Daily Market Color

Rally in Oil Prices Boosts Investor Sentiment

US stocks are opening the week higher while Treasuries rates are moving up across the curve as higher oil prices has boosted investor appetite for risk assets.  Both WTI and Brent crude rallied close to 3% (up over 80% from Feb lows) off the back of continued supply disruptions in Nigeria and a bullish report on the commodity from Goldman Sachs.  Goldman, which had previously been bearish on oil supply/demand fundamentals, said “the physical rebalancing of the oil market has finally started”.  Goldman believes the market shifted into a deficit in May, driven by “sustained strong demand as well as sharply declining production”.  Goldman’s new price forecast for the second half of 2016 is $50, up from a March estimate of $45.
The boost in oil prices overshadowed the market impact of weak Chinese economic data over the weekend.  China’s industrial production, retail sales and investment data all missed expectations, suggesting the world’s second largest economy still faces significant headwinds.  In the US, the earnings season is coming to a close, and the US economic data calendar is light to start the week.  The market gets some more significant releases starting tomorrow in the form of housing starts, CPI, and industrial production.  In the meantime, the new issue debt calendar looks relatively heavy, with a $20 billion+ multi-tranche debt issuance expected from Dell – helping to finance its EMC acquisition. 

All three major US stock indexes are currently up close to 1%, while Treasury yields and swap rates are 3-5 bps higher across all major maturities. 

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