It’s been an interesting start to the week in financial markets, with the usual themes continuing to dominate.

There’s a huge question mark hanging over the stock market recovery , with investors seemingly not currently pricing in the prospect of restrictions could be re-imposed across the globe. I’m not saying we’re going to see a repeat of the late March/April period but a significant setback in the process now looks perfectly feasible, further threatening the economic recovery and may the longer-term prospects.

We’re not exactly seeing markets come under any significant pressure but the momentum that carried it for much of the second quarter has clearly waned. Vulnerabilities are starting to appear, possibly hinting at an end of summer correction as the economic reality doesn’t catch up fast enough.

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While all of this would make a lot of sense, it’s so difficult to bet against the stock market when there’s so much stimulus backing it. And any delay in the reopening process or the reimposition of restrictions will likely trigger more stimulus anyway and could be viewed as a reason to buy. The old “bad news is good news” trade could be with us for a while.

Oil content around $40, for now

Oil is being lifted a little by the slightly positive shift we’ve seen as the European session has gone on. But, like the moves we’ve seen in equity markets, the momentum has clearly dropped significantly which suggests oil has reached its peak for now, more-or-less.

I’m sure there’ll be plenty who are relieved at crude floating around the $40 mark but I don’t expect it will linger around these levels too long. Between agreements expiring and economies heading in various directions, depending on the viciousness of phase two, oil prices will likely remain highly volatile for some time to come.

Gold crawling towards major level

Gold is continuing to edge its way towards its next huge test, which will come around $1,800. The fact that the rally already appears to be struggling a little on the momentum side doesn’t fill me with hope that its going to be much of a fight at the first time of asking, but we’ll see.

A break above here could be huge but, as has been the case for so long with gold, we may just have to be a little patient. The strength of the dollar continues to slow the ascent but it is gradually falling out of favour as economies reopen. As I’ve said many times already though, that may not last.

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