After almost a week, the evergreen ship Ever Given grounded in the Suez Canal is likely to be refloated today. Oil prices fell as the news of this hit the market. The stocks of oil companies were soaring on Monday as the news emerged.
But the damage to the world economy might have been done already with several shipments getting delayed and maritime getting affected. The maritime industry is already in tatters over a pandemic hit traffic and congestion which has accelerated with the Suez Canal issue.
Markets Ride High on Optimism
Amidst this, the refloating news bore some positivity in the market as Asian markets soared tracking a record-breaking lead from Wall Street as investors focus on the economic recovery.
Oil prices dropped in the hope of the Suez Canal logjam getting cleared. Main oil contracts tumbled more than 1% as the news of the refloating broke out. The early morning tweet by Maritime services provider Inchcape that Ever Given had been refloated meant that the reopening of the world’s most important trade routes
According to media sources,” the forecast of US prices on Friday provided support as it eased fears that inflation caused by an expected strong global rebound will force central banks to wind back their ultra-loose monetary policies or hike interest rates”.
Reports also indicate that traders will urge for the release of key US jobs data for March along with manufacturing figures around the world, in the coming week.
Meanwhile, the next leg of the US President’s economic recovery is scheduled to be unveiled soon. The stress is going to be on infrastructure this time as an estimated $3 trillion fund is going to be released by the White House. This comes at a time when Joe Biden’s $1.9 trillion stimulus package is set to kick in.
Traders are concerned that the stimulus bill will be covered by higher taxes and it will drive an upswing in oil prices. The US Treasury bond yields which guides future interest rates are already quite high. They are sitting with one year highs treasury bond yields.
According to JP Morgan Asset Management Associate, John Bilton, “Inflation remains a persistent concern for investors. We expect headline inflation to be volatile in the second and third quarters, with the potential for some sticker shock as annualised base effects generate optically elevated year-on-year readings.
“However, we believe that many of the secular disinflationary forces — globalisation, technology adoption, etcetera — continue to anchor core inflation so that even allowing for huge policy stimulus, inflation rates should remain contained in 2021”, added Bolton.
Reports show that “Wall Street’s three main indexes finished Friday on a strong note, with the Dow and S&P 500 ending at all-time highs”
Asian Stocks Rallies
On Friday, Oil Prices soared by 4%, marking a week of wild swings as the industry analysed the twin effect of covid lockdown and Suez Canal blockage.
Stocks in Asia built on this rally with Tokyo, Taipei and Jakarta gaining more than 1% and heavyweights like Shanghai, Hong Kong, Seoul, Singapore, Manila, Bangkok and Wellington enjoying considerable gains. Australia however went into a slumber over fresh covid lockdown in Brisbane which put investors off. The slow down of the pandemic in the US and UK courtesy vaccine roll outs aided in the optimism.
European markets were buoyant despite stumbling vaccine drives and rising infection rates. All this because of some upbeat economic forecast.
All Eyes on This Week’s Data
However, experts like Axi strategist Stephen Innes warn people to act cautiously as this week’s data releases will determine the gains.
“Given there is so much optimism in the economic reopening narrative baked into the price, it’s hugely important this week’s financial data, at minimum, meets expectations to maintain this ship on an even keel,” Innes said.
“But this could be a double-edged sword for pockets of the market as the combination of stimulus and robust data support equity prices. However, tech faces some challenges if the ‘risk-on’ signal manifests into higher real yields”, he added further.