China’s domestic lending deteriorates

The Daily Shot: 17-Jun-24
China
The United States
The United Kingdom
The Eurozone
Europe
Asia-Pacific
Emerging Markets
Commodities
Equities
Credit:
Global Developments
Food for Thought



 

China

1. Economic activity in May showed mixed results, as industrial output growth slowed, but retail sales exceeded forecasts.
 
Industrial production:
 

 
Retail sales:
 

 
Source: @economics   Read full article  

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2. China’s housing market slump is deepening, which is putting pressure on industrial metals (see the commodities section).
 
New home prices (month-over-month):
 

 
Existing home prices (month-over-month):
 

 
Residential sales:
 

 
Mainland-listed real estate shares:
 

 
Source: @markets   Read full article  

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3. Bank lending was well below expectations in May amid soft demand.
 

 
Source: Reuters   Read full article  
 
Aggregate financing bounced from the April lows, …
 

 
… boosted by government bond issuance.
 

 
Below are the year-over-year trends.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The slump in China’s equity issuance continues.
 

 
The money supply growth is slowing rapidly, with the M1 measure now in contraction territory.
 

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4. Bond yields are lower again, …
 

 
…a development that has been frustrating Beijing.
 
Source: @markets   Read full article  
 
Short-term rates have been trending down as well.
 


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The United States

1. The University of Michigan’s consumer sentiment index unexpectedly fell this month.
 

 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Source: MarketWatch   Read full article  
 
Households are concerned about deteriorating income levels.
 


 
Real income expectations hit the lowest levels in over a decade.
 

 
There is growing concern about potential job losses over the next five years.
 

 
Buying conditions for durables continue to worsen.
 

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2. Next, we have some updates on inflation,
 
The U. Michigan longer-term inflation expectations climbed this month.
 

 
It’s worth noting that the data behind the longer-term inflation expectations index is highly skewed to the upside.
 

 
Import prices dropped last month.
 

 
Source: MarketWatch   Read full article  
 
Market-based inflation expectations declined last week after soft CPI and PPI reports.
 

 

 
The 10-year Treasury yield moved lower.
 

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3. The labor market will ultimately determine the path of Fed easing.
 
Source: Numera Analytics (@NumeraAnalytics)  
 
4. The share of household spending on goods remains elevated.
 
Source: White House   Read full article  


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The United Kingdom

1. UK asking prices for housing remain above the levels seen last year.
 

 
2. Demand for rentals has been rising.
 
Source: RICS  
 
Source: @financialtimes   Read full article  

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3. Inflation expectations continue to moderate.
 


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The Eurozone

1. The headlines from France continue to spook investors.
 
Source: @bpolitics   Read full article  
 
Source: @bpolitics   Read full article  
 
Source: @bpolitics   Read full article  
 
French longer-term yields have risen sharply against the German equivalent.
 

 

 
Below is the yield curve comparison.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The sovereign CDS spread keeps widening.
 

 
Here is the divergence in stock prices, …
 

 
… and implied volatility.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. The EUR/USD risk reversals continue to show increasing downside bias.
 

 
3. Euro-area trade surplus topped forecasts.
 


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Europe

1. Swedish inflation was higher than expected in May.
 

 
But bond yields continue to fall.
 

 
Here is the swap curve.
 

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2. The Swiss franc continues to gain vs. the euro amid concerns about the upcoming French elections.
 

 


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Asia-Pacific

1. Economists are boosting their forecasts for South Korea’s export growth.
 

 
Export prices have been strengthening.
 

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2. New Zealand’s service sector activity is contracting.
 

 
3. Australia’s job ads continue to trend lower.
 


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Emerging Markets

1. Brazil’s economic activity was unchanged in April.
 

 
Service sector output rebounded.
 

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2. India’s wholesale price inflation is climbing again.
 

 
The trade deficit widened in May as imports jumped.
 

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3. Ukraine’s central bank cut rates last week.
 

 
4. Here is a look at last week’s performance.
 
Currencies:
 

 
Bond yields:
 

 
Equity ETFs:
 


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Commodities

1. Induatrial metals are struggling due to China’s worsening property slump.
 

 
Source: @markets   Read full article  
 
Copper:
 

 
Aluminum:
 

 
Iron ore:
 

 
The SPDR Metals & Mining ETF (XME) broke below long-term support relative to the S&P 500.
 

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2. The SPDR Materials ETF (XLB) is entering a seasonally weak period.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
XLB remains in a long-term downtrend vs. the S&P 500.
 

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3. Shanghai’s gold premium vs. the international bullion price in yuan remains elevated.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
4. Speculative accounts continue to boost their bets against palladium futures.
 

 
5. Hedge funds are now net short cotton futures.
 

 
6. Here is last week’s performance data.
 


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Equities

1. The outperformance of US equities relative to the rest of the world has accelerated.
 

 
2. The S&P 500 appears overbought.
 
Source: MarketDesk Research  
 
3. Last week, roughly 73% of sub-industry groups closed within 5% of a six-month relative low versus the S&P 500. This reflects weakening short-term breadth.
 
Source: SentimenTrader  
 
The latest rally has been very narrow.
 
Source: @5thrule, @TheTerminal, Bloomberg Finance L.P.   Read full article  
 
There has been underlying weakness within the Nasdaq 100.
 
Source: MarketDesk Research  

——————–

 
4. Next, we have some equity factor trends.
 
Momentum:
 

 
Quality:
 

 
Dividend Aristocrats:
 

 
Growth vs. value:
 
Large caps (skewed by tech mega-caps):
 

 
Mid-caps:
 

 
Small-caps:
 

——————–

 
5. The wide performance gap between the Nasdaq 100 Index and Russell 2000 Index (small-caps) points to a period of underperformance for tech stocks.
 
Source: MarketDesk Research  
 
The S&P Small-Cap 600 Index continues to trade at a record discount versus large-caps.
 
Source: State Street Global Advisors   Read full article  

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6. According to some measures, the latest rally has been outstripping market fundamentals.
 
Source: @5thrule, @TheTerminal, Bloomberg Finance L.P.   Read full article  
 
7. Are credit markets signaling higher volatility in equities?
 
Source: BofA Global Research; @MikeZaccardi  
 
8. Finally, we have some performance data from last week.
 
Sectors:
 

 
Equity factors:
 

 
Macro basket pairs’ relative performance:
 

 
Thematic ETFs:
 

 
Largest US tech firms:
 


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Credit:

1. Private credit is looking frothy relative to historical levels.
 
Source: J.P. Morgan Asset Management  
 
2. Here is last week’s performance across credit asset classes.
 


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Global Developments

1. Rate cuts and improving global economic growth have supported risk-on conditions.
 
Source: MRB Partners  
 
2. Here is a look at last week’s performance data.
 
Currencies:
 

 
Bond yields:
 

 
Large-cap equities:
 


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Food for Thought

1. Employment growth by new and existing occupations since 1940:
 
Source: Goldman Sachs; @MikeZaccardi  
 
2. Share of web traffic caused by bots:
 
Source: Statista  
 
3. Chewy.com sales:
 
Source: @chartrdaily  
 
4. Top exports by country in the EU:
 
Source: Visual Capitalist   Read full article  
 
5. Mexico’s murder rates decline while disappearances increase:
 
Source: @financialtimes   Read full article  
 
6. The largest armies in the world:
 
Source: Visual Capitalist   Read full article  
 
7. Father’s Day vs. Mother’s Day spending:
 
Source: @TheDailyShot  
 

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