Rising US Covid Cases To Keep Risk Sentiment In Check

After a strong close on Wall Street, European stocks are looking to play catch up, although grim coronavirus statistics and growing fears over a second wave will keep risk sentiment in check.

Fears of lockdown restrictions being re-imposed or economies being reopened at a slower pace have weighed on sentiment across the week resulting in choppy trading and a constant struggle between the bulls and the bears. Whilst the FTSE closed the previous session in positive territory and aims for another jump higher on the open, the index is on track for a 2% loss across the week. Meanwhile the S&P is on track for a flat weekly move despite being up as much as 1.8% and down by as much as 2.4% at different points across the week.

In the US several states posted the highest one day increase in daily coronavirus infections whilst Texas has slammed on the brakes on its reopening plan, reversing course after just one month of reopening, as new cases hit a record 5996. Texas has been operating a more aggressive reopening plan, easing restrictions at as a faster rate that New York, which is still seeing improving stats.

US recorded its highest number of daily cases, with an increase of 42,000 infections. Concerns are rising that the fragile economic recovery could be knocked off track, however hope that stimulus could offset this is keeping the markets range bound.

US data in the previous session showed just how fragile the economic recovery is. Whilst durable goods soared, jobless claims showed that the improvement in the labour market is slowing.

With little on the European economic calendar to grab traders’ attention, a relatively quiet session is expected. In the afternoon, US Personal consumption expenditure and consumer confidence data could provide fresh impetus.

Oil extends gains, but remains cautious
After steep falls mid-week, oil continued its recovery, extending gains amid hopes of continued fuel demand recovery. Satellite traffic data from China, US and Europe is showing growing levels, boosting optimism surrounding fuel demand. Gains will remain capped as concerns surrounding oversupply linger following EIA inventory data showing a much bigger than expected inventory build, supporting a similar find from API data earlier in the week.

FTSE Chart

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.