US equities were stronger overnight and were on track for fresh records.

No stimulus breakthroughs, but no setbacks either, or as always, when it comes to Washington’s political morass, no news is being viewed as good news on that front.

But in the case of bad news is good, the weak labour market data stoked optimism that Congressional leaders will finalize another round of stimulus before holiday wide lockdowns could shutter the “Last Chance Stimulus Saloon” on Friday.

Bonds are little changed despite the rally in equities highlighting that the recent string of central bank outcomes (FED, ECB, BOE) keeps a tight lid on financial conditions to clear the way for risky assets to push higher the US dollar to move lower.

The Fed yesterday disappointed on duration extension but more than made up for it on forwarding guidance, which strengthened from time-based to outcome-based. At the same time, participants had an underlying suspicion the Fed could have turned more notably hawkish in a tone that did not quite materialize.

Helping European equities outperformed yesterday was the announcement hat the EU drug regulator would decide on the Pfizer vaccine on Dec 21, with distribution likely to come before the new year.

Oil rises on stimulus wave

Since February, oil has settled at the highest level as US lawmakers are putting the finishing touches on a Covid-19 relief deal that might provide a much-needed mobility footbridge and boost near-term fuel demand ahead of a wider distribution of the Covid19 vaccine. Notwithstanding the continued problems the northern hemisphere is experiencing with the combination of winter and the Covid-19 virus.

With all boats rising on the stimulus wave, the US benchmark pumped higher in tandem with broader markets as the omnipresent weak US labor market scrim stirred enthusiasm that another stimulus deal is on the way.

The stimulus package is unquestionably one of the key drivers pushing the oil market higher as the whole dollar-denominated commodity markets are repricing higher thanks to frothy risk markets after the FOMC reaffirmed that policy is going nowhere for a long time.

So, the combination of low for longer rates and the anticipated US stimulus deal offered up support for broader risk markets appetite, which has proven enough to push the USD weaker.

And the currency passthrough effect provides spot and forward price discounts to Asia buyers. Both China and India are splurging to that currency advantage as India’s refinery demand is roofing and China continues to fill storage tanks.

Oil traded higher today with the help of a US dollar at 2-1/2-year lows and continuing optimism for an imminent stimulus deal in the US. Yesterday’s benign oil inventory report also contributed.

Asian buying continues to attract barrels from Russia, the Middle East, and North America. The futures market’s strength is replicated in the physical market, where various grades prices have risen.

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