The Daily Shot: 06-Feb-23
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. With over half a million jobs created, the January jobs report far surpassed economists’ expectations. The labor market is far from signaling a recession.
• Revisions remain positive.
Source: @WSJ Read full article
• Results from the household survey were even stronger.
• Job gains were broad.
Source: @TheTerminal, Bloomberg Finance L.P.
• The unemployment rate hit its lowest level since 1969.
– The unemployment rate is now well below NAIRU, signaling tightness in the labor market.
– This chart shows the contributions to the unemployment rate based on labor flows.
• Underemployment edged higher.
• After two months of declines, temp employment jumped.
• Labor force participation improved.
Source: Chart and data provided by Macrobond
Here is the employment-to-population ratio.
• Wage growth has been moderating but remains elevated.
• Average weekly hours worked jumped in January.
• Below are some additional trends from the jobs report.
– Workers with a disability:
– Not at work due to illness:
Source: Chart and data provided by Macrobond
– Construction employment:
Source: @WSJ Read full article
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2. The jobs report shocker boosted rate hike expectations, with the terminal rate back above 5%.
Two more rate hikes?
Below, we have other market responses to the employment report.
• Treasury yields:
• Real yields:
• Stocks (remarkably stable):
• The US dollar:
• Precious metals:
• Crude oil:
Source: Reuters Read full article
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3. The ISM Services PMI jumped back into growth territory, also topping forecasts.
Source: @TheTerminal, Bloomberg Finance L.P.
• New orders surged.
• Price pressures persist:
• Employment remains stable.
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4. The Citi Economic Surprise Index rebounded sharply due to the employment and ISM reports.
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5. Is the crash in residential investment signaling weakness for broader CapEx?
Source: Simon White, Bloomberg Markets Live Blog
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The United Kingdom
1. The post-BoE rally in gilts held on Friday.
One or two more rate hikes?
Wells Fargo sees juts one.
Source: Wells Fargo Securities
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2. The S&P Global PMI report shows businesses becoming more upbeat about the future.
3. Public employee wage growth has been lagging.
Source: @WSJ Read full article
The BoE sees wage growth moderating over the next couple of years.
Source: Danske Bank
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The Eurozone
1. The post-ECB euphoria subsided after the realization that there was no dovish message from the central bank. The US employment shocker exacerbated the bond market gloom.
• The market sees another 50 bps increase followed by one or two 25 bps hikes.
Here is a forecast from Pantheon Macroeconomics.
Source: Pantheon Macroeconomics
• Combining the ECB’s rate changes with that of the Bundesbank (prior to the euro) makes the current tightening the second highest over an eight-month period.
Source: Deutsche Bank Research
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2. Despite its recent rally, the euro is still undervalued by about 15%.
Source: BCA Research
3. Professional forecasters boosted their inflation estimates for 2023 and 2024.
Source: ECB
They also increased their 2023 growth projections relative to the previous survey, amid a pullback in energy prices.
Source: ECB
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4. French manufacturing output continues to trend higher.
5. Service industries reported an improvement last month, with Italy and Spain now in growth territory.
Source: S&P Global PMI
Source: S&P Global PMI
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6. Input price pressures should moderate further as supply chain stress eases.
Source: Natixis
7. Public debt reductions have been exceeding the pace required by current fiscal rules.
Source: @DanielKral1
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Europe
1. Sweden’s manufacturing activity continued to contract last month.
And services growth has slowed markedly.
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2. Swiss manufacturing is shrinking for the first time since 2020.
3. Poland’s manufacturing contraction is slowing.
Source: S&P Global PMI
4. Public sector hiring advanced in recent years.
Source: BlackRock Investment Institute
5. Next, we have data on the EU’s renewables situation.
• Renewables overtaking natural gas:
Source: @MathisWilliam, @business Read full article
• Wind and solar by country:
Source: @EmberClimate Read full article
• Solar growth:
Source: @EmberClimate Read full article
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6. Below are some trends in asylum applications.
Source: Eurostat Read full article
7. Finally, here is a look at cash usage.
• Cash usage has declined since the start of the pandemic.
Source: ECB Read full article
• How do different countries view the importance of having cash as a payment option?
Source: ECB Read full article
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Japan
1. Long-term growth forecasts continue to move lower.
Source: BoJ
2. The yen is significantly undervalued.
Source: BCA Research
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Asia – Pacific
1. Asian currencies declined sharply in response to the US jobs report shocker.
• The South Korean won:
• The Taiwan dollar:
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2. New Zealand’s labor market imbalance remains severe.
Source: @ANZ_Research
3. The RBA terminal rate is priced at around 3.75%.
Source: @ANZ_Research
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China
1. The rise in A-shares has been relatively mild, possibly indicating subdued mainland sentiment relative to foreign sentiment.
Source: PGM Global
2. The credit impulse remains weak, which could stall a meaningful economic recovery.
Source: PGM Global
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Emerging Markets
1. Let’s begin with Brazil.
• Manufacturing (still in contraction mode):
Source: S&P Global PMI
• Services PMI (growth stalling):
• Industrial production (holding steady, despite weak signals from the PMI data):
• Exports (strong start):
• Auto sales (above last year’s level but still soft):
• Formal job creation:
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2. Chile’s vehicle sales were well below 2022 levels last month.
3. Colombia’s core CPI continues to surge.
4. Mexico’s consumer confidence keeps rising.
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5. South Africa’s business activity slipped into contraction, according to S&P Global.
Source: S&P Global PMI
Electricity output tumbled in December.
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6. Saudi business activity is surging amid elevated energy prices.
Source: S&P Global PMI
7. Qatar’s business activity slows as the FIFA World Cup boost wanes.
Source: S&P Global PMI
8. Turkey’s trade deficit remains wide.
• Manufacturing has returned to growth.
Source: S&P Global PMI
• This chart shows foreign ownership of Turkish assets.
Source: Alpine Macro
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9. India’s service sector growth remains robust.
Source: S&P Global PMI
10. Thai exports declined further in December on a year-over-year basis.
11. EM market-based inflation expectations remain elevated relative to DM.
Source: IMF
12. Real wage growth has been negative in many EM economies.
Source: Capital Economics
13. This chart shows 10-year bond term premia in select economies.
Source: Oxford Economics
14. Finally, we have last week’s performance.
• Currencies:
• Bond yields:
• Equity ETFs:
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Commodities
1. This chart shows the cereal crop production mix changes since 1981.
Source: Statista
2. US orange juice futures hit a record high.
Source: @WSJ Read full article
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3. Here is last week’s performance across key commodity markets.
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Energy
1. The US oil rig count dipped back below 600 last week.
Source: Reuters Read full article
Fracking activity remains well below the 2022 peak.
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2. Global crude oil spending dipped below its long-term average during the recent price drop. Spending has been relatively weak during this cycle.
Source: MRB Partners
3. The state of New Mexico produces more oil than Mexico.
Source: @OilSheppard, @FR Read full article
4. Next, we have some updates on renewable energy.
• Offshore wind installations:
Source: @messageannkoh, @business Read full article
• Solar capacity vs. solar generation in the US and China:
Source: @davidfickling, @opinion Read full article
• US renewable diesel capacity projections:
Source: @EIAgov
• Wind turbines’ rotor diameter:
Source: @messageannkoh, @business Read full article
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Equities
1. It’s decision time with respect to the 2008 analog.
Source: Numera Analytics (@NumeraAnalytics)
2. Morgan Stanley’s model points to a deep earnings recession.
Source: Morgan Stanley Research; @dlacalle_IA
3. Net revenue surprises have been low relative to historical levels.
Source: Jack Ablin, Cresset Wealth Advisors
4. Options volume surged at the end of last week.
5. It was a strong week for retail market orders.
Source: JP Morgan Research; @business, @luwangnyc Read full article
6. The NYSE New Highs/New Lows indicator reached its best reading since 2021.
Source: Aazan Habib, Paradigm Capital
7. A majority of S&P 500 tech stocks are trading above their 200-day moving average.
Source: @DeanChristians
• Most S&P 500 consumer discretionary stocks are no longer in a bear market.
Source: @DeanChristians
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9. Finally, we have some performance data from last week.
• Sectors:
• Equity factors:
Has the momentum factor found support relative to the S&P 500?
• Macro basket pairs:
• Thematic ETFs:
• Largest US tech firms:
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Credit
1. Key economic indicators continue to flash warning signals for credit.
• ISM vs. high-yield:
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
• The leading index vs. investment-grade:
Source: Merrill Lynch
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2. Bankraptices picked up in January.
Source: S&P Global Market Intelligence
3. Muni issuance slowed at the end of last year.
Source: Brookings Read full article
4. This chart shows last week’s performance by asset class.
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Global Developments
1. There is a positive relationship between R&D and long-term productivity growth, although the magnitude of the productivity gains is a topic of debate amongst economists.
Source: Codera Analytics
2. Here is the increase in household leverage since 1999 in select economies.
Source: Capital Economics
3. How did the manufacturing PMIs change over the past month?
Source: Deutsche Bank Research
4. This chart shows the number of housing units per one thousand people in select economies.
Source: Capital Economics
5. Finally, we have some performance data for advanced economies.
• Trade-weighted currency indices:
• Bond yields:
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Food for Thought
1. Largest media companies:
Source: @OpenAxisHQ
2. Online gambling markets:
Source: Statista
3. US corporate profit margins since 1950:
Source: @heimbergecon
4. Top pizza chains:
Source: @OpenAxisHQ
5. Box-office revenue in the US and Canada:
Source: @Datawrapper, @elliot_bentley
6. Aid to Ukraine:
Source: Statista
7. Long COVID:
Source: KFF Read full article
8. US issuance of work visas:
Source: TS Lombard
9. Jonathan, the world’s oldest known land animal (190 years old):
Source: CBS News Read full article
Source: St Helena Tourism Read full article
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