The Daily Shot: 03-Oct-23
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The September ISM Manufacturing PMI exceeded expectations, indicating an easing in the US factory slump.
• Production and employment shifted to growth (2 charts).
Source: @TheTerminal, Bloomberg Finance L.P.
• The spread between the indicators of orders and inventories signals a further improvement ahead.
Source: @TheTerminal, Bloomberg Finance L.P.
• Order backlog keeps shrinking.
• Manufacturers continue to report falling input prices.
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2. Construction spending climbed again in August (8th increase in a row).
Both residential and non-residential expenditures are rising.
Source: Chart and data provided by Macrobond
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3. Here is a look at real consumer spending trends for goods and services.
Source: Chart and data provided by Macrobond
4. This diagram bridges nominal and real wage growth.
Source: Arcano Economics
5. Last month, the decline in rents was greater than the typical decrease observed in September.
Source: Apartment List
Rental vacancies are now above pre-COVID levels.
Source: Apartment List
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6. Used vehicle prices have been declining, yet they remain approximately 40% above pre-pandemic levels.
Source: BofA Global Research; @MikeZaccardi
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Canada
1. Canadian manufacturing contraction accelerated last month.
Source: Reuters Read full article
Input price gains have stalled as demand softens.
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2. The monthly GDP estimate was unchanged in July.
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The United Kingdom
1. The manufacturing sector continued to struggle last month.
Source: S&P Global PMI
2. Real wages are back in positive territory.
Source: Chart and data provided by Macrobond
3. Shop price gains are moderating.
4. Here is a look at the BoE’s economic forecasts.
Source: Chart and data provided by Macrobond
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The Eurozone
The manufacturing slump continued last month, with the PMI report pointing to weakness in industrial production.
Source: S&P Global PMI
Source: Reuters Read full article
The contraction in Spanish and Italian factory activity moderated somewhat in September.
Source: S&P Global PMI
Source: S&P Global PMI
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Asia-Pacific
1. JGB yields continue to grind higher.
2. Next, we have some updates on Australia.
• The RBA left rates unchanged. The market expects one more rate increase in this cycle.
• The 10-year yield hit the highest level since 2011.
• Residential building approvals increased in August.
• Job postings remain elevated.
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China
1. Very few cities report rising property prices.
Source: Chart and data provided by Macrobond
The supply of new housing has been falling,
Source: @financialtimes Read full article
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2. China’s savings rate stands out.
Source: @financialtimes Read full article
3. A-share corporates experienced a slowdown in revenue growth and a contraction in profits in Q2.
Source: Fitch Ratings
• Weakness was notable in the energy and materials sector. (2 charts)
Source: Fitch Ratings
Source: Fitch Ratings
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Emerging Markets
1. Let’s begin with Chile.
• Economic activity is gradually easing.
• August manufacturing output surprised to the upside.
• Copper production remains soft but is now above last year’s levels.
• The unemployment rate is rising.
• Retail sales are running below 2022 levels.
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2. Brazil’s trade surplus is at multi-year highs.
• The budget deficit was worse than expected in August.
• Manufacturing activity is still not growing (PMI < 50).
Source: S&P Global PMI
• Brazil’s short-term bond yields are rising as traders temper their rate-cut expectations.
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3. Mexico’s manufacturing growth has stalled.
Source: S&P Global PMI
• Remittances remain elevated.
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4. South Africa’s manufacturing activity declined sharply last month.
• Vehicle sales are slowing.
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5. EM bond prices continue to sink in dollar terms.
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Cryptocurrency
1. Let’s start with the Q3 performance for some of the most liquid cryptos.
2. Bitcoin is struggling to break above the 200-day moving average.
Ether is not quite there.
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3. Here is a look at market cap and liquidity rankings across select cryptos, according to Keiko.
Source: @KaikoData
4. Crypto funds saw outflows for the sixth consecutive week led by long-bitcoin products. (2 charts)
Source: CoinShares Read full article
Source: CoinShares Read full article
US crypto funds led outflows last week, while Europe saw inflows.
Source: CoinShares Read full article
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Commodities
1. Surging real rates and the US dollar rally continue to pose downside risks for gold.
Source: @TheTerminal, Bloomberg Finance L.P.
2. The lumber futures price is holding long-term support with improving momentum.
Source: Aazan Habib, Paradigm Capital
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Energy
1. Surging bond yields have been pressuring crude oil, but Brent appears to hold support at $90/bbl.
Source: barchart.com
2. Oil prices are highly correlated to the OECD liquids inventories (inverse correlation).
Source: TS Lombard
3. BCA Research expects China’s oil demand to remain robust, which could benefit prices.
Source: BCA Research
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Equities
1. Market breadth keeps deteriorating.
2. Surging real yields remain a threat to stock valuations. Something has to give.
Source: @TheTerminal, Bloomberg Finance L.P.
3. The stock market’s earnings “spread” to Treasuries (equity risk premium) is now well below spreads offered by the investment-grade bond market (IG OAS).
Source: @TheTerminal, Bloomberg Finance L.P.
4. Small caps and microcaps are widening their underperformance.
• The Russell 2000/Nasdaq 100 ratio hit a record low.
• The number of Russell 2000 companies with negative earnings remains elevated.
Source: BofA Global Research
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5. Value stocks are also widening their underperformance.
Technicals suggest that value is oversold.
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6. So far, US homebuilding stocks have shrugged off accelerating mortgage rates.
Source: Aazan Habib, Paradigm Capital
7. REITs are struggling as bond yields surge.
8. VIX has been below twenty for 93 trading sessions in a row.
9. Next, let’s take a look at some valuation metrics.
• Sectors’ 12-month forward P/E vs. the 10-year average:
– Sector P/E changes during Q3:
• Equity factors’ forward P/E vs. the 10-year average:
• Factor P/E changes during Q3:
• Selected international indices’ 12-month forward P/E vs. the 10-year average:
– P/E changes during Q3:
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Credit
1. Here is a look at the high-yield debt maturity wall.
Source: @business Read full article
2. Yields on new-issue US junk bonds have crept higher over the past quarter. According to PitchBook, the primary market continues to re-engage with last month’s deal volume at the highest level since January 2022.
Source: PitchBook
3. Retail money market funds continue to see inflows.
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Rates
1. The rout in longer-dated Treasuries continues.
2. Real yields keep surging.
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3. The divergence between Treasury yields and the copper-to-gold ratio is still growing.
Source: @TheTerminal, Bloomberg Finance L.P.
4. Retail investors continue to buy Treasury ETFs.
Source: Vanda Research
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Global Developments
1. Oil prices recovered in Q3 as major equity indices and sovereign bonds declined.
Source: Deutsche Bank Research
2. Here is a look at return projections by the end of 2025 from Capital Economics.
Source: Capital Economics
3. The rise in government interest expenses has been more pronounced in mature markets in recent months.
Source: IIF
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Food for Thought
1. Preschool enrollment rates:
Source: US Census Bureau
2. Largest metro populations globally:
Source: @TheDailyShot
3. The G7 and BRICS:
Source: Statista
4. Spending on regional conflicts:
Source: Alpine Macro
5. How many Americans have access to legal marijuana?
Source: Statista
6. Canada’s wildfire CO2 emissions:
Source: @axios Read full article
7. Hate crime in the largest US cities:
Source: @axios Read full article
8. Not at work due to a labor dispute:
Source: @WSJ Read full article
9. Missing inventory:
Source: @chartrdaily
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