How much will a US technical default impact employment?

The Daily Shot: 23-Feb-23
The United States
The Eurozone
Europe
Asia – Pacific
China
Emerging Markets
Cryptocurrency
Energy
Equities
Alternatives
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. Mortgage applications continued to sink last week, …
 

 
… as mortgage rates climb back toward 7%.
 

 
Rate locks were also at multi-year lows.
 
Source: AEI Housing Center  

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2. Next, we have some updates on the labor market.
 
Labor demand still exceeds supply.
 
Source: Commerzbank Research  
 
The declining quits rate points to a slowdown in wage growth.
 
Source: Alpine Macro  
 
Job openings are falling, which should soon be reflected in the official JOLTS figures.
 
Source: Goldman Sachs  
 
Most US unemployed are still finding work quickly, …
 
Source: Oxford Economics  
 
… especially tech workers.
 
Source: Oxford Economics  
 
The employment change for workers without a college degree remains below pre-COVID levels.
 
Source: SOM Macro Strategies  
 
Market jitters around US debt default risks persist as the x-date approaches. The Treasury is expected to run out of emergency funds in late summer. Here is the US one-year sovereign CDS spread.
 

 
How much will a US technical default impact the unemployment rate?
 
Source: RSM   Read full article  

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3. Economists have been upgrading their GDP growth forecasts for 2023, …
 

 
… especially the current quarter.
 

 
Here is Goldman’s GDP tracker.
 
Source: Goldman Sachs; @MikeZaccardi  
 
Economists are also reversing their lowered projections for inflation in 2023.
 

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4. Financial conditions are tightening again, according to Morgan Stanley’s model.
 
Source: Morgan Stanley Research  
 
The market is coming to terms with “higher for longer.” The surge in US terminal rate was not followed by steeper rate cut expectations.
 
Source: Deutsche Bank Research  

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5. The recent decline in the money supply has been unprecedented.
 


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The Eurozone

1. Germany’s Ifo expectations index continues to recover.
 

 
Source: ifo Institute  

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2. French business confidence is also turning higher.
 

 
Separately, France saw a lot of protests this year.
 
Source: Pantheon Macroeconomics  

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3. ECB rate hike expectations have repriced sharply over the past month.
 
Source: @financialtimes   Read full article  
 
4. Here is how the ECB models the transmission mechanism of its monetary policy.
 
Source: ECB   Read full article  
 
5. This chart shows the 5-year inflation expectations distribution based on inflation options.
 
Source: La Banque de France  
 
6. Labor force participation is well above the levels implied by demographics.
 
Source: Goldman Sachs  


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Europe

1. Here is the reduction in natural gas demand across the EU between August and January.
 
Source: @JLeeEnergy, @opinion   Read full article  
 
2. How has the median age changed across the EU over the past decade?
 
Source: @EU_Eurostat   Read full article  


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Asia – Pacific

1. Economists expect the BoJ to tighten policy this year under new leadership.
 
Source: @GregDaco, @economics   Read full article  
 
2. Taiwan’s unemployment rate is at multi-decade lows.
 

 
3. Australia’s business investment strengthened last quarter.
 


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China

1. The bounce in property developer stocks and bonds is starting to fade.
 
Source: BCA Research  
 
Developers’ sales sagged this year.
 
Source: @WSJ   Read full article  

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2. China’s households’ wealth declined for the first time in decades last year.
 
Source: Capital Economics  
 
3. Household savings have risen amid weak credit demand. But regulators have asked lenders to front-load lending. (2 charts)
 
Source: Pantheon Macroeconomics  
 
Source: Pantheon Macroeconomics  

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4. Could we see further weakness in China’s industrial activity?
 
Source: BCA Research  
 
5. Here are the components of China’s infrastructure investment.
 
Source: Oxford Economics  
 
6. China’s labor costs have risen sharply over the past decade.
 
Source: @jessefelder; The Economist   Read full article  


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Emerging Markets

1. Mexico’s 2-year yield is now firmly above 11% amid persistent inflationary pressures.
 

 
2. Argentina’s official currency devaluation is not keeping up with the market.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. Here is Russia’s industrial production index (as reported by the government).
 

 
4. Turkey’s capacity utilization continues to sink.
 

 
5. A leading indicator from Oxford Economics suggests that EM stocks will underperform bonds.
 
Source: Oxford Economics  
 
6. Here is the EM debt maturity wall.
 
Source: IIF  


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Cryptocurrency

1. Bitcoin’s $25k resistance is holding.
 

 
2. Ether is testing resistance at the 50-week moving average.
 

 
3. So far, bitcoin has improved relative to gold this year as investors embraced risk-on conditions.
 
Source: MRB Partners  
 
4. The slowdown in excess cash and savings has been a headwind for bitcoin over the past year.
 
Source: MRB Partners  
 
5. This map shows the most searched tokens by state.
 
Source: @genuine_impact  


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Energy

1. Crude oil has been under pressure this week amid demand concerns.
 

 
Source: Reuters   Read full article  

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2. US natural gas futures dipped below $2/mmbtu for the first time since 2020, before rebounding.
 

 
Will natural gas test record lows?
 
Source: @JKempEnergy  
 
Will we see lower production ahead?
 
Source: Reuters   Read full article  
 
US LNG exports are expected to keep surging.
 
Source: Alpine Macro  

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3. The SPDR Oil & Gas Exploration & Production ETF (XOP) is testing long-term resistance.
 
Source: Aazan Habib, Paradigm Capital  


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Equities

1. The S&P 500 is testing initial support near its 50-day moving average, although short-term momentum is negative.
 

 
2. Elevated real yields suggest that stocks are too expensive.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. Macro hedge funds have been boosting their exposure to stocks.
 
Source: JP Morgan Research  
 
4. US value stocks trade at a substantial premium to non-US large-caps.
 
Source: Yardeni Research  
 
5. Which industries are most concerned about inflation?
 
Source: Torsten Slok,¬†Apollo  
 
6. Fund flows into financials are recovering after massive withdrawals last year. Energy-sector funds are seeing outflows.
 
Source: Deutsche Bank Research  
 
7. Active ETFs’ share of fund flows surged this year.
 
Source: @BloombergTV  
 
8. M&A spending (deal value) has been trending lower.
 
Source: @FactSet   Read full article  


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Alternatives

1. VC fundraising hit a nine-year low.
 
Source: @WSJ   Read full article  
 
2. 73% of venture capital commitments in 2022 went to Bay Area or NYC firms.
 
Source: PitchBook  
 
3. China-focused PE and VC funds didn’t get much love last year.
 
Source: @financialtimes   Read full article  


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Credit

1. ETF investors have been dumping HY bonds and moving into cash.
 
Source: @SamJPotter, @markets   Read full article  
 
3. Capital markets financing slowed sharply last year.
 
Source: IIF  
 
4. CLO issuance has been robust year-to-date.
 
Source: Deutsche Bank Research  


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Rates

1. The 10-year Treasury yield has risen above average levels during previous hiking cycles.
 
Source: Deutsche Bank Research  
 
2. Over the long run, the 10-year Treasury yield tends to track US nominal GDP growth.
 
Source: Jack Ablin, Cresset Wealth Advisors  


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Global Developments

1. Excess liquidity ticked up off very low levels, largely reflecting the dollar’s sell-off since October 2022.
 
Source: Variant Perception  
 
2. This chart shows labor force participation rates in advanced economies.
 
Source: Goldman Sachs  
 
3. Global trade volumes and prices have eased.
 
Source: MRB Partners  
 
4. Which countries have the most firms with low interest coverage ratios?
 
Source: IIF  


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Food for Thought

1. Gen-Z career goals:
 
Source: @axios   Read full article  
 
2. US pickup truck sales by size:
 
Source: @axios   Read full article  
 
What do truck buyers care about?
 
Source: @axios   Read full article  

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3. Weapons manufacturers’ share prices:
 
Source: @pogkas, @BBGVisualData, @bpolitics   Read full article  
 
4. Twitter’s advertising revenue loss:
 
Source: Reuters   Read full article  
 
5. Salesforce revenue growth:
 
Source: @chartrdaily  
 
6. The Wikimedia Foundation:
 
Source: @chartrdaily  
 
7. CO2 emissions by income group:
 
Source: @_HannahRitchie  
 
8. Political polarization globally:
 
Source: Visual Capitalist   Read full article  
 
9. The amount of sugar per ounce in select drinks:
 
Source: @genuine_impact  
 
10. Share of obese adults by income quintile in France and Italy:
 
Source: The Economist   Read full article  
 
11. Most Super Bowl appearances:
 
Source: Statista  

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