Stock Futures Trade With Caution Ahead of US NFP

Stock Futures Trade With Caution Ahead of US NFP

US and European futures are trading with caution ahead of crucial data as traders do not want to get caught on the wrong side of the trade. There are also concerns about Pfizer’s supply chain for its coronavirus vaccine production. On top of this, we are also looking at much tighter restrictions taking place in some states in the US. California has announced that it will lock down its economy if critical-care in hospitals reaches capacity.  

The Big Day 

Today is the most important day for the US stocks as we will get to see a new reading for the U.S. Non-Farm Payroll data. Recent restrictive measures have made an impact on the US jobs, and we have seen the evidence of this in the more frequent data sets, such as the Weekly Jobless Claims. 

If today’s number confirms that things are still on track, we could easily see the US equity markets recording new highs. However, if the numbers are underwhelming, we could see a serious correction for the stock market. Having said that, it is equally important to keep in mind that the situation is very different today as we do have a coronavirus vaccine.  

OPEC Decision 

After weeks of negotiations, OPEC+ has finally reached a decision, and market players have decided to back their decision fully. The OPEC+ has decided to increase its oil production but only gradually. Under the new agreement, the oil production will only be increased by 500,000 barrels a day, which is far below the rumoured number. The fear was that the OPEC+ could be increasing oil production by over one million barrels a day starting from January next year. However, we know now that the oil production will only be increased gradually, and by only half a million starting from January next year. 

The cartel has made it clear that it is paying close attention to the economic recovery, and it still has the ability to pull things together even if they are at the last minute. The impact on oil prices has been positive, and we have had a decent surge in oil prices. The improvement in oil prices has also helped the energy stocks as well. 

The most important lesson for this year for OPEC+ is that their unity is the biggest tool that they have, and they need to make sure that they do not lose control over this. Lessons should be learned, and mistakes should never happen again; otherwise, oil prices will crash again without any floor, and we have seen the evidence of that this year.  

Stimulus package 

Investors are also optimistic about the second stimulus package. As discussed yesterday, the negotiations for the second package are back on track. House Speaker Nancy Pelosi, and Senate Majority Leader Mitch McConnell are looking at ways to reach a deal. The fact is that both sides need to show flexible behaviour, and a blame game isn’t going to yield any outcome—just like before. Democrats need to be more reasonable with their asking, and Republicans need to show more generosity in their package.