Market Analysis

The euro is down more than 1%

FOREX

The euro is down more than 1% to the yen during early Monday trading in Europe. The flight to safety is obvious, with refuge assets recording gains following the deterioration of the outlook in Europe, especially as Italy imposed draconian containment measures, with 16 million people now being quarantined. The markets are looking at what is happening in Italy as a sign of what may be coming elsewhere in Europe, as the virus continues to spread. It is difficult to gauge what the actual impact of the disease and the measures to contain it will have on the global economy and, faced with growing uncertainty, investors are seeking refuge in traditional safe havens. It is also important to mention that the mood of risk aversion in the foreign exchange markets and across the board on all assets has been compounded by oil’s dramatic plunge, which has fallen in excess of 20% from Friday’s closing price.

Ricardo Evangelista – Senior Analyst, ActivTrades


OIL 

The oil price collapsed on the Arabic retaliation after the “niet” received from Russia to the proposed production cut. The scenario is dramatic, with a 30% drop in the price in a single trading session, something we haven’t seen in the last 30 years. WTI fell to $28, before rebounding to $32. Investors are awaiting further news, but the first effect of this new “oil war” were tremendous for the barrel as they arrived in conjunction with the spread of the coronavirus, which was already having a hugely bearish impact on oil demand, and now makes the likelihood of a global oversupply almost inevitable.

Carlo Alberto De Casa – Chief analyst, ActivTrades

 

EUROPEAN SHARES 

Stock markets across the globe witnessed one of the most dramatic crashes after a breakdown between two of the largest oil producing nations in the world triggered a collapse in an already weak oil price and further spooked investors who are already in full on risk off mode amid the global spread of coronavirus. The plunge in prices followed the breakdown of the OPEC+ agreement after Russia refused to comply with further production cuts or any extension to the current cut agreement that expires at the end of this month. These measures were discussed to bring more stability to oil prices that are already struggling against weakening demand due to the economic impact of coronavirus. Russia’s move took investors by surprise and added to the current panic stance on other asset classes as OPEC+ countries usually comply to OPEC members’ decisions. Unsurprisingly, oil markets but also oil currencies (CAD, AUD, BRL etc…) as well as energy shares are leading declines almost everywhere across the globe on Monday. In addition, there was disappointing economic data from Asia with Japan publishing a weaker growth than expected and China announcing a massive drop in its trade balance. Markets begin to be very hard to predict for most long-term investors as well as short-term traders as uncertainty is higher than ever. Even safe havens seem to be suffering from the global uncertainty with gold, silver and even alternative instruments like crypto markets dipping on Monday. Only Treasuries look to be benefitting from the global panic as both US and European bonds ticked significantly higher. It is little surprise to see that the FTSE-MIB of Milan, with northern Italy in lockdown, is the worst hit among European share markets, with the Index collapsing by 10%. The market is now challenging its first available support zone at 20,775pts (61.8% Fibonacci retracement) and may continue to drop below the psychologically important 20,000pts zone and down to 19,940pts and 19,660pts by extension.

Pierre Veyret– Technical analyst, ActivTrades

 

 

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