Broader indices are off the lows, but conviction remains near zero. The rebound was mainly due to supply hedging by crowded shorts and a slight rebound in higher beta technology as bond yields fell.

The growing risk of a global recession is a priority for markets, but as the process towards recession shortens, concerns about growth are increasing, leaving equities vulnerable to the negative feedback loop.

What would typically be met with a shrug, increasingly weak data can now amplify the downward move. And with few positive developments lately, the market remains vulnerable to the mainstream narrative, with the negative feedback loop only intensifying over the past few sessions.


China is easing lockdowns and mobility restrictions in Shanghai and considering more widespread easing, driving up oil prices. Although Brent is off the weekly highs, it is still well above the weekly lows.

The growing threat of disruption to Russian crude exports continues to help oil sentiment, despite opposition to an EU-wide embargo from Hungary and a handful of other EU member states. the EU who remain heavily dependent on Russia.

News of unrest in Libya serves as a reminder of supply-side risks, but Russia remains a focus.

And while larger than expected declines in US crude oil and gasoline inventories initially had limited impact, this week’s US inventory data is still bullish for oil.

But if U.S. growth data continues to deteriorate, oil prices could get caught in the negative stock market feedback loop.


Gold rose as US yields tumble and the US dollar loses some of its safe-haven appeal due to weak US growth data.

Gold market dynamics changed for the first time in several months. Bullion prices have started to break free from the tendency to sell into economic destruction, like other commodities, and now appear to be acting as a safe haven. With gold performing well as stocks fall, bullion could surprise a short market if it can sustain this trend.

Friday Forex Madness

The safe haven dollar is not so safe these days.

The US Dollar is weaker as the curve predicts less upside, and some are placing greater weight on the likelihood of a recession.

Thus, the focus shifted from not fighting the Fed to a policy error, with upsides priced along the US curve due to poor data and higher recession risks. The Fed is leading the bull cycle, so the USD will also be hit first, as bulls are repriced lower.

Technical data from the rates market also plays a role, with 10-year yields capping at nearly 3%. The lower end of the range is now 2.70%, so some in the market believe there may be a downside test of this level; that’s why gold has found a little shine.

The stabilization of China would be a huge weight on the shoulders of the equity market. A few well-positioned areas could experience a reversal if there starts to be better news from China.

On the G10 side, the AUD has room for improvement if China manages to stabilize in the short term (the NZD and the CAD should benefit from this).

The JPY remains a long in a recessionary environment, as does the CHF on SNB intervention talks. The ECB is raising rates in a perfect storm that will no doubt widen peripheral spreads, making lower EURCHF screens brighter.

In Asia FX, the periphery would benefit from any easing of Chinese concerns. Consequently, there has been some selling interest across $Asia pairing longs and initiating tactical shorts on China’s easing impulse. I think the undervalued MYR could be an excellent rally candidate with the BNM already rising. And of course, the travel-sensitive THB is on track after the robust trade data, and a rebound in tourism will melt in to provide the BoT with the opportunity to raise rates to ward off imported inflation.

As we suggested during China’s re-opening rebound, this could turn the tide for YUAN; it apparently does as there has been less USD buying over the past few sessions, while longs have started to give way to strong momentum from domestic equities.

However, the drop is likely due to reports suggesting that Chinese Communist Party members should shed their overseas assets, which is likely contributing to the downdraft.

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