAC-40 index has seen one of the best performance so far, even if prices could technically go deeper before registering any rebound. The first support can be found over 5,230 pts and then 5,165 pts by extension, while the 5,450 pts/5,525 pts stays as the main objective on the short-term basis.

FOREX-The GBP regained the front foot

After losing ground to the dollar and the euro during Thursday’s trading, the pound regained the front foot during early Friday trading following press reports that Prime Minister Boris Johnson’s closest advisor is set to leave his post by Christmas. The claims that Dominic Cummings will leave his role at Downing Street, followed in-fighting within Johnson’s inner circle and represents a blow to Brexit hardliners. Given the continued uncertainty surrounding the outcome of the post-Brexit negotiations with the EU as well as the bleak economic and the continuing healthcare crisis in the country due to coronavirus, the fact that investors are this morning backing the pound suggests the departure of Cummings means there is an increased likelihood of a softer break from the EU.

EUROPEAN SHARES-The worsening virus situation in many hotspots is weighing on market sentiment

The stock market showed signs of slowing down in Europe on Thursday, despite a bullish correction in Chinese tech shares overnight, as the initial enthusiasm over a vaccine starts to wane. The worsening virus situation in many hotspots is weighing on market sentiment as it sparks fears of tougher containment measures that could bring further economic damage. While a bearish correction after the rally over the past few days would be logical and even healthy, fears of a W-shaped recovery are occupying more and more space in investors‘ minds. Today’s session is likely to remain volatile as investors will have to cautiously monitor speeches from top central bankers at the ECB forum as well as major macro data from the US (CPI and jobless claims). Technically, European benchmarks remain capped by major resistance, with buyers not strong enough to push the market higher. The DAX-30 Index has significant short-term resistance as 13,245pts and then 13,450pts. The first supports can be found just above 13,100pts and 12,900pts before the 23.6% retracement ratio at 12,825pts.