Markets steadier after Monday madness

  • European stock markets rally
  • Congress approves stimulus bill
  • Brexit deal hopes rise with final push

Shares across Europe rose as markets absorbed the implications of the new coronavirus with a little more sanguinity than on Monday. There was heavy selling early doors yesterday, but across risk assets the lows were well off where we finished.  This morning stocks in Frankfurt and Paris rose over 1%, while the FTSE 100 recovered the 6,400 level. US futures were essentially flat.

As usual, markets overshoot on the downside whenever there is trouble, which can be easily faded, and the lack of liquidity at this time of year can exaggerate moves in either direction. Trouble over here was felt across the pond. The S&P 500 closed down 0.4% despite Congress finally agreeing to the $892bn Covid relief package. Donald Trump is expected to sign the bill into law today.  The Dow rallied slightly with Goldman Sachs and JPMorgan rising on the Fed’s decision to allow banks to carry out share buybacks.

Sterling recovered, with GBPUSD rising above 1.34 again having briefly taken a 1.31 handle yesterday amid concerns of a no-deal Brexit and short-lived fears the country was being cut off from Europe due to the new strain of the coronavirus. It was a storm in a port but highlights market sensitivity to trade vis-a-vis Brexit trade disruptions and shows that we are far from out the worst of the coronavirus.

We are seeing progress on Brexit though. According to reports, the UK has made an offer to the EU on fisheries in a last-ditch attempt to get an agreement before Christmas. It’s still hanging by a thread but if all that’s left is a few million euros in sardines then you’d have to think that a deal is more likely than not.

Chart: Gold has failed to confirm the break above the 50-day simple moving average. Downtrend remains intact.

Gold has failed to confirm the break above the 50-day simple moving average.