Oil Rebounds, PMI's and US Jobless Claims

European bourses are pointing to a mixed start as oil prices gain and more US aid is coming, but PMI's and US jobless claims could hit hard

European markets are pointing towards a mixed start as investors digest the promise of more US aid to cushion the blow of the coronvirus hit, in addition to rising oil prices. However, with dire PMI data and US jobless claims lined up to be released later in the session, traders are questioning the next move.

Timing is everything
Oil has been the key driver of markets across the week. After Brent fell to its lowest level since mid-1999 in the previous session, it then rebounded in the latter part of the day. After some wild swings in trading WTI ended the previous session 19% higher whilst Brent added 5% . The rally came thanks in part to President Trump’s warning to Iran over harassing US ships. They say timing is everything. There is a distinct whiff of Trump stirring up political tensions to intentionally boost the price of oil. Still it appears to have been just the prompt that oil traders needed and WTI has jumped a further 10% in early trade. Sentiment has been closely tied to oil price swings; today’s push higher could help under pin bourses. 

PMI’s in focus
Sentiment clearly remains fragile and that could be magnified with the release of the PMI readings for the UK and Eurozone. The service sector accounts for 80% of UK economic activity. In March the UK service sector contracted at the fastest pace on record, dropping to 34.5 on the index. And that was only the beginning of lock down! This months’ reading is expected to dive deeper into contraction territory to 29.  The manufacturing sector, which has not been as servery impacted by the stay at home measures is forecast to contract further to 42 in April down from 47.8 the previous month.

The UK has extended its lock down until at least the 7th May and there is still no exit strategy in place. With no light at the end of the tunnel weak PMI readings could drag heavily on the pound and on sentiment in general.

4.5 million jobless claims forecast
Sticking with data, the US jobless claims, which have become the most closely followed US macro, release will be in focus. So far, over a 4-week period 21 million Americans, equivalent to 13% of the US workforce have signed up for unemployment insurance. This number is expected to increase by 4.5 million.

However, there is a chance that the additional $484 billion rescue package which is expected to be cleared by the House of Representatives today will offer some relief to traders in the case of soaring unemployment claims. With $320 billion aimed at helping small companies pay their employees during lock down there is a chance that we could start to see these sky-high initial claims start to ease.

FTSE Levels to watch
FTSE futures are trading at pointing to a 0.25% fall on the open, even so the upward trend remains intact. 
Immediate resistance can be seen at 5854 (high 17th April) prior to 5950 (high 14th April).
Immediate support can be seen at 5700 (tend line support) and break below here could negate the uptrend and open the door to 5622 (21st April) and 5528 (low 15th April).

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account