Stock markets had a relatively quiet day yesterday when compared with the very impressive moves that were registered on Monday.
There was a lack of major news, so traders couldn’t latch onto any stories in particular. The European trading session was lacklustre and, in the end, all the major indices finished in the red, with the exception of the DAX.
It seemed as if equity traders decided to pare back their long positions as there was an absence of fresh positive news. The overarching theme that governments are easing up on their lockdown restrictions is still relevant.
Optimism surrounding Moderna’s potential Covid-19 vaccine faded a little, and that was a contributing factor to the low note the Dow Jones and the S&P 500 finished on. An article in STAT news claimed that that Moderna’s phase one trial lacked sufficient evidence, so doubt was cast over the study. The losses that were witnessed yesterday were small in comparison with the gains that were racked up on Monday, so equity benchmarks remain in their recent upward trends.
Equity markets in the Far East are mixed as the session saw low volatility, and European indices are on track to open broadly unchanged on the day.
Gold gained ground yesterday as traders swapped stocks for the metal. At the start of the week when equities were driving higher, the asset lost ground as dealers were content to take on more risk – that’s why they dropped the metal Yesterday, there was a reversal of fortune, as funds were poured back into gold. The commodity has been in an upward trend since mid-March, and if it takes out the recent high, it might pave the way for the $1,800 area to be tested. Industrial metals like silver, platinum and palladium gained ground too.
The UK claimant count in April surged to over 856,000 – a record high – as the lockdown has crippled the UK economy. The jobs report didn’t have much of an impact on the pound – then again the dreadful jobless claims reports from the US never really influenced the greenback.
The EU’s rescue package is likely to be in the news in the near term. France and Germany have supported a €500 billion package. The programme would see grants be distributed to parts of the eurozone that have been badly impacted by the coronavirus, namely Spain and Italy. In typical EU fashion, there is division among the member states as nations like Austria, Denmark and the Netherlands would prefer loans to be issued.
The oil market was a little mixed yesterday as WTI built on recent gains, while Brent crude finished slightly in the red. The energy market has undergone a big turnaround in the past month. The reopening of economies has sparked speculation that demand for oil will increase. Reports from China and India point to an increase in demand for fuel. The upward lift in the oil market is also because of falling output. OPEC+ have introduced historic production cuts this month, and there is talk the body want to maintain the deep cuts beyond June.
At 7am (UK time), UK CPI will be posted and economists are expecting 0.9%, which would be a big drop-off from the 1.5% posted in March. The core reading is tipped to be 1.4%, and keep in mind the previous reading was 1.6%.
Eurozone CPI for April is anticipated to fall from 0.7% in March to 0.4% in April. The core update is anticipated to be 0.9%, and that would be a fall from the 1% registered in March. The figures will be announced at 10am (UK time).
Canadian CPI will be released at 1.30pm (UK time). The report is expected to be -0.1% and that would be a huge drop from the 0.9% posted in March.
The EIA report will be in focus as oil has seen a major rebound in the past month. US oil stockpiles are anticipated to be 900,000 barrels, while gasoline inventories are tipped to fall by 1.7 million barrels. The report will be revealed at 3.30pm (UK time).
EUR/USD – has been range bound recently and a break below the 1.0768 area should pave the way for 1.0636 to be tested. A move higher from here might run into resistance at 1.1000.
GBP/USD – is in a downtrend and while it holds below the 50-day moving average at 1.2292, the bias should remain to the downside, and it might target 1.2000. The 200-day moving average at 1.2654 might act as resistance.
EUR/GBP – while it holds above the 100-day moving average at 0.8684, the bias should remain to the upside, and 0.9000 might act as resistance. A break below 0.8684 might pave the way for 0.8600 to be tested.
USD/JPY – has been pushing lower since March and a break below 106.00 might see it target 104.00. 108.27, the 200-day moving average, might act as resistance.