The Daily Shot: 30-Jan-24
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
We will continue to publish an abbreviated version of The Daily Shot over the next few days.
The United States
1. Consumers continue to save less than they did prior to the pandemic (relative to their disposable incomes). The rate has been trending lower since last spring.
2. Core durable goods orders held up well in December.
Here is a look at nominal and real capital goods orders.
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3. Jobless claims are running slightly above last year’s levels.
4. US new home sales were trending higher going into 2024 (2 charts).
Source: Oxford Economics
This is partially explained by homebuilders reducing home sizes to offset the affordability challenges posed by higher mortgage rates.
Source: Oxford Economics
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5. Pending home sales were in line with 2022 levels in December.
6. Further upside in oil prices could lead to higher inflation expectations.
Source: Aazan Habib, Paradigm Capital
7. Cheap natural gas in the US (see Energy) offers a competitive edge, potentially accelerating the ‘reshoring’ of industries by reducing operational costs.
Source: Morningstar
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Canada
The CFIB index of small/medium-size business activity signaled some improvement this month, boosted by retail.
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The United Kingdom
1. The flash PMI report showed stronger business activity this month.
2. But industrial orders remain soft, according to the CBI.
3. Consumer confidence is rebounding.
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The Eurozone
1. Germany’s Ifo index declined this month, coming in below forecasts.
Source: MarketWatch Read full article
2. Germany’s power prices have normalized relative to the extremes hit in the wake of the destruction of Nord Stream-2.
But normalization came at the expense of industrial production, …
Source: Morningstar
… resulting in a significant drawdown for some of Germany’s largest industrial companies.
Source: Morningstar
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3. Pantheon Macroeconomics expects a meaningful contraction in the euro-area GDP.
Source: Pantheon Macroeconomics
– Here is the French composite PMI.
• Underlying inflation in the euro area has fallen considerably.
Source: Nordea Markets
– Inflation momentum is declining faster in the euro area than in the US.
Source: Danske Bank
• Falling inflation and soft economic activity point to ECB rate cuts, which could arrive sooner than the market expects.
Source: Pantheon Macroeconomics
Source: Reuters Read full article
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4. Shipping costs from Asia appear to be stabilizing.
Source: @TheTerminal, Bloomberg Finance L.P.
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Japan
1. Business activity picked up momentum this month.
2. Tokyo’s core inflation declined faster than expected.
3. The unemployment rate is trending lower.
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China
1. The PBoC cut the reserve ratio (RRR) to stabilize the stock market and boost economic activity.
But equity investors want more …
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2. A Hong Kong court ordered the liquidation of Evergrande. Here is the bond price.
3. Autos, electrical equipment, and utilities experienced an increase in investment in recent years.
Source: Gavekal Research
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Emerging Markets
1. Mexico’s inflation continues to ease.
• Economists have been upgrading their GDP growth estimates for 2024 (along with the US).
Source: Bloomberg
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2. The strength of India’s business sector has carried over into 2024.
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Cryptocurrency
1. Crypto funds saw significant outflows last week, mostly driven by incumbent bitcoin ETF issuer Grayscale. (2 charts).
Source: CoinShares Read full article
Source: CoinShares Read full article
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2. Cumulative fund flows so far this year:
Source: @FarsideUK
3. As of Monday’s close, Grayscale’s GBTC remains the most liquid US spot-bitcoin ETF, although iShare’s IBIT is close behind.
Source: @JSeyff
4. This chart shows the number of BTC held by US spot-bitcoin ETFs, excluding GBTC.
Source: @Capital15C
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Commodities
US soybean and corn futures remain under pressure.
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Energy
US natural gas futures are nearing $2/mmbtu.
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Equities
1. The S&P 500 hit a new high, marking its sixth record close in the past seven trading sessions. The index is now in overbought territory.
2. Deutsche Bank’s positioning index signals a growing investor appetite for stocks, though the shift towards an overweight stance has not reached extreme levels.
Source: Deutsche Bank Research
3. Flows into tech funds remain robust (2 charts).
Source: BofA Global Research
Source: Deutsche Bank Research
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4. A positive January typically signals a positive year for the S&P 500.
Source: @RyanDetrick
5. What happens to stock prices after the yield curve “un-inverts”?
Source: Goldman Sachs; @dailychartbook
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Credit
1. Leveraged loan default rates have risen over the past two years. Troubled companies and their lenders are increasingly turning to distressed exchanges to avoid costly bankruptcy proceedings, according to PitchBook.
Source: PitchBook
• January is typically a busy month for leveraged loan activity.
Source: PitchBook
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2. Low office occupancy rates indicate hybrid work is a lasting trend.
Source: Torsten Slok, Apollo
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Rates
1. The average real Fed funds rate at the first rate cut is 3% (median 2.8%). In this cycle, the real rate could exceed the historical average if inflation continues to decline.
Source: Deutsche Bank Research
2. The 2-year Treasury yield remains below long-term resistance with declining momentum.
Source: Aazan Habib, Paradigm Capital
3. Heavy bond issuance could place upward pressure on yields.
Source: Nordea Markets
4. The Fed has signaled it may reduce the level of QT to ease pressure on government funding and thereby cool volatility in rates markets.
Source: 3Fourteen Research
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Global Developments
1. Globally, the bond-equity correlation is breaking down.
Source: Deutsche Bank Research
2. The recent rise in global supply chain bottlenecks could slow the decline in inflation.
Source: Gavekal Research
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Food for Thought
1. A growing wave of theft in US retail:
Source: @WSJ Read full article
2. The US federal budget:
Source: J.P. Morgan Asset Management
3. Political polarization:
Source: Alpine Macro
4. How much snow is typically required to cancel school?
Source: Alexandr Trubetskoy/Reddit
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