But oil broke, a distinct break of pattern with just about everything:

Weirdly, metals lifted. If oil keeps falling then this won’t last:

Miners were flat even as iron ore tanks:

EM popped:

But not junk:

The curve is sinking ever deeper into the red:

And stocks don’t care:

The oil breakdown was one of my major preconditions for seeing a Fed pivot so this supports the risk asset rally. Is it enough to justify it?  The Market Ear has more on the oil break:

Oil – say goodbye to 200 day moving average Oil continues sliding and is at the lowest levels since Russia invaded Ukraine. We stick to our non consensus view on oil outlined in late June in our thematic email “Oil – last man standing?” (premium subs only, sign up here). Note black gold is now “well” below the 200 day moving average. We saw it dip below the longer term moving average late last year, but back then the world wasn’t dealing with a looming recession…First real support is the longer term trend line a few bucks lower. Refinitiv

Oil – starting to price the recession? If not even the geopolitical situation can’t help soggy oil, then maybe we should start thinking about what happens should we start pricing the recession risk component in oil? Refinitiv

Oil and recessions – schhh Recall the oil vs recession chart we presented a few weeks back? Barclays

This demand is cratering US gasoline demand ain’t looking pretty. MPAS

Oil – what about “jets”? US jet fuel supplied moving lower…As MPAS writes: “…still unfriendly skies despite TSA turnstile stats and pictures of packed airports”. MPAS

What about China’s thirst for oil? Demand is falling quickly… GS market strats/Bloomberg

Oil – losing the inflation “connection” US 10 year breakevens vs oil chart has moved in opposite directions lately. Oil discounting stagflation, or just poor liquidity and no interest in oil causing “trouble”? Refinitiv

Oil – refusing to buy the furious bounce Remember when oil was the only asset refusing to sell off? Things have changed drastically since the local equities low. SPX only up, oil only down. Is oil trying to tell us something about the economy, or? Refinitiv

Not all vols have collapsed since June equity lows Oil volatility, OVX, has moved higher since June lows. Looks like oil and equity vols are discounting different recession scenarios at the moment. Refinitiv

The “fast market” economy: oil edition Several trips to the -20% decline line for Brent crude oil this year. Bloomberg

No bears around On average, investment banks and oil market forecasters are predicting an average Brent price of $112/b this year (as of mid-July) S&P Global

The problem for the Fed is that this is easing financial conditions for households and businesses which will lift inflation even as falling oil pressures it lower.

Hence I still see the Fed tightening and, more importantly, much further than anybody else, supporting DXY.

So I am still struggling to find a bull case for AUD, especially since local data is already falling away fast.

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Houses and Holes

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.

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