The Daily Shot: 04-Jun-24
• The United States
• Canada
• The Eurozone
• Europe
• Asia-Pacific
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Food for Thought
The United States
1. The ISM Manufacturing PMI moved deeper into contraction territory in May as demand softened.
Source: @TheTerminal, Bloomberg Finance L.P.
Source: MarketWatch Read full article
• The spread between indices of orders and inventories points to further weakness ahead.
Source: @TheTerminal, Bloomberg Finance L.P.
• However, factories are hiring again.
• Price pressures eased.
• The ISM PMI diverged from S&P Global’s US PMI indicator, which showed a modest expansion in factory activity last month.
Source: @TheTerminal, Bloomberg Finance L.P.
• Will improving global liquidity boost factory activity?
Source: Simon White, Bloomberg Markets Live Blog
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2. US construction spending was down for the second month in a row in April.
• Private residential spending edged higher, but nonresidential expenditures declined again.
Source: @TheTerminal, Bloomberg Finance L.P.
– Here are the components of private residential spending (% of total).
Source: Wells Fargo Securities
• Construction spending in manufacturing hit another record high, driven by investment in semiconductor facilities.
• Separately, office construction starts have been trending lower.
Source: ResiClub Read full article
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3. Weaker construction spending, combined with softer consumer spending on goods, pulled the Atlanta Fed’s GDP tracker further down (lowering the “fixed investment” component). The indicator is now below 2% (annualized).
Source: Federal Reserve Bank of Atlanta
Source: @TheTerminal, Bloomberg Finance L.P.
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4. Bloomberg’s economic surprise index is near the lowest level since 2019.
• The market pricing for Fed rate cuts in 2024 moved to 42 bps.
• Softer economic data is pressuring the US dollar.
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5. Vehicle sales edged higher in May.
• Wholesale used vehicle prices increased in May for the first time in eight months.
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6. Labor productivity at the largest US firms has been increasing.
Source: BofA Global Research; @MikeZaccardi
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Canada
1. Factory activity continues to contract amid softer demand.
2. Consumer confidence is rebounding.
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The Eurozone
1. The May manufacturing PMIs have been mixed, with strong results from the Netherlands and Spain, …
Source: S&P Global PMI
… but more weakness in Italy.
The contraction in manufacturing activity at the Eurozone level has been slowing.
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2. The euro area’s economic outlook is improving, which could support equities. (2 charts)
Source: MRB Partners
Source: MRB Partners
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Europe
1. Sweden’s factory activity is accelerating.
2. Manufacturing activity in Central Europe continues to contract.
3. The SPDR Euro Stoxx 50 ETF (FEZ) is holding support vs. the S&P 500 ETF (SPY) after breaking above a long-term relative downtrend.
4. Here is a look at the EU’s goods trade with China.
Source: @DanielKral1, @OxfordEconomics
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Asia-Pacific
1. South Korea’s inflation continues to ease.
2. Australia’s current account unexpectedly swung into deficit last quarter.
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Emerging Markets
1. Let’s continue with May’s manufacturing PMI data.
• ASEAN (accelerating):
Source: S&P Global PMI
• Turkey (deeper contraction):
• South Africa (a sudden pullback):
• Brazil (slower growth):
• Mexico (steady):
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2. The Mexican peso experienced the worst decline since the COVID shock in 2020.
– Implied volatility jumped.
– The largest Mexican equity ETF (EWW) was down over 10% on Monday.
Source: Reuters Read full article
• Mexico’s loan growth is holding above 10% per year.
• Remittances hit a record high, topping expectations.
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3. Indian stocks tumbled almost 5% after hitting a record high as the vote count continues.
4. Turkey’s core inflation remains near 75%.
5. EM equities have been underperforming.
6. This scatterplot shows EM currency rate differentials vs. USD and implied volatility.
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Cryptocurrency
1. Crypto funds saw minor inflows last week led by long-Bitcoin and Ethereum-focused products. Investors exited short-bitcoin funds. (2 charts)
Source: CoinShares Read full article
Source: CoinShares Read full article
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2. Top altcoins have displayed weakening relative strength and momentum vs. bitcoin over the past 10 days.
Source: @StocktonKatie
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Commodities
1. Iron ore futures are rolling over.
2. Cocoa futures are surging again.
3. Here is a look at China’s copper output.
Source: @markets Read full article
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Energy
1. Crude oil is sharply lower this week after the OPEC+ meeting as the market appears to be well supplied.
Source: @markets Read full article
• WTI crude oil broke below support at $75/bbl, near the midpoint of its wide trading range.
– The news from South Korea didn’t help.
Source: Reuters Read full article
• Here is the Brent curve.
• Could we see Brent futures below $60/bbl? The options market assigns a 5.5% probability of such an outcome by the end of July and an 8.2% probability by the end of August.
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2. The US government is gradually rebuilding the Strategic Petroleum Reserve (at lower prices).
Source: Reuters Read full article
Source: @TheTerminal, Bloomberg Finance L.P.
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3. US gasoline prices at the pump are heading lower.
Source: @TheTerminal, Bloomberg Finance L.P.
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Equities
1. June often starts with a rally in US stocks, only to fizzle out by month’s end.
2. Here is a look at the S&P 500 performance across the presidential election cycle.
Source: Truist Advisory Services
3. Pump and dump activity is alive and well.
Source: CNBC Read full article
4. The S&P 500 concentration has been intensifying.
• Capitalization:
Source: Truist Advisory Services
• Performance:
Source: Heather Burke, @TheTerminal, Bloomberg Finance L.P.
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5. Hedge funds have been rotating out of software into semiconductors.
Source: Goldman Sachs; @WallStJesus
6. The S&P 500 liquidity has been improving.
Source: Deutsche Bank Research
7. Short interest in S&P 500 stocks has been rising.
Source: Goldman Sachs; @MikeZaccardi
8. Margins continue to improve.
Source: @markets Read full article
9. Here is a look at valuations relative to the 10-year average across equity factors/styles.
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Credit
1. The commercial real estate maturity wall is sizable, and a large portion of CRE-related debt has been extended rather than refinanced after the pandemic, according to Alpine Macro.
Source: Alpine Macro
• Small banks have been increasing CRE exposure.
Source: Simon White, Bloomberg Markets Live Blog
• Non-agency CMBS has been a bright spot this year.
Source: Alpine Macro
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2. US investment-grade corporate bonds saw an increase in net upgrades in May.
Source: BofA Global Research; @MikeZaccardi
3. This scatterplot shows yields vs. implied volatility (expected returns vs. perceived risk).
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Food for Thought
1. Shift in fitness visits by time of day and its impact on fitness growth:
Source: Placer.ai
2. The top startup cities:
Source: Visual Capitalist Read full article
3. Change in US public school enrollment and number of schools by area type:
Source: @axios Read full article
4. Ex-USSR republics’ views on Russia:
Source: Gallup Read full article
5. California’s average daily energy generation mix in April 2021 and April 2024:
Source: The New York Times Read full article
6. Tech employment:
Source: Torsten Slok, Apollo
7. Crocs:
Source: @chartrdaily
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