Posted on by The Daily Shot Editor: Lev Borodovsky

Housing prices keep outpacing wages

The Daily Shot: 26-Jul-23
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought

 

The United States

1. The Conference Board’s consumer confidence index confirmed the July gains we saw in the U. Michigan’s report.
 

 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
• Robust employment and stock market gains contributed to improving mood. Here are the contributions to the Conference Board’s index.
 
Source: Mizuho Securities USA  
 
• The report showed a sharp gain in stock market sentiment.
 

 
• Confidence in the labor market strengthened.
 

 
• Will we see a rebound in consumer spending growth?
 
Source: Pantheon Macroeconomics  
 
• The spread between consumer expectations and current conditions still signals a recession ahead.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. Home prices continued to rise in May amid depressed inventories.
 

 
• Housing prices keep outpacing wages.
 

 
• By the way, residential construction has been running well below household formation for over a decade.
 
Source: Nomura Securities  

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3. The Richmond Fed’s regional manufacturing index continues to show deteriorating factory activity, …
 

 
… as inventories climb.
 

 
Price pressures are easing.
 

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4. The Philly Fed’s regional services index signaled an improvement in July.
 

 
5. The Johnson Redbook index of same-store sales remains below last year’s levels.
 

 
6. Nomura expects a sharper pace of Fed rate cuts than the market in 2025.
 
Source: Nomura Securities  

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The United Kingdom

1. The CBI report points to some improvement in industrial orders, …
 

 
Source: Reuters   Read full article  
 
… contradicting the PMI data.
 
Source: Pantheon Macroeconomics  
 
• Gains in selling prices have been moderating.
 

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2. UK inflation-linked debt has been costly for the government.
 
Source: @WSJ   Read full article  

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The Eurozone

1. Germany’s Ifo index declined again this month.
 

 
Source: ifo Institute  

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2. Euro-area demand for business loans is crashing.
 

 
Source: @economics   Read full article  

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3. The Eurozone-US divergence in economic surprises persists.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
4. Households have been shifting cash from overnight deposits into higher-yielding products.
 
Source: Deutsche Bank Research  
 
5. Here is Spain’s PPI.
 
Source: Arcano Economics  

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Europe

1. The Swiss franc has been surging, approaching a multi-year high versus the euro.
 

 
2. Norway’s manufacturing confidence hit the lowest level since the COVID shock.
 

 
3. Poland’s unemployment rate continues to fall.
 

 
4. This chart shows the annual changes in housing transactions in 2021 and 2022.
 
Source: Eurostat   Read full article  

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Japan

1. Services PPI declined sharply last month.
 

 
2. Here is the CPI forecast from ING.
 
Source: ING  

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Asia-Pacific

1. South Korea’s consumer confidence continues to improve.
 

 
Separately, this chart shows South Korea’s GDP growth forecast from ING.
 
Source: ING  

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2. Singapore’s GDP growth has slowed, although sequential gains in services offset declines in manufacturing.
 
Source: Barclays Research  
 
3. Australia’s CPI report surprised to the downside.
 
• Headline CPI:
 

 
• Core CPI:
 

 
The Aussie dollar declined in response to the CPI print.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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China

1. Economists are downgrading their GDP forecasts, …
 

 
… and lowering the CPI projections.
 

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2. Stocks bounced this week on stimulus hopes.
 

 
Source: Reuters   Read full article  

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3. Aggregate financing growth slowed last month.
 
Source: Barclays Research  
 
Corporate long-term loans and household loans improved in June.
 
Source: Barclays Research  

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4. This chart shows China’s clean energy capacity additions.
 
Source: @climate   Read full article  

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Emerging Markets

1. Let’s begin with Mexico.
 
• The peso has been surging.
 

 
Is it overvalued?
 
Source: Capital Economics  
 
• Economic activity was flat in May (but still robust).
 

 
• Inflation continues to ease.
 

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2. Brazil’s inflation has declined sharply.
 

 
Rate cuts are coming. Here is the money market curve (%).
 

 
• Brazil’s consumer confidence continues to improve.
 

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3. Turkey’s capacity utilization keeps rising.
 

 
4. Nigeria’s central bank hiked rates again amid rising inflation.
 

 
5. EM debt has been outperforming equities.
 
Source: TS Lombard  

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Cryptocurrency

Bitcoin is back below $30k and testing support at the 50-day moving average.
 

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Commodities

1. US cotton futures have been surging due to dry conditions for the Southern Plains and Delta regions.
 

 
2. Global commodity flows remain robust.
 
Source: JP Morgan Research; @VolatilityMgmt  

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Energy

1. Investors are betting on offshore drillers.
 

 
Here is the offshore CapEx over time.
 
Source: @WSJ   Read full article  

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2. Based on current cash flow, energy companies look cheap.
 
Source: @markets   Read full article  
 
3. Saudi oil revenue hit the lowest level since 2021.
 
Source: @mburtonmetals, @markets   Read full article  

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Equities

1. The Dow winning streak continues.
 

 
2. There isn’t much risk priced into this week’s FOMC meeting. The chart shows the S&P 500 one-week skew around FOMC meetings.
 
Source: Nomura Securities; @WallStJesus  
 
3. Stocks benefiting from AI advances continue to outperform.
 

 
How much could AI adoption boost corporate earnings over the next two decades?
 
Source: Goldman Sachs  

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4. US IPO activity has been depressed this year.
 
Source: S&P Global Market Intelligence  
 
Here is the global IPO activity by quarter.
 
Source: @MikeZaccardi, @WallStHorizon   Read full article  
 
Will post-IPO share outperformance boost IPO activity later this year?
 
h/t Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  

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5. S&P 500 valuations are stretched, according to BCA Research.
 
Source: BCA Research  
 
6. The divergence between big tech and real yields is similar to what we saw in the late 1990s.
 
Source: Alpine Macro  
 
7. The median number of holdings among new indexes declined sharply between 2003 and 2007 before steadying over the most recent 15 years. According to Morningstar, most indexes have shifted away from market-cap weighting.
 
Source: Morningstar   Read full article  
 
Most indexes do not have long track records when they become the target of a fund.
 
Source: Morningstar   Read full article  

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Credit

1. The spread between BBB and single-A corporate bonds has been tightening, an indication of growing risk appetite in the investment-grade market.
 

 
2. CLO issuance has been slow relative to last year.
 
Source: Deutsche Bank Research  
 
Secondary CLO spreads continue to tighten.
 
Source: Deutsche Bank Research  

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3. This chart shows leveraged loan defaults.
 
Source: Torsten Slok, Apollo  
 
4. Here are the industries with the highest levels of distressed debt.
 
Source: @business   Read full article  

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Rates

1. The 10-year Treasury yield is entering a seasonally weak period.
 
Source: Deutsche Bank Research  
 
2. The real-yield curve has been inverting rapidly as short-term inflation expectations ease.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
Here is the global real-yield curve.
 
Source: Simon White, Bloomberg Markets Live Blog  

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3. Treasury fund flows remain robust.
 
Source: BofA Global Research  

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Global Developments

1. Financial conditions have tightened across developed markets, driven by higher borrowing costs and lower credit availability.
 
Source: Capital Economics  
 
2. Is the IMF too optimistic about next year’s GDP growth in advanced economies?
 
Source: Oxford Economics  
 
3. Leading indicators signal a rebound in global manufacturing activity (2 charts).
 
Source: Deutsche Bank Research  
 
Source: BCA Research  

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4. M&A activity remains soft.
 
Source: S&P Global Market Intelligence  
 
5. Next, we have the productivity of G7 small and medium-sized companies.
 
Source: @financialtimes   Read full article  

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Food for Thought

1. Labor force participation among Americans with disabilities:
 

 
• Employment growth:
 
Source: USAFacts  

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2. Employment share exposed to AI automation:
 
Source: Goldman Sachs; @dailychartbook  
 
3. Travel time to abortion facilities:
 
Source: @WSJ   Read full article  
 
4. Impeachment censure and contempt fervor:
 
Source: @axios   Read full article  
 
5. The US Congress is older than the US workforce:
 
Source: @TheDailyShot  
 
6. US pedestrian deaths:
 
Source: @axios   Read full article  
 
7. Auto insurance inflation in the US:
 
Source: @WSJ   Read full article  
 
8. The street price of a gram of cocaine:
 
Source: Statista  
 

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