Stefano Sciacca

Fri, Dec 6

Macro Data & Market Reaction Paradox

We have said many times how “mad” are the times in which we are living. We have already raised the negative interest rate environment contradictory nature and economic unsustainability. This week we are going to present how the market “fundamentally” reacts to specific macro data points that are still perceived as “market movers”. 

Before that, I will give you a quick market wrap-up of the last two weeks. December kicked off with two percentage-wise insignificant, but conceptually crucial price corrections. Both due to Donald Trump’s already known over exuberant attempt to once again bully a trade deal with threats on further tariffs if no agreement will be reached any time soon. The general perception is of increased uncertainty around the infamous “Phase One Deal”. What caught the attention of many practitioners was the almost immediate market meltdown (probably driven by algos and passive investments) which confirmed how market participants’ readiness to “short the high” and “buy the dip”. 

Back to the macro data releases and consequent market reaction paradigm, we are seeing a newly shaping pattern. Firstly, there are few extremely significant data points that the Fed and the market participants closely watch. Unemployment Rate, Non-Farm Payrolls, ISM Producers Manufacturing Index, Consumer Credit Data among the most notorious ones. How are they doing? Interestingly, this week we have seen the ADP Employment Change suggesting 67,000 jobs added in the US Private Sector in November (against a consensus of 140,000), being the second lowest figure over the past decade.

On a similar note, the Continuing Jobless Claims are also suggested a softening job market as a dramatic spike (1693K vs Consensus at 1650K) happened over the last month.

The ISM PMI came out weaker than expected with a 48.1 November level (vs consensus at 49.2). The last one of several misses confirmed the US manufacturing sector is struggling.

While many experts might argue the poor correlation between these datapoints and the Non-Farm Payrolls - closely followed and publicly mentioned by the Fed - the general picture should suggest a physiological economic slowdown especially in what seemed to be the only and unbeatable strength of the US economy: the job market. 

That said, the paradox consists in bullish market reactions following “ugly” employment data and vice versa.  We have now seen this trade off where the markets price-in the higher likelihood of an interest rate cut, on the back of bad employment, manufacturing or “fundamentally” crucial data, whilst investors become more “hawkish” following a positive data release and short the market. This simply happens because “the everything bubble” survives on hopeful prolonged liquidity injections and trade war developments, while other important matters (i.e. Hong Kong, Lebanon…) are being unmercifully ignored. The global economy is now like-never-before liquidity and “free-money” addicted and as every addict reacts, cannot stop asking for more and more, it is trapped, and shareholders love it.

What if interest rates will eventually be hiked? The economy would just dramatically collapse due to the huge pile of outstanding debt causing the failure of both the banking system, the housing market and the most creditworthy corporations (mainly the biggest and sector leaders). 


Next week our macro spotlight will be on?



  • GDP Growth Rate – Japan
  • Balance of Trade – Germany




  • NAB Business Confidence – Australia
  • Inflation Rate – China
  • Balance of Trade – UK
  • Industrial Production – UK
  • Manufacturing Production – UK
  • GDP Growth Rate – UK
  • ZEW Economic Sentiment – Germany
  • ZEW Economic Sentiment – Eurozone




  • Vehicles Sales – China
  • Inflation Rate – US
  • EIA Crude Oil and Gasoline Stock Change - US




  • Machinery Orders – Japan
  • Inflation Rate – Germany
  • Inflation Rate – France
  • Industrial Production – Eurozone
  • Marginal Lending Rate – Eurozone
  • ECB Interest Rate Decision
  • Continuing and Initial Jobless Claims - US



  • Industrial Production – Japan

  • Outstanding Loan Growth – China

  • Retail Sales - US


Chart of the week

As reported many times, one of the main consequences of the continued extremely low interest rate policy is the tightening net interest income from core banking business activities leading to stricter (higher) credit standards and credit concentration (increased default risk).


Fact of the week

The number of fintech start-ups founded this year was only 12 versus 390 in 2015 


Quote of the week

“Ongoing trade tensions and geopolitical uncertainties are contributing to a slowdown in world trade growth, which has more than halved since last year. This has in turned depressed global growth to its lowest level since the great financial crisis,” 

Christine Lagarde, newly elected ECB Governor