The Daily Shot: 28-Oct-22
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. The third-quarter GDP growth was a bit better than expected, …
… with net exports driving a significant portion of the increase. Imports declined last quarter for the first time since Q2 of 2020, boosting net exports.
Here is the GDP level.
• However, final sales to private domestic purchasers (the “core” GDP) shows that the underlying economic growth has stalled.
• Consumer spending growth is slowing.
• Housing investment has been crashing.
• Business investment has been growing, but that could change going forward.
• Inventories were once again a drag on growth.
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2. Durable goods orders unexpectedly declined last month.
Here are the nominal and the real capital goods orders indices.
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3. The Kansas City Fed’s manufacturing index showed deterioration in factory activity in the region this month.
By the way, here is the Kansas City Fed’s district.
• Demand is crashing, with expectations for new orders near the GFC lows.
• Here is the backlog of orders index.
• Price pressures are moderating.
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4. Soft-data (survey-based) economic surprises are turning lower, which will be showing up in hard-data surprises in the months ahead.
Source: Morgan Stanley Research
5. Jobless claims remain below pre-COVID levels, pointing to persistent strength in the labor market.
But leading indicators point to labor market weakness ahead.
Source: Capital Economics
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6. Next, we have some updates on the housing market.
• Mortgage rates are above 7%, …
… in part due to wide spreads on mortgage-backed securities (MBS).
Source: Morgan Stanley Research
The Fed and commercial banks are no longer buyers of MBS, contributing to wider spreads.
– The Fed:
Source: @AndreasSteno
– Commercial banks:
• Pending home sales are crashing (2 charts), …
Source: Redfin
Source: Redfin
… as housing demand deteriorates.
Source: Redfin
The supply has been moving higher.
Source: Redfin
• Land prices have declined in recent months.
Source: @RickPalaciosJr
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7. Households’ drawdown of excess savings is expected to slow next year.
Source: Oxford Economics
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Canada
1. The CFIB small business indicator declined further this month.
Service sectors are reporting slower activity (2 charts).
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2. Nonfarm payrolls fell in August.
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The United Kingdom
1. The CBI retail sales index bounced in October.
But retailers’ outlook has been weakening.
Source: Reuters Read full article
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2. Inactivity due to long-term illness is surging.
Source: Morgan Stanley Research
3. Self-employment has stabilized after a massive COVID-driven decline.
Source: Longview Economics
4. The “Truss premium” on mortgage rates remains elevated.
Source: Reuters Read full article
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The Eurozone
1. The ECB hiked rates by 75 bps and scaled back support for the banking system.
Source: Reuters Read full article
Source: ECB Read full article
Despite the jumbo hike, the market saw the announcement as a bit dovish.
Source: FXS Read full article
• Expectations for the overnight rate in one year declined sharply.
• EUR/USD dipped back below parity.
• 50 basis points in December?
Source: Danske Bank
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2. Germany’s consumer confidence ticked up this month (from record lows).
But Italian consumer confidence continues to deteriorate.
Here is Italy’s manufacturing confidence.
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3. Have Bund yields finally peaked?
Source: BCA Research
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Europe
1. Let’s begin with some updates on Sweden.
• Manufacturing confidence:
• Consumer confidence (new low):
• Nordea’s GDP model:
Source: @MikaelSarwe
• Housing transactions and home prices:
Source: Nordea Markets
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2. Denmark’s consumer confidence has collapsed.
3. Here is Czech Republic’s business and consumer confidence.
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4. The Swiss central bank continues to tighten liquidity.
5. Credit Suisse shares dropped 18% – back near the lows.
6. The gap between European credit spreads and equity implied volatility remains unusually wide.
Source: @themarketear
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Japan
1. The Tokyo core CPI climbed above 2% this month, topping expectations.
Here are the goods and services CPI indices.
Source: Capital Economics
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2. The jobs-to-applicants ratio keeps climbing.
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Asia – Pacific
1. Taiwan’s leading indicator has been falling quickly.
2. Australian PPI hit a multi-decade high.
Separately, here is an updated budget forecast from Fitch Ratings.
Source: Fitch Ratings
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China
1. The equity market rout resumed today.
• The Shanghai Shenzhen CSI 300 Index (mainland stocks):
Source: @TheTerminal, Bloomberg Finance L.P.
• Stocks in Hong Kong (3 charts):
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2. China’s steel prices keep falling, putting pressure on iron ore.
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3. Official measures of property prices peaked around mid-2021.
Source: Gavekal Research
4. Beijing’s focus has been shifting in recent decades.
Source: Societe Generale Cross Asset Research; @WallStJesus
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Emerging Markets
1. Egypt devalued its currency again, …
… and hiked rates, …
… as it secured a loan from the IMF.
Source: Bloomberg Read full article
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2. Russia’s FX reserves continue to decline.
Russia’s trade has been robust despite the sanctions.
• Imports:
Source: IIF
• Exports:
Source: IIF
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3. Turkey’s economic confidence improved this month.
4. Brazil’s unemployment rate continues to move lower.
5. EM equities are seeing inflows.
Source: BofA Global Research
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Energy
1. US diesel prices are surging …
… boosting backwardation (an indication of tight supplies).
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2. Analysts have massively downgraded their projections for Russia’s natural gas exports.
Source: @AndreasSteno
3. It’s going to be tricky for Russia to secure the oil tankers it needs to evade the G7 oil price cap.
Source: S&P Global Commodity Insights
4. China is buying Russian oil which has been rebranded as Malaysian.
Source: @JavierBlas, @opinion
5. The EU’s natural gas inventories continue to climb.
Source: BCA Research
6. West Texas natural gas prices dipped below zero amid pipeline constraints.
Source: @TheTerminal, Bloomberg Finance L.P.
7. The US supply response to higher oil prices has been limited in this cycle.
Source: BofA Global Research
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Equities
1. Tech mega-caps remain under pressure as results disappoint.
• Meta:
• Amazon after the close:
Source: CNBC Read full article
Large tech firms have become a significant drag on the market. Index futures have diverged massively as a result.
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2. Small caps have been outperforming large-cap growth equities (2 charts).
Source: @allstarcharts
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3. Tech mega-caps’ valuations are converging with key indices (2 charts).
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4. Trailing earnings and forward estimates for tech have flatlined.
Source: PGM Global
5. Nearly half of all tech stocks have fallen more than 30% this year.
Source: PGM Global
6. Next year’s earnings expectation for consumer discretionary is too high.
Source: MRB Partners
7. Here is the number of days without reaching the prior high. It may take a while.
Source: @LizAnnSonders
8. The S&P 500 put/call premium ratio is elevated.
Source: SentimenTrader; @GameofTrades_
9. The equity market options skew is near pre-COVID lows.
10. The stock/bond price ratio is on the verge of breaking out.
Source: Aazan Habib, Paradigm Capital
11. The US equity market risk premium is too low.
Source: BCA Research
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Credit
Taxable bond funds saw $36 billion in outflows in September, driven by a lower appetite for risk among US investors.
Source: Morningstar Direct
• Money has rushed out of most bond categories, but long-term government bond funds have stayed in high demand.
Source: Morningstar Direct
• Muni bond funds continue to see outflows.
Source: Morningstar Direct
• But BofA’s clients have been moving into bonds.
Source: BofA Global Research
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Global Developments
1. Here is a look at housing market valuations in advanced economies.
Source: BCA Research
2. The number of rate hikes around the world has been unprecedented.
Source: BofA Global Research
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Food for Thought
1. Shipments of manufactured homes:
Source: @WSJ Read full article
2. US holiday sales by category:
Source: Wells Fargo Securities
3. Amazon Prime Days sales growth:
Source: Earnest Research
4. VR-AR users:
Source: Statista
5. Various news media consumers with at least a bachelor’s degree:
Source: Morning Consult Read full article
6. Ukrainians’ confidence in their military:
Source: Gallup
7. Life expectancy changes since 2019:
Source: Nature Read full article
8. Halloween spending:
Source: @CivicScience Read full article
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Have a great weekend!
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