The Daily Shot: 03-Apr-23
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The February core PCE inflation came in slightly below forecasts (charts show month-over-month changes). The third panel shows the “supercore” index, which is closely tracked by the Fed.
Supercore inflation remains elevated on a year-over-year basis (2nd panel).
Here are the drivers of the supercore index.
Source: BCA Research
2. The terminal rate is grinding toward 5% again, with a May rate hike back on the table.
3. Real consumer spending declined slightly in February.
• US real disposable personal income edged higher.
This chart shows US personal income excluding government payments.
• Here is personal saving as a share of disposable income.
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4. The most recent U. Michigan Consumer Sentiment Index showed a decrease compared to the report from early March.
This chart shows households’ perception of their current financial situation relative to five years ago.
• Inflation expectations have been easing. But this trend could reverse if oil prices rise sharply (see the Energy section).
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5. The MNI Chicago PMI edged higher in March but still points to softer national manufacturing activity (ISM) last month.
Source: @TheTerminal, Bloomberg Finance L.P.
Regional Fed indicators also signal ISM weakness ahead.
Source: Yardeni Research
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6. Tax refunds are running well below last year’s levels.
Source: Oxford Economics
7. Household net wealth remains elevated, due to historically low debt levels, high cash, and relatively strong asset prices. (2 charts)
Source: Mizuho Securities USA
Source: Mizuho Securities USA
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Canada
1. The GDP bounced in January.
The economy is tracking 2.8% growth in Q1.
Source: @rtkwrites, @economics Read full article
Source: @rtkwrites, @economics Read full article
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2. Speculative accounts continue to bet against the loonie.
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The United Kingdom
1. Home prices declined further on a year-over-year basis in March.
Source: Reuters Read full article
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2. The Lloyds business sentiment index improved last month.
3. UK financials outperformed US peers, boosting the pound.
Source: Capital Economics
4. The UK is currently experiencing some of the most contentious labor disputes since 1989.
Source: @WillWilkesNews, @tomelleryrees, @eckldorna, @bpolitics Read full article
5. Immigration kept the workforce from shrinking last year.
Source: Pantheon Macroeconomics
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The Eurozone
1. Headline inflation indicators eased in March.
• Italy:
• France (still running hot):
• The Netherlands:
• The Eurozone:
However, core inflation continues to surge.
Source: Reuters Read full article
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2. German import prices are headed toward deflation (due to lower energy prices).
3. French household consumption of goods remains on a downward trajectory.
4. Germany’s unemployment rate increased in March.
Unemployment held steady at the Eurozone level.
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Japan
1. The Tankan report showed soft manufacturing sentiment in Q1.
Source: Reuters Read full article
• The non-manufacturing index is back at pre-COVID levels.
• Manufacturing output prices signal a peak in Japan’s consumer inflation.
Source: Capital Economics
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2. Non-bank financial institutions own a lot of foreign assets.
Source: Gavekal Research
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Asia – Pacific
1. South Korea’s exports remain well below last year’s levels.
Imports are also down on a year-over-year basis.
Source: ING
South Korea’s manufacturing activity contracted at a faster pace in March.
Source: S&P Global PMI
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2. Australia’s residential building approvals are at multi-year lows.
Home prices jumped last month.
Source: @WSJ Read full article
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China
1. The manufacturing PMI report from S&P Global was softer than expected, suggesting that the rebound has stalled.
Source: Reuters Read full article
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2. Onshore stocks continue to hold support relative to global equities.
Source: BCA Research
A sustained economic recovery could support equity market outperformance.
Source: BCA Research
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3. Banks’ interest margins have been shrinking in recent years.
Source: Marco Polo Read full article
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Emerging Markets
1. Let’s run through Asian manufacturing PMI indices.
• ASEAN (slower growth):
Source: S&P Global PMI
• Thailand (growth continues):
Source: S&P Global PMI
• Indonesia (faster expansion):
Source: S&P Global PMI
• Malaysia (contraction):
Source: S&P Global PMI
• The Philippines (robust):
Source: S&P Global PMI
• Vietnam (back in contraction):
Source: S&P Global PMI
• India (very strong):
Source: S&P Global PMI
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2. India’s key industries’ output remains robust.
Source: Economic Times Read full article
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3. Pakistan’s inflation continues to surge (after currency devaluation).
4. South Africa’s trade balance unexpectedly swung into surplus.
5. Mexico’s unemployment rate hit a multi-year low.
6. Next, we have some performance data for March.
• Currencies:
• Bond yields:
• Equity ETFs:
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Cryptocurrency
1. Crypto liquidity deteriorated in March.
Source: @isabelletanlee, @technology Read full article
2. Here is last month’s performance for select cryptos.
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Commodities
This chart displays the March performance of major commodity markets.
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Energy
1. OPEC unexpectedly announced a large cut in production, …
Source: Reuters Read full article
… sending crude prices sharply higher.
Positioning has been bearish, which could support further gains.
Source: Deutsche Bank Research
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2. This chart shows US natural gas pipeline exports to Mexico.
Source: @EIAgov
3. Weak natural gas prices have been pressuring coal.
Source: @WSJ Read full article
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Equities
1. Let’s start with the quarterly attribution for the S&P 500 and the S&P 600.
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2. Top three stocks have been driving recent gains in the S&P 500.
Source: Simon White, Bloomberg Markets Live Blog
3. Tech shares are trading at a substantial premium to the S&P 500.
4. Hedge funds have rotated from cyclicals to defensives.
Source: JP Morgan Research; @luwangnyc, @markets Read full article
5. Fund flows show rotation from value to secular growth (from financials to tech).
Source: Deutsche Bank Research
6. So far, S&P 500 sector returns have been underwhelming compared to prior bear market lows.
Source: @scottcharts
7. Deutsche Bank’s “early cycle” basket has sharply underperformed “end of cycle” stocks.
Source: Deutsche Bank Research
8. Options activity is down sharply from the recent peak.
Source: Deutsche Bank Research
• The Nasdaq 100 VIX-equivalent index hit its lowest level since January 2022.
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9. Finally, we have some performance data for March.
• Sectors:
• Equity factors:
• Macro basket pairs:
– Stocks that benefit from higher prices underperformed.
• Thematic ETFs:
• Largest US tech firms:
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Credit
1. Small banks saw a tiny portion of lost deposits return last week.
Total US bank deposits continue to fall.
What’s driving the declines? Deposits have been flowing into the Fed’s RRP facility …
… via retail money market funds. We should see some deposits return to the banking system, now that we are past the quarter-end.
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2. Weaker banks continue to pay a premium to borrow in the fed funds market.
3. Bank credit default swap spreads remain low relative to previous spikes.
Source: MRB Partners
4. CMBS spreads continue to widen.
5. Next, we have some performance data for March.
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Rates
Here are the Treasury yield change attributions.
• March:
• Q1:
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Global Developments
1. So far, this has been the year of reversals.
Source: @LizYoungStrat
2. Next, we have some DM performance data for March.
• Currency indices:
• Yields:
• Large-cap equity indices:
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Food for Thought
1. Global app revenues:
Source: Statista
2. Changes in poverty rates:
Source: US Census Bureau
3. Deadliest natural disasters:
Source: @genuine_impact
4. Iran’s stockpile of enriched uranium:
Source: @ethanbronner, @bpolitics Read full article
5. GOP 2024 nomination poll:
Source: @MorningConsult Read full article
6. Better to be born rich than gifted:
Source: Papageorge and Thom Read full article
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