Share markets drifted significantly lower almost everywhere around the globe on Monday, extending last Friday’s losses with a clear switch to “risk-off” mood so far in May. Despite April’s 7-10% rally on stocks, investors’ attitude is driven by several negative signs from a variety of sources. A series of mixed earnings combined with poor economic data and the fear of a second virus wave after countries will ease lockdowns has led to a “cautious” or “protective” trading approach from investors. Furthermore, tensions between Beijing and Washington are on the rise again with President Trump promising a “very conclusive” report on the outbreak and China’s role in it, which makes traders afraid of deepening tensions between the two blocs. Investors are realising that April’s rally may have been built on exacerbated optimism about the end of the crisis, and even if no bearish driver seems to be powerful enough to send prices below this year’s lows registered in March, it is still possible for there to be a very sharp correction in May.
The Stoxx-50 Index opened with a 100 points wide bearish gap, below both its bullish trendline and 55-day moving average as well as the 23.6% Fibonacci level, which now forms a resistance level to the market, with the next targets at 2,780pts and then 2,735pts.
