US equities were stronger ThursdayS&P up 1.0%. US bonds rallied, 10yr yields down 15bps to 2.87% and 2yrs to 14bps after weak US data. Oil closed down 2.6%. but off the overnight lows

The US employment situation is turning ugly as US continuing claims spiked higher, up to 1384k from 1331k the week prior. There are increasing reports of companies putting in place hiring freezes, if not moving to layoffs. Ford is reporting it has “too many staff.”

Meanwhile, Philadelphia Fed manufacturing at -12.3 has retraced half of the post-pandemic recovery.

But it is still a case of bad data is still good news for stocks and very much highlights the disconnect between Wall Street and Main Street.


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What’s good for Main Street and what’s good for Wall Street aren’t necessarily the same thing. Mainly because the financial markets, by their very nature, pull events forward, whereas the public lives the economic slowdown in real-time.

By slashing staff, companies can preserve profits, and with the uptick in unemployment, the Fed is forced to reverse course with rate cuts supporting equity multiples. Eventually, the pendulum will swing again in favour of Wall Street over Main Street.


Oil is struggling amid concerns of increasing supply and a drop in gasoline demand in the US.

A counter-seasonal buyer’s strike at the pump sees the US peak driving season running below the same week in 2020 as higher fuel prices hit consumption.

Production in Libya has risen to 700k bbl/day and is expected to return to 1.2mn bbl/day in a week after restrictions on the country’s exports were lifted.

Also, US Deputy Treasury Secretary Adeyemo said a price cap on Russian oil should go into effect by December, allowing Russian energy to flow into the market.

Meanwhile, the Asian Development Bank lowered its GDP growth for China by 0.5pp, to 4.6% for 2022, due to the impact of the country’s Zero Covid policy, which added further concerns on slower demand growth.


The ECB removed negative rates in one go, but the market, in the end, traders saw a dovish 50bp hike flashing across their screens. The terminal rate price remains at just below 1.5%, but that level seems vulnerable to the downside risks to growth that the ECB sees.

Considering early comments from ECB President Lagarde, it sounds like yesterday’s 50bp hike was opportunistic. In the background, the hawks were squawking, “Could you get a jumbo rate hikes done while there’s still a chance?” The ECB has long wanted to get out of negative rates and even more so with the EURUSD breaching parity.

As we suggested yesterday, many macro traders went into the ECB decision with the plan to sell into EURUSD rallies which happened right on our 1.0270-80 sell order as the post ECB price action played out precisely as scripted.

Rates traders were split going into the ECB, so when the 50bp decision was announced, the market immediately priced an excellent probability for 75bp in September, which boosted the euro. However, market sentiment changed towards the dovish side when ECB President Lagarde noted that the previous guidance for 50bp was ‘not applicable’ anymore, driving EURUSD back to below where it had started.


Gold is higher on softer US yields after weaker US data, especially on the employment claims, marginally increased the odds of a Fed pause. Ultimately, we expect gold to trend higher against the backdrop of slowing growth, rising recession risks, and as the Fed shifts back towards a more accommodative policy stance.

Originally published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT