The Daily Shot: 19-Apr-24
• Global Developments
• The United States
• Europe
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Equities
• Credit
• Rates
• Food for Thought
Global Developments
1. Israel launched a retaliatory strike against Iran.
Source: @WSJ Read full article
• Crude oil and safe-haven assets surged.
– The Swiss franc climbed by over 1% against the euro.
– Treasury yields declined.
• Asian stocks and US futures dropped sharply.
Here is Taiwan’s key equity index.
• However, markets have reversed some of the initial moves this morning as Iran downplayed the attack, with the nation’s nuclear facilities reportedly remaining intact.
Source: The Jerusalem Post Read full article
Source: The Independent Read full article
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2. Morgan Stanley forecasts a renewed acceleration in global debt-to-GDP alongside rising debt servicing costs. (2 charts)
Source: Morgan Stanley Research
Source: Morgan Stanley Research
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3. Investors have delayed expectations around policy easing across major developed markets.
Source: Numera Analytics (@NumeraAnalytics)
4. The IMF’s projections for growth five years out have been trending lower.
Source: IMF Read full article
5. This chart shows the percentage of imports billed in foreign currency by country.
Source: Capital Economics
6. Swiss watch exports slumped last month due to weak demand from China.
Source: @wealth Read full article
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The United States
1. Fed officials continue to signal delays in rate cuts.
Source: @economics Read full article
Source: @economics Read full article
Rate cut expectations for 2024 dipped below 40 bps.
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2. The Conference Board’s leading index declined again in March. Some economists argue that in the current environment, this indicator does not effectively measure economic activity.
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3. The Philly Fed’s regional manufacturing index rose this month, signaling an improvement in US factory activity. This report contrasts with the earlier data from the New York Fed.
• The Philly Fed’s index is consistent with the ISM PMI (at the national level) reaching 55.
• Although the region’s factories continue to reduce their workforce and employee hours, …
… they are becoming more optimistic about labor demand in the coming months.
• Manufacturers increasingly expect their costs to rise.
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4. Next, we have some updates on the labor market.
• Initial jobless claims remain low, …
… but continuing claims appear to be trending up relative to recent years.
– Here are the seasonally adjusted trends. It is important to note that seasonal adjustments to weekly data may not always be reliable in the short term.
Source: @TheTerminal, Bloomberg Finance L.P.
– Layoff data seem to suggest that jobless claims will move higher in the weeks ahead.
Source: Pantheon Macroeconomics
• Economists have been surprised by the strength of the US labor market.
Source: @WSJ Read full article
• The entry of more prime-age women into the labor force has extended the expansion of the US labor force.
Source: Merrill Lynch
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5. Existing home sales dropped below 2023 levels last month, reaching a multi-year low for this time of the year.
Source: @economics Read full article
• Here is the regional breakdown (seasonally adjusted).
Source: @TheTerminal, Bloomberg Finance L.P.
• Inventories of homes for sale have risen well above the 2023 levels, …
… which is confirmed by RedFin’s data.
Source: Redfin
• The median sales price was 4.8% above last year’s level.
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Europe
1. The Eurozone’s construction output improved further in February.
Source: RTT News Read full article
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2. EU vehicle registrations dipped below last year’s levels.
3. Here is a look at the changes in rents and house prices in the EU.
Source: Eurostat Read full article
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Japan
Inflation eased last month.
Source: Reuters Read full article
Here are a couple of CPI components.
• Autos:
• Clothing:
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China
1. The renminbi continues to weaken gradually, diverging from the PBoC’s target midpoint.
Source: @TheTerminal, Bloomberg Finance L.P.
2. Coal production declined for the first time since September 2021. This is partly because of recent accidents leading to a tightening of safety regulations, according to Capital Economics.
Source: Capital Economics
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Emerging Markets
1. Asian currencies are weaker after Israel’s retaliatory strike. This chart shows the US dollar gaining against the Philippine peso.
2. The Vietnamese dong reached a new low against the dollar. Will Vietnam’s central bank intervene to avoid being labeled a currency manipulator by the US Treasury?
Source: @markets Read full article
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3. The increase in Thailand’s exports could benefit domestic earnings growth.
Source: Alpine Macro
4. Foreigners continue to buy Turkish stocks.
5. Here is a look at the Africa-China trade.
Source: Boston University Global Development Policy Center Read full article
6. Argentina’s trade surplus surprised to the upside as exports firmed while imports slumped last month.
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Cryptocurrency
1. It has been a tough month for cryptos, with several altcoins underperforming bitcoin.
Source: FinViz
2. Bitcoin’s market cap relative to the total crypto market cap (dominance ratio) continues to rise.
3. Is the bitcoin halving priced in?
Source: CoinDesk Read full article
4. The rally in bitcoin mining stocks has faded.
Source: @WSJ Read full article
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Commodities
1. The rally in copper remains intact.
2. The rise in industrial metal prices has been supported by improving global manufacturing PMIs.
Source: BCA Research
3 Here is an annotated history of gold.
Source: Deutsche Bank Research
• Gold prices continue to diverge from real rates.
Source: @TheTerminal, Bloomberg Finance L.P.
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3. The selloff in US soybean futures continues.
A weak Brazilian real and favorable weather conditions have been a headwind for soybeans.
4. With nearly half of US soybean oil being used in biofuels, the commodity now behaves like an energy product.
Source: @SusanNOBULL, @Barchart Read full article
5. Lumber prices have been down for 13 days in a row, reaching the lowest level since 2020 this week. Weak US housing data has weighed on lumber.
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6. Cocoa futures have resumed their unprecedented rally.
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Equities
1. Let’s take a look at the market drawdowns in the current selloff.
• Sectors:
• Equity factors/styles:
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2. Micorcaps’ underperformance worsened this week.
3. Investment managers are trimming equity exposure.
Source: NAAIM
4. Yesterday, we showed a sharp increase in the US Treasury’s balances at the Fed, which reduces liquidity in the private sector and typically acts as a headwind for risk assets.
Source: @TheTerminal, Bloomberg Finance L.P.
5. Insiders’ net equity buying has been running well below the historical average.
Source: @Mayhem4Markets
6. The relative performance of value versus growth stocks is approaching its 50-year lows.
Source: @IanRHarnett
7. The S&P 500 dividend yield is over 3% below the 10-year Treasury yield.
8. First-quarter earnings per share (EPS) beats for the S&P 500 are typically the strongest of the year.
Source: Citi Private Bank
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Credit
1. HYG, the largest corporate high-yield ETF, is testing support at the 200-day moving average.
2. Foreigners bought $53 billion worth of US corporate bonds in February.
3. Direct lending funds, including BDCs, are reporting an increase in distressed names within their portfolios.
Source: @markets Read full article
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Rates
1. A small number of players have been dominating the Treasury futures/cash arb trades (2 charts).
Source: @markets Read full article
Source: IMF Read full article
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2. The bid-to-cover ratio at 10-year Treasury auctions has been relatively stable.
Source: Alpine Macro
3. Fund flows suggest that investors believe longer-term interest rates have peaked, as evidenced by their rotation from money market funds to longer-term fixed-rate debt.
Source: BofA Global Research
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Food for Thought
1. Return-to-office rates in major US cities during 2023:
Source: @markets Read full article
2. Decline in the willingness of US workers to relocate for employment opportunities.
Source: @economics Read full article
3. Length of House of Representatives GOP speakerships:
Source: @axios Read full article
4. Highly Pathogenic Avian Influenza (bird flu) detections in livestock:
Source: USDA Read full article
5. Fast-casual and quick-service restaurant chains vs. the full-service dining segment:
Source: Placer.ai
6. Highest-grossing music festivals:
Source: Statista
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Have a great weekend!
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