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Stock markets are in a bit of a muddle right now. On the one hand there are signs of economies emerging from stasis. New York governor Cuomo says three regions of the state will reopen this weekend. Britain has moved from ‘stay home’ to ‘stay alert’, Europe is reopening: there is light at the end of the tunnel, and markets are always first to move. Massive stimulus from central banks and governments helps, too.

But on the other hand, government stimulus can’t go on forever. Businesses will need to get back to a new normal of reduced earnings in the main. House Democrats are said to be plotting a 4th massive stimulus bill this week, but it’s not clear whether this will pass. Signs of second-wave outbreaks across South Korea, China and even Germany stoke fears among investors that economies will, if not shut down again at scale, look very different to before as countries take sustainable steps to reopen. The Bank of England’s Andy Haldane warned that the crisis will leave economic scars, signalling of the long-term loss of demand and productivity we should expect.

Meanwhile, looking a little further out, US-China tensions are really starting to come to the fore. Donald Trump says he is not interested in reopening the phase one trade deal and the president ordered US federal retirement funds to pull investments in China stocks, worth about $4.5bn. Anti-China feeling is growing on a bi-partisan basis in the US and is even spreading to the EU.

Stock markets endured a mixed session on Monday. Wall Street pared early losses to leave the S&P 500 barely moved for the day. The Nasdaq advanced again, notching a sixth straight positive session, as Apple, Facebook, Netflix, Alphabet Microsoft all rose. The Dow Jones was down 0.45% but managed to close 150 points off the lows. The S&P 500 tried to break the 61.8% retracement at 2934 but fell just short at 2930. European markets fell, with the Stoxx 600 down 0.4%, albeit the FTSE 100 notched a tiny gain.

This morning, European markets again moved either side of the flat line. Really it looks like markets are lacking any conviction to break through to new post-trough highs.

Vodafone advanced as the company kept its dividend – already cut back a year ago to 9 euro cents. Vodafone can afford to do this since free cash rose more than 12% to €4.9bn. Longer-term, demand for data will only rise. Vodafone shares rose 4%, lifting Telecoms to the top of the Stoxx 600 with Healthcare close behind – this is not a risk-on rally. Ryanair shares rose over 2% after it said it would restore 40% of capacity by July.

Elsewhere, the US dollar is higher, with the dollar index rising to a two-week high on higher US yields and demand for safety amid signs of second wave infections. EURUSD took a 1.07 handle overnight before rallying to test the 100-hour simple moving average at 1.0820. GBPUSD is pretty well slap in the middle of the range it has traded within since the end of March at 1.2320.

Gold trades either side of $1700 in a fairly tight range but could come under pressure should US yields advance further.

Brent and WTI futures settled lower on Monday despite Saudi Arabia saying it will cut an additional 1m barrels per day from its output in June, which would take its total production cut from April levels to 4.8m bpd next month. Kuwait and the UAE joined in support with their own additional voluntary cuts beyond what OPEC++ had pencilled in. The worry for the market seems to be that there is just no demand, rather than extra goodwill on the part of the Kingdom to rebalance the market sooner. Futures traded a little higher on Tuesday. The concern is really there is still no demand.

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