US stocks slid, and the price of Brent crude touched its lowest since January after robust economic data revived concerns that the Federal Reserve may need to hike borrowing costs much higher to tame inflation.

Markets are getting off to a very rocky start this week, with sentiment still reflecting the solid beat on the US services ISM reported Monday and the hiking pressure that keeps on the Fed.

Adding another Fed hike or two to the rates curve is undoubtedly a significant shocker for those banking on the US economic demise hence a Fed pivot. Any hopes that the Fed would turn more dovish in the months ahead have been dashed significantly as the vast US services industry is where sticky inflation hangs out.

Ultimately, it matters more where the Fed ends up than how fast they get there. The tighter-than-expected labour market combined with the boisterous business sentiment index gives more clout to the + 5 % terminal camp. As a result, short sellers are back out on force thanks to the concern about further rate hikes.


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The curse of the quiet data week has stirred the ghost of Christmas meltdown past, while thoughts of the Grinch who stole Christmas are beginning to resonate around global trading rooms. Indeed, a nasty case of macro discomforts has returned for the holiday season as the Fed may have no alternative than to dash the holiday spirit on Main Street and slow the economy down.


WTI and Brent crude oil prices got crushed, with the US benchmark settling at its lowest level in nearly a year. Oil prices are feeling the pressure from broader market selloff due to heightened recessionary concerns compounded by worries about more aggressive monetary tightening by the Federal Reserve might trigger that downturn sooner rather than later.

Also, oil markets will need to navigate a crater-filled China reopening path. As far as oil traders should be concerned, Hong Kong and Taiwan’s reopening are most relevant for Mainland China. And their experience suggests that cases are likely to skyrocket upon reopening, which means mobility declines sharply as cases rise, which will significantly delay any meaningful price impact, possibly well into the New Year.

OPEC Secretary General Haitham al-Ghais is on record recently saying the organization stands ready to intervene for the benefit of oil markets, which may be something worth keeping an eye on.

Published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT