As nations like the US, France, Italy and Spain began preparations to ease lockdowns, market optimism also increased, putting the week on a bullish start. The dollar index struggled as investor demand for dollar as a safe haven dropped and risk appetite increased.
Wall Street’s main indices started positive. The DJI was up 0.4% and the S&P 500 gained 0.7% breaking above the 2850 resistance. The CBOE volatility index, the reflection of panic in the market dropped 2.3% plunging it to its lowest level since the first week of March, near 35 points. This showed the market was indeed ready to take on risks.
On the flipside, energy index went down 1.65% amid a 25% fall in US crude oil prices. The West Texas Intermediate traded at $12.80 and a barrel of Brent traded at $19.70, its lowest level since February 2002. This drop was due to global storage capacity concerns.
Goldman Sachs analysts estimated that global oil market could tease storage capacity limit in mid-May. Producers would be forced to shut enough supply to match demand loss, leading to a cut of around 18 to 20 million barrels per day, about 20% of global production.
- Also read: Forex Forecast for the Week Ahead 4th-7th May 2020: Using Technical Analysis
- Nigerian Stock Market Weekly Report: Week ended April 30th 2020
On Tuesday, caution was the order of the day as tensions rose between US and China over China’s faulty coronavirus response. The US dollar regained strength as investors averted risk. Gold went down 1% testing the 1700 level. US equity futures bagged moderate losses and the US oil fell over 13% heading back towards the $10 level.
USDJPY ranged within a 15 pip band around 107.25. NZDUSD was down 0.80% to around the 0.5990 region amid RBNZ’s talks of negative interest rates. AUDUSD retreated from the 0.6450 level. EURUSD suffered a bull-bear fight trading tightly in a range between 1.0727 and 1.0860. GBPUSD retreated from week highs and traded around 1.2400.
Trading ended on a bearish note as corporate earnings data began to roll in. DJI shed 33 points, S&P 500 shed 15 points and the Nasdaq Composite shed 122 points.
Wednesday trading kicked off with great optimism. Major equity indices were sharply higher. This came as a result of a statement by Gilead Sciences renewing hopes of Remdesivir as an effective Coronavirus treatment as it met its main goal in a clinical trial.
The Dow Industrial Average gained 1.7%, while the S&P 500 and Nasdaq composite gained 1.9% and 2.35% respectively. Crude oil went up 15% leading to a 3.75% gain for the energy index. Not even the bad US Q1 GDP result could dampen market optimism.
- Further read: 4 out of every 10 Nigerians are Poor – Government Agency
- Barr. Amaka discusses Nigeria’s Business Laws and Tax System: What every Business Owner should Know: Part 2
The dollar did move lower, not because of the news, but due to increased risk appetite and optimism as US indexes surged to their highest in almost two months. Commodity linked currencies rallied to multi-week highs against the dollar. WTI settled above $15 per barrel.
Thursday was a very dramatic trading day. EURUSD surged to 1.0972. GDPUSD also surged to tease the monthly high of about 117.775. WTI jumped and finished at $19.00 a barrel.
Friday saw the market start on a weak note. Following the drop in Amazon and Apple share prices due to disappointing Q1 earnings result, the technology index went down 1.7%, the S&P 500 shed 2% and the DJI lost 1.8%. The CBOE volatility index gained 12% indicating panic.
Written by:
Nnadi Victor – An Independent Economics Researcher
Disclaimer: Any person accessing this information and considering potential investment opportunities featured here should make their own commercial assessment of an investment opportunity after seeking the advice of an appropriately authorized or regulated financial advisor. This information should not be construed as advice or a personal recommendation to any prospective investor.
