We are seeing History in the making when the European Union announced its 750 billion- Euro ($824 billion) recovery package, aimed at boosting economic growth and creating a swathe of new jobs.
The capital injection will have global financial markets breathing a sigh of relief, following the commitment from China at the Two Session to focus on a stable recovery, as it looks to create nine million new jobs. The EU went one step further by announcing they proposed to make it a climate neutral strategy
Financial markets responded favorably with the S&P 500 moving above its 200-period daily average for the first time since the 4th March. European indices also continued to make new highs; however, it is worth noting the Eurostoxx 50 index remains 300 points below its 200-period daily average.
Copper, which has been negative for 3 of the last 4 trading session looks to be potentially halting with the downside move stalling on its 55-period exponential moving average. Will it be enough to drive prices higher or will market sellers look to test the downside to confirm that the worst is over before they turn to a risk on footing? Only time will tell.
Brent futures continue to hold near their highs having rallied 130% since April, again taking a breather before moving higher, or waiting to see more action from OPEC plus Russia and an easing of the global lockdown? Probably both but with aggregate open interest dropping it would suggest that money is being taken off the table for now
Bulk shipping continues to struggle with the Capesize index still coming under pressure. However, global stimulus equals global trade, meaning the BDI and the Capsize market could be a big benefiter here. Key things to watch will be the re-emergence of Vale in the market; The capsize orderbook as a % of DWT stands at 11.1%. However, history will prove that low scrapping and a large order book mean for nothing if the fleet is in the wrong basin!
The road to recovery is unlikely to be V shaped as there will be a second wave element, versus huge debt pile, however one would imagine that stock markets will be awash with bargain hunters on any setbacks.
As a global barometer to the world economy copper is going to be in focus; having rallied 25% there is a potential for a sell off, the big question for copper is where it will base?
If it holds anywhere between USD 5,046 – USD 4,796 then it would suggest a recovery is either in progress or the markets are starting to go risk on in anticipation of one (FIS)