European open – US jobs, OPEC+++, gold, bitcoin

Cause For Optimism?

Stock markets are heading into the weekend in the red, but investors may be a little encouraged by how the week has gone despite notching up small losses along the way.

Source – Thomson Reuters Eikon

The extraordinary moves that became an all-too-regular feature in March are occurring less frequently or severely. The falling knife scenario that we were seeing is looking less hazardous which may entice people back in, with stocks still trading at very discounted levels.

I must stress, this is not me calling a market bottom. The next two weeks will likely be quite distressing in the coronavirus fight and I expect that may have knock-on effects in the markets as well. If the panic selling has passed, as it appears to have done, it will be interesting to see what kind of defence the March low puts up, if tested.

The next test for investors was touted to be the economic data and I must say, I’ve been flabbergasted by the lack of response its had. The jobless claims data from the US has been uttely horrendous, with more than 10 million – around 3% of the population – signing up in the last two weeks alone. This should make for a messy jobs report later today.

Not that investors will be particularly bothered. I understand that forecasts right now are basically plucked out of thin air and that it’s impossible to predict what proportion will be permanent but still, the shock factor alone should have done something.

Forecasts today look far too conservative again, particularly in light of what we’ve seen so far, but I guess this will also get a free pass even if the unemployment rate has the shock factors that claims lack.

Where do you begin with these oil moves?

I worry that I’m using this word too much at the moment and diluting its impact but yesterday’s moves in oil were extraordinary. Granted, when prices are as low as they are, moves on a percentage basis can exaggerate the absolute change. But still, Brent was up more than 40% at one point, that’s extraordinary.

WTI Daily Chart

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The surge came as Trump tweeted that a deal including Saudi Arabia and Russia to cut production by at least 10 million barrels was in the offing. As ever, this was accompanied by mixed messages from the various parties but it does seem that there is a willingness to address this common problem. But how? And who’s involved?

How Trump would get domestic producers on board, I’m not sure, but I struggle to see a deal being done that doesn’t include the US and others, OPEC+++ if you will. A failure to get a deal over the line now will undoubtedly cause prices to crash again, maybe even more severely, so Monday’s emergency virtual meeting will be one to watch!

Gold back above $1,600

The disconnect in the market remains, with gold rallying around 1.5% yesterday – more than 2% from its lows – alongside the dollar and the stock market. It’s slightly lower at the time of writing but is basically hovering around breakeven on the day but holding its position back above $1,600. Going into another uncertain weekend that could see some dire numbers, particularly from the US, it’s perhaps not surprising to see the nerves creeping in.

Gold Daily Chart

Bitcoin bears holding the fort

Bitcoin finally managed to smash through $7,000 on Thursday and what an hour it was. Unfortunately, the cryptocurrency was quickly driven back below which may be worrying for those so keen to see this barrier broken down. Not to be deterred, we’re seeing another attempt today but the result is currently the same. This level is being well defended and if it’s not broken soon, the buyers may start to fade.

Bitcoin Daily Chart

Source – Thomson Reuters Eikon

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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.