US equities were stronger on Friday as the S&P 500 found a fresh record high ahead of a busy data week. The Non-Farm Payroll data – the granddaddy of them all — is set to provide keen direction for risk markets as we enter Q2.

After springing a few leaks due to global Covid-19 concerns, with new variants causing more than a few consternation for policymakers, risk sentiment bounced after US President Biden doubled his goal for the US vaccine roll-out pace played its part in stabilizing the ship.

Investors swung back to the policy agenda, with President Biden expected to formally unveil a $3 trillion infrastructure plan this week. This comes just as the acceleration in activity from recently delivered stimulus checks are already showing up in the alt-data with should provide a solid base for Spring lift off.

With a noticeable growth pick in March, “the street” is likely positioning and expecting an upbeat cadence for the economic news over the coming weeks. Given there is so much optimism in the economic reopening narrative baked into the price, so it’s hugely important this week’s financial data, at minimum, meets expectations to maintain this ship on an even keel.

But this could be a double-edged sword for pockets of the market as the combination of stimulus and robust data support equity prices.


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However, tech faces some challenges if the “risk-on” signal manifests into higher real yields.

The strength of the recovery and the partaking inflation risk remains at the vanguard of investors minds after the final read on Michigan sentiment for March was revised up, leaving the index 1.9 points higher than February.

Most notable in the details: a tick up in long-run inflation expectations. 5-10yr expectations rose from 2.7% to 2.8% – the highest level since July 2018 and only slightly below the 2.9% average that prevailed before the 2014 oil shock.

And for medium-term concerns, investors know spending the money is the easy part. However, the more difficult decision is how to pay for it. And with all roads appearing to lead to US tax hikes, Wall Street won’t be enamoured with that.

Oil remains under pressure

Crude oil has slumped, to some extent driven by profit-taking after a year-long rally.

Inflation remains a threat and positioning is much cleaner.

OPEC+ seems more likely to maintain production cuts, and Suez Canal blockage creates supply problems.

With a lot of economic, vaccine, and US herd immunity love priced into the oil markets, Covid-19 resurgence continues to hang like an anvil around the market’s neck and keeps prices in check.

But the inflation theme has not gone away. Positioning is probably much cleaner after such a volatile week. OPEC+, having maintained production cuts at higher prices last month, seems less likely to open the taps at current levels

After oil sentiment sprung a leak early last week, prices recovered as markets continued to digest the blocked Suez canal’s challenges and ramifications.

Similarly, this morning, that beat goes on as canal workers struggle to refloat the vessel due to numerous logistical issues, non more so than the fact they have never undertaken a task of this horror.

Each day that passes increases the oil on water rather than in the refinery for processing as voyage times increase for those queueing for the canal or voyage distance and time increases as vessels re-route around Africa. Either way, it should help to re-tighten the physical market and stabilize prices

While there has been plenty of noise – Iran, China buying, European lockdowns, dollar, Suez Canal – none of it tallies with the big moves we have been seeing, which imply to be nothing more sinister than the extensive rise at the beginning of March, which was primarily forward-looking, got too far ahead of the demand reality in the immediate aftermath of the last OPEC+ meeting.

Given the evident fragility in prices, this week’s meeting seems likely to be quite cautious on the production front.

Market analysis from Stephen Innes, Chief Global Market Strategist at Axi