Morning Note

European stocks mixed, oil rally runs out of gas

Morning Note

Germany’s top court laid down a challenge to the European Union: who is the final arbiter in European law? Apparently, they don’t think it is the ECJ. German judges think the ECB needs to show buying bonds under QE was proportionate – by what yardstick? They have 3 months to comply or the Bundesbank won’t be allowed to play.

The ECB is clearly not amused. In a very brief update, the central bank said it ‘takes note’ of the judgement by the German Federal Constitutional Court but remains ‘fully committed’ to its price stability mandate.

Finally, it added simple: “The Court of Justice of the European Union ruled in December 2018 that the ECB is acting within its price stability mandate.” Quite clearly the German court cannot overrule the ECJ – that’s the whole point, it’s why we wanted out. Italy’s PM Conte agrees, noting that ECB independence is at the heart of European treaties.

The euro has held onto losses to test the 1.0820 level this morning, as German factory orders declined 15.6%, more than the 10% expected. As I noted yesterday, anything that casts doubt on the ability of the ECB to provide the backstop to the bond market is a concern and is euro-negative.

It also seems this decision will likely kill of any hope of collective debt issuance to tackle the current crisis. And a challenge to the PEPP bond buying by the ECB from the same German actors looks likely. There is yet a tail risk that the Bundesbank is forced not to take part in ECB bond buying in three months’ time – this would cause chaos.

The S&P 500 rose yesterday but closed where it opened at 2868, some 30 points off the highs of the day. The lack of any real conviction has led to a mixed start to trading for European markets, where Monday’s rebound looks to be under threat.

Oil rallied strongly but pulled back from the highs as traders realised once again that storage is still a problem. Whilst clearly there are signs of supply and demand rebalancing because lockdown measures are being lifted, but it’s going to be a slow process and it’s hard to see it righting itself before the Jun WTI contract is up.

Crude oil inventories rose 8.4m barrels, according to data from the American Petroleum Institute (API) late on Tuesday. The more closely watched EIA inventory data is released at 15:30 London time and is forecast showing a similar kind of build around 8m barrels. Front month WTI bounced off resistance at $26 to pull back to under $24.50 in early European trade.

Today’s ADP payrolls print will be an amuse-bouche for the weekly jobless claims starter on Thursday followed by Friday’s nonfarm payrolls main course.

Latest Markets.com News

US Election, Recession, Brexit: What’s in store for markets in 2020 H2?

Read More

US Election 2020: What happens to the US dollar with a Democrat clean sweep?

Read More

Stocks steady as pubs prepare to reopen

Read More

Risk assets rally on bumper US NFP jobs report

Read More

Blonde Money US Nonfarm Payrolls Preview

Read More

Stocks go up, cases go up, US jobs harder to call

Read More

US oil inventories preview: EIA data to confirm the biggest draw this year?

Read More

Stocks steady after Q2 boom, gold breaks higher, economic data uncertain

Read More

Short sellers triumph as Wirecard collapses – but who’s next?

Read More
Previous
Next

Join Markets.com to Experience Marketsx

Markets.com is the state-of-the-art trading platform provided by Markets.com. As part of the TradeTech Group, a constituent of Playtech, a FTSE 250 listed company, at Markets.com we have deep knowledge of the financial markets and an incredible range of resources to continually raise the bar in the world of financial trading.

Create Account

CySEC (EU)

  • Client’s funds are kept in segregated bank accounts
  • FSCS Investor Compensation up to EUR20,000
  • Negative Balance Protection

Products

  • CFD
  • Share Dealing
  • Strategy Builder

Markets.com, operated by Safecap Investments Limited (“Safecap”) Regulated by CySEC under License no. 092/08 and FSCA under Licence no. 43906.

FSC (GLOBAL)

  • Clients’ funds kept in segregated bank accounts
  • Electronic Verification
  • Negative Balance Protection

Products

  • CFD
  • Strategy Builder

Markets.com, operated by TradeTech Markets (BVI) Limited (“TTMBVI”) Regulated by the BVI Financial Services Commission (‘FSC’) under licence no. SIBA/L/14/1067.

FCA (UK)

  • Client’s funds are kept in segregated bank accounts
  • FSCS Investor Compensation up to GBP85,000
    *depending on criteria and eligibility
  • Negative Balance Protection

Products

  • CFD
  • Spread Bets
  • Strategy Builder

Markets.com operated by TradeTech Alpha Limited (“TTA”) Regulated by the Financial Conduct Authority (“FCA”) under licence number 607305.

ASIC (AU)

  • Clients’ funds kept in segregated bank accounts
  • Electronic Verification
  • Negative Balance Protection

Products

  • CFD

Markets.com, operated by Tradetech Markets (Australia) Pty Limited (‘TTMAU”) Holds Australian Financial Services Licence no. 424008 and is regulated in the provision of financial services by the Australian Securities and Investments Commission (“ASIC”).

FSCA (ZA)

  • Clients’ funds kept in segregated bank accounts
  • Negative Balance Protection

Products

  • CFD
  • Strategy Builder

Markets.com, operated by TradeTech Markets (South Africa) (Pty) Limited (“TTMSA”) Regulated by Financial Sector Conduct Authority (‘FSCA’) under the licence no. 46860.

Selecting one of these regulators will display the corresponding information across the entire website. If you would like to display information for a different regulator, please select it. For more information click here.