The Daily Shot: 01-Sep-23
• The United States
• The Eurozone
• Europe
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Consumer spending jumped in July, topping expectations.
Most sectors registered an increase in consumption (2 charts).
Source: Oxford Economics
Source: Chart and data provided by Macrobond
• Income growth slowed, with a lower-than-expected gain in July.
This chart shows real disposable income.
• Increased expenditures, coupled with sluggish income growth, have reduced the savings rate (3 charts).
Source: ING
• With student debt payments kicking in shortly, …
Source: Morgan Stanley Research
… we are likely to see a sharp pullback in spending in the fourth quarter.
Source: Morgan Stanley Research
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2. The core PCE inflation increased by 0.2% in July, the same as in June.
But core services inflation accelerated.
Here is the supercore PCE inflation, a measure closely tracked by the Fed.
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3. Initial jobless claims eased last week.
However, continuing claims keep diverging from their historical pattern.
This deviation clearly shows a softening in the labor market.
• Job cut announcements increased in August.
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4. The Chicago PMI surprised to the upside, …
… boosted by Boeing’s orders.
Source: Pantheon Macroeconomics
• Leading indicators point to some strengthening in US factory activity in August.
– The stock market:
Source: @TheTerminal, Bloomberg Finance L.P.
– The Philly Fed’s manufacturing index:
Source: @TheTerminal, Bloomberg Finance L.P.
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The Eurozone
1. French inflation accelerated in August, boosted by higher energy prices.
Source: @economics Read full article
• Dutch and Italian inflation continued to ease.
• At the Eurozone level, the CPI topped expectations, …
… as services inflation remains elevated.
Source: @economics Read full article
Here is the core CPI.
Survey data point to easing services inflation.
Source: Nordea Markets
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2. Germany’s retail sales declined in July.
But French household spending on goods continued to increase.
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3. Let’s take a look at some labor market trends.
• Germany’s unemployment rate (steady):
• Italian unemployment rate (unexpected increase in July):
• Eurozone unemployment rate (steady):
• Labor constraints continue to limit production for many firms.
Source: ECB
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4. Will the 10-year Bund yield hold the uptrend support?
Source: @TheTerminal, Bloomberg Finance L.P.
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Europe
1. Sweden’s sentiment indicators softened in August.
The GDP has been running below Riksbank’s forecasts.
Source: Nordea Markets
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2. This chart shows how some European currencies performed against the euro in August.
3. EU car registrations are following the 2021 trend.
4. A shortfall in European natural gas supply remains a risk.
Source: Alpine Macro
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Japan
1. Business investment slowed in Q2.
Source: @economics Read full article
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2. Housing starts hit a multi-year low in July.
3. Japanese stocks continue to outperform Asian peers.
h/t Sungwoo Park, Bloomberg
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Asia-Pacific
1. South Korea’s manufacturing activity remains sluggish.
Source: S&P Global PMI
Taiwan’s manufacturing contraction continues.
Source: S&P Global PMI
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2. New Zealand’s home prices continue to fall.
3. Australia’s housing prices were up again in August.
Source: ABC News Read full article
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China
1. The manufacturing PMI from S&P Global showed factory activity expanding in August, topping forecasts.
Source: MarketWatch Read full article
Hiring in the manufacturing sector accelerated.
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2. Beijing cut the forex reserve ratio, …
Source: @markets Read full article
… boosting the renminbi.
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Emerging Markets
1. Let’s run through Asian manufacturing PMI trends.
• Indonesia (faster growth):
Source: S&P Global PMI
• Malaysia (sluggish):
Source: S&P Global PMI
• Thailand (sudden contraction):
Source: S&P Global PMI
• The Philippines (also contracting):
Source: S&P Global PMI
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2. India’s GDP growth picked up in Q2.
Source: Business Standard Read full article
Core industries’ output remains robust.
Source: Business Standard Read full article
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3. The ruble remains under pressure.
4. The Mexican peso’s rally is over.
Source: barchart.com
5. Next, we have some performance data for August.
• Currencies:
• Bond yields:
• Equity ETFs:
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Commodities
1. A triple top for gold?
2. Here is last month’s performance across key commodity markets.
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Energy
1. Brent is nearing resistance again.
2. On a five-year smoothed basis, capex among oil producers turned positive for the first time since 2015.
Source: The Crude Chronicles Read full article
3. US natural gas in storage is rising slower than usual for this time of the year.
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Equities
1. S&P 500 earnings expectations for the next 12 months continue to climb.
Here are the quarterly trends for 2024.
Source: Yardeni Research
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2. Retail investors were unprepared for the market rebound.
Source: @TheTerminal, Bloomberg Finance L.P.; h/t @themarketear
3. Breadth in global stocks has been narrowing for years.
Source: BofA Global Research
But short-term breadth is improving among NYSE-listed stocks.
Source: Aazan Habib, Paradigm Capital
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4. The SPY/TLT price ratio (stock/bond ratio) appears extended, although, for now, momentum is still positive.
But higher energy-driven inflation could place upward pressure on yields, resulting in a positive correlation between US equity and bond returns – a potential headwind for both assets.
Source: PGM Global
A depressed risk premium points to a pullback in the stock/bond ratio.
Source: Variant Perception
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5. Housing and retail stocks have diverged.
Source: BofA Global Research
6. Next, let’s take a look at quarterly performance attribution.
• S&P 500 (this quarter’s gains have been driven by earnings expectations):
• S&P 600 (small caps are almost flat QTD):
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7. Finally, here are some performance metrics for August.
• Sectors:
• Equity factors:
• Macro basket pairs’ relative performance:
• Thematic ETFs:
• Largest US tech firms:
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Credit
1. MBS spreads are elevated relative to corporate bonds.
Source: @markets Read full article
2. Here is last month’s performance across credit asset classes.
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Rates
1. Variant Perception’s model shows the 10-year Treasury yield at a short-term peak, which coincides with extremes in the stock/bond ratio.
Source: Variant Perception
• Technicals suggest the 10-year Treasury note is oversold.
Source: PGM Global
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2. BofA’s private clients are dumping inflation-linked Treasuries again.
Source: BofA Global Research
3. Here is the attribution of Treasury yield changes in August.
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Global Developments
1. What do central bankers fear most?
Source: ING
2. Here is last month’s market performance across advanced economies.
• Currencies:
• Bond yields:
• Equities:
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Food for Thought
1. US credit card usage:
Source: LendingTree Read full article
2. Days lost to strike action:
Source: ING
3. According to S&P Global, “retailers are preparing for Halloween sales earlier than ever.”
Source: S&P Global Market Intelligence
4. Growth in digitally-delivered service exports:
Source: @WSJ Read full article
5. Music popularity by genre:
Source: @chartrdaily
6. Proportion of women born in 1970 who are childless:
Source: @bbgequality Read full article
7. Average monthly payment on student debt:
Source: Truist Advisory Services
8. Changes in spending and enrollment at public universities:
Source: @WSJ Read full article
9. Golf course popularity:
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The next Daily Shot will be published on Tuesday.
Have a great weekend!
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