While the market is still trading short-term impulses, we are likely reaching peak Fed and inflation. That is coincident with the equity market running peak bearishness.
Remember that Fed fear has been the root cause of equity unrest.
But never underestimate the purchasing power of the US consumer as the solid retail sales print pushes back against the US recessionary fat tail and pricing out China's extreme left tail (lockdown) should meld to support global equity markets, with the reopening of supply chains easing inflation concerns, at least over the short term.
That has allowed asset managers to pick through the wreckage of a 15% decline in the S&P in just four weeks.
Stability is most necessary for all the fundamental factors that could be cited as a trigger to buy back in. And there are tentative signs of that happening.
Oil
While optimism around Chinese oil demand prevailed yesterday, the EU disagreeing on the makeup of a Russian embargo, could win today. The "special" summit on 30-31 May is the next opportunity to agree on such an embargo, so the lack of an EU Russian oil ban could limit top side ambition until then.
Beyond the near term, less awful news on China offers a nip in the tail in the form of much higher oil demand and prices, which is positive for producers, but harmful for consumers' sentiment.
And with unaffordable prices at the pump, which are a by-product of demand exceeding supply, the Fed will be on a mission to raise rates to at least moderate the demand side of the economy, which could eventually filter through to a mild form of demand destruction where there could be a buyer strike rather than buyers splurge over US peak driving season.
Forex
The IMF's decision to raise the weighting of the RMB in its SDR basket by 1.36 ppt indicates that the RMB has steadily gained attraction as a global currency since the 2015 SDR review. And could encourage more reserve managers to do the same given the current weakness as the country is on the cusp of reopening.
The reopening plans can, of course, be knocked off track. Still, a renewed willingness to reopen reflects fewer new COVID cases, which should open the door to more stimulus and support China's equity market. And importantly, for the yuan, it should attract capital inflows.
Pricing out the extreme left tail for China should support global equity markets in the near term and reduce safe-haven demand in the FX Asia basket.