IN THE SPOTLIGHT:
Investment package in the United States
OPEC + Meeting
Yesterday, US treasury yields declined and are now at 1.67% per annum for ten-year securities. US stock indexes rose yesterday – the S&P500 rose by 1.2% and updated the historical high, the Dow Jones added 0.5%, and the NASDAQ soared by 1.75%. At the same time, today is a public holiday in the United States and Europe, and activity in the markets will be reduced.
Yesterday was not marked by any new significant events in the United States, and the most discussed topic continues to be Joe Biden's plan for infrastructure investments. Yesterday, another Fed official - San Francisco Fed President Mary Daly-voiced support for the proposed investment. Thus, she noted that she positively assesses the investments under consideration, as they are able to strengthen the potential volume of production. In addition, M. Daly also voiced the usual statements of the regulator about the long-term maintenance of soft conditions and that inflation this year will be short-term. It is worth noting that yesterday, the chairman of the House Committee on Ways and Means (Budget Committee), Richard Neal, announced plans to include bonds in the ways of financing an investment project. At the same time, he has already received approval from the head of the US Treasury for such actions, and the market will wait for further details of these plans. In addition, there is increasing criticism of the proposed measures, both from Republicans and from some Democrats, which further casts doubt on the prospects for passing the bill. In this regard, the approval of investments may be delayed until the fall, when it will again be possible to use the "budget reconciliation" tool.
Yesterday, data on the number of applications for unemployment benefits in the United States were published. So, during the week, the number of applicants increased from annual lows of 658 thousand and now stands at 719 thousand. The market, although waiting for the growth of applications, but in a much smaller amount – the consensus forecast was 680 thousand. Today, the report on the state of the labor market in March from the US Bureau of Labor Statistics will continue to publish data. As we wrote earlier, the high pace of the labor market recovery may increase fears of an imminent tightening of monetary policy, even despite the assurances of the Fed representatives to the contrary. This, in turn, will push yields higher, so the market will pay special attention to today's statistics.
Also yesterday, the data of the industrial index of business activity ISM PMI in the United States were published – for March, the indicator reached 64.7 p, which is the highest value since 1983. At the same time, the market expected much more modest results of 61.5 p. As we wrote earlier, the positive situation in the industry is also observed in most other countries, and the industrial PMI index in Germany and the UK also updated multi-year highs. At the same time, the ISM report noted problems with the supply of materials and rising prices for resources, which supports the inflationary fears of the market. It is also worth noting that the largest growth in the components of the index occurred in the ISM employment indicator, and therefore today's data on the labor market can be quite strong.
Contrary to market expectations, OPEC+ agreed on a gradual increase in oil production – in May and June by 350 thousand barrels per day, and in July by 400-450 thousand barrels per day. In addition, Saudi Arabia plans to gradually abandon its voluntary production cuts, as a result, the kingdom will increase production by 250 thousand barrels per day in May, 350 thousand barrels per day in June and 400 thousand barrels per day in July. At the same time, oil prices have so far reacted positively to the news from the meeting, Brent crude futures rose 3% during the day and stopped at a level above $64.5 per barrel. At the same time, the situation on the demand side remains negative, and further deterioration of the epidemiological situation, coupled with an increase in supply, may return prices to levels of about $60 per barrel. Yesterday's data from Baker Hughes showed another fairly strong increase in the number of active drilling rigs in the United States – for the week, the number of rigs increased from 324 units to 337 units. The increase in production from the United States will put additional pressure on the global oil supply, which is negative for quotations.