The overall lack of fireworks on earnings means boring is beautiful. And while supply chain and inflation conversations are improving, a significant consumer-driven earnings headwind remains.

There was little to read from overnight price action, with many markets struggling to find a consistent direction as active investors were reluctant to chase, given the uptick in political risk in Italy and ongoing energy concerns in Europe. But overall, the market seemed to be in derisking mode ahead of the ECB and uncertainty about Nord Stream 1

Kommersant reports comments from Russian President Putin that a second NS1 turbine is scheduled for maintenance from July 26 (not clear where this will occur). He also mentioned the possibility of additional volumes via Nord Stream 2 (complete but sanctioned) if launched.

Indeed, this is consistent with the view Russia will want to constrain volumes to keep prices high but does not gain anything (yet) from keeping NS1 at zero.


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With equities now positioning for peak inflation, I would remind folks what’s good for Main Street and what’s good for Wall Street aren’t necessarily the same. Mainly because the financial markets pull events forward by their very nature, whereas the public must wait to live reality in real-time, Main Street will have to experience an economic slowdown, a drop in employment and soaring energy bills this winter. Wall Street has already priced that and is now looking to the further horizon of the recovery back up the other side.


Oil is trading off intersession highs on the back of the weekly EIA report showing back-to-back higher gasoline inventories and typically read as an indicator of lower consumer demand. And even more within the context of a seasonal counter-trend. Gasoline demand usually is quite strong during the US mid-summer months.

Oil also received a boost after China Premier Li saying said on Tuesday that China will continue to pursue reopening and resumption of international travel. But as the headlines get fleshed out, I would keep expectations low as the reopening process will be extremely slow. For all the hoopla over quarantine easing on the mainland currently, there are only two non-stop flights between New York and Shanghai, and the price is over $10k per economy seat for the next six months.

China is always a big worry, but it has a solid energy security program and continues to buy crude through thick or thin. Although China is not consuming as much as it was, month-over-month demand is improving. So the oil market quickly looks through domestic Covid headlines after the initial shock. Still, the situation remains volatile and will keep traders on edge.


All eyes are on the ECB rate decision today as the market is split between a 25 and 50 bp hike. Hence the EURO should get a lift if the ECB follows through with the massive hike.

USD was trading soft Wednesday until Russia’s Lavrov announced their intentions of wartime escalation in Ukraine, which sent the EURUSD down around 50 bp. The drop was further compounded by headlines suggesting Italy’s Forza Italia would not vote for confidence. And the subsequent widening of the BTP-Bund spread proved to be the EURO’s undoing.

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