US30

It was a come back type of week for stocks, even with another hot inflation report. But next week brings the Fed and markets are still holding on to hopes for 2024 rate cuts.

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Investors have now digested those hawkish central bank meetings, but what's next?

It is possible that volatile market conditions might return after the relative calm in the last couple of months.

US traders are to return to their desks today after a 3-day weekend. And the biggest question we have is whether we can see some sort of relief rally, after the recent drubbing.

Buying Momentum Falters Asian markets pushed higher overnight, with the exception of the Shanghai Index, which was nursing losses following dismal Chinese industrial profits. Europe also started in the black, although European bourses were back in the red by midway through the European session.

Today is the second last trading day of the week for stocks ahead of the Easter break, and there’s little further data to provide significant direction. The focus will be on the official weekly US oil inventories data later today. Stockpiles have been rising relentlessly despite signs of lower oil output in recent months. Last night, the American Petroleum Institute (API), an industry group, again reported a sharp build of 8.8 million barrels for the prior week. This was much higher than expected, although it didn’t cause a notable decline in oil prices. However, if confirmed by the official data from the Energy Information Administration (EIA) later this afternoon then this could pressurise oil prices, which in turn may have an impact on commodity stocks. But it should be noted that during this time of the year when refineries carry out their maintenance works ahead of the driving season, inventories do tend to rise. Thus, a bigger surprise would be if we see a drawdown, or even a small build. In this case, oil and possibly stocks could extend their recent gains. The other key US data to watch for the remainder of this week includes durable goods orders tomorrow and the final GDP estimate on Friday. From Europe, this week’s key remaining data includes the German Gfk Consumer Climate survey and the ECB’s Target LTRO results, both tomorrow. The start of next week will also be a slow one as far as the economic calendar is concerned, but things should pick up later on in the week with the monthly US jobs report scheduled for release on Friday April 1.

Equities have surged higher this week, surprising many traders and analysts who were preparing for a stock market crash. Heavily-shorted stocks led the rally as the sellers scrambled to book profit on their positions. The resulting gains saw Wall Street log its first three-day rally of the year. Today, traders are making a more sober assessment of the situation. They know full well that bear market rallies tend to be vicious and can last from several days to several weeks. The continued rise of safe haven gold and yen suggests sentiment is still shaky and that the stock market recovery may well have been just an oversold bounce. But rallies start with short covering anyway and the fact that several key resistance levels have broken down already means the recovery may continue for a few more days yet.  After all, crude oil is trying to form a long-term base, though so far the bulls have not been successful. In fact both oil contracts fell sharply this afternoon after the US Department of Energy reported a disappointing set of stockpiles data which showed stocks of oil and oil products rose across the board last week. So, the wait for a strong reversal signal continues. Nevertheless, the potential for a stronger oil price recovery is there if large oil exporters agree to freeze their production at January levels and/or US oil output starts to fall noticeably now. What’s more, the Fed's January meeting minutes and speeches from several FOMC members suggests the Fed may delay upcoming rate hikes. Meanwhile other central banks such as the BoJ and ECB have turned even more dovish. Thus, if more central bank stimulus is introduced then this could boost the appeal of higher-yielding equities.

Global equity markets have rebounded slightly in the first half of this week after a shocking start to the year sent the major indices tumbling. The rebound is in part due to the sellers taking profit on their positions, a technical rebound in crude oil prices from around the psychologically-important $30 handle and the stronger-than-expected Chinese trade figures that were released overnight which also gave the black stuff a further boost and helped to lift copper prices. Miners and energy stocks find themselves at the top half of the UK’s FTSE 100 index, as a result. But after the initial bounce, European stocks struggled to further extend this morning's rally as traders awaited direction from Wall Street. US index futures point to a higher open today. Understandably, sentiment remains fragile after US stocks had their worst start to a year. Not many people are willing to jump back into equities as they fear this could be a mere oversold bounce in a bear market. Bullish speculators are hopeful that the fourth quarter earnings and forward guidance will provide a positive outlook on US equities, a day before the major Wall Street banks start reporting their results.