Mortgage applications are down almost 40% from a year ago

The Daily Shot: 06-Oct-22
The United States
Canada
The United Kingdom
The Eurozone
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. The September ISM Services PMI report suggests that US service-sector business activity remains robust (PMI > 50 means growth).
 

 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
New orders continue to show strength.
 

 
The employment index jumped, …
 

 
… which points to stronger payroll gains in September.
 
Source: LPL Research  
 
Supply pressures continue to ease.
 

 
Price gains are moderating, …
 

 
… signaling lower inflation ahead.
 
Source: Oxford Economics  

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2. The September ADP private payrolls report showed solid job gains.
 

 
Source: CNBC   Read full article  
 
What should we expect from the nonfarm payrolls report on Friday? Oxford Economics sees 280k new jobs created last month.
 
Source: Oxford Economics  
 
One of the drivers of the labor market imbalance has been the COVID-related dip in immigration.
 
Source: @gutavsaraiva, @Jonnelle, @bpolitics   Read full article  

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3. The Atlanta Fed’s GDPNow model Q3 growth estimate climbed to 2.7% (annualized).
 
Source: @AtlantaFed  
 
Consumer spending on services and a lower trade deficit have been the key drivers of the upward move.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The trade deficit continues to narrow as demand slows.
 
Source: Oxford Economics  

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4. Next, we have some updates on the housing market.
 
Mortgage applications are crashing, …
 

 
… now down almost 40% from a year ago.
 

 
Worsening affordability is keeping buyers away.
 
Source: Black Knight   
 
Home sales are dropping, …
 
Source: Redfin  
 
… and there are further declines ahead.
 
Source: Pantheon Macroeconomics  
 
Inventories are higher, but new listings are down.
 
Source: Redfin  
 
Source: Realtor.com  
 
Home prices are down for two months in a row (July and August).
 
Source: Black Knight   
 
The year-over-year home price appreciation is expected to reach zero in a few months.
 
Source: AEI Center on Housing Markets and Finance  
 
Housing-related online search activity slumped in recent months.
 
Source: @LizAnnSonders, @GoogleTrends, @DataArbor  
 
Homebuilder sentiment continues to deteriorate.
 
Source: Evercore ISI Research  
 
Apartment demand was down again last quarter.
 
Source: @jayparsons  

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5. US gasoline prices continue to rebound, …
 

 
… which will push consumer inflation expectations higher.
 
Source: BCA Research  


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Canada

1. The trade surplus was much lower than expected.
 

 
2. Housing permits jumped in August.
 

 
3. Condo sales are at multi-year lows in the Greater Toronto Area.
 
Source: @BenRabidoux  


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The United Kingdom

1. New car registrations finally climbed above last year’s level.
 

 
2. Households are holding on to excess savings.
 
Source: Pantheon Macroeconomics  
 
3. Capital Economics is forecasting a deeper recession ahead as higher rates and energy prices take a toll.
 
Source: Capital Economics  
 
4. Here are the latest voting intentions polls.
 
Source: Statista  


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The Eurozone

1. Services PMI reports point to falling business activity in the euro area.
 
Italy:
 
Source: S&P Global PMI  
 
Spain:
 
Source: S&P Global PMI  
 
Germany:
 
Source: S&P Global PMI  
 
Eurozone Composite PMI:
 
Source: S&P Global PMI  

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2. French manufacturing output jumped in August.
 

 
3. Germany’s factory orders continue to sink.
 

 
Germany’s trade surplus is almost gone.
 

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4. The broad euro index is relatively strong despite the EUR/USD crash.
 
Source: @RobinBrooksIIF  
 
5. European bond yields have risen enough to offer attractive spreads over duration-matched government bonds, according to BCA Research.
 
Source: BCA Research  


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China

1. Shadow financing is recovering as bailout funds ramp up.
 
Source: Pantheon Macroeconomics  
 
2. Will the property market follow the trend we saw in Japan in the 1990s?
 
Source: @ANZ_Research  
 
3. Crude oil refining activity has slowed.
 
Source: @EIAgov   Read full article  
 
4. Hong Kong’s business activity is back in contraction mode.
 
Source: S&P Global PMI  


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Emerging Markets

1. Brazil’s services growth is slowing.
 

 
Price pressures are rapidly easing.
 

 
Industrial production declined in August.
 

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2. Colombia’s inflation has been surging.
 

 
3. Mexican consumer confidence remains robust.
 

 
4. South Africa’s business activity is contracting.
 
Source: S&P Global PMI  
 
5. Romania’s central bank hiked rates again.
 

 
6. Iran’s currency continues to weaken.
 
Source: Bonbast.com  
 
Inflation has been surging.
 
Source: @WSJ   Read full article  


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Cryptocurrency

1. Bitcoin is testing downtrend resistance.
 

 
2. Open interest in bitcoin futures is ticking higher, especially at Binance (2 charts).
 
Source: Coinglass  
 
Source: Coinglass  

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3. There are more users on gaming decentralized applications (dApps) than on decentralized finance applications (DeFi).
 
Source: @Delphi_Digital  


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Commodities

1. Copper has been rebounding as the US dollar softens.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. Gold positioning has been very bearish.
 
Source: Longview Economics  
 
The gold/S&P 500 price ratio broke above its 200-day moving average.
 
Source: Aazan Habib, Paradigm Capital  

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3. This chart shows metals demand from vehicles and power generation.
 
Source: Fitch Ratings  


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Energy

1. OPEC is cutting production, …
 
Source: @WSJ   Read full article  
 
… sending oil prices higher.
 

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2. US oil inventories declined last week.
 
Days of supply:
 

 
Barrels:
 

 
3. US refined product demand surged recently.
 
Gasoline:
 

 
Distillates:
 

 
Refinery utilization:
 

 
As a result, inventories are sharply lower.
 
Gasoline:
 

 
Distillates:
 

 
Below are refined product inventories in terms of barrels.
 

 

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4. Gazprom, Russia’s majority state-owned energy company, daily gas output edged up in September to meet seasonally higher domestic demand. As in previous months, exports to Europe declined.
 
Source: Nadia Kazakova; Renaissance Energy Advisors  


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Equities

1. How does the market perform following yield curve inversions?
 
Source: MarketDesk Research  
 
2. Earnings projections for 2023 and 2024 continue to move lower.
 
Source: Yardeni Research  
 
3. More firms issued positive EPS guidance last quarter, but the negative guidance count was still higher.
 
Source: @FactSet  
 
Here is the breakdown in select sectors.
 
Source: S&P Global Market Intelligence  
 
How has the market been responding to positive and negative guidance?
 
Source: @FactSet  

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4. Retail buying has been subdued.
 
Source: Vanda Research  
 
5. Here is the US market performance under different partisan control.
 
Source: Truist Advisory Services  
 
6. Below is Goldman’s forecast for the S&P 500 in the soft- and hard-landing (recession) scenarios.
 
Source: Goldman Sachs; @MikeZaccardi  
 
7. S&P 500 stocks with high international revenue exposure have underperformed domestic-focused peers during the dollar rally.
 
Source: Global X ETFs   Read full article  
 
8. Short-term equity options have been increasingly popular.
 
Source: @WSJ   Read full article  
 
9. 27% of active large-cap managers outperformed their benchmark over the past 12 months.
 
Source: BofA Global Research  


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Credit

1. High-yield bond issuance deteriorated in recent quarters.
 
Source: @lcdnews  
 
2. High-yield spreads need to widen to make the projected bond returns attractive.
 
Source: MarketDesk Research  
 
3. The Credit Suisse situation shows no signs of improvement.
 
CDS spread:
 

 
Perpetual bond price:
 


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Rates

1. Demand for T-bills remains extreme as spooked investors move into cash.
 

 
2. The market is still pricing a Fed rate cut in the second half of next year.
 

 
3. There is a great deal of uncertainty around the real neutral rate (r*).
 
Source: UBS Research  
 
The market pricing for the nominal long-run rate is around 3%.
 


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Global Developments

1. PMI reports show global export orders contacting.
 
Source: @WSJ   Read full article  

——————–

 
2. Is the global rate hike cycle near the peak?
 
Source: Truist Advisory Services  
 
3. Next, we have the changes in mortgage debt-to-income ratios since 2007.
 
Source: Oxford Economics  


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Food for Thought

1. Production and processing of clean energy metals:
 
Source: The New York Times   Read full article  
 
2. Marriages before the age of 18 in Latin America:
 
Source: UN   Read full article  
 
3. Suicide rates in US prisons:
 
Source: Statista  
 
4. Camera shipments:
 
Source: Statista  
 
5. Electric and hybrid vehicles on the road in the US:
 
Source: USAFacts  
 
6. Industrial-robot installations:
 
Source: @WSJ   Read full article  
 
7. Where is the best fall color?
 
Source: Erin Davis  
 
Westmore, Vermont:
 
Source: @mark_tarello   Read full article  

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