The Daily Shot: 25-Jul-23
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia-Pacific
• China
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought
The United States
1. The services PMI index from S&P Global declined in July but remained in growth territory (PMI > 50). Business outlook and hiring softened.
Source: Reuters Read full article
• On the other hand, factory activity showed signs of improvement, …
… as outlook brightened.
• Separately, the rising stock/bond ratio points to a recovery in the ISM manufacturing PMI.
Source: Alpine Macro
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2. Easing financial market conditions will have some Federal Reserve officials advocating for further tightening.
Source: Oxford Economics
3. Fed officials track supercore inflation closely because it tends to align with wage growth.
Source: BlackRock Investment Institute
4. Labor market imbalances continue to ease as job openings moderate.
Source: Goldman Sachs
Fewer firms are mentioning labor shortages on earnings calls.
Source: Goldman Sachs
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5. Next, we have some data on student debt.
• by income:
Source: Oxford Economics
• by age group:
Source: Merrill Lynch
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6. The AEI Housing Center analysis suggests that the year-over-year home price changes never dipped below zero in this cycle and are now rebounding.
Source: AEI Housing Center
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Canada
1. Economists are revising this year’s GDP growth higher.
2. Collective bargaining has sharply boosted wages in Canada.
Source: Scotiabank Economics
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The United Kingdom
1. Just like in the US, service sector growth is slowing.
• UK manufacturing activity moved deeper into contraction territory.
• Output price inflation across services and manufacturing is moderating, …
… signaling declines in the CPI.
Source: Pantheon Macroeconomics
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2. The US-UK 10-year spread is tightening.
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The Eurozone
1. As we saw yesterday, Germany’s PMI figures point to economic headwinds.
– Services activity is slowing, and business outlook is deteriorating.
– Manufacturing contraction is accelerating as demand tumbles.
• French PMI indicators point to a GDP contraction.
– Services:
– Manufacturing:
– Manufacturing employment:
– French composite PMI vs. GDP:
Source: Pantheon Macroeconomics
• The euro-area composite PMI shows shrinking business activity.
• Recession?
Source: Pantheon Macroeconomics
Source: Reuters Read full article
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2. The downside PMI surprise sent the Citi Economic Surprise Index sharply lower.
3. Bankruptcies have been rising.
Source: IMF Read full article
4. This table shows potential ECB scenarios this week and expected market responses (from ING).
Source: ING
A 25 bps rate hike this week is baked in, and there is an 80% chance of another 25 bps hike this year.
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Europe
1. Czech business confidence was stable this month, and consumer sentiment is rebounding.
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2. Earnings growth has been mixed across sectors, while expectations sharply declined alongside weaker economic data. Could we see surprise earnings beats? (2 charts)
Source: PGM Global
Source: PGM Global
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3. This piechart shows the contributions to the EU’s industrial production.
Source: Eurostat Read full article
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Japan
1. Wage growth surged this year.
Source: @ANZ_Research
2. The labor force is expected to contract significantly in the decades ahead.
Source: Capital Economics
3. The JGB market implied volatility has been surging amid BoJ policy uncertainty.
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Asia-Pacific
1. South Korea’s Q2 GDP print was better than expected, …
… boosted by net exports as imports tumbled. Domestic demand weakened.
Source: Reuters Read full article
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2. Taiwan’s industrial production dropped below 2020 levels.
Nonetheless, the unemployment rate continues to fall.
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3. Singapore’s CPI is slowing.
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China
1. Crashing producer prices will pressure corporate earnings.
Source: BCA Research
2. The July SMI report showed contracting business activity.
• Services:
Source: World Economics
• Manufacturing:
Source: World Economics
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3. The CSI 300 Index is testing long-term support.
• For now, the Hang Seng Index remains capped below its 100-week moving average with negative momentum.
• Variant Perception’s models show tactical upside for Chinese and Hong Kong stocks, assuming additional liquidity support flows through into asset prices.
Source: Variant Perception
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4. Here is why some US firms have been relocating from China.
Source: Oxford Economics
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Cryptocurrency
1. So far, XRP is the top traded altcoin this year based on trading volume.
Source: @KaikoData
2. Crypto funds saw another week of inflows led almost entirely by long-bitcoin products. Investors continued to exit short-bitcoin funds for the 12th straight week. (2 charts)
Source: CoinShares Read full article
Source: CoinShares Read full article
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3. Binance’s share of the US crypto market has collapsed.
Source: @WSJ Read full article
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Commodities
1. High-protein wheat (used to make bread and pasta) was up almost 7% on Monday in response to the Ukraine situation.
2. Wholesale cheddar cheese prices are surging.
3. Orange juice futures hit a record high.
Source: @markets Read full article
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4. Is copper ready for a breakout?
5. Here is a look at lithium reserves by country.
Source: @chartrdaily
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Energy
1. Brent is testing resistance at the 200-day moving average.
Source: Reuters Read full article
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2. US rig count keeps moving lower.
3. Air travel continues to grow.
Source: @ANZ_Research
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Equities
1. The S&P 500 risk premium hit the lowest level in two decades, which will be a headwind for longer-term returns.
• The S&P 500 PE ratio has diverged from real yields.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. Realized volatility in the S&P 500 and Nasdaq has plummeted to its lowest level since 2021.
3. Stock prices have diverged from other leading indicators.
Source: Quill Intelligence
4. The S&P 500 has retraced roughly 78% of its peak-to-trough decline, which historically preceded the start of a new uptrend. (2 charts)
Source: @GinaMartinAdams
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5. The S&P 500 concentration surged in recent months.
Source: Morgan Stanley Research; @dailychartbook
6. Defensives continue to lag.
7. Earnings revisions breadth has turned lower.
Source: Morgan Stanley Research; h/t @dailychartbook
8. This figure shows the average real and nominal return of a 60/40 equity/bond portfolio across inflation regimes between 1875-2021…
Source: CFA Institute Read full article
…and global factor premiums.
Source: CFA Institute Read full article
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9. The semiconductor rally is not yet supported by chip sales.
Source: @ANZ_Research
10. Previous stock market rallies during a recession occurred after low initial valuations, especially post-war, or in the formation of a bubble. (2 charts)
Source: Capital Economics
Source: Capital Economics
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Credit
1. US high-yield market maturities continue to shorten as issuance (refi) remains weak.
Source: Morgan Stanley Research
2. This is the first US non-revolving debt contraction in 12 years, underpinned by tighter lending standards.
Source: FHN Financial
3. Here is the upgrade-to-downgrade ratio.
Source: JP Morgan Research; @dailychartbook
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Rates
1. Alpine Macro has a fair value estimate at 2.8% for the 10-year Treasury yield.
Source: Alpine Macro
2. Speculative positioning in Treasury futures remains extremely bearish.
Source: Deutsche Bank Research
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Food for Thought
1. Weekend box office gross proceeds:
Source: @chartrdaily
2. Netflix subscriber growth:
Source: Earnest Analytics Read full article
3. Participation in sports:
Source: Statista
4. Practicing yoga:
Source: Statista
5. Melanoma in Florida:
Source: @axios Read full article
6. Border Patrol apprehensions at the US southwest border:
Source: CBP
7. A look at political polarization around the world:
Source: Alpine Macro
8. GOP candidates campaigning in Iowa and New Hampshire:
Source: FiveThirtyEight Read full article
9. Planning a trip:
Source: LendingTree Read full article
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