Morning Briefing: Global markets and Crude oil surged on hopes for economic recovery

Posted on May 21, 2020May 27, 2020 by Vrasidas Neofytou

Global financial markets and Crude oil prices gained more than 2% on Wednesday, extending their recent rally, on hopes for a faster economic recovery and a drop in US oil inventories. The S&P 500 index closed at its highest level since March 6, offsetting most of the pandemic-related losses.

Coronavirus Update:

Global cases: More than 4.99 million
Global deaths: At least 328,079
U.S. cases: More than 1.55 million
U.S. deaths: At least 93,416

Crude oil:

Crude oil prices surged 4% yesterday, extending their recovery rally from historic lows in late April. WTI oil price climbed near $34.50 per barrel, while Brent crude broke above $36 on Thursday morning, getting support from the optimism that the energy market had rebalanced amid ongoing supply cuts and increasing fuel demand as economies reopen.

WTI oil price was boosted yesterday, after U.S. crude inventories fell for a second straight week on lower Shale oil production and increased gasoline demand as many States start removing lockdown restrictions.

According to Energy Information Administration (EIA), weekly storage report, the U.S. crude inventories fell by 5 million barrels for the week ending May 15 vs a build of 1.8 million barrels , while stocks at the Cushing, Oklahoma, delivery hub dropped by 5.6 million barrels.

Furthermore, EIA reported lower US crude production by 100k to 11.5 million per day last week. Overall, the whole US crude oil production has fallen 1.6 million barrels from a record high of 13.1 million bpd in mid-March, amid record low WTI prices and massive declines of fuel demand in April.

Market Reaction:

US markets surged on Wednesday, on hopes for a faster economic recovery. The Nasdaq index led the gains with 2%, with tech giants Amazon and Facebook hitting record highs on improved sales.

The Dow Jones index closed 1.5% higher at 24,575, the S&P 500 advanced 1.7% to 2,971, its highest closing level since March 6, while Nasdaq Composite jumped 2.1% to 9,375.

Asian markets were mixed on Thursday morning, following the overnight rally in Wall Street and Trump’s tweets against China. Kospi index led the gains with 0.5%, while Nikkei lost 0.3%.

Precious Metals:

Gold and Silver prices moved lower this morning, retreating from their recent highs. Both metal prices have failed to break above $1.770/oz and $17.50/oz resistance levels on the ongoing rally in the global stock markets following the hopes for economic recovery, together with the recovery of the US dollar from its weekly lows.

Forex Market:

The Australian dollar’s rally has lost some steam since yesterday, following the dovish comments from Central Bank’s governor and the rising trade tensions between China-US.

The US dollar bounced back from its weekly lows as it seems to receive some safety flows after Trump ramped up his attack on China. DXY-dollar’s index rose to 99.40 after dropping yesterday as low at 99.

Economic Calendar for May 21, 2020 (GMT+ 3:00):

Morning Briefing: Market volatility over vaccine developments

Posted on May 20, 2020July 3, 2020 by Vrasidas Neofytou

Global financial markets fell 1% on Tuesday, giving back some of the massive gains from the previous session, as investors raised concerns about the trial results for a potential coronavirus vaccine from Moderna. Gold and Silver prices extended their recent uptrend momentum, while the US dollar continued its downtrend.

Coronavirus Update:

Global cases: Around 4.9 million
Global deaths: More than 323,000
Top 5 countries: United States (More than 1.5 million), Russia (299,941), Brazil (271,885), United Kingdom (250,138), Spain (232,037).

Market Reaction:

Market volatility has surged since the start of the week, as investors feel excited over the prospect of a virus vaccine, while some remain concerned for a second wave of infections as global markets reopen.

US stock markets opened the week with very strong gains of 4%, cheering the vaccine positive developments from Moderna biotech company. However, the vaccine-related rally lost some steam yesterday, after a STAT News report raised concerns about the trial results for a potential coronavirus vaccine from Moderna. Shares of the biotechnology company dropped 10% together with the rest of the market, as the Dow Jones index lost 400 points or 1.6% to close at 24.206.

Asian markets were mixed on Wednesday morning trade, following the overnight losses from Wall Street. Nikkei and Kospi indices led the gains with 1%, while Chinese indices fell 0.5%.

Precious metals:

Gold price surged 1% yesterday, approaching once again the key resistance level of $1.750/oz. Silver price extended recent gains towards 2-months high of $17.60/oz, while Palladium trades just above the support level of $2.000/oz.

Precious metals gained support from the US dollar’s weakness, the monetary stimulus packages, zero interest rates and stock market volatility.

Crude Oil:

Crude oil prices rose 1% this morning supported from the ongoing supply cuts from OPEC, Russia, and US Shale producers. Furthermore, oil demand is gradually recovering as global economies reopen and economic activity restarts. WTI and Brent crude prices trade near monthly highs of $32 and $35 per barrel, respectively.

Forex Market:

Euro currency climbed near 1.10 against the US dollar, after France and Germany proposed a 500-billion-euro coronavirus bond program to support an economic recovery in the EU.

The US dollar has been the weakest currency across the board this week. The vaccine optimism combined with the improved sentiment, have reduced the safe-haven demand for the greenback.

The DXY-dollar’s index fell at 99.40 this morning, in response to the willingness of the Federal Reserve to extend its monetary stimulus to support the economy.

Economic Calendar for May 20, 2020 (GMT+ 3:00):

Morning Briefing: Global markets and Crude oil rally on vaccine optimism

Posted on May 19, 2020July 3, 2020 by Vrasidas Neofytou

Global financial markets and Crude oil prices advanced higher on Monday, as investors cheered news that an experimental coronavirus vaccine from the biotech company Moderna, showed promising early-stage results. The positive early test results boosted risk sentiment as investors bet on a faster-than-expected economic recovery which could improve the demand for energies.

Coronavirus Update:

Global cases: More than 4.8 million
Global deaths: At least 318,303
U.S. cases: More than 1.5 million
U.S. deaths: At least 90,340

Market Reaction:

US markets had their best day in over a month yesterday, supported from news around the virus vaccine progress, the re-opening hopes after pandemic and growing expectations for more stimulus packages from the Federal Reserve to support the US economy.

The Dow Jones index closed at 24,597, up 3.9%, the S&P 500 gained 3.2% to close at 2,953 while the Nasdaq Composite advanced 2.4% to 9,234. Both indices, Dow Jones and S&P 500 had their biggest one-day gains since April 8th .

Moderna, an American pharmaceutical company reported “positive” phase one results for its potential coronavirus vaccine. The firm announced that after two doses, all 45 trial participants had developed coronavirus antibodies.

The positive trial results from Moderna, have strengthened investor’s confidence that a vaccine may be found faster-than-expected, rising the expectations for a quicker global economic recovery at a time where many countries continue efforts to reopen their economies.

Asian markets advanced on Tuesday morning on risk appetite sentiment, following the massive rally from Wall Street. Nikkei and Kopsi led the gains with 2%, while the Australian index moved lower after China imposed tariffs on cereal exports.

Crude oil:

Crude oil prices extended their massive rally yesterday, where the WTI contract finished the day with 8% profits, at $31.83, while Brent crude closed at $34.81, up 7%.

The rally in crude prices boosted after reports that the Chinese oil demand had fully recovered to pre-pandemic levels. In addition, the potential vaccine could improve the oil demand recovery much faster than the market expects.

Crude oil prices managed to double in value since the start of the month, getting support from the ongoing supply cuts from OPEC members and their allies led by Russia, the lower production from the US and Canada, combined with the first withdrawals in the storage stockpiles.

Precious Metals:

Gold and the rest of the precious metals, retreated from their intraday highs yesterday, as investors moved away from safety assets, in response to the coronavirus vaccine announcement and re-opening optimism after the pandemic.

Gold price fell 1% to $1.730/oz yesterday, reversing lower after hitting its highest since October 2012 at $1765/oz. Meanwhile, Palladium gained 5% to $2.030/oz after soaring more than 9% earlier, while Silver also jumped 3% to $17.10/oz

Forex Market:

The US dollar dropped across the board yesterday, as the improved risk sentiment and the stock market rally, reduced safe-haven demand for the greenback.

*Fig.03: DXY-dollar’s index, 1-hour chart*

The DXY-dollar index against a basket of major currencies lost 1% right after the report of the potential vaccine. The weakness of the greenback helped the rest of risky currencies to advance higher. EUR/USD broke above 1.09, while Australian and New Zealand dollars hit fresh weekly highs.

Commodity-related currencies such as Canadian dollar, Mexican Peso, Norwegian Crone and Russian Rubble rallied against safe havens currencies, supported from the massive surge in crude oil and industrial metal prices.

Economic Calendar for May 19, 2020 (GMT+ 3:00):

Morning Briefing: Commodities rally on improved economic outlook

Posted on May 18, 2020May 27, 2020 by Vrasidas Neofytou

Commodity assets have extended their recent gains supported from the first signs of gradual recovery of their demand after the pandemic. Crude oil prices gained more than 100% since the start of May and industrial metals followed higher, as more countries reopen their economies. Precious metals hit fresh highs on stronger safety demand and improved outlooks.

Coronavirus Update:

Global cases: More than 4.7 million
Global deaths: At least 315,023
U.S. cases: More than 1.48 million
U.S. deaths: At least 89,550

Crude oil:

Crude oil prices extend their upside momentum, gaining another 4% this morning. WTI crude price broke above $30 per barrel for the first time after the crisis, while Brent price climbed to $34 per barrel.

Black gold has received support from the massive voluntary production cuts from OPEC and its allies led by Russia to stabilise the energy market, and from the deeper production cuts from US Shale and Canadian oil producers amid lower prices.

On the demand side, we can see signs for a recovering demand for Gasoline, as more countries around the world eased travel restrictions and more people start using their cars.

The improved energy fundamentals helped to remove some pressure from US stockpiles. The Energy Information Administration (EIA) announced on Wednesday, that the U.S. crude inventories fell for the first time in 15 weeks on stronger Gasoline demand.

Precious Metals rally:

Gold price surged 1%, near $1.770/oz on Monday, hitting its highest level since October 2012.

Precious metals got support from the ongoing US-China trade tensions, as the rhetoric is becoming very hot, and especially from the United States. Furthermore, China’s commerce ministry said yesterday that the government was firmly opposed to the latest rules by the United States against Huawei and they would take all necessary measures to safeguard Chinese firms’ rights and interests.

In addition, investors fled to the safety of gold-silver as hedge positions against inflation. Market believes that the zero interest rates combined with the massive fiscal and monetary policies could stay for longer to support the damaged economies from the pandemic.

Silver price rallied 4% this morning, breaking above the $17 key resistance level, following the massive gains from the Gold rally. The white metal hit a 2-month high at $17.30/oz, while it is approaching the yearly highs of $19/oz. The Gold/Silver ratio dropped to 102 (1.760/17.30), an indication of stronger demand for Silver.

Palladium price surged up to 10% this morning, surpassing the $2.000 level for a while, before retracing back to the $1.940/oz level or up 4%. The industrial metal received support on better-than-expected demand outlook from the World Platinum Investment Council (WPIC) together with reports for stronger auto-catalyst demand in China and America.

Meanwhile, Copper price gained 2% as well, reaching monthly highs of $2.37/lb amid stronger demand for industrial metals from China and other Asian countries.

Market Reaction:

US stock futures climbed 1% on the first day of the week, after Fed’s Powell optimism for a recovery in the US economy at the end of 2020. Furthermore, he added that economies may need a coronavirus vaccine to fully recover from th pandemic damages.

The overnight gains have offset some of the losses from last week amid weaker US employment and retail sales data. Dow Jones index finished the week down with almost 3% losses, while the Nasdaq Composite and S&P 500 fell 1.1% and 2.2%, respectively.

Asian markets rose 0.5% on Monday morning, following the overnight gains in US futures and commodity prices. Kospi and CSI 300 indices led the gains with 1%, while Nikkei followed with 0.5% profit.

Forex Market:

The DXY- dollar index trades above 100.30, holding last week’s gains against major currencies. The greenback gets support from safety flows as trade tensions with China overshadows the improved risk sentiment.

The Australian dollar was stronger across the board this morning, supported from the recent rally in commodities, such as crude oil, gold-silver, copper and from higher exports of iron-ore to China. AUD/USD extended its bounce to regain 0.645 while the AUD/JPY rose to the 69 level. The currency had fallen last week on global economic fears and from the trade tensions between the country and China.

Economic Calendar for May 18, 2020 (GMT+ 3:00):

Morning Briefing: Crude oil climbs to 2-months high on OPEC cuts & higher demand

Posted on May 15, 2020May 27, 2020 by Vrasidas Neofytou

Crude oil prices surged 3% on Friday morning, extending the recovery rally from their historic lows in late April, on improved fundamentals in the energy market. Global stock markets have also moved higher this morning, as economies reopen after the pandemic, while governments around the world implement more stimulus plans.

Coronavirus Update:

Global cases: More than 4.4 million
Global deaths: At least 302,025
Most cases reported: United States (over 1.4 million), Russia (252,245), United Kingdom (234,439), Spain (229,540), Italy (223,096).

Crude Oil:

WTI and Brent crude prices traded near $29 and $32.50 per barrel respectively on the Friday morning session, having jumped more than 10% since yesterday. Both contracts are heading for a third weekly gain, up by more than 100% from their April lows.

Crude prices got a boost yesterday, after the International Energy Agency (IAE) reported that it expects lower global stockpiles by about 5.5 million barrels per day in the second half of this year.

Those predictions fit well with the first draw-down in Cushing oil inventories after 4-months of build, because of lower Shale oil production and recovering fuel demand as more States have started easing lockdowns.

Market Reaction:

The US stock markets rose 1.5% on Thursday on gains from the energy and banking sector, after President Trump said that he could negotiate another possible stimulus bill to boost the economy.

The Dow Jones index finished the day at 23.625, up 1.6%, after falling more than 450 points to 22.800 earlier in the day on fears for a second pandemic wave. The S&P 500 and Nasdaq Composite settled at 1% higher.

Asian markets traded slightly higher on Friday morning in response to the better-than expected China’s industrial output for April, which was the first expansion data after the pandemic. China’s industrial output rose 3.9% year-on-year in April vs 1.5% estimated by analysts. Retail sales, however, fell more than expected at 7.5% in April vs 7% decline.

Precious Metals:

Gold price extended recent gains towards yearly highs, benefiting from zero interest rates, synchronised stimulus plans, record high unemployment rates, and ongoing US-China trade tensions.

Gold price climbed at $1.736/oz this morning, approaching the multi-year highs of $1.750/oz. Silver price also broke above the $16 level, currently trading near $16.30 while Palladium extended recent declines, dropping near $1.835/oz.

Forex Market:

US dollar was stronger across the board yesterday on growing fears of a second wave of infections combined with the renewed trade tensions and weakness in the growth-related currencies.

The DXY-dollar’s index holds recent gains above the 100 level, after the Federal Reserve Chairman Jerome Powell dismissed speculation over U.S. interest rates entering negative territory.

Economic Calendar for May 15, 2020 (GMT+ 3:00):

Morning Briefing: Global markets fall on fears for a second pandemic wave

Posted on May 14, 2020July 3, 2020 by Vrasidas Neofytou

Global financial markets dropped 2% on Wednesday on concerns over a second pandemic wave and the potential recovery of global economies. The sell-off in markets came as Federal Reserve chairman Powell warned that the “path ahead is both highly uncertain and subject to significant downside risks”.

Coronavirus Update:

Global cases: More than 4.3 million
Global deaths: More than 296,600
Most cases reported: United States (over 1.38 million), Russia (over 242,200), United Kingdom (over 230,900), Spain (over 228,600), Italy (over 222,100).

Market Reaction:

US markets 2% lower after Fed’s Powell warning

US stock markets finished in red on Wednesday for a third day in row on a general risk aversion. Dow Jones lost 516 points or 2.1% while the S&P 500 and Nasdaq Composite finished lower by 1.8% and 1.6%.

The Dow Jones index lost almost 1.500 points or 6% since the start of the week as investors moved away from risky stocks and into the safety of bonds and the US dollar.

Asian markets fell 1% on fears for a second pandemic wave

Asian markets fell 1% this morning following the overnight negative sentiment from Wall Street. Investors fear for a second pandemic wave in Asia, after fresh outbreaks in South Korea, while China has re-imposed movement restrictions near its borders with North Korea and Russia.

Crude oil dropped 2% despite drawdown in oil inventories

WTI and Brent crude oil prices dropped 2% at $26 and $29.30 per barrel as a second wave of infections would hurt the demand for fuels.

The oil price fell even after the first drawdown in US oil inventories after 4 months. The U.S. Energy Information Administration’s reported a surprise drop in crude stockpiles by 745k barrels for last week at a key storage hub in Cushing, Oklahoma, despite analysts’ consensus for a 4.1m-barrel increase. In addition, EIA reported a larger-than-expected drawdown in gasoline on higher driving demand as the US economy reopens.

Cushing, which is the delivery point for WTI, had reached 80% of its capacity, as producers find themselves with fewer places to store oil.

Safe havens rose near monthly highs

Gold price climbed near monthly highs of $1.720/oz on safe-haven demand and after Powell signalled more stimulus plans to support the US economy from the pandemic. Precious metals tend to benefit from stimulus measures as it is often seen as a hedge against inflation and currency devaluation.

*Fig.2: 10-year US Treasury yields, Weekly chart*

US treasuries rose yesterday after the Fed’s warnings of the US economic outlook, sending investors to the safety of US government debt. The yield on the benchmark 10-year Treasury note fell to 0.64%, while the yield on the 30-year Treasury bond was also down at 1.34%. Yields move inversely to prices.

Forex Market: US dollar stronger across the board

US dollar was stronger across the board yesterday on safety flows and after Powell talked down the prospect of negative interest rates in the United States.

*Fig.3, DXY-dollar’s index, 2-hour chart*

The DXY-dollar’s index extended gains above the 100 key level, mainly on gains against the Euro and Sterling, while it was weaker against safe havens such as the Japanese Yen and Swiss Franc.

In addition, the greenback was stronger against growth-related currencies such as the Australian and New Zealand dollars and against commodity-related currencies such as the Canadian dollar and Mexican Peso.

Economic Calendar for May 14, 2020 (GMT+ 3:00):