Crude oil’s the relief rally

Oil retreat continues

Oil prices continued falling overnight, powering the equity relief rally on Wall Street which has extended into Asia this morning. New York Empire State Manufacturing Index fell into negative territory overnight, and US PPI came in ever so slightly under expectations. In a market hungry for reasons to buy the dip, that was enough to pull back on hawkish FOMC expectations from their policy decision tonight. That, of course, is complete nonsense, and I believe the oil retreat is the underlying reason. That too is built on very marginal foundations, on the hopes that Ukraine-Russian negotiations will yield fruit. If nothing else, it shows that the pre-programmed need to buy the dip in equities is alive and well.


Helping things along in Asia today is news that China covid cases have fallen to around 3,000, and, most notably, the government has shortened post-infection isolation requirements. That is providing more than a little solace to embattled Chinese stocks today which has taken a beating on soaring oil and commodity prices, delisting fears, and most especially, growth concerns around escalating lockdowns.


Whether markets are now reaching a point of pricing in Ukraine, is too early to say. The perpetual mega-bull gnomes of the stock market will say yes, but if we take the example of China tech stocks over the last six months, that light at the end of the tunnel has sadly been the train coming the other way each time. The stagflationary wave emanating from the Ukraine conflict will continue rolling over the world long after the conflict concludes one way or the other, and with its impact on growth, it is hard to see it being a conducive environment for equity markets. It will be interesting to see if the earnings downgrades begin at the next quarterly earnings cycle.


The Asian data calendar is light today and doesn’t really matter anyway, because all roads lead to the Federal Reserve and the FOMC’s latest policy decision. All the noise around a Russian default on bond payments today is just that, noise. In a market conditioned to thinking in trillions these days, what’s a few hundred billion? What will matter will be how hawkish, or not, the FOMC is around future rate hikes after they raise rates by 0.25% tonight. The FOMC rate decision and dot plot have been analysis-paralysed to death, I prefer to wait for the decision and statement to emerge, and then play what is in front of me. The FOMC may blink on Ukraine disruptions, or they may not, and I know not.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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