Posted on by The Daily Shot Editor: Lev Borodovsky

Household confidence in the job market continues to deteriorate

The Daily Shot: 29-May-24
• The United States
• The Eurozone
• Europe
• Japan
• Australia
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Rates
• Food for Thought

 

The United States

1. The market no longer expects two Fed rate cuts this year, with only 31 bps of reductions currently priced in.
 

 
Source: @markets   Read full article  

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2. The Conference Board’s consumer confidence index unexpectedly improved this month, …
 

 
… diverging from the University of Michigan’s index.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
• Household confidence in the job market continues to deteriorate.
 

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3. US economic indicators have been surprising to the downside in recent months.
 

 
4. Air travel surged going into the Memorial Day.
 
Source: Reuters   Read full article  
 
5. The Dallas Fed’s manufacturing index indicates a persistent slump in factory activity across Texas.
 

 
• Fewer firms expect increases in new orders.
 

 
• Manufacturers are not doing much hiring, …
 

 
… but expect employees to put in more hours in the months ahead.
 

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6. The broad money supply is now up on a year-over-year basis.
 

 
7. Home prices continued to climb in March.
 

 
8. The population outflow from major metropolitan areas over the past year was driven by younger generations in search of a lower cost of living, according to BofA customer data. (2 charts)
 
Source: Bank of America Institute  
 
Source: Bank of America Institute  

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The Eurozone

1. Inflation expectations continue to trend lower.
 

 
• Economists expect an uptick in the euro-area CPI in May.
 
Source: @economics   Read full article  
 

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2. Nomura sees ongoing ECB rate cuts until the second half of next year.
 
Source: Nomura Securities  
 
3. The euro’s share of SWIFT payments has been trending lower.
 
Source: @JeffreyKleintop  

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Europe

1. European corporate credit supply remains strong.
 
Source: ING  
 
2. This chart illustrates the trends in the trade of agricultural products within the EU.
 
Source: Eurostat   Read full article  
 
3. Here is a look at motorization rates and the proportion of electric passenger cars in Europe.
 
Source: Eurostat   Read full article  

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Japan

1. The yen remains under pressure.
 

 
2. JGB yields continue to surge.
 

 
3. Consumer confidence unexpectedly declined in May.
 

 
4. Tourists are back.
 
Source: @JeffreyKleintop  

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Australia

1. The monthly CPI report surprised to the upside.
 

 
• Following the CPI report, market expectations for any RBA rate cuts this year have dissipated.
 

 
• Bond yields jumped.
 

 

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2. Retail sales rose less than expected in April.
 

 
3. Construction activity declined sharply last quarter.
 

 
4. AUD/GBP could benefit from a wider expected interest rate spread. This could imply a higher-for-longer RBA policy and a forthcoming BoE pivot.
 
Source: Numera Analytics (@NumeraAnalytics)  

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China

1. Bond yields are trending lower.
 

 
2. The renminbi has been weakening against the dollar.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. The market expects softer GDP growth over the next few quarters.
 

 
• Growth is expected to be driven by external demand. Economists have been downgrading their forecasts for China’s retail sales this year, …
 

 
… while boosting projections for export growth.
 

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4. Hong Kong’s inflation has slowed.
 

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Emerging Markets

1. Brazil’s mid-May CPI was a touch below consensus estimates.
 

 
2. Economists are boosting their projections for Chile’s GDP growth this year.
 

 
3. Colombia’s industrial confidence has been weakening.
 

 
4. Mexico’s trade balance hit a multi-year low for this time of the year, …
 

 
Source: MarketWatch   Read full article  
 
… as imports surged (2nd panel).
 

 
• Economists expect 125 bps of additional Banxico rate cuts this year.
 

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5. Turkey’s manufacturing confidence remains soft.
 

 
6. Vietnam’s trade deficit was wider than expected this month amid stronger imports.
 

 
7. Historically, EM debt has outperformed DM bonds in the year following a Fed pivot.
 
Source: Numera Analytics (@NumeraAnalytics)  

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Commodities

1. Silver hit the highest level in over a decade.
 

 
2. Coffee futures are approaching their peak levels from April.
 

 
3. Commodities’ breadth has been rising, which could keep US inflation elevated.
 
Source: SG Cross Asset Research; @WallStJesus  

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Energy

1. NYMEX crude is back above $80/bbl.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. CTAs are bullish on crude oil.
 
Source: Deutsche Bank Research  
 
3. Refining stocks are starting to price in rising crack spreads.
 
Source: The Crude Chronicles  
 
• The spread between the ISM Manufacturing PMI orders index (demand proxy) and refined product inventories (supply) typically leads crack spreads by about nine months.
 
Source: The Crude Chronicles  

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4. Increases in US natural gas storage have been slower than expected for this time of year.
 

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Equities

1. The Dow is back at its 50-day moving average.
 

 
2. The S&P 500 has risen in 23 out of the last 30 weeks. The last time we were above that level was in 1989.
 
h/t Deutsche Bank Research  
 
3. US households remain upbeat on stock prices.
 

 
• Here is a look at Schwab customers’ sector views.
 
Source: Schwab   Read full article  

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4. The S&P 500 risk premium is nearing zero for the first time since 2002.
 

 
5. Leveraged companies continue to widen their underperformance.
 

 
6. Correlations among S&P 500 members have been falling, which, in theory, should be a good environment for stock pickers.
 
• Realized correlation:
 

 
• Implied correlation:
 

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7. The S&P 500 (SPY) has shown less correlation with Treasury prices compared to the equal-weight index (RSP)and small caps (IWM). …
 

 
… and small caps (IWM).
 

 
This is largely due to the cash-rich tech mega-caps, which are less sensitive to higher interest rates.
 

 
The above trend partially explains the disregard for higher-for-longer Fed policy.
 

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8. Transportation stocks have been struggling.
 

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Rates

1. Foreign ownership of Treasuries has not been keeping up with the market size.
 
Source: Reuters   Read full article  
 
2. Here is a look at rate trajectories across the Fed’s easing cycles.
 
Source: EY-Parthenon  

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Food for Thought

1. The average age of power grids:
 
Source: Goldman Sachs  
 
2. Financial well-being of adults by year and parental status (2015-2023):
 
Source: Federal Reserve Board  
 
3. Munitions fired by Russia into Ukraine and Ukraine’s interception rate:
 
Source: @WSJ   Read full article  
 
4. Cocaine in wastewater in European cities:
 
Source: @bpolitics   Read full article  
 
5. Americans without health insurance:
 
Source: USAFacts  
 
6. Trends in DUI arrests and alcohol-related driving fatalities in the US:
 
Source: @WSJ   Read full article  
 
7. Management teams mentioning AI during quarterly earnings calls:
 
Source: Goldman Sachs; @MikeZaccardi  
 
8. Number of US babies named Alexa:
 
Source: @chartrdaily  
 

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