Beijing seems uncommitted to policy easing

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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