US labor productivity jumps

The Daily Shot: 03-Nov-23
The United States
The United Kingdom
The Eurozone
Europe
Asia-Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Rates
Food for Thought



 

The United States

1. US labor productivity increased more than expected last quarter.
 

 
Source: MarketWatch   Read full article  
 
Is the trend changing?
 

 
Unit labor costs unexpectedly declined.
 

 
Source: CNBC   Read full article  
 
Nonetheless, wage inflation remains elevated (2 charts).
 
Source: SOM Macro Strategies  
 
Source: @thefuture   Read full article  

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2. Next, we have some updates on the labor market.
 
Layoffs slowed again last month.
 

 
But Americans are increasingly worried about job cuts.
 
Source: @economics   Read full article  
 
Initial jobless claims remain near multi-year lows.
 

 

 
Continuing claims are elevated but appear to be stable.
 

 

 
The latest run of favorable seasonal adjustments to private payrolls looks unsustainable.
 
Source: Pantheon Macroeconomics  

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3. Manufacturing orders were very strong in September, boosted by aircraft sales.
 

 
Source: Reuters   Read full article  

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4. Automobile sales edged lower last month.
 

 
5. Retail gasoline prices continue to drift lower.
 

 
How do gasoline prices impact consumer spending?
 
Source: Truist Advisory Services  

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6. Federal interest expense is expected to hit 5% of the total debt outstanding.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
Here are the projections in dollar terms.
 
Source: Truist Advisory Services  
 
What drove the increase in the US fiscal deficit over the past year?
 
Source: Deutsche Bank Research  


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The United Kingdom

1. The BoE left rates unchanged.
 
Source: @economics   Read full article  
 
The market still sees a one-in-three chance of another rate increase in this cycle.
 

 
But expectations have shifted toward deeper rate cuts over the next couple of years.
 

 
The expected rate trajectory is similar to the US.
 
Source: Simon White, Bloomberg Markets Live Blog  

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2. The 2-year gilt yield has been trending lower.
 

 
3. The BoE sees no economic growth next year.
 
Source: Barclays Research  
 
The central bank expects rapid declines ahead for UK inflation.
 
Source: @financialtimes   Read full article  
 
Source: Barclays Research  
 
For now, UK inflation is trailing behind the deceleration seen in the US and Eurozone.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Forecasts show unemployment rising all the way into 2026.
 
Source: Barclays Research  

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4. The UK real overnight rate remains negative, unlike in the US and Eurozone.
 
Source: Simon White, Bloomberg Markets Live Blog  


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The Eurozone

1. The manufacturing PMI reports continue to show deep contraction in factory activity.
 
Italy:
 
Source: S&P Global PMI  
 
Eurozone (final):
 
Source: S&P Global PMI  

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2. Next, we have some updates on Germany.
 
Unemployment jumped last month.
 

 
Here is the unemployment rate.
 

 
Energy-intensive industries continue to struggle.
 
Source: Capital Economics  
 
Will Germany’s GDP surpass Japan’s?
 
Source: @economics   Read full article  

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3. Euro-area government deficits remain wide.
 
Source: @DanielKral1  


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Europe

1. Central European manufacturing hubs continue to struggle. Here are the PMI trends.
 
Poland:
 
Source: S&P Global PMI  
 
The Czech Republic:
 
Source: S&P Global PMI  

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2. Swiss core inflation topped expectations, …
 

 
… boosted by core services.
 
Source: @MarkoNikolay  
 
 
The EUR/CHF resistance is holding.
 

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3. Here is a look at employment rates in Europe.
 
Source: Eurostat   Read full article  


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Asia-Pacific

1. Japan’s inflation expectations remain elevated.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
2. Taiwan’s trade surplus is mostly about semiconductors.
 
Source: Macrobond  
 
3. The South Korean won has surged since the FOMC meeting, with the market perceiving the Fed as being on hold for now.
 

 
4. Australia’s service sector activity contracted last month.
 
Source: S&P Global PMI  


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China

1. Similar to the official measure, the PMI report from S&P Global showed very little growth in services last month.
 

 
2. Hong Kong’s business activity is contracting.
 

 
3. Average monthly earnings remain high relative to other EM countries.
 
Source: SOM Macro Strategies  
 
Wages for coastal workers have outpaced inland workers in recent years.
 
Source: SOM Macro Strategies  


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Emerging Markets

1. Let’s begin with Chile.
 
Economic activity (an improvement in September):
 

 
Manufacturing output (better than expected):
 

 
Copper production (above last year’s levels):
 

 
Retail sales (held up reasonably well in September):
 

 
The unemployment rate (lower than expected):
 

 
The Chilean peso (a sharp rebound):
 

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2. South Africa’s electricity output remains depressed, creating a drag on economic growth.
 

 
Vehicle sales have been soft.
 

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3. EM fund outflows have accelerated.
 
Source: BofA Global Research  


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Cryptocurrency

1. Most of the top cryptos extended their rally this week, with XRP in the lead and bitcoin cash (BCH) underperforming.
 
Source: FinViz  
 
2. The Crypto Fear & Greed Index entered “greed” territory last week.
 
Source: Alternative.me  


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Commodities

1. So far, copper is holding short-term support above $3.50 and appears oversold.
 

 
The earlier rally in copper faded alongside weakness in China, but seasonals point to a positive Q4.
 
Source: Kyaw Swar Ye Myint  
 
The copper/gold ratio is testing initial support within its broader downtrend.
 

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2. Chicago hog futures are rebounding.
 

 
3. The orange juice fever seems to be breaking.
 


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Energy

1. M&A activity in the US oil and gas industry has been rising.
 
Source: Alpine Macro  
 
2. Clean energy stocks continue to underperform.
 


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Equities

1. Market sentiment remains gloomy.
 
Investment managers:
 
Source: NAAIM  
 
Hedge funds:
 
Source: Goldman Sachs; @dailychartbook  
 
Retail investors:
 

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2. Companies are increasingly concerned about weak demand.
 
Source: @markets   Read full article  
 
3. Tighter financial conditions could weigh on the S&P 500 over time.
 
Source: Stifel  
 
4. Are investors concerned about the risk of a government shutdown this month?
 

 
Source: NBC News   Read full article  

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5. Share buyback authorizations are below last year’s levels but still robust.
 
Source: Goldman Sachs; @dailychartbook  
 
6. BofA’s private clients continue to rotate from stocks to bonds.
 
Source: BofA Global Research  
 
7. Here is a look at valuations relative to the past 20 years by size.
 
Source: Truist Advisory Services  
 
There is still scope for S&P 500 valuation compression.
 
Source: Stifel  

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8. US housing stocks are breaking above their short-term downtrend with strong volume.
 
Source: @mnkahn  
 
9. Tech funds are seeing some ouflows.
 
Source: BofA Global Research  
 
Outflows from financials have accelerated.
 
Source: BofA Global Research  


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Credit

1. The Fed’s emergency facility for banks continues to expand gradually.
 

 
2. Loan growth is expected to slow sharply.
 
Source: ING  
 
3. BofA’s private clients have been dumping corporate bonds.
 
Source: BofA Global Research  


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Rates

1. The 5-year Treasury yield is testing support at the 50-day moving average.
 

 
2. The pullback in Treasury yields has occurred alongside extreme bearish positioning.
 
Source: MRB Partners  
 
3. The Fed’s balance sheet continues to shrink.
 

 
But reserves remain stable.
 

 
The reason lies in the continuous decrease of the reverse repo program (RRP) balances, which have been outpacing the gains in the US Treasury’s cash holdings at the Fed.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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4. Treasury market liquidity is near its worst levels of the COVID era. This chart shows the aggregate deviations from the fitted yield curve.
 


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Food for Thought

1. Income needed to be in the top 1%:
 
Source: Visual Capitalist   Read full article  
 
2. The US population pyramid:
 
Source: @WSJ   Read full article  
 
3. US remaining life expectancy at the age of 25:
 
Source: Brookings   Read full article  
 
4. Iran selling oil to China:
 
Source: The Economist   Read full article  
 
5. Inflation-adjusted defense spending:
 
Source: Danske Bank  
 
6. The EIU Democracy Index for Africa:
 
Source: The Economist   Read full article  
 
7. Americans’ reluctance to live in a nursing home:
 
Source: @TheDailyShot  
 
8. The average length of MLB games:
 
Source: @axios   Read full article   Further reading  
 

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Have a great weekend!


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