Wall Street Spurred on by Strong Data

Written by: Craig Erlam | OANDA Europe

A stellar trading session in Europe so far on Wednesday, with Wall Street eyeing more record highs as investors welcome good news on the economy.

While the stock market recovery has, to this point, been dominated by tech - the undeniable beneficiary of the global lockdown - and aided by central banks slashing rates and promising to leave them there for years to come, there is hope that the data will start to give more cause for optimism as governments and business seek to make a success of the reopening.

Obviously, there will be many setbacks along the way and there are some industries that have been ravaged by the pandemic, but the hope is that the huge stimulus efforts around the world will pay dividends in the tough months ahead. This will be a recovery like no other, the employment support efforts are evidence of that, but even these are limited in what they can achieve and the true consequences of the crisis will become clear in the final months of the year.

Data like we've seen this week though will alleviate some of those concerns. The PMIs, while volatile, do offer timely insight into business conditions and employment prospects and what we've seen has been really encouraging across the board. A strong jobs report on Friday could be another boost if these numbers are anything to go by. The ADP number today could offer some insight on that.

Oil remains in consolidation

Oil remains in consolidation, even with crude prices edging a little higher today. The consolidation is occuring around the 200-day moving average, with both Brent and WTI stalling around these levels. It's interesting that, at this moment in time, there seems little sign of a breakout to the upside or significant correction occuring. 

Rather, we appear to be in limbo with OPEC+ monitoring the situation month by month and the outlook remaining unclear. These consolidations typically don't last but these aren't normal circumstances. A break above $44 in WTI may trigger some interest again, as may a move below $41.50 but I wouldn't say that with any real confidence, particularly in reference to the former given how any momentum has just disappeared.

Unfortunate timing for gold

Gold made another push for $2,000 on Tuesday but once again came up short as the dollar staged another comeback. The greenback had just fallen to its lowest level since April 2018 when the positive surprise in the ISM manufacturing PMI saw it spring back to life again, stealing gold's thunder just as it was looking to clear that major psychological level once more. 

US yields remain low though, as they did yesterday in fact, so it may not all be doom and gloom for the yellow metal. The dollar index remains on a downward trajectory and US  yields remain low. Another failure at $2,000 is a concern but perhaps it was just bad timing.

Related: Wall Street Eyeing New Records