The Daily Shot: 01-Feb-23
• The United States
• Canada
• 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. Gains in the employment cost index slowed last quarter, …
… which should help cool inflation.
Source: Pantheon Macroeconomics
• Here are the year-over-year changes in total compensation by industry.
Source: Wells Fargo Securities
• This chart from Pantheon Macroeconomics shows the Phillips Curve returning to pre-COVID levels.
Source: Pantheon Macroeconomics
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2. The Conference Board’s consumer confidence index edged lower in January.
The labor market strength has been keeping this index from deteriorating.
Source: Mizuho Securities USA
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3. The MNI Chicago PMI moved deeper into contraction territory this month, highlighting softening business activity in the Midwest.
4. Home prices declined less than expected in November.
• These are the year-over-year changes.
• The FHFA index shows only a modest drop in prices.
• High-frequency indicators point to further declines in December.
Source: Calculated Risk
• The gap between home prices and wages remains elevated.
• Undeveloped land prices have been falling in most regions.
Source: @RickPalaciosJr
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5. Next, we have some updates on the debt ceiling impasse.
• The Treasury bill market expects the X-date by early August.
Source: Piper Sandler
• The 1-year US sovereign credit default swap spread signals market fears similar to 2011. The market expects the government to take the debt ceiling fight to the brink.
• Here is what happened to financial conditions in 2011.
Source: Deutsche Bank Research
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Canada
1. Economic growth slowed in November but remained in positive territory.
2. Real retail sales are turning lower.
Source: Industrial Alliance Investment Management
3. This chart shows housing exposure by province.
Source: Desjardins
4. Will USD/CAD test support around 1.323?
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The United Kingdom
1. Housing credit is deteriorating rapidly.
• Mortgage lending:
• Mortgage approvals:
Source: @LucyGJWhite, @economics Read full article
2. The broad money supply growth is slowing.
3. Next, we have the CPI forecast from BCA Research.
Source: BCA Research
4. Below is the history of GBP/USD exchange rate since 1800.
Source: Credit Suisse
5. Bregret has become widespread.
Source: UnHerd Britain, h/t Walter
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The Eurozone
1. Let’s begin with Germany.
• Retail sales tumbled in December
• The labor market remains resilient.
– Changes in the number of unemployed workers:
– The unemployment rate:
• Import price inflation slowed less than expected in December.
• This chart shows naturalizations in Germany over time.
Source: @financialtimes Read full article
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2. French consumer spending on goods deteriorated further in December.
Inflation remains elevated.
Source: Arcano Economics
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3. Italian unemployment held steady in December.
4. Spain’s current account surplus has been surging.
The nation’s labor productivity has been lagging behind the Eurozone.
Source: Arcano Economics
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5. The euro-area GDP expanded last quarter, topping expectations.
Here is the quarterly breakdown (where available).
Source: @OliverRakau
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6. Below is Commerzbank’s ECB “hawk-o-meter.”
Source: Commerzbank Research
7. The currency market isn’t too concerned about the ECB and the Fed this week. Here is the EUR/USD risk reversal.
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Europe
1. Sweden’s GDP unexpectedly declined last quarter.
• Sweden’s house prices are sharply lower, diverging from Greece.
Source: Deutsche Bank Research
• Sweden has one of the highest private debt levels as a percent of GDP in the developed world.
Source: Deutsche Bank Research
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2. The Norwegian krone underperformed in January.
3. Swiss retail sales slowed sharply in December.
4. Youth unemployment has been trending lower.
Source: @financialtimes Read full article
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Asia – Pacific
1. Japan’s consumer confidence edged higher in January.
2. Taiwan’s export orders were down sharply last year relative to 2021.
Source: South China Morning Post Read full article
• Taiwan’s manufacturing activity continued to contract in January.
Source: S&P Global PMI
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3. South Korea’s exports tumbled further in January, …
… exacerbated by soft demand from China.
The trade deficit widened to a record.
• Manufacturing activity is declining.
Source: S&P Global PMI
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4. Next, we have some updates on New Zealand.
• Wage growth:
• Unemployment:
• Home prices:
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China
1. The manufacturing PMI data from S&P Global was less upbeat than the official report. Factory activity remains in contraction mode.
2. Revenue growth improved in January.
Source: China Beige Book
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Emerging Markets
1. Let’s run through Asian PMIs for January.
• Indonesia (back to growth):
Source: S&P Global PMI
• Thailand (robust expansion):
Source: S&P Global PMI
• The Philippines (accelerating growth):
Source: S&P Global PMI
• Malaysia (further deterioration):
Source: S&P Global PMI
• Vietnam (continuing contraction):
Source: S&P Global PMI
• ASEAN (improved growth):
Source: S&P Global PMI
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2. Adani shares remain under pressure.
India’s key industries expanded rapidly in December.
Source: India TV News Read full article
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3. Next, we have some performance data for January.
• Currencies:
• Bond yields:
• Equity ETFs:
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Cryptocurrency
1. $22,500 is now a support level for bitcoin.
2. Next, we have some performance data for January.
3. Who lost money on crypto?
Source: LendingTree Read full article
What makes Americans fearful of crypto?
Source: LendingTree Read full article
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Commodities
1. Platinum’s short-term price trend is improving, while palladium remains in a downtrend. (2 charts)
Source: @ANZ_Research
Source: @ANZ_Research
The platinum/palladium price ratio is improving.
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2. The copper/gold ratio diverged from the US ISM manufacturing new orders index. The market is likely pricing in global growth divergence, driven by China’s reopening.
Source: Piper Sandler
• Copper is at support.
Source: @Ole_S_Hansen
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3. Coffee futures are rebounding.
4. Next, we have some performance data for January.
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Energy
1. Arab Light crude is trading at a higher discount to Brent.
Source: Reuters Read full article
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2. Demand for second-hand oil tankers (to ship Russian oil) surged last year.
Source: The Economist Read full article
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Equities
1. Let’s begin with some attribution data.
• S&P 500:
• S&P 600 (small caps):
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2. The Nasdaq 100 closed above its 200-day moving average again.
3. Small caps have been outperforming.
4. Should we be concerned about the divergence between the S&P 500 and Fed liquidity (reserves)?
Source: @TheTerminal, Bloomberg Finance L.P.; h/t @themarketear
5. US corporate profits typically decline by at least 15%-20% during recessions, which is out of line with current analyst expectations.
Source: TS Lombard
6. Q4 earnings reports have been disappointing relative to historical surprises.
Source: @lisaabramowicz1, @bloomberg
7. Single stock and ETF flows diverged in January.
Source: BofA Global Research; @MikeZaccardi
8. Risk-off conditions could continue as earnings and market prices have not fully reflected the rapid rise in rates.
Source: Piper Sandler
9. Money managers have been spending quite a bit on downside protection recently.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
10. Next, we have some performance data for January.
• Sectors:
• Equity factors:
• Basket pairs:
• Thematic ETFs:
• Largest US tech stocks:
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Credit
1. CLO issuance picked up in January.
Source: Deutsche Bank Research
2. High-yield credit spreads have not risen to the same extent as the 10-year Treasury yield.
Source: Piper Sandler
3. Next, we have the returns by asset class in January.
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Rates
1. Let’s begin with the Treasury yield decline attribution for January.
2. Here is a look at Fed rate cuts in past recessions. This time, inflation would need to move sharply lower to encourage a pivot.
Source: TS Lombard
3. SOFR market share is rising in the loan market.
Source: Goldman Sachs; III Capital Management
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Global Developments
1. Broad money supply growth is correlated with inflation and inflation forecast errors.
Source: BIS, h/t Torsten Slok, Apollo Read full article
2. China and India will drive global growth in 2023, according to the IMF.
Source: IMF Read full article
Oxford Economics is less optimistic about global growth this year than the IMF.
Source: Oxford Economics
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3. Financial conditions in developed markets have eased in recent months, almost back to their long-run average.
Source: Capital Economics
4. Next, we have some DM performance data for January.
• Currency indices:
• Bond yields:
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Food for Thought
1. Countries by share of the global economy:
Source: Visual Capitalist Read full article
2. Living paycheck-to-paycheck:
Source: @atanzi, @bbgequality Read full article
3. A minute on the internet:
Source: @genuine_impact
4. Fastest internet speeds:
Source: @genuine_impact
5. Podcast platform preferences:
Source: Morning Consult Read full article
6. Legal abortions in the US over time:
Source: Pew Research Center Read full article
7. Human names for dogs:
Source: @andrewvandam, @alyssafowers, @chrisalcantara Read full article
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