The Daily Shot: 26-Oct-23
• The United States
• The Eurozone
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Let’s begin with the housing market.
• Mortgage rates near 8% are exerting downward pressure on demand for housing loans.
Here is the rate lock count.
Source: AEI Housing Center
• New home sales surprised to the upside.
Source: Reuters Read full article
– The median new home sale price is down 12% from a year ago.
– Measured in months of supply, inventories of new homes declined.
• This chart shows year-over-year home price changes by metro area.
Source: @APompliano, @NewsLambert Read full article
• The rise in home prices coincided with the Fed’s purchases of mortgage-backed securities (MBS) over the past 15 years.
Source: MUFG Securities
• Longer selling times tend to coincide with listing price cuts.
Source: MUFG Securities
• Household formation was an organic driver of housing between 2012-2019.
Source: MUFG Securities
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2. Next, we have some updates on inflation.
• The latest PMI report from S&P Global signals further easing in US consumer price gains.
Source: @SPGlobal, @PMInstitute
• Adjusted for wages, gasoline prices are below pre-COVID levels.
Source: BofA Global Research; @MikeZaccardi
• Consumer inflation expectations have been higher than those reflected in the bond market.
Source: Simon White, Bloomberg Markets Live Blog
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3. Inflation worries among small business owners have moderated, while concerns about rising interest rates have increased over the past year.
Source: BofA Global Research
• The average interest rate paid by US small firms has reached 10%.
Source: @scottdavisCRE
• In general, small businesses tend to spend a higher share of their revenues on interest expense than large firms.
Source: Goldman Sachs; @MikeZaccardi
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The Eurozone
1. The market does not expect any more rate hikes from the ECB (less than 3 bps is priced for December).
2. The PMI data continues to signal softer inflation ahead.
Source: @SPGlobal, @PMInstitute
3. Loan growth has been declining rapidly.
However, the contraction in the money supply appears to be slowing.
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4. Germany’s Ifo business expectations index surprised to the upside.
Below are the Ifo trends by sector.
Source: ifo Institute
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Japan
1. Dollar-yen is above 150. Will Tokyo intervene?
2. Services PPI was a bit higher than expected.
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Asia-Pacific
1. Let’s begin with South Korea.
• Economic growth held up well last quarter.
• Business surveys showed better sentiment in manufacturing this month but a large drop in services.
• South Korea’s stocks have been tumbling.
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2. The Taiwan dollar hit a multi-year low against USD.
Source: barchart.com
3. Australian bond yields continue to surge, …
… while the Aussie dollar is trending lower.
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China
1. The stock market is not rebounding despite a promise of fresh fiscal stimulus.
2. Rising air pollution tends to indicate stronger economic activity, …
Source: @JeffreyKleintop
… as evidenced by the Citi Economic Surprise Index.
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3. Analysts see slower growth ahead for China.
Source: @WSJ Read full article
The expectations of China’s GDP soon overtaking the US may have been premature.
Source: Arcano Economics
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Emerging Markets
1. Mexican bond yields are surging.
2. Indian stocks tumbled in recent days.
3. Turkey’s capacity utilization is holding up despite industrial sector weakness in the EU.
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Commodities
1. Uranium stocks have been improving relative to copper miners. Could we see a relative breakout?
Source: Aazan Habib, Paradigm Capital
2. Orange juice prices continue to hit record highs.
Source: @WSJ Read full article
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Energy
1. Global crude oil production is increasingly characterized by a higher proportion of lighter crude.
Source: Philip Geurts, @TheTerminal, Bloomberg Finance L.P. Read full article
2. The Houston-Cushing crude spread is tightening rapidly, suggesting softer international demand.
3. The Brent-Dubai spread continues to tighten.
4. US Permian production has been slowing.
Source: Goldman Sachs; @dailychartbook
5. Oil and gas capital spending has declined in recent years as companies focused on shareholder payouts and debt servicing.
Source: PGM Global
6. US coal consumption peaked about 15 years ago as natural gas usage accelerated.
Source: PGM Global
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Equities
1. The Nasdaq Composite is at the 200-day moving average.
2. Breadth remains very weak as the average S&P 500 stock is down ~21% from its one-year high.
Source: @DavidCoxRJ
• Only 147 S&P 500 stocks are above their 200-day moving average.
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3. The average S&P 500 stock valuation (S&P 500 equal weight index) is now well below the pre-COVID average.
Source: @TheTerminal, Bloomberg Finance L.P.
4. US-listed companies with significant international sales are underperforming, …
… as the US dollar rally resumes.
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5. Financials continue to see outflows.
Source: Deutsche Bank Research
6. Next, we have some sector performance data over the past ten business days.
• Communication Services:
• Semiconductors:
• Consumer Discretionary:
• Industrials:
• Transportation:
• Real Estate:
• Consumer Staples:
• Utilities:
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Credit
CCC-rated bonds have outperformed this year.
Source: @TheTerminal, Bloomberg Finance L.P.
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Rates
1. T-bills as a share of total US Treasury debt have been rising.
Source: Simon White, Bloomberg Markets Live Blog
2. Households have been buying Treasuries while others have been selling.
Source: Simon White, Bloomberg Markets Live Blog
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Global Developments
1. Most major economies avoided contractions in Q2, although some developed markets could experience declines in Q3.
Source: Capital Economics
2. The PMI reports show softening labor markets in advanced economies.
Source: Goldman Sachs; @MikeZaccardi
3. The share of individuals in their thirties and forties in China, the US, and Western Europe has plateaued in recent decades while India continues to grow.
Source: Deutsche Bank Research
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Food for Thought
1. Key investment themes by decade:
Source: Visual Capitalist Read full article
2. Migration of the world’s millionaires in 2023:
Source: Visual Capitalist Read full article
3. Drivers of the US budget deficit surge:
Source: @economics Read full article
4. Unemployment rates in Gaza and the West Bank:
Source: @financialtimes Read full article
5. Organ transplant waiting lists:
Source: The Economist Read full article
6. Generative AI proficiency:
Source: Indeed Hiring Lab
• Jobs least exposed to generative AI:
Source: Indeed Hiring Lab
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7. Life expectancy ranges for selected house pets:
Source: FlowingData
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