Residential construction is holding up well

The Daily Shot: 20-Nov-23
Administrative Update
The United States
Canada
The United Kingdom
Europe
China
Emerging Markets
Commodities
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

Administrative Update

Please note that The Daily Shot will not be published this Thursday and Friday (November 23rd and 24th).


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The United States

1. Residential construction held up well last month amid tight inventories.
 

 
Source: Reuters   Read full article  
 
Building permits are back to last year’s levels.
 

 
Single-family activity is now well above 2022 levels.
 
Starts:
 

 
Permits:
 

 
Year-over-year changes in single-family permits:
 

 
Multi-family construction remains relatively soft.
 

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2. Next, we have some additional updates on the housing market.
 
Consumers view the current buying climate for houses as the worst in recent history.
 

 
More homes are mortgage-free.
 
Source: @BW   Read full article  
 
There is roughly a one-year lag between changes in the level of interest rates and corresponding changes in home prices.
 
Source: MUFG Securities  
 
Higher rates are gradually bleeding into the overall mortgage pool.
 
Source: Bank of America Institute  
 
Residential investment as a share of GDP is very low, contributing to tight inventories.
 
Source: Torsten Slok,¬†Apollo  
 
Home inventories are further impacted by more Americans choosing to remain in their current residences.
 

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3. Now, let’s take a look at some updates on the labor market.
 
It’s been 21 months since the unemployment rate was above 4%.
 

 
Prime-age men with less than a high school diploma have been returning to the labor force.
 
Source: Wells Fargo Securities  
 
Prime-age women with at least one child continue to engage in the labor market at a lower rate than women of the same age without children at home.
 
Source: Wells Fargo Securities  
 
Industrial production has kept rising even as the share of workers in manufacturing declined.
 
Source: Deutsche Bank Research  

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4. More Americans are reporting challenges in obtaining credit.
 


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Canada

1. Last month’s housing starts topped expectations.
 

 
2. The industrial producer price index is back in negative territory on a year-over-year basis due to a pullback in oil prices.
 

 
3. Foreigners sold Canadian bonds in September.
 

 
Source: WP   Read full article  

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4. Speculative accounts have been boosting their bets against the loonie.
 


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The United Kingdom

1. Retail sales unexpectedly declined last month.
 

 
Source: @economics   Read full article  
 
2. The market has almost completely discounted the possibility of another BoE rate hike in this cycle, …
 

 
… as services inflation is expected to moderate.
 
Source: ING  

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3. The pound has been weakening against the euro, …
 

 
… with sentiment deteriorating further last week (chart shows speculative CME futures positioning).
 


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Europe

1. Here is a look at the euro-area CPI components.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. Spain’s housing sales are slowing rapidly.
 

 
3. Speculative accounts have been boosting their bets against the Swiss franc.
 

 
4. This chart shows the year-over-year changes in industrial production across the EU.
 
Source: Eurostat   Read full article  
 
6. Finally, we have EU companies with the highest profit per employee.
 
Source: @TheDailyShot  


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China

1. The renminbi is rebounding.
 

 
Source: @markets   Read full article  

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2. Utilized foreign direct investment continues to diverge from last year’s trajectory.
 

 
3. Construction starts remain soft.
 
Source: @JeffreyKleintop  


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Emerging Markets

1. Dollarization ahead for Argentina?
 
Source: AP News   Read full article  
 
The nation’s exports are over 30% below last year’s levels.
 

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2. Next, we have some updates on Brazil.
 
The economy contracted slightly in September, …
 

 
Source: The Brazilian Report   Read full article  
 
… signaling a contraction in Q3.
 

 
Economists also downgraded their forecasts for the current quarter.
 

 
The MSCI Brazil Index is trading at a discount relative to historical levels.
 
Source: Global X ETFs   Read full article  

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3. Ecoomists are boosting their forecasts for Mexico’s growth next year.
 

 
4. Here is Ukraine’s trade balance.
 

 
5. Risk appetite is rising in the EM FX market.
 

 
6. Finally, we have some performance data from last week.
 
Currencies:
 

 
Bond yields:
 

 
Equity ETFs:
 


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Commodities

1. The copper market is in extreme contango, suggesting flagging demand.
 

 
2. Nickel prices continue to fall.
 

 
3. Cocoa prices hit the highest level since 1978.
 

 
4. Rice prices keep climbing.
 

 
Source: @markets   Read full article  

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5. Here is a look at last week’s performance across key commodity markets.
 


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Energy

1. The US oil rig count increased last week.
 

 
2. Oil futures positioning is very bearish, setting the stage for a rebound.
 
Source: Deutsche Bank Research  
 
3. US natural gas futures dropped below $3/mmbtu.
 


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Equities

1. Let’s start with some technicals.
 
The Nasdaq 100 is at resistance.
 

 
The S&P 500 Equal Weighted index is testing resistance at the 200-day moving average.
 
Source: barchart.com  
 
A wedge pattern in the S&P 500?
 
Source: Yardeni Research  
 
The S&P 500 RSI suggests that the rally is about to pause.
 

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2. It has been 472 trading days since the S&P 500 reached its all-time high.
 

 
3. The S&P 500 breadth has improved markedly.
 

 
4. Asset managers are boosting their bets on the Nasdaq 100 futures.
 

 
Funds flows into QQQ (Nasdaq 100 ETF) surged last week.
 

 
5. CTAs have become upbeat on US equities.
 
Source: Goldman Sachs; @Marlin_Capital  
 
6. The last correction wasn’t unusual.
 
Source: Deutsche Bank Research  
 
7. Here is a look at the S&P 500 seasonality.
 
Source: Goldman Sachs; @Marlin_Capital  
 
8. It was a good week for small caps.
 

 
Demand for call options on the Russell 2000 index (IWM) has been surging. Here is the call option skew.
 
Source: Chris Murphy, Susquehanna International Group  

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9. How do equity markets’ year-to-date returns compare to other asset classes?
 
Source: Bank of America Institute  
 
10. Finally, we have some performance updates from last week.
 
Sectors:
 

 
Equity factors:
 

 
Macro basket pairs’ relative performance:
 

 
Thematic ETFs:
 

 
Largest US tech firms:
 


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Credit

1. MBS spreads have been tightening but remain above pre-COVID levels.
 

 
2. Middle-market companies’ interest coverage has been deteriorating.
 
Source: @theleadleft  
 
4. Here is last week’s performance by asset class.
 


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Rates

The 10-year Treasury yield broke below its five-month uptrend last week. The next major support level is around 4%.
 


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Global Developments

1. Are markets too dovish on the Fed relative to peers?
 
Source: Deutsche Bank Research  
 
2. Here is a look at central bank staffing levels relative to the population in select economies.
 
Source: Codera Analytics   Read full article  
 
3. What are the drivers of growth in total hours worked in Europe and the US?
 
Source: IMF  
 
4. Finally, we have some performance data from last week.
 
Currencies:
 

 
Bond yields:
 

 
Equities:
 


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Food for Thought

1. Average age of US vehicles:
 
Source: @WSJ   Read full article  
 
2. Changes in US household wealth by income percentile:
 
Source: Goldman Sachs; @MikeZaccardi  
 
3. Accelerated aging across Asia:
 
Source: The Economist   Read full article  
 
4. 5G download speeds:
 
Source: @WSJ   Read full article  
 
5. Hype cycles:
 
Source: @Marlin_Capital  
 
6. Generative AI is sending shockwaves through the online freelancing world:
 
Source: @financialtimes   Read full article  
 
7. Highest-grossing horror movies:
 
Source: Visual Capitalist   Read full article  
 

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