European stocks are bounding higher on Tuesday, as the mood in the market improves. The number of deaths in Italy from coronavirus dipped for a second straight day, fuelling hopes that the devastating outbreak may have peaked there. The government announced a death toll of 602, down from 651 on Sunday and 793 on Saturday.
The data is providing a glimmer of hope that the unprecedented national lock down, imposed two weeks ago is at last having an effect. The news comes as Boris Johnson finally put the UK into lock down last night and as the number of deaths in Spain jumps 32%.
Still too early to call a bottom
Whilst it is definitely far too early to try to call the bottom there are certain factors that trades will be watching for. These include signs of each country peaking, sufficient monetary and fiscal support to prevent the collapse of the economy and of course any signs of a vaccination.
The improved mood also came after the Fed unleashed unlimited quantitative easing and as there are signs of progress in Washington towards the agreement of a $2 trillion rescue programme.
PMI's
However, this improved mood could be shattered by the release of PMI data. Expectations are for manufacturing and service sector UK PMI’s to fall sharply to 45 and 45.1 respectively, down from 51.7 and 53. Even if the data did come in better than forecast, which is unlikely, the revision will be significantly worse after the UK goes into lockdown.
Levels to watch
The FTSE has jumped 3% higher on the open. On the 1 hour chart the FTSE has pushed through both the 50 and 100 sma. It currently attacking the 200 sma at 5210. A meaningful move above this level could see more bulls jump in.
Immediate resistance can be seen at 5210, prior to 5440 (high 20th March). A move beyond this level could negate the downward trend.
Immediate support can be seen at 5006 (low overnight) and 4780 (yesterday’s low).
