Global stock markets got a decent start to the week yesterday on a combination of factors, and this positive sentiment continued in Asia overnight. This optimism was driven by a number of factors, firstly, increasing hope that fatality rates for Covid-19 may well be starting to plateau in Europe, saw strong gains across the board, after Spain, Italy and France reported sustained dips in the death rates in their respective countries.
We also saw the announcement of a variety of new measures to cushion the economic effects of the virus from the governments of Japan, Singapore and Spain, while in the US, there is the prospect of another US stimulus package later this month, or early May. Germany also said it was planning a “limitless credit” facility for small companies.
European finance ministers are also set to meet today in order to try and come up with a collective aid scheme to help deal with the economic disruption caused by coronavirus. One thing seems certain, Coronabonds won’t be up for discussion, and even if they are Germany, the Netherlands and Austria are likely to block them. Germany in particular is under growing pressure to show more solidarity with southern European countries, who have borne the brunt of the impact of this virus. Talk of ESM credit lines are likely to be up for discussion, however new loans are unlikely to go down too well with Italy given how much debt the country already has.
US markets carried on the positive theme as the number of new cases in the US continued to slow, according to the latest data from Johns Hopkins University, with both the Dow and S&P500 finishing the day over 7% higher.
This surge into the US close, saw Asia markets pick up the baton and this looks set to carry over into Europe this morning, with another positive open, as hopes rise that countries in Europe are starting to win the fight against the virus.
The pound slid sharply late Monday evening on the news that UK Prime Minister Boris Johnson has been moved into the intensive care unit of St. Thomas’ Hospital, London in order to better treat his coronavirus condition, as he continues his own battle with the virus, which he is struggling to shake off. Foreign Secretary Dominic Raab will stand in for the Prime Minister in his absence.
Crude oil prices have remained under pressure, giving up some of the gains at the end of last week as caution sets in on the ability of the OPEC+ members to coalesce around an agreement to cut back on output. According to some OPEC+ sources any agreement on Thursday is likely to be conditioned on the US being part of those cuts, against a backdrop of reports that storage facilities in Cushing are quickly filling up. A US agreement still seems a big ask, given recent comments from President Trump, however if there is nowhere to put the excess product US producers may well have no choice, but to stop pumping. In any case, any agreement could well slip into the G20 at the weekend.
EURUSD – still finding support near the 1.0770/80 area, however rebounds are getting shallower. If we break below this level, we could slip back towards the previous lows at 1.0630. We need to see a move back above the 1.0920 area to stabilise.
GBPUSD – finding it difficult to rally but still above the 1.2200 area. As long as we hold above the 1.2200 area, we can see a recovery back to the highs last week at 1.2475. The 1.2500 area remains a key resistance, and obstacle to a move 1.2775.
EURGBP – the 200-day MA at 0.8740 continues to support. A break of 0.8720 has the potential to retarget the 0.8600 area. Rebounds need to stay below the 0.8900 area to keep downside momentum intact.
USDJPY – continues to edge higher moving beyond the 109.20 area, we could well head back towards the recent highs just above the 110.00 area. Long term support remains down near the 106.80 area which we saw last week.
FTSE100 is expected to open 14 points higher at 5,596
DAX is expected to open 90 points higher at 10,165
CAC40 is expected to open 30 points higher at 4,376
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