The Daily Shot: 13-Oct-23
• The United States
• The United Kingdom
• Europe
• Asia-Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The September CPI report topped expectations, suggesting that the Fed’s effort to curb inflation remains a work in progress.
Source: CNBC Read full article
Here are the contributions.
Source: @TheTerminal, Bloomberg Finance L.P.
• Core inflation strengthened.
Alternative measures of core inflation showed rapid price gains in September.
– Median CPI:
– Trimmed-mean CPI:
– Sticky CPI:
• Core goods CPI was negative for the fourth month in a row.
But core services CPI surged last month.
Shelter drove most of the gains in core inflation.
– Rent:
– Owners’ equivalent rent:
– Hotel costs:
• But even excluding shelter, services inflation climbed sharply. Here is the supercore CPI.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. The probability of a Fed rate hike in December increased in response to the CPI report. November still seems to be off the table.
• Treasury yields surged, with the 2-year rate climbing above 5% again.
The 30-year yield increase was the highest in years.
• The yield curve steepened.
• Real yields also increased.
• The dollar jumped.
• Risk assets retreated.
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3. US jobless claims are holding just above multi-year lows for this time of the year.
But continuing claims remain elevated.
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4. The Atlanta Fed’s wage growth tracker eased in September but remained above 5%.
5. US housing inventories remain tight.
Source: realtor.com
6. The average interest rate on government debt is projected to stay below nominal GDP growth until about 2038.
Source: Alpine Macro
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The United Kingdom
1. The monthly GDP index was up slightly in August.
• Services activity improved.
But manufacturing output declined again.
Construction output also eased.
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2. The trade deficit was a bit narrower than expected.
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Europe
1. Norway’s house price declines deepened last quarter.
2. Here is a look at the EU’s reduction in electricity demand.
Source: PIIE Read full article
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Asia-Pacific
1. Dollar-yen is trading just below 150 as traders watch for signs of another F/X intervention from Japan.
2. Economists downgraded South Korea’s growth forecasts for next year.
South Korean unemployment remains very low.
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3. Singapore’s Q3 GDP growth was stronger than expected.
4. New Zealand’s manufacturing contraction accelerated last month.
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China
1. China’s CPI surprised to the downside, hitting zero on a year-over-year basis in September.
Source: Reuters Read full article
The weakness was driven by falling food prices.
• Core inflation held steady, …
… with services CPI edging higher.
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2. The PPI remains negative on a year-over-year basis.
3. Exports improved but remained below last year’s levels.
Source: South China Morning Post Read full article
Here are the cumulative year-to-date trends.
• The trade surplus was still below 2021 levels.
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4. What will it take to prop up the stock market?
Source: @markets Read full article
Earnings momentum remains strong in the consumer and communication services sectors.
Source: MRB Partners
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Emerging Markets
1. India’s industrial production was 10% above last year’s level.
Source: Reuters Read full article
• The CPI surprised to the downside.
• Indian shares continue to widen their outperformance vs. China.
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2. South Africa’s manufacturing and mining output increased modestly in August.
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3. Romania’s industrial production continues to trend lower.
4. Mexican manufacturing output unexpectedly declined in August (on a year-over-year basis).
5. Argentina’s CPI is nearing 140%.
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Commodities
1. It was a good week for gold, bolstered by the unfolding developments in the Middle East
2. The front-month coffee futures price is holding short-term support with improving momentum.
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Energy
1. US crude oil inventories surged last week.
• Refinery runs are at 2021 levels.
• Gasoline demand rebounded.
But gasoline inventories remain elevated when measured in days of supply.
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2. European natural gas prices continue to surge, …
… despite record-high inventories.
Source: @JKempEnergy
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Equities
1. The hotter-than-expected CPI report and a rebound in bond yields spelled trouble for small caps.
Housing stocks also took a hit.
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2. Semiconductor shares have been outperforming.
3. Bullish sentiment is in the bottom decile for the first time in almost a year.
Source: @RenMacLLC
4. A 19% gain over the next 12 months? This forecast is based on Goldman’s target levels for S&P 500 companies.
Source: Goldman Sachs; @MikeZaccardi
5. Generally, equities are negatively correlated to fixed income volatility (MOVE index).
Source: Deutsche Bank Research
6. Options trading has overtaken futures.
Source: @markets Read full article
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Credit
1. Here is a look at cumulative fund flows for US corporate credit markets.
Source: Goldman Sachs
2. Growth in private credit has been outpacing traded markets.
Source: @WSJ Read full article
• Here is the maturity wall for private credit.
Source: S&P Global Ratings
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3. Interest coverage ratios continue to trend lower.
Source: Torsten Slok, Apollo
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Rates
1. Realized volatility in longer-dated Treasuries surged in recent days.
2. Stagflation environments are typically negative for Treasuries.
Source: Saxo Bank Read full article
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Global Developments
1. Currency market implied volatility remains subdued despite increased geopolitical risks.
2. Here is a look at inflation and real wage growth in the 1970s.
Source: ING
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Food for Thought
1. US labor force participation rates:
Source: @WSJ Read full article
2. Music piracy:
Source: Statista
3. Global per capita meat consumption:
Source: USDA Read full article
4. Causes of death globally:
Source: Our World in Data Read full article
5. Terrorist activity and arrests in Europe:
Source: Statista
6. Cruise tourism:
Source: @chartrdaily
7. Plans to travel to a foreign country for vacation:
Source: Torsten Slok, Apollo
8. GOP 2024 presidential nomination probabilities in the betting markets:
Source: @PredictIt
9. New NFL fans:
Source: @CivicScience Read full article
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