European open – Markets, PMIs, oil, gold, bitcoin

Cause for optimism?

European stock markets are back in the green on Tuesday, up around 4%, in what is becoming a normal move in these quite extraordinary times.

Source – Thomson Reuters Eikon

It’s been an incredibly turbulent month, one in which central banks and governments have been forced to announce extreme measures to combat the coronavirus crisis. Despite all of this stimulus, the stock market has continued to plummet, registering the kind of swings we very rarely ever see. It really has been a remarkable month.

Considering how these markets have traded over the last month, I’m certainly not confident that the worst of the rout is behind us but we have seen a little more stability over the last week or so. Given the scale of the moves in recent days, that’s probably more a reflection of just how wild these markets have been but it may be encouraging.

With China preparing to lift the lockdown in Wuhan and Italy reporting a reduction in the number of new cases and coronavirus related deaths – it’s still early days, of course – perhaps investors can start to envisage life beyond the coronavirus. That could make stocks look a little more attractive, although anyone jumping back in now will need to have nerves of steel.

Much of Europe is still in the acceleration phase, as is the US, which brings a huge element of uncertainty still, so this volatility is going nowhere. A roadmap to deceleration and lockdowns being lifted is encouraging but there’s still a long way to go, which will likely keep markets under pressure for now.

Horrific PMIs fail to knock market bounce

We’ve been getting PMI survey’s throughout the morning and, as is to be expected, they’re horrendous. The services sector is suffering far worse than the markets had forecast, although it’s worth noting that a lot of leeway was always going to be afforded under the circumstances. Manufacturing was better than expected but still quite poor.

I’m not sure this really alters anyone’s view on the situation, we’ve all seen the headlines and watched various world leaders as they gradually impose lockdowns. It’s still quite shocking to see the data and get a grasp of just how severe the situation truly is. Of course, we’ll have to wait a little longer for the hard data to get a firmer idea of exactly how bad it is.

Is oil bounce sustainable?

The rebound in risk appetite this morning is bringing some welcome reprieve for oil prices, which are also up around 4% on the day. This is, of course, coming from some exceptional lows as the impending global recession is compounded by the oil price war to pummel crude prices.

While investors may be cheering the Fed action and positive noises from China and Italy, the oil price war between Russia and Saudi Arabia piles further pressure on crude prices and makes this rally even more difficult to sustain.

Gold gets Fed lift

Gold prices are rallying again on Tuesday, alongside the stock market, as the yellow metal gets a huge boost from the Fed’s QE-infinity stimulus package. Gold has had a rough month, torn between its safe haven status and the need to fund margin calls and cover losses elsewhere.

If the market can start to move past this period of extraordinary volatility, then this environment could be very bullish indeed for gold. Of course, that’s a big if. I’m saying this having just seen Europe open around 5% higher and the US limit-down pre-market on Monday. It does feel like we’re heading in the right direction though. Famous last words.

Bitcoin facing major resistance

Bitcoin is not one to miss out on a rally and it’s doing just that this morning, up almost 5% with its eyes set on $7,000. The area we’re now trading within – around $6,500-7,500 – has been a strong area of support and resistance over the last couple of years and represents a major hurdle to the upside.

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