Posted on by The Daily Shot Editor: Lev Borodovsky

The US leading index down for 17 months in a row

The Daily Shot: 22-Sep-23
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Equities
• Credit
• Rates
• Food for Thought

 

The United States

1. The 10-year Treasury yield hit 4.5%, as the Fed’s “higher for longer” message continues to pressure bonds.
 

 
The sell-off in longer-dated government debt has been brutal.
 

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2. Next, we have some updates on the housing market.
 
• The 30-year mortgage rate is near 7.5%.
 
Source: Mortgage News Daily  
 
• Despite the housing market headwinds, homebuilders have been outperforming retail stocks.
 
Source: BofA Global Research  
 
• 33% of homes have been selling above their list price.
 
Source: Torsten Slok, Apollo  
 
• In many metro areas, property investors are increasing their share of the housing market.
 
Source: The New York Times   Read full article  
 
• Existing home sales were at multi-year lows last month …
 

 
… amid depressed inventories.
 

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3. The Conference Board’s US Leading Index has seen a 17-month consecutive decline, …
 

 
… a pattern not observed since the Global Financial Crisis.
 

 
The index continues to signal a recession.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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4. We remain in a pattern of lower initial unemployment claims …
 

 
… and elevated continuing claims.
 

 
Continuing claims are up almost 30% vs. 2022.
 

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5. The Philly Fed’s regional manufacturing index dipped back into contraction territory.
 

 
• While more firms saw softer demand this month, factories are more upbeat about the future.
 

 
• There isn’t much hiring taking place.
 

 
• More firms are reporting rising input costs.
 

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The United Kingdom

1. The BoE left rates unchanged (MPC voted 5-4 in favor of holding) after core inflation registered a monthly decline in August.
 
Source: Pantheon Macroeconomics  
 
Source: CNBC   Read full article  

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2. Gilt yields bounced from the post-CPI slump.
 

 
The pound remains under pressure.
 

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3. Consumer sentiment is recovering.
 

 
4. In July, the official measure of UK home prices remained positive on a year-over-year basis.
 

 
5. Government borrowing for the fiscal year to date has been below the projections of the OBR.
 

 
Source: @economics   Read full article  

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The Eurozone

1. The 30-year Bund yield continues to climb.
 

 
2. Euro-area consumer confidence declined again this month.
 

 
3. French manufacturing sentiment unexpectedly improved this month.
 

 
The nation’s real retail sales continue to slump.
 

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4. Spain’s trade deficit widened in July.
 

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Europe

1. Sweden’s central bank hiked rates again.
 

 
Source: Reuters   Read full article  
 
The 2-year bond yield hit a multi-year high.
 

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2. Norway’s central bank also raised rates, which was widely expected.
 

 
Source: Reuters   Read full article  
 
Bond yields (and swap rates) climbed.
 

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3. The Swiss central bank unexpectedly left rates unchanged.
 
Source: Reuters   Read full article  
 
Swiss bond yields and the franc tumbled.
 

 

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4. Here is a look at the performance of European currencies against the euro on “central bank day.”
 

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Japan

1. The August headline inflation was firmer than expected.
 

 
Core inflation held steady.
 

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2. The BoJ left policy unchanged, …
 
Source: @economics   Read full article  
 
… putting pressure on the yen.
 

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3. The decline in manufacturing activity accelerated this month, according to the S&P Global PMI.
 

 
Service sector growth is holding up.
 

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China

1. The Capital Economics China Activity Proxy points to growth returning.
 
Source: Capital Economics  
 
2. Neither households nor businesses show much interest in spending.
 
Source: BCA Research  
 
3. Chinese electric vehicle makers have a significant cost advantage relative to global competitors.
 
Source: Alpine Macro  
 
4. Hong Kong’s August CPI was lower than expected (back below 2%).
 

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Emerging Markets

South Africa, Egypt, the Philippines, Indonesia, and Taiwan all left rates unchanged this week.
 
Turkey’s central bank is playing catchup, pushing rates up by another 500 bps.
 
Source: Reuters   Read full article  
 

 
The markets were hoping for more, sending the lira lower.
 

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Cryptocurrency

1. It has been a mixed week for cryptos, with XRP outperforming and Ether (ETH) underperforming top peers.
 
Source: FinViz  
 
2. Activity on the Bitcoin blockchain advanced despite the recent selloff.
 
Source: Deutsche Digital Assets  
 
3. The Crypto Fear & Greed Index remains in “fear” territory.
 
Source: Deutsche Digital Assets  

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Commodities

1. Lithium prices are retreating again. In US-dollar terms, China’s lithium carbonate index hit its lowest level since 2021.
 

 
Here is the lithium ETF.
 

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2. Gold continues to consolidate.
 
Source: barchart.com  
 
3. The selloff in wheat futures persists.
 

 
4. The rebound in Chicago milk futures didn’t last very long.
 

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Equities

1. It’s been a rough couple of days for stocks after the Fed’s “higher for longer” warning.
 

 
Here is the breakdown by sector and equity factor.
 

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2. Below is a look at the percentage of S&P 500 and Nasdaq 100 members that are above their 50-day moving average.
 

 
3. BofA reports a big outflow from US equity funds.
 
Source: BofA Global Research  
 
4. The correlation between stocks (SPY) and bonds (TLT) is hitting multi-year highs, reflecting the market’s response to the Fed’s hawkish stance.
 

 
This increase in correlation includes values stocks.
 

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5. Here is a look at historical real returns for US equities and bonds.
 
Source: Deutsche Bank Research  
 
6. Not good …
 

 
7. The chart below shows stock market performance during government shutdowns.
 
Source: LPL Research  
 
8. Here is a look at Robinhood’s active users.
 
Source: @WSJ   Read full article  

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Credit

1. The correlation between high-yield bonds (HYG) and longer-dated Treasuries (TLT) is at multi-year highs.
 

 
2. Here is a look at COVID-era flows into investment-grade and high-yield bond funds.
 
Source: BofA Global Research  
 
3. The composition of the US fixed-income market has shifted toward more coupon Treasuries and less financial debt.
 
Source: Deutsche Bank Research  

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Rates

1. The divergence between Treasury yields and the copper-to-gold ratio continues to widen.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. The 10s/2s Treasury yield spread is showing early signs of steepening.
 
Source: Aazan Habib, Paradigm Capital  
 
3. Central banks continue to reduce their balance sheets.
 
Source: Deutsche Bank Research  
 
4. Global bond yields are hitting multi-year highs.
 
h/t Simon White, Bloomberg Markets Live Blog  

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Food for Thought

1. Percentage of the population over 65:
 
Source: @genuine_impact  
 
2. US metro areas by population:
 
Source: @TheDailyShot  
 
3. Life expectancy across the US:
 
Source: @jeremybney  
 
4. Teacher gender ratios:
 
Source: Scott Galloway   Read full article  
 
5. China buying support:
 
Source: @financialtimes   Read full article  
 
6. Growth in the US Hispanic population:
 
Source: Pew Research Center   Read full article  
 
7. Duration of government shutdowns:
 
Source: LPL Research  
 
8. The most expensive TV shows:
 
Source: @genuine_impact  

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Have a great weekend!

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