EUROPEAN SHARES-Stocks in Europe opened higher on Friday

Stocks in Europe opened higher on Friday, extending gains from Asian shares as investors remain optimistic ahead of the weekend. The risk-on mood is holding sway despite yesterday’s negative US unemployment figures as well as last night’s disappointing GDP release from China, which led to increased volatility. This optimistic wind has been triggered after President Trump outlined a structured plan, welcomed by investors, regarding the re-opening of the US economy. Investors particularly liked the fact the country will reopen in stages, in a state by state manner, instead of ending lockdowns measures everywhere at the same time as this is seen as the best way to get the economy back to normal and avoid the likelihood of a second peak of COVID-19. However, this risk-on trading stance remains fragile and strongly depends on each day’s news with corporate earnings likely to play a big role in determining sentiment. The earning season continues with more large European companies publishing their Q1 results next week with investors still struggling to evaluate the hit of the virus crisis to corporate results. As a result, this could lead to profit-taking moves before today’s closing bell. 

The DAX-30 Index of Frankfurt is the best performer so far after the market opened with a solid 200-point bullish gap this morning. The 21-day moving average is going up, acting as a support for the price in the process, while the RSI indicator is showing significant bullish pressure with room to progress further. The market is now trading above 10,600pts and is likely to head towards the 10,790pts-10,880pts zone today (50% Fibonacci) but bearish corrections may take place below that level ahead of the weekend.

OIL-Oil remains in a bearish phase with the WTI price falling to a 18-year low

Oil remains in a bearish phase with the WTI price falling to a 18-year low. The spread between WTI and Brent is also widening with Brent proving to be much more resilient currently. This is a clear indicator of how much this oil crisis directly affects the United States and their producers, with the shale oil sector likely to be one of the casualties from the huge oversupply.

FOREX- European trading warms up on Friday

The pound is down versus all other major currencies as European trading warms up on Friday. Despite the slight drift in market sentiment towards a greater appetite for risk, sterling appears to have missed that train, on concerns about the country’s economic prospects. Yesterday the UK government extended the lockdown for another three weeks, as the coronavirus infection and fatality rates haven’t yet reached their peak while the Office for Budget Responsibility warned of a drop in GDP in the order of 35% during the second quarter of 2020. Then there is the ‘small matter’ of Brexit which, with time running out, is still there to be dealt with. All in all, today’s drop may just be the forerunner to more testing times ahead for the pound.

OIL-The collapse of the oil price is not yet over

The collapse of the oil price is not yet over. As mentioned in previous comments, the new agreement seems to be massive but in reality it is simply not enough in the face of the collapse in oil demand, leaving producers in serious crisis. In just a few days we have seen the price slow down to test the support zone at $19.50. A clear break down of these levels could open space for a new low with the bearish sentiment far from finished.

GOLD is back in green

Gold is back in green today to continue its unusual direct correlation with stocks, which are also gaining amid a positive environment for shares. This follows both asset classes, which typically are inversely correlated, falling yesterday. Technically we are still in a bullish scenario, with the gold price not being boosted by the risk scenario but from the awareness that central banks are going to be forced to print a huge quantity of liquidity in the next months, and probably years too.

For the spot price, the zone $1,700-$1,710 has now become a first support area, while a climb above $1,730 could open space for further rallies and new records.

FOREX-US dollar continues to strengthen

The US dollar continues to strengthen during the morning trading session in Europe, as the flight to safety intensifies with a cascade of sobering numbers from around the globe illustrating the scale of the economic recession triggered by the coronavirus crisis. The greenback is gaining ground against all other major currencies pushing the Dollar Index to the vicinity of 100. Interestingly, the dollar is recording gains against both the Japanese yen and the Swiss franc, outperforming the two refuge currencies par excellence in terms of safe-haven appeal.