Wall Street opens on an optimistic note, oil dives

The three major US indices opened the week trading higher, after closing between 0.3% and 0.7% last week. The optimistic opening came after world stock markets neared recent record highs as upbeat Chinese economic data eased concerns about a slowdown in the world’s No.

The Dow Jones Industrial Average rose 0.2%, while the S&P 500 gained 0.16% and the Nasdaq Composite 0.15%.

The MSCI World Equity Index, which tracks stocks in 45 countries, gained 0.2%.

A surprise report on US inflation weighed on the markets last week, as investors wondered whether the Federal Reserve might be forced to raise rates too soon to cope with price pressure. But the looming holiday season, as well as the likely progress in returning the US economy to normalcy after the COVID-19 pandemic, gave some analysts reason for optimism.

Art Hogan, chief market strategist at National Securities, wrote in a note, “We are bringing more people back into the labor force. Vaccination rates are up, and COVID therapeutics are getting better every week. Will go away together.” “We believe that demand has not been destroyed, but has been delayed, leading to well-being by 2022 after the pandemic.”

Nevertheless, there was also a note of caution in world markets, with the latest COVID headlines supporting sentiment in Europe and safe-haven bond markets.

Austria on Monday took a slap on those unvaccinated against the coronavirus as infections soared across Europe, Germany contemplated tighter restrictions and Britain expanded its booster program to young adults.

Expected increased supply, higher energy costs and demand impact due to COVID-19 helped bring down crude.

Brent crude for delivery was down 1.36% per cent at $81.05 a barrel. US crude was down 1.39% at $79.67 a barrel.

Elsewhere, the United Nations Climate Conference in Scotland managed to reach an agreement on emissions, but only by undermining the commitment to phase out coal.

Safe-haven gold looked set to break a seven-session winning streak, with gold falling 0.22% to $1,859.90 an ounce.

The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.03%.

central bank watch

The reaction of major central banks to the emergence of inflationary pressures also dominated the market.

European Central Bank chief Christine Lagarde said on Monday that persistent supply chain bottlenecks and rising energy costs are slowing euro area growth and will sustain inflation for even longer.

A calmer tone in major bond markets re-emerged after strong US inflation data lifted bond yields last week.

The benchmark 10-year US Treasury yield rose 11 bps to 1.6059% after jumping 11 bps last week as markets were positioned for an early monetary tightening by the Federal Reserve.

“On the inflation side, the term transitory is not a good fit for the conditions we are seeing,” said Seema Shah, chief strategist at Principal Global Investors in London.