US Futures Higher, Oil Rebounds

U.S. equity markets are expected to start the week on a positive note, with futures currently higher by around a quarter of one percent.

In the absence of any major catalysts in the markets at the start of the week, it seems equities are continuing to be lifted by the prospect that U.S. interest rates will remain lower for longer. The Federal Reserve’s new dovish stance has provided some reassurance to investors that were concerned that a faster pace of tightening could choke off any recovery in the U.S., particularly at a time when conditions are already tightening as a result of the increasingly stimulative policy of other central banks. The release of the FOMC minutes from the March meeting on Wednesday should offer more insight into how fast the pace of tightening will be, with the Fed having already indicated at the last meeting that it now only expects two hikes this year rather than the four it alluded to in December.

Monday April 4: Five-things the markets are talking about

Oil has been under pressure once again this morning although it has rebounded early in the session which is probably alleviating some of the downward pressure on indices. That said, there has been a decoupling between oil prices and indices over the last two weeks as the Fed has once again taken over as the main driver, with oil taking more of a backseat. Perhaps the rebound in prices has eased some of the concerns surrounding the industry and the knock on effects it could have on others, with banks coming under some heavy pressure at one point as investors feared the ramifications that rising non-performing loans could have on the sector.

Eurozone unemployment fell to 10.3% in February, down from 10.4% in January and the lowest since August 2011. While we continue to see progress here, it is coming from extremely high levels and the rate of the decline is very slow which suggests that while we’re seeing a recovery, it is very gradual. There is little sign that this is going to pick up either which is concerning, even though the ECB is doing all it can to create an extremely accommodative environment. Despite this very accommodative stance from the ECB, deflationary pressures remain, as seen in the PPI data released alongside the unemployment number.

Economic Calendar

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.