News

15.06.2020 – Special Report. After the astonishingly rapid recovery of the stock market from the corona shock since March, the threat of a setback is now looming. Three factors should worry the bulls: 1) The outbreak of a second wave of Covid-19, and 2) politics plus a possible civil war in the US. And 3) the fact that deflation is showing up in America despite all the help of monetary policy.

The second wave

As predicted at this point some time ago, the danger of a second corona wave is currently weighing on the minds of Wall Street. In China, Covid-19 has now appeared in Beijing. After the riots in the USA a new outbreak is to be feared: Twenty US states report an increase in new outbreaks after the looting of recent weeks. Needless to say, a new lockdown would strangle the US economy once again.
Which, by the way, would certainly be in the Democrats’ interest – since this would reduce the chances of US President Donald Trump being re-elected. Perhaps this is the reason why the riots raged so violently, especially in democratically governed cities – it seems that local politics left the streets to the mob. In the end, the Democrats’ strategy seemed to work.

Biden gains

In various opinion polls, Joe Biden has moved far ahead. Many brokers are sweating over the prospect of BIden as president: Presumably, an election victory of the challenger means higher taxes for companies and earners; higher health care contributions for the hard-working middle class; open borders with unrestricted immigration including full medical care; rising crime and at the same time a restriction of gun ownership – and a president who may have an age-related Alzheimer’s problem, as various dropouts in recent weeks have shown.

Here is the deflation

Analyst Albert Edwards of the Societé Générale warned against deflation after the presentation of US consumer prices for May: “the markets remain focused on what lies ahead and not on the deflationary crevasse that has just opened up beneath them. So, what’s amazing is that despite all the aid money, we are seeing deflation. Edwards continues: “We are transitioning from The Ice Age to The Great Melt”. Meaning that the frozen money must now finally be unfrozen. Specifically: “massive monetary stimulus is combining with frenzied fiscal pump-priming in an attempt to paper over the current slump”. So, continuous stimulus.
The lesson for the stock market: the price-earnings ratio is likely to be severely undermined in a deflationary environment. And literally, Edwards added, “Before markets can properly embrace The Great Melt, they first need to comprehend the new normal: deflation has arrived.” In other words, the stock market has not yet recognized the situation. …except, perhaps, for some of the professionals who have cashed in the last few days.

Zombie companies suck up the cheap money

Deflation, in other words – and the world is currently experiencing the biggest aid program ever. According to Fitch Ratings, the combined balance sheets of the world’s largest central banks – the Federal Reserve, Bank of Japan, European Central Bank, Bank of England and People’s Bank of China – have exceeded $20 trillion. This is around 7 percent of the world’s gross domestic product.
But where is all the money? At zombie companies. Those companies that survive on cheap credit. The number of companies in the euro zone and in the USA that are unable to pay their interest from current business has just reached an all-time high, according to Deutsche Bank and the Bank of International Settlements. In addition, the number of global defaults in corporate bonds climbed to 50 billion dollars in the second quarter, according to the Institute of International Finance.
So here is the problem of printed money: the massive liquidity and low interest rates keep the zombie companies alive. But in a crowding out, they are pushing small, healthy companies out of the market. A collapse of these companies, which are financed on credit, could mean severe trouble for the stock market.

The gap in the share price continues to attract investors

In this overall situation, it is worth taking a brief look at the chart analysis. Here is a small crisis warning. At the beginning of April, the S&P 500 had torn a gap just over 2,500 points. The assumption is that this gap will be closed at some point. Especially since the 50-day moving average is also magically pulling prices up. And at some point, the index should then go to the closing of the just torn downward gap above 3,100. But for now, the general weather situation looks rather bearish.

Stay careful

Our conclusion: all the aid money is not yet reaching the real economy. People are not shopping, they stay at home because of Corona and now because of the riots and hoard their money, because they could lose their jobs. Zombie companies only survive with cheap loans. The fast recovery of the stock market in V-form is a blank cheque for the hoped-for effect of the central bank money. If that check bounces and just a bubble has built up, things will get messy. Watch out for news about collapsing banks, unattended corporate bonds or insolvent shopping centres – and keep an eye on the corona situation.

The Bernstein-Bank wishes successful trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The strong decline of stock markets on Thursday did not continue on Friday. It seemed that there would even be a bounce, but by the end of the trades the bears still sold down. As a result, the S&P 500 index closed only slightly above the values shown on Thursday.

S&P 500

But what happens next? Yes, investors have realized that interest rates will stay around 0 for a long time. But on the other hand, it became clear that new money will not be printed anymore. And then there’s talk of a second wave of coronavirus, while many countries have not yet coped with the first. This week will be crucial in answering that question.

Euro

The Euro continues its downward correction. Potential support is only visible at the level of 1.10 on the EUR/USD pair. By the way, 200 daily moving average is in the same place.
Participants of the Forex market should remember that in summer, most currency pairs are in flat, and trend movements occur only in extraordinary events. We will not see anything new, obscured by the coronavirus theme, until autumn, so do not wait for strong movements to the level of 1.20 or parity.

Gold

When you look at the gold chart, it seems like all this has happened before. Indeed, by scrolling the chart to the left, we will see 3 similar situations in 2020, when the yellow metal price was in range for a very long time. Sooner or later, it would break through up, move and a new range would appear. This is exactly what we see on the chart now. Large investors are waiting for another jump to absolute price highs and then to $2,000 per troy ounce.

What’s waiting for us today?

04.00 Retail sales in China for May
04.00 Industrial production in China for May
11.00 Trade balance in the European Union for April.
14.30 New York Manufacturing Index for June

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Most markets are starting to move. It is difficult to say where the markets have gone so far, but apparently not all is so good in the economy. Although there were no sharp statements from the U.S. Federal Reserve, investors still decided to reinsure themselves and fix profits.

DAX

For two consecutive days, Wednesday and Thursday, the markets are in a free fall. Interestingly, almost all sectors of the economy, from technology to healthcare, are falling. Donald Trump is angry at Powell’s statements about the decisions that the Fed is making. Perhaps now begins a certain period of correction, which reflects the real state of the economy. Things are not good in Europe either. Against the backdrop of protests about racial discrimination, some companies are suspending their operations. DAX is falling almost 4.5% on Thursday, S&P500 is trading at 3038, 4.7% below opening.

Euro

The US dollar is strengthening on Thursday as investors preferred exit from risk assets. For the EUR, there are also some risks for the upcoming European Council, which will be held next week. The pair EUR/USD, which has reached such heights since March, may well adjust to the level of 1.12, if the recovery measures for the EU economy are questionable.

Oil

Exporters and oil market participants are still trying to determine the consequences of the coronavirus pandemic. Although the demand for oil is increasing slightly, it still remains depressed. One glad thing is that OPEC+ has decided to reduce production. It will definitely affect the oil rate, but in the short term. WTI oil falls 8% on Thursday and trades at $36.4 per barrel.

Gold

The gold has performed very well in a few weeks. On Thursday, trading at $1730 per ounce, the gold showed that it will strengthen as soon as investors withdraw from risky assets. There is potential for growth, given that the world, and the U.S. in particular, is afraid of a second wave of infection with COVID-19. The gold may reach the resistance levels of $1750 per ounce at any moment and try to break through it.

What’s waiting for us today?

08.00 UK GDP.
11.00 Volume of industrial production in the European Union for April.
16.00 US consumer sentiment index

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

This amount of “infinite” money has warmed up the situation on risky assets so much that it is not yet clear how to control the situation. Perhaps it will be possible for the Fed, at a meeting on Wednesday which will clarify further policy.

USD/JPY

As we can see, markets are very enthusiastic about the economic recovery, but still many want to be reinsured. Just yesterday, we assumed that it was time for the markets to make a correction, as the correction began on Tuesday. In anticipation of the Fed meeting, investors are making some profit right now. After the meeting, traders will look for signals in the statement that the worst part of the crisis is over. It is also important to understand whether the Fed will intervene in trading to smooth out the yield in the markets or not. The DAX closed 1.7% lower and the S&P500 traded 0.5% lower of the opening price but still above 3000.

Euro

On Tuesday the whole European market was traded in different directions. Euro grew and reached the level of 1.1360, which it could not pass, several trading sessions back. A very strong resistance zone was formed from above at 1.14. Fluctuations in the European politics, as well as the Brexit standing in place, do not allow to formulate a clear direction. So far, an exit above 1.14 is unlikely, as the dollar still has a potential for strengthening.

JAPANESE YEN

Yen went on the offensive and it’s alarming. Of course, much will depend on the Fed’s rhetoric, how much their control and actions will affect financial revenues. The rally of safe haven currencies will continue from strict statements. USD/JPY traded at 107.70.

Gold

The same is true for gold now. The price is above $1700 per ounce and will also rise in case of serious claims by the US Federal Reserve. If the statement hears the notes that the economy no longer needs stimulus measures, we will see a massive profit taking in risky markets and an outflow of money into safe assets.

What’s waiting for us today?

12.00 OPEC meeting.
16.30 US crude oil reserves.
20.00 Statement by the US Federal Reserve

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

09.06.2020 – Special Report. If Turkey were still a great empire, we would currently speak of an “imperial overstretch” – in other words, an over-expansion of the empire. Ankara is simply fighting on too many fronts at once: open war in Syria. Undercover war in Libya. The Corona crisis has killed tourism. In addition, the country provokes its neighbours with oil ambitions and the unilateral expansion of its territorial claims in the Mediterranean. This cannot end well for the lira.

A corridor across the Mediterranean

Osmanisches Großwesir-Gehabe In the Mediterranean an interesting trial of strength is currently taking place in politics and on the energy market.
However, this is likely to have consequences for foreign exchange trading in particular.
In November 2019, Ankara unilaterally redefined its economic area in a bilateral deal with Libya – and laid a corridor across the Mediterranean. In December 2019, Turkey declared a large part of the Mediterranean Sea off its coast its Mavi Vatan – the blue home.
However, the 1994 International Convention on the Law of the Sea drew other maritime boundaries – and calculated the 200-mile zone from the coast and islands in favour of Greece, Cyprus and Egypt.

Türkische Lizenzen in griechischen und zyprischen Gewässern

Finally, in January 2020, Turkey began test drilling near the coast of Crete – and thus, according to international law, in Greek waters. And now the next affront: As the news site Oilprice.com and also the news agency Anadolu reported, Ankara’s Foreign Ministry has just published the plan for the awarding of production licenses to the state-owned energy company Turkish Petroleum. Earlier, Ankara had already issued the schedule to drill for oil and gas in controversial waters within three to four months.
Athens reacted indignantly on Monday. Foreign Minister Nikos Dendias stated that Greece was ready to respond to the provocation. The plan violated Greek sovereignty, he said. Josep Borell, EU High Representative for Foreign Affairs and Security Policy, condemned the Turkish plan because the waters belonged to Greece and Greek Cyprus. The island republic is literally encircled by Turkish licences, and northern Cypriot triplet claims even lie off its coast.

Turbulence for the Turkish Lira

Enough material for violent conflicts. And now the link to the foreign exchange market: new, perhaps even military conflicts are likely to completely sink the ailing Turkish national budget. This threatens a similar scenario to the one at the beginning of May, when the Turkish currency slid to a record low. At 7.25 Turkish Lira, one Dollar cost more than ever before.

No dollars from the Fed

The Turkish central bank had asked the Federal Reserve and other central banks for funding. The reason was the decline in net foreign exchange reserves, which had fallen from 40 billion dollars to around 28 billion dollars. But Fed member Thomas Barkin refused to expand swap credit lines, which give flabby states like Turkey access to fresh dollars. The funds of the US central bank were only meant to stabilize the markets, he said.
Turkish Finance Minister Berat Albayrak tried to reassure international investors by describing Turkey’s currency reserves as “more than sufficient”. Ankara, of course, blamed foreign banks for the fall of the lira: speculators had bought foreign currencies on a large scale and had not serviced subsequent lira obligations in order to deliberately weaken the lira. The financial supervisory authority prohibited the banks BNP Paribas, Citi and UBS from trading in lira.

Too many conflicts at once

Our conclusion: Turkey’s energy ambitions could in the worst case lead to war with Greece, Cyprus and Israel. The European Union is also potentially a player and could impose sanctions, but Turkey could open the gates and let millions of migrants into Europe.
If Turkey gets away with its grip on oil and gas in the Mediterranean, the petrodollars should soon be bubbling. And stabilize the Turkish lira. But if there is resistance from local residents, this would be a new blow to the currency. The state treasury is empty, the economy is down, investors are avoiding the country. In addition, Turkey has not made friends with its various campaigns in Europe and America – financial support is not to be expected.

So let’s wait and see – the Bernstein-Bank keeps you up to date and wishes you successful trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

While the markets are overflowing with optimism, many investors are trying to take everything from it. Stocks are selling like hotcakes, and many are buying everything. For good or bad, it’s not clear yet. Time will show what such growth during the economic crisis can lead to.

S&P500

The bulls have taken over the initiative completely. Excellent unemployment figures in the US give high hopes that the country has completely bottomed out. But it’s worth seeing that the macroeconomic data is far from perfect. From the current situation we can assume that investors are too optimistic. Analyzing the market, we can see that there is a correction. It is quite possible that in the near future the market will be corrected downwards to reduce the pace of the current growth. On Monday, the S&P500 index went beyond 3200. The DAX index was traded mixed and closed almost at the opening level – 12819.

AUSTRALIAN DOLLAR

The Australian dollar continues to grow following the American stock market. On Monday, a very important resistance level of 0.70 was reached. It can be argued that the Australian dollar has fully recovered from the Coronavirus Pandemic and reached annual highs. The whole world economy will be waiting for the Fed’s statements, which will take place this week. In the stock markets there is a correction, which will obviously pull the Australian dollar. In the current situation we can expect the rebound up to the level of daily SMA200 – 0.6650.

Oil

Smooth recovery in economic growth in major countries is beneficial for the price of oil. On Monday WTI oil traded at $38.5 per barrel. Now the price of black gold is in the hands of OPEC+. The way exporters will behave further depends on actions and decisions. The option of reducing the production constraint since July is being worked out, which may pull the price down.

Gold

Now we see another historical record in gold. The volume of gold in physical ETFs has exceeded 100 million troy ounces. However, it is strange that such purchases are not accompanied by a price rally. It could be about central banks trying to hold the price given the gold and currency reserves. Most likely in the near future the markets seized by the euphoria of growth will negatively affect the price of gold, but all this is temporary. The rise in price on Monday to $1700 per ounce still shows the strength of the precious metal.

What’s waiting for us today?

08.00 Trade balance in Germany.
11.00 EU GDP.
12.00 OPEC meeting

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

08.06.2020 – Special Report. The Brexit negotiations between London and Brussels are about to end. We had seen it coming: After the Tories’ resounding victory in the December 2019 general election, Prime Minister Boris Johnson is bursting with strength. And he doesn’t have to make any concessions to the EU – he has the support of the people and a solid majority in the House of Commons. Now an important deadline of 30 June is approaching. We look at the possible consequences for the pound sterling.

London wants a lot

Michel Barnier sounded “not amused” last Friday: The EU Commission representative for the negotiations on the UK’s withdrawal from the EU made no secret of his pessimism. He said there was “no significant progress” in the negotiations on future relations with Great Britain. Since March, four rounds of talks had ended largely without results. Now Barnier accused the British of “blockade”.
Johnson wants to collect one promise after the other – for example, the ongoing dispute over the “level playing field”. The British would only have wanted to maintain a similar standard of environmental protection, labour law and social standards as the EU after the Brexit. Now they did not want to know anything more about it, complained Barnier. The situation was similar regarding cooperation in the civil use of nuclear energy and the fight against money laundering and terrorist financing.

Deadline June 30

The next step is now a meeting of Commission President Ursula von der Leyen and Council President Charles Michel with Johnson. But whether this will be done by videoconference or in person is still as open as the date. Presumably, the EU side will wait until the EU video summit on 19 June to coordinate their actions. However, a decision must be made by 30 June on an extension of the transitional phase during which the EU rules will continue to apply in Great Britain. At present it ends on 31 December.
Prime Minister Johnson has repeatedly rejected an extension. Perhaps the British economy is now so battered by Corona that the possible consequences of a hard Brexit no longer make any difference. Perhaps he does not expect trade to collapse.

Warning from the Bank of England

In the currency market, there has recently been intense discussion about whether the Bank of England (BoE) will follow the European Central Bank and the Swiss National Bank on the path to negative interest rates. The BoE is currently focusing on containing the economic damage from Corona. Now, a hard Brexit could possibly be added. As the “Financial Times” reported a few days ago, Andrew Bailey, the governor of the Bank of England, in a telephone conversation urged the heads of commercial banks to prepare for a no-deal Brexit. However, given the long smouldering topic, most institutions have probably already taken into account possible interruptions in currency flows anyway.

Pound traders hope for strong integration

So it all looks like hard Brexit at the moment – which should push the British Pound down against the Dollar and Euro. Because an analysis by the CME Group has found exactly that for the past five years: “Despite all the developments during this time, one element has remained constant: If the UK moves towards greater integration within Europe, the British pound (GBP) will rise – if it’s a no deal Brexit, it will fall,” said recently Erik Norland, Executive Director and Senior Economist of the CME Group. The US-based CME Group is one of the world’s largest options exchanges and the world’s largest futures and options exchange, based in Chicago, Illinois.

Pound falls on prospect of hard Brexit

According to the CME Group, this is the chronological development in the long-term issue: in the period between the passing of the law on the EU referendum on 9 June 2015 and the referendum itself on 23 June 2016, the British pound lost 4 per cent against the euro and 3 percent against the US dollar. In the months following the referendum, the pound slipped 17 percent against the euro and 21 percent against the greenback. Since the referendum, a clear trend has become apparent: As soon as an agreement seemed not far away, the British pound tended to strengthen, according to the CME. For example, it rose by 21 percent against the US dollar until early 2018, when Prime Minister Theresa May led the negotiations. And when Great Britain then again moved towards a no deal scenario, Sterling devalued. For example, minus 16 percent when deals by the unlucky May were repeatedly rejected.
According to the CME Group, investors felt the impact of this once again in early May when negotiations between the UK and the EU reached an impasse and both sides complained about a lack of progress on issues ranging from fishing rights to competition regulation. Since then, the pound has fallen by 3 percent against the euro and by 4.5 percent against the US dollar (USD).

The bears are waiting

And what happens next? Norland pointed out an interesting indicator: Recently, the GBP options markets have shown a more pronounced than usual downward trend: “Out-of-the-money (OTM) put options are much more expensive than usual compared to OTM call options”. Reuters just hit the same mark with a survey of around 50 forex experts: GBP/USD could fall to 1.23 by the end of June if the talks between London and Brussels fail.

Our conclusion: If the experts are right with their observations and forecasts, the pound will fall when we head for a hard exit. If there is an agreement, Cable will go up. We are curious to see how things will continue and will keep you informed.

The Bernstein Bank wishes successful trades and good investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The first trading week of June was very difficult for the whole economic society. Plenty of diverse data led investors to choose between risky assets and safe haven assets.

Gold

Although the stock market is growing steadily, the first signs of problems appear in the market. A lot of securities took off and exceeded the SMA50 level, which gives grounds for a possible correction. In due course, it is worth considering that the majority of securities have not yet reached the monthly SMA200, which is the second sign of correction. In the near future we will see how the markets will develop, but it is likely that the rally is over and the correction is coming. The S&P500 index rose on Friday to 3193, while the DAX index rose to 12847.

Euro

Decisions of the European Central Bank on the expansion of economic support measures have so inspired investors that on Friday the main European currency bounces off the monthly SMA200 and trades at 1.1285. Even negotiations on Brexit do not affect the Euro at all, as the dollar is very bad in the current situation. Wave of protests, army in the streets, tough statements of the US president make it very doubtful that the US economy will be able to recover quickly after the end of the pandemic.

Oil

Oil is a product that is highly liquid and always in demand. WTI oil has been growing for two weeks and probably needs a certain rollback. Of course, after such a sharp drop in March, it is difficult to imagine an adequate price for black gold, but what is important now is that the oil price in the current situation is formed only on the market supply and demand. WTI oil has reached an important level of $40 per barrel and correction from this level is inevitable.

Gold

The situation on the gold market is ambiguous. We thought that the trillions that entered the U.S. economy would allow the price of gold to reach $1800 and even $1900 per ounce, but it turned out to be not so. It was necessary to share with the stock market, which sharply decided to show its growth opportunity. Investors in the American stock market were so optimistic that now the S&P500 index is trading only 7% below its value since the beginning of the year. Of course, gold cannot resist under such pressure. Let’s look at the development of the situation in the near future and determine the direction. On Friday, gold closes at $1684 per ounce.

What’s waiting for us today?

01.50 Japanese GDP.
08.00 Volume of industrial production in Germany.
14.30 Volume of construction of new houses in Canada for May

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Thursday was a very busy day in terms of macroeconomic statistics. Also important statements of ECB head clarified some situation. From the US data and Christine Lagarde’s statements it became clear that it is not so easy for the whole economy to recover.

EUR/USD

The markets took a break on Thursday and closely followed the main data. Christine Lagarde made it clear that economic recovery in Europe is not worth waiting for until 2021, and 2020 will be in deep recession. In the U.S. after the release of economic data markets have suspended their weekly growth, as the resulting statistics do not reflect the current rally in the markets. The DAX index has been practically on the spot the whole trading session. The S&P500 index is falling by 0.5%. On Friday, it is unlikely to expect any serious movements, as there is likely to be some profit taking and closing of the trading week.

Euro

The US dollar has completely lost its position against the Euro. After the ECB meeting and the announcement of additional aid to the European Union in the amount of 1.35 trillion euros, the EUR/USD exchange rate has moved to the monthly SMA200 1.1330. Of course, for many people such growth is too fast, but in the current situation there is a possibility of correction. The economy of the European Union is very weak now and the quarantine restrictions will still strongly affect it. Central banks usually have a relatively large time lag of up to one month. Therefore, the EUR/USD pair is likely to have a correction period soon, to the level of 1.12.

Oil

WTI oil is gaining momentum very slowly, but the volatility in this market has subsided. Although OPEC+ is trying to work, but incomprehensible statements about the postponement of the meeting, slow reaction to sharp changes in the markets, as well as regular changes in its position, mislead investors. So far WTI oil has been holding at $37.5 per barrel. As long as there is relative stability in the market, the oil price will move upwards following the growth of the leading countries’ economies.

Gold

As we expected, as soon as a negative note appeared in the markets due to macroeconomic data, so immediately gold began to rise in price. The rebound from $1700 level was obvious. The gold returns to the range above $1700 per ounce and will try to break above $1750.

What’s waiting for us today?

8.00 Production order volume in Germany for April.
14.30 Change in non-agricultural employment in the USA
16.00 PMI Canada business activity index

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

On Wednesday, the optimistic mood of investors continued. No protests, do not interfere with the growth on stock markets. Wednesday, which was very rich in macroeconomic data, showed that this growth is not accidental.

DAX

On Wednesday we saw quite a lot of macroeconomic data, which determine the current situation in the world economy. Unemployment data in the US showed that the rate of unemployment has slowed down significantly and signs of stabilization are visible. Shares of manufacturing companies in the US are starting to grow as they are trying hard to compensate for past production losses. The DAX index rose to record levels in the last three months at 12487.

Euro

Trading on Wednesday set a new 11-week record for the EUR/USD pair. On the eve of the ECB meeting, investors are optimistic about the measures to expand the assistance in connection with the economic crisis caused by the coronavirus pandemic. The EUR/USD pair took the level of 1.12 and keeps growing. Many analysts believe that ECB will strongly expand its assistance and thus will support the economy. The Euro has only one strong level left at 1.13. Probably, once it reaches this level, the currency pair will start a certain downward correction movement.

British Pound

The British pound has shown excellent dynamics over the past two weeks. Although the last round of negotiations on Brexit was supposed to make adjustments to the price of these currencies, but investors believed that a recovering economy and weakening quarantine are more important than negotiations. The GPB/USD currency pair on Wednesday is at 1.2550 and keeps moving up. The important resistance level is at SMA200 at – 1.2660, where the down correction is very likely.

Gold

Against the background of strong growth of risk assets, on Wednesday gold did not resist and adjusted to the level of $1700 per ounce. Probably, many people may think that such a serious decline may put an end to future growth, but for gold it is quite a normal situation. While investors are trying to make money in the fast-growing US market, gold is waiting for its time. Sooner or later many will have to return to gold, as it is an asset for preservation and long-term investment of funds. All profits made on risky markets in any difficult situation pass into the assets of the safe haven. Growth for gold in the future is inevitable.

What’s waiting for us today?

10.30 UK Construction Business Index
13.45 Statement on ECB monetary policy
14.30 Number of initial applications for unemployment in the United States

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.