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

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Vrasidas Neofytou
Head of Investment Research

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

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.

Fig.01: WTI crude oil, Daily chart

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.

Fig.02: Nasdaq Composite, Daily chart

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.

Fig.3: AUD/USD, 1-hour chart

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):

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