European markets trade higher – Oil likely to move higher

US futures and European markets are trading higher because investors are shrugging off the pessimism. They are focused on more optimistic things: The slowing death rate caused by Coronavirus. Italy, Spain, France, and Germany have all seen declining numbers. Some optimism does exist in New York’s death numbers too, but it may be premature to comment on anything further because the infection rate is still on the rise in New York. But, as for Europe, especially Italy – The epidemic center of the disease – the country is certainly heading in the right direction because the death rate is at the lowest point in two weeks.

Another element that is also playing in favor of bulls today is the prospect of removing the lockdown. The fact that policymakers have started to talk about the exit strategy (of the lockdown), it has increased the prospects of life returning to its normality – to some extent. This doesn’t mean there is no qualm about the second wave of virus retuning – absolutely not.

The policymakers need to be immensely vigilant and careful before they make the idea of removing the lockdown mainstream because, if the second wave returns with more intensity, we could be in for a longer period of recession. This is why policymakers must not rush into opening the economy, but they can certainly improvise things to improve the overall sentiment – after all, the sentiment is the key to get the economy back on track.

Back in the UK, the focus is on Johnson’s health. The UK’s prime minister was hospitalized last night because of Coronavirus. The prime minister has already spent 10 days in self-quarantine. Sterling is trading lower against the dollar on the back of this news, and the sterling-dollar may likely suffer more throughout the day. This is because there is almost a lag of a week or two of coronavirus hitting the peak in the UK. Hence, the overall situation may become a little worse first before it improves. The state is pretty much similar for the US as well, however, President Trump thinks that the outbreak may be leveling off in the US.

Nonetheless, this remains a matter of healthcare issue, and the only way to level anythings is quarantine and mass tests.

As for the economic impact of this virus on the global economy, one doesn’t have to go too far to see this. The US NFP data released on Friday paints a pretty good picture of this. The economy lost 701K jobs in March, and the labor market looks even dire if one pays attention to weekly jobless claims number, that printed 9.9 million. The sad element is that the upcoming numbers are going to remain under the influence of Coronavirus, in other words, the economic numbers are likely to become more worse before we see a bottom.

 

Oil

In the commodity space, the much-touted OPEC+ meeting has been pushed till Thursday. But the fact is that the meeting is still taking place, and this is all that matters. Hence, we have not seen much drop in oil prices. The WTI Crude is still trading above the $27 price mark, and this keeps the door open for the oil price to touch the level of $35. The $35 price mark remains the optimal point for now because it is the demand that is stopping the price from moving higher. If the global lockdown starts to ease off, we could see the oil price improving a little more.