Mortgage originations for sub-760 credit scores hit a multi-year low in Q1

The Daily Shot: 20-May-24
The United States
The United Kingdom
Europe
China
Emerging Markets
Commodities
Energy
Equities
Credit
Global Developments
Food for Thought



 

The United States

1. Let’s begin with the housing market.
 
Housing starts and building permits were above last year’s levels in April, …
 

 

 
…. supported by single-family construction.
 

 

 
Multifamily activity remains depressed.
 

 
This seasonally adjusted chart illustrates the divergence between single-family and multifamily trends.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Homebuilder sentiment declined this month.
 

 
Source: NAHB   Read full article  
 
Builders are increasingly focused on rental units.
 
Source: @WSJ   Read full article  
 
Active listings are well below pre-pandemic levels in most metro areas.
 
Source: @WSJ   Read full article  
 
But existing home inventories are now above last year’s levels.
 
Source: Redfin  
 
More sellers are forced to cut prices to attract buyers.
 
Source: Redfin  
 
Housing demand has softened further this year.
 
Source: Redfin  
 
Mortgage originations for households with credit scores below 760 reached a multi-year low in the first quarter.
 
Source: Federal Reserve Bank of New York  

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2. The Conference Board’s US leading index declined again last month.
 

 
Here are the contributions.
 
Source: Wells Fargo Securities  
 
Based on historical precedent, the 6-month changes in the leading index suggest that the economy should be in recession.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
By the way, a majority of investors don’t expect a US recession over the next 12 months.
 
Source: BofA Global Research  

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3. US financial conditions continue to ease.
 

 
The market does not anticipate either a recession or a rebound in inflation.
 
Source: Simon White, Bloomberg Markets Live Blog  

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4. Total tax receipts as a percent of GDP are now at the low end of the historical range.
 
Source: Gavekal Research  


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The United Kingdom

1. Economists have upgraded their estimates for UK GDP growth this year.
 

 
2. Home price appreciation slowed in May.
 

 
3. Market-based inflation expectations are rising again.
 
h/t Nour Al Ali  
 
4. Here is a look at the Bank of England’s voting history and dissenting voices.
 
Source: ING  


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Europe

1. Here is a look at the euro-area CPI contributions (month-over-month and year-over-year).
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Services inflation has been sticky.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Gains in insurance costs have been accelerating.
 
Source: Pantheon Macroeconomics  
 
On an EU-harmonized basis, the euro-area CPI matches that of the US.
 

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2. The Swiss franc continues to weaken, …
 

 
… as Swiss industrial production slows.
 

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3. This chart shows the change in EU life expectancy at birth in 2023 compared to 2019 and life expectancy at birth.
 
Source: Eurostat   Read full article  


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China

1. Beijing is once again intensifying its efforts to bail out the housing market.
 
Source: @wealth   Read full article  
 
Here are some recent trends.
 
The inventory of unsold homes remains elevated.
 
Source: @markets   Read full article  
 
Mortgage balances are now down on a year-over-year basis.
 

 
China’s banks are struggling with bad loans and shrinking NIM.
 
Source: @markets   Read full article  
 
The market likes what Beijing is offering.
 
Property stocks (2 charts):
 
Source: @DavidInglesTV, @BloombergTV  
 
Source: @DavidInglesTV, @BloombergTV  
 
Distressed developers’ USD bonds (price):
 

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2. Last month, Chinese bank clients purchased the most foreign currency since 2016.
 

 
3. Here is a look at China’s auto exports.
 
Source: Moody’s Investors Service  


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Emerging Markets

1. The Chilean peso has been rallying with copper prices (chart shows USD weakening against CLP).
 

 
2. Colombia’s GDP growth was softer than expected in Q1.
 

 
3. Here are some updates on India.
 
Economic growth has been impacted by global and domestic shocks.
 
Source: Franklin Templeton  
 
Inflation has become lower and less volatile under the inflation-targeting regime.
 
Source: Franklin Templeton  
 
Foreign direct investment has increased considerably over the past 20 years, especially among large global firms.
 
Source: Franklin Templeton  
 
Global funds have been shorting Indian shares.
 
Source: @markets   Read full article  

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4. Finally, here is a look at last week’s performance.
 
Currencies:
 

 
Bond yields:
 

 
Equity ETFs:
 


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Commodities

1. Copper continues to surge as funds squeeze out short sellers.
 

 
Source: Reuters   Read full article  
 
The short squeeze has created a substantial spread between COMEX and LME prices. (2 charts).
 

 
Source: Simon White, Bloomberg Markets Live Blog  
 
Speculative bets continue to rise.
 

 
Here is the LME’s industrial metals index.
 

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2. LME lead is testing resistance.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. Precious metals continue to rally.
 
Gold:
 

 
Silver:
 

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4. Speculative accounts are now net-short sugar futures.
 

 
5. Wheat positioning continues to improve.
 

 
6. Funds have been rotating between coffee and wheat, resulting in a record inverse correlation.
 

 
7. Orange juice prices are hitting record highs.
 

 
8. Here is last week’s performance across key commodity markets.
 


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Energy

1. US natural gas futures are surging.
 

 
2. Here is Goldman’s forecast for US electricity demand growth.
 
Source: Goldman Sachs  


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Equities

1. Retail investors have been moving in, driving up speculative stocks.
 

 
Microcaps have been outperforming.
 

 
Off-exchange activity has been surging, indicating increased retail participation. Platforms like Robinhood, E*TRADE, and Schwab frequently route orders to off-exchange venues, such as dark pools or internalizers.
 
Source: Goldman Sachs; @markets   Read full article  

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2. Share buyback announcements are up sharply.
 
Source: Goldman Sachs; @MikeZaccardi  
 
And yet, companies known for share buybacks have been underperforming (2 charts).
 

 
Source: Deutsche Bank Research  

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3. The S&P 500 is on track for another double-digit earnings growth.
 
Source: SentimenTrader  
 
4. The valuation gap between US shares and those in the rest of the world continues to widen.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
5. Short interest in US index ETFs has collapsed.
 
Source: JP Morgan Research; @themarketear  
 
6. Resource-heavy stock indices are catching up to the US.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
7. VIX closed below 12 for the first time since 2019. The 3-month VIX dipped below 14.
 

 
The VIX curve contango continues to intensify.
 

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8. Finally, we have some performance data from last week.
 
Sectors:
 

 
Equity factors:
 

 
Macro basket pairs’ relative performance:
 

 
Thematic ETFs:
 

 
Largest US tech firms:
 


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Credit

1. US leveraged loans will face a large maturity wall as issuers choose to “amend and extend.” (2 charts)
 
Source: PitchBook  
 
Source: PitchBook  
 
Flows into leveraged loan funds remain robust.
 
Source: BofA Global Research; @dailychartbook  

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2. More IPO deals are being undertaken to pay off debt.
 
Source: Bloomberg Law   Read full article  
 
3. Here is last week’s performance.
 


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Global Developments

1. The growth in GDP per capita among select developed economies has trended lower over the past 60 years.
 
Source: TS Lombard  
 
2. Here is a look at housing ownership and rental distribution by country.
 
Source: Torsten Slok, Apollo  
 
3. Finally, we have some performance data from last week.
 
Currencies:
 

 
Bond yields:
 

 
Equities:
 


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Food for Thought

1. Americans are paying less attention to the news.
 
Source: Pew Research Center   Read full article  
 
2. Declining murder rates:
 
Source: @SteveRattner  
 
3. Changes in global surface temperature vs. carbon dioxide levels:
 
Source: The New York Times   Read full article  
 
4. Earnings comparison of foreign-born to native-born Americans by education level:
 
Source: Oxford Economics  
 
5. Trends in suicide rates by age and gender (globally):
 
Source: The Economist   Read full article  
 
6. Quarterly sales of Novo Nordisk’s weight loss drugs:
 
Source: @chartrdaily  
 
7. Evolution of MLB umpires’ accuracy in calling balls and strikes:
 
Source: @axios   Read full article  
 

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