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A shift in market sentiment – but will it last?

A shift in market sentiment –  but will it last?

The last two days of the month brought renewed optimism, although rate hikes expectations increased after the Fed’s latest statements.

The market’s rebound could be due to purchases by those institutional investors who have maintained for days that the stock markets were already offering plenty of buying opportunities.

Now the question is whether this was just a small relief rally after such a strong sell-off - the biggest monthly decline in years - or whether equity markets are stabilizing.

One factor that negatively affects economies is the rise in energy prices.

Oil prices remain on the upside at levels very close to $89/barrel. Most industry analysts believe this positive trend will continue ahead of Wednesday's OPEC and Russia meeting. They expect the group to maintain the production increase policy at 400k barrels per day, although some countries have had trouble meeting their quotas since this position was adopted in August. This has resulted in tight inventories due to the strong post-pandemic recovery. At the same time, it was one of the main reasons why crude oil rose in the last two months. Geopolitical tensions – the Ukraine- Russia conflict – also influenced oil prices.

In addition, weekly data from Baker Hughes revealed that US drillers continued to add oil rigs at a slow pace, despite tight supply and higher prices that increase economic incentives to support production.

Technically, oil has been stalling at high levels for three days without giving any sign of reversing the trend. Above the recent high at 88.81, it would not encounter any obstacles until the 100 zone. The daily RSI showed some sign of overbought but without yet reaching bearish divergences.

Sources: Bloomberg, Reuters.

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.

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