May 4 (Lagos) - Global stocks descended deeper into the abyss in the first trading week of May following the tepid Chinese manufacturing data and slash in Europe’s growth outlook that renewed concerns about the health of the global economy.
European equities were left depressed with the FTSE100 attracting most of the headline attention yesterday after the major index dropped to its lowest level in around three weeks. The bearish contagion from Europe encouraged investors to scatter away from riskier assets and this consequently punished American markets that also closed negative.
With expectations rapidly diminishing over further central bank interventions by the BoJ, Asian markets could remain pressured for an extended period as an appreciating Yen weighs heavily on the Nikkei. Investors should keep in mind that confidence towards the global economy is strikingly low and with oil prices almost puppeteering the movements in the stock markets, further declines could be pending in the near term.
Gold regains allure
Gold edged closer to a major resistance around $1305 this trading week following the explosive mixture of Dollar weakness and steep declines in equity markets that boosted investor attraction to safe haven assets.
We remain fundamentally bullish on Gold and Dollar weakness may provide a platform for bullish investors to install another heavy round of buying momentum. With concerns over slowing global growth and fading expectations over the Fed raising US rates in Q2 magnifying the metal’s allure, prices could be poised for further inclines.
Although Gold has descended back towards $1280, this correction could provide a platform for bulls to send the metal back towards $1305 and potentially higher. From a technical standpoint, prices are trading above the daily 20 SMA while the MACD has crossed to the upside. Previous support at $1270 could encourage buyers to send Gold prices back towards $1305.
reporting for easykobo.com on Wednesday, May 4 2016 from Lagos, Nigeria
by Lukman Otunuga, Research Analyst at FXTM
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