Global stocks rise, dollar falls as coronavirus risks ease
European and American equities bounced back following a sharp decline yesterday as fears emerged about a second wave of the virus. In Europe, the DAX, FTSE 100, and CAC 40 indices rose by more than 1% while in the United States, futures tied to the S&P500 and Nasdaq soared by more than 2%. Still, there are concerns that a new wave of the disease will start in the United States because of the ongoing protests. The challenge is that the wave will come at a time when there is no drug or vaccine for the illness. Investors were also rattled by the statement of Jerome Powell who said that the US economy would go through years of slow growth.
The British pound rose against the US dollar and the Japanese yen even as the Office of National Statistics (ONS) showed that the economy shrank in April. The GDP declined by 20.4% on a month on month basis and by 24.5% on a year on year basis. In the same month, all parts of the economy declined. For example, construction output fell by 40.1% while industrial production fell by 20.3%. Similarly, manufacturing production declined by 20.3% because of the shutdown. The rise of the sterling was partly because of the overall weakness of the dollar.
The price of crude oil rose today as sentiment in the market improved. The action came as JP Morgan released a positive statement on the Saudi oil market. In a report, the analysts said that the country’s share of the oil market will rise this decade to its highest level since the 1980s. In its report, the bank said that it expects oil demand to average about 91 million barrels a day this year, which is 9 million below its earlier estimate. The report came a few days after Saudi Arabia roiled markets by announcing the imminent end of its voluntary supply cuts.
The EUR/USD pair rose from an intraday low of 1.1276 to the current 1.1315. On the four-hour chart, the price is along with the 25-day exponential moving averages and slightly below the 14-day EMA. Also, the RSI has been moving lower and is now at 50. The value down bars of the awesome oscillator has also moved below the neutral level. This implies that today’s bounce could be a dead cat bounce, which means that the pair could continue moving lower.
The USD/CHF pair rose today as traders moved from risk assets like the Swiss franc. The pair is trading at 0.9460, which is above yesterday’s low of 0.9377. On the four-hour chart, the price is along with the 38.2% Fibonacci retracement level. It is also below the 100-day and 50-day exponential moving averages. As with the EUR/USD pair, this upward trend seems like a dead cat bounce, which means that the pair may retest the 0.9400 support.
The DAX index rose to an intraday high of €12,067 as traders reacted to a new stimulus package by the German government. On the four-hour chart, the price is slightly below the 50-day EMA and slightly above the 100-day EMA. The RSI, which reached the oversold level of 30, bounced back today. A close above the 50-day EMA at €12,200 could see the index continue to rally on Monday.