The Daily Shot: 25-Sep-23
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Asia-Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The US manufacturing PMI report from S&P Global showed a modest improvement this month but held in contraction territory (PMI < 50).
A higher share of factories reported rising input costs.
• Growth in service sector activity is stalling, with companies reporting net declines in new business (2nd panel).
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2. US financial conditions have been tightening, driven by a stronger US dollar, higher yields, wider credit spreads, and a pullback in stocks.
3. A survey by the Chicago Fed indicates that businesses in the Midwest region (refer to the Seventh Federal Reserve District map below) are rapidly reducing hiring.
Source: Federal Reserve Bank of Chicago
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4. The MetLife & US Chamber of Commerce Small Business Index paints a different picture from the NFIB’s small business sentiment indicator.
Source: @axios Read full article
5. Economists still forecast a sharp slowdown ahead but no longer expect a recession (median consensus estimate).
Source: Deutsche Bank Research
Growth has been surprising to the upside.
Source: Deutsche Bank Research
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6. Consumer confidence is expected to deteriorate as the government shutdown looms.
Source: Wells Fargo Securities
7. Elevated mortgage rates, combined with mortgage applications at multi-year lows (2nd chart), indicate further declines in home sales.
Source: Capital Economics
Source: Pantheon Macroeconomics
• Weak homebuilder confidence signals a slowdown in residential construction.
Source: Gavekal Research
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Canada
1. Retail sales were stronger than expected in July.
2. Fixed-income markets are pricing a substantial rate shock for mortgage holders ahead.
Source: Desjardins
3. The CPI breadth remains elevated.
Source: Scotiabank Economics
• The August CPI acceleration was driven by goods.
Source: Desjardins
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4. Here is a look at permanent residency and visa issuance.
Source: Capital Economics
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The United Kingdom
1. Gilt yields and the pound continue to trend lower.
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2. The September flash PMI report confirmed persistent weakness in business activity. The labor market faces incresing headwinds.
• Manufacturing:
• Services:
Here is the composite PMI.
Source: S&P Global PMI
Source: @economics Read full article
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3. The CBI reported softer industrial orders this month.
4. Retail sales edged higher in August.
5. Britons want higher taxes …
Source: National Centre for Social Research Read full article
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The Eurozone
1. The flash PMI report suggests that business activity continued to contract this month.
• Manufacturing (the labor market is under pressure):
– Germany:
– France
• Services:
– Germany:
– France:
• Composite PMI (weakening outlook):
Source: @economics Read full article
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2. Which German carmakers are most exposed to China?
Source: Gavekal Research
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Europe
1. Switzerland and the UK, which held rates unchanged, saw their currencies underperform last week.
2. Riksbank’s rate projections this month were almost unchanged from June.
Source: ING
3. Here is a look at AI usage in the EU.
Source: Eurostat Read full article
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Asia-Pacific
1. Let’s begin with Taiwan.
• Industrial production is running at pre-COVID levels.
• The unemployment rate remains at multi-year lows.
• Productivity growth has been very strong.
Source: @WSJ Read full article
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2. New Zealand’s trade deficit remains elevated.
3. Australia’s services are back in growth mode, but manufacturing contraction accelerated this month.
Source: S&P Global PMI
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China
1. The PBoC is struggling to strengthen the renminbi.
Source: @TheTerminal, Bloomberg Finance L.P.
2. Domestic freight volume has been strong.
Source: @JKempEnergy
3. According to the World Economics SMI report, inflation has returned to China’s services sector.
Source: World Economics
4. Has China reached peak gasoline demand?
Source: Alpine Macro
5. The Hang Seng Index continues to struggle.
Source: @TheTerminal, Bloomberg Finance L.P.
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Emerging Markets
1. Let’s begin with Mexico.
• Inflation continues to ease.
• Economic activity edged higher in July. The trend remains strong.
• MXN/USD is capped below resistance at its 40-day moving average as long-term momentum weakens.
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2. Real rate differentials are less supportive of EM carry trades.
Source: PGM Global
3. Here is last week’s performance data.
• Currencies:
• Bond yields:
• Equity ETFs:
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Commodities
1. Iron ore prices have diverged from Bloomberg’s industrial metals index.
Source: @TheTerminal, Bloomberg Finance L.P.; h/t BCA Research
2. Here is a look at last week’s performance across key commodity markets.
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Energy
1. Inflows into MLP ETFs are rising.
Source: The ETF Shelf
MLPs have outperformed the energy sector this year.
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2. Hedge funds helped drive oil prices higher in recent weeks.
Source: @financialtimes Read full article
3. Next, we have US petroleum product exports.
Source: @EIAgov Read full article
4. European nuclear power capacity utilization is trending above seasonal norms as the rivers used for French reactor cooling return to a more typical temperature.
Source: Longview Economics
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Equities
1. Retail investors are not as keen on buying the dip in the current selloff.
Source: Vanda Research
2. Will the S&P 500 hold support?
3. Long-short hedge funds have been scaling back their market exposure.
Source: Goldman Sachs; @ResearchQf
4. Over the long run, equity returns are driven by earnings and dividends.
Source: JP Morgan Research; @dailychartbook
5. Microcaps are near the May lows.
6. ESG-focused firms have been underperforming.
ESG fund liquidations surged this year.
Source: @markets Read full article
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7. Next, we have some performance data from last week.
• Sectors:
• Equity factors:
• Macro basket pairs’ relative performance:
• Thematic ETFs:
• Largest US tech firms:
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Credit
1. Which sectors have the highest share of 2024 and 2025 bond maturities?
Source: BofA Global Research; @MikeZaccardi, @TheStalwart
2. So far, the pullback in stocks has not triggered a rise in high-yield credit spreads.
Source: Aazan Habib, Paradigm Capital
3. Here is last week’s performance data across credit asset classes. Rising rates drove much of the selloff in credit, with spreads remaining resilient.
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Rates
1. By some measures, Treasuries are expensive.
Source: BofA Global Research
2. The 10-year Treasury yield has returned to its long-term average.
Source: Deutsche Bank Research
3. Treasury funds continue to register inflows.
Source: BofA Global Research
4. The market sees fewer Fed rate cuts next year.
Source: Morgan Stanley Research
5. Here is a look at TS Lombard’s Taylor Rule estimate vs. the fed funds rate.
Source: TS Lombard
6. According to Bloomberg, …
Trading volume surged [last] week in a corner of the fed funds futures market, based on the notion that the Federal Reserve is likelier to raise rates in December than November.
Source: @markets Read full article
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Global Developments
1. Slumping business demand is loosening labor markets in advanced economies.
Source: S&P Global PMI
2. Only 30% of countries have manufacturing PMIs in expansion territory.
Source: BofA Global Research
3. Finally, we have last week’s performance data for advanced economies.
• Currencies:
• Bond yields:
• Large-cap equity indices:
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Food for Thought
1. LinkedIn revenue:
Source: @BW Read full article
2. US automakers’ market capitalization per employee:
Source: Jack Ablin, Cresset Wealth Advisors
3. Agriculture as a share of each state’s GDP:
Source: Wells Fargo Securities
4. Changes in the unemployment rate:
Source: @axios Read full article
5. Americans looking to relocate:
Source: Redfin
6. Americans without health insurance:
Source: @jeremybney
7. Betting markets’ probabilities for the 2024 GOP presidential nomination:
Source: @PredictIt
8. Who has tattoos?
Source: Pew Research Center Read full article
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