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Markets recover from initial post-PMI weakness

European equity markets have recovered from earlier weakness, following another disappointing batch of PMIs from the euro area, with stocks being supported by a weaker euro.

It's going from bad to worse for the eurozone, with the latest PMIs for the region once again highlighting just how worrying the outlook has become. The block started to slow last year but the decline appears to have accelerated in recent months, with the manufacturing survey now giving contractionary readings for Germany, France and the euro area as a whole, with the former being well into the territory despite rebounding slightly to 44.5.

It's been a staggering drop off that has forced Italy into recession, pushed Germany to the brink and weighed heavily on the currency just as the central bank was planning to bring a decade of stimulus to an end with a first rate hike this year since 2011. That plan has collapsed before it really got going and instead we have new TLTROs and it won't be long until people are asking questions about whether more QE will be necessary, only a matter of months after new purchases were brought to an end.

Naturally the euro is not responding well to the news, as it dipped below 1.13 against the dollar to trade in the mid-1.12 range. While we're still a little bit from the recent lows, the path of least resistance certainly looks below as it becomes clear just how fragile the region still is. This is keeping the dollar well supported as other currencies win the race to the bottom, even as the Fed dramatically lowers its interest rate expectations and an economic slowdown and possible earnings recession looms. The grass is simply less green everywhere else.

Can gold break $1,280 again?

What's interesting is that the stronger dollar is not really holding gold back this morning, which has been the opposite trend to what we've been seeing recently. Gold is holding onto gains early in the session, although it's still trading below $1,280 which had previously been a strong support zone for the yellow metal. It already tested this from below on Wednesday and held but another run may be on the cards.

The bears won't have been filled with confidence earlier this morning as we barely made a new low – and with flagging momentum – before prices started to rise again. Coming even as the dollar rallied doesn't provide any additional comfort either. A break back above $1,280 doesn't necessarily signal the end of the decline in gold prices but it will make the bears nervous coming so soon.

Oil finding resistance after inventory data

Oil is trading marginally lower so far today, with a stronger dollar potentially being a drag on WTI and Brent crude. Yesterday's inventory report from EIA may also have taken some of edge off the rally, with the drawdown having been lower than that reported by API a day earlier. Oil is in an interesting place though because on the one hand it recently broke through notable technical resistance but on the other it did so as momentum lagged.

Reports of a tighter oil market even as the US pumps at record rates will be encouraging to OPEC+ given the efforts made this year to rebalance, although it will cast significant doubt over Russia's participation in any extension to the end of the year, with current cuts set to expire in June.