The GDP-GDI divergence has reached extreme levels

The Daily Shot: 05-Dec-23
The United States
The Eurozone
Europe
Japan
Asia-Pacific
China
Emerging Markets
Cryptocurrency
Energy
Equities
Rates
Global Developments
Food for Thought



 

The United States

1. Factory orders declined in October.
 

 
Source: RTT News   Read full article  
 
This chart shows the dollar level of vehicle and parts orders.
 

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2. The economic surprise index has been rolling over.
 

 
3. Real GDP growth consensus estimates have been revised higher.
 
Source: Deutsche Bank Research  
 
Here is Goldman’s forecast.
 
Source: Goldman Sachs  

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4. The GDP-GDI divergence has reached extreme levels. Could recent GDP data be overstating the true extent of the US economic growth?
 

 
Source: USA Today   Read full article  

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5. Next, we have some updates on the US consumer.
 
Dwindling excess savings:
 
Source: JP Morgan Research; @WallStJesus  
 
Slowing student loan payments:
 
Source: Oxford Economics  
 
Real household income vs. the pre-COVID trend:
 
Source: Deutsche Bank Research  
 
Capital Economics expects real disposable income to remain well below the current pace of consumption growth.
 
Source: Capital Economics  

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5. The GS Twitter Economic Sentiment continues to diverge from the U. Michigan’s measure.
 
Source: Goldman Sachs; @MikeZaccardi  
 
6. The 30-year mortgage rate is approaching 7%.
 
Source: Mortgage News Daily  
 
7. Market pricing for faster Fed rate cuts suggests that the US dollar has room to decline further.
 
Source: BNP Paribas; @WallStJesus  


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The Eurozone

1. The market is pricing in steep ECB rate cuts next year.
 

 
Here is the 2-year Bund yield.
 

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2. While the Sentix Investor Confidence Index experienced a marginal uptick, the extent of its recovery fell short of market expectations.
 

 
3. Germany’s trade surplus increased in October.
 

 
Amid an already faltering economy, Germany’s ‘debt brake’ may pose a significant additional obstacle to economic growth, intensifying existing headwinds.
 
Source: Gavekal Research  
 
Source: @bpolitics   Read full article  

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4. Here is a look at labor force participation.
 
Source: ECB   Read full article  
 
Source: ECB   Read full article  


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Europe

1. Swiss inflation eased last month.
 

 
2. Next, we have the number of FDI projects by country.
 
Source: The Economist   Read full article  


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Japan

1. Tokyo’s November CPI was lower than expected, but core inflation is still elevated relative to recent history.
 

 
2. As Japanese firms increasingly divest from cross-shareholdings, a longstanding barrier to investment in Japan’s stock market is being dismantled, potentially altering the landscape for equity investors.
 
Source: Goldman Sachs  


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Asia-Pacific

1. South Korea’s inflation eased last month.
 

 
2. Next, we have some updates on Australia.
 
Although the RBA maintained its interest rates, its less hawkish-than-expected commentary fell short of market anticipations, leading to a dip in the Australian dollar and short-term yields.
 

 

 
Australia’s services sector is now a drag on economic growth.
 
Source: World Economics  


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China

1. The selloff continues despite Beijing’s attempts to stabilize the stock market.
 
Mainland shares:
 

 
Hong Kong:
 

 

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2. Fluctuations in the excess reserve ratio lead the non-public credit impulse by several months.
 
Source: BCA Research  
 
3. Hong Kong’s retail sales have been slowing.
 


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Emerging Markets

1. Let’s begin with Mexico.
 
The unemployment rate (very low):
 

 
Vehicle sales (well above last year’s levels):
 

 
CapEx (down in September):
 

 
Remittances (record high):
 

 
The budget deficit (extra spending ahead of the elections):
 

 
The latest poll:
 
Source: The ETF Shelf  

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2. Argenitna’s consumer confidence is rebounding.
 

 
3. South Africa’s vehicle sales are 10% below last year’s levels.
 

 
The trade balance unexpectedly swung into deficit in October.
 

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4. Is Turkey’s inflation finally peaking as the central bank pushes rates to extreme levels?
 

 
5. EM leading indicators are turning up alongside an improvement in trade.
 
Source: TS Lombard  
 
Source: TS Lombard  


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Cryptocurrency

1. Cryptos are off to a strong month, with bitcoin cash (BCH) and bitcoin (BTC) in the lead.
 
Source: FinViz  
 
2. Bitcoin’s market cap relative to the total crypto market cap, or dominance ratio, continues to trend higher.
 

 
3. The BTC/ETH price ratio is also trending higher.
 

 
4. Crypto funds continued to see inflows last week, led by long-bitcoin products. (2 charts)
 
Source: CoinShares  
 
Source: CoinShares  


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Energy

1. European natural gas futures dip below €40.0/MWh.
 

 
2. Uranium prices are surging.
 


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Equities

1. There are not a lot of bearish retail investors left.
 

 
CTAs have turned very bullish.
 
Source: Goldman Sachs; @dailychartbook  
 
And yet, corporate insiders are bearish.
 

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2. Fund inflows have been robust (2 charts).
 
Source: Goldman Sachs; @MikeZaccardi  
 
Source: BNP Paribas; @WallStJesus  

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3. Tailwinds from higher liquidity (reserves) are fading.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
4. Many hedge funds have piled into the same stocks.
 
Source: Goldman Sachs  
 
5. Deeper yield-curve inversions mean larger market corrections in a recession.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
6. US investors have been willing to pay a large premium for rising, high-quality profits this year.
 
Source: Citi Private Bank  
 
7. The S&P 500 is trading at the bottom end of its long-term trend channel since 2008.
 
Source: Deutsche Bank Research  
 
8. How did forward PE multiples across S&P 500 sectors change in November?
 

 
Here is a look at expected performance (forward earnings yield) vs. perceived risk (implied volatility) by sector.
 

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9. Finally, we have detailed equity factor performance data for small and large caps over the past five weeks.
 
Source: CornerCap Institutional  


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Rates

1. Repo rates jumped last week due partly to tax payment dynamics and bond settlements.
 

 
SOFR climbed above the fed funds rate.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. Hedge funds have been boosting their bets on rapid-fire Fed rate cuts next year. Too much enthusiasm?
 

 
Source: @markets   Read full article  

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3. The real Fed funds rate rose from very low levels back into its historically normal range.
 
Source: Deutsche Bank Research  


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Global Developments

1. Here is a look at the November manufacturing PMIs. 22 out of 31 countries tracked by S&P Global are in contraction territory.
 
Source: S&P GlobalĀ PMI  
 
2. Real consumer spending has been strong in the US while the Eurozone and UK continue to see weakness.
 
Source: Capital Economics  
 
3. The CPI distribution has shifted lower across major developed markets.
 
Source: TS Lombard  
 
And wage pressure has started to ease.
 
Source: TS Lombard  


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Food for Thought

1. How Americans view small businesses:
 
Source: @chartrdaily  
 
2. Amazon’s seasonal workforce:
 
Source: @chartrdaily  
 
3. US healthcare employment growth:
 
Source: @WSJ   Read full article  
 
4. Allocation of defense spending by category:
 
Source: OECD   Read full article  
 
5. Deaths attributed to smoking in selected countries:
 
Source: Jeremy Ney   Read full article  
 
Smoking and median household income by US county:
 
Source: Jeremy Ney   Read full article  
 
Smoking rates:
 
Source: Jeremy Ney   Read full article  

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6. Common Christmas dishes in Europe:
 
Source: @loverofgeography  
 

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