Stocks showing signs of hope virus peak has neared, reports Fiona Cincotta.
European indices are following in Asia’s footsteps, moving higher on Thursday, in their last day of trading ahead of the long Easter weekend. Despite some awful Coronavirus statistics traders are optimistic that the outbreak is nearing its peak and that governments would roll out more stimulus. A jump in oil prices amid expectations of an oil output cut at today’s OPEC meeting is also playing its part.
In the UK daily deaths jump to 938, even higher than Italy at its peak. However, hospital admissions are falling. In New York, Mayor Andrew Cuomo said that the social distancing measures were working. These signs that the pandemic is peaking are leading to a change in market sentiment.
Recession coming
Clearly there is still a deep economic hit which is coming, and which will keep gains capped. Germany’s economy is set to shrink by 10% in Q2, the sharpest decline since records began in 1970 and double the size of the biggest drop of the 2008 financial crisis. However, for now sentiment and the prospect of more government support is driving gains.
Today the Eurogroup of finance ministers is meeting again after failing to agree on the Coronavirus stimulus package earlier in the week. The ECB has called for fiscal stimulus in the region of €1.5 trillion ($1.64 billion). However, EU ministers have failed to agree due to a persistent stand-off between norther and southern European states. Failure again to agree a joint deal could hit sentiment hard, whilst signs of a deal could lift stocks higher.
Jobless claims to hit sentiment?
Whether current uplift in sentiment can offset the release of US Jobless claims (up 6.6 million) this morning remains to be seen. Expectations were 5.25 million. This put the total jobless claims over the past three weeks at more than 6.5 million.
Dax levels to watch:
The Dax has jumped 1.9% on the open, breaking out of the horizontal channel which dated back to March 25. The short term trend is bullish.
Immediate resistance can be seen at 10600 (yesterday’s high) prior to 11038 (March 10 high).
Support can be seen at 10150 (resistance turned support, upper bound of horizontal channel and trend line support) prior to 9540 (April 5 low) and 9335 (lower bound of horizontal channel).
Fiona Cincotta is a Market Analyst for Currency Live
