GOLD-1% away from the one-month peak

Gold’s spot price rebounded on the support level of $1,640, thereby confirming the recent positive mode. The bullion price soared to $1,660 and we are just 1% away from the one-month peak achieved earlier this week. Despite the risk-on approach on stock markets of the last few days, investors are still confident that gold can shine further. This is particularly the case in a scenario where central banks are going to be forced to add a tremendous quantity of liquidity into the monetary system while keeping rates close to zero for a long time, as long as inflation doesn’t start to soar. Moreover, gold is also seen as an insurance in the event of further collapses on stock markets due to coronavirus.

FOREX-Positivity continues to be the prevailing sentiment

Positivity continues to be the prevailing sentiment in the financial markets, with the S&P 500 Index once again in a bull market. In the FX space however, activity has been subdued with this lack of dynamism stemming from investors being on standby ahead of important risk events later today. Chief among these is the publication of weekly American unemployment figures with the last two weeks revealing record-busting numbers of new claims. As a result, investors are buckled up in anticipation and this explains the relative steadiness in the correlation between the dollar and its peers, with the Index that measures the performance of the greenback almost flat on the day. We should expect more activity and fluctuation later in the day once these unemployment figures are published.

EUROPEAN SHARES -All European benchmarks are trading significantly higher

All European benchmarks are trading significantly higher on Tuesday, extending yesterday’s gains, as market sentiment strengthened towards risk assets such as stocks and corporate bonds. This revived risk appetite, mainly built on hopes of an easing of the COVID-19 spread, is getting stronger and stronger as new reassuring data confirm the progress we saw during the weekend. In addition, investors around the world still have in mind the unprecedented global monetary response to this crisis and know that it could significantly sustain an extended rally if the virus starts to be brought under control in most impacted economies. While the current situation may tempt some investors to “catch the rebound” by buying the dip, others may want to remain cautious and wait for more accurate corporate reports to get a better idea of the extent of the economic damage before increasing their exposure to these markets. 

The Stoxx-50 Index is being driven higher by financial shares with ING and Société Générale some of the best performers in Europe so far. The technical landscape of the Stoxx-50 Index is becoming really interesting as the price is now challenging its double resistance level (Speedline + 38.20% Fibonacci) following on from a bullish runaway gap opened up at the beginning of this week, which led to the validation of a bullish flag pattern (see attached chart). A clearing of the zone at 2,880pts is likely to extend the current rally towards 2,975pts and 3,075pts on a short-term basis.

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.