Market Overview

Shares and crude prices have been paradoxically climbing since the beginning of this week amid the worldwide expansion of a second wave of the coronavirus. Seemingly, risky assets like stocks and oil should be at severe pressure as infections spike. But, an overall optimistic vibe has made controversial moves of these assets possible for certain reasons.

Sitting U.S. President Donald Trump has unexpectedly advocated a bigger relief plan for the American economy that made even his Republican fellows disconcerted. Trump’s support for negotiations on the relief plan came just a few days after he banned any discussions with Democrats over this bill. However, markets are expecting this relief money, and this may support risky assets. Besides, Democratic nominee Joe Biden is well ahead of Trump in the presidential race. Investors assume that Biden may take over Trump and lower U.S. Administration inclination to trade tensions with China and Europe, and therefore decrease risks to the global economy.

The S&P 500 broad market index was seen to make additional gains on these expectations and went above 3,500 points, and may be ready to challenge all-time highs at 3,588 points. However, this index may hardly significantly outperform this landmark level before the relief bill will be actually approved. So, the S&P 500 index may be squeezed within the range of 3,000-3,588 points.

Inclination towards risks seem to increase the demand for crude futures. But, Brent crude prices halted their rally from $39 per barrel to a technical level of $43 per barrel, and stepped back below $42. The divergence of crude futures with stock assets may be explained by short-living factors like hurricane Delta in the Mexican gulf and the termination of the oil strike in Norway that may slash crude production in this country by a quarter. The oil market was hit by the forecast made by the International Energy Agency that sees crude demand slumping by 8% in 2020.

Crude prices this week will most likely largely depend on the development of these factors. If the second wave of the novel coronavirus dramatically expands, crude prices will probably fall under serious pressure. Any burst in geopolitical tensions may affect prices too. New developments in the U.S. presidential race or relief bill negotiations, or even incoming data on the Chinese trade balance on Tuesday, or U.S. crude reserves on Thursday, may push prices in either direction. Technically, crude prices may be locked between the $39.2 support level and the $43.9 resistance level this week. However, a downward trend in the oil market may pressure crude prices to the lower margin on this range.

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Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.