Model Signal Alert

August 30, 2023

What a bounce-fest we had, both in bonds and equities. All related to lower-than-expected JOLTS numbers and weaker Conference Board Consumer Confidence prints.

JOLTS slipped to 8827k in July from a revised down of 9165k prior. The quits rate fell to 2.3%, back to pre-pandemic levels last seen in early 2021. Hirings slowed, too. Meanwhile, Conference Board Consumer Confidence also disappointed: 106.1 August vs. 116 expected, 114 revised down prior. Both the present situation and six-month ahead expectations fell, though the former's plunge to 144.8 and its downside prior revision suggest higher fuel prices might be the catalyst.

This has built dovish risks amount for Friday's NFP report, though the aggressive retracement across US yields may limit the impact of any dovish surprise.

This morning, German state CPI release showed a surprise acceleration, with headline CPI rising 5.9% in August, up 0.1ppt from July, sending bund futures lower and denting risk sentiment. If this move is repeated at a national level, headline inflation would edge rise from 6.2% YoY in July to 6.3% in August, well above consensus of 6.0%. This would sharply raise the chance of another ECB rate hike in September (45% probability priced).

Elsewhere, Australian inflation came in under expectations today. The market continues to expect a hold at RBA’s decision next week, with the softer inflation prints shaving some hike premium from the end of the year. 

ZT (US 2-yr) bounced nicely but is holding below 20 ema.

Despite the rally, November kept its hike probability with still a cumulative 50% priced into the next 2 FOMC meetings.

ES jumped past the 50-ema resistance. The bad news is good news, it seems, at least for now.

Russell equally leapt higher now, trading just below the 50 ema.

DXY, I flagged the overbought conditions, which firmly came into play yesterday. Now holding above 200 ema.

Let’s see what else has been flagging as of the close of business yesterday.