All eyes on Powell and OPEC+ meeting

European stock indices recovered from their earlier lows, as too did US index futures, but sentiment remained cautious after shares of growth companies that dominate the Nasdaq index fell sharply on Wednesday. Investors will be watching a speech by Fed Chair Jay Powell closely later on. We also have the OPEC+ decision to look forward to.

Tech sell-off

In recent weeks, tech stocks have lost some of their appeal due to rising long-term bond yields, as investors no longer expect to see any further monetary policy loosening by the Fed and other major central banks. This is because the markets have priced in a sharp economic recovery in the months ahead owning to the rolling out of Covid vaccines around the world, which has raised hopes that lockdowns will end for good.

Source: ThinkMarkets and TradingView.com

All eyes on Powell

Jay Powell, the Fed Chair, will do his best to quell talks of QE tapering during his much-anticipated speech about the US economy at an online event, starting at 17:05 GMT today. Wednesday’s soft employment data from the ADP and the weaker employment component of the ISM services PMI may be among the factors Powell will use to reaffirm that the central bank is determined to keep monetary policy accommodative. However, Powell can’t be too dovish either as he will also need to address worries about inflation. So, he will have a tough job convincing the markets that Fed’s policy is on the right path. Stocks may drop further if he’s unable to do so.

OPEC meeting

OPEC and its allies are meeting today, but no one is quite sure about the outcome of the meeting in terms of production changes, with Saudi Arabia remaining cautious on increasing output while Russia is keen to increase supply. Most analysts feel that the OPEC+ will decide to ease production quotas due to the success of the global vaccine rollouts, which has already prompted a sizeable rally in oil prices. So, it is not a question if, but how much oil production quotas will be relaxed. I think the market is pricing in a 500,000 barrels per day increase. If Saudi then decides to again take a voluntary cut then this should be good news for oil prices. Otherwise, I think oil prices will fall, especially if the relaxation of quotes turn out to be greater than 500Kbpd.

Source: ThinkMarkets and TradingView.com