The Daily Shot: 30-Jan-23
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Consumer spending declined more than expected in December.
• The overall consumer spending level is back on its pre-COVID trend.
• Here are the key components of consumer spending.
Source: Chart and data provided by Macrobond
And this chart shows last month’s changes by category.
Source: Oxford Economics
• Leading indicators signal a contraction in consumer spending this quarter.
Source: Scotiabank Economics
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2. Real incomes continue to climb.
• Disposable personal income:
• Personal income excluding payments from the government:
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3. Personal savings as a share of disposable income have bottomed.
4. The Kansas City Fed’s manufacturing index edged higher this month.
• Manufacturers have been cutting workers’ hours.
• More factories expect to be hiring over the next few months.
• Shipments expectations continue to soften.
A separate report from the Kansas City Fed focusing on service companies shows a rapid deterioration in business activity.
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5. The updated U. Michigan consumer sentiment index confirmed a bounce in confidence this month.
6. Next, we have some updates on inflation.
• Inflation expectations continue to ease.
• The core PCE inflation is off the highs but remains elevated.
– Services inflation has been stubbornly high.
• The NFIB small business price plans index signals rapid declines in the core PCE inflation ahead.
Source: ING
– Significant supply chain improvements could help lower inflation.
Source: Pantheon Macroeconomics
• Elevated corporate markups could maintain upward pressure on prices.
Source: Simon White, Bloomberg Markets Live Blog
But the EM Asia business cycle points to reduced US corporate pricing power.
Source: BCA Research
• Inflation surprises have been the biggest drivers of financial conditions, impacting equity prices, rates/yields, spreads, and the dollar.
Source: Goldman Sachs; @MikeZaccardi
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7. The Atlanta Fed’s GDPNow started the Q1 estimate at 0.7% (vs. negative growth projections from economists).
Source: Atlanta Fed
8. US money market funds’ assets hit a record high.
Source: BofA Global Research
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The United Kingdom
1. The Lloyds Bank business sentiment index improved this month.
2. The CBI part-time employment outlook has deteriorated.
Source: Longview Economics
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The Eurozone
1. French consumer sentiment declined this month.
2. Spain’s Q4 GDP growth was a bit better than expected.
Source: Reuters Read full article
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3. Euro-area economic surprises have boosted investor sentiment.
Source: TS Lombard
4. This scatterplot shows industrial production changes in 2022 vs. each sector’s exposure to energy.
Source: ING
5. Loan growth is starting to slow.
Here is mortgage lending.
Source: TS Lombard
• The euro-area money supply expansion has been slowing faster than expected.
Real M1 (narrow) money supply has been contracting rapidly, signaling slower business activity ahead.
Source: Pantheon Macroeconomics
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Europe
1. Sweden’s household credit growth continues to slow.
• Retail sales are down sharply on a year-over-year basis.
• The Swedish krona underperformed last week.
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2. Norway’s retail sales were also down sharply in December.
3. This chart shows Russia’s share of EU imports for select products.
Source: Eurostat Read full article
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Asia – Pacific
1. The market expects Japan’s central bank to hike rates by the end of the year.
Source: Barclays Research
2. The drop in Korean stock forward earnings and valuation downside appears stretched.
Source: MRB Partners
3. As import costs eased, New Zealand’s trade deficit tightened last month.
4. The Aussie dollar outperformed last week in response to Australia’s upside inflation surprise.
Australian bonds underperformed other advanced economies.
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China
1. Let’s start with R&D spending by local vs. international companies in China.
Source: McKinsey & Company Read full article
2. This chart shows foreign ownership of renminbi-denominated debt.
Source: VOXEU Read full article
3. Next, we have some mobility trends.
Source: Gavekal Research
And here is the holiday travel season.
Source: TS Lombard
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4. Hong Kong’s exports were down sharply last year.
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Emerging Markets
1. Brazil’s loan growth has been slowing but remains elevated.
Personal default rates have been grinding higher.
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2. Mexico’s trade surplus was higher than expected.
Exports have been holding steady.
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3. Colombia’s central bank slowed its rate hikes to 75 bps (the market expected 100 bps).
Source: @omedinacruz, @economics Read full article
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4. Vietnam’s inflation continues to climb.
Exports are now well below last year’s levels.
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5. EM fund flows have been surging.
Source: BofA Global Research
Source: @financialtimes Read full article
There is plenty of room for bond flows to rebound.
Source: Deutsche Bank Research
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6. Next, we have some performance data from last week.
• Currencies:
• Bond yields:
• Equity ETFs:
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Cryptocurrency
1. Bitcoin is testing initial resistance between $23K-$25K.
2. BTC’s price is almost double the estimated cost of production. But mining difficulty is still high, requiring a decisive breakout from BTC’s downtrend to offset costs.
Source: @glassnode
3. Here is a ranking of top-performing coins.
Source: CoinDesk Read full article
This chart shows the performance of select cryptos over the past seven days.
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Commodities
1. Extreme bearish sentiment helped propel gold prices higher. Current sentiment readings are neutral.
Source: Longview Economics
2. Next, we have some data on lithium demand.
Source: McKinsey & Company Read full article
3. Global agricultural supply growth has stagnated for over a decade.
Source: Longview Economics
4. Hedge funds are boosting their bets against wheat amid ample global supplies.
5. Finally, we have last week’s performance across key commodity markets.
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Energy
1. The Brent oil futures curve is slightly backwardated. But the curve typically flips into contango during economic slowdowns and recessions.
Source: Longview Economics
2. US natural gas in storage is now above the 5-year average.
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Equities
1. Companies with exposure to China continue to outperform.
2. Stocks tend to perform poorly after the Fed is done hiking if the yield curve is inverted.
Source: Simon White, Bloomberg Markets Live Blog
3. The Deutsche Bank Consolidated Equity Positioning Index is rebounding.
Source: Deutsche Bank Research
The put/call ratio has been moving lower (reduced risk aversion).
Source: Deutsche Bank Research
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4. Dividend aristocrats have been underperforming this year.
5. Small-cap consumer discretionary stocks are improving relative to the S&P 500. This could support additional upside for the sector.
Source: Aazan Habib, Paradigm Capital
6. The US equity risk premium is well below its long-term average. Lower valuations compared with 2022 mean earnings yields are more attractive. However, according to TS Lombard, recession risks and higher Treasury yields put bonds ahead of stocks in terms of risk compensation.
Source: TS Lombard
7. Next, we have some performance data from last week.
• Sectors (defensives underperformed):
By the way, this year’s sector performance is a partial reversal of the price changes we saw in 2022.
Source: BCA Research
• Equity factors:
This chart shows the month-to-date performance of high-beta and low-vol factors.
Source: S&P Dow Jones Indices
• Thematic ETFs:
• Thematic basket pairs:
• Largest US tech firms:
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Credit
1. US corporate bond fund inflows jumped in recent weeks.
Source: BofA Global Research
2. MBS spreads have been tightening.
Source: PGM Global
3. Here is last week’s performance by asset class.
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Rates
1. Rate markets’ implied volatility continues to sink.
2. TIPS are seeing outflows, putting downward pressure on real yields.
Source: Deutsche Bank Research
3. Next, we have the decomposition of the liabilities side of the Fed’s balance sheet.
Source: PGM Global
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Global Developments
• Tighter interest rate differentials could extend the dollar pullback this year, according to Research Affiliates.
Source: Research Affiliates Read full article
• The US dollar weakened during the 2011 debt ceiling impasse.
Source: ING
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Food for Thought
1. Flu-related hospitalizations and deaths:
Source: USAFacts
2. The efficacy of antidepressants:
Source: The Economist Read full article
3. The demographics of alcohol use:
Source: Gallup Read full article
4. Centrist US politicians tend to be unpopular.
Source: @MorningConsult Read full article
5. 2022 gains in state legislatures:
Source: @axios Read full article
6. Best-selling EVs in the US:
Source: Statista
7. Biggest sports betting states:
Source: @OpenAxisHQ
8. Elementary particles of the Standard Model:
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