Read on the Trading Floor - 05 Oct 2023
Today’s focus… more questions than answers on why oil had a record drop, US labour market "normalization" or just confusion, Liz signing her budget and more from the conservative party conference...
Theme 1: What Happened Oil...?
All good rallies must come to an end, after a 3-month rally it was simply positioning, the weight of consensus? Global data sliding towards recession? OPEC fears? Higher for longer? Real rate gravity finally taking hold?... all of these points have been present for most of September and into early October so why yesterday?
The EIA report showed US gasoline demand at a 25yr low whilst the trucking industry in the US is being smashed by the UAW strike ... "The UAW strike is having a massive impact on trucking volumes. I haven't seen this big of a drop in trucking contract volumes outside of a holiday since the start of COVID. Contracted load volumes are down over 12%." (source @freightalley via
#294)Some further reading of note that our users have been focused on...
oilprice.com - Oil Prices Attempt To Recover After The Bullish Bubble Appears To Burst
- - Confounding Signals From Bonds, Oil Markets
- (Epsilson Theory) - One Less Vulnerability
On a more positive footing for CL1...
oilprice.com - Goldman Sachs: China's Demand For Oil And Copper Is Booming
ING Commodities - Oil prices to remain well supported
Theme 2: US labour data ... ISM vs Jolts vs ADP vs IJC
As we wait in a vacuum this afternoon for tomorrow's NFP / AHE / UER data set, the market is still struggling to know which indicator is "correct". Any recession is based on a weakening labour market, something participants know full well, after sitting and waiting for the labour market to break over the past 10months and slow the Fed's rapid hiking cycle, will it come in Q4?
ISM Manufacturing Employment Index stronger at 51.2 vs consensus 48.3
Jolts 9.61m vs exp 8.8m
ADP 89k headline - drop down from previous print of 180k and consensus expectations of 153k (Advisor Perspectives, ZeroHedge)
Strikes / Seasonal labour change... Some excellent charts from Daily Chart Book ...
ADP at levels not seen in 2years, however it is hard to compare "like for like" figures given the recent ADP methodology change
ISM Services Employment Index dripping lower to 53.4 vs previous 54.7
Initial jobless claims near record lows .... 207k with continuing jobless claims 1664k vs consensus 1675k. Still yet to lead UER higher...
ZeroHedge - "one does have to wonder just what world we are living in when ADP (and BLS) jobs data has been trending weaker over the last few months, and yet initial jobless claims has been trending not just stronger, but towards its strongest on record...Which pill do you want to swallow?"
Source Bloomberg, ZeroHedge
What does it all mean for NFP tomorrow .... not a lot ... #nonethewiser
touched on this topic today in FX Poetry - Two Faced: "My first thought was to determine what type of relationship both numbers have with the NFP data which is set for release tomorrow morning. I ran some simple regressions for the past year and as it happens, the R2 between NFP and ADP is 0.5 while between NFP and JOLTS it is 0.65. I do find it interesting that the JOLTS data, which has a bigger lag built in, has the stronger relationship, but I also remember that ADP changed its model and formulation and since they have done that, the fit to NFP is far less impressive."Theme 3: Pritti and Nigel putting the P in P-arty
No HS2 north of Birmingham but it will make its way to Euston rather than a London suburb.
A Hunt giveaway budget looks more likely to appear in the spring than autumn. Despite calls for tax cuts, the leadership of the party is more worried about refueling inflation.
Rumours that Liz has been signing copies of her infamous budget after once again making the case for radical tax cuts. She delivered an address on the fringes of the conference at a "British growth rally"
MP's already campaigning like they're in opposition ... from Braverman (tsunami of migrants), Patel attacking mainstream media in support of GB News .... they’re positioning themselves for a post Sunak world
... Once seen, you will never forget... Nigel Farage and Priti Patel doing their best impersonations of Frankie Valli... Telegraph
Soon to join the Harkster library, The Rest is Politics has delivered an excellent podcast review of the conference (Can the Tory Party be saved?)...
Some other reading of note
FT - Sunak should learn from his predecessors about remaking Tory party
Politico - London Playbook PM: Long-term decisions, short term politics
ㅤㅤㅤ
👍 If you found this piece helpful, please give it a ‘Like’ at the bottom of the page. It only takes a few seconds and helps our free commentary reach a wider audience.
- - JOLTS & Japan
FT - Generation Rent: tenant woes widen role of ‘build-to-rent’ investors
Unchained - SBF Trial Day 2 Recap
Axios - House GOP quietly panics over how to escape its self-inflicted mess
- - Finally Putting My Money Where My Mouth Is!
Have a great day and keep smiling ㅤㅤㅤ
Stay informed throughout the day with our new commentary feed (‘Intraday Market Colour’) highlighting key notes, topics du jour, and HarksterHQ’s market updates around key data points and headlines.
Available on the Harkster Research Platform.
ㅤㅤㅤ
ㅤㅤㅤ
ㅤㅤㅤ
The information provided in this post is for general information purposes only. No information, materials, services, and other content provided in this post constitute solicitation, recommendation, endorsement or any financial, investment, or other advice. Seek independent professional consultation in the form of legal, financial, and fiscal advice before making any investment decision.
thanks for the shout out!