Global markets have been trading in the green today, with future contracts for major US indices trading higher.
Oil has been a key driver of volatility during the Covid-19 crisis. Brent is up 1.6% at $33,56 with a short-term target of $35. Oil is higher on hopes that the major producers would agree about significant production cut: the cartel and independent producers are expected to meet virtually on Thursday.
Prices above $40% per barrel is considered a not realistic assumption as the demand side is slashed (about 40% barrels per day). We expect energy prices to hover around +/-10% around current levels until economic activities recover. On the other hand, if the coming meeting is delayed or no agreement is reached prices will slump again.
Gold climbed to $1,673 in the morning session and is now hovering around the $1,655 level, with expectations of $1,680 and $1,705 if prices do not break the support level of $1,625. The US dollar retraced, signaling fewer strains in funding and that markets are getting the liquidity they need.
Libor-OIS spread declines
Source: Bloomberg
With the continued rebound in equity markets and improved risk sentiment, it appears the Covid-19 crisis is easing and the disease’s spread may be slowing. Investors’ attention is now likely to move to corporates’ earning expectations, which they will use it to quantify the cost of the pandemic.
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