European open – Markes rally, oil, gold, bitcoin

Investors buoyed as Europe turns a corner

A strong start again on Tuesday, as investors grow increasingly optimistic that the continent has turned a corner in the fight against the coronavirus.

Source – Thomson Reuters Eikon

There are really encouraging signs that the worst hit countries in Europe are seeing significant improvements, that the lockdown measures are working and that life may soon be able to at least start to return to normal. This is the moment investors have been waiting for, a time when they can start to put a date on normality and in some way quantify the damage.

Of course, it’s far too early to declare victory and we now must go through the economic wreckage and determine what can be salvaged and what the longer-term cost has been, but this was always an important first step. Some difficult weeks lie ahead but the UK, US and others will be encouraged by the trends we’re starting to see across Europe.

The UK will go into, what is expected to be, the worst weeks of the coronavirus with its Prime Minister among those to be sadly suffering with the illness. Boris Johnson was moved to intensive care on Monday as his condition deteriorated. It is believed that Boris is receiving oxygen but not currently on a ventilator, which is hopefully cause for optimism despite the situation being extremely serious.

The pound dipped in the immedite aftermath of the announcement but has since bounced back as details have emerged and the government has sought to reassure the public that they will continue with the Prime Ministers plans, under the temporary leadership of Dominic Raab.

The US is facing a terrible couple of weeks which makes the rally on Wall Street all the more baffling. While I understand the market is trading at heavily discounted levels and the numbers of the last couple of days have maybe been better than some were expected, but analysing the day to day moves doesn’t feel very productive, under the cirucmstances.

This all feels very premature even if we are seeing promising signs from Europe. Investors will be encouraged by the growing optimism though which may keep the rally going, with futures already a few percentage points higher, pointing to another strong day on Wall Street.

Too optimistic about production deal?

Oil prices are rising again on Tuesday, lifted it seems by the broader improvement in risk appetite as we approach the OPEC+++ meeting later this week. The weekend has cast doubt over the ability of the producers to come to an agreement and certainly one that adequetly addresses the current imbalance.

Still, as far as we know, the rescheduled meeting is still going ahead on Thursday and producers are keen to reach an agreement. Just because it’s in all of their interests though, it doesn’t mean it will happen and may hang on whether Trump can secure cuts from the shale sector. Traders seem surprisingly optimistic though.

WTI Daily Chart

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Gold surging in calmer markets

Gold is pulling back a little today after surging again on Monday, with the yellow metal powering through the previous peak around $1,640, with its eyes now set on March’s highs around $1,700. It seems the more settled market conditions are aiding the move in gold in a time of unprecedented stimulus from the world’s central banks. If conditions can remain relatively stable, it could be very suportive for gold prices.

Gold Daily Chart

Bitcoin bulls pushing for big break

Bitcoin has finally battled through the $7,000 resistance level but the fight isn’t over yet as the upper end of its resistance range continues to put up a fight. The $6,500-7,500 region has been an interesting area of support and resistance over the last year and is proving so again with bulls struggling to force their way back above. It peaked this morning just shy of the upper end of the range before paring gains and could have another run at it soon.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.