That is turning right into a outstanding day and it is solely half over.
Take a look at intraday emini futures:
The market was in an excellent temper forward of CPI however imploded on the information, falling 130 factors.
For one, the 3500 stage held in futures, so that may have attracted some patrons. There was additionally a WSJ report that did not float a 100 bps hike. The implied odds of which have drifted to 9% from 13% post-CPI.
There’s additionally speak of Russia-Ukraine negotiations however for me that is the largest stretch.
In brief, none of this provides as much as a justification for an infinite reversal in equities and FX. The euro fell as little as 0.9632 however is now buying and selling at 0.9763 — a 130 bounce.
So what explains it?
What I can inform you is that there is not any thriller headline behind it.
There is not any simple reply to clarify the market strikes. One factor I might spotlight is that sentiment proper now’s as unfavorable as it has been since 2008. There aren’t many bulls on the market and individuals are feeling ache. The liquidation trades in utilities and telecom present mother & pop puking shares, which is mostly an indication of the underside.
Alongside the identical traces, JPMorgan was speaking a couple of 5% decline in shares if CPI was sizzling as we speak. When critical individuals are speaking a couple of 5% each day fall, sentiment is terrible.
So the perfect you could possibly say is that that is one thing of a brief squeeze or these on the sidelines with money stepping in. The UK pension system additionally does not appear to be imploding so the ‘Fed will hike till one thing breaks’ crowd must transfer onto the following goal.
All that mentioned, I nonetheless do not love what’s taking place in bonds. US 2-year yields hit 4.50% and are again to 4.45% however that is nonetheless up 16 bps on the day. I do not assume we get a sustainable rally in shares till yields start turning decrease.
Additionally, I might have a lot most popular this sort of rally into the shut relatively than noon.
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