Risk sentiment improves at the start of the European session. US Treasury bonds yields fell around three bps from the levels recorded yesterday (approximately 1.75%), their highest since January 2020. This appears to be the markets’ reaction following the Fed's meeting and the fiscal stimulus measures.
The Treasury sell-off sent the Tech100 down 3% yesterday, but futures point to a modest rally, at least for now. If the bond yields remain low, today’s trading session could be less eventful.
Yesterday, the Philadelphia Fed Manufacturing Index data was published, showing an unexpected growth of 51.8 versus 23 expected. All its components, including those of prices and employment, experienced a colossal rise, adding more strength to economic recovery expectations.
In the currency market, the U.S. Dollar remains firmly in position against its main competitors, apart from the Japanese Yen.
A relevant movement that occurred yesterday was that of oil.
Although Crude recovered around 2% today, it still did not get fully back on track after yesterday’s sharp losses of more than 7%. Without any news or fundamental data causing this fall, the markets were led to conclude it was due to technical factors. Oil prices fell to support 58.62 from where they bounced back. From a technical perspective, below this level, the uptrend would be over, heading towards the next support level located at 52.38.
In principle, this downward movement can be considered purely technical, although the new confinement measures in European countries such as France, Germany, and Italy, may have had some negative effect.
Sources: WSJ, FT.