Risk -On As Economies Reopen and On Vaccine Optimism
Fiona Cincotta May 18, 2020 7:33 AM
investors ignore rising US – Sino tension and focus on the gradual reopening of businesses across major economies. Vaccine hopes are playing a part in boosting risk on sentiment.
Asian markets pushed higher overnight, whilst European and US futures are pointing to a stronger start as investors ignore rising US – Sino tension and focus on the gradual reopening of businesses across major economies. Vaccine hopes are playing a part in boosting risk on sentiment. Oil prices hit a 5-week high amid growing optimism that the worst is behind us and global economies are coming back to life. Gold soars to a 7.5 year high.AstraZeneca is the latest firm to boost vaccine hopes. The firm aims to make 30 million doses available by September if the inoculation, which is currently been trialled in humans proves to be successful. In the meantime, economies are reopening and deaths in the UK have fallen to the lowest level since 24th March.
Gold at 7.5 year high
Gold is a standout performer at the start of the week, hitting a 7.5 year high as it extends a series of higher highs and higher lows. Gold has traded at fresh yearly highs every month so far this year and could continue to do so following Jerome Powell’s warning of a drawn-out recovery and a disruption to economic activity that could stretch towards the end of next year.
Oil back above $30 per barrel
WTI is trading back over $30 staging a moderate recovery at the start of the week as demand rises and supply drops. A month after falling below $0, WTI is on the road to recovery but still nowhere near where it was prior to the coronavirus outbreak. As lockdown across Europe and the US eases, driving is picking up, refineries in China are buying more oil and Russia and Saudi Arabia have ended their price war and cur production. US firms are decommissioning rigs and closing wells. These developments are helping to push oil prices cautiously higher. Whilst there is still a long way for oil to go, many oil traders will be sitting a lot more comfortable than there were just a few weeks ago.
Any recovery in oil will be drawn out given that the oil stock glut needs to be worked through first. Now that Russia and Saudi Arabia have sorted out their difference OPEC production is expected to fall below 24.1 million barrels a day by early June Any second wave in infections could quickly bring the price crashing backdown.
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