EUROPEAN SHARES -Important bullish impact on both US and Asian stock market

Monday’s optimism on President Trump’s improving health conditions as well as hopes of further stimulus from US lawmakers recently had an important bullish impact on both US and Asian stock markets, however, this sentiment isn’t continuing in Europe today after benchmarks opened mixed. While many investors welcomed the good news from the US, they may also prefer to stay cautious prior to today’s speeches from the chairs of both the ECB and the FED, Christine Lagarde and Jerome Powell. While nothing significant is really expected today from the central banks, investors will still scrutinize these speeches in order to get more clues on where monetary policies will be going soon, which could have an important impact on both the FX and stock markets. Today’s best performances are so far coming from the energy and industrial sector while healthcare and real estate trade at the bottom of the table. The IBEX-35 Index from Madrid leads the way so far in Europe and is now trading well above 6,830pts, closer to its major resistance at 6,900pts.

FOREX-The Dollar Index is almost flat in relation to other currencies

The Dollar Index is almost flat in relation to other currencies during early Tuesday trading. Today’s calm comes after the dollar dropped more than 0.4% during Monday, as risk appetite improved following the discharge of the US President from hospital and rising hopes that a deal between Democrats and Republicans will be reached by lawmakers in Washington on a much-needed fiscal stimulus package. The progress of these talks will be closely followed by the financial markets, as will any developments surrounding Donald Trump’s health with no news being good news for the greenback in the case of the latter.

EUROPEAN SHARES-The DAX-30 Index is one of the eurozone’s worst performers

European stocks opened on a mixed tone on Tuesday as rising concerns and uncertainty globally put pressure on prices. Investors who chose to take profits following the rally since the 23rd of March may be tempted to keep on doing so after new virus cases were recorded in South Korea and Wuhan, highlighting fears of a new wave. We are now in a crucial phase where investors, after the recent mixed data and corporate results, desperately need more clarity on the short to mid-term outlook. Even though most market operators believe the virus peak is now behind us, they still need more evidence that economies are back on track and that the pathogenic agent is firmly contained before increasing their exposure to risk assets. Additionally, market sentiment is being shaken by rising US-China tensions, especially after President Trump declined a request from Chinese officials to renegotiate the Phase One trade deal. Traders now have to deal with two different bearish leverages on stocks: the 2020 virus crisis as well as a resurgence of 2019’s trade tensions between Washington and Beijing, which is making for a very difficult trading environment ahead of the summer season.

 

The DAX-30 Index is one of the eurozone’s worst performers with the price dancing near its open price level. Technically, the market has failed to clear the 10,980-11,120pts zone previously mentioned and slipped back to their double support (trendline + 55-day moving average). Even if a pull-back towards 11,000pts remains possible, a break out down below the support level at 10,770pts is now the most likely scenario on a short-term basis. If that support fails then the subsequent ones are at around 10,545pts and 10,200pts.

OIL-Investors are betting on a V-shaped recovery for economies

Investors are betting on a V-shaped recovery for economies and a similar scenario on oil demand. Moreover, they are seemingly confident that there will be space in Cushing’s oil tanks at the expiries of the contracts in the coming months. All this sounds a bit too optimistic but what we have seen is that in just three weeks the price of the June WTI contract has trebled from the bottom reached on April 20-21 at $7, when the May contract finished its life in negative. It is currently above $24 amid lower volatility in a market trying to consolidate after the brutal moves of the last few weeks.

GOLD-The spot price of gold is consolidating just above the threshold of $1,700

The spot price of gold is consolidating just above the threshold of $1,700 in a scenario where investors remain bullish on gold but require fresh stimuli to generate another rally. In particular, we need to note that risk-on has dominated the last few weeks on stock markets, with a huge recovery after March’s sharp fall. This means that many investors have moved some of their liquidity back to stocks, hoping for a quick buck. Of course, if this scenario changes gold can be king again and price could climb above its recent peaks.

FOREX-COVID-19 cases in countries that eased lockdown restrictions

After Monday’s gains versus other major currencies, the US dollar is taking a breather and stabilising during early trading in Europe on Tuesday European. However, further gains are likely for the dollar because the Fed is giving increasing signals that it is unwilling to take interest rates into negative territory. At the same time, reports of a growth in numbers of new COVID-19 cases in countries that eased lockdown restrictions, such as China and Germany, are causing concern for investors and to some extent driving dollar gains as a safe-haven trade.