Economists keep pushing forward US recession start

The Daily Shot: 19-May-23
The United States
The United Kingdom
The Eurozone
Europe
Asia-Pacific
China
Emerging Markets
Commodities
Equities
Credit
Food for Thought



 

The United States

1. Let’s begin with the labor market.
 
Initial jobless claims declined last week …
 

 
… as fraudulent filings in Massachusetts are reversed.
 
Source: Reuters   Read full article  
 
Source: @axios   Read full article  
 
Source: MarketWatch   Read full article  
 

 
Nonetheless, continuing claims are over 25% above last year’s levels.
 

 
Here is the percentage of states with continuing claims rising by more than 30%.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
The breadth of job gains is declining.
 
Source: Morgan Stanley Research  
 
Fewer small businesses plan to increase headcount.
 
Source: @WSJ   Read full article  

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2. The Philly Fed’s regional manufacturing index improved in May but remains in contraction territory.
 

 
Expectated orders and shipments deteriorated.
 

 
Factories report shedding jobs …
 

 
… and cutting prices.
 

 
Here is the Philly Fed’s index vs. the ISM Manufacturing PMI (manufacturing at the national level).
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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3. The Conference Board’s leading index declined again last month, …
 

 
Source: Wells Fargo Securities  
 
… signaling a recession ahead (2 charts).
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Source: Oxford Economics  
 
Source: MarketWatch   Read full article  
 
The index also suggests that wage growth will slow sharply.
 
Source: Merrill Lynch  

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4. Existing home sales slowed to multi-year lows in April.
 

 
Below are the seasonally-adjusted trends by region.
 
Source: Wells Fargo Securities  
 
Here is a look at trends in new and existing home sales as well as mortgage applications.
 
Source: ING  
 
Existing home inventory is now roughly at last year’s levels, but the months-of-supply measure is higher due to slower sales.
 

 
Here is the median price (year-over-year change).
 

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5. Economists keep pushing forward their estimates for a negative real GDP quarter. Most expect a contraction in Q3, which could kickstart a recession (2 charts).
 
Source: Deutsche Bank Research  
 
Source: @endacurran, @readep, @BW   Read full article  

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6. The World Economics SMI index shows almost no growth in US business activity this month.
 
Source: World Economics  
 
7. US travel spending has been slowing.
 
Source: BofA Global Research  


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The United Kingdom

1. The 10-year gilt yield is nearing 4%.
 

 
2. Speculators have trimmed net-short GBP positions over the past year. Positioning is now neutral.
 
Source: PGM Global  
 
3. London’s economy has been outperforming.
 
Source: @financialtimes   Read full article  


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The Eurozone

1. The euro rally has stalled.
 

 
2. The Citi Economic Surprise Index has been declining.
 

 
3. Tighter lending standards have dampened credit growth for households and firms.
 
Source: ECB  
 
The Capital Economics’ financial conditions index points to downside risks for euro-area growth.
 
Source: Capital Economics  

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4. Eurozone housing markets are facing some headwinds.
 
Source: Pantheon Macroeconomics  
 
5. Inflation momentum remains high for all components except energy.
 
Source: ECB  
 
6. Spain’s trade gap has almost closed.
 


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Europe

1. EUR/SEK is testing long-term resistance.
 

 
2. Here is a look at young adults living with parents.
 
Source: Pew Research Center   Read full article  


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Asia-Pacific

1. Japan’s inflation increased in April.
 

 
Food prices continue to surge.
 

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2. The Korean Won is deeply undervalued.
 
Source: Alpine Macro  
 
3. New Zealand’s trade balance shot into surplus last month as exports surged.
 


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China

1. The renminbi has massively underperformed the MSCI EM Currency Index.
 
h/t @BloombergLive  
 
2. Housing prices are increasing in most cities, with improving sales and delivery.
 
Source: Alpine Macro  
 
3. Service sector growth was robust in May, according to the World Economics SMI report.
 
Source: World Economics  
 
Manufacturing activity also expanded.
 
Source: World Economics  


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Emerging Markets

1. Banxico finally halted its rate hikes.
 
Source: Reuters   Read full article  
 

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2. Chile’s GDP expanded in Q1.
 

 
3. India’s SMI report shows improving growth in May. This indicator is not nearly as upbeat as the S&P Global’s PMI.
 
Source: World Economics  
 
4. Policy easing in Vietnam could fuel economic recovery and possibly benefit stocks.
 
Source: Alpine Macro  


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Commodities

1. US cattle futures are surging.
 

 
Source: Financial Post   Read full article  

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2. Chicago milk futures continue to sink.
 

 
3. This chart shows the divergence between soybean oil and meal futures.
 
Source: @SusanNOBULL   Read full article  


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Equities

1. The Nasdaq 100 Index has rallied as Treasury yields peaked.
 
Source: Aazan Habib, Paradigm Capital  
 
But technical indicators suggest that the Nasdaq 100 is overbought.
 

 
The Nasdaq Composite breadth remains weak.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. The S&P 500 IT index is breaking above long-term resistance relative to the S&P 500.
 
h/t @lizannsonders  
 
3. Top five stocks contributed more than 80% of the S&P 500 gains this year.
 
Source: Merrill Lynch  
 
4. Small caps outperformed this week, …
 

 
… boosted by banks.
 

 
Small-cap call options volume has risen.
 
Source: @ericwallerstein, @WSJmarkets   Read full article  

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5. Healthcare stocks are struggling.
 

 
6. Neither Home Depot shares nor lumber prices corroborate the rally in homebuilders.
 
Source: Liz Young, On The Money; h/t @dailychartbook   Read full article  
 
7. Despite all the discussions surrounding the retrenchment of US consumers, consumer discretionary companies are managing to enhance their margins this year through a combination of lower input costs, reduced inventories, and continued price hikes.
 
Source: Reuters   Read full article  
 
8. Long-duration equities continue to outperform.
 

 
9. Hedge funds have been cutting cyclicals exposure relative to defensives.
 
Source: Goldman Sachs  
 
But cyclicals outperformed sharply this week.
 

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10. Here is a look at growth vs. value year-to-date performance globally.
 
Source: S&P Dow Jones Indices  
 
11. Finally, let’s take a look at some correlation trends.
 
The S&P 500 vs. the US dollar:
 

 
The S&P 500 vs. Treasuries:
 

 
The S&P 500 vs. inflation-protected Treasuries:
 


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Credit

1. Here is a look at the Fed’s emergency funding facilities.
 

 
2. It’s hard for banks to compete with this …
 

 
3. According to the Credit Derivatives Determinations Committee, the Credit Suisse CoCo bond wipeout does not qualify as a default. CDS spreads tumbled.
 
Source: @gmorpurgo, @markets   Read full article  
 

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4. Which commercial real estate sectors are most exposed to tighter credit conditions?
 
Source: Oxford Economics  


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Food for Thought

1. Views on work requirements for federal aid:
 
Source: @axios   Read full article  
 
2. Gun carrying rates:
 
Source: USAFacts  
 
3. Quality of the rule of law:
 
Source: Statista  
 
4. What do college seniors see as the most important benefit in their first job?
 
Source: Quality Logo Products  
 
5. People forced to flee their homes:
 
Source: The Economist   Read full article  
 
6. The average length of ongoing military conflicts:
 
Source: The Economist   Read full article  
 
7. US homeownership rates by generation and age:
 
Source: Apartment List  
 
8. The presence of bacteria in human tumors:
 
Source: Ground Truths   Read full article   Further reading  

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Have a great weekend!


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