It was a tale of two tapes overnight as the positive vibes from an earlier-than-expected China reopening narrative and a dovish RBA were unwound as US ISM andJOLTS data in the US came out stronger than expected, casting doubts on the anticipated Fed pivot.

The quality of the October rally was on display, with many single stock air pockets lower on disappointing results, while more robust US economic data did not help matters.

Markets have been reacting to dovish expectations for Wednesday’s FOMC, which I have argued are wrong. Based on US economic data out Tuesday (JOLTS, manufacturing PMI), there is no way for the Federal Reserve to turn dovish. The labour market is still strong, and manufacturing is still (slightly) expanding.

Even if we see the Fed slow the pace of hikes, they are still hiking, the policy is still highly restrictive, front-end rates will still get worse before they get better, and risks of higher terminal rates are still very acute. Sure we could see a knee jerk higher on stocks via a lower Fed glide path, but will it be sustainable?


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While oil is still struggling to break higher to further demand weakness and more evidence of withering macro fundamentals in Europe and Asia, oil bulls are hoping longs will bear fruit fuelled by a social media post circulated about the formation of a reopening committee in China.

Still, with the EU embargo in the market headlights now, implying the oil complex may lose anywhere between 1-3 million barrels per day, oil could power higher when the embargo kicks in and/or any nod from China that an earlier-than-expected China reopening is on the cards.


Although unlikely to trigger a sustained USD decline, the notion of a ‘Fed pivot’ has seen the positive dollar impulse from US rates fade over the past month. Until an actual  Fed pivot and global growth stars align, it may be too early to give up on the greenback.

Published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT