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US equities fell on Friday as the US stimulus impasse, no-deal Brexit concerns, and the omnipresent rolling lockdown holiday siege weighed heavy on investors’ minds.

So it seems we could be stuck in the positive vaccine then negative Covid-19 feedback loop waiting for a stimulus check to arrive.

In truth, the headlines on the US fiscal stimulus are all too familiar. But there is little sign of any movement in resolving divisions over the primary components. Squabbling continues over government aid to the states and COVID-19 liability protection for businesses.

Given these talks have been running since July, the market may be bored to tears, but if the stimulus door slam shut before Christmas, it could still change the positive vaccine mood music.

Brexit impasse

Both sides met overnight in the latest iteration of the Brexit saga, resulting in a can-kicking extension. Still, UK PM Johnson quickly pointed out that both sides remain far apart as we enter another round of high-stakes brinkmanship.

Both sides want to avoid being the ones walking away from negotiations. However, whether such an extension would be for show only, or in fact, signal a real and realistic attempt to hammer out a deal is the real question.

To the extent this Brexit detente holds up remains the most pressing question as no Brexit will continue to worry investors to no end with UK ministers telling supermarkets to stock up for a no-deal Brexit that could take up to three months to resolve the vegetable shortage.

Unquestionably, this could make COVID-19 hoarding look like small potatoes. According to the ministry of defence, the Royal Navy has put four patrol boats on stand by to defend UK fishing waters on an even more ominous note.

And all of this will put the Bank of England’s back against the wall. Already this morning, the Bank of England economists are out warning the market they are running out of policy wiggle room, noting that QE at this stage will prevent tightening but will not add more stimulus at this point

New York eatery lockdowns

Near-term growth worries in the US also intensified Friday, with growing virus infections and hospitalizations causing NY Governor to halt indoor dining, in effect from Monday. Suggesting investors will again be tasked with gauging the vaccine rollout against the near-term negative impact from soft lockdowns, which leave a nasty psychological impression on the consumer who could stay at home to protect families over the holiday season.

But on a positive risk note, the FDA approved the emergency authorization of the COVID 19 vaccine. And suggesting supply constraints will be overcome quickly, a convoy of trucks is already making their way from Pfizer Kalamazoo headquarters to US hospitals.

And the Airline industry is also kicking in by offering idled planes as vaccine cargo haulers. Indeed, this will help assuage some of the markets near term growing laundry list of near-term economic worries.

IPO and M&A mania

Eventually, the greater risk is still for the market to break positively as the market shift from vaccine euphoria to IPO and M & A mania as profits from recent stock market gains will send mega-caps on takeover splurge.

Anyone who was trading in 1999 probably felt some nostalgia watching Airbnb go public last week. Of course, the IPO wave in the summer of 1999 was followed by a move from 3000 to 5000 in the NASDAQ, so it is not like the IPO madness was a bearish signal!

However, the early warning radars went off two months later when the IPOs started to flop, which crushed many a day trader.

But the real worries can when the Four Horseman came riding in with IPO stock in their saddlebags. The concern is that everything moves in hyper speed in 2020, and 2021 is unlikely to be any different. So, let the New Year count down begin to yet another retail-driven call option buying splurge on the high-tech flyers.

Oil trades higher as vaccines roll out

Last week was a significant inflexion point for oil markets. Brent breaks $50 for the first time since early March, reflecting continued momentum as the market was adjusting for this past weekend’s FDA emergency vaccine approval and the demand recovery into 2021.

The oil markets are trading up this morning as the FDA approves the vaccine’s emergency rollout; Brexit discussions endure suggesting no immediate global risk reset, and it appears vaccine supply constraints will be overcome quickly.

There are definitive signs of a strong rebound in the eastern hemisphere, still worrying signs in Europe and the US could hamper year-end top-side ambitions. It seems likely that COVID-19 fears have returned to the fore. Germany, for example, reported its highest number of cases and deaths. Its economy minister said a full lockdown had become a question of when rather than if

In early 2021 two supply responses will be key in determining the medium-term price: how OPEC+ reacts, where policy suggests that it should begin feeding its spare capacity back carefully but possibly how quickly could be the question; and US shale producers, where the consensus is that producer remain on a tight capital leash, but history suggests they are itching to get back to drilling.

1Q 21 could be challenging, with the outlook for demand still uncertain, but it looks increasingly likely that the second half of the year will see oil demand approaching normal levels. But that will not necessarily result in significantly higher prices as both OPEC + spare capacity and all, but forgotten shale could resume pumping at the improved break-even levels.

The market has been well supported on dips. Still, sellers line up as we near Brent $51, perhaps banking on year-end volatility as the JMMC becomes increasingly in the market’s focus where oil price support may hinge on an OPEC + decision whether or not to open up oil spigots a bit more freely.

And while I still worry that the sharp rebound in Oil in recent weeks is pricing in a level of optimism that may not withstand any mixed news on the vaccine and the global economy, but whatever my concerns about the near-term outlook, the future looks a lot brighter for the oil markets than it did only a month ago.

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