Back to Europe and UK, the activity is expected to decline by 9% and 7.5% this year according to Goldman Sachs, which warns that the contraction could be as much as 16%, in line with the ECB President Lagarde’s prediction of a 15% decline, if the reopening is slower than expected.
Still, the market mood is better this Monday. Beta-currencies are up against the US dollar, the US 10-year treasury yield advanced to 0.624 as the US dollar index tests the 100 mark to the downside.
Gold remained capped below the $1730 per oz on the back of an improved investor appetite and higher government bond yields.
Meanwhile, nothing could better the mood in oil markets. WTI crude is down 8.85% to below $16 a barrel, as according to the latest EIA report, the non-OPEC producers kept their production flat near all-time highs in December.
The pound pulled out the 50-day moving average resistance (1.2420) against the greenback and advanced to 1.2445. Cable is preparing to make an attempt to the 1.25 offers on the back of a broadly softer US dollar. The 1.25 mark is where the GBP bears and bulls will be fighting, and in the absence of major economic data releases in the UK, the short-term direction in Cable will likely depend on the strength of the dollar. The net speculative positions are flat in sterling, meaning that short-term, non-commercial investors do not have a strict opinion on to where the pound should be heading in the coming weeks.
Speculative long positions in the euro remained firm last week, throwing a floor under the EURUSD sell-off below the 1.08 mark. But firm speculative long positions, coupled with a limited advance in euro, could hint at a steeper sell-off if the risk appetite were to reverse. The single currency will likely remain under the pressure of a blurry compromise amid European leaders’ inability to come up with a solid fiscal rescue plan. Resistance is eyed at 1.10 mark.
Anyway, the European and British stocks are poised for a strong positive start to the week. The FTSE 100 is expected to advance past the 5800p mark despite depressed oil prices and a stronger pound.
On the US corporate agenda, big names are expected to release their first quarter earnings this week; among them Ford, Starbucks,
Boeing, Amazon, Facebook, Microsoft, Apple, Exxon Mobile and Chevron. Except from Amazon, Microsoft, Facebook and possibly
Apple amid the very timely launch of Apple TV, the first quarter earnings are expected to take a severe hit from the coronavirus-led
economic shutdown. But the market reaction to figures could be mixed given the very low expectations, the fuzzy guidance on
expectations and mixed investor sentiment.
By Ipek Ozkardeskaya
