Europe To Extend Gains Ahead of US GDP and Fed

An upbeat session in Asia is set to spill over into Europe, with European stocks pointing to a positive start, extending gains from the previous session. Optimism surrounding the reopening of economies, upbeat Alphabet revenue and a surge in the price of oil are doing the heavy lifting this morning.

Risk assets remain in favour as the broad mood in the market is in a significantly better place than a month ago. At the end of March, many countries were at the beginning of lockdown and there were too many unknowns. Fast forward a month and economies are gradually reopening, news surrounding potential treatments and progress towards a vaccine has also helped improve the mood, as has a heavy dose of fiscal and monetary stimulus to help cushion the economic blow from the coronavirus crisis.

Rally to stall?
That said there are still many unknowns, perhaps too many to justify the return to a bull markets for many bourses across the globe. The true scale of the economic impact of the coronavirus is still unknown. Whilst people returning to work and economies reopening is a good thing, there is a good chance that the rally will start to stall over the coming weeks, as investors are faced with the stark reality of the hard data whilst also waiting to see if the gradual reopening are working.. Investors face the same conundrum as governments; will the reopening prove successful or lead back to a second wave of infections?

US GDP & Fed
Attention will now shift towards UD GDP and Federal Reserve FOMC announcement. Of the two events, the GDP has more market moving potential. The Fed are not expected to move on rates. Recently, if the Fed wants to move, it doesn’t wait for the monthly meeting.

Q1 US GDP, will shed some light on how badly the coronavirus crisis hit the US economy. There were only two full weeks of lock down included in Q1. A worse than forecast GDP reading will stoke fear in the markets that the Q2 numbers will be even worse.

Investors will look to the Fed for guidance as to what to expect for the economy this year. How deep does the Fed envisage the Covid-19 contraction being and how long do they intend to keep rates at 0? Whether Fed Chair Jerome Powell emphasizes a long slow slug higher for the economy or an optimistic quick rebound will set the tone for the market.

Dax levels
Dax remains in an uptrend, supported by a trend line from March low. Immediate resistance can be seen at 10901 (yesterday’s high) prior to 11034 (high 10th March)
Immediate resistance is seen at 10719 (low yesterday) prior to 10595 (trend line support).

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.