The Daily Shot: 10-Jul-23
• The United States
• Canada
• The Eurozone
• Europe
• Asia-Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. The June payrolls figures came in below expectations …
… for the first time in over a year. Nonetheless, the report was sufficiently robust to ensure a Fed rate hike this month.
Source: @bespokeinvest
• Here are the contributions to nonfarm payrolls.
Source: @TheTerminal, Bloomberg Finance L.P.
– The payrolls diffusion index has been trending lower.
Source: @gutavsaraiva, @readep, @economics Read full article
• Wage growth exceeded forecasts.
– According to a survey from Morning Consult, more employees are confident they would get a raise if they asked.
Source: Morning Consult Read full article
– However, the NFIB small business compensation index declined sharply in May.
• The unemployment rate edged lower.
– But some groups saw unemployment increasing in June. Here is the rate for African Americans.
– Other indicators also point to a softening labor market. Underemployment increased.
– Temp help services numbers continue to trend lower.
– Part-time employment for “economic reasons” jumped.
– By the way, unemployment, a lagging indicator, is typically flat during the 12 months leading up to a recession.
Source: Deutsche Bank Research
• Prime-age labor force participation hit a multi-year high. This is good news from the Fed’s perspective because the trend should keep wage growth capped.
Source: Chart and data provided by Macrobond
Source: @axios Read full article
– Labor force participation among prime-age women reached a record high.
– But participation among Americans 55 and older declined further.
We will have additional updates on the jobs report tomorrow.
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2. Longer-dated Treasury yields climbed further after the payrolls report.
The yield curve steepened.
• The 10-year TIPS yield (real yield) hit the highest level since 2009.
• The dollar declined.
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3. The Redbook index of same-store sales is now almost flat year-over-year.
Source: Arcano Economics
4. This chart shows US goods imports by source.
Source: @WSJ Read full article
5. Anticipated population stagnation in the upcoming decades is expected to contribute to further deceleration in potential GDP growth.
Source: CBO
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Canada
1. The June employment report topped expectations.
• But wage growth declined sharply.
• The unemployment rate increased …
… as more Canadians entered the labor force.
• Here is the breakdown by sector.
Source: Scotiabank Economics
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2. The 2-year yield reached 4.8% for the first time since 2001.
3. The Ivey PMI showed business activity growth stalling in June.
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The Eurozone
1. EUR/USD has been resilient despite weaker economic data versus the US.
Source: Convera
2. French trade deficit narrowed in May.
3. Commerzbank’s leading indicator for Germany looks recessionary.
Source: Commerzbank Research
4. Euro-area unemployment has been running below the natural rate of unemployment, indicating tightness in the labor market.
Source: ECB Read full article
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Europe
1. Let’s begin with Sweden.
• Industrial and services output indicators edged higher in May.
• But household consumption inched lower.
• Industrial orders jumped.
• It was another rough week for the Swedish krona.
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2. Norway’s industrial production contracted further in May.
3. This map shows the share of people in the EU who are not studying and are outside the labor force.
Source: Eurostat Read full article
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Asia-Pacific
1. The yen rallied last week.
Source: @hcarterjohnson, @AnyaAndrianovaV, @markets Read full article
2. Taiwan’s exports slumped in June.
Source: Reuters Read full article
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3. The RBA’s cash rate is barely restrictive compared to previous dispersions above the neutral policy rate.
Source: Coolabah Capital Read full article
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China
1. The change in money supply has been below average in recent years.
Source: PGM Global
2. Hedge fund short positions have been on the rise, especially in the communication and real estate sectors.
Source: Morgan Stanley Research
3. Electric vehicles boosted China’s value added per unit of car export.
Source: @ANZ_Research
4. China is mostly self-sufficient in grains.
Source: Barclays Research
5. It’s been toasty in Beijing.
Source: @JKempEnergy
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Emerging Markets
1. Let’s begin with some updates on Mexico.
• Inflation (moderating):
• Consumer confidence (trending higher):
• Business investment (peaking?):
• Private consumption:
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2. Russia’s automobile sales jumped in June.
3. South Africa’s electricity production remains depressed (multi-year lows).
4. Next, we have some performance data from last week.
• Currencies:
• Bond yields:
• Equity ETFs:
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Commodities
1. The rebound in iron ore prices is fading.
2. Solar capacity growth is expected to drive demand for silver (according to ANZ).
Source: @ANZ_Research
3. Here is last week’s performance across key commodity markets.
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Energy
1. US rig count continues to decline.
2. US refining capacity edged higher in 2023.
Source: @EIAgov Read full article
3. Net US crude oil imports are at multi-year lows for this time of the year.
Source: Princeton Energy Advisors
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Equities
1. Analysts’ targets imply a 9% increase in the S&P 500 over the next 12 months.
Source: @FactSet Read full article
2. The S&P 500 returns have been very concentrated (2 charts).
Source: Truist Advisory Services
Source: @JessicaMenton, @lena_popina, @markets Read full article
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3. Morgan Stanley’s sentiment indicator flipped to risk-off, which could point to a pullback in stocks. (2 charts)
Source: Morgan Stanley Research
Source: Morgan Stanley Research
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4. Compared to Treasuries and corporate bonds, stocks appear progressively less appealing.
5. The valuation discount on non-US shares has widened sharply in recent months.
6. Profit margins continue to ease.
Source: @WSJ Read full article
7. The VIX/MOVE ratio (equity vol vs. rates vol) hit the lowest level since 1996.
8. Next, we have some performance data from last week.
• Sectors:
Here is healthcare:
• Equity factors:
• Macro basket pairs’ relative performance:
– High vs. low operating leverage:
– Strong vs. weak balance sheet:
• Thematic ETFs:
• Largest US tech stocks:
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Credit
1. The iBoxx High Yield Bond ETF (HYG) shows improving breadth.
Source: SentimenTrader
But the ETF saw substantial outflows last week.
Source: @isabelletanlee, @VildanaHajric, @markets Read full article
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2. Lower-rated bonds have been outperforming.
Source: MarketDesk Research
3. Here is last week’s performance by asset class.
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Global Developments
1. The US dollar remains capped below long-term resistance after a false breakout last year.
Source: Symbolik
Hedge funds have turned bearish on the dollar.
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2. The NBFI (non-bank financial institutions) sector has more than doubled since 2008.
Source: ING
3. Here is last week’s performance data for advanced economies.
• Currency indices:
• Bond yields:
• Large-cap equity indices:
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Food for Thought
1. Net migration by US region:
Source: BLS
2. Population pyramids for US Latino vs. non-Latino populations:
Source: Census Bureau Read full article
3. Global food per capita:
Source: Oxford Economics
4. Concerns about total mobilization in Russia:
Source: Alpine Macro
5. The hottest June on record:
Source: @financialtimes Read full article
6. Political polarization:
Source: Alpine Macro
7. Self-identification on social issues:
Source: Gallup Read full article
8. Views on gender-neutral pronouns:
Source: @axios Read full article
9. Cricket team ratings:
Source: The Economist Read full article
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