European stock markets started the week on a positive note, climbing decently as a loosening of coronavirus shutdowns boosted investor sentiment despite weak economic data and the lingering recession risks. Market sentiment also improved after comments from U.S. Federal Reserve Chairman Jerome Powell about the prospects for the U.S. economy to recover in the medium term.
Meanwhile, it is reported that Chinese oil demand is all but back to levels last seen before nationwide lockdown measures were imposed to curb the spread of the coronavirus outbreak. Elsewhere, the ECB chief economist Philip Lane said the central bank has done a lot already in terms of coronavirus response and stands ready to adjust all instruments if necessary, while China president Xi urged countries to ensure that global supply chains are kept open.
Against this backdrop, UK’s FTSE 100 gains 2.83 percent to 5,964, Italy’s FTSE MIB edges higher by 1.65 percent to 17,131, France’s CAC 40 rises by 3.02 percent to 4,407, while German DAX 30 gains 3.50 percent to 10,836. U.S. stock index futures are climbing as well after finishing last week in the red.
As for other markets, EURUSD turned slightly positive on the daily timeframes but the upside momentum remains limited despite risk-on sentiment. The euro was rejected from the 1.0850 area last Friday, and this intermediate resistance may cap the ascent in the short term as the bulls refrain from more decisive actions. Germany's Bundesbank said in its monthly report that “despite the easing measures that have been introduced, social and economic life in Germany is still very far from what was previously considered normal”. The bank said the second-quarter reading is likely to be much worse after the first quarter GDP came in at -2.2% on a quarterly basis.
In commodities, Brent crude spiked to five-week highs around $34,64 on Monday, supported by continuing output cuts and signs of a gradual recovery in fuel demand. The positive mood was also reinforced by US Federal Reserve Chairman Jerome Powell’s optimistic outlook for economic recovery later this year. Also, Kuwait and Saudi Arabia have agreed to halt oil production from the joint al-Khafji field for one month, starting from June 1. Should Brent keep the upside momentum, the futures may regain the $35 handle in the near term.
Nathan Lambert, Head of Global FX Analytical Department