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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