Equities rallied briskly on Friday morning, echoing the overnight rally on Wall Street, which pushed the indices to record highs. Overnight, the S&P 500 gained 0.58%, the Nasdaq Composite rose 0.69%, and the industrial Dow Jones jumped 0.95% right away. In time with them, the broad Asia-Pacific stock index without Japan MSCI is now adding 0.58%.
There is a reason for this optimism, of course, and its name is Joe Biden. Last night, the US president backed a bipartisan Senate infrastructure deal. This decision required some sacrifices from him, including initial ambitions for climate change mitigation, support for parents and guardians, and tax increases for wealthy citizens and corporations.
Meanwhile, oil prices rose to nearly a three-year high. This was facilitated by the reduction in stocks in the United States and the acceleration of economic activity in Germany. WTI added 0.29% to $73.51, and a Brent now costs $75.77, which is +0.28% per day.
This increase in value pushed the oil chart into the overbought zone: a clear sign that this uptrend may soon fade away. All eyes are now on the OPEC + meeting due next week. Investors are interested in whether the cartel will realize the much-anticipated increase in the volume of oil supply on the market. By the way, India, the third-largest importer in the world, urged OPEC+ to resume production because it remains “deeply concerned” about the rise in energy prices as reserves are rapidly depleting.
There is indeed cause for concern. In the first half of 2021, oil futures have already gained more than 50%. Now a particularly strong driver is the recovery from the pandemic of the economies of the United States, China, and some European countries: business is gradually returning to its usual course, and fuel consumption is increasing. Progress in the pace of COVID-19 vaccinations around the world is also helping to raise forecasts for energy demand.
However, uncertainty over whether OPEC+ will increase production or not could pose a risk for oil investors. Some may start to cut positions at the end of the quarter to lock in profits if a fall in prices follows the cartel meeting.
