The Daily Shot: 21-Aug-23
• China
• Asia-Pacific
• Europe
• The United Kingdom
• The United States
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
China
1. Despite the turmoil in its property markets, China unexpectedly left its 5-year mortgage benchmark rate unchanged (the market expected a 15 bps cut).
Source: Yahoo Finance Read full article
Beijing lowered the one-year rate by ten basis points, a smaller-than-expected cut.
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2. The expected economic growth trends in the US and China are diverging, putting pressure on the renminbi.
Source: Barclays Research
China’s bond yields continue to fall, …
… widening the differential with the US.
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3. Despite Beijing’s forceful attempts to halt the RMB’s decline, …
Source: @TheTerminal, Bloomberg Finance L.P.
… China’s currency continues to weaken vs. USD.
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4 Both Mainland and Hong Kong-listed stocks are under pressure.
Source: @WSJ Read full article
• Flows into Mainland stocks from Hong Kong-based and foreign investors have turned negative.
Source: Barclays Research
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5. Developers’ stocks and bonds continue to struggle.
• Existing home prices are down sharply from peak levels.
Source: @economics Read full article
• Real estate sentiment continues to deteriorate as vacancies rise.
Source: @AndreasSteno Read full article
• China’s property sales are increasingly dominated by state-owned enterprises.
Source: Capital Economics
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6. Foreign direct investment is now running below last year’s levels.
7. This chart shows China’s key economic indicators (seasonally adjusted by Gavekal).
Source: Gavekal Research
8. A growing number of young people are pessimistic about China’s economy.
Source: @WSJ Read full article
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Asia-Pacific
1. South Korea’s exports are down 16.5% from last year as China’s downturn weighs on demand.
Source: @economics Read full article
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2. New Zealand’s trade deficit widened in July, …
… as exports slump.
New Zealand’s PMI signals a sharp deterioration in economic growth.
Source: Capital Economics
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3. Fund managers continue to view Asia Pacific ex-Japan equities as undervalued, according to a BofA survey.
Source: BofA Global Research
Regional investors have been overweight China and underweight Australia.
Source: BofA Global Research
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Europe
1. Euro-area construction output is running roughly in line with last year’s levels.
2. Eurozone corporate earnings are facing some headwinds.
Source: BCA Research
Investors surveyed by BofA increasingly view European equities as overvalued – a sharp rise over the past month and the highest level in three years.
Source: BofA Global Research
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3. The Swedish krona hit a new low vs. the euro.
The drawdown in Swedish government bonds has been extreme.
Source: Nordea Markets
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4. Here is a look at inflation rates across the EU.
Source: Eurostat Read full article
Airfares surged this year.
Source: @financialtimes Read full article
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The United Kingdom
1. Retail sales declined more than expected in July.
2. UK inflation has been more persistent than that in the Eurozone.
Source: Barclays Research
3. The nation’s birth rate has been falling.
Source: @financialtimes Read full article
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The United States
1. The Treasury curve bear steepening continues, pushing the 10-year yield to a multi-year high.
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2. Tighter financial conditions have resulted from higher bond yields, recent gains in the dollar, and the stock market wobble.
3. Is the stock market signaling a trough in US leading economic indicators?
Source: SentimenTrader
4. The full impact of the Fed’s policy tightening is yet to be felt.
Source: Torsten Slok, Apollo
5. Economists have revised their economic growth forecasts upward for 2023 and 2024.
Goldman sees only a 20% chance of a recession over the next 12 months.
Source: Goldman Sachs
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6. The recent decline in stock prices and higher gasoline prices are weighing on consumer sentiment.
Source: @CivicScience
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Emerging Markets
1. The Indian rupee hit a record low vs. USD.
2. Thailand’s Q2 GDP growth was disappointing.
3. Turkey’s inflation outlook looks ugly.
Source: @economics Read full article
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4. Russia’s exports have been falling.
5. Chile’s GDP contracted less than expected last quarter.
7. Next, we have some performance data from last week.
• Currencies:
• Bond yields:
• Equity ETFs:
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Commodities
1. Have agriculture fund outflows finally ceased?
Source: EPFR
2. Here is last week’s performance across key commodity markets.
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Energy
1. European LNG prices remain elevated amid labor uncertainty in Australia’s gas platforms.
Source: Reuters Read full article
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2. Brent crude backwardation deepened in recent months.
Source: @ANZ_Research
Here are some price forecasts from BCA Research.
Source: BCA Research
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Equities
1. Sentiment deteriorated sharply in recent days.
• AAII bull-bear spread (retail investors):
• CTAs:
Source: BNP Paribas; @WallStJesus
• Investment manager sentiment:
Source: NAAIM
• The put/call ratio:
• SentimenTrader’s risk-on/risk-off indicator:
Source: SentimenTrader
• CNN Fear/Greed index:
Source: CNN Business
• Goldman’s sentiment index:
Source: Goldman Sachs; @WallStJesus
• Deutsche Bank’s positioning indicator (pulled lower by discretionary investors):
Source: Deutsche Bank Research
• ETF flows:
Source: @business Read full article
• VIX (firmly above its 50-day moving average):
Source: CNN Business
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2. Small caps are lagging, …
… driven by fundamentals.
Source: Merrill Lynch
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3. Cash yields are higher than the S&P 500 projected earnings yield.
4. US IPO activity has been slow.
Source: @JeffreyKleintop
5. Retail investors have been less enthusiastic about individual stocks, but they boosted ETF purchases this summer.
Source: Vanda Research
6. Next, we have some performance data from last week.
• Sectors:
• Equity factors:
• Macro baskets’ relative performance:
• Thematic ETFs:
• Largest US tech firms:
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Credit
1. Leveraged loan prices have been recovering.
2. The maturity wall for high-yield debt was extended as risk appetite improved and bond issuance increased.
Source: @markets Read full article
3. Here is last week’s performance across credit asset classes.
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Rates
1. Real yields continue to surge, which is a headwind for growth equities. The 10-year TIPS yield is near 2% for the first time since 2009.
2. Treasury duration from monthly auctions is set to increase over the next few months.
Source: Deutsche Bank Research
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Global Developments
1. Most investors expect lower short-term rates over the next 12 months, according to a survey by BofA.
Source: BofA Global Research
2. Here is last week’s market performance in advanced economies.
• Currencies:
• Bond yields:
• Equities:
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Food for Thought
1. Popular streaming services:
Source: Statista
2. Death rates among older Americans:
Source: St. Louis Fed Read full article
3. Military spending trends for China and India:
Source: The Economist Read full article
4. How do Chinese citizens feel about other countries?
Source: Visual Capitalist Read full article
5. US foreign aid:
Source: USAFacts
6. Upward mobility:
Source: Statista
7. The US pay gap has been narrowing:
Source: @jeffsparshott, @WSJ
8. Smallest countries in the world (by area):
Source: @OpenAxisHQ
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