The Daily Shot: 08-Jan-24
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. Last month’s job growth surprised to the upside. This report deviated from the Fed’s anticipated trend of a loosening labor market.
• Here is the overall US employment level.
Source: @WSJ Read full article
• Once again, healthcare, local government, and leisure & hospitality were the key contributors to job gains (4 charts).
Source: ING
Many of the government job gains were due to hiring/re-hiring public school teachers, whose numbers are now approaching pre-COVID levels.
• Employment services and temp help services, which tend to be leading indicators for the overall labor market, showed another decline.
– Temp help services have been down for 11 months in a row, …
… mostly due to the unwind of COVID-related temp hiring.
Source: Simon White, Bloomberg Markets Live Blog
• The unemployment rate did not increase as expected, …
… while labor force participation declined. This points to persistent tightness in the labor market, suggesting that there is no urgency for the Fed to cut rates.
– The unemployment rate has been below 4% for 23 months in a row.
– Here is the employment-to-population ratio.
• The greatest concern for the Fed in the December report was accelerating wage growth.
• Market expectations for the 2024 rate cuts eased further but remain much deeper than the FOMC’s forecast.
We will have more data on the December payrolls report shortly.
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2. The ISM Services PMI showed a sharp deceleration in growth.
The biggest surprise was a significant downturn in services sector employment, a trend that was absent from the jobs report.
Source: Pantheon Macroeconomics
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3. Here is a look at consumer credit rates. The sharp increases will take time to work their way through the economy.
Source: Truist Advisory Services
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Canada
1. Canada’s job growth stalled last month.
• The unemployment rate did not tick higher as expected.
• Wage growth accelerated.
Source: Reuters Read full article
• Labor force participation declined.
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2. The Ivey PMI, which includes public sector organizations, continues to show strong growth, contradicting S&P Global’s PMI results.
Source: Reuters Read full article
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The United Kingdom
1. The market scaled back its BoE rate cut projections over the past week.
Source: @economics Read full article
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2. New car registrations were 10% above 2022 levels last month.
3. The UK construction sector recession persisted last month.
Source: Pantheon Macroeconomics
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4. Home prices have been rising in recent months.
Source: S&P Global PMI
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The Eurozone
1. The headline inflation edged higher last month, but it shouldn’t impact monetary policy.
Here is a quote from Capital Economics.
December’s jump in headline inflation in the euro-zone was widely anticipated and entirely due to a base-effects-driven increase in energy inflation, so it won’t alter ECB policymakers’ views on the outlook for monetary policy.
Source: Capital Economics
2. The market has been scaling back its rate-cut expectations.
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3. Germany’s retail sales tumbled in November.
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Japan
1. The yen took a hit last week.
2. The BoJ owns almost 60% of the JGB market.
Source: Torsten Slok, Apollo
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China
1. Despite Beijing’s efforts, …
Source: Reuters Read full article
… stocks remain under pressure, with the CSI 300 Index at its lowest since 2019.
Shares are also down in Hong Kong.
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2. Bond yields continue to sink.
3. FX reserves surprised to the upside.
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Emerging Markets
1. Let’s begin with Brazil.
• Industrial production jumped in November, …
… boosted by mining.
– Factory output has been drifting lower.
• The trade surplus climbed in December, topping expectations.
Below are the yearly figures.
Source: The Brazilian Report Read full article
• The debt-to-GDP ratio is approaching 60% again.
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2. Hard-currency debt issuances accelerated at the start of this year.
Source: @markets Read full article
3. Most EM central banks are cutting rates.
Source: Truist Advisory Services
4. Next, we have some performance data from last week.
• Currencies:
• Bond yields:
• Equity ETFs:
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Commodities
1. Speculative accounts continue to boost their bets against soybeans.
2. Gold typically performs well in January.
Source: Variant Perception
3. COMEX copper is back at its 200-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
4. Here is a look at last week’s performance data.
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Energy
1. The US rig count has been stable at around 500.
Fracking activity continues to trend lower.
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2. Energy sector valuations remain attractive relative to the S&P 500.
Source: J.P. Morgan Asset Management
• The energy sector remains in a long-term downtrend versus the S&P 500.
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3. Speculative accounts are betting on higher gasoline prices.
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Equities
1. The Nasdaq 100 underperformed sharply last week.
But speculative accounts have been boosting their bets on Nasdaq futures.
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2. Market sentiment is moderating. Here is Goldman’s index.
Source: Goldman Sachs; @MikeZaccardi
Insiders are nervous.
Source: Thomson Reuters; @WallStJesus
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3. S&P 500 breadth has significantly improved, which typically signals lasting internal momentum during bull markets.
Source: SentimenTrader
However, there are signs of short-term breadth deterioration.
Source: Aazan Habib, Paradigm Capital
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4. Value companies’ earnings expectations continue to trend lower relative to growth.
Source: Truist Advisory Services
5. Share buyback activity has been strong.
Source: BofA Global Research; @MikeZaccardi
6. What does reinvesting dividends do for long-term returns?
Source: @TheTerminal, Bloomberg Finance L.P.
7. Equities tend to bottom first during recessions.
Source: J.P. Morgan Asset Management
8. The S&P 500 has a strong full-year return bias to its performance in January.
Source: Deutsche Bank Research
9. Next, 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. Maney market fund assets continue to hit record highs.
2. US leveraged loans had a solid year in 2023 thanks to a combination of higher base rates and renewed investor optimism.
Source: PitchBook
As interest rates declined late last year, the share of outstanding loans priced at par and above climbed, leading to a rush of leveraged loan repricing.
Source: PitchBook
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3. Investment-grade bond fund flows remain robust.
Source: BofA Global Research
4. Finally, we have last week’s performance data.
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Global Developments
1. It was a rough first week of the year for stocks and bonds.
Source: @markets Read full article
2. Investors have been exiting bullish-dollar assets.
h/t Wes Goodman, Simon White, Bloomberg Markets Live Blog
3. Pantheon Macroeconomics expects a gradual recovery in the semiconductor cycle.
Source: Pantheon Macroeconomics
4. Next, we have some performance data from last week.
• Currencies:
• Bond yields:
• Large-cap equities:
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Food for Thought
1. S&P 500 returns by year:
Source: Visual Capitalist Read full article
2. Twitter’s valuation:
Source: @chartrdaily
3. Buy Now Pay Later online spending:
Source: Statista
4. Nvidia’s Q3 geographic revenue breakdown and income statement:
Source: @genuine_impact
5. Share of US vehicle production by type:
Source: @chartrdaily
6. Percentage of consumers planning to spend more in 2024:
Source: @CivicScience Read full article
7. The biggest obstacle to peace between Russia and Ukraine:
Source: ECFR Read full article
8. How Americans meet their partners:
Source: YouGov
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