There are more and more indications that the relief package for the American economy prepared by President Joe Biden will soon come into force in the United States. The package is to be worth USD 1.9 trillion. This prospect seems to improve the sentiment in the financial markets.
The latest US labour market forecasts, which came out in the first week of February, estimated that employment would return to pre-pandemic levels in 2024. Meanwhile, the head of the Treasury Department Janet Yellen said at the weekend that the situation in the US labour market may improve as early as 2022, and the market may reach full employment. There is only one condition: the Joe Biden rescue plan must be implemented. Therefore, it seems that its implementation is almost certain, which would allow the US economy to recover faster from the epidemic, which in turn may fuel the growth of stock prices, oil prices or lead to a faster increase in US bond yields and inflation expectations.
Thus, U.S. futures hit historic highs on Monday, extending last week's gains on hopes that a new stimulus package may soon be passed. House Speaker Nancy Pelosi said Friday that the House intends to pass the bill within two weeks.
Corporate earnings release season is underway. Reports from Cisco, DuPont, Twitter, Uber and Coca-Cola are due this week. Last week, the major stock indexes rose the most since November: Dow Jones was up 3.9 percent, S&P 500 up 4.7 percent and Nasdaq up 6 percent.
The good mood from overseas is also visible in Europe. European stock markets rose Monday, with the DAX 30 in Frankfurt surpassing 14160 for the first time, breaking an all-time record on hopes of more stimulus in the U.S. and easing political uncertainty in Italy. Italy's Prime Minister-designate Mario Draghi secured the support of the two largest parties in parliament to form a government.
In addition to the near implementation of the stimulus program for the U.S. economy, the gradual reduction of vaccine distribution problems around the world also supported sentiment in the oil market. On Monday, a barrel of Brent approached $60 and WTI approached $57. These are the highest levels in more than a year. In China, the world's largest oil importer, health authorities approved Sinovac's COVID-19 vaccine on Saturday. Mainland China saw no new cases for the first time in nearly two months. Additional support for prices came from pledges by major oil producers to cut oil production. Thus, demand continues to outstrip supply and the price seems to be moving higher.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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