Global stocks turned positive on Monday following a deep sell-off witnessed last week. Asian markets managed to recover decently, followed by European equities. Of note, investors shrugged off the official report from China that showed the manufacturing PMI declined to an all-time low of 35.7 in February versus 50.0 previously. Despite dismal data, Chinese stocks rebounded by over 3% at the start of a new trading week.
The main driver behind the current recovery in stocks are the rising hopes for additional stimulus measures by major central banks after the Federal Reserve governor Jerome Powell hinted at the possibility of a rate cut in an effort to support the economy amid the coronavirus break. Additionally, the Bank of Japan head Kuroda also pointed to possible stimulus measures on Monday.
Against this backdrop, the selling pressure surrounding the greenback has intensified, as dovish hints by the Fed governor were unexpected for many traders. As such, EURUSD extended gains to one-month highs just shy of the 200-DMA around 1.11. This is a critical point for the pair at the moment, as failure to break above this level could bring the euro under the selling pressure again. By the way, the common currency received a local support from better-than-expected preliminary manufacturing PMIs out of Germany and the Eurozone.
Still, it’s too early to expect a continuation of the recovery in risky assets, as coronavirus-related risks continue to persist, and investor concerns could reemerge at any moment. Of note, oil traders are more cautious than stock investors, as Brent struggles to regain the upside momentum after a rejection from the daily lows around $52, registered earlier in the day. So, should risk aversion resume, crude oil prices could get back below the $50 handle and suffer further losses despite the oversold conditions.
In cryptocurrencies, BTCUSD switched into a recovery mode after seven days of losses in a row. Bitcoin dipped to fresh lows around $8,400 on Sunday and rebounded to the 200-DMA at $8,700 at the start of the week. Should the pair struggle to overcome this local resistance today, downside risks will persist.