The Daily Shot: 11-Jan-24
• The United States
• The Eurozone
• Europe
• Japan
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought
The United States
1. Let’s begin with some updates on inflation.
• Most economists see inflation near the Fed’s target in the first quarter of 2025. Is the market becoming complacent about inflation risks?
Source: TS Lombard
Should we be concerned about the “second wave”?
Source: TS Lombard
• Wage growth will likely slow from here, according to Oxford Economics.
Source: Oxford Economics
But small business compensation plans point to upside risks in the near-term.
Source: Oxford Economics
– The Atlanta Fed’s wage growth tracker ticked higher last month and remains well above pre-COVID levels.
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2. Mortgage applications were a bit firmer last week (just below 2016 levels).
• CoreLogic sees home prices rising 2.5% (year over year) by November of this year.
Source: CoreLogic
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3. There is a lot of uncertainty around the trajectory of the unemployment rate.
Source: @WSJ Read full article
4. The GDPNow model estimate for the Q4 economic growth is holding above 2%.
Source: Federal Reserve Bank of Atlanta
Here are the contributions to GDPNow.
Source: @TheTerminal, Bloomberg Finance L.P.
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5. This chart shows the contribution of energy trade to the nation’s trade balance.
Source: Wells Fargo Securities
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The Eurozone
1. French factory output edged higher in November.
But Dutch manufacturing production continues to sink.
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2. Leading indicators suggest that euro-area wage growth is peaking.
Source: Nomura Securities
3. Pantheon Macroeconomics expects the ECB to cut rates earlier than consensus as core inflation and wage growth decline. (2 charts)
Source: Pantheon Macroeconomics
Source: Pantheon Macroeconomics
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4. Some of the most indebted Eurozone states have significantly reduced their debt ratios.
Source: @DanielKral1, @OxfordEconomics
Here is the Greek 10-year spread to Germany.
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Europe
1. Sweden’s household consumption declined in November, …
… and so did private-sector output.
That’s why it was surprising to see the GDP estimate tick higher.
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2. Norway’s inflation was a touch lower than expected.
3. How much financial support his the EU providing to Poland?
Source: ING
4. The new European Parliament will lean to the right, according to polls.
Source: Deutsche Bank Research
Below is a timeline of European elections this year.
Source: Deutsche Bank Research
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5. Here is a look at the EU’s trade in olive oil.
Source: USDA Read full article
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Japan
1. The TOPIX Index broke above a four-month-long range with improving momentum.
The Nikkei hit the highest level since 1990.
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2. The Invesco Japanese Yen ETF (FXY) remains in a long-term downtrend, although it has stalled since the October 2022 and November 2023 price lows.
3. The output gap is almost positive.
Source: TS Lombard
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Emerging Markets
1. Brazil’s vehicle sales held above 2022 levels in December.
2. Mexico’s fixed investment hit a record high.
3. Turkey’s industrial production weakened again in November.
4. Most EM countries ran trade balances last year that were well within their historical norms.
Source: Oxford Economics
Several EM trade balances have improved relative to the past six months, which could be a positive for local currencies.
Source: Oxford Economics
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5. Here is a look at nominal and real 10-year bond yields.
Source: Alpine Macro
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Cryptocurrency
1. The SEC finally approved US spot-bitcoin ETFs.
Source: @WSJ Read full article
2. There was a spike in BTC buying activity on Binance on Wednesday surrounding the approval.
Source: @KaikoData
3. While bitcoin had mostly priced in the cash ETF approval, hopes are rising that an ether ETF approval could be next.
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4. BTC futures open interest on the CME exchange reached a new high.
Source: @glassnode
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Commodities
1. The lithium bubble continues to deflate.
2. This infographic illustrates commodity returns by year.
Source: Visual Capitalist Read full article
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Energy
1. Last week saw another large increase in US refined product inventories.
Crude oil stockpiles unexpectedly increased as well.
Source: Reuters Read full article
Here are the inventory levels.
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2. US crude oil exports to Europe continue to climb.
Source: @WSJ Read full article
3. Here is Goldman’s forecast for US crude oil production.
Source: Wikipedia
4. Oil is entering a positive seasonal period.
Source: Aazan Habib, Paradigm Capital
5. Oil flows through the Bab-El-Mandeb Strait continue to trend lower.
Source: Goldman Sachs; @MikeZaccardi
Source: Wikipedia
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6. Uranium prices keep surging.
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Equities
1. Rolling 12-month forward earnings estimates for the S&P 500 hit a record high.
• Expectations for US tech long-term earnings growth have soared.
Source: MRB Partners
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2. The average S&P 500 stock valuation (equal-weight index) remains well below that of the overall index.
Source: @TheTerminal, Bloomberg Finance L.P.
3. On average, the S&P 500 trades sideways during the first quarter of an election year.
Source: @granthawkridge
4. This chart shows short interest by sector over the past two years.
Source: Deutsche Bank Research
5. The Russell 2000 has been much more volatile than the S&P 200 in recent months.
Source: @TheTerminal, Bloomberg Finance L.P.
6. The CBOE VVIX index (vol of vol) has been tumbling, reflecting falling demand for VIX call options.
7. The traditional 60% equities/40% bonds portfolio posted its best returns since 2019 last year, staking up well against other strategies. (2 charts)
Source: Morningstar Read full article
Source: Morningstar Read full article
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8. Homebuilding stocks are trading at a wider discount to the S&P 500 relative to the past decade.
Source: State Street Global Advisors
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Credit
1. Investment-grade bond issuance surged at the start of the year.
Source: @axios Read full article
2. Here is a look at securitized product issuance in 2022 and 2023.
Source: Deutsche Bank Research
3. The rise in usage of the Fed’s Bank Term Funding Program (BTFP), an emergency facility introduced following the SVB failure, has generated a lot of excitement. But the overall Fed emergency funding usage is down substantially since last March (2nd panel).
The BTFP demand is due to its low funding rates to banks.
Source: @WSJ Read full article
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4. Bank deposits have been rising, …
… as the Fed’s RRP facility usage decreases, boosting liquidity in the private sector.
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Rates
1. Goldman expects the Fed to begin tapering QT in May.
Source: Wikipedia
2. What drove the declines in R-star over the past four decades?
Source: III Capital Management
3. Deutsche Bank identifies the 2024 dot plot contributors.
Source: Deutsche Bank Research
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Food for Thought
1. Back to the office?
Source: @axios Read full article
2. Commuting times relative to 2019:
Source: The New York Times Read full article
3. Tax offenders prosecuted at the federal level:
Source: Scholaroo Read full article
4. Photo camera shipments:
Source: Statista
5. Deteriorating trust in the media:
Source: Visual Capitalist Read full article
6. US residential solar electricity generation:
Source: @WSJ Read full article
7. China’s surging coal capacity:
Source: MacroPolo Read full article
8. Legalization of cannabis in the US:
Source: @financialtimes Read full article
9. Euthanasia rates for dogs in US shelters:
Source: @axios Read full article
10. Lunar landings:
Source: @WSJ Read full article
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