European Close – Stocks mostly lower on economic worries, Oil higher on Libya outlook, Gold at 8-year high, Bitcoin struggles

The global stock market rally showed some signs of running on empty as coronavirus cases reaccelerate for a third week and economic uncertainty as several countries reinstate stricter restrictions.  S&P futures are struggling to recapture pre-pandemic levels as the pace of the recovery seems like it will be much slower.  Everyone loves the Nasdaq, mega-cap tech stocks are still the hottest trade this summer.  Strong improvement with market breadth has supported the S&P 500 index and small-cap stock market indexes but everyone still wants to be overweight tech.

The FTSE 100 led the decline in Europe as reopening momentum was thwarted by Brexit worries and doubts that Sunak will not be able to do enough to support the labor market.  Tomorrow, Chancellor the Exchequer will outline his summer economic plan.

The DAX was also down sharply after disappointing German industrial data fostered doubts of the economic recovery in Europe.

Despite a plethora of reasons for a stock market pullback, no corporate guidance, reinstated lockdowns, or second wave concerns to name a few, investors remain comfortable tossing away the upcoming earnings season and putting all that cash that has been on the sidelines to work.  What is helping stocks right now is that Wall Street is now pricing in a new US coronavirus stimulus package before August recess.  The Fed is also not tapping the breaks anytime soon as financial crisis risks remain, the labor market rebound is uncertain, and a wave of bankruptcies could grow if the virus spread does not improve.  It is easy to be skeptical of this rally, but too much money has been pumped into the global economy and it might be hard to see any major weakness this summer.  When the tech rally comes back to earth, investors will likely become overweight Europe and neutral with the US.


Oil prices have completely shrugged off the softer-than-expected German industrial production data that suggested the European economic rebound might be struggling.  Crude prices seem stuck just above the $40 level as tighter supplies continue to counter growing concerns oil demand will struggle as much of the world reinstates lockdown measures.  It is hard to be bullish crude when parts of Australia are reinstating lockdowns for six weeks, many US states are reversing reopening efforts and LATAM is reeling from the coronavirus.

New virus hotspots across the globe is telling OPEC + that the global economic recovery will take longer and that the pickup in crude demand will be slower.  If energy traders continue to see headlines that suggest COVID-19 lockdown measures will be reinstated, that should translate into better-than-expected OPEC+ production cut compliance and it could help the argument for extending production cuts into August.

Crude was also supported after Libya’s state-run National Oil Corp estimated that their production might only return to half of what is was in 2022.  If Libya’s oil production might only rebound to 650,000 bpd, that will be much lower that the 1.2 million bpd they produced at the beginning of the year and distant from their 2.1 million bpd goal for 2024.


Gold is back above the $1800 level on economic jitters, stricter quarantines, and stimulus hopes.  The latest part of the stock market rally seems to be over and gold should shine over the next several trading sessions.  Demand for safe-havens was strong once US traders processed all the morning’s headlines that included downbeat German data, a boost for risky assets following Regeneron’s contract and Novavax funding from Operation Warp Speed, and hospitalization surges in Arizona and Miami.

Gold seems poised to make a run for the $1850 level as economic uncertainty is here to stay, as too many virus hotspots are re-emerging globally.  The stimulus trade component for gold also got some positive developments after the White House told Congress the next stimulus package needs to be done by the first week in August.


Bitcoin trading has lost some enthusiasm as investors focus primarily on gold and equities.  Bitcoin seems trapped around the low-$9000 level and that is very disappointing for cryptocurrency traders.  Bitcoin traders are growing nervous as appetite has been recently strong for risky assets, but the largest cryptocurrency has underperformed.  Bitcoin’s competitors are starting to make some progress too and that is definitely impacting Bitcoin.  Ether and Cardano have been gaining new investors and if Bitcoin continues to struggle, you could see the smaller coins outperform.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya