Risk Improves But Can It Last

European markets are pointing to a cautiously higher start on the open as investors see a glimmer of hope in Italy’s easing death rates and as oil prices rebound. However, it is questionable whether the lift in risk sentiment will be last the session, let alone into the weekend.

Italy provides glimmer of hope
Signs are growing that the worst could be over in Italy, the epicentre of Europe’s coronavirus outbreak as the death rate continues to fall and as the number of new cases ease. Yet despite the optimism, the lock down which has brought the spread of the virus under control and simultaneously brought the economy to a grinding halt, will be in place for longer than initially thought. This ultimately means the economy will be paralysed for an extended period of time.

Oil jumps 10%
A surge in the price of oil is also playing its part in boosting stocks. China’s plans to boost its oil reserves has seen oil soar over 10% in early trade. WTI reached a high of $22.55 overnight and is easing off that level at the start of the European session. Despite today’s announcement $20 remains the clear line in the sand for oil as the global backdrop remains challenging. Whilst today’s news will provide some brief reprieve, the fundamentals for oil remain weak. Heavyweight oil majors are pushing higher in early trade.

US initial jobless claims
Whilst risk sentiment is just about holding up on the open it is questionable whether it will remain the case across the session. US initial jobless claims are set to show another record-breaking number of sign ups and reveal the devastating impact that the coronavirus outbreak in having on the US labour market. The figures come just ahead of tomorrow’s non-farm payrolls; a weak reading today could see risk being whipped off the table with traders reluctant to put risk back on the table until after the weekend.

FTSE levels to watch
The FTSE has jumped over 2% on the open. Whilst it has pushed over its 50 sma on 4 hour chart, it failed to break through the 100 sma at 5485.
Immediate support can be seen at 5350, a level which has capped losses since 25th March. A breakout below this level could see the FTSE target the round number level of 5200.
Immediate resistance can be seen at 100 sma of 5485. A breakthrough here could see more bulls jump in. A key level to watch would be a break out above 5816.

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