Posted on by The Daily Shot Editor: Lev Borodovsky

The ISM Services PMI signals weaker economic growth

The Daily Shot: 04-Apr-24
• The United States
• Canada
• The Eurozone
• Europe
• Asia-Pacific
• Emerging Markets
• Commodities
• Energy
• Equities
• Alternatives
• Rates
• Food for Thought

 

The United States

1. The ISM Services PMI fell short of expectations, …
 

 
… indicating slower consumer spending …
 
Source: Pantheon Macroeconomics  
 
… and weaker economic growth.
 
Source: Oxford Economics  
 
• The employment index remains in contraction territory, …
 

 
… which could indicate slower job growth.
 
Source: Piper Sandler   
 
• Fewer service firms are reporting rising costs, …
 

 
Source: @economics   Read full article  
 
… signaling slower supercore inflation.
 
Source: Pantheon Macroeconomics  
 
• Supplier delivery times are falling at the fastest pace on record, suggesting softer demand.
 

 
– Will supply chain stress bring back delivery delays in the months ahead (2 charts)?
 
Source: Oxford Economics  
 
Source: Truist Advisory Services  

——————–

 
2. Short-term Treasury yields fell following the ISM Services report, while longer-dated yields continue to climb.
 

 
The dollar dropped, boosting commodity prices.
 

——————–

 
3. The ADP private payrolls index exceeded forecasts …
 

 
… supported by the Leisure and Hospitality sector.
 

 
• This ADP diffusion index incorporates job gains vs. losses by sector, region, and company size and suggests that the labor market remains robust.
 

 
• The ADP report has been a poor predictor of the official employment data.
 
Source: Pantheon Macroeconomics  

——————–

 
4. Next, we have some updates on the housing market.
 
• Mortgage applications are running well below last year’s levels.
 

 
This chart shows the rate lock count.
 
Source: AEI Housing Center  
 
• Home purchases are increasingly made with cash.
 
Source: Redfin  
 
• Existing home inventories are rising relative to 2023.
 
Source: Redfin  
 
• Foreclosures remain very low.
 

——————–

 
5. Based on the language in Fed officials’ speeches and statements, the central bank’s stance is becoming less hawkish.
 

Back to Index

 

Canada

1. The Services PMI remains deep in contraction territory.
 

 
2. Vehicle sales declined last month.
 
Source: DAC  

Back to Index

 

The Eurozone

1. The euro-area CPI report was a bit softer than expected as inflation continues to moderate (2 charts).
 

 
Source: Arcano Economics  
 
Food inflation is falling rapidly.
 

 
• Here is a look at Germany’s headline and core CPI
 
Source: Arcano Economics  
 
And this chart shows Germany’s goods and services inflation.
 
Source: Arcano Economics  

——————–

 
2. The unemployment rate held steady in February.
 

Back to Index

 

Europe

1. Swiss inflation surprised to the downside, with the core CPI back at 1%.
 

 
• Swiss bond yields dropped as the market prices in more SNB rate cuts.
 

 
• The Swiss franc continues to tumble vs. the euro.
 

——————–

 
2. Here is a look at parental leave and employment rates in Europe in 2023.
 
Source: The Economist   Read full article  

Back to Index

 

Asia-Pacific

1. Short-term realized volatility for dollar-yen has plummeted, with the exchange rate stabilizing just below 152.
 

 
2. South Korean banks could see a rebound in net interest income.
 
Source: BofA Global Research  
 
3. Next, we have some updates on Australia.
 
• The revised services PMI was higher than the initial flash estimate.
 
Source: S&P Global PMI  
 
• Building approvals for houses bounced from the recent lows.
 

 
But apartment permits hit a 12-year low.
 

 
Source: @economics   Read full article  

Back to Index

 

Emerging Markets

1. Turkey’s core inflation exceeded 75% in March, leading to increased support for Erdogan’s opposition.
 

 
Source: Reuters   Read full article  
 
The lira has stabilized.
 

——————–

 
2. Next, we have some updates on India.
 
• The revised services PMI was even higher than the flash estimate.
 
Source: S&P Global PMI  
 
• Lower inflation could pressure the Reserve Bank of India to cut rates.
 
Source: Gavekal Research  
 
The central bank has room to cut rates, given the rapid decline in inflation.
 
Source: Numera Analytics (@NumeraAnalytics)  
 
• Indian equities have declining sensitivity to the MSCI EM Index.
 
Source: Gavekal Research  
 
• Inflows into index-eligible (fully accessible route, FAR) India bonds surged ahead of its upcoming inclusion in JP Morgan and Bloomberg’s EM local currency bond indices.
 
Source: @markets   Read full article  

——————–

 
3. Brazil’s industrial production declined again in February.
 

 
• Services growth remains robust.
 
Source: S&P Global PMI  
 
• Vehicle sales dipped below the 2023 level.
 

——————–

 
4. Indian, Colombian, and Romanian sovereign bonds have reacted favorably to index inclusion announcements.
 
Source: Numera Analytics (@NumeraAnalytics)  

Back to Index

 

Commodities

1. Copper prices jumped on Wednesday as the dollar weakened.
 

 
Technicals suggest copper is overbought over the medium term.
 
Source: Longview Economics  

——————–

 
2. Robusta coffee is hitting new highs.
 

 
3. US cattle futures remain under pressure.
 

 
Source: @markets   Read full article  

——————–

 
4. Gold appears to be overbought.
 

 
5. The SPDR Metals & Mining ETF (XME) is holding support relative to the S&P 500.
 

Back to Index

 

Energy

1. US oil inventories rose again last week, but stockpiles of refined products declined more than expected.
 
• Weekly changes:
 

 
• Levels:
 

——————–

 
2. Will oil demand peak over the next decade (2 charts)?
 
Source: Goldman Sachs; @MikeZaccardi  
 
Source: Goldman Sachs; @MikeZaccardi  

Back to Index

 

Equities

1. BofA’s bullish signals are at a 30-month high, implying an almost synchronized global growth upturn.
 
Source: BofA Global Research  
 
• The number of bearish US investors has dwindled
 

——————–

 
2. Goldman sees share buybacks driving demand for stocks this year, …
 
Source: Goldman Sachs; @WallStJesus  
 
… as CEO confidence improves.
 
Source: Morgan Stanley Research; @AyeshaTariq  

——————–

 
3. This chart shows US index valuations relative to the 20-year average.
 
Source: Truist Advisory Services  
 
4. Concentration risks remain extreme.
 
Source: Truist Advisory Services  
 
5. S&P 500 index funds accounted for a record 27% of global equity ETF flows in 2023.
 
Source: @financialtimes   Read full article  
 
6. The S&P 500 realized correlation is holding near multi-year lows.
 

 
7. Here is a look at global equity return composition.
 
Source: J.P. Morgan Asset Management  

Back to Index

 

Alternatives

1. US private equity has grown massively as a percentage of the total equity market.
 
Source: Torsten Slok, Apollo  
 
However, the number of private equity-backed companies has declined in recent years.
 
Source: Torsten Slok, Apollo  

——————–

 
2. Real estate fundraising has been led by more established firms recently.
 
Source: Torsten Slok, Apollo  
 

Back to Index

 

Rates

The 10-year Treasury yield attempted a minor breakout on Tuesday and could face resistance around 4.53%
.

——————–

Back to Index

 

Food for Thought

1. The rise of TikTok for news:
 
Source: @financialtimes   Read full article  
 
2. Women’s share of regional wealth:
 
Source: BCG   Read full article  
 
3. Entrepreneurial trends by race/ethnicity:
 
Source: @WSJ   Read full article  
 
4. The rise in annual carbon dioxide levels as measured at the Mauna Loa Observatory:
 
Source: NOAA   Read full article  
 
5. North Korean provocations since 2011:
 
Source: @ThatJennieWelch, @economics   Read full article  
 
6. The worst states to work as a chef:
 
Source: Affordable Seating  
 

——————–

Back to Index