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Optimism in the financial markets

Аналитика финансовых и товарных рынков

Market Watch review. 28.04.2021

In today's release, we’ll cover the following topics:

  • Growth of US stock indices.
  • Weakening of the US dollar.
  • US Federal Reserve rate decision.
  • Rising oil prices.

The US stock market continues to attract the attention of investors from around the world. As a consequence, on Tuesday, April 27, the S&P 500 index once again renewed its historical high. Goldman Sachs analysts draw attention to the fact that on Friday the period of prohibition on share buyback ended. Share repurchase or buyback is the repurchase of a company's own shares by the issuer. With increased liquidity and steady growth of the stock market, this tool is quite attractive for many companies.

The lifting of the ban on share repurchases has already provided support to US stock indices. At the same time, the effect may be more long-term, which is what Goldman Sachs analysts are trying to draw attention to. This is quite logical, because the real demand will increase. But this situation has a downside - the US dollar, which is already under pressure from sellers. Therefore, we shouldn't count on a significant strengthening of the US currency yet.

Pay attention to the fact that despite the growth of stock indices the activity of sellers of the US dollar remains very weak. This may be due to the expectation of the results of the vote on the main interest rate of the US Federal Reserve, as well as the subsequent press conference. As a rule, on the eve of this event, the trading activity of the American currency decreases – traders take a wait-and-see position, even if the probability of changing rates is very low.

Now let's move on to the oil market. Trading volatility remains moderate, and the overall dynamics indicate a clear weakening of the uptrend. Nevertheless, UBS analysts are confident in the prospect of further growth in oil prices in the second quarter. Arguing their position, they note the still high level of control of oil production by OPEC, as well as growing demand. These two factors increase the likelihood of a shortage and, as a result, will contribute to a further reduction in the reserves of black gold.

The local target for Brent oil is $75 per barrel. This is quite a strong technical resistance level on the weekly chart. As for American oil, the WTI, the nearest target is $66 and the maximum of the current year is $68. But the return of WTI below $61 may cancel the bullish scenario.

That’s all for me. Closely monitor the news background and be prepared for all the surprises of the market.


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