The Daily Shot: 26-Jun-23
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Initial jobless claims remain elevated compared to pre-COVID levels as well as 2022.
Source: @economics Read full article
Here are the continuing jobless claims.
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2. Existing home sales remain depressed but were slightly above forecasts last month.
• Absolue inventories hit a multi-year low (first panel below). The second panel shows the months of supply, which remains above last year’s levels due to sluggish sales.
• Prices continue to ease.
Source: @WSJ Read full article
Source: Reuters Read full article
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3. US manufacturing activity deteriorated this month, according to S&P Global PMI. Factories are reporting falling orders.
– Price pressures have been easing.
• Service firms continue to report expansion, …
… with business expectations rebounding.
– Service companies still face strong inflationary pressures, but fewer firms boosted prices this month.
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4. The Kansas City Fed’s regional manufacturing report was awful, …
… with factories reducing their workforce.
• Outlook deteriorated.
However, CapEx expectations improved.
• Price indices tumbled this month.
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5. The Conference Board’s index of leading indicators declined again in May.
This chart depicts the six-month changes in the leading index.
Source: @TheTerminal, Bloomberg Finance L.P.
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6. Economists continue to boost their forecasts for US core inflation.
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The United Kingdom
1. The BoE hiked rates by 50 bps last week as core inflation surges.
Source: Reuters Read full article
• The market sees further rate increases ahead, with another 50 bps hike a possibility in August and/or September.
• Short-term gilt yields continue to surge …
… as the yield curve inverts further.
• A policy error?
Source: BCA Research
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2. Manufacturing activity sagged this month.
But service-sector growth is holding up (similar to the US).
• Both input and output manufacturing prices are now falling.
But service-sector price indices remain elevated.
Nonetheless, the “prices charged” index signals slower services CPI.
Source: Pantheon Macroeconomics
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3. Retail sales unexpectedly increased in May.
4. Consumer sentiment is improving.
5. On average, GBP/USD weakened around BoE policy meetings during the current hiking cycle.
Source: Convera
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The Eurozone
1. The June flash PMI report looks recessionary, with activity indicators surprising to the downside.
• Germany manufacturing PMI:
• France manufacturing PMI:
By the way, the INSEE indicator of French manufacturing sentiment improved this month.
• Germany services PMI (still in growth mode but below forecasts):
• France services PMI (back in contraction territory):
• The composite PMI at the euro-area level (stalling growth).
– The money supply contraction signals further weakness ahead.
Source: Pantheon Macroeconomics
– Price pressures continue to ease.
Manufacturers have been slow at passing on falling input costs, while services firms have increased their margins. (2 charts)
Source: Deutsche Bank Research
Source: Deutsche Bank Research
• Expectations among service firms have deteriorated, especially in France.
Source: Deutsche Bank Research
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2. The weak PMI report sent the Citi Economic Surprise Index tumbling to the lowest level since the initial COVID shock.
3. Consumer confidence is rebounding.
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Europe
1. In addition to BoE, two other European central banks hiked rates.
• The SNB:
Source: Reuters Read full article
• Norway’s Norges Bank (the market expected 25 bps):
Source: Reuters Read full article
The Norwegian krone underperformed last week.
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2. Poland’s retail sales have been softening.
3. This chart shows the distribution of energy consumption by EU households.
Source: @TheDailyShot
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Japan
1. Inflation remains elevated, …
… as food price climb.
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2. The yen has been under pressure.
3. Manufacturing activity dipped back into contraction this month…
… while service firms continue to report growth.
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Asia-Pacific
1. Singapore’s inflation is starting to moderate.
2. The S&P Global PMI report shows stalling growth in Australia’s business sector.
Source: S&P Global PMI
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China
1. China’s currency and stocks are down as the market reopens after the holidays.
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2. Households’ savings growth remains elevated (2 charts).
Source: @ANZ_Research
Source: BCA Research
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3. Industrial-related capex growth slowed over the past two months.
Source: China Beige Book
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Emerging Markets
1. Under the new management, the Turkish central bank hiked rates to 15% (a 6.5% increase).
However, the market expected a bolder move from the central bank, with forecasts pointing to 20% (instead of 15%).
The lira plummeted.
Source: Reuters Read full article
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2. The Russian ruble continues to weaken and is now well below pre-war levels.
3. Mexico’s inflation continues to moderate.
4. EM central banks are pivoting to rate cuts.
Source: BofA Global Research
5. EM stocks are already discounting an earnings recovery.
Source: MRB Partners
6. Finally, we have some performance data from last week.
• Currencies:
• Bond yields:
• Equity ETFs:
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Commodities
1. The rise in renewable electricity generation could substantially boost demand for copper. (2 charts)
Source: Alpine Macro
Source: Alpine Macro
• Copper inventories are already very low.
Source: Alpine Macro
• The front-month copper futures contract is holding support above its 40-week moving average, reacting to oversold conditions last month.
Source: Symbolik
2. Palladium prices hit the lowest level since 2019.
3. Here is last week’s performance across key commodity markets.
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Energy
1. Brent crude remains in a trading range.
Stabilizing supplies point to firmer prices ahead.
Source: Simon White, Bloomberg Markets Live Blog
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2. US oil rig count continues to fall.
3. Next, let’s take a look at US petroleum inventories.
– Crude oil (barrels):
Days of supply:
– Gasoline inventories:
– Distillates inventories:
4. Gasoline demand is holding above last year’s levels.
This chart shows US refinery runs.
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5. Oil usually performs well in recessions.
Source: Simon White, Bloomberg Markets Live Blog
6. The S&P 500 energy sector has been more friendly to shareholders this cycle. (2 charts)
Source: @_rob_anderson
Source: @_rob_anderson
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Equities
1. Last week’s market pullback was consistent with historical patterns.
Source: @RyanDetrick
• Equities tend to see a pullback one month after an extreme high in the stock/bond ratio (current situation), …
Source: Variant Perception
… although performance improves three months onward.
Source: Variant Perception
• The S&P 500 typically trades sideways during the summer.
Source: SentimenTrader
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2. Tech funds saw some outflows …
Source: BofA Global Research
… while financials gained capital.
Source: BofA Global Research
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3. The S&P 500’s cumulative advance/decline line reached an all-time high, reflecting improving breadth.
Source: SentimenTrader
4. Small caps widened their underperformance last week.
5. The Nasdaq 100 valuation continues to diverge from real yields. Something has to give.
Source: @TheTerminal, Bloomberg Finance L.P.
6. The VIX/S&P 500 correlation surged in recent days.
Source: Goldman Sachs; @dailychartbook
7. Next, we have some performance updates from last week.
• Sectors:
• Equity factors:
• Macro basket pairs’ relative performance:
• Thematic ETFs:
• Largest US tech firms:
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Credit
1. Investment-grade bond funds continue to see inflows.
Source: BofA Global Research
2. Here is last week’s performance by asset class.
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Rates
1. Almost 90% of the Treasury curve is inverted.
Source: Chart and data provided by Macrobond
Source: @WSJ Read full article
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2. The 10-year Treasury yield is testing downtrend resistance.
Source: Symbolik
3. While the median FOMC projection for the long-run fed funds rate has been stable in recent years, the central tendency measure points to a higher long-run forecast.
Source: @ANZ_Research
4. Investment fund allotments for 2-year and 7-year Treasury auctions have risen strongly.
Source: Deutsche Bank Research
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Global Developments
1. Employment conditions are improving among developed markets.
Source: MRB Partners
2. Fund flows into risky assets are still outpacing safe assets.
Source: Goldman Sachs
3. Here is a look at labor productivity and innovation.
Source: Alpine Macro
4. Supply-chain stress has mostly dissipated.
Source: The Economist Read full article
5. The WFH shift is not going away.
Source: Torsten Slok, Apollo
6. Finally, we have some DM performance data from last week.
• Currency indices:
• Bond yields:
• Large-cap equity indices:
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Food for Thought
1. S&P 500 top 20 stocks’ weight and returns:
Source: Visual Capitalist Read full article
2. Big Oil profits:
Source: Visual Capitalist Read full article
3. Declining demand for pizza delivery:
Source: @CivicScience Read full article
4. Indoor farming startups:
Source: @WSJ Read full article
5. Poultry exporters’ market share:
Source: Semafor
6. Top steel-producing nations:
Source: Visual Capitalist Read full article
7. Relationship status by gender and educational attainment:
Source: IFS Institute Read full article
8. Cannabis legality by state:
Source: Global X ETFs Read full article
9. Close calls on airport runways:
Source: @WSJ Read full article
10. Taking a break from Twitter:
Source: Pew Research Center Read full article
11. Suicide rates:
Source: The Economist Read full article
12. The number of years to get to 30 teams in major sports leagues in North America:
Source: @axios Read full article
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