Posted on by The Daily Shot Editor: Lev Borodovsky

Market trims expected Fed rate cuts amid stronger manufacturing data

The Daily Shot: 02-Apr-24
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought

 

The United States

1. The ISM Manufacturing PMI finally returned to growth in March, topping expectations.
 

 

 
Source: @economics   Read full article  
 
– Here are the contributions to the PMI.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
• The index of production surged, …
 

 
… but employment remained soft.
 

 
As a result, we could see improvements in labor productivity.
 
Source: @RenMacLLC  
 
• Companies increasingly see customers’ inventories as too low.
 

 
• Input prices are rising again.
 

 
• The ratio of cyclical-to-defensive equity sectors continues to signal stronger factory activity ahead.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. In response to the robust ISM PMI report, the market scaled back the anticipated Fed rate cuts for this year (2 charts).
 

 

 
Source: @markets   Read full article  

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3. Construction spending unexpectedly declined in February, …
 

 
Source: Reuters   Read full article  
 
… amid softer private nonresidential construction …
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
… and weaker public construction expenditures.
 

 
Year-over-year, total private construction spending has increased.
 

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4. This year’s gains in the Citi Economic Surprise Index have been driven by soft data (surveys).
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
5. Retail inventories continue to climb.
 

 
6. More Americans are flying this year (2 charts).
 

 
Source: @sonusvarghese  

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Canada

1. The manufacturing PMI shows factory activity stabilizing, but growth remains elusive.
 

 
• Fewer factories are boosting prices.
 

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2. The BoC’s first-quarter business survey report was lackluster, with sales growth expectations stalling.
 

 
• Labor shortages are less of a problem.
 

 
• The CapEx index deteriorated.
 

 
• Fewer firms expect high inflation ahead.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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3. Capital Economics expects an increase in residential investment, although it will be below the historical trend.
 
Source: Capital Economics  

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The United Kingdom

1. Shop price gains continue to slow.
 

 
2. Here is a look at Britain’s migration trends.
 
Source: The Economist   Read full article  
 
This chart shows the foreign-born population by country of birth.
 
Source: The Economist   Read full article  

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The Eurozone

1. Household perceptions of the labor market remain robust, except in Germany.
 
Source: Deutsche Bank Research  
 
2. Eurozone total factor productivity remains weak.
 
Source: Longview Economics  
 
3. Deutsche Bank expects the ECB policy rate to drop to 2% by mid-2025.
 
Source: Deutsche Bank Research  

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Japan

1. The year-over-year headline CPI figure for Tokyo increased slightly in March, while core inflation shows signs of deceleration.
 

 
Here is food inflation.
 

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2. The unemployment rate increased in February, while the jobs-to-applicants ratio continues to trend lower.
 

 
3. Housing starts are at multi-year lows.
 

 
4. Investors continue channeling capital into Japan-focused equity funds.
 
Source: BofA Global Research  
 
BofA’s private clients also love Japanese stocks.
 
Source: BofA Global Research  

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5. Resistance is holding.
 

Back to Index

 

Asia-Pacific

1. South Korea’s industrial production picked up momentum in February.
 

 
However, the manufacturing PMI is back in contraction territory.
 
Source: S&P Global PMI  
 
• The headline inflation is holding above 3%, but the core CPI continues to moderate.
 

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2. Taiwan’s factory activity is stabilizing.
 
Source: S&P Global PMI  
 
3. New Zealand’s consumer confidence declined sharply in March.
 

 
4. Next, we have some updates on Australia.
 
• The Melbourne Institute inflation tracker continues to ease.
 

 
• Home prices keep rising.
 

 
• Job openings remain elevated relative to pre-COVID levels.
 

Back to Index

 

China

1. Property sales continue to soften.
 
Source: @economics   Read full article  
 
2. Banks are experiencing shrinking margins as nonperforming loans continue to rise.
 
Source: @markets   Read full article  
 
3. China is a dominant player in the global solar power supply chain. (2 charts)
 
Source: TS Lombard  
 
Source: TS Lombard  

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4. Here is a look at Macau casino revenues.
 

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Emerging Markets

1. Let’s run through the March manufacturing PMI data.
 
{*) Asia:
 
– ASEAN (accelerating):
 
Source: S&P Global PMI  
 
– Indonesia (very strong):
 
Source: S&P Global PMI  
 
– The Philippines (modest growth):
 
Source: S&P Global PMI  
 
– Thailand (stabilizing):
 

 
– Vietnam (growth stalled):
 
Source: S&P Global PMI  
 
• Turkey (no growth):
 

 
• LatAm:
 
– Brazil (strong expansion):
 
Source: S&P Global PMI  
 
– Mexico (holding up well):
 
Source: S&P Global PMI  
 
– Colombia (growth stalling):
 
Source: S&P Global PMI  

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2. This chart shows the rate differentials (vs. USD) and implied volatility for select EM currencies.
 

 
3. Next, we have some market performance data for Q1.
 
• Currencies:
 

 
• Bond yields:
 

 
• Equity ETFs:
 

Back to Index

 

Cryptocurrency

1. Cryptos had a solid Q1 with Bitcoin Cash (BCH – a modified version of bitcoin that runs on its own blockchain), significantly outperforming while XRP lagged top peers.
 
Source: FinViz  
 

 
• But cryptos are under pressure this morning, …
 

 
… with bitcoin testing the uptrend support.
 

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2. Bitcoin cash’s halving has contributed to bullish sentiment.
 
Source: Decrypt   Read full article  
 
• Separately, this table shows bitcoin’s forward returns after previous halving events.
 
Source: @StocktonKatie  

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3. BTC/USD is closely tracking the 2018-2021 cycle.
 
Source: @glassnode  
 
4. Bitcoin’s intraday price volatility is advancing from historically low levels.
 
Source: @KaikoData  
 
Bitcoin’s realized volatility has surpassed ether’s since February.
 
Source: @KaikoData  

Back to Index

 

Commodities

1. Chicago cattle futures are selling off.
 

 
Source: Drovers   Read full article  

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2. Cocoa futures are trading above $10k per ton.
 

 
3. Here is gold vs. the S&P 500 over the past six months (relative performance).
 

Back to Index

 

Energy

1. Brent crude is testing resistance.
 

 
Source: @markets   Read full article  

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2. Uranium mining shares are climbing again.
 

Back to Index

 

Equities

1. Stocks tend to rise following the tax filing deadline.
 

 
2. Here is a look at the year-to-date performance across dividend strategies.
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  
 
3. Below, we have detailed year-to-date performance across equity factors.
 
Source: CornerCap Institutional  
 
4. Outside of the US, multiple expansion has been driving stock gains year-to-date.
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  
 
5. Earnings growth for the “Magnificent 7” is expected to slow coming off a period of high performance dispersion within the group.
 
Source: J.P. Morgan Asset Management  
 
6. Productivity growth is improving, which is supporting margins.
 
Source: Longview Economics  
 
7. Investment advisors say go all in …
 
Source: BofA Global Research  
 
… and don’t bother with defensive sectors.
 
Source: @topdowncharts   Read full article  

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8. Next, we have forward earnings yields and implied volatility (“expected performance” vs. “perceived risk”).
 
• Factors:
 

 
• Sectors:
 

 
• International indices:
 

Back to Index

 

Credit

1. The single-B – BB corporate spreads continue to tighten, singling increased risk appetite.
 

 
2. It was a good quarter for IG bond sales.
 
Source: @markets   Read full article  

Back to Index

 

Global Developments

1. The dollar index (DXY) is testing resistance at 105.
 

 
• A wider US budget deficit could be a catalyst for weakness in the dollar.
 
Source: Aazan Habib, Paradigm Capital  

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2. Debt servicing ratios in developed markets have remained low compared with past cycles. (2 charts)
 
Source: TS Lombard  
 
Source: TS Lombard  

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Back to Index

 

Food for Thought

1. The evolution of US TV consumption and current costs:
 
Source: @WSJ   Read full article  
 
2. US households’ financial asset allocation:
 
Source: Goldman Sachs; @MikeZaccardi  
 
3. US consumer spending expectations across various services over the next six months:
 
Source: The Conference Board  
 
4. Population changes by county:
 
Source: Census Bureau   Read full article  
 
5. Fentanyl seizures:
 
Source: The Economist   Read full article  
 
• Fentanyl overdose deaths:
 
Source: The Economist   Read full article  

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6. Violent crime in the US:
 
Source: FBI   Further reading  
 
7. Changes in the number of local governments:
 
Source: Federal Reserve Bank of St. Louis   Read full article  
 

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