EUROPEAN SHARES-Investor sentiment continues to be dominated

Early declines on European stocks erased the advance registered during pre-market trading with uncertainty reigning everywhere this morning. Despite a new stimulus plan announced by Beijing overnight, investor sentiment continues to be dominated by the recent disappointing developments in the struggle to stem the spread of the coronavirus. The death toll continues to climb in the worst affected countries and the total number of COVID-19 cases gets ever closer to the million mark and this is putting a lot of downward pressure on markets. China also surprised oil markets with its decision to pile up crude oil stocks following the black gold crash. This had an obvious effect on the barrel price but also a significant impact on energy shares like Total and Eni, which are currently helping the Stoxx-50 Index to offer some resistance against today’s selling pressure. The most resilient index can be found in Milan this morning where the FTSE-MIB Index registered a solid rebound above 16,000pts, however it remains inside its bearish continuation channel and the market will have to clear short-term resistance 16,655pts to reach 17,070pts .

GOLD-price is languishing just below $1,600

The gold price is languishing just below $1,600 in a market where volatility seems to be decreasing, at least temporarily. There are no clear directional signals in this phase as gold is facing a mixed set of fundamentals. Investors are worried by the possibility that central banks will reduce their purchases, while also jewellery and industrial demand could decline. They are unsure that investment demand will grow enough to offset this loss. As mentioned in previous reports, one factor that doesn’t yet seem to be fully priced into the markets is the huge liquidity input that central banks are preparing and this could be a supportive element for the bullion price in the next few months.

FOREX-Fear is likely to once again take over and offer further support to the dollar.

The US Dollar Index, which measures the performance of the greenback versus a basket of other currencies, was pretty much flat during early Thursday trading. Recently investors had sought refuge in the dollar, with the fallout from the coronavirus creating a very risky trading environment with losses across nearly all sectors. Today however that move towards the dollar is on hold, with all eyes and ears on the US jobless claims due to be published later. Should the numbers mark an improvement on the record 3.3 million new claims released last week, we will probably see a growth in risk appetite which, in the current context, could incite greenback losses. On the other hand, if the new jobless claims number is within last week’s ballpark, fear is likely to once again take over and offer further support to the dollar.

GOLD-challenging the psychological threshold of $1,600

The gold price fell yesterday as low as $1,570, breaking down the first support level of $1,590 in the process, on growing fears that central banks will buy much less gold and other precious metals in the next few years. Despite this quick descent and despite the strength of greenback seen in the last few hours, bullion has managed to recover and is once again challenging the psychological threshold of $1,600, in a situation which remains volatile and dominated by uncertainty. In the next few hours bullion will be called to hold on around $1,590-$1,595 with any failure to do so confirming the weakness seen yesterday.

FOREX-Many investors are flocking to the greenback

The dollar is strengthening versus a basket of other major currencies, with the Dollar Index gaining just over 0.5% during the early part of Wednesday’s session. Many investors are flocking to the greenback due to its safe haven status as bleak data continues to gather and point towards an unprecedented contraction for the world’s economy. It is interesting to note this dollar strength comes barely a day after the Fed announced robust liquidity measures in response to the surge in demand for the currency and illustrates the scale of the global appetite for greenbacks.

EUROPEAN SHARES-Stocks rose in Europe

Stocks rose in Europe on Tuesday, following a mixed trading session in Asia despite reassuring data from China overnight. Stock markets around the world have extended their very-short-term rally with investors’ appetite towards risky assets revived amid signs of stabilization in the number of coronavirus cases in some of the worst affected countries in Europe. Italy reported its lowest number of daily new cases in weeks while the data also seems to be trending lower in Germany as well as in Spain. However, even if the current rally limits losses as we head into Q2, the outlook remains bearish for Europe. First, it is far from certain that the bottom of the market is definitely behind us. Secondly, even if it is, investors around the world are highly likely to soon start pricing in the negative impacts of such massive monetary adjustments from central banks. This situation is especially true in Europe where the ECB is likely to get out of the crisis with record levels of debt, which will certainly impact on the robustness of the EU bloc. 

The Stoxx-50 Index is trading higher today, above 2800pts, led by travel and leisure shares. The German DAX-30 Index is today’s best performer with the market challenging the upper band of its consolidation zone, a clearing of which could drive prices higher still towards 10,200pts and 10,435pts by extension. Both the MACD indicator and the 55-day moving average are giving bullish signals, however, another failure to break through the ceiling at 10,065pts could lead prices down to support levels at first 9,970pts and then 9,815pts.