The Daily Shot: 13-Jan-23
• The United States
• The United Kingdom
• The Eurozone
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought
As a reminder, The Daily Shot will not be published on Monday, January 16th.
The United States
1. The CPI report was in line with expectations.
• The headline CPI declined in December.
Here are the contributions.
• The core CPI rose faster than in November.
• Inflation slowed on a year-over-year basis.
• The core goods CPI was down for the third month in a row.
But the core services CPI continues to surge.
• Housing is driving the core services CPI, with shelter inflation hitting a multi-decade high.
– Rent:
– Owners’ equivalent rent:
However, leading indicators tell us that shelter inflation should moderate.
Source: Pantheon Macroeconomics
With wage growth now lagging shelter inflation, demand should ease.
By the way, here is the CPI excluding shelter.
Source: @AndreasSteno Read full article
• Hospital services costs surged last month, but this increase is expected to be a “one-off” event.
• New vehicle prices declined for the first time in two years.
Used car prices fell again.
• We will have more inflation-related data next week.
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2. Markets cheered the softening headline inflation, with bonds and commodities surging while the dollar weakened further.
• 2yr yield:
• 5yr TIPS yield (real rate):
• The dollar index:
The 10-year/3-month portion of the Treasury curve inverted further.
3. The market now expects a 25 bps rate hike next month, with the probability of a 50 bps increase dipping to 10%.
• The terminal rate edged lower. The market doesn’t see it going to 5%, …
… but Fed officials still do.
Source: @SteveMatthews12, @Jonnelle, @economics Read full article
Source: MarketWatch Read full article
• The market still sees a 50 bps rate cut later this year.
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4. Initial jobless claims remain very low for this time of the year.
But small business hiring plans suggest that unemployment applications will start rising.
Source: Piper Sandler
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The United Kingdom
1. Unemployment is heading higher.
Source: Pantheon Macroeconomics
2. Here is how UK labor productivity compares to other advanced economies.
Source: @LucyGJWhite, @economics Read full article
3. More doctors and nurses, please, but no students or bankers (way too scary).
Source: Statista
4. The diverging English breakfast costs …
Source: @johnauthers
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The Eurozone
1. Germany’s current account is rebounding.
2. Based on the 2/10yr spread, Germany’s yield curve is more inverted than the US.
Source: Oxford Economics
3. Here is the GDP forecast from Danske Bank.
Source: Danske Bank
4. Spain’s industrial production is rolling over.
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Japan
1. The Economy Watchers Expectations index edged higher.
2. The yen continues to rally.
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Asia – Pacific
1. South Korea’s central bank hiked rates again.
Export price gains are moderating rapidly.
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2. Australia’s mortgage lending saw its 6th monthly decline in a row.
Consumer spending is slowing.
Source: @ANZ_Research
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China
1. The December trade balance and exports were a bit stronger than expected.
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2. Herd immunity?
Source: Capital Economics
3. The 6-month credit impulse dropped sharply in December.
Source: @macro_daily
4. Here is the Q4 GDP forecast based on a survey from Reuters.
Source: Reuters Read full article
5. Semiconductor demand is slowing.
Source: BCA Research
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Emerging Markets
1. Brazil’s services output is holding up well.
Source: To share this content, please use the link https://brazilian.report/liveblog/2023/01/12/services-stable-boom/ or the tools offered on the page. Read full article
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2. Argentina’s CPI is nearing 100%.
3. India’s industrial production hit a multi-year high in November.
4. Turkey’s retail sales continue to surge.
5. South Africa’s electricity production remains at multi-year lows.
6. Russian car sales climbed above 50k last month.
7. EM fund flows have turned positive.
Source: BofA Global Research
8. FX reserves continue to fall.
Source: IIF
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Cryptocurrency
1. Cryptos started the year on a strong note.
Source: @isabelletanlee, @crypto Read full article
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2. Coinbase share prices are highly correlated to bitcoin.
Source: @chartrdaily
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Commodities
1. Iron ore continues to surge on China’s reopening.
2. This chart shows the disconnect between base metals and US real yields.
Source: TS Lombard
3. Gold prices are nearing $1900/oz as the dollar weakens and US real yields decline.
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Energy
1. China is importing “rebranded” Russian oil.
Source: @JavierBlas
2. Despite the pre-Christmas cold blast, US natural gas in storage is at its 5-year average.
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Equities
1. The S&P 500 is at resistance.
2. Small caps are outperforming.
Here are the differences in sector composition between the S&P 500 and the Russell 2000.
Source: J.P. Morgan Asset Management
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3. Long-duration stocks are surging as bond yields (including real yields) decline.
4. Meme stocks are soaring (2 charts).
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5. The Q4 earnings estimates dispersion is very high.
Source: Deutsche Bank Research
• This chart shows the S&P 500 earnings with and without the energy sector.
Source: Yardeni Research
• Are earnings estimates for 2023 and 2024 too optimistic?
Source: J.P. Morgan Asset Management
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6. Next, we have some sector performance updates.
• Defensive sectors are underperforming, …
– Consumer Staples:
– Healthcare:
• … but property stocks are doing well as bond yields fall.
Lower bond yields are also helping housing stocks.
• Consumer discretionary and retail stocks are surging.
• Falling US dollar and China reopening are helping materials, mining, and energy shares.
• Tech, semiconductor, and communication services shares are rebounding.
• Transport shares are outperforming as well.
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Credit
1. Investors are jumping into corporate credit, with fund inflows picking up speed.
Source: Reuters Read full article
Source: BofA Global Research
Source: BofA Global Research
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2. This scatterplot shows the fixed-income universe risk/reward profile (risk = correlation to the S&P 500, reward = yield).
Source: J.P. Morgan Asset Management
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Rates
1. The 5-year Treasury yield is at support.
Source: @NautilusCap
2. The yield curve slope and the bond-equity correlation tend to move in tandem.
Source: Longview Economics
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Food for Thought
1. Average new car loan in the US:
2. Migration to smaller cities:
Source: @I_Am_NickBloom, Raman and Bloom Read full article
3. US population growth by age group:
Source: Wells Fargo Securities
4. Infrastructure employment:
Source: Brookings Read full article
5. 15 largest employers in the world:
Source: @genuine_impact
6. The impact of your job on your mental health:
Source: Gallup Read full article
7. Declining interest in economic growth:
Source: The Economist Read full article
8. Rating the US healthcare system:
Source: Gallup Read full article
9. US naturalizations:
Source: Pew Research Center Read full article
10. Frequency of Friday the 13th by year:
Source: Statista
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The next Daily Shot will be out on Tuesday, January 17th.
Have a great weekend!
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