US open – COVID-19, earnings, data, gold, oil

Markets coast into the weekend

A flat start brings an end to yet another eventful week, as traders continue to weigh up just how detrimental COVID-19 will be to the global economy.

Source – Thomson Reuters Eikon

It’s been interesting to watch investors navigate their way through this crisis as it was evident very early on that the scale of it would likely be unknown for a while at least. We had the inevitable panic to begin with and then, as the reality became worse than feared, calm was restored and stock markets found themselves back in record territory.

Naturally, a stronger earnings season on Wall Street has provided a positive distraction for investors, desperate to find any reason to buy the dips. The US is on course to end the 2019 earnings recession a little earlier than expected which will come as a relief as companies outperform fourth quarter expectations.

Ultimately, investors are refusing to be deterred for any significant period of time. It obviously helps when you have a central bank that is afraid to resume tightening again and has plenty of room to cut at the first sign of weakness. The Fed has been portrayed as the enemy of the markets over the last year or so and now, it effectively providing a floor below any periods of weakness.

The US data heading into the open has been broadly in line with market expectations so no nasty surprises heading into the weekend on that front. It hasn’t really changed much though, with US stocks marginally in the green but effectively now coasting into the weekend.

Gold has its eyes on $1,600 again

Undeterred by it’s other failures already this year, gold is creeping higher and approaching the heavily guarded $1,600 barrier. The events in the middle east last month saw gold briefly break through the defence but this was short-lived and it hasn’t really come close since. Back at $1,580 now, with the next test being the last attempt earlier this month will ran out of gas around $1,590. If it can get through here then perhaps the bullish case will grow.

Gold Daily Chart

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Oil traders buoyed by apparent deceleration in COVID-19 cases

The oil recovery is gathering momentum as the week draws to a close. Naturally, any bounce was likely to be decent given the scale of the declines that preceded it but we’re now on the fourth day of gains as optimism grows among traders that the fight against COVID-19 has turned a corner, despite the setback of the midweek spike. The next test for Brent comes around $58, with WTI facing a similar test in the $53.50-54.50 region.

Brent Daily Chart

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