The Daily Shot: 11-Aug-23
• The United States
• Europe
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Commodities
• Equities
• Credit
• Rates
• Food for Thought
The United States
1. The July CPI report was in line with expectations, pointing to moderating inflationary pressures.
– Headline CPI (month-over-month):
– Core CPI:
• The core goods CPI was negative again, …
… as vehicle prices declined.
Used vehicle CPI could fall further.
Source: Pantheon Macroeconomics
• The core services CPI increased.
Here is a look at housing inflation, which remains elevated.
– Rent:
– Owners’ equivalent rent:
– Private indicators of rent costs point to further easing in housing inflation.
Source: ING
– By the way, excluding shelter, the overall CPI is well below 2%.
Source: @jayparsons
Here is how much shelter contributes to the monthly CPI changes.
Source: BCA Research
• Supercore inflation (core services excluding housing) remains subdued.
Source: @TheTerminal, Bloomberg Finance L.P.
• The percentage of CPI components that are greater than 2% declined sharply in July.
Source: @RobinBrooksIIF
• Despite hopeful signs on the inflation front, Fed officials remain cautious.
Source: @economics Read full article
Concerns persist about inflation remaining stubbornly high or re-accelerating, as we saw in the 1970s.
Source: @JeffreyKleintop
Source: FXS Read full article
We will have more data on inflation next week.
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2. The market is increasingly convinced that the Fed will be on hold in September.
The implied terminal rate has been drifting lower in recent weeks.
• Treasury yields jumped after the CPI report.
Real yields also climbed.
• Equities rallied initially but ended up closing flat on the day.
• The dollar was higher.
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3. The Atlanta Fed’s wage growth tracker is holding above 5%, which adds to inflation re-acceleration concerns.
4. Initial jobless claims popped last week.
Continuing claims are holding steady.
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5. The federal budget deficit widened more than expected in July and is now more than double last year’s gap.
Source: MarketWatch Read full article
Interest payments continue to surge.
Source: Oxford Economics
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Europe
1. Dutch industrial sales are down 10% from a year ago.
2. The spread between output and new orders in Germany’s PMI points to trouble ahead. Production is too high, given weaker demand.
Source: @SPGlobalPMI, @HCOB_Economics
3. Next, we have some updates on Sweden.
• Industrial production tumbled in June.
• Services output edged lower.
• Here is the composite business sector production.
Source: Nordea Markets
• Household consumption has been trending lower.
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4. Norway’s core CPI is off the highs but remains elevated. Another rate hike is on the way (25 bps).
5. Denmark’s inflation jumped last month.
Source: @economics Read full article
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Japan
1. Foreigners have been dumping JGBs.
2. Terms of trade have improved sharply as commodity prices fell.
Source: BoJ Read full article
3. This chart shows the number of visitors to Japan.
Source: BoJ Read full article
4. The PPI is moderating.
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Asia-Pacific
1. Taiwan’s inflation is not slowing.
2. Singapore’s Q2 GDP growth surprised to the downside.
3. New Zealand’s manufacturing contraction accelerated last month.
4. Next, we have some updates on Australia.
• Elevated inflation could increase the chance of additional rate hikes.
Source: ING
• Household spending has been subdued.
Source: @ANZ_Research
• AUD/USD appears undervalued.
Source: ING
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China
1. Moody’s downgraded Country Garden’s debt to a near-default level.
Source: Moody’s Investors Service Read full article
Bonds hit a new low.
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2. The stock market retreated on concerns about property developers.
Hong Kong and international investors withdrew a significant amount of capital from mainland Chinese stocks.
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3. The renminbi has reversed its recent bounce, …
… even as Beijing continues its attempts to prop up the currency.
The rate differential with the US has made supporting China’s currency more challenging.
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Emerging Markets
1. India’s central bank held rates unchanged but remained hawkish, …
Source: Capital Economics Read full article
… amid elevated food prices.
Source: Barclays Research
USD/INR is at resistance.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. Turkey’s manufacturing output has been surging this year.
3. Egypt’s inflation continues to climb.
4. The Philippine GDP unexpectedly contracted last quarter.
Source: @economics Read full article
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5. The Mexican peso appears overbought versus the dollar.
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Commodities
1. Industrial metals have been selling off.
2. This chart shows LNG import capacity additions globally.
Source: @EIAgov
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Equities
1. The S&P 500’s uptrend has been losing momentum as breadth weakens. Important support is around 4,300.
Source: Aazan Habib, Paradigm Capital
• Historically, the rally in US stocks stalls toward the end of pre-election years.
Source: @AlmanacTrader
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2. Speculative stocks are under pressure.
3. Retail buying has been strong, but a seasonal slowdown is coming (2 charts).
Source: Vanda Research
Source: Vanda Research
Retail investor dip buying is alive and well.
Source: Vanda Research
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4. Next, we have some sector updates.
• Are US bank shares oversold?
Source: BCA Research
US bank shares have massively underperformed global peers.
Source: Capital Economics
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• The rally in tech stocks relative to the S&P 500 is starting to fade.
• The consumer discretionary sector is testing resistance relative to the S&P 500.
• Healthcare funds registered some inflows.
Source: BofA Global Research
• Globally, energy and materials were a drag on earnings growth.
Source: Deutsche Bank Research
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5. US stock valuations are too high, given the relatively tight financial conditions.
Source: Stifel
6. Over the past 30 years, hedge funds have experienced lower drawdowns versus the S&P 500, possibly because of their lower aggregate exposure to equity risk. (2 charts)
Source: Unlimited ETFs Read full article
Source: Unlimited ETFs Read full article
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Credit
1. CLO returns have been strong this year.
Source: Deutsche Bank Research
2. Private credit funds are boosting their investments in consumer debt (ABF = asset-backed finance).
Source: @business Read full article
3. Muni auctions have slowed.
Source: Bloomberg Law Read full article
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Rates
1. Treasury fund inflows will hit a record this year.
Source: BofA Global Research
2. Elevated inflation expectations suggest that Treasury term premium will rise.
Source: Simon White, Bloomberg Markets Live Blog
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Food for Thought
1. Full-time days working from home:
Source: The Economist Read full article
2. US poverty rates:
Source: USAFacts
3. Confidence in the US military:
Source: Gallup Read full article
4. Change in homicides from last year:
Source: The Economist Read full article
5. Greenhouse gas emitters:
Source: @financialtimes Read full article
6. China vs. Japan vehicle exports:
Source: Caixin Read full article
7. The most populous countries:
Source: Statista
8. The economics of coffee:
Source: @chartrdaily
9. Share of US marriages that took place in Nevada:
Source: @TheDailyShot Further reading
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Have a great weekend!
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