22 June 2020

European Markets Seesaw Between Bullish and Bearish

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News shaping
the markets today

     

What’s happening: European stocks closed the week on a higher note as the European Union kicked off negotiations over a proposed fiscal stimulus.

What happened: Equity markets remained mostly choppy last week, struggling to rise further from the lows reached in March, as investors worried about the rising covid-19 numbers around the world.

Investor sentiment was boosted by the EU leaders coming back to the table to negotiate a recovery fund, although doubts remain over the progress it can make. Investors are also expecting some good news on the US-China trade front.

Why it matters: The 27 European Union leaders restarted negotiations on Friday over a €750 billion recovery stimulus to overcome the impact of the coronavirus crisis. Investors remained concerned, however, about whether the leaders will be able to sort out their differences.

Investors also worried about the rise in infections in various parts of the world, including four states in the US recording a spike in new cases amid reopening measures. On the other hand, a Chinese Center for Disease Control expert indicated that the new outbreak in Beijing was under control.

European indices trading pushed higher on Friday and ended the week with gain, with hopes of easing tensions between the US and China., as US Secretary of State Mike Pompeo and China’s foreign policy chief Yang Jiechi met in Hawaii.

Some momentum also ensued as the Bank of England added another £100 billion to its bond-buying program and the UK reported a strong 12% rise in retail sales for May. Meanwhile, Germany reported a 2.2% decline in inflation for the month.

The Stoxx Europe 600 index gained 0.56% on Friday, after falling 0.7% on Thursday. The index posted a gain of 3.2% for the week. The German DAX 30 index rose 0.4%, while the French CAC 40 closed higher by 0.42% on Friday. Both indices recorded weekly gains of 3.2% and 2.9%, respectively.

Meanwhile, London’s FTSE 100 gained 3.1% last week, after closing higher by 1.1% on Friday.

What to watch: Markets await consumer confidence data from the Eurozone and speeches by ECB members. Eurozone’s consumer confidence is expected to recover to -15 in June, from a reading of -18.8 in May. Investors will be hoping for news of the EU nations sorting out their differences and announcing a recovery fund soon.

Investors will also continue to keep an eye on coronavirus numbers, with the total cases reaching almost 9 million globally.

The Markets Today

     

Crude oil will be in focus today, after closing the week on a stronger note.

Context: Oil futures closed higher on Friday, with WTI (West Texas Intermediate) gaining around 10% for the week. Signs of some rebound in energy demand and with OPEC+ pushing members to comply with output cuts brightened the overall outlook for crude oil.

Details: The JMMC (Joint Ministerial Monitoring Committee), which is responsible for monitoring compliance with production quotas, held a video conference on Thursday, during which it said that member nations that had fallen short of their pledges to cut output had submitted their schedules to compensate with further reductions in output quotas.

Meanwhile, Baker Hughes said on Friday that the number of active US rigs drilling for oil had declined by 10 to 189 in the latest week. The rig-count has been declining every week since mid-March.

Renewed talks over Europe’s recovery fund and some easing in US-China tensions with Beijing reportedly agreeing to acquire American farm products also helped raising the outlook for crude oil demand.

On Friday, WTI crude for July delivery gained 2.3% to end at $39.75 per barrel on the NYMEX (New York Mercantile Exchange), after rising as high as $40.50 per barrel earlier in the session. The front-month contract recorded a weekly gain of 9.6%.

Brent oil for August rose 1.6%, at $42.19 a barrel on Friday, posting a weekly gain of 8.9%.

July natural gas gained 1.9% to $1.669 per million British thermal units on Friday but recorded a weekly decline of 3.6%.

What to watch: With various US states recording a rise in covid-19 infections, concerns over a possible second wave could hamper global energy demand. Markets look forward to a slowdown in new infections supporting the outlook for crude oil demand.

Other Markets: US indices trading closed mostly lower on Friday, with the Dow Jones index and S&P 500 down by 0.80% and 0.56%, respectively. However, the Nasdaq 100 rose slightly by 0.03% in the previous session.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

UAE’s inflation rate, UK’s CBI industrial trends orders as well as the US Chicago Fed National Activity Index and existing home sales.

 

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