A widening gap in living standards

The Daily Shot: 22-May-24
The United States
Canada
The United Kingdom
The Eurozone
Europe
Japan
Asia-Pacific
China
Emerging Markets
Commodities
Energy
Equities
Rates
Global Developments
Food for Thought



 

The United States

1. The Philly Fed’s index shows that service sector sales continued to expand modestly this month.
 

 
Companies in the region are reporting a moderation in cost pressures.
 

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2. Historically, when oil and gold prices have exceeded their median levels, producer price inflation has shown marked increases in the following years.
 
Source: Barron’s   Read full article  
 
Fewer firms are citing inflation on earnings calls.
 
Source: @FactSet   Read full article  

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3. Investors expect the Fed to deliver the first rate cut in the second half of the year.
 
Source: BofA Global Research  
 
4. There has been a widening gap in living standards between higher and lower income groups.
 
Source: Gavekal Research  
 
5. The largest tech firms’ CapEx is increasingly dominated by spending on servers.
 
Source: Goldman Sachs; @AyeshaTariq  


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Canada

1. Canada’s April CPI matched expectations, indicating progress on inflation.
 

 
Source: @WSJ   Read full article  
 
Core inflation indicators are trending lower.
 

 
Services inflation remains sticky.
 

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2. The market sees two BoC rate cuts this year.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Here is the rate pricing for the BoC meeting dates.
 

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3. Canadian investment in foreign securities hit an all-time high in March.
 


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The United Kingdom

1. The CPI report surprised to the upside.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The pound strengthened.
 

 
We will have more on the UK CPI tomorrow.

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2. Industrial orders deteriorated this month.
 

 
Source: Reuters   Read full article  
 
Gains in output prices slowed.
 

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3. What do Britons see as the outcome of the next general election?
 
Source: @YouGov   Read full article  


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The Eurozone

1. The March trade surplus was smaller than expected.
 

 
Here is a look at manufactured goods imports from China.
 
Source: Pantheon Macroeconomics  

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2. Construction output is back above last year’s levels (slightly).
 

 
However, the PMI index points to downside risks for the sector.
 
Source: Pantheon Macroeconomics  

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3. Growth in labor costs remains elevated.
 

 
4. The CPI can remain at the ECB’s target level even with services inflation remaining sticky.
 
Source: Nomura Securities  
 
5. Almost all of the fall in 10-year bund yields in recent decades has occurred around the FOMC three-day window, while yields have typically risen around ECB meetings.
 
Source: Deutsche Bank Research  
 
6. Dutch house price increases continue to accelerate.
 


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Europe

1. Denmark’s GDP declined sharply last quarter, reversing some of the Q4 gains. A substantial portion of this growth volatility is related to Novo Nordisk’s weight loss drug production.
 

 
Source: @economics   Read full article  

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2. Here is a look at the IMF’s forecasts for government debt.
 
Source: @DanielKral1, @IMFNews  
 
3. This map shows where people work long hours.
 
Source: Eurostat   Read full article  


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Japan

1. Machinery orders are rebounding.
 

 
2. The vacancy rate for homes has been rising, …
 
Source: Torsten Slok,¬†Apollo  
 
… yet options are increasingly limited for those looking to purchase a condo in Tokyo.
 


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Asia-Pacific

1. South Korea’s manufacturing outlook is improving, according to the latest BoK survey.
 

 
2. The RBNZ left rates unchanged (as expected) but struck a hawkish tone.
 
Source: @economics   Read full article  
 
Bond yields and the Kiwi dollar climbed.
 

 


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China

1. The Hang Seng Index rally appears extended.
 
Source: Longview Economics  
 
Short positioning suggests that investors lack confidence in the rally (preferring EM ex-China instead).
 
Source: @markets   Read full article  
 
12-month forward earnings for the CSI 300 Index have rolled over.
 
Source: Longview Economics  
 
However, the Oxford Economics leading indicator signals a rebound in earnings growth.
 
Source: Oxford Economics  

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2. Land sales continue to slow.
 
Source: @economics   Read full article  


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Emerging Markets

1. Hungary’s central bank delivered another 50 bps rate cut.
 

 
2. Nigeria’s central bank hiked rates above 26% amid extreme currency weakness and elevated inflation.
 

 
Source: @economics   Read full article  

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3. India’s economic growth is expected to remain strong.
 
Source: Morgan Stanley Research; @AyeshaTariq  


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Commodities

1. Industrial metals continue to climb.
 

 
Here is zinc.
 

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2. This pie chart shows the distribution of global copper production by country.
 

 
3. US wheat prices are surging amid weaker production in Russia, …
 

 
… and lower stockpiles.
 
Source: @markets   Read full article  
 
Here is Bloomberg’s grains index.
 

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4. Orange juice prices are soaring.
 


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Energy

1. Brent crude is nearing $82/bbl.
 

 
The WTI oil price is stuck in a wide trading range and capped below resistance near $90/bbl.
 

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2. Speculators have gradually trimmed their long positions since the pandemic peak.
 
Source: Longview Economics  
 
3. Longview Economics expects global oil inventories to decline over the next 18-24 months, which could keep prices elevated.
 
Source: Longview Economics  


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Equities

1. A number of sell-side analysts are bullish, ..
 
Source: Yahoo Finance   Read full article  
 
… but current prices are well above the average year-end forecast.
 
Source: @johnauthers, @opinion   Read full article  

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2. It’s been a while since the S&P 500 had a 2%+ down day.
 

 
Source: @markets   Read full article  

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3. The S&P 500 long-term P/E ratio is back above 30x.
 

 
The earnings yield of the S&P 500 is nearly 2% below the average yield of BBB-rated bonds.
 

 
Will valuations shift lower as earnings reaccelerate?
 
Source: Morgan Stanley Research; @dailychartbook  
 
4. The market has gotten comfortable with the Fed’s “higher for longer” policy.
 

 
5. This chart shows the decomposition of US equity returns.
 
Source: Oxford Economics  
 
6. The S&P 500 put option volume declined sharply in recent weeks.
 

 
7. The front end of the volatility curve is significantly inverted, primarily due to anticipation of NVIDIA’s earnings and, to a lesser extent, the upcoming FOMC minutes.
 
Source: @TheTerminal, Bloomberg Finance L.P.  


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Rates

1. The release of the FOMC minutes has had a limited impact on Treasury yields.
 
Source: Deutsche Bank Research  
 
2. Fed officials’ speeches remain hawkish.
 
Source: JP Morgan Research; @Mayhem4Markets  


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Global Developments

1. Below is the calendar of expected central bank actions in the coming months.
 
Source: Reuters   Read full article  
 
2. This chart shows the fiscal impulse in select economies.
 
Source: Goldman Sachs; @WallStJesus  


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Food for Thought

1. US job satisfaction over time (2 charts):
 
Source: @axios   Read full article  
 
Source: @WSJ   Read full article  
 
Job satisfaction of job-hoppers and job-stayers:
 
Source: @axios   Read full article  

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2. Work expectations vs. reality in retirement:
 
Source: @WSJ   Read full article  
 
3. The tax burden by state:
 
Source: Visual Capitalist   Read full article  
 
4. Comparison of the foreign-born population in prisons vs. the general population by country:
 
Source: @financialtimes   Read full article  
 
5. Teens and video games:
 
Source: @axios   Read full article  
 
6. Declining amount of sexual content in top films:
 
Source: The Economist   Read full article  

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