Morning Briefing: Global markets higher on improved risk appetite

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Vrasidas Neofytou
Head of Investment Research

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Global financial markets extend gains on improved risk sentiment after an American biotech company Novavax said that it started the first human study of its experimental virus vaccine. Furthermore, markets have been getting support from the re-start of the global economic activity and from the new stimulus plans from China, despite the tensions in Hong Kong.

Coronavirus Update:

Global cases: More than 5.4 million
Global deaths: More than 346,200
U.S. cases: More than 1.6 million
U.S. deaths: More than 98,000

Market Reaction:

US futures traded 1% higher on Tuesday morning after coming back from Memorial Day holidays. The Dow Jones futures indicated an opening near the 25.000 level, while Nasdaq futures traded above 9.600.

Fig.01: Dow Jones index, Daily chart

Asian markets rose on Tuesday after China's central bank said it would strengthen economic policy to support the economy. Nikkei and Kospi indices led the gains with 2%, despite the growing tensions between U.S and China.

Crude oil:

Crude oil prices gained 2% on Tuesday morning, supported from the expectation that the oil fundamentals will be balanced in coming weeks. The imbalance between demand and supply has decreased amid improved gasoline demand as more people have started using cars after lockdowns and from the ongoing supply cuts led by OPEC+ and US shale oil producers.

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

WTI crude price climbed above $34 per barrel while Brent crude traded at the $36 level. Both prices have gained more than 100% since they bottomed in late April.

Furthermore, oil prices received a boost yesterday after comments from Russian oil minister Alexander Novak, reporting the country’s oil output had nearly dropped to its target of 8.5 million bpd for May and June under its supply cut deal with OPEC.

Precious Metals

Precious metals had a strong rally supported from the weaker US dollar and tensions in Venezuela and Hong Kong. Gold price rose to $1.735/oz, up 0.5%, Silver up 2% to $17.50/oz, while Palladium price rallied 3% this morning by breaking above the key resistance level of $2.000/oz.

Forex Market:

Risk sensitive Australian & New Zealand dollars rose 0.5% against the safe-havens US dollar and Japanese Yen, benefiting from the improved risk sentiment and stock market rally.

Fig.03: AUD/USD pair, 1-hour chart

The US dollar index dropped to the 99.60 level, its lowest since last week, while EUR/USD broke above 1.09 level, and GBP/USD rose near 1.225.
The Chinese yuan, a barometer of relations between US and China, fell to 7.143, though it remains near a two-month low of 7.16 hit on Friday.

Economic Calendar for May 26, 2020 (GMT+ 3:00):

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