Stock exchange indices around the world seem to be rising along with an improvement in market sentiment. Opportunities for another vaccine have emerged, the state of emergency has been lifted in Japan, better data on new cases in the U.S. have also been published, and Russia is moving towards a fixed level of oil production, which raises prices of this commodity.
These are all potential events that could positively affect the financial markets and the sentiment of investors who have turned to more risky assets. In Europe, the French CAC 40 and the Spanish IBEX are the strongest (Madrid and Barcelona have entered the first phase of exiting the restrictions, and from 1 July the country will reopen its borders to international tourism). Investors are therefore looking at mitigating the effects of the blockade associated with the coronavirus. There is also growing optimism ahead of the European Union's meeting, which will already take place in June, and politicians are to agree on a joint recovery plan. The news that the American company Novavax has started to test its vaccine in humans and expects first results in July has also improved investors' moods.
In Asia, the Nikkei 225 rose by 2.55 percent on Tuesday to its highest level in 12 weeks. Japanese Prime Minister Shinzo Abe has lifted the state of emergency for the whole country, including Tokyo and the surrounding area. The Governor of the Bank of Japan, Haruhiko Kuroda, said that the central bank could take further steps to mitigate the economic impact of the coronavirus pandemic. Positive news also came from China. The People's Bank of China announced that it has reduced its reserve requirement ratio for large banks to 11% to support the economy affected by the Covid-19 pandemic.
On the oil market, we observe a further increase in WTI prices above USD 34.5 per barrel. This is the highest level in 2.5 months. On the one hand, the growth is supported by a recovery in demand, and on the other hand, a decrease in supply. Russia reported that oil production dropped to the target of 8.5mn barrels per day in May and June, according to OPEC+ agreement. Moreover, the executive director of the International Energy Agency said that the consumption of oil has not yet reached the maximum level, and demand is likely to increase to pre-pandemic levels, news services said.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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