Easing Optimism Boosts Markets

Following a late rebound on Wall Street and a rise in Asian stocks overnight, European bourses are heading towards a stronger start on the open. Investors are taking stock of the gradual reopening of economies whilst oil also picks up on greater fuel demands.

Optimism surrounding the gradual easing of lockdown restrictions and the impending economic recovery is outweighing rising US – Chinese tensions, which had dragged on sentiment in trading on Monday.

Italy and Spain are gradually reopening their economies, Germany is moving towards the second phase with large shops set to reopen, joining smaller shops which have already started trading. In the UK, blueprints of how Britain will ease out of lockdown have also been leaked, although more details are expected from Boris Johnson later in the week.

Oil back over $20pb
The rebound in oil has been largely driven by an increase in demand as governments ease lockdown restrictions. Data from the Cushing storage (largest oil storage tank in the world, responsible for 13% of total US storage) showed inventories rose 1.88mb last week, the smallest increase since mid-March and the surest indication that oil demand is slowly picking up.

Whilst April was all about the collapse of demand and approaching storage capacity limits, expect May and June to be about rising demand and rising storage capacity as more oil is consumed. As economies reopen demand will gradually pick up. However, any rapid bounce back is looking highly unlikely, this will be a gradual advance, unless OPEC+ manages to pull together another production cut.
Attention will now turn to tomorrow’s API data and then EIA data, which could well confirm that a gradual recovery is underway.

Service sector PMI bottom
The pound is pushing higher, snapping a three-day losing streak against the Dollar as the number of coronavirus daily deaths fall to levels last seen at the end of March as the UK awaits further details on the UK’s exit strategy.

Today the service sector PMI is expected to drop to 12.2 in April (final), reflecting a full month of lockdown. The very measures implemented to slow the spread of covid-19 caused services sector demand to evaporate. With the UK economy set to gradually reopen this should represent a bottom. With the market expecting a horrifying number, its unlikely to rock the boat much at these levels. A significantly worse reading (if possible?!) could.

FTSE chart

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

FOREX.com is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment and CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.forex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.forex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 42.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.