The Daily Shot: 03-May-24
• The United States
• The United Kingdom
• Europe
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Equities
• Credit
• Rates
• Food for Thought
The United States
1. Growth in labor productivity slowed in the first quarter, …
… pushing up unit labor costs.
Source: @economics Read full article
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2. Next, we have some updates on the labor market.
• Initial jobless claims are holding near multi-year lows.
• Layoff announcements slowed last month.
• The market expects a 240k increase in the April employment report. Below are the payroll gains as implied by some leading indicators.
Source: Goldman Sachs; @MikeZaccardi
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3. The ISM Manufacturing Index dipped back into contraction territory in April.
• Factories are not doing much hiring.
• Cost pressures are on the rise again.
Source: Reuters Read full article
• The spread between the indices of orders and inventories points to persistent weakness ahead.
Source: @TheTerminal, Bloomberg Finance L.P.
– The stock market, however, signals improvement in US factory activity.
Source: @TheTerminal, Bloomberg Finance L.P.
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4. March factory orders surprised to the upside.
5. Construction spending unexpectedly declined in March, …
… with residential investment slowing.
Source: @TheTerminal, Bloomberg Finance L.P.
– Here are the components of residential construction spending.
Source: Wells Fargo Securities
– Investment in office buildings faces some headwinds.
Source: Oxford Economics
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6. Below are some updates on the housing market.
• Mortgage applications continue to weaken relative to recent years.
This chart shows the rate lock count.
Source: AEI Housing Center
• Home prices jumped in February.
• Here is a look at home price appreciation (level) by price tier.
Source: AEI Housing Center
• The gap between home prices and US wages continues to widen.
• Below is the ratio of completed houses for sale compared to those under construction.
Source: @bbgequality Read full article
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7. Since the release of the Fed’s last dot plot, the market has sharply repriced its expectations for interest rates.
Source: @TheTerminal, Bloomberg Finance L.P.
8. The US sovereign CDS spread has remained elevated since the debt ceiling standoff a year ago.
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The United Kingdom
1. Home prices declined again last month.
Source: Reuters Read full article
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2. UK households are dissatisfied with the BoE.
Source: Pantheon Macroeconomics
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Europe
1. Spain’s manufacturing growth accelerated last month.
On the other hand, Italy’s manufacturing PMI fell back into contraction territory due to shrinking demand.
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2. The Swiss manufacturing sector remains in recession.
• Swiss inflation unexpectedly jumped in April.
Source: @economics Read full article
• The Swiss franc and Swiss bond yields climbed in response to the CPI report.
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3. Central European manufacturing activity remains depressed.
• Poland:
• The Czech Republic:
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4. BofA’s European composite macro indicator is improving.
Source: BofA Global Research
5. European debt-to-GDP ratios are rising.
Source: @economics Read full article
6. Here is a comparison of the 2024 European Parliament election predictions to the results from 2019.
Source: @financialtimes Read full article
7. Finally, we have some data on video streaming in the EU.
Source: Eurostat Read full article
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Japan
The yen is rebounding following what appears to be the Bank of Japan’s second intervention in a week.
Source: See Bloomberg Video
Here is the history of Japan’s interventions in the currency markets.
Source: Reuters Read full article
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China
1. Stocks are surging in Hong Kong, …
… as China-focused equity funds see inflows.
Source: BofA Global Research
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2. Private sector leverage is very high.
Source: BCA Research
3. China’s share of global goods exports continues to rise.
Source: Capital Economics
4. Hong Kong’s first-quarter GDP growth topped expectations.
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Emerging Markets
1. Brazil’s manufacturing growth is surging.
2. Chile’s economic activity eased in March from all-time highs.
3. Mexico’s manufacturing activity remains in growth territory.
4. Turkey’s manufacturing sector is back in contraction, according to the S&P Global PMI report.
5. Next, we have some updates on South Africa.
• Factory activity accelerated last month.
• Car sales in South Africa unexpectedly increased on a year-over-year basis.
• Electricity output remains depressed.
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6. Economists continue to boost their forecasts for India’s GDP growth.
Separately, here is a look at India’s global export share in goods and services.
Source: The Economist Read full article
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7. This scatterplot shows EM currencies’ implied rate differentials with the US dollar (carry) vs. implied volatility.
• Finally, we have EM currencies’ correlation with the S&P 500 and the US dollar index.
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Cryptocurrency
1. It has been a tough week for cryptos with Bitcoin Cash (BCH) underperforming top peers.
Source: FinViz
Bitcoin Cash’s early backer was charged with tax fraud this week, which weighed on sentiment.
Source: @crypto Read full article
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2. Crypto funds are seeing large outflows (2 charts).
Source: BofA Global Research
Source: @WSJ Read full article
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3. There was a spike in long liquidations as BTC dipped below $60K.
Source: Coinglass
4. The Crypto Fear & Greed Index entered “fear” territory this week.
Source: Alternative.me
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Commodities
1. We are seeing panic selling in cocoa and coffee futures.
Source: Reuters Read full article
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2. Some commodity funds are rotating into corn and soybeans where sentiment has been depressed for some time.
3. Rice futures took a hit on Thursday.
4. CTA exposure to copper appears stretched.
Source: Deutsche Bank Research
5. This scatterplot shows the correlation between key commodity markets and both the S&P 500 and the US dollar.
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Equities
1. The market liked what it heard from Apple, sending share prices higher after the close.
Source: CNBC Read full article
Tech shares are up this morning.
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2. The bull market in tech megacaps is outperforming the average, while the S&P 250 smallest stocks are lagging behind the historical average.
Source: Simon White, Bloomberg Markets Live Blog
3. The scatterplots below display the correlations between various market segments and Treasuries, as well as the S&P 500.
– Sectors:
– Factors:
• Note that larger companies show less correlation with Treasuries, as indicated in the chart above. Larger firms are better equipped to handle high interest rates compared to smaller ones.
Source: Simon White, Bloomberg Markets Live Blog
As a result, we are seeing the largest firms increasingly dominate the S&P 500 market cap.
Source: Goldman Sachs; @MikeZaccardi
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4. Here is a detailed look at last month’s equity factor performance.
Source: CornerCap Institutional
5. Macro conditions are more conducive to IPO activity, according to Goldman.
Source: Goldman Sachs
6. Global equity sentiment is exiting the “euphoria” stage.
Source: BofA Global Research
• US mega-cap growth and tech positioning is starting to unwind.
Source: Deutsche Bank Research
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7. Put writing and covered call ETFs are starting to improve relative to the S&P 500, possibly reflecting a choppy trading environment.
Source: Aazan Habib, Paradigm Capital
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Credit
1. Corporate bond spreads remain tight despite elevated Treasury yields and the massive repricing of Fed rate cut expectations.
• Investment grade:
• High yield:
Source: Reuters Read full article
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2. CCC-rated bonds are decoupling from the rest of the market.
Source: BofA Global Research
3. This scatterplot shows credit market yields and implied volatility (expected performance vs. perceived risk).
4. Finally, we have credit market correlations to Treasuries and US stocks.
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Rates
1. This chart depicts how the 10-year Treasury note returns have suffered as rate cut probabilities dissipated.
Source: Morningstar Direct Read full article
2. Historically, the 10-year Treasury yield has declined around FOMC days but has collectively risen outside of FOMC days.
Source: Deutsche Bank Research
3. Next, we show the term structure of realized volatility for Treasury yields. While shorter-term volatility has declined, it remains significantly above pre-COVID levels.
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Food for Thought
1. Business ownership demographics in the US:
Source: Brookings Read full article
2. US births hit a multi-decade low.
Source: @jessicanix_, @business Read full article
3. A snapshot of Ivy League admissions statistics:
Source: Visual Capitalist Read full article
4. A decade of clinical trial growth in obesity research:
Source: Tema
5. Exponential growth in computing to train AI models:
Source: Deutsche Bank Research
6. Sources of tax revenue in the US:
Source: Tax Foundation Read full article
7. Perfecting the hard-boiled egg to your taste:
Source: BuzzFeed
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Have a great weekend!
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