Last week featured a hefty set of tier-one data and policy events, and I am sure most were glad when the closing bell struck, given the number of positions caught offside.

And while far from unwavering, the keen takeaways were broadly affirmational of a healthier macro backdrop.

ECI and average hourly earnings were relatively tame, yet the JOLTS data, jobless claims and certainly nonfarm payrolls distinctly indicate there’s still unrelenting demand for American labour.

The Fed is entering the fine-tuning mode, not to mention both the ECB and BOE endgames are becoming more visible; hence central banks are a lot less economically threatening these days.


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And when you toss it all into the macro mash bowl, we are still riding the January wave that had the markings of a soft landing trade.

And as we start the week, there’s no significant revision to that trade, and I would not be surprised to see S&P 500 chop higher to and above 4300, as the FED is much less intimidating.

The one “tap the brake” caveat: I’m curious to see what post-payrolls Fedspeak brings us, but it seems pretty straightforward; they want to get to 5% and let the cake bake.

To be sure, this is all a reflection of the ongoing fundamental progress that we know: incontrovertibly lower US inflation, a gushing China reopening and a critical reduction in European recession odds.


From weekend chats, traders are very unsure about how the product’s price cap regulation will work, and its impact on the different grades, so many oil traders were sitting on their hands last week waiting to see that play out. And it could have explained some of the craziness, given the lack of price discovery. So, undoubtedly, we should see another uptick in volatility this week for no other reason than the product price impact unknowns from the EU cap.

While bullish expectations have led the markets, last week was the time for prices to catch down to the reality of what is happening on the ground.

That glaring product inventory build-up in the US was a reality check. It triggered a rather big and unexpected air pocket, especially given the markets were trading soft landing and moderate Q1 China reopening impulse.

In addition, Russian oil has continued to find a home in India and China, just like the EU and G-7 planned, keeping more Brent and WTI barrels available for global consumption at lower clearing prices. Now the challenge is whether the allies can work the same price cap magic for products as they did for Brent; we will quickly find out in the following days and weeks.

Published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT