Equity and Oil market analysis: US stocks on the mend

Market analysis from Stephen Innes, Chief Global Market Strategist at Axi, 

US equities were on the mend from springing a couple of small leaks after financial stocks came under pressure over concerns about potential losses from exposure to a liquidated investment fund.

The bond market ignored the headline “hair on fire” melodrama as US 10-Year yields rose again, another 3 bps to 1.71%.

Oil prices gushed 1% even as the container ship that spent a week sideways in the Suez Canal found itself back on the straight and narrow. With thanks, it seems, to a Super Moons tidal force.

US equity gauges recovered nicely and proved resilient despite the quarter-end rebalancing. And as the contagion risk of the forced liquidation behind block sales in single name stocks lessens, investors feel less distracted, especially as the news quickly becomes tail end fodder with the market moving to bigger fish to fry.

And with the US Fed dove’s plumage on constant display, perhaps it is a full-on pivot to hopefully much-improved data for March, which should start coming down the pipe this week, lighting the touch paper for a robust set of data into Q2.

After a couple of quiet weeks on the US data front, fasten the seatbelt as things are sure to get a little more interesting in the coming days.

With spring in the air and US President Joe Biden expected to formally unveil a $3 trillion infrastructure plan Wednesday, just as the acceleration in activity from stimulus checks hitting doormats and feeding into the alt-data, it could provide a smoother and lengthier runway for risk to initially take flight.

But spending the money is the easy part. However, the more difficult decision is how to pay for it. And with all roads intersecting at “tax hike junction”, Wall Street won’t be enamoured, so all that is yummy around the infrastructure deal will need to be taken with a pinch of tax man salt.

Oil markets eye OPEC meeting

Last week was characterised by wild intraday volatility in crude price, with the entire week almost unchanged but close to a $5/bbl intra-week range.

Well, it was no rest for the weary on Monday as the whipsaw was on full force again, illustrating how fragile and the testy sentiment is.

Still, into the Asia open, optimism for an extension of production curbs at this week’s OPEC+ meeting appears to be working in favour of today’s price action. OPEC+, having maintained production cuts at higher prices last month, seems less likely to open the taps at current levels

Time to recheck the dipstick and top up on oil?

Oil is also powering ahead as energy traders look to President Joe Biden to outline his infrastructure spending plans this week, which could supercharge an already accelerating US recovery.

Noisy markets not for the faint of heart

While there has been plenty of noise to keep the fast money moving, and undoubtedly not conditions for the faint of heart, Ever Given in the Suez is perhaps something of a volatility trigger, although the knock-on effect is relatively short-term and localised.

Maybe more in focus are on continuing lockdowns – including Manila and likely Mumbai plus the upcoming OPEC+ meetings on 31-Mar/1-Apr where the pre-meeting assumptions are coalescing around producer caution in any decisions around bringing back production to this fragile market.