US Open – A Shot in the Arm

Vaccine Results Promising

Stock markets are pulling back a little on Tuesday after surging at the start of the week on some promising results for a potential coronavirus vaccine.

A vaccine is key to getting the global economy functioning properly again and accelerating whatever recovery it is we’re heading for. The fact that this trial triggered an immune response is very encouraging and if it can repeated in larger numbers, there may be real cause for optimism.

Investors clearly feel the same way, despite European markets flashing red today. Europe also had the good news this morning of a Franco-German deal on a 500 billion euro recovery fund which, crucially, will be grant rather than loan based. While it could be argued this is not enough to address the crisis and doesn’t yet have the backing of member states opposed to debt sharing and grants, it’s a huge step in the right direction.

Investors’ new found optimism will be put to the test shortly after the open on Wall Street as Jerome Powell makes a virtual appearance before lawmakers with Steve Mnuchin. While Mnuchin will naturally talk up the prospects for the economy, Powell has previously been less so and spooked markets last week with his downbeat assessment.

No repeat of May expiry for WTI

Oil prices continue to march on higher ahead of the US open. Not only has there been no repeat of last month’s carnage, the rally has accelerated ahead of the expiry of the June contract, today, as news of the vaccine and economic reopenings raise demand expecations. There may be setbacks along the way but oil prices are now back at far more reasonable and less damaging levels, albeit still too low for most producers to sustain output. There may be more relief closer to $40 and the way prices are moving, you wouldn’t bet against it in the near-future.

Gold bullish, despite some profit taking

Gold has leveled off a little after pulling off its highs on Monday. The yellow metal is looking far more bullish since breaking higher late last week and yesterday’s setback may simply be nothing more than a little profit taking as equities enjoyed a strong start to the week. It will be interesting to see if this relationship re-establishes itself although there’s been little evidence of it so far. If anything gold has appeared to be well aligned with riskier assets. Gold found support around $1,725 this morning – around the highs of earlier this month and late April – and has since edged higher. The next big test will come around $1,800, a major barrier of resistance since late 2011.

$10,000 holding strong, for now

Bitcoin continues to trade below $10,000 but only just, with pressure continuing to build to the upside. This level is getting tested on a daily basis at this point, without success. An eventual breakout could trigger another wave of bullishness in the cryptocurrency, while more failures could reinforce it as a major level of resistance, especially if followed by a move below $9,000. The coming days could be very interesting, indeed.

Economic Calendar

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