The Daily Shot: 22-Mar-24
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Commodities
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The March PMI report by S&P Global indicates a further strengthening of US manufacturing activity
– Outlook is improving.
– Factories are hiring again.
• Growth in the service sector decelerated slightly this month.
But companies’ outlook strengthened.
• After a pullback (due to soft demand), an increasing share of US firms are now boosting prices.
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2. The Philly Fed’s regional manufacturing index held in growth mode this month, with new orders now growing.
• Factories’ outlook improved sharply, …
… with CapEx plans surging.
• But the region’s manufacturers are not hiring.
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3. The Conference Board’s leading index ended its streak of declines.
Here are the drivers of last month’s changes in the leading index.
Source: Wells Fargo Securities
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4. Initial jobless claims are holding near multi-year lows.
5. Existing home sales are following the 2023 trajectory.
• Inventories are above last year’s levels.
• The median sale price is at record highs.
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6. Despite the recent increase, productivity growth is historically low.
Source: Deutsche Bank Research
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The United Kingdom
1. The BoE left rates unchanged but struck a dovish tone.
Source: CNBC Read full article
A June rate cut looks increasingly likely.
The pound and gilt yields declined.
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2. Manufacturing activity has finally stabilized, with orders starting to grow.
• The services PMI remains in growth mode, but hiring has slowed.
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3. Consumer confidence was unchanged this month.
4. Government borrowing last month exceeded market expectations, yet it remained below the levels seen in 2023.
Source: BBC Read full article
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The Eurozone
1. The March flash PMI report was mixed, with manufacturing slump persisting.
– Germany:
– France:
• Services activity in Germany stabilized, whereas in France, the outlook was less positive.
– Germany:
– France:
• At the Eurozone level, service firms are now reporting growth, but factory activity contraction persists.
• Growth in output prices eased.
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2. Contrary to the PMI report, the official index for French manufacturing confidence showed further improvement.
3. European shares continue to surge.
And given the deep discounts to the US, there is room for outperformance.
Source: Goldman Sachs; @MikeZaccardi
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Europe
1. Switzerland’s central bank unexpectedly cut rates.
Source: MarketWatch Read full article
• The Swiss franc tumbled vs. the euro.
• Swiss bond yields were sharply lower.
Here is the yield curve.
• Swiss stocks jumped.
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2. Norway’s central bank left rates unchanged.
Source: Reuters Read full article
• EUR/NOK has risen above its 200-day moving average.
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3. New car registrations in the EU are running above last year’s levels.
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Japan
1. The headline inflation climbed last month (year-over-year), but core inflation eased.
Source: @WSJ Read full article
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2. Dollar-yen is holding resistance.
3. Shares are surging.
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Asia-Pacific
1. Taiwan’s central bank unexpectedly hiked rates.
Source: @WSJ Read full article
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2. New Zealand’s trade deficit narrowed as exports surged.
3. South Korea faces deteriorating demographics.
Source: Yardeni Research
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China
1. The CSI 300 resistance held.
Shares declined sharply in Hong Kong.
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2. Leading indicators point to a recovery in mainland exports.
Source: @ANZ_Research
3. Spending has been softening.
Source: BCA Research
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Emerging Markets
1. Turkey’s central bank unexpectedly hiked rates by 500 bps to stem the lira’s slide.
Source: Reuters Read full article
• Here is the 3-month OIS (short-term rates).
The yield curve inversion intensified.
• The lira jumped.
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2. India’s business activity remains remarkably strong.
– Services:
– Manufacturing:
• The rupee has been weakening this month.
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3. Banxico delivered its first rate cut of the cycle, …
Source: Reuters Read full article
… as economic activity slows.
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Commodities
1. Open interest and average daily volume (ADV) in Copper options on the CME Exchange spiked this month.
Source: CME Group
2. Gold has been outpacing gold miners’ shares.
3. Here is a look at global wheat inventories over time.
Source: @IGCgrains
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Equities
1. The S&P 500 equal weight index hit another record high and is now in overbought territory.
2. Market breadth has been improving.
3. Momentum stocks continue to outperform.
4. The Invesco S&P 500 high-beta ETF is testing resistance relative to its low-vol ETF.
5. The healthcare sector broke below support relative to the S&P 500.
Source: @meanstoatrend
6. There is a growing divergence within the “Magnificent Seven” performance.
Source: Alpine Macro
7. Expected rate cuts may prompt cash deployment, which could be a positive for stocks.
Source: Barclays Research
• Related to the above, retail money market funds’ AUM hit another record ($2.4 trillion).
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8. Investors increasingly want companies to return cash, …
Source: BofA Global Research
… which they will do via share buybacks, according to Goldman.
Source: Goldman Sachs; @MikeZaccardi
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9. The S&P 500 risk premium (earnings ‘spread’ to Treasuries) is now below the average investment-grade bond spread.
Source: @TheTerminal, Bloomberg Finance L.P.
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Credit
1. Corporate credit spreads continue to tighten.
• Investment-grade:
• High yield:
– Single-B spread:
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2. In the past, companies used the broadly syndicated loan (BSL) market to refinance their direct loans (DL), which tend to be more expensive. But this quarter, the opposite is taking place – companies are using direct financing to take out BSLs, …
Source: PitchBook
… as investors pour capital into direct lending funds.
Source: @theleadleft
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Rates
1. The current yield curve inversion is the longest on record.
2. Implied volatility in the Treasury market continues to sink as the Fed maintains its forecast for three rate cuts this year.
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Global Developments
1. Implied volatility has collapsed across a range of assets.
Source: Alpine Macro
2. Disinflation momentum persists among G10 nations, ex-US.
Source: Barclays Research
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Food for Thought
1. Trend in global political rights and civil liberties:
Source: Statista
2. Impact of remote work on motherhood employment gap:
Source: The Economist Read full article
3. Work from home by age group:
Source: The New York Times Read full article
4. Latino representation and engagement in film and streaming media:
Source: McKinsey & Company Read full article
5. The US Congress is becoming less active:
Source: Reuters Read full article
6. Obesity rates in the US across ages:
Source: Statista
7. Availability of subsidized housing by state:
Source: USAFacts Read full article
8. Insect species eaten by humans:
Source: @davidfickling, @opinion Read full article
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Have a great weekend!
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