Marketsare looking up as more economies plan to reopen, reports Fiona Cincotta.
Asianmarkets pushed higher overnight, while European and U.S. futures are pointingto a stronger start as investors ignore rising U.S.-China tension and focus onthe gradual reopening of businesses across major economies.
Vaccinehopes are playing a part in boosting risk on sentiment. Crude oil prices hit a five-weekhigh amid growing optimism that the worst is behind us and global economies arecoming back to life. Gold soared to a 7.5-year high.
AstraZenecaPlc. (ANZ) is the latest firm to boost Covid-19treatment hopes as it is testing an existing diabetes drug as a treatment forCovid-19. The firm aims to make 30 million doses of the drug available— whichis currently being trialed in humans— if it proves to be successful. In themeantime, economies are reopening and deaths in the UK have fallen to thelowest level since March 24.
Themood in the market is optimistic despite the United States continuing its blamegame with China and warnings from Federal Reserve Chair Jerome Powell that afull recovery may need to await a vaccine. He added that any recovery could stretchwell into next year. His comments came after U.S. retail sales plunged 16%, theworst reading on record, but consumer confidence bounced in a sign that thingsmight be starting to look up.
Harddata is backward looking and will continue to give further insight into thedepth of the downturn. Meanwhile sentiment data tends to be more forwardlooking and provides insight into how quickly global economies could recover.German ZEW sentiment data will be in focus tomorrow.
Goldat 7.5 year high
Goldis a standout performer at the start of the week, hitting a 7.5 year high as itextends a series of higher highs and higher lows. Gold has traded at freshyearly highs every month so far this year and could continue to do so followingJerome Powell’s warning of a drawn-out recovery and a disruption to economicactivity that could stretch towards the end of next year.
Oilback above $30 per barrel
WTIis trading back over $30 staging a moderate recovery at the start of the weekas demand rises and supply drops. A month after falling below zero, WTI is onthe road to recovery but still nowhere near where it was prior to the Coronavirusoutbreak. As lockdowns across Europe and the United States ease, driving ispicking up, refineries in China are buying more oil and Russia and Saudi Arabiahave ended their price war and cut production. U.S. firms are decommissioningrigs and closing wells. These developments are helping to push oil pricescautiously higher. While there is still a long way for oil to go, many oil traderswill be sitting a lot more comfortable than there were just a few weeks ago.
Anyrecovery in oil will be drawn out given that the oil stock glut needs to beworked through first. Now that Russia and Saudi Arabia have sorted out theirdifferences, OPEC production is expected to fall below 24.1 million barrels aday by early June. Any second wave in infections could quickly bring the pricecrashing backdown.
WTIchart
Fiona Cincotta is a MarketAnalyst for Currency Live
