The Daily Shot: 27-Oct-23
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Food for Thought
The United States
1. US economic growth accelerated last quarter, …
… driven by robust consumer spending. However, most economists expect a slowdown ahead.
• The index of real final sales to private domestic purchasers (the “core” GDP) was also quite strong.
• After seven consecutive quarterly gains, business investment growth stalled.
• Inventory accumulation boosted GDP growth.
• Housing investment saw its first increase in ten quarters.
• Net exports were roughly flat.
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2. Core inflation cooled in Q3.
3. Last month’s increase in retail inventories surprised to the upside.
This chart shows the level of retail inventories adjusted for inflation.
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4. Durable goods orders surged in September, …
… boosted by aircraft orders.
Source: MarketWatch Read full article
But even excluding transportation, new orders topped expectations.
Capital goods orders surprised to the upside.
Here is a look at capital goods orders adjusted for inflation.
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5. The Kansas City Fed’s manufacturing index showed sagging demand in the region this month.
Input costs are now falling.
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6. The goods trade deficit widened slightly in September.
Both imports and exports increased.
Source: @TheTerminal, Bloomberg Finance L.P.
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7. Initial jobless claims remain exceptionally low despite the massive increase in interest rates in this cycle.
But continuing claims are elevated relative to recent years.
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8. September pending home sales surprised to the upside but remained at multi-year lows.
Source: MarketWatch Read full article
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Canada
The CFIB business activity index of small and medium-sized firms deteriorated further this month, signaling a sharp slowdown in economic growth.
Here is the breakdown by sector.
• CFIB index level:
• Changes from September:
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The United Kingdom
The CBI reported a deterioration in retail sales this month, with businesses expecting further weakness in demand next month.
Source: Reuters Read full article
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The Eurozone
1. The ECB kept rates unchanged, as expected. The market does not see any more rate increases in this cycle, with cuts starting next spring.
Source: @johnauthers, @opinion Read full article
The market now expects deeper cuts in 2024 and 2025 as the economy struggles.
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2. Euro-area financial conditions are very tight, according to Goldman’s indicator.
3. This chart shows the evolution of COVID-era debt-to-GDP ratios.
Source: @DanielKral1
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Europe
1. Sweden’s key sentiment measure deteriorated further this month.
2. Here is a look at plastics recycling in the EU.
Source: Eurostat
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Japan
1. The yen trade-weighted index continues to decline.
2. JGB yields are grinding higher.
3. This month’s Tokyo inflation surprised to the upside, including the core CPI.
Source: Reuters Read full article
Food inflation remains elevated.
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4. Last month’s machine tool orders were robust.
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China
1. Industrial profits are running about 9% below last year’s levels (on a cumulative basis).
2. Even investment-grade developer debt is struggling.
Source: @markets Read full article
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3. Hong Kong’s trade deficit blew out last month.
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Emerging Markets
1. Let’s begin with central bank actions.
• Chile’s central bank delivered a smaller-than-expected rate cut.
Source: Reuters Read full article
• The Philippine central bank unexpectedly boosted rates.
Source: @WSJ Read full article
• Turkey’s central bank pushed rates up by another 500 bps to fight severe inflation.
Source: Reuters Read full article
• Ukraine’s central bank reduced rates by 400 bps.
Source: @economics Read full article
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2. Mexico’s unemployment rate remains very low.
3. Argenitna’s consumer confidence has been rebounding despite inflation running close to 140%.
4. South Africa’s PPI strengthened last month.
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Cryptocurrency
1. It has been a good week for cryptos, with bitcoin outperforming major peers.
Source: FinViz
2. Crypto trading volumes have dropped globally across all exchanges this year.
Source: @KaikoData
3. Exchange delistings are at their highest level ever.
Source: @crypto Read full article
4. Here is a look at Circle’s balance sheet, the issuer of the USDC stablecoin.
Source: Global X ETFs Read full article
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Commodities
1. On a price basis, gold is now outperforming the S&P 500 this year. If dividends are included, the S&P 500 is still slightly ahead.
2. Cocoa prices continue to surge.
Source: Reuters Read full article
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Energy
1. US commercial crude oil inventories increased last week but remained near 5-year lows.
• Gasoline demand dipped below last year’s levels.
• Refinery runs and utilization are also below last year’s levels.
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2. US oil production is very sensitive to prices.
Source: Goldman Sachs; @dailychartbook
• US production has outpaced the rest of the world as prices remain above breakeven levels.
Source: Alpine Macro
• However, production has mostly flatlined outside of the US Permian basin as drilling becomes more complex. (2 charts)
Source: Alpine Macro
Source: Alpine Macro
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3. US natural gas futures are surging again.
• It will get colder in parts of the US over the next few days.
Source: NOAA
• Storage injections were lower than expected last week, …
… but are still above the 5-year average.
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Equities
1. It’s been a rough couple of days for the tech megacaps (3 charts).
Source: @johnauthers, @opinion Read full article
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2. US indices are nearing oversold territory.
• S&P 500:
• The Nasdaq Composite:
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3. The S&P 500 is approaching initial support after dipping below its year-long uptrend.
• Longer-term indicators suggest the S&P 500 is overbought, which could delay the path to new highs.
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4. US small-caps have spent nearly 500 days below their one-year high – the longest drought since the financial crisis.
Source: @jasongoepfert
5. The S&P 500 has been diverging from its seasonal pattern.
Source: Aazan Habib, Paradigm Capital
However, the S&P 500 typically stabilizes in November after a strong first-half of the year.
Source: @RyanDetrick
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6. Bank shares outperformed on Thursday.
7. Long-duration stocks underperformed this week.
8. Retail investors have been buying tech megacaps as prices fall.
Source: Vanda Research
9. Investment managers are very bearish now.
Source: NAAIM
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Rates
1. Deutsche Bank’s models show a higher neutral rate.
Source: Deutsche Bank Research
However, the market is still pricing the longer-run (nominal) fed funds rate well below the current level, suggesting that the Fed’s policy is quite restrictive.
Source: @TheTerminal, Bloomberg Finance L.P.
Moreover, given the tight financial conditions, the “effective” policy rate is substantially higher than the actual fed funds rate.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. The lead time between the Treasury curve inversion and the start of a recession ranges from 3-16 months. However, there is typically a significant re-steepening after max inversion before a recession, particularly in a bear-steepening scenario.
Source: Deutsche Bank Research
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Food for Thought
1. US street and highway spending:
Source: Stifel
2. What is the ideal family size?
Source: Gallup Read full article
3. What did successful startup founders study in school?
Source: @genuine_impact
4. Which universities produce the most successful founders?
Source: @genuine_impact
5. Spending on prescription vs. nonprescription drugs:
Source: @WSJ Read full article
6. Space flight payload costs:
Source: Visual Capitalist Read full article
7. The pause in US mass shootings just ended.
Source: @axios Read full article
8. Sales/prices for white rhinos:
Source: The Economist Read full article
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Have a great weekend!
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