The Daily Shot: 27-Jul-23
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. The Fed raised rates as expected and signaled readiness for additional increases.
Source: @economics Read full article
• Most economists now think this was the last increase of the cycle. ANZ’s adjusted Taylor Rule suggests that the current fed funds rate is optimal.
Source: @ANZ_Research
• Market reaction was muted, viewing the Fed’s action as marginally dovish. The implied terminal rate edged lower, …
… and bond yields declined.
• The dollar sold off …
… sending commodity prices higher.
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2. Mortgage application softened last week, …
… as did the rate lock count.
Source: AEI Housing Center
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3. While new home sales saw a pullback in June, …
… they are still up 25% versus last year.
• Measured in months of supply, new home inventories climbed.
• This chart shows the median price of new houses sold.
Source: Chart and data provided by Macrobond
And here is the distribution of sales by price range.
Source: Calculated Risk
• The number of homes sold but not started increased in June.
Source: Wells Fargo Securities
• The gap between houses sold and those under construction is narrowing.
Source: Chart and data provided by Macrobond
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4. This chart shows the drivers of non-residential investment in structures.
Source: Nomura Securities
5. Finally, here are the destinations for US companies relocating activity out of China.
Source: Oxford Economics
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The United Kingdom
1. This graphic shows ING’s scenarios for the BoE decision this week.
Source: ING
2. Housing affordability continues to deteriorate.
Source: Longview Economics
• House prices face significant downside risks as net demand slumps. “New buyer enquiries” is a proxy for buyers entering the market, and “vendor instructions” indicate sellers entering the market.
Source: Longview Economics
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The Eurozone
1. Loan growth continues to slow, …
Source: @WSJ Read full article
…. amid the recent spike in rates …
Source: Capital Economics
… and tighter bank lending standards.
Source: ECB
• Liquidity is deteriorating rapidly, …
… pointing to further weakness in business activity.
Source: Pantheon Macroeconomics
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2. Households’ overnight deposits are falling, …
h/t Pantheon Macroeconomics
… partially due to the shift to term deposits (to get higher yields).
Source: Capital Economics
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3. French consumer confidence held steady this month.
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Europe
1. USD/CHF is near the lowest levels since the 2015 cap removal.
2. This chart shows the main components of industrial production in the EU.
Source: Eurostat Read full article
3. Water supplies are dwindling.
Source: The Economist Read full article
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Japan
1. Foreigners dumped JGBs last week.
2. The JGB implied volatility continues its ascent as uncertainty surrounding BoJ policy lingers.
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Asia-Pacific
1. Singapore’s industrial production increased last month.
2. Rising exports in South Korea could bode well for earnings. (2 charts)
Source: PGM Global
Source: PGM Global
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China
1. The real estate sector underwent forced deleveraging in recent years. According to Gavekal, this is mainly because of tighter financial regulation, although private developers have accumulated non-debt liabilities via pre-sales. (2 charts)
Source: Gavekal Research
Source: Gavekal Research
2. This chart shows developers’ completions versus starts.
Source: @ANZ_Research
3. This figure compares China’s household leverage to that of the US in the run-up to the GFC.
Source: Barclays Research
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Emerging Markets
1. Brazil’s FDI has been dropping.
2. India’s business activity remained in growth mode this month, according to the World Economics SMI report.
Source: World Economics
3. EM valuations are slightly above average, although many countries remain relatively cheap. (2 charts)
Source: TS Lombard
Source: TS Lombard
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Cryptocurrency
1. Bitcoin’s correlation with the S&P 500 continues to decline.
Source: @KaikoData
2. Each BTC rally and correction since the FTX fallout has seen an uptick in short-term holder profit or loss. This suggests that positions established in recent months experienced rapid price swings around the average cost basis.
Source: @glassnode
3. BTC’s put/call ratio ticked higher over the past week.
Source: The Block Research
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Commodities
1. Cocoa prices are surging due to concerns about future production amid tight inventories.
Source: Reuters Read full article
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2. Orange juice futures hit another record high.
Source: Markets Insider Read full article
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Energy
US gasoline inventories are rising.
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Equities
1. Profit margins are at pre-COVID levels and headed lower.
Source: FactSet Read full article
2. The share of unprofitable Russell 2000 companies remains elevated.
Source: Merrill Lynch
3. Retail investors are boosting their share of call option buying.
Source: Barclays Research
4. The recent market action does not look like a bear-market rally.
Source: Simon White, Bloomberg Markets Live Blog
5. US value stock valuations are still below their long-term average relative to growth.
Source: J.P. Morgan Asset Management
6. Hedge funds’ stock picks have been outperforming since May.
7. The Dow’s winning streak takes us back to 1987, a few months before Black Friday.
8. This chart shows cumulative fund flows by sector.
Source: Deutsche Bank Research
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Credit
1. Prime money market funds experience inflows during rate hike cycles, while government funds face outflows. However, in March of this year, government money market funds became a haven for depositors.
Source: Deutsche Bank Research
2. This chart shows cumulative Fed rate hikes versus changes in bank deposit rates.
Source: Nomura Securities
3. As a share of profits, corporate interest costs have been falling despite the recent surge in interest rates.
Source: @albertedwards99 Read full article
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Global Developments
1. Retail sales have generally been weak in developed markets outside of the US over the past year.
Source: Capital Economics
2. Which countries are most dependent on exports to China?
Source: Wells Fargo Securities
3. How much could AI adoption boost productivity over the next decade?
Source: Goldman Sachs
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Food for Thought
1. 13-year-old students reading for fun:
Source: @chartrdaily
2. Student loan borrowers by age group:
Source: Wells Fargo Securities
3. Trade school or a 4-year college?
Source: @CivicScience Read full article
4. Annual childcare costs in the US:
Source: @TheDailyShot
5. North Korea’s trading partners:
Source: Statista
6. A survey of OBGYNs:
Source: Statista
7. Nuclear reactors under construction:
Source: The Economist Read full article
8. GOP presidential candidates’ primary polls:
Source: FiveThirtyEight
• Betting markets’ nomination probabilities:
Source: @PredictIt
• Small-dollar donations:
Source: @axios Read full article
• Candidates who qualified for the first round of RNC debates:
Source: Statista
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9. Tipping in US – Americans vs. foreigners:
Source: @TheDailyShot
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