Morning Briefing: Global markets higher on improved risk sentiment

Vrasidas Neofytou

Vrasidas Neofytou
Head of Investment Research

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Morning Briefing: Global markets higher on improved risk sentiment

Global financial markets and crude oil prices extended recent gains amid the optimism around a potential coronavirus vaccine, stimulus plans and re-opening of economies. The risk sentiment has improved, despite the rising tensions between US-China over Hong Kong’s legal status and the pandemic outbreak in Latin America.

Brazil has the second-highest number of confirmed coronavirus infections worldwide behind U.S., according to data from Johns Hopkins. The Latin American country has more than 350k cases and over 22k deaths. The US administration was considering imposing a travel ban on Brazil shortly after the country’s deadliest day on record from the pandemic.

The World Health Organization warns that the epicentre of the pandemic has shifted from Europe and the U.S. to South America.


Coronavirus Update:

Global cases: More than 5.4 million
Global deaths: At least 345,059
Countries with the most cases: United States (more than 1.6 million), Brazil (363,211), Russia (344,481), United Kingdom (260,916), Spain (235,772).


Market Reaction:

US and UK markets closed on Monday for Memorial Day and Bank Holidays, respectively. However, US futures traded slightly higher, extending last week’s gains as the US economy reopens, amid positive sentiment around a vaccine.

Fig.01: Dow Jones index, Daily chart

For last week, the US stock markets gained more than 3%, posting their best weekly performance since the start of April. Stocks rallied after positive news about a potential vaccine from Moderna, while Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said that Moderna’s vaccine data looked “promising”.

Asia markets rose on Monday morning despite the growing tensions between U.S and China. Nikkei and Kospi indices led the gains with 1%, while Hong Kong shares extended Friday’s losses after China announced a new national security law.


Crude oil:

Crude oil prices rose 1% this morning, offsetting Friday’s losses on concerns that a resumption of a trade war could damage oil demand.

Fig.02: WTI crude oil prices, Weekly chart

However, oil prices posted gains for the fourth straight week, supported from recovering global demand and massive production cuts from OPEC and its allies. In addition, prices were boosted from the first signs of lower US crude inventories and the rise in gasoline and jet fuel demand as more people started using their cars and airplanes to travel.


Forex Market:

The US dollar was stronger across the board this morning, as investors prefer the safety of the greenback on rising US-China tensions over Hong Kong’s status.

Fig.03, EUR/USD pair, 1-hour chart

The DXY-dollar’s index rose just below 100 level, while the EUR/USD fell below 1.09. In addition, the greenback was stronger against China-linked currencies of the Australian and New Zealand dollars amid concerns over trade tensions in the region.


Economic Calendar for May 25, 2020 (GMT+ 3:00):

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