European Markets Continue Their Climb Despite Weak German Data; Oil in Recovery Stage
|European markets are trading higher as investors have become less concerned about the outbreak of Coronavirus. As of yesterday, there have been over 28.018 confirmed cases of Coronavirus and 563 deaths in China. The volatility index for the Euro Stoxx 50 plunged by 6.15%, while the German DAX gained 1.48% yesterday.
On the data front, traders have ignored the feeble German economic numbers. The German factory order number was expected to come in strong. Market participants were expecting it to print a 0.6%, but the actual numbers fell to -2.1%, much worse than the previous reading of -0.8%.
There is an ample amount of optimism among traders that the global stocks can weather the hit from the Coronavirus. This has put the global stocks back towards its all-time high. We are within the 1% mark to touch those levels again.
Moreover, the stellar US ADP reading has set a positive tone for today’s trading action, although there are some doubts if the markets are overly enthusiastic. But, no one seems to care that much because the S&P closed at a record high of 3334.69, pushing the YTD gains to 3.22% and, the NASDAQ index is still the leading index with gains of 7.26% YTD.
Short Run Event and Optimistic Picture
Looking at the markets, one always questions if the sell-off which saw in the past few weeks was overly exaggerated? Without being pandemic expert, the right thing to do for investors could be to stay diversified. This is the golden rule for investments. The chances are that the current virus situation will be a short run event, at least economically.
The fundamentals of the US economy are strong, as we can see from the US ADP reading, economic surprise indices are rising, not only here in the United States, but also the Eurozone, and the emerging market economies.
The earning season has been pretty good over in the US, so it is safe to say that there is little pressure on the system. Further evidence of this can also be seen in bond yields, they are really low—they haven't even been climbing. Credit spreads are tight, they're not suggesting any debt issues, inflation is not a problem. Thus, until there's some pressure, investors may stay fairly bullishly tilted.
OPEC and Oil
On the oil front, OPEC will continue its meeting for the second day, and traders aren’t expecting any action from the committee. Russia is simply not in a mood to cave in, even though there are serious concerns that the outbreak of the Coronavirus is going to impact global growth. So far, Saudi Arabia has failed to strong-arm Russia, and this equates to no cuts in oil supply.
As for the Crude oil price action, bulls are back in town and they paid close attention to oversold price levels. This has supported the oil prices and the fact that there is so much positive sentiment around the discovery of the vaccine against the on-going virus, the hope among traders is that the final impact may not be that serious as previously anticipated, which drove the prices to an oversold zone.
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