A longer runway for consumer spending after excess savings revisions

The Daily Shot: 06-Oct-23
The United States
Canada
The United Kingdom
The Eurozone
Japan
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. Let’s begin with the labor market.
 
Initial jobless claims are nearing multi-year lows for this time of the year.
 

 

 
Continuing claims are holding steady relative to the average of 2018, 2019, and 2022.
 

 

 
Job cut announcements eased last month and are back at pre-COVID levels.
 

 
The NFIB small business survey suggests that payrolls are not rolling over just yet.
 
Source: Pantheon Macroeconomics  
 
Will the labor force participation rate of women in the US match that of the other G7 countries by the end of the decade?
 
Source: Oxford Economics  

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2. Next, let’s take a look at some consumer-related trends.
 
Households’ excess savings have been revised higher (2 charts). Consumer spending could have a longer runway than implied by earlier projections.
 
Source: ING  
 
Source: The White House   Read full article  
 
Goods consumption is no longer declining relative to services.
 
Source: BCA Research  
 
The overall net worth of households remains buoyant.
 
Source: Moody’s Investors Service  
 
Retail sales growth for lower-income consumers has been remarkably strong.
 
Source: Goldman Sachs  
 
Student loan payments are running at pre-COVID levels.
 
Source: Wells Fargo Securities  

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3. The trade deficit continues to narrow.
 
Source: @TheTerminal, Bloomberg Finance L.P.  


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Canada

1. Canada’s trade balance unexpectedly swung into surplus.
 

 
Source: Reuters   Read full article  

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2. The Ivey PMI suggests that business activity remains in growth mode.
 

 
3. Canada stands to substantially increase crude oil exports next year after the Trans Mountain pipeline capacity is expanded.
 
Source: Capital Economics  


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The United Kingdom

1. Construction activity is sinking, …
 

 
… dragged lower by crashing residential demand.
 

 
Source: Reuters   Read full article  

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2. New car registrations remain well above last year’s levels.
 

 
3. Here is a look at UK carbon emission contract prices vs. the EU.
 
Source: @financialtimes   Read full article  


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The Eurozone

1. Germany’s trade surplus declined in August but was higher than expected.
 

 
Exports are slowing.
 

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2. The Eurozone’s construction activity continues to shrink.
 
Source: S&P Global PMI  
 
While the French construction PMI has been soft, …
 
Source: S&P Global PMI  
 
… Germany’s construction sector is under severe pressure, …
 

 
… as demand collapses.
 

 
Real estate insolvencies are rising.
 
Source: @markets   Read full article  
 
Source: The Economist   Read full article  

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3. French manufacturing output eased in August but remains on an upward trajectory (though still below pre-COVID levels).
 

 
Spain’s industrial production is rolling over.
 

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4. Here is Danske Bank’s euro-area growth tracker.
 
Source: Danske Bank  
 
5. Has wage growth peaked?
 
Source: ECB   Read full article  
 
6. Longer-dated debt rout has been remarkable. The Austrian 100-year bond is down 74% from the peak.
 
Source: BofA Global Research  


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Japan

1. Wage growth was below forecasts in August, with real wages holding well below last year’s levels.
 

 
Source: @economics   Read full article  

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2. Household spending topped expectations.
 


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China

1. Retail sales volumes declined in September, particularly luxury.
 
Source: China Beige Book  
 
2. Suppliers for real estate developers are seeing a spike in account receivables.
 
Source: Gavekal Research  
 
3. Here is a look at equity indices for China and Japan (in USD terms).
 
Source: BofA Global Research  


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Emerging Markets

1. Let’s begin with Mexico.
Stocks tumbled after the news on airport fees.
 

 
Source: @markets   Read full article  
 
USD/MXN is now well above the 200-day moving average.
 

 
The peso implied volatility surged.
 

 
Consumer confidence remains robust.
 

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2. Peru’s central bank cut rates again.
 

 
Source: @economics   Read full article  

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3. Chile’s wage growth is rolling over.
 

 
4. Argentina’s manufacturing output is slowing.
 

 
5. India’s service sector growth remains remarkably strong.
 
Source: S&P Global PMI  
 
6. South Africa’s electricity production is at multi-year lows, putting pressure on economic growth.
 


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Cryptocurrency

1. It has been a mixed week for cryptos, with BTC and XRP outperforming ETH.
Source: FinViz  
 
2. Bitcoin’s put/call ratio ticked higher over the past week.
 
Source: The Block  
 
Bitcoin’s implied volatility remains historically low.
 
Source: The Block  

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3. This chart shows the most “crypto-obsessed” countries.
 
Source: Marketplacefairness.org   


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Commodities

Gold entered a death cross and is now firmly in oversold territory.
 


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Energy

1. Crude oil entered correction territory, with Brent down 10.9% from the peak.
 

 
It has been a rough week so far.
 

 
Oil implied volatility jumped in recent days.
 

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2. US retail gasoline prices are headed lower.
 
Source: Pantheon Macroeconomics  
 
3. OPEC has plenty of spare capacity (2 charts).
 
Source: UniCredit; @dailychartbook  
 
Source: IEA; @harryhhutch  

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3. US natural gas futures jumped …
 

 
… in response to smaller-than-expected storage injection (2 charts).
 

 

 
Source: barchart.com   Read full article  
 
Increasing LNG exports could keep US natural gas prices elevated next year.
 
Source: Capital Economics  


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Equities

1. Here is a look at some sectors that have struggled this year.
 
Retail:
 

 
Consumer staples:
 

Source: MarketWatch   Read full article  
 
REITs:
 

 
Biotech:
 

 
2. Automakers’ shares are under pressure from the UAW strike and GM’s air-bag issue.
 

 
Source: @WSJ   Read full article  

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3. The put-call ratio surged this week, pointing to bearish sentiment.
 

 
Investment managers’ positioning has deteriorated sharply.
 
Source: NAAIM  
 
Hedge funds remain cautious on stocks.
 
Source: Goldman Sachs; @dailychartbook  

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4. The S&P 600 (small caps) is nearing support.
 

 
5. If Treasury yields have peaked, we could see a bounce in stocks over the next month.
 
Source: Goldman Sachs; @dailychartbook  


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Credit

1. High-yield funds are seeing outflows.
 
Source: BofA Global Research  
 
Leveraged loan fund flows have also turned negative.
 
Source: BofA Global Research  

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2. US small business rent delinquencies is trending higher.
 
Source: Alignable  
 
3. Muni issuance has been slowing.
 
Source: Truist Advisory Services  
 
4. Here is a look at ESG bond issuance.
 
Source: Goldman Sachs; @MikeZaccardi  
 
5. US money market funds’ AUM continues to surge.
 


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Rates

1. Treasury yields are dislocated, according to JP Morgan.
 
Source: JP Morgan Research; @dailychartbook  
 
The Treasury selloff appears to be overextended.
 
Source: Societe Generale Cross Asset Research; @WallStJesus  

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2. Here is a look at macro factors driving the surge in Treasury yields.
 
Source: Goldman Sachs; @dailychartbook  
 
3. TLT trading volume and open interest in call options surged this week.
 
Source: @markets   Read full article  
 
4. Traders are placing massive bets on the outcome of the November FOMC meeting.
 
Source: @markets   Read full article  


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Global Developments

1. Over the past 15 years, since the initial round of the Fed’s Quantitative Easing, US equities have outperformed other major assets, with commodities trailing behind.
 
Source: Deutsche Bank Research  
 
2. Here is a look at debt-to-GDP ratios in advanced economies.
 
Source: Goldman Sachs  
 
3. This chart shows the GDP per capita relative to the OECD mean.
 
Source: OECD   Read full article  
 
4. Mexico, Vietnam, India, and the euro area account for a growing share of US goods imports, possibly displacing China.
 
Source: MRB Partners  


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Food for Thought

1. Student loan debt:
 
Source: Wells Fargo Securities  
 
2. Cigarette prices around the world:
 
Source: Statista  
 
Taxes on cigarettes in the US:
 
Source: Statista  

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3. Accelerating adoption rates of technologies:
 
Source: Goldman Sachs; @dailychartbook  
 
4. Huawei mobile phone shipments:
 
Source: Gavekal Research  
 
5. Nuclear warhead inventories:
 
Source: The Economist   Read full article  
 
6. Browser market share by region:
 
Source: Statista  
 
7. Which animals are morally acceptable to eat?
 
Source: @chartrdaily  

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Have a great weekend!


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