FOREX-Hope grows that the spread of the coronavirus is slowing

The early part of Tuesday’s session is so far marked by across-the-board gains on risk-related assets, such as stock futures but also currencies like the euro and the pound. Investors are taking a glass half-full stance as hope grows that the spread of the coronavirus is slowing. As the mood in the markets improves, the US dollar is losing some of the ground gained over the last few days, with the Dollar Index down by almost 0.7%. During the darkest moments of the crisis the greenback took over the role of safe haven and with the improvement in sentiment some of those gains are being eroded, as the latest figures from the US and Europe point at slower rates of infection in the main epicentres of the disease. This good news is generating some hope that the pandemic is being brought under control, which supports the growth of risk appetite.

EUROPEAN SHARES-Investors welcomed reassuring news on the evolution of Covid-19 over the weekend

Stocks in Europe are trading significantly higher at the beginning of a new week after investors welcomed reassuring news on the evolution of Covid-19 over the weekend. The fact that nations like Italy, Spain and the US, who have been the most impacted by the deadly virus so far, have reported a slowing in both death toll and new daily cases on Sunday is reviving market sentiment this week. In addition to the reactions of governments and central banks to the crisis, many investors desperately wanted to see some progress on the actual spread of the virus to lift the uncertainty surrounding most markets. However, it is still too soon to say the bottom is behind us now as this weekend’s reassuring numbers will have to be confirmed over the next few days with volatility on most stock markets likely to increase. All benchmarks are performing strongly in Europe today, led by the industrial and financial sectors this morning. Today’s best performers are the German DAX-30 Index and Paris’ CAC-40. Technically speaking, the French benchmark opened up a bullish gap of 150 points at the market open today and this has pushed the price above their bearish trendline, invalidating the short-term bearish correction started at the end of March. This bullish signal has also been confirmed by the RSI indicator which has returned above the 50% level. The market cleared the 4,250pts-4,285pts zone and this level will now play a support role to the price while 4,335pts presents major resistance before fresh highs towards 4,470pts, 4,585pts and 4,700pts can be reached.

OIL-Spectacular rebound of 50% in just two trading sessions

Even the best Hollywood movie director would have struggled to imagine the last few days for oil. The dramatic scenario seen last week, with WTI falling below $20 has been followed by a spectacular rebound of 50% in just two trading sessions. This happened when markets realized that the lower price, in conjunction with coronavirus, was becoming a huge problem for the US as well. Donald Trump’s tweet was seen by markets as an admission of sorts, making clear the US’ intention to try and achieve a higher price. It now faces the most difficult part as it is very complicated to find an equilibrium between cuts that are strong enough to have the necessary impact yet not too stringent so that other members of the alliance do actually adhere to them.

Technically, we have seen a jump from the bottom of $19.50 up to $29, followed by a drop at the start of the new week to see oil trading at $26. Given the price movement of the last few hours, it is clear that investors are still believing that some agreement will be reached, despite the unclear scenario. This helped the price to rebound to $27.5, while the situation remains strongly volatile as even a deal being agreed won’t sort out all the problems oil faces.

FOREX-GBP is up by more than 0.5% against the USD due to a recovery in risk appetite

Despite some weakness against both the dollar and the euro during Asian trading hours, the pound is back on the front foot during early trading in Europe. Sterling’s volatility stems from the admission into hospital of Prime Minister Boris Johnson and also by a timid global resurgence in risk appetite. Unless his condition worsens, news regarding the Prime Minister’s health is unlikely to have a long-lasting effect on the behaviour of the pound, as illustrated by the sudden change of direction that followed the start of trading in Europe. Sterling is up by more than 0.5% against the dollar due to a recovery in risk appetite, which is also reflected in other risk-related assets such as stocks. It appears that the draconian measures to contain the spreading of the coronavirus are starting to pay off, with the main European epicentres for the disease recording lower numbers in infections and fatalities. Amidst the doom and gloom of the last few weeks these may be feeble rays of hope, but are good news nevertheless with investors quickly grabbing hold of them.

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.