The Daily Shot: 15-Aug-23
• China
• Japan
• Europe
• The United Kingdom
• Canada
• The United States
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Alternatives
• Credit
• Rates
• Global Developments
• Food for Thought
China
1. The PBoC unexpectedly cut its one-year benchmark rate as economic activity slumps, …
Source: Reuters Read full article
… and deflationary pressures push real rates higher.
Source: The Economist Read full article
• Market-based rates slipped further.
• The rate differential with the US keeps moving further into negative territory, which is pressuring the renminbi.
• China’s currency continues to weaken vs. the dollar, …
… even as Beijing attempts to drive it higher.
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2. Economic activity in July was softer than expected.
• Industrial production:
• Retail sales:
• Real estate investment:
China stopped reporting youth unemployment as the indicator created a PR nightmare for Beijing.
Source: @economics Read full article
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3. The credit impulse is rolling over.
Source: Barclays Research
4. The property credit crisis is spreading, with dollar-denominated bonds tumbling.
Source: Reuters Read full article
• Country Garden bond price:
• Gemdale:
• Agile Group:
• Longfor:
Source: @markets Read full article
• Developers’ share prices in Hong Kong:
• Could financial firms be next?
Source: @markets Read full article
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5. The EV price war is back, …
Source: @climate Read full article
… pressuring automotive stocks.
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6. This chart shows forecasts for China’s GDP growth: Capital Economics vs. consensus.
Source: Capital Economics
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Japan
1. The GDP growth was shockingly strong in Q2, …
… boosted by net exports.
Source: CNBC Read full article
However, domestic demand softened.
• Business spending:
• Private consumption:
2. Dollar-yen is above 145 as pressure on the yen persists.
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Europe
1. Economists have been lowering their unemployment forecasts for the euro area.
2. Projections for German and Italian economic growth in 2024 were revised lower.
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3. This is a nightmare scenario for Germany’s auto manufacturers.
Source: @Brad_Setser
4. The Swiss central bank continues to reduce liquidity.
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The United Kingdom
1. Economists keep lowering their projections for next year’s growth.
2. Permanent placements have been slowing, signaling some loosening in the labor market.
Source: REC
3. Wage growth accelerated in recent months.
Source: @economics Read full article
• But leading indicators suggest that wage growth should be easing.
Source: Capital Economics
• Real wages in the UK fell more rapidly for public-sector employees, leading to a surge in strikes.
Source: @resfoundation, @nyecominetti, @hcslaughter_ Read full article
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4. Surveys point to further gains in rental costs.
Source: @financialtimes Read full article
5. All the wealth is in London.
Source: @financialtimes Read full article
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Canada
1. Building permits unexpectedly increased in June.
2. New immigrants have not been the driving force behind job gains.
Source: Scotiabank Economics
3. Wages have been rising faster than inflation.
Source: Scotiabank Economics
4. The TSX Composite is stabilizing relative to the S&P 500. Could we see a period of outperformance?
Source: Aazan Habib, Paradigm Capital
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The United States
1. Let’s begin with some consumer trends.
• Household deposit balances remain elevated, according to BofA.
Source: BofA Global Research
• Incomes are up, but higher prices are pressuring consumer balance sheets.
Source: Goldman Sachs
• Consumers are starting to feel the impact of higher rates.
Source: TS Lombard
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2. Next, we have some updates on the housing market.
• Consumers are growing more optimistic about the appreciation of home prices.
• This chart shows homeownership rates by age and generation.
Source: @stlouisfed Read full article
• Next, we have the total housing value by generation.
Source: Redfin
– Here are the changes in total home equity.
Source: Redfin
• According to Realtor.com, “more shoppers are looking for homes in areas other than where they live.”
Source: realtor.com
• The share of homes worth at least $1 million is approaching the recent peak.
Source: Redfin
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3. Freight activity is slowing, …
Source: Cass Information Systems
… pressuring freight rates.
Source: Cass Information Systems
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Emerging Markets
1. The Russian ruble bounced from the lows as the central bank hiked rates by 350 bps to stabilize the currency.
Source: @financialtimes Read full article
Source: CNBC Read full article
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2. Ukraine’s trade deficit has blown out.
3. India’s exports slowed last month.
Wholesale price deflation eased in July.
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4. Argenitna’s election took an unexpected turn.
Source: Fox News Read full article
Capital outflows kicked in quickly. With insufficient foreign reserves to support the currency, Argentina permitted a significant depreciation of the peso, …
Source: @bpolitics Read full article
Source: @TheTerminal, Bloomberg Finance L.P.
… and hiked rates by 21% to arrest further declines.
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5. Brazil’s economic activity edged higher in June.
6. Colombia’s economic activity is slowing.
• Manufacturing:
• Retail sales:
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7. EM equity fund inflows accelerated in recent days.
Source: BofA Global Research
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Cryptocurrency
Bitcoin cumulative fund flows and assets under management have leveled off in recent years.
Source: CoinShares Read full article
Crypto funds saw inflows last week after a three-week run of outflows. Long-bitcoin products attracted the most capital.
Source: CoinShares Read full article
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Commodities
1. Wheat prices declined despite the Black Sea tensions.
Source: @markets Read full article
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2. Coffee futures are sharply lower.
Source: barchart.com Read full article
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3. Over the past month, agriculture prices have generally fallen while energy prices rallied.
Source: Capital Economics
4. Falling US production has been putting upward pressure on orange juice futures.
Source: @financialtimes Read full article
5. Global fund managers covered their bets against commodities.
Source: BofA Global Research
6. Diamond prices have been falling.
Source: @WSJ Read full article
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Energy
1. Fund managers are boosting their bets on diesel futures.
Source: @JKempEnergy
2. Energy supply risks remain elevated.
Source: TD Securities; @dailychartbook
3. Who is moving Russian crude?
Source: @financialtimes Read full article
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Equities
1. The market is pricing in a no-recession scenario.
Source: TS Lombard
2. Rising real rates are a headwind for stock valuations.
Source: @TheTerminal, Bloomberg Finance L.P.
3. The one-month implied correlation between S&P 500 constituents is rising from its lowest level since 2017. This typically occurs during periods of market stress.
Source: Aazan Habib, Paradigm Capital
4. One-day options now make up over 50% of the overall volume.
Source: Nomura Securities; @markets Read full article
• Traders of one-day options have turned increasingly bearish.
Source: Citi; @markets Read full article
• The overall equity call volume dropped sharply in recent days.
Source: Deutsche Bank Research
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5. The equal-weighted S&P 500 has been improving relative to the cap-weighted S&P 500, especially among cyclical value stocks. (2 charts)
Source: Stifel
Source: Stifel
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6. Next, we have some sector trends.
• Banks:
• Semiconductors:
• Metals & Mining:
Source: @WSJ Read full article
• Fund managers have been dumping REITs …
Source: BofA Global Research
… amid concerns about commercial real estate.
Source: BofA Global Research
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Alternatives
1. The velocity of US venture capital value creation (VVC) has fallen rapidly across all stages.
Source: PitchBook
2. Sales by private equity (PE) funds have slowed.
Source: @BW Read full article
3. PE deal activity this year has been the slowest since the 2020 COVID shock.
Source: S&P Global Market Intelligence
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Credit
1. Leverage loan defaults have been rising.
Source: @lcdnews
2. Single-name CDS volume surged over the past 12 months.
Source: Barclays Research; III Capital Management
3. This chart shows the maturity profile by credit category.
Source: Morgan Stanley Research; @Mayhem4Markets
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Rates
1. The 10-year TIPS yield (real rates) hit a multi-year high.
2. The largest long-dated Treasury ETF registered a significant outflow.
Source: @markets Read full article
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3. The market reaction to this year’s US debt downgrade has been quite different from the 2011 event.
Source: LPL Research
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Global Developments
1. The dollar is rising against Asian currencies.
2. Fund managers are becoming less concerned about recession risks.
Source: BofA Global Research
3. Housing prices are rebounding in interest-rate-sensitive economies like Canada and Australia.
Source: MRB Partners
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Food for Thought
1. Semiconductor industry value added:
Source: Statista
2. ChatGPT users:
Source: @chartrdaily
3. Generative AI job listings:
Source: @WSJ Read full article
4. US food insecurity on the rise:
Source: Purdue Agriculture Read full article
5. US consumption of spirits over time:
Source: The Washington Post Read full article
6. COVID-era changes in alcohol consumption and alcohol-related deaths:
Source: The Washington Post Read full article
7. Removal of shows from streaming services:
Source: @CivicScience Read full article
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