The Daily Shot: 13-Feb-24
• The United States
• The United Kingdom
• The Eruozone
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought
The United States
1. Let’s begin with some updates on inflation.
• The New York Fed’s consumer survey showed stable one-year inflation expectations, while the three-year outlook experienced a significant decline.
However, as gasoline futures indicate, inflation expectations may increase with rising gasoline prices.
• Investors see inflation as the biggest “tail risk” for the markets.
Source: BofA Global Research
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2. Here are some additional trends from the New York Fed’s survey.
• Probability of losing a job:
• Probability of moving residence:
• Improving financial situation:
Source: Federal Reserve Bank of New York
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3. In the first four months of fiscal 2024, the US budget deficit expanded by 16% compared to the previous year.
Source: @economics Read full article
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4. Tax refunds are coming.
Source: Oxford Economics
5. CEO confidence has been improving.
Source: BofA Global Research
But companies in consumer sectors increasingly mention “weak demand.”
Source: BofA Global Research
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6. Job switchers continue to see faster wage growth, but the gap with job stayers has narrowed.
Source: Deutsche Bank Research
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The United Kingdom
1. The revised/updated employment data indicate a stronger-than-anticipated labor market.
• Employment change:
• The unemployment rate:
– The market is not yet confident in the new employment figures.
Source: @financialtimes Read full article
• Payroll estimates remained strong in January.
• The decline in job vacancies stalled last month.
• Wage growth slowed less than expected.
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2. Five-year fixes make up the majority of mortgage debt, followed by two-year fixes.
Source: Barclays Research
The weighted average rate of fixed-rate debt to be refinanced will rise only gradually over the next year.
Source: Barclays Research
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3. Global investors remain cautious on UK stocks.
Source: BofA Global Research
4. Compared to their European and US counterparts, young adults in the UK express significantly lower confidence in achieving upward mobility.
Source: @financialtimes Read full article
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The Eruozone
1. The euro-area GDP is expected to grow 0.5% this year, diverging sharply from the US.
Source: @TheTerminal, Bloomberg Finance L.P.
• Germany is increasingly a drag on the Eurozone economy.
• Economists are more upbeat on Spain.
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2. On a monthly basis, inflation has picked up in recent months.
Source: Pantheon Macroeconomics
3. German office prices took a hit last year.
Source: @business Read full article
4. Here is a look at borrowing costs in the Eurozone.
Source: ECB
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Japan
1. The Nikkei 225 is surging, nearing the 1990 peak.
2. The PPI appears to have bottomed.
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Asia-Pacific
1. Economic growth is improving in South Korea and Taiwan, which could signal stronger global trade. (2 charts)
Source: MRB Partners
Source: MRB Partners
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2. Australia’s consumer sentiment improved this year (2 charts).
Source: @ANZ_Research
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China
1. Global investors remain cautious on China.
Source: BofA Global Research
2. Liquidity provisions have been a main driver of the PBoC’s balance sheet expansion. This is mainly to help the banking system buy a surge of government bonds, according to Gavekal.
Source: Gavekal Research
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Emerging Markets
1. India’s inflation eased last month.
Source: @economics Read full article
• Industrial production held up well in December.
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2. EM stocks’ discount to DM peers continues to widen.
Source: Goldman Sachs; @MikeZaccardi
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Cryptocurrency
1. Bitcoin climbed above $50k.
• BTC/USD maintained positive momentum over the past week.
2. The total cryptocurrency market cap continues to rise.
3. Crypto funds saw another week of inflows while investors exited short-bitcoin products. (2 charts)
Source: CoinShares Read full article
Source: CoinShares Read full article
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Commodities
1. HRW wheat dipped below $6 per bushel.
2. The massive rally in rice futures appears to be fading.
3. US textile mills’ cotton demand has dropped to its lowest since 1885.
Source: @markets Read full article
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Energy
1. Capex among the top five energy companies is on an upward trend, yet remains significantly below the peaks of 2014.
Source: Longview Economics
• Free cash flow is starting to trend lower while the sharp reduction in debt levels has stalled. (2 charts)
Source: Longview Economics
Source: Longview Economics
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2. Global investors are underweight energy stocks.
Source: BofA Global Research
3. The US natural gas contango has intensified amid near-record production and elevated inventories in storage.
• This chart shows US LNG Exports.
Source: @financialtimes Read full article
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Equities
1. Global investors are increasingly bullish, …
Source: BofA Global Research
… drawing down their cash positions.
Source: BofA Global Research
• Allocations to US stocks (particularly tech) have climbed sharply.
Source: BofA Global Research
Source: BofA Global Research
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2. Deutsche Bank’s positioning indicator is grinding higher.
Source: Deutsche Bank Research
• Positioning in financials has shifted to overweight.
Source: Deutsche Bank Research
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3. The momentum factor has been seeing robust inflows in recent weeks, …
Source: Deutsche Bank Research
… boosting outperformance in the US and globally.
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4. 2024 EPS estimates are holding up well.
Source: BofA Global Research
5. The share of negative earnings surprises among small firms has been climbing.
Source: @markets Read full article
6. The average S&P 500 stock is trading at a substantial discount to the index.
Source: @TheTerminal, Bloomberg Finance L.P.
7. The S&P 500 skew shows increasing complacency in the market.
Source: @TheTerminal, Bloomberg Finance L.P.
• Similarly, here is Goldman’s Panic Index.
Source: Goldman Sachs; @dailychartbook
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8. Correlations among S&P 500 stocks have been moving lower.
There is a similar trend among Nasdaq 100 stocks.
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9. Stock funds saw some outflows this month.
Source: BofA Global Research
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Credit
1. The BBB – single-A bond spread has been tightening amid increased risk appetite.
2. CCC-rated bonds have been outperforming.
3. Investment-grade financials have been outperforming the broader corporate bond market.
Source: @TheTerminal, Bloomberg Finance L.P.
4. Here is a list of the top 20 US distressed cities based on late consumer debt payments.
Source: Quill Intelligence
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Rates
1. Traders are pressing the basis trade (futures vs. cash bonds). The unwind could be ugly.
Source: Deutsche Bank Research
2. DM bond liquidity could worsen amid elevated CPI volatility.
Source: Simon White, Bloomberg Markets Live Blog
3. Investors increasingly see the yield curve steepening.
Source: BofA Global Research
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Food for Thought
1. Political openness and economic freedom:
Source: @financialtimes Read full article
2. Top US import trading partners:
Source: Visual Capitalist Read full article
3. Adults experiencing long COVID:
Source: USAFacts
4. Cognitive test score by age:
Source: The Economist Read full article
5. Cookie controls:
Source: Statista
6. Films adapted from a musical:
Source: The Washington Post Read full article
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