As commods gave way under mounting recession pressure. Oil:
Metals too. Copper is below key support:
Miners have enormous double tops in place:
Everything else held on. EM stocks:
Junk:
Yields lifted a little:
Stocks too:
Watch oil. The Fed has to get it down a lot more before it can pivot into what is clearly now a building recessionary environment.
Anything below $80 Brent probably puts a pivot in the game though I think it would be better off below $60. It will take more time yet to work through Ukraine supply-side frictions so the moment the Fed turns it’s going to run again.
Of course, if we get a credit event first then market reflexivity will take over and we may end up with oil below $50.
Gas and coal are still going up after the recent US LNG plant explosion and Russia starting to squeeze Nord Stream 1. They can only be brought to heal by crashing demand so there’s more work for the Fed there too.
The bearish price action is not done yet. But oil on Friday is indicative that the fat lady is warming her chords.
Given the AUD is a commodity currency and the last leg of this bear market leading into a global recession by definition must deflate commodities, I still see it going lower.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
