The market continues to reprice rate cut expectations

The Daily Shot: 18-Mar-24
The United States
Canada
The United Kingdom
The Eurozone
Europe
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Global Developments
Food for Thought



 

The United States

1. Market expectations for the Fed’s policy rate trajectory have moved up substantially since the last projections were published in December. Will the Fed’s new dot plot shift higher?
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The market now expects a smaller rate cut this year than the FOMC’s last dot plot.
 

 
Underlying inflation measures remain sticky, which could delay rate cuts.
 
Source: MRB Partners  
 
Treasury yields surged last week, reflecting a growing ‘higher for longer’ interest rate sentiment.
 

 
Traders are trimming their bets on rate cuts.
 
Source: Deutsche Bank Research  
 
Market-based inflation expectations have been rising with crude oil prices.
 

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2. The U. Michigan consumer sentiment index edged lower this month.
 

 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Concerns over potential job loss in the next five years have intensified.
 

 
However, expectations of households’ financial situation improved as stocks surged.
 

 
Buying conditions for vehicles continue to move higher.
 

 
Inflation expectations were roughly unchanged.
 

 
Inflation expectations could be revised upwards later this month due to rising gasoline prices. Futures indicate an increase in pump prices in the coming days.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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3. US import prices (ex petroleum) unexpectedly climbed last month.
 

 
4. The NY Fed’s manufacturing index (Empire Manufacturing) moved deeper into contraction territory this month.
 

 
Employment and workers’ hours declined.
 

 

 
However, forward-looking indicators were more upbeat.
 

 
Price indices have been trending higher.
 

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5. The federal government’s interest expenses continue to climb.
 
Source: Oxford Economics  


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Canada

1. Housing starts were stronger than expected last month.
 

 
2. Canada’s goods trade is well below last year’s levels.
 
Source: Economics and Strategy Group, National Bank of Canada  


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The United Kingdom

1. Wage growth is drifting lower.
 
Source: Nomura Securities  
 
2. House prices are rebounding.
 

 
3. Traders haven’t been this bullish on the British pound (vs. USD) in a long time.
 


 
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The Eurozone

1. Italy was running a trade surplus in January.
 

 
2. Here is a look at the consensus estimates for GDP and inflation over time in the Eurozone and the US.
 
Source: Nomura Securities  
 
Euro-area/US economic surprises continue to diverge.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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3. Wage growth is moderating.
 
Source: Nomura Securities  


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Europe

1. Sweden’s unemployment rate, which has been trending higher, declined last month.
 

 
2. Poland’s inflation continues to sink.
 

 
3. STOXX 600 has been up for eight weeks in a row.
 

 
4. Here is a look at overcrowding rates in European homes by country.
 
Source: ING  


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China

1. Industrial output surprised to the upside.
 

 
Source: Reuters   Read full article  
 
Fixed-asset investment was also robust in the first two months of the year.
 

 
Retail sales were roughly in line with expectations.
 

 
Source: @economics   Read full article  

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2. Credit growth slowed last month.
 
Bank loans:
 

 
Total financing:
 

 
Year-over-year changes:
 

 
Source: Reuters   Read full article  
 
The money supply growth has been trending lower.
 

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3. The CSI 300 index is nearing its 200-day moving average.
 
Source: @TheTerminal, Bloomberg Finance L.P.  


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Emerging Markets

1. India’s exports jumped last month.
 

 
Source: The Indian Express   Read full article  

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2. Brazil’s service sector output strengthened in January.
 

 
3. Here is a look at last week’s performance.
 
Currencies:
 

 
Bond yields:
 

 
Equity ETFs:
 


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Cryptocurrency

1. Solana has been surging.
 

 
Source: crypto.news   Read full article  
 
Here is the month-to-date performance.
 

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2. Bitcoin fund flows have diverged from gold.
 
Source: JP Morgan Research; @WallStJesus  
 
3. The trading volume in memecoins soared this month.
 
Source: @wealth   Read full article  


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Commodities

1. Central banks have room to acquire more gold reserves. (2 charts)
 
Source: Alpine Macro  
 
Source: Alpine Macro  

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2. Commodities are starting to improve relative to the S&P 500.
 
Source: Aazan Habib, Paradigm Capital  
 
3. This chart shows last week’s performance across key commodity markets.
 


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Energy

1. Crude oil futures continue to climb.
 

 
2. The US rig count is rebounding with prices.
 

 
3. Energy shares have been outperforming crude oil.
 

 
4. Here is a look at the trend in global oil and gas upstream investment.
 
Source: The Economist   Read full article  


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Equities

1. Bullish positioning in US equities is getting crowded.
 
Source: Aazan Habib, Paradigm Capital  
 
Here is Goldman’s sentiment indicator.
 
Source: Goldman Sachs; @MikeZaccardi  
 
The volatility skew points to market complacency setting in (the title is supposed to say “25 delta”).
 
Source: @financialtimes   Read full article  
 
Fund inflows have been surging.
 
Source: Goldman Sachs; @WallStJesus  

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2. The following ETF segments have attracted the most funds year-to-date.
 
Source: The ETF Shelf  
 
3. Unlike in 2020, margin debt has risen modestly and has declined relative to the S&P 500 market cap. (2 charts)
 
Source: TS Lombard  
 
Source: TS Lombard  
 
Market leverage has shifted from margin borrowing to options.
 
Source: @WSJ   Read full article  

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4. US non-tech cyclicals have benefited from low financial stress.
 
Source: Numera Analytics (@NumeraAnalytics)  
 
5. Here is a look at activist campaigns.
 
Source: S&P Global Market Intelligence  
 
6. Value stocks have been outperforming in recent days. Vanguard’s value ETF has been up for eight weeks in a row.
 

 
7. Next, let’s take a look at last week’s performance data.
 
Sectors:
 

 
Equity factors:
 

 
Macro basket pairs’ relative performance:
 

 
Thematic ETFs:
 

 
Largest US tech firms:
 


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Credit

1. The implied volatility in high-yield bonds has been trending lower.
 

 
2. Global corporate defaults are at the highest level since 2009.
 
Source: S&P Global Ratings  
 
US and European default rates are climbing.
 
Source: S&P Global Ratings  

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3. Synthetic risk transfers have been increasingly popular.
 
Source: @markets   Read full article  
 
4. Commercial real estate prices are starting to rebound.
 
Source: Torsten Slok,¬†Apollo  
 
5. Here is a look at last week’s performance (price weakness driven by Treasuries).
 


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Global Developments

1. World goods trade declined last year.
 
Source: Oxford Economics  
 
2. The combined performance of ETFs tracking stocks, Treasuries, and credit hit a multi-year high this month.
 
Source: @markets   Read full article  
 
3. Here is last week’s performance across advanced economies.
 
Currencies:
 

 
Bond yields:
 

 
Large-cap equities:
 


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Food for Thought

1. The scale of the world’s largest stock markets by country:
 
Source: Visual Capitalist   Read full article  
 
2. Global adoption of electric vehicles in new car sales:
 
Source: @OurWorldInData  
 
3. What it takes to join the 1%:
 
Source: @economics   Read full article  
 
4. US pharmaceutical imports from China:
 
Source: PIIE   Read full article  
 
5. Ruminant livestock emissions:
 
Source: @davidfickling, @opinion   Read full article  
 
6. Chip design and fabrication costs:
 
Source: @financialtimes   Read full article  
 
7. The most popular movie stars of 2023:
 
Source: NoDepositRewards.com  

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