The Daily Shot: 20-Feb-24
• The United States
• Europe
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The World Economics SMI report signals an acceleration in US business activity this month. Price pressures appear to be easing.
Source: World Economics
2. Next, we have some updates on the labor market, …
• Payroll revisions recently turned positive.
Source: Deutsche Bank Research
… but the slowdown in hiring suggests that labor market strength relies on maintaining a low-layoffs rate.
Source: Deutsche Bank Research
• Job openings remain elevated for businesses with 1-9 employees, while larger firms have scaled back. (2 charts)
Source: Variant Perception
Source: Variant Perception
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3. Below are some housing market trends.
• Mortgage rates are holding above 7%.
Source: Mortgage News Daily
• Homebuyer demand has been softening, according to Redfin.
Source: Redfin
• This chart shows home sales per real estate agent.
Source: Torsten Slok, Apollo
• More than a quarter of lower-priced homes in the US are purchased by investors.
Source: Redfin
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4. The jump in house prices drove a relatively equitable rise in wealth.
Source: Oxford Economics
• Net worth has risen across the income spectrum.
Source: Oxford Economics
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5. Next, let’s take a look at a few inflation trends.
• Nomura’s assessment of January’s core PCE inflation points to the largest monthly increase in a year.
Source: Nomura Securities
• Inflation surprises have bottomed.
Source: HSBC; @WallStJesus
• Will inflation follow the post-WWII path?
Source: Elaine Garzarelli; @carlquintanilla
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6. Investment in nonresidential structures has been fueled by the manufacturing sector, especially semiconductor facilities.
Source: Oxford Economics
Here are the new manufacturing mega projects.
Source: Goldman Sachs
• Capital spending on intellectual property and R&D has surpassed structures and equipment as a share of GDP.
Source: J.P. Morgan Asset Management
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Europe
1. This chart shows wind and solar share of power generation in the EU.
Source: @EmberClimate Read full article
• Germany is accelerating permits for wind farms.
Source: @business Read full article
• EU coal facility closures have been picking up momentum.
Source: EMBER Read full article
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2. Here is a look at old-age dependency ratios in the EU.
Source: Eurostat Read full article
• Which countries’ population is aging at the fastest rate?
Source: Eurostat Read full article
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China
1. Beijing unexpectedly instructed the banks to cut the benchmark mortgage rates by 25 bps.
Source: Nikkei Asia Read full article
The goal is to stabilize the housing market by pushing borrowing rates even lower.
Source: Capital Economics
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2. According to the World Economics SMI report, China’s factory activity contracted this month, while services growth remains robust.
Source: World Economics
3. Foreign direct investment tumbled last year.
Source: @economics Read full article
4. Here is a look at China’s manufacturing labor costs relative to Asian peers.
Source: The Economist Read full article
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Emerging Markets
1. Brazil’s economic activity jumped in December.
2. India’s business activity accelerated this month, according to World Economics.
Source: World Economics
3. EM corporate sentiment has been surging.
Source: HSBC; @WallStJesus
4. EM real policy rates are still substantially higher than developed markets. There is much greater room for further EM rate cuts.
Source: Alpine Macro
5. The implied volatility in EM currency markets has been crashing.
Below is the ratio of implied volatilities between EM and G7 currencies.
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Cryptocurrency
1. Bitcoin’s market cap relative to the total crypto market cap (dominance ratio) broke below its year-long uptrend.
2. The ETH/BTC price ratio is approaching initial resistance at its 40-week moving average, although momentum is improving.
3. Crypto funds saw record inflows last week, led by new US spot-bitcoin products. (2 charts)
Source: CoinShares Read full article
Source: CoinShares Read full article
Here is a look at daily bitcoin ETF flows.
Source: Jefferies; @dailychartbook
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Commodities
1. Despite Beijing’ rate cut, iron ore and steel futures are dropping amid soft demand from China’s housing sector.
Source: @markets Read full article
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2. Gold prices continue to diverge from ETF gold holdings.
Source: @TheTerminal, Bloomberg Finance L.P.
• Sanctions typically have a positive impact on the gold market.
Source: @ANZ_Research
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3. How do commodities perform around the Fed’s first rate cut?
Source: JP Morgan Research; @dailychartbook
4. The rally in cotton futures is fading.
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Energy
Natural gas prices have been falling globally.
• Asia (2 charts):
Source: @JKempEnergy
• Europe:
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Equities
1. The S&P 500 is increasingly tech-heavy.
Source: @liamdenning, @opinion Read full article
2. Tech stocks’ market cap share is outpacing their earnings share.
Source: Goldman Sachs; @MikeZaccardi
3. Excluding tech stocks, margins for the S&P 500 are projected to see only a slight expansion this year.
Source: Goldman Sachs; @MikeZaccardi
4. Most S&P 500 sector valuations are running above their 25-year averages.
Source: @FactSet Read full article
5. The S&P 500 dividend yield is running well below that of its global counterparts.
Source: Goldman Sachs; @MikeZaccardi
6. Share buybacks picking up.
Source: Deutsche Bank Research
7. The market hasn’t been kind to companies that missed earnings and sales estimates in the latest earnings season.
Source: BofA Global Research
8. Retail investors have been buying IWM (the Russell 2000 ETF).
Source: Goldman Sachs; @dailychartbook
• Retail investors have been more involved in options as their portfolios’ P&Ls improve.
Source: Vanda Research
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9. The correlation between the Russell 2000 relative performance and Treasury yields hit extreme levels in recent weeks.
h/t UBS
10. Momentum stocks continue to outperform.
11. Over the past four years, S&P 500 returns were predominantly driven by earnings.
Source: @RyanDetrick, @sonusvarghese
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Credit
1. US small-cap stocks have more floating rate debt than large caps.
Source: J.P. Morgan Asset Management
2. The size of the private credit market is approaching that of the leveraged loan and high-yield bond markets.
Source: Morgan Stanley Research
3. Is the office market returning to balance?
Source: Alpine Macro
• The downturn in commercial real estate prices was correlated with rising interest rates, although CMBS spreads remained relatively low.
Source: Alpine Macro
• During this Fed rate-hiking cycle, the correction in the US commercial real estate market has been notably severe.
Source: IMF Read full article
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4. Here is a look at US household loan growth rates and delinquencies, which have been particularly high in credit cards.
Source: Moody’s Investors Service
• Michigan, Nevada, and Texas have some of the highest delinquency levels.
Source: Moody’s Investors Service
• The decline in household loan originations means that it has been taking longer for higher rates to pass through to consumers.
Source: Oxford Economics
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Rates
1. The 2-year note is testing support at the 200-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
2. Recent movements in the 10-year Treasury yield have been driven by Fed policy and a rising term premium.
Source: Numera Analytics (@NumeraAnalytics)
3. Foreign official accounts have been reducing their holdings of Treasuries.
Source: @ANZ_Research
4. BofA’s private clients are getting back into TIPS.
Source: BofA Global Research
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Global Developments
1. The post-pandemic uptrend in commodity prices could eventually benefit the credit profiles of commodity-exporting countries.
Source: Alpine Macro
2. Four G7 economies experienced GDP contractions over the past two quarters.
Source: Economics and Strategy Group, National Bank of Canada
3. This chart shows where companies from each region generate their sales, highlighting their global market reach and regional sales presence.
Source: Goldman Sachs; @MikeZaccardi
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Food for Thought
1. The top four US banks pay very low interest rates to consumers.
Source: Torsten Slok, Apollo
2. BofA’s and JPMorgan’s bank branches:
Source: @WSJ Read full article
3. Apple’s product revenue:
Source: Visual Capitalist Read full article
4. US birth rates by mother’s age:
Source: The Economist Read full article
5. The Great Lakes ice cover:
Source: @axios Read full article
6. Issues that are underreported by the national media:
Source: @YouGovAmerica Read full article
7. The Google autocomplete, by state:
Source: Bazomo Read full article
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