The Daily Shot: 14-Jun-24
• The United States
• The Eurozone
• Europe
• Japan
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Alternatives
• Global Developments
• Food for Thought
The United States
1. Producer prices unexpectedly fell in May, while the core PPI remained unchanged.
Source: CNBC Read full article
• Part of the reason for the downside surprise was the decline in logistics services prices.
Here are the contributions to the PPI changes.
Source: @TheTerminal, Bloomberg Finance L.P.
• The trade services PPI (business markups) suggests that corporate margins have stopped rising.
• Softer PPI and CPI reports signal a significant slowdown in the core PCE measure.
Source: Nomura Securities
• The market is now pricing in two rate cuts this year, deviating from the June dot plot that projected only one.
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2. Real wages jumped in May as consumer inflation slowed.
3. Initial jobless claims moved higher last week.
• Continuing claims keep diverging from the levels seen in recent years.
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4. Next, we have some updates on the housing market.
• Mortgage applications were firmer last week.
Here is the rate lock count.
Source: AEI Housing Center
• Mortgage rates have been moving lower.
Source: Mortgage News Daily
• Housing inventories have been running well above last year’s levels (3 charts).
Source: AEI Housing Center
Source: Redfin
Source: Redfin
• More home sellers have been dropping prices, …
Source: Redfin
… yet sales prices continue to climb.
Source: Redfin
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The Eurozone
1. EUR/USD risk reversals continue to show increased downside bias ahead of the French elections.
2. Eurozone industrial production inched lower in April.
Source: @economics Read full article
Here is the industrial production trend excluding Ireland (dotted line).
Source: @DanielKral1, @OxfordEconomics
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Europe
1. The Swiss franc continues to strengthen vs. the euro amid jitters about France.
2. Container shipping costs from Asia keep rising.
Source: @TheTerminal, Bloomberg Finance L.P.
3. Here is a look at European death rates due to diseases of the circulatory system.
Source: Eurostat Read full article
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Japan
1. The Bank of Japan will keep the market in suspense until the July meeting regarding the specifics of its bond purchasing taper. A rate hike in July is also being considered.
Source: Reuters Read full article
Bond buying has already slowed this year.
Source: @economics Read full article
• The yen tumbled following comments from the Bank of Japan.
• JGB yields declined.
• JGB implied volatility has been rising.
h/t Masaki Kondo FX/Rates Strategist, Bloomberg
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2. The BoJ owns about 60% of JGBs outstanding.
Source: Torsten Slok, Apollo
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China
1. The renminbi continues to weaken vs. USD.
2. China’s credit impulse (change in new credit issued as a percentage of GDP) has been weakening, which doesn’t bode well for economic growth.
3. Exports are recovering outside of the US and euro area.
Source: MRB Partners
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Emerging Markets
1. LatAm equity ETFs have underperformed sharply this week after Mexico’s election results (2 charts).
2. The Colombian peso has been tumbling.
• Colombia’s core inflation continues to moderate.
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3. The Indonesian rupiah remains under pressure.
4. Stock trading activity in India has been surging.
Source: @markets Read full article
5. Next, we have some updates on South Africa.
• Business confidence (lower in May):
• Manufacturing production (a rebound in April):
• Mining output:
• Real GDP per capita:
Source: ING
• Government debt-to-GDP-ratio:
Source: ING
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Commodities
1. Speculative gold bets have been rising.
Source: @bespokeinvest
• Gold ETF outflows appear to have stopped.
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2. ANZ expects a gradual reduction in global platinum supply.
Source: @ANZ_Research
Platinum has recently diverged from gold.
Source: @ANZ_Research
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Energy
1. Crude oil implied volatility continues to trend lower.
2. What is the market-implied probability of Brent futures trading above $90/bbl or below $70/bbl? The charts below show the results for late July and the end of the year.
3. US biodiesel imports have doubled since 2022 due to low prices in Europe.
Source: @EIAgov Read full article
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Equities
1. Investors have been rotating into tech stocks, shifting away from nearly all other sectors (“LOs” = long-only investors).
Source: Barclays Research; @markets Read full article
• For example, this chart shows cumulative year-to-date flows for SOXX (semiconductor ETF) and XLY (consumer discretionary ETF).
And here is the price action.
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2. Related to the above, industrials have been underperforming.
3. Stock market concentration in the US is at the highest levels since the 1960s.
Source: Counterpoint Global; Morgan Stanley Research
• This figure shows the stocks of US companies that have been among the top three in market cap at the end of the year from 1950-2023.
Source: Counterpoint Global; Morgan Stanley Research
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4. The average S&P 500 stock is trading at an increasing discount to the index.
Source: @TheTerminal, Bloomberg Finance L.P.
5. Correlations among S&P 500 stocks continue to sink. In theory, this trend is good news for stock prickers (actively-managed funds).
• Realized correlations:
• Impleid correlations:
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6. The market expects over 30% of Russell 2000 members to remain unprofitable.
Source: Goldman Sachs; @AyeshaTariq
7. Fed liquidity is no longer a tailwind for stocks.
Source: @TheTerminal, Bloomberg Finance L.P.
8. Investors are sitting on a lot of cash.
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Alternatives
1. There is a wide dispersion of returns in private equity.
Source: J.P. Morgan Asset Management
2. Exit values in Australia and New Zealand have declined in recent years, although hopes of the next wave of growth are pinned to Canva at a roughly $40 billion valuation.
Source: PitchBook
3. Startup fundraising typically holds up during the summer months.
Source: Carta
4. Here is a look at private/public market correlations.
Source: J.P. Morgan Asset Management
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Global Developments
1. Container shipping costs continue to climb.
2. Here is a look at the country-level share of fixed-rate mortgages.
Source: IMF Read full article
3. Finally, we have seaborne trade over time.
Source: J.P. Morgan Asset Management
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Food for Thought
1. The distribution of S&P 500 CEO pay in 2023:
Source: @WSJ Read full article
2. Share of US TV-viewing time by platform:
Source: @WSJ Read full article
3. Increasing Chinese incursions into Taiwan’s air-defense identification zone:
Source: The Economist Read full article
4. Mexico’s drug cartels:
Source: @financialtimes Read full article
5. Number of abortions in the US:
Source: Brookings Read full article
6. Global adoption of graphic warnings on cigarette packages:
Source: Statista
7. National flags featuring the most stars:
Source: Statista
• Versions of US flags used over time:
Source: Quarterhouse
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Have a great weekend!
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