Consumers remain concerned about inflation resurgence

The Daily Shot: 27-Nov-23
The United States
The United Kingdom
The Eurozone
Japan
Asia-Pacific
China
Emerging Markets
Commodities
Energy
Equities
Credit
Global developments
Food for Thought



 

The United States

1. The S&P Global flash PMI report indicated a modest expansion in the US services sector this month.
 

 
However, hiring at service companies has stalled.
 

 
Fewer firms reported rising input costs.
 

 
Manufacturing activity dipped back into contraction territory.
 

 
But export demand is improving.
 

 
Manufacturers are reporting fewer employees.
 

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2. The revised inflation expectations data from the University of Michigan highlight consumers’ concerns about inflation resurgence.
 

 
Source: Reuters   Read full article  
 
Treasury yields moved higher in response to the University of Michigan report.
 

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3. Durable goods orders declined sharply last month, …
 

 
… driven by the transportation sector.
 

 
Source: Reuters   Read full article  
 
Capital goods orders edged lower.
 

 
This chart shows the nominal and real levels of capital goods orders.
 

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4. Bloomberg’s index of US economic surprises has experienced a sharp decline in recent weeks.
 

 
5. Initial jobless claims remain very low for this time of the year.
 

 
Continuing claims appear to be stable.
 

 
Seasonal hiring has been relatively soft.
 
Source: Challenger, Gray & Christmas   Read full article  
 
Here is a look at the proportion of job losses each state has recovered since the onset of the pandemic.
 
Source: Wells Fargo Securities  

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6. Mortgage applications continue to show some improvement, …
 

 
… as mortgage rates ease.
 

 
Here is the rate lock count.
 
Source: AEI Housing Center  
 
The average loan size has been trending lower.
 


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The United Kingdom

1. The flash composite PMI indicator from S&P Global signaled stabilization in business activity this month.
 

 
Services (back in growth territory):
 

 

 
Manufacturing (slower contraction):
 

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2. The CBI report showed deteriorating industrial goods demand.
 

 
3. Consumer confidence edged higher this month.
 


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The Eurozone

1. The euro-area flash PMI report shows a slightly slower contraction this month.
 

 
Source: Reuters   Read full article  
 
The PMI indicators continue to signal a GDP decline.
 
Source: Capital Economics  
 
Manufacturing:
 
The manufacturing sector has contracted for 17 months in a row.
 

 
Germany (a slower decline this month):
 

 
France (severe contraction):
 

 
Services:
 
Germany:
 

 
France:
 

 
The PMI report shows that the euro-area labor market is under pressure.
 
French service firms (hiring has stalled):
 

 
French manufacturing (ongoing staff reductions):
 

 
German manufacturing employment:
 

 
The Eurozone Composite PMI employment:
 

 
The PMI report does not bode well for employment growth.
 
Source: Capital Economics  

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2. Germany’s Ifo indicator remains depressed, …
 

 
Source: ifo Institute  
 
… signaling further declines in the nation’s GDP.
 
Source: Capital Economics  

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3. Here is a look at Germany’s GDP growth components.
 
Source: Pantheon Macroeconomics  
 
4. French business sentiment has been trending lower.
 

 
5. Consumer sentiment indicators improved this month.
 
The Netherlands:
 

 
Belgium:
 

 
The Eurozone
 


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Japan

1. The CPI report was a bit softer than expected, but core inflation remains elevated.
 

 

 
Economists have been boosting their forecasts for next year’s core CPI.
 

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2. Manufacturing activity contracted further this month.
 

 
Services remain in expansion territory.
 


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Asia-Pacific

1. Let’s begin with Taiwan.
 
Industrial production surprised to the upside.
 

 
The unemployment rate hit a multi-year low.
 

 
The inability of Taiwan’s two primary opposition parties to form a united front for the presidential election raises the likelihood that Lai Ching-te, the current Vice President and candidate of the ruling Democratic Progressive Party (DPP), will win the upcoming presidential election scheduled for January 13th.
 
Source: @ThatJennieWelch, @economics   Read full article  

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2. After last year’s plateau, South Korea’s household debt is reaching record highs.
 
Source: @economics   Read full article  
 
3. Australia’s PMI indicators are firmly in contraction territory, …
 

 
… amid soft demand.
 

 
Australia’s corporate insolvencies continue to climb, particularly in construction, where builders have been squeezed by fixed-price contracts.
 
Source: Coolabah Capital   Read full article  


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China

1. The stock market remains under pressure despite Beijing’s attempts to intervene.
 

 
Hong Kong/foreign investors continue to pull capital out of mainland markets. The chart below shows the cumulative year-to-date flows.
 

 
Below are the net purchases by year.
 
Source: @financialtimes   Read full article  

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2. Industrial profit growth has slowed.
 
Source: @markets   Read full article  
 
3. Demographics remain a headwind for China’s longer-term growth.
 
Source: Nikkei Asia   Read full article  


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Emerging Markets

1. Turkey’s central bank raised the benchmark rate to 40%.
 

 
The lira continues to weaken, fueling inflation.
 

 
Separately, consumer confidence improved again this month.
 

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2. South Africa’s CPI report topped expectations.
 

 
3. Mexico’s September retail sales disappointed.
 

 
Source: Reuters   Read full article  
 
The Q3 GDP growth was revised higher.
 

 
Here is the monthly economic activity index.
 

 
Inflation continues to ease.
 

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4. Lat Am stocks have outperformed this year.
 

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

 
Bond yields:
 

 
Equity ETFs:
 


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Commodities

1. Iron ore has been rallying due to low inventories in China, …
 
Source: @markets   Read full article  
 
… as the nation boosts steel exports.
 
Source: @markets   Read full article  
 
But Beijing wants to curb iron ore price gains.
 
Source: @markets   Read full article  
 

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2. Gold is trading above $2,000, widening its divergence with US real yields (chart shows inverted 10-year TIPS yield).
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. Here is last week’s performance across key commodity markets.
 


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Energy

1. Brent crude is back below $70/bbl.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Brent put options volume surged last week.
 
Source: @markets   Read full article  

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2. USO, the largest crude oil ETF, saw substantial outflows last week.
 

 
3. Malaysia has been reporting a surge in oil exports over the past year. A substantial portion of this gain is the “washing” of Russian crude oil.
 
Source: Gavekal Research  
 
4. US natural gas futures have tumbled this month, …
 

 
… with the latest decline driven by mild weather.
 
Source: NOAA  

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5. Sustainable funds continue to see outflows, …
 
Source: @WSJ   Read full article  
 
… putting pressure on renewable energy stocks. Is the underperformance over?
 


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Equities

1. So far, tt’s been a good month for the S&P 500.
 
Source: @markets   Read full article  
 
2. Sentiment continues to improve.
 
Retail investors:
 

 
Deutsche Bank’s consolidated positioning index (now in overweight territory):
 
Source: Deutsche Bank Research  
 
Goldman’s sentiment indicator:
 
Source: Goldman Sachs  

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3. The rally has been broadening out.
 
The S&P 500 equal-weight index (above its 200-day moving average):
 

 
The percentage of S&P 500 stocks above their 200-day moving average:
 

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4. Equity funds are seeing inflows, …
 
Source: BofA Global Research  
 
… boosted by tech flows (2 charts).
 
Source: BofA Global Research  
 
Source: Deutsche Bank Research  
 
However, hedge funds have been selling tech stocks.
 
Source: Goldman Sachs; @carlquintanilla  

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5. The Russell 2000 index is holding resistance at the 200-day moving average.
 

 
Small and micro-cap stocks are also holding key support zones.
 
Source: Aazan Habib, Paradigm Capital  
 
Small caps continue to widen their earnings gap relative to the Nasdaq 100.
 
Source: SG Cross Asset Research; @WallStJesus  

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6. VIX hit its COVID-era low last week, …
 

 
… as volatility moderates.
 

 
Low volatility could result in higher stock-market allocations by risk parity and vol control funds.
 
Source: Nomura Securities; @WallStJesus  

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7. Finally, we have some performance data from last week.
 
Sectors:
 

 
Equity factors:
 

 
Macro basket pairs’ relative performance:
 

 
Thematic ETFs:
 

 
Largest US tech firms:
 


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Credit

1. US investment-grade corporate spreads hit the lowest levels since early 2022, …
 

 
… amid robust fund inflows.
 
Source: BofA Global Research  
 
It has been a good month for corporate bond flows.
 
Source: @financialtimes   Read full article  

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2. The dispersion among high-yield bond spreads has risen substantially.
 
Source: Goldman Sachs  
 
3. Small caps face a much steeper maturity wall than large caps.
 
Source: @markets   Read full article  
 
4. Money market fund balances continue to hit record highs.
 

 
5. Here is last week’s performance by asset class.
 


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Global developments

1. Generally, the gap between GDP growth and the cost of capital is mildly positive across G7 nations.
 
Source: MRB Partners  
 
2. The global credit impulse has moved deeper into negative territory.
 
Source: UBS Research; @WallStJesus  
 
3. Goldman expects higher returns on non-cash assets than cash next year.
 
Source: Goldman Sachs  
 
4. The dollar’s share of global private transactions has been rising.
 
Source: Deutsche Bank Research  
 
5. Finally, we have some performance data from last week.
 
Currencies:
 

 
Bond yields:
 

 
Large-cap equity indices:
 


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Food for Thought

1. Declining mobility:
 
Source: Torsten Slok,¬†Apollo  
 
2. Remote work postings:
 
Source: Indeed Hiring LabIndeed  
 
3. US views on the Israel-Hamas war:
 
Source: @axios   Read full article  
 
4. Health insurance deductibles:
 
Source: @WSJ   Read full article  
 
5. Overdose deaths among children and teenagers:
 
Source: @axios   Read full article  
 
6. Ultra-processed foods:
 
Source: BMJ¬†   Read full article  
 
7. Pie preferences based on Google search trends:
 
Source: @JeffreyKleintop  
 

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