If asking traders where stocks and oil would be trading one day after a weekend in which the Doha OPEC meeting resulted in a spectacular failure, few if any would have said the S&P would be over 2,100, WTI would be back over $40 and the VIX would be about to drop to 12 and yet that is precisely where the the S&P500 is set to open today, hitting Goldman’s year end target 8 months early, and oblivious of the latest batch of poor earnings news, this time from Intel and Netflix, both of which are sharply down overnight. We expect that after taking out any 2,100 stops, the S&P will then make a solid effort to take out all time highs, now just over 1% away.

Instead of these fundamental drivers, the market is focusing on the possibility that Japan may unleash more stimulus in the aftermath of this weekend’s massive quake, which has pushed the USDJPY to 109.40 in the overnight session, wiping out about 160 pips of losses in two days. Toshihiko Matsuno, chief strategist at SMBC Friend Securities in Tokyo, said that “we now have concerns that the economic impact from the Kumamoto earthquake could become larger, which is leading to expectations of further easing from the Bank of Japan.”

And that’s how every M7 and larger earthquake not only has a silver lining but is bullish for stocks.

Meanwhile OPEC watchers continue to focus on the Kuwait oil worker strike hoping it takes away enough production from the market over the next few days that the oil price jump despite the Doha meeting failure, is justified.

As a result, global stocks climbed to a four-month high and emerging markets rallied as oil rose above $40 a barrel whie European equities were poised for their highest close since January as financial reports boosted companies including Danone SA and L’Oreal SA. The Stoxx Europe 600 Index jumped 1.3% after energy shares snapped a two-day decline, tracking oil higher.

S&P 500 Index futures rose 0.5%, indicating U.S. equities will extend gains after reaching their highest level since Dec. 1.

It wasn’t just risk assets as gold jumped while silver surged to its strongest level since June. The metal has gained 21 percent this year, and is the best performing asset in the Bloomberg Commodity Index. And even as Treasury markets sold off modestly (the 10Y is still below 1.80%), Japan’s long TSY yields continued to make fresh record lows following strong demand for 5 year paper.

As Michael McCarthy, chief market strategist at CMC Markets in Sydney, summarized the market action: “There appears to be less skepticism, with investors shrugging off oil’s losses overnight. Pessimism in analysts’ expectations in the lead-up to the U.S. earnings season appears overdone. There’s room for an upward surprise.”

On the calendar today, we have data on housing starts in March, with economists estimating a drop from the previous month. Goldman Sachs’s earnings follow results from JPMorgan Chase & Co.,
Bank of America Corp. and Morgan Stanley that helped fuel a rally in

Where markets are now:

  • S&P 500 futures up 0.5% to 2098
  • Stoxx 600 up 1.2% to 348
  • FTSE 100 up 0.5% to 6387
  • DAX up 1.8% to 10304
  • German 10Yr yield up 2bps to 0.18%
  • Italian 10Yr yield up 5bps to 1.4%
  • Spanish 10Yr yield up 4bps to 1.53%
  • S&P GSCI Index up 0.6% to 337.7
  • MSCI Asia Pacific up 1.8% to 133
  • Nikkei 225 up 3.7% to 16874
  • Hang Seng up 1.3% to 21436
  • Shanghai Composite up 0.3% to 3043
  • S&P/ASX 200 up 1% to 5189
  • US 10-yr yield up 2bps to 1.79%
  • Dollar Index down 0.13% to 94.37
  • WTI Crude futures up 1% to $40.19
  • Brent Futures up 1.2% to $43.41
  • Gold spot up 0.8% to $1,242
  • Silver spot up 2.6% to $16.65




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