European markets are edging higher as investors try to save the European markets from recording a weekly loss. However, traders are worried about the surge in coronavirus cases, and the situation has started to deteriorate in other parts of European countries as well.
Coronavirus Numbers Are Surging
In Madrid, the hospitalization rate has gone through the roof, and beds are filled with seriously ill patients. France has also recorded a record number of new coronavirus. As for the U.K., we also saw an echo of similar messages—the highest new coronavirus cases in a single day since the pandemic outbreak started.
Things to Look Out For
The above situation shows that investors have every right to be worried about the coronavirus stock market rally, which is under a great threat. The airline, retail, and hospitality sectors are the ones to keep an eye on as investors continue to question their future.
Stimulus and New Price Level
Investors are still holding on to some hopes with respect to the U.S. stimulus package. House Democrats have started to put together their $2.4 trillion stimulus plan. They are hoping to find some middle ground with the White House and Senate Republicans.
There is no doubt that the U.S.’s economic recovery has started to lose its momentum, as the U.S. weekly Jobless Claims data also confirmed yesterday. The U.S. economy needs more stimulus, and such news could really help the stock market rally.
In the absence of such, it is highly likely that the stock market will continue to move lower. If there is no stimulus, the stock market will need to discover a new price level, and the chances are that the price level will be a lot lower than the current one.
Unemployment Rate and the Ticking Time Bomb
Over in the U.K., the Chancellor of the Exchequer, Rishi Sunak announced new stimulus measures to save the economy from a cliff-edge yesterday. The current furlough scheme is still going to end at the end of October.
However, the U.K. has replaced this measure with a new job-saving programme. The primary concern for the markets is that the government now pledges to save the “viable” jobs, and the question is who is going to determine which job is viable and which is not. Moreover, it is quite clear that the new plan is nowhere near as generous as the previous one.
Unemployment is a ticking time-bomb. The Chancellor’s job-saving programme cannot save the U.K. from facing a higher unemployment rate, and this increase in the unemployment rate is going to have an adverse effect on the economy. Hence, the Sterling’s upside is really limited, especially taking into consideration that the Brexit deadline is just around the corner, with no deal in place.
Economic Data and Gold Price
In terms of the gold price, the precious metal is holding on to its support of 1,850. This is certainly very encouraging for the bulls, as we do not want to see the price falling below this critical support level.
Investors and traders are keeping a close eye on the dollar index, which has been the very reason for the recent sell-off in the gold price. The dollar index has eased off recently, and the upward momentum isn’t supporting the dollar price today.
Traders will be looking at the upcoming U.S. Durable Goods Order m/m. The forecast is for 1.5% against the previous reading of 11.4%, and for the Core Durable Goods Order, the forecast is 1.2% against the previous reading of 2.6%.
If we see a number that beats the forecast, the chances are that it will support the dollar index. This may result in further weakness in the gold price.