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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