U.S. Stock Market

U.S. Stocks Set To Open Higher As World Economies Continue To Reopen

Countries All Over The World Lift Some Virus Containment Measures

S&P 500 futures are gaining more than 1% in premarket trading session as traders and investors cheer the reopening of the world economies.

The coronavirus containment measures put incredible pressure on the world economy, and there is a sense of urgency to reopen as soon as possible to prevent further economic damage.

However, the reopening will be gradual to avoid the potentially devastating second wave of the virus. In the upcoming weeks, the market will focus both on the speed at which the economy reopens and also on whether coronavirus is kept in check as the economic activity increases.

Oil Continues Its Upside Move

Oil rallies as oil traders focus on the reopening of the world economy while fears about the availability of oil storage are put aside.

Front-month contracts for both WTI and Brent are experiencing the biggest upside moves but longer-dated contracts are gaining ground as well.

Major oil stocks have held reasonably well during the current earnings season despite some dividend cuts from Royal Dutch Shell or Equinor, and the continuation of the oil price rally may lead to additional gains for the shares of oil majors.

More Economic Data To Digest

The current market optimism will soon get tested by another portion of economic data. Later in the day, traders and investors will get a chance to evaluate Markit Composite PMI Final  and Markit Services PMI Final for April.

The Composite PMI is expected to decline from 40.9 in March to 27.4 in April, while the Services PMI is expected to shrink from 39.8 in March to 27.0 in April.

It remains to be seen whether the negative data will be able to put the current upside under question although a negative surprise on the PMI front might be dangerous for stocks.

I’d note that the U.S. dollar, which serves as the safe haven asset of last resort during the current crisis, is gaining ground against a broad basket of currencies despite the optimism in many asset classes.

This signals that investors are not sure whether the recent gains are sustainable as the market will have to face months of challenging economic data.