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US equities traded mostly sideways overnight, supported by talk of more vaccination rollouts and discussion of a bipartisan $908 billion US relief bill to be unveiled.

But the broader indexes sold off relatively hard into the close in a case of buy rumour sell the facts.

Indeed, it seems like investors are reacting in a day late and a dollar short fashion with both the US employment situation and Covid-19 spread shackling the economy due to a state of lockdown siege suggesting Congress needs to do much more, especially with New York lockdown headlines playing a major factor.

Again, it feels like we are stuck in the negative feedback loop. Unless policymakers over-deliver on market expectation, especially at this time of year when our risk-taking proclivities give way to profit-taking, it seems virus-related economic restrictions will never cease to weigh as the market continues to straddle that fence between hope and reality.

And while the vaccine heralds a return to normalcy, just how quickly will folk embrace that reopening normalcy remains the great unknown. Still, one would think that over time, as the virus fades from the memory, people would be happy to return to past behaviour.

The problem with that is whether the services and amenities that make high density living appealing to some can last that long. While consumer preference might be temporary, it could become permanent if cities become much less attractive places in the meantime.

Last week’s pullback in risk had markets primed for yesterday’s recovery as progress resurfaces in Brexit and stimulus against a backdrop of vaccine distribution commencing in the US. Brexit talks will now be extended once again, with EU chief Brexit negotiator Michel Barnier saying a fish compromise could open the door for a deal.

Is it starting to feel like Christmas?

It is starting to feel like Christmas trading is beginning to kick in despite some Brexit and US stimulus risks. Exchange volumes remain fairly depressed as trader fatigue becomes a factor and investors turn predictably more selective and defensive to protect profits. Keeping in mind this is likely the real last week of liquidity this year, culminating with expiry and rebalances on Friday.

The US has started rolling out the Pfizer vaccine, with health workers among the first recipients. Officials have indicated they expect 40 million doses of the vaccine will be distributed by the end of the year.

Indeed, this is a great start for the rollout process and should continue to provide some downside inoculation to overall market risk sentiment given the horizon looks rosy with the world in chorus screaming out, ” Dear Future, I’m now ready.”

Bumpy session for oil

Oil markets are being viewed as an overall bellwether to the market reopening sentiment as this year’s negative year-on-year base effect will most certainly give way to Q1 exuberance. But even oil still had a bit of a bumpy ride overnight, pressured from lockdown sieges on both sides of the pond and some less optimistic demand forecasts from OPEC and the company.

Hopes of more vaccination rollouts, the possibility of a coronavirus stimulus being agreed in the US, and possible tensions in the Middle East due to a terrorist attack on a tanker in the Saudi port of Jeddah all brought support to prices.

However, the market started selling off after OPEC revised down projections for global fuel consumption for the first quarter of 2021. The market pared losses before the close.

Having broken Brent $50 on Thursday last week, a massive momentum shifter for oil markets, the crude oil price has hung that significant level. Despite soft rolling lockdown concerns on both sides of the pond, the approval of the Pfizer/BioNTech for emergency use by the US FDA on Friday and its rollout from Pfizer manufacturing facilities on Sunday continues to find a bullish echo in the oil market.

While the reported attack on an oil product tanker in Jeddah’s Saudi port will serve as a stark reminder of the potential for more significant disruptions should militants actively pick up after a period of relative calm.

But signs of rally fatigue are setting in as buy volumes show less of an appetite above Brent $50, suggesting the market is nearing both sentiment and actual supply and demand equilibrium where oil price reality has quickly caught up with emotion.

International market analysis and insights from Stephen Innes, Chief Global Market Strategist at Axi