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: BMJÂ Read full article
7. Pie preferences based on Google search trends:
Source: @JeffreyKleintop
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