The Daily Shot: 05-Jan-24
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• China
• Emerging Markets
• Cryptocurrency
• Energy
• Equities
• Alternatives
• Rates
• Global Developments
• Food for Thought
The United States
1. Let’s begin with the labor market.
• The December ADP private payrolls index surprised to the upside.
The ADP report is generally not a good predictor of the official payrolls data, …
Source: Pantheon Macroeconomics
… but the market took notice of the ADP report.
Here are some ADP sector trends.
– Manufacturing:
– Leisure & Hospitality:
– Healthcare:
By the way, the latest PMI figures suggest that the healthcare sector activity accelerated last month, boosting job creation.
Source: S&P Global PMI
• Initial jobless claims ended the year on a strong note (multi-year lows).
– This chart shows the continuing unemployment claims.
– Fewer states are reporting significant increases in continuing jobless claims.
Source: Simon White, Bloomberg Markets Live Blog
• What should we expect from today’s payrolls report?
– Here are some estimates.
Source: Goldman Sachs; @MikeZaccardi
– Below is Morgan Stanley’s forecast.
Source: Morgan Stanley Research
Morgan Stanley sees the unemployment rate edging higher (1st panel) as more Americans enter the labor force (2nd panel).
Source: Morgan Stanley Research
– Oxford Economics sees 135k new jobs created last month.
Source: Oxford Economics
– Here is Goldman’s longer-term forecast.
Source: Goldman Sachs; @MikeZaccardi
• Hiring has been concentrated in a few industries (2 charts). Note that a significant portion of government hiring consists of public school teachers.
Source: Goldman Sachs; @MikeZaccardi
Source: Oxford Economics
• This chart shows the foreign-born share of the US labor force.
Source: Morgan Stanley Research
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2. Next, we have some updates on the housing market.
• Mortgage applications were (relatively) firmer going into the year-end.
• Very few mortgage properties have negative equity.
Source: Goldman Sachs; @MikeZaccardi
• Traffic of prospective homebuyers appears to be stabilizing, although overall housing conditions remain unaffordable. (2 charts)
Source: Torsten Slok, Apollo
Source: Torsten Slok, Apollo
• Goldman sees mortgage rates remaining elevated for years, …
Source: Goldman Sachs; @carlquintanilla
… keeping housing affordability low.
Source: Goldman Sachs; @MikeZaccardi
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3. Consumer sentiment has been improving.
Source: Penta-CivicScience Index
4. There are a lot of news articles mentioning “soft landing.”
Source: The Economist Read full article
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Canada
The PMI data remains recessionary.
• Services:
Source: S&P Global PMI
• Composite PMI:
Source: S&P Global PMI
The contraction in demand and employment accelerated last month.
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The United Kingdom
1. The December services PMI was revised higher, pointing to accelerating growth.
2. Mortgage approvals surprised to the uspide, …
… with more improvements on the way.
Source: Pantheon Macroeconomics
– By the way, here is a look at mortgage rates.
Source: Capital Economics
• Growth in consumer credit strengthened in November.
• Liquidity is starting to recover.
– Households’ real savings are well below the pre-COVID trend.
Source: Pantheon Macroeconomics
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3. Inflation expectations have been trending lower.
Source: ING
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The Eurozone
1. German inflation increased in December due to temporary effects in energy prices.
Source: @economics Read full article
French inflation also edged higher.
Source: @economics Read full article
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2. The December composite PMI remained in recessionary territory (2 charts).
Source: S&P Global PMI
Source: Pantheon Macroeconomics
Spain was an exception, registering modest growth last month.
Source: S&P Global PMI
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Europe
1. Sweden’s service sector activity stabilized in December.
2. Shipping costs from Asia to Europe are surging as vessels are forced to avoid the Red Sea.
3. Here is a look at the demand for tech professionals in the EU.
Source: Eurostat Read full article
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China
1. Government bond yields continue to tumble.
2. The nation’s total leverage reached a record high in 2023.
Source: Goldman Sachs; BofA Global Research Read full article
• Local governments have been borrowing more to support smaller banks.
Source: @financialtimes Read full article
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Emerging Markets
1. Let’s begin with Brazil.
• Vehicle sales (well above 2022 levels):
• Inflation (higher than expected):
• Services PMI (no growth):
Source: S&P Global PMI
• Trade surplus (well above peers):
Source: Reuters Read full article
• Last year’s approval of Brazil’s tax reform is expected to boost the economy.
Source: TS Lombard
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2. Pantheon Macroeconomics expects further rate cuts amid slowing inflation across Latin America. (2 charts)
Source: Pantheon Macroeconomics
Source: Pantheon Macroeconomics
3. India’s foreign direct investment has been slowing.
Source: Goldman Sachs
Source: The New York Times Read full article
• Will India’s equities maintain their performance edge over China’s stock market?
Source: Capital Economics
Here is a look at relative valuations.
Source: Capital Economics
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4. Philippine inflation continues to moderate.
5. Thailand is in deflation.
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Cryptocurrency
1. Retail investors have been buying crypto-focused stocks.
Source: Vanda Research
2. Here is why access to crypto, especially stablecoin, is so important in many countries.
Source: Vanda Research
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Energy
1. US crude oil inventories declined last week, …
… but the stockpiles of refined products surged.
Here are the inventory levels …
… and gasoline days of supply.
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2. Oil prices remain subdued despite the Middle East tensions.
Source: @TheTerminal, Bloomberg Finance L.P.
3. US gross oil exports are near record highs.
By the way, the US is now the largest producer of crude oil
Source: @simongerman600, @heysidain
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4. Hedge funds remain very cautious on energy shares.
Source: Goldman Sachs; @dailychartbook
5. Coal equities have been surging.
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Equities
1. Tech mega-caps have been underperforming.
• The Nasdaq 100 and the Nasdaq Composite have been down for five days in a row.
• Here is a look at the largest US tech firms’ performance this year.
• Apple is nearing the 200-day moving average.
• Here is tech mega-caps’ market value in perspective.
Source: Torsten Slok, Apollo
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2. Equity fund flows have been robust.
Source: BofA Global Research
• There is a strong correlation between the S&P 500 and net inflows, especially when accounting for reduced supply.
Source: TS Lombard
3. Small caps have seen substantial inflows.
Source: BofA Global Research
4. Retail investors have been buying small caps and financials.
Source: Vanda Research
5. A rising portion of the stock market is positively correlated to Treasuries.
Source: SocGen; @johnauthers, @opinion Read full article
6. Here is a look at the equal-weight S&P 500 index and its relative performance.
Source: S&P Dow Jones Indices
7. The net count of Variant Perception’s equity buy versus sell signals flipped to more sells.
Source: Variant Perception
8. Here is the percentage of stocks trading above the July highs.
Source: LPL Research
9. Buying the dip has been profitable over the long run.
Source: @bespokeinvest
10. The market hasn’t been kind to strategic transactions
Source: @WSJ Read full article
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Alternatives
1. US private equity middle-market deal activity continued to decline into Q3 2023.
Source: PitchBook
2. Median pre-money valuations for US early-stage ventures increased in Q4.
Source: Carta Read full article
• Median valuations have substantially declined for late-stage ventures over the past three years.
Source: Carta
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Rates
1. Significant option wagers anticipate a yield spike following today’s payrolls report.
Source: @markets Read full article
2. TLT is at the 200-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
3. The Fed typically cuts rates within eight months after its first pause.
Source: Piper Sandler
4. The copper/gold ratio decline preceded the recent drop in yields.
Source: Piper Sandler
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Global Developments
1. The US dollar positioning is increasingly bearish.
2. Most central banks are no longer under pressure to hike rates.
Source: BCA Research
3. Here is a look at consumer spending trends in select economies.
Source: J.P. Morgan Asset Management
4. China is exporting disinflation.
Source: Mary Nicola, @TheTerminal, Bloomberg Finance L.P.
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Food for Thought
1. Job satisfaction:
Source: @WSJ Read full article
2. Social media commerce challenges:
Source: EcommerceDB Read full article
3. How will Large Language Models impact jobs?
Source: @WSJ Read full article
4. Average weekly cybersecurity attacks per industry:
Source: Global X ETFs Read full article
5. US charitable giving:
Source: @chartrdaily
6. Femicides by family or partners:
Source: Statista
7. Voting in national elections:
Source: @financialtimes Read full article
8. Cost of electricity by technology:
Source: @WSJ Read full article
9. The most expensive paintings sold:
Source: @genuine_impact
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Have a great weekend!
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