May 22, 2024May 22, 2024 by The Daily Shot Editor: Lev Borodovsky

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

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.

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

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.

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

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.

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.

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

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

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.

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

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.

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

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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