Asian stocks are in the green, while US and European equity futures are pushing higher. The dollar index is easing slightly, allowing some reprieve for gold and oil prices.

Although Thursday’s 7-year Treasury auction was met with a dull response again, yields are still some 10 basis points below last week’s peak. Moderating Treasury yields for the week has contributed to the relative calm in equity markets, with the VIX index now back in line with its long-term average around 20.

Steps to normality

Market risk sentiment was buoyed by the lower-than-expected US weekly initial jobs claims, while continuing claims dropped below the 4 million mark for the first time since the pandemic broke out. US stocks also reacted positively Thursday to President Biden’s upward revision to his ambitious vaccination target, which now aims to administer 200 million doses by the end of April.

Markets have shown that investors’ optimism is predicated on the vaccine’s rollout reaching more of the population, forming the basis for the expected economic recovery.

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The rotation into cyclically-sensitive counters are testament to such hopes, while the euro’s declines against its major peers are testament to persisting concerns over the snags in the EU’s vaccination efforts.

Financial stocks are set to see another boost when US markets open today, having been the best-performing sector on the S&P 500 on Thursday, after the Fed announced plans to ease up on the pandemic-induced restrictions over US banks’ dividend raises and share buybacks. This presents yet another sign that the worst of the pandemic is behind us, as the financial sector takes another significant stride back towards the world we once knew.

Barring any negative surprises, the Dow Jones index is set to erase its mid-week declines and avoid posting back-to-back weekly declines for the first time this year.

US personal income and spending prints to influence risk appetite

Investors will be monitoring the February US personal income and spending data due to be released later today. Noting that this print is sandwiched between late December’s $600 stimulus checks and the $1400 payments just approved this month, both personal income and spending levels for February are expected to register declines.

A better-than-expected reading may help ensure that US equities go into the weekend on a positive note.

Market participants must stay on their toes

Still, a fresh major catalyst is needed in order for risk assets to roar higher.

In the interim, market participants will just have to continue contending with major cross-currents affecting risk appetite. From signs that Covid-19 cases are making a resurgence globally, to simmering US-China tensions, amid the shifting expectations for the Fed’s policy outlook, the relative calm in markets could yet be upended by the realization of such risks.

 

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