Odds of another Fed rate hike up after Jackson Hole

The Daily Shot: 28-Aug-23
Administrative Update
The United States
Canada
The Eurozone
Europe
Asia-Pacific
China
Emerging Markets
Commodities
Energy
Equities
Credit
Global Developments
Food for Thought



 

Administrative Update

The Daily Shot will not be published on Monday, September 4th.


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The United States

Chair Powell’s speech at Jackson Hole was measured and revealed little new insight. Although he recognized improvements on the inflation front, he emphasized the need for further progress, indicating that the central bank stands ready to tighten policy again.
 
Source: CNBC   Read full article  
 
The market interpreted Powell’s comments as being a bit on the hawkish side, pushing the probability of another rate hike to 65%.
 

 
The terminal rate hit the highest level since March.
 

 

 
Treasury yields climbed.
 

 
Rate cut expectations in the first half of next year moderated further.
 

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2. The updated consumer sentiment report from the University of Michigan indicated a decline in confidence during the latter half of August. This dip can be attributed in part to higher gasoline prices and stock market volatility.
 

 
Households are more optimistic about their short-term financial prospects.
 

 
Inflation expectation metrics have risen slightly since the early August readings.
 

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3. The Citi Economic Surprise Index appears to be rolling over.
 

 
4. Next, we have some updates on households’ financial situation.
 
Credit card delinquencies are grinding higher as consumers face headwinds.
 
Source: @WSJ   Read full article  
 
Source: Insider   Read full article  
 
Households’ interest payments as a share of personal disposable income have been rising.
 
Source: BofA Global Research; @MikeZaccardi  
 
Excess savings are still elevated (2 charts).
 
Source: BofA Global Research; @MikeZaccardi  
 
Source: BofA Global Research; @MikeZaccardi  

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5. Here are some charts on US federal debt.
 
The Congressional Budget Office projects federal debt as a percent of GDP to nearly double by 2053 if current tax and spending laws remain unchanged.
 
Source: Committee for a Responsible Federal Budget  
 
Interest expense is expected to accelerate.
 
Source: Torsten Slok, Apollo  
 
Source: Torsten Slok, Apollo  


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Canada

1. Growth in mortgage lending has been slowing.
 
Source: @markets   Read full article  
 
2. This chart shows remote and hybrid job postings on Indeed.
 
Source: @BrendonBernard_   Read full article  
 
3. Canada’s forest fires have been devastating.
 
Source: Capital Economics  


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The Eurozone

1. Germany’s Ifo sentiment index surprised to the downside, …
 

 
Source: ifo Institute   Read full article  
 
… signaling rising risks for economic growth.
 
Source: Capital Economics  
 
Source: Reuters   Read full article  
 
Germany’s business investment was stronger than expected in the second quarter, …
 

 
… but there was no growth in consumer spending.
 

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2. Has euro-area wage growth peaked?
 
Source: TS Lombard  
 
3. The Eurozone’s longer-dated inflation expectations are converging with those in the US, which is highly unusual.
 
Source: Gavekal Research  


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Europe

1. Sweden’s unemployment rate dropped sharply last month.
 

 
The employment rate continues to climb.
 
Source: Nordea Markets  
 
Lending to households is slowing.
 

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2. Here is a look at homeownership rates in the EU.
 
Source: @financialtimes   Read full article  


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Asia-Pacific

1. The BoJ’s JGB purchases are expected to hit a record high this year.
 
Source: @markets   Read full article  
 
2. New Zealand’s economic growth is stalling.
 
Source: Capital Economics  


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China

1. Beijing is attempting to mitigate the negative publicity stemming from the nation’s underperforming stock market. Will it work?
 
Source: @markets   Read full article  
 
Source: @markets   Read full article  
 
Source: @markets   Read full article  
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. Industrial profits have been soft.
 

 
Source: Reuters   Read full article  

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3. Real estate is becoming a smaller part of fixed asset investment.
 
Source: Commerzbank Research  
 
4. Productivity growth has slowed in recent decades.
 
Source: @WSJ   Read full article  


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Emerging Markets

1. Economists have been upgrading their estimates for this year’s GDP growth in Brazil and Mexico.
 

 

 
Chile’s economy is still expected to contract in 2023.
 

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2. Mexico’s Q2 current account surplus topped expectations.
 

 
3. The World Economics SMI report for India shows ongoing expansion in business activity.
 
Source: World Economics  
 
4. Turkey’s manufacturing confidence edged lower this month.
 

 
5. The ruble is weakening again.
 

 
6. Here is a comparison of EM and DM countries across different metrics.
 
Source: BofA Global Research  
 
7. Finally, we have last week’s performance data.
 
Currencies:
 

 
Bond yields:
 

 
Equity ETFs:
 


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Commodities

1. US soft red winter wheat is selling off, …
 

 
… pressured by robust Russian output.
 
Source: @sizov_andre   Read full article  
 
Will wheat test support at $6 per bushel?
 

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2. Sugar prices are higher.
 

 
Source: @markets   Read full article  

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3. As the milk supply climbs, US dairy prices are steadily declining. Milk cow efficiency rates have reached new highs.
 
Source: Wells Fargo Securities  
 
4. Orange juice prices continue to surge, …
 

 
… driven by depressed yields.
 
Source: Wells Fargo Securities  

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5. Here is last week’s performance across key commodity markets.
 


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Energy

1. US diesel prices and crack spreads are sharply higher, …
 

 

 
… as Marathon shuts down the Garyville refinery.
 
Source: @markets   Read full article  

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2. US LNG exports surpassed those of other countries in the first half of the year.
 
Source: @EIAgov  
 
3. US natural gas injections into storage slowed, …
 

 
… as scorching heat in parts of the US boosts demand.
 
Source: NOAA  
 
Here is the situation in Texas.
 
Source: @JKempEnergy  
 
Source: Reuters   Read full article  


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Equities

1. This month, the S&P 500 failed to achieve two consecutive daily gains – a phenomenon not seen in years.
 

 
Source: @markets   Read full article  

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2. Stocks look increasingly expensive relative to corporate credit.
 

 
3. The S&P 500 remains concentrated.
 
Source: BofA Global Research  
 
4. Investment managers have turned bearish.
 
Source: NAAIM  
 
5. The top three largest US ETF issuers collectively generate more revenue than all other issuers combined.
 
Source: The ETF Shelf  
 
6. Here is a look at the Fortune 500 companies’ age.
 
Source: The Economist   Read full article  
 
7. Finally, 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. Stressed credits have been outperforming.
 

 
Source: @markets   Read full article  

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2. Leveraged loan recovery rates are crashing, offsetting the benefits of relatively low default rates.
 
Source: @markets   Read full article  
 
3. Multifamily housing delinquency rates continue to rise.
 
Source: Calculated Risk  
 
4. Here is last week’s performance across credit asset classes.
 


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Global Developments

1. US dollar usage in global payments hit a record high.
 
Source: @markets   Read full article  
 
2. Which DM currencies are most correlated to stocks?
 
Source: Capital Economics  
 
3. Next, we have some DM performance data from last week.
 
Currencies:
 

 
Bond yields:
 

 
Equities:
 


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Food for Thought

1. Alcohol consumption by age:
 
Source: @CivicScience   Read full article  
 
2. Inflation-adjusted cost of US disasters:
 
Source: @bbgvisualdata   Read full article  
 
3. US EV charging infrastructure:
 
Source: @WSJ   Read full article  
 
Fast-charging stations:
 
Source: @bbgvisualdata   Read full article  

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4. Active trading by members of Congress:
 
Source: @genuine_impact  
 
5. Websites blocking OpenAI’s web-scraping bots:
 
Source: Originality.AI   Read full article  
 
6. Preferred payment apps:
 
Source: @CivicScience   Read full article  
 
7. Blue-collar workers working from home:
 
Source: USA Today   Read full article  
 
8. Ice cream consumption in the US:
 
Source: CNN Business   Read full article  
 

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