European update – Oil, earnings, gold, bitcoin

What crazy times we live in

Stock markets are back in the red on Tuesday afer Wall Street endured a shaky start to th week and oil left everyone gobsmacked as it ventured into uncharted territory.

Oil clearly stole the show on Monday as WTI not only ventured into negative territory for the first time ever, it did so in style, plunging hundreds of percent to minus $40 a barrel. The May contract plunged as traders panicked at the prospect of taking delivery of something that had nowhere to go.

WTI Crude Futures

Source – CME Group

The very idea of someone paying someone else $40 to take oil off their hands is utterly ludacrous and yet, indicative of the crazy times we’re living in. Just for some perspective, six years ago WTI was trading around $100 a barrel. At the time of writing, it’s trading at a more modest minus $7.45, who knows where it will finish.

It does make you wonder what’s to come for the June contract. It’s hardly going to be immune from this, although you’d imagine lessons will surely be learned and production cuts will soon catch up. That said, it’s off more than 40% this morning and close to $10 a barrel. Brent crude is being sucked in as well, off more than 20% but still some way from zero.

Earnings takes a backseat but that will change

Earnings took a bit of a backseat on Monday but that will change over the coming days as more companies report, including some big tech names. It wasn’t a great start to earnings season but let’s face it, it was never going to be. The question is whether there’s enough there for investors to feel comfortable. It’s been an impressive bounce off the lows, with the Dow now only 20% from its highs. That seems a bit crazy but we live in a time of unprecedented stimulus which was always going to cause distortions and this will not be any ordinary recession. The next couple of weeks will be very interesting for stock markets.

USD puts pressure on gold prices

Gold is continuing to pare gains, with the dollar putting downward pressure on the yellow metal as it continues to perform well in these risk-averse markets. Gold held up quite well around $1,680 yesterday but with that level coming under pressure already again today, it’s looking quite vulnerable, which means we could be heading back to the lower end of the $1,600 range, with $1,640 the next test below.

Gold Daily Chart

OANDA fxTrade Advanced Charting Platform

Uninteresting times lie ahead

It’s not often that we talk about wild markets and don’t include bitcoin in that bracket. The cryptocurrency has been rangebound between $6,500 and $7,500 for almost three weeks now and at this point, it’s tough to say who has the upper hand. Given the inability to break $7,500, I can’t help but feel the ground below is looking a little more vulnerable but it’s been well defended so far. Perhaps for once, uninteresting times lie ahead.

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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.