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US equities ended flat on Friday, but stock futures are pointing higher this morning on expectations that China’s GDP will rebound further amid continued normalisation of economic activity, with increases in domestic demand decisively above their pre-Covid-19 levels.

All the while, investors sit in wait for a US pre-election stimulus package with is going to be necessary as viewed through the lens of rising US initial jobless claims, which will only become more painful towards year-end as state-level unemployment stop-gaps fall under pressure.

A near-term deal could go a long way to relieving much of the markets’ post-election anxiety, which could still result in a contested affair and drag out into the mid-December electoral college vote.

On again? 48 hours and counting

Nancy Pelosi said a stimulus package must be agreed in the next 48 hours if it is to pass before the election, as the Democratic speaker of the House of Representatives turned up the heat on senior Republicans over coronavirus aid.

She said in a media interview on Sunday: “We don’t have agreement on the language yet, but I’m hopeful.”

Let us hope for the millions of Americans struggling to put food on the table and in fear of getting the proverbial lump of coal in their holiday stockings, where there is a will, there is a way.

Of course, failing a stimulus package, Investors could approach the next few weeks with caution – markets were overly consensus around a Democratic sweep and all that entails larger stimuli. Still, it may be difficult for risk to trend too far in either direction without an actual outcome at this point.

The US elections of late may have overshadowed the Brexit theme, but since it could be President Trump’s last kick of the can and the final chance to turn the tables as the last presidential debate ahead of the US election is on Thursday.

The President will be loaded down with Hunter Biden’s e-mail implicating the Democratic nominee Joe Biden in a kickback scandal. It should be another bar brawl debate night for the ages. So look for investors to pivot back to US election risk this week.

Near-term headwinds remain for oil

The tug of war between Covid-19 and demand continues to play out in oil markets backstopped by the omnipresent OPEC backstop.

Near-term headwinds remain, but OPEC’s efforts to tighten the market seem to be working. OPEC+ will meet at the end of November to discuss, among other things, whether to proceed with the planned easing of production cuts from January 2021.

Iraq, one of the main laggards in the early stages of the new OPEC+ agreement, said it had achieved 100% compliance with its OPEC quota in September, including an additional 200kb/d of cuts to compensate for initial overproduction.

Any recovery in risk markets on stimulus talks will also find an echo in oil markets. And beneath the choppy surface, China’s data for September so far is indicative of an economy that is firmly in a cyclical upswing and supportive for all commodities, including oil.

The coronavirus pandemic will continue to dominate attention as case numbers rise in Europe and the US as governments move to impose mobility restrictions. And with a trajectory for Covid-19 infections skewed firmly upwards at this juncture, it raises doubts about the robustness of the anticipated economic recovery and thus the prospects for oil demand growth.

The good news is that the OPEC+ producers appear well attuned to these fluid conditions. OPEC Sec-Gen Barkindo acknowledged that the group would take stock at its November meeting, suggesting the potential for January’s planned quota easing to be deferred.

A resurgence of Covid-19 or the ramping up of oil production in Libya each by themselves could have been sufficient for OPEC+ leadership to extend the current quotas. Still, the toxic combination makes the scheduled tapering on Jan. 1, 2021, very unlikely.

Frankly, adding oil to the market at this juncture, with demand so fragile, is a flat-out bad idea if the group’s real intentions are to stabilise and support prices.

While the soft and curfew-style mobility restrictions appear to be the first line of defence when it comes to curbing the Covid-19 outbreak in the EU, for global growth concerns, let us hope these measures do not prove to be the equivalent of the Maginot line.

Still, every cloud has a silver lining as Asia’s colossal oil consumers via Chinese and Indian refineries are ramping up production. China’s economic lift-off combined with the surging Yuan sees mainland’s teapots snapping up barrels of Middle Eastern crude to feed new and expanding plants.

And India’s oil refiners have the Navratri and Diwali boost to look forward to that not even a rapidly spreading virus is expected to derail.

Equity and Oil markets analysis and insights from Stephen Innes, Chief Global Market Strategist at Axi