ActivTrades’ Market Analysts prepared their daily commentary on traditional markets for April 7, 2020. This is not a trading advice. See details below:
The early part of Tuesday’s session is so far marked by across-the-board gains on risk-related assets, such as stock futures but also currencies like the euro and the pound. Investors are taking a glass half-full stance as hope grows that the spread of the coronavirus is slowing. As the mood in the markets improves, the US dollar is losing some of the ground gained over the last few days, with the Dollar Index down by almost 0.7%.
During the darkest moments of the crisis the greenback took over the role of safe haven and with the improvement in sentiment some of those gains are being eroded, as the latest figures from the US and Europe point at slower rates of infection in the main epicentres of the disease. This good news is generating some hope that the pandemic is being brought under control, which supports the growth of risk appetite.
All European benchmarks are trading significantly higher on Tuesday, extending yesterday’s gains, as market sentiment strengthened towards risk assets such as stocks and corporate bonds. This revived risk appetite, mainly built on hopes of an easing of the COVID-19 spread, is getting stronger and stronger as new reassuring data confirm the progress we saw during the weekend. In addition, investors around the world still have in mind the unprecedented global monetary response to this crisis and know that it could significantly sustain an extended rally if the virus starts to be brought under control in most impacted economies. While the current situation may tempt some investors to “catch the rebound” by buying the dip, others may want to remain cautious and wait for more accurate corporate reports to get a better idea of the extent of the economic damage before increasing their exposure to these markets.
The Stoxx-50 Index is being driven higher by financial shares with ING and Société Générale some of the best performers in Europe so far. The technical landscape of the Stoxx-50 Index is becoming really interesting as the price is now challenging its double resistance level (Speedline + 38.20% Fibonacci) following on from a bullish runaway gap opened up at the beginning of this week, which led to the validation of a bullish flag pattern (see attached chart). A clearing of the zone at 2,880pts is likely to extend the current rally towards 2,975pts and 3,075pts on a short-term basis.