What is Driving Sentiment this Week besides Presidential Politics?……

The markets are enjoying a bull run in March, but it is largely unrelated to the jockeying for position among GOP and Democratic presidential frontrunners. The onstage antics of candidates like Hillary Clinton, Bernie Sanders, Donald Trump, Marco Rubio, John Kasich and Ted Cruz make for an interesting spectacle but that is not what is driving equities, commodities, indices or currencies at this juncture. In fact, bullish sentiment on Wall Street is largely the result of positive US PMI data, a mini-stabilisation in the price of crude oil, and non-farm payroll numbers for February. These are a handful of the many factors which are driving sentiment on US major averages. Let’s explore some of the factors impacting on asset prices, and then extrapolate to currencies, commodities, indices and stocks. In January 2016, total non-farm payrolls were revised upwards to 172,000, but in February 2016 the number was recorded at 242,000. Major gains in employment numbers were seen across the board, notably healthcare, retail trade, drinking places and food services. The sector that experienced the sharpest losses in employment numbers was mining.

In international news, oil prices are now trading at a 2-month high with Brent crude oil trading at $38.72 per barrel on the ICE, and WTI crude oil trading at $35.92 per barrel on the Nymex. The increases in the price of crude oil are especially important given that they have reversed their downward trend when they were trading between $25 and $30 per barrel in January. The positive sentiment in crude oil has come about with pledges by OPEC and non-OPEC countries to maintain output at January levels, despite protestations to the contrary by countries like Saudi Arabia and Iran. Crude oil price rises are seen as imperative to helping central banks achieve their inflation targeted rates. The European Central Bank, the Bank of England and the Federal Reserve Bank are all targeting an inflation rate of 2% per annum. Steady price rises are essential to keeping economic growth alive and preventing the ill effects of deflation and economic contractions. Crude oil remains the most important component of global economic prosperity, since major averages are closely correlated with crude oil price movements.