The Daily Shot: 18-Jul-23
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Food for Thought
The United States
1. The NY Fed’s manufacturing index, the first regional report of the month, held in positive territory in July.
• Factories are hiring again, …
… and no longer cutting workers’ hours.
• Price gains continue to slow.
• CapEx plans remain soft.
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2. The stock market continues to signal a rebound in US manufacturing activity.
Source: @TheTerminal, Bloomberg Finance L.P.
This chart shows Deutsche Bank’s discretionary investors’ equity positioning versus the ISM Manufacturing PMI.
Source: Deutsche Bank Research
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3. The proportion of higher-income households worried about making debt payments is rising.
Source: Torsten Slok, Apollo
4. Here are the CPI forecasts based on the WSJ survey.
Source: @WSJ Read full article
Morgan Stanley sees core inflation running below the Fed’s forecast this year.
Source: Morgan Stanley Research
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5. The drop in federal government receipts looks recessionary.
Source: Piper Sandler
However, the recession “can” keeps getting kicked down the road.
Source: BCA Research
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6. Goods consumption remains above trend relative to services consumption.
Source: BCA Research
7. The chart illustrates the four-decade decline in corporate inventories as a percentage of GDP, underscoring their diminishing role in economic activity.
Source: UBS Research
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Canada
1. Wholesale trade jumped in May.
2. Home prices are rising again.
Source: @WSJ Read full article
• Housing shortages remain a persistent problem, especially for newcomers.
Source: PGM Global
• The rental market is also tight.
Source: PGM Global
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The United Kingdom
1. The probability of a recession in the next 12 months is at 60%, according to the latest Bloomberg survey.
Economists downgraded their forecasts for next year’s GDP growth.
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2. Durable goods inflation has been rising despite a higher inventory-to-sales ratio.
Source: ING
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The Eurozone
1. The gap between the euro-area and US economic surprises hit extreme levels.
Source: BCA Research
2. Economists are downgrading their projections for Germany’s economic growth.
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3. This chart shows the changes in house prices in Q1 by country.
Source: ING
4. How “green” is household energy consumption across the Eurozone?
Source: ING
5. This is a mistake …
Source: IEA
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Asia-Pacific
1. Nikkei 225 futures activity spiked as Japanese equities experienced a multi-decade high in Q2. 75% of trades occurred outside of Tokyo cash hours, according to CME Group.
Source: CME Group
Equity fund flows surged.
Source: Morningstar
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2. Integrated circuit exports remain depressed.
Source: S&P Global Market Intelligence
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China
1. The post-lockdown economic rebound has been lackluster.
Source: @economics Read full article
• Most investors don’t expect economic growth to accelerate.
Source: BofA Global Research
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2. June industrial production growth was higher than expected.
3. Although the year-over-year growth in retail sales has decelerated, it comes off a high baseline.
Here is a seasonally-adjusted index of retail sales.
Source: Commerzbank Research
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4. Property investment remains weak.
This chart shows China’s residential construction starts.
Source: Arcano Economics
And here are residential real estate transactions.
Source: Arcano Economics
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5. Youth unemployment continues to climb.
6. Households remain cautious.
Source: Nordea Markets
7. China’s equities continue to lag global peers, …
Source: Capital Economics
… trading at substantial discounts.
Source: Capital Economics
But the rise in excess liquidity could support equities, assuming monetary stimulus is absorbed by the real economy.
Source: Variant Perception
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Emerging Markets
1. Brazil’s economic activity dropped sharply in May.
2. Is Peru in recession?
3. Colombia’s manufacturing output bounced in May.
The Colombian peso is surging.
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4. Nigeria’s CPI keeps rising.
5. Next, let’s take a look at ASEAN’s economic relationship with China and the US.
• ASEAN map:
• Foreign direct investment:
Source: Gavekal Research
• The Economic Influence Index:
Source: Gavekal Research
• China’s infrastructure investment:
Source: Gavekal Research
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Cryptocurrency
1. Bitcoin is testing support at 30k.
• Bitcoin continues to trade with relatively low volatility.
Source: @glassnode
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2. Crypto funds continued to see inflows last week. According to CoinShares, this has been the largest run of inflows since late-2021.
Source: CoinShares Read full article
Long-bitcoin funds accounted for most inflows last week, while investors exited short-bitcoin products.
Source: CoinShares Read full article
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3. XRP’s trading volume spiked over the past week.
Source: @KaikoData
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Commodities
1. Fund managers are underweight commodities.
Source: BofA Global Research
2. North American steel prices have diverged from the ISM manufacturing PMI.
Source: PGM Global
3. The gold/silver price ratio appears extended.
Source: BCA Research
• Silver demand has exceeded supply by a large margin.
Source: BCA Research
• CTAs have been boosting their exposure to gold.
Source: Deutsche Bank Research
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4. China’s pork output continues to climb.
Source: Reuters Read full article
Nonetheless, US pork belly prices are surging.
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5. Arabica coffee futures hit the lowest level since January.
6. How does El Niño impact wheat production?
Source: Capital Economics
How about corn output?
Source: Capital Economics
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Energy
1. Money managers boosted their exposure to crude oil and refined products last week.
Source: @JKempEnergy
2. Oxford Economics lowered its forecast for Brent prices …
Source: Oxford Economics
… on weaker expected demand.
Source: Oxford Economics
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3. A significant global expansion of utility-scale battery installations is slated for the upcoming years.
Source: The Economist Read full article
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Equities
1. According to BofA’s fund manager survey, the disparity in sentiment between institutional and retail investors has reached unprecedented levels.
Source: BofA Global Research
• JP Morgan’s clients are bearish.
Source: JP Morgan Research; @WallStJesus
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2. Equity positioning is stretched, according to Goldman.
Source: Goldman Sachs; h/t @dailychartbook
3. Poor breadth does not necessarily portend weak returns over the following year.
Source: Goldman Sachs
• Market participation tends to widen.
Source: Goldman Sachs
This chart illustrates this year’s improvement in breadth.
Source: S&P Dow Jones Indices
• The equal-weight index tends to rebound after tech concentration peaks.
Source: S&P Dow Jones Indices
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4. US small-cap growth stocks are improving after a period of low volatility.
Source: Aazan Habib, Paradigm Capital
5. Corporate sales growth historically slows as inflation eases, creating potential margin pressure.
Source: MarketDesk Research
6. Next, we have some sector trends.
• Telecoms (under pressure):
Source: Yahoo Finance Read full article
• Deutsche Bank’s positioning indicator:
Source: Deutsche Bank Research
• Fund flows:
Source: Deutsche Bank Research
• Which sectors had the strongest earnings guidance?
Source: BofA Global Research; h/t @dailychartbook
• Weak ISM manufacturing PMIs typically precede higher returns for US industrial stocks only when valuations are low.
Source: MarketDesk Research
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7. The one-day implied volatility index hit a new low.
.
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Rates
1. Market-based real short-term rates show that the Fed’s policy is restrictive.
• 2yr TIPS yield:
• Real 1yr OIS:
The market is now expecting steeper Fed rate cuts ahead.
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2. Higher US rates have led to a strong influx of Treasury purchases.
Source: BCA Research
3. Options traders are betting on a rally in long-term Treasuries.
Source: @TheTerminal, Bloomberg Finance L.P.
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Food for Thought
1. Risk-averse CFOs:
Source: @axios Read full article
2. Some famous asset bubbles:
Source: @genuine_impact
3. Students’ perception of US public schools:
Source: Gallup Read full article
4. China’s exports of semi trucks to Russia:
Source: @jakluge
5. Changes in Russia’s population:
Source: @WSJ Read full article
6. Medications too expensive to take:
Source: @TheDailyShot
7. US youth suicide and homicide rates:
Source: @axios Read full article
8. DACA recipients:
Source: @axios Read full article
9. Successful Everest ascents:
Source: @chartrdaily
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