Morning Briefing: Global markets advance on economic reopening

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Vrasidas Neofytou
Head of Investment Research

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Global financial markets moved higher on Tuesday, extending their recent strong gains, supported from the optimism about the reopening of the global economy and a potential coronavirus vaccine. However, the market rally was capped after reports circulated that the US government is weighing sanctions on Chinese firms and officials over the situation in Hong Kong.

Coronavirus Update:

Global cases: More than 5.58 million
Global deaths: At least 350,423
U.S. cases: More than 1.68 million
U.S. deaths: At least 98,902

Market Reaction:

US markets continued their uptrend momentum by hitting fresh 2-months highs on Tuesday’s trading session driven by risk appetite. Dow Jones index surged 2.2% to close at the 25.000 level for the first time since early March, while the S&P 500 and Nasdaq followed with 1.2% and 0.2% in gains, respectively.

Fig.01: Dow Jones index, 2-hour chart

Asian markets traded mixed on Wednesday morning on fears for US sanctions on China and the re-opening optimism. Nikkei and Kospi indices led the gains with 0.5% while Hang Seng and CSI300 indices fell 0.5% on US-China tensions.

Crude oil:

Crude oil prices rose 2% on Tuesday, supported by growing confidence that OPEC members and allies are following through on commitments to cut supplies. Russian oil production volumes were near the country’s quota of 8.5 million bpd for May and June.

Fig.02: WTI crude oil price, 2-hour chart

WTI crude price rose near $35 per barrel, the highest since March, while Brent crude broke above the $36 level. The fuel demand is recovering faster than expected as more countries re-open their economies and as more people start using their cars.

Oil prices received support yesterday after Russia’s Energy Ministry Alexander Novak said a rise in fuel demand should help to cut a global surplus of about 7 million to 12 million bpd by June or July.

Precious Metals:

Gold price fell 1% yesterday as investors moved away from safe-haven assets into growth instruments such as equities on improved risk sentiment. The price of the yellow metal hit weekly lows of $1.705/oz, followed by 1% losses in Silver and Palladium.

Forex Market:

The DXY- US dollar’s index, which measures the greenback’s strength against six other major currencies, fell 0.8% yesterday, breaking below the 99 level, its weakest since May 1st. However, the index rose to 99.20 this morning receiving some support from the escalation of trade tensions over Hong Kong’s status.

Fig.03: AUD/USD pair, 2-hour chart

Australian and New Zealand dollars extended their recent gains against the US dollar, by hitting fresh highs of $0.667 and $0.623, respectively. EUR/USD pair rose near the 1.10 key resistance level while GBP/USD also climbed above 1.23.

Economic Calendar for May 27, 2020 (GMT+ 3:00):

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