The Daily Shot: 19-Dec-23
• The United States
• The Eurozone
• Europe
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought
The United States
1. Let’s begin with the housing market.
• The NAHB homebuilder sentiment index showed a modest improvement this month, driven by a pullback in mortgage rates.
Source: Reuters Read full article
• Asking prices for newly-listed homes are well above last year’s levels.
Source: Redfin
• CoreLogic sees home price appreciation running below 3% next year.
Source: CoreLogic
• Over 41% of household income now goes into mortgage payments for recently purchased homes.
Source: Redfin
• The proportion of mortgage-free homes has been rising.
Source: @axios Read full article
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2. Next, let’s take a look at the regional service-sector report from the NY Fed.
• The overall index remains in contraction territory, …
… with companies starting to reduce staff.
• Fewer companies are raising wages.
• Input costs are moderating, …
… but more firms expect to boost prices in the months ahead.
• The index of CapEx expectations hit the lowest level since 2021.
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3. At the national level, the World Economics SMI index remains in growth mode.
Source: World Economics
4. The stock market is pricing in a sharp rebound in US manufacturing activity.
Source: @TheTerminal, Bloomberg Finance L.P.
5. The NFIB (small business) data points to wage growth accelerating next year.
Source: @MikaelSarwe
6. Too many “soft landing” stories out there?
Source: TS Lombard
• Goldman remains upbeat on US GDP growth next year.
Source: Goldman Sachs
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The Eurozone
1. Germany’s Ifo Business Climate indicator unexpectedly declined this month.
Source: ifo Institute
Source: ING Read full article
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2. The Eurozone’s trade balance has been rebounding as energy prices eased.
3. Economic uncertainty is highest within the euro area consumer sector.
Source: Deutsche Bank Research
4. Most euro area corporate debt is financed through banks and is mostly fixed for a short duration. This makes corporate borrowers more sensitive to changes in interest rates, especially more so than the US.
Source: Vanguard Read full article
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Europe
1. Here is a look at vacancy rates across the EU.
Source: Eurostat Read full article
2. This scatterplot shows COVID-era GDP and consumption growth.
Source: @DanielKral1, @OxfordEconomics
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Japan
1. Despite all the rumors of policy tightening, the BoJ did not signal a rate hike ahead.
Source: @markets Read full article
The yen dropped.
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2. Wage growth has been picking up.
Source: Scotiabank Economics
3. Rising shareholder proposals signify an enhancement in Japan’s stock market conditions.
Source: Matthews Read full article
4. Chinese tourists are starting to return.
Source: @WSJ Read full article
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China
1. The equity risk premium for both onshore and offshore Chinese stocks remains very low.
Source: BCA Research
• China’s underperformance versus India continues to widen.
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2. The World Economics SMI report shows manufacturing contraction but faster services growth this month.
Source: World Economics
3. Households are sitting on a lot of cash.
Source: Longview Economics
4. The M1-to-M2 ratio has been falling, which suggests that banking-sector liquidity is not translating into loan growth.
Source: @ANZ_Research
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Emerging Markets
1. Argentina cut rates after the massive currency devaluation.
Source: @economics Read full article
The nation is expected to run out of foreign reserves in 2025.
Source: Oxford Economics
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2. Colombia’s economy is contracting.
3. South Africa’s real loan growth is negative again.
Source: Codera Analytics Read full article
4. EM government bonds have outperformed US government bonds as the dollar weakened.
Source: Aazan Habib, Paradigm Capital
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Cryptocurrency
1. Crypto funds saw minor outflows, ending an 11-week run of inflows.
Source: CoinShares Read full article
Bitcoin and Ethereum-focused funds saw outflows last week, while some altcoin funds bucked the trend.
Source: CoinShares Read full article
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2. The SOL/ETH price ratio is trending higher.
Source: @KaikoData
3. Historically, bitcoin has deviated -40% by year-end from its annual price peak. So far, BTC is hovering near its yearly high, similar to 2016 and 2020.
Source: @KaikoData
4. The market for tokenized Treasury bills significantly increased this year.
Source: Global X ETFs Read full article
5. Here is a look at blockchain-based private credit.
Source: @crypto Read full article
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Commodities
1. UK sanctions on Russia are causing headaches for the LME.
Source: @markets Read full article
Traders are rushing to deliver Russian metal to the LME.
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2. Nippon is making a massive bet on steel demand in the US.
Source: @markets Read full article
3. Gold prices are still negatively correlated with US real yields but at higher levels.
Source: Oxford Economics
4. Sugar futures are in bear-market territory.
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Energy
1. The Houthi threat is disrupting shipping markets, …
Source: Reuters Read full article
… which boosted natural gas prices in Europe.
• The overall shipping costs to Europe have risen.
Source: Gavekal Research
• Shipping companies’ shares are higher.
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2. Crude oil positioning has become very cautious.
Source: @markets Read full article
Source: HFI Research
CTAs are now net short.
Source: Deutsche Bank Research
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Equities
1. A gain of 1.2% from here will bring the S&P 500 to its record-high close. The RSI indicator is now deep in overbought territory.
2. Deutsche Bank’s positioning index shows investors becoming more overweight on stocks.
Source: Deutsche Bank Research
• Bullish options bets have increased in most sectors, especially financials.
Source: Deutsche Bank Research
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3. The SPDR S&P 500 ETF (SPY) saw a record spike in inflows last Friday (SPY is the largest ETF).
4. The Fed’s “pivot” brought out the Reddit crowd. Speculative stocks have been surging.
Source: @financialtimes Read full article
SPACs are back.
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5. Long-duration stocks have been outperforming.
6. Goldman sees more gains for the S&P 500 next year, targeting 5100 by the end of 2024.
Source: Goldman Sachs; @carlquintanilla
7. Demand for small-cap options created a sharp divergence between VIX and RVX (Russell 2000 VIX equivalent).
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8. The largest seven stocks now represent almost 30% of the S&P 500’s market cap.
Source: @WSJ Read full article
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Credit
1. High-yield bonds are still outperforming investment-grade corporate debt year-to-date.
2. Munis haven’t been this expensive relative to Treasuries since 2021.
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Rates
1. There is little agreement on the direction of Treasury yields next year.
Source: @markets Read full article
2. The Fed’s RRP facility balances continue to shrink as money markets prefer T-bills and private repo.
The US Treasury’s cash balances at the Fed have also been declining.
• As a result, reserve balances have surged (which tends to be a tailwind for stocks).
• More liquidity in the private markets (driven by the above trends) has been boosting bank deposits.
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3. Treasury term premium continues to sink.
4. The bond/equity correlation implies an estimate of the neutral rate (r*) in a 1.25%-1.50% range.
Source: Deutsche Bank Research
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Food for Thought
1. Office construction starts:
Source: Wells Fargo Securities
2. Global fertiliser use:
Source: @financialtimes Read full article
3. Shoplifting incidents:
Source: Statista
4. Inmigration and outmigration rates:
Source: US Census Bureau
5. US population by age:
Source: @WSJ Read full article
6. China’s continuing reliance on coal:
Source: @JKempEnergy
7. Listening to festive music:
Source: @chartrdaily
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