European markets and U.S. futures are lacking their momentum, as the S&P 500 failed to reach a record high yesterday. Traders have been waiting for a while for the S&P 500 index to move above its record high. However, the index has so far failed to reach this milestone.
One of the reasons that the Dow Jones futures and the S&P 500 futures are lacking some serious firepower is because investors are still waiting for the second stimulus aid package. The U.S. economy is likely to suffer without this fiscal support. That’s because it is not only the economy that has been waiting for this fiscal support, but there is also a vast amount of money parked on the sidelines, waiting for the next aid package. Investors believe that the moment we will get the next stimulus aid package, the coronavirus stock market rally will charge once again. Without this, it is likely to remain on standby.
Dow Jones and the S&P 500 futures are also sensitive to the deteriorating situation between the U.S. and China. The U.S. commerce department announced additional restrictions on Huawei, which is likely to influence the company’s access to commercial chips. China has made it clear several times that the U.S. should not interfere in places where it doesn’t need to, but Trump seems to be afraid of nothing. Traders are worried that the new measures by the U.S. are likely to have consequences.
One crucial question that comes to mind is if this coronavirus stock market rally would have looked any different, had there been no geopolitical tensions between the U.S. and China? The reality is that these geopolitical tensions haven’t influenced the equities much – this stock market rally is charged because of the fiscal and monetary policy support. That is not to say that the U.S. and China tensions do not matter; the point is that we have not seen these tensions triggering a significant stock market crash that everyone should be fearful of.
Meanwhile, only seven weeks are left for the U.K. and E.U to reach a Brexit deal, and both sides do not seem to have made much progress.. Having said that, the U.K. and the E.U both have their top negotiators discussing the deal again. There is little prospect of achieving any major breakthrough so far, but the hope is that both sides will be able to hammer out all the sticking points and come to some sort of deal.
Oil on the Move
Oil prices are holding on to their gains as traders are keeping a close eye on the supply glut. The stubbornness of the supply glut may be fading, and we are finally seeing some light at the end of the tunnel. All eyes are on the Crude Inventories data, and the hope is that we will get a reading that will confirm another decline. If the data, which is due out tomorrow, confirms this, it will be the fourth consecutive decline.