A new low in buying conditions for houses

The Daily Shot: 19-Jun-24
• The United States
• The Eurozone
• Japan
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought

The United States

1. US retail sales growth was well below forecasts in May.

Source: @economics Read full article

• Weak housing market activity is taking a toll on spending.

Source: @GregDaco

– Vehicle sales were higher.

– Restaurant spending declined.

• Here is a look at real retail sales.

Source: @GregDaco

– “Core” retail sales (Control Group) continue to trend higher when adjusted for inflation.

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2. Last month, manufacturing output exceeded forecasts, rebounding after two consecutive months of declines.

Here is the manufacturing capacity utilization rate.

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3. This month, the University of Michigan’s survey recorded a new low in buying conditions for houses, …

… amid depressed affordability.

Source: @TheTerminal, Bloomberg Finance L.P.

However, households are upbeat on house prices over the next five years.

• Home equity has risen in recent years, which could keep savings rates low. (2 charts)

Source: SOM Macro Strategies

Source: SOM Macro Strategies

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4. This diagram bridges nominal and real hourly earnings.

Source: Arcano Economics

5. There has been a rise in middle-aged Americans behind on their rent payments. (2 charts)

Source: Quill Intelligence

Source: Quill Intelligence

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6. A majority of investors do not expect a US recession over the next 18 months.

Source: BofA Global Research

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The Eurozone

1. The increases in Germany’s ZEW measure of expected economic growth stalled this month.

The same index at the Eurozone level continues to climb.

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2. Next, we turn to France, where recent political uncertainties have heightened concerns regarding the nation’s fiscal health.

• Relative to its euro-area counterparts, France’s debt-to-GDP ratio has increased more rapidly over the past three decades. The accompanying chart includes forecasts from the IMF.

Source: @TheTerminal, Bloomberg Finance L.P.

The trend continued over the past five years.

Source: Simon White, Bloomberg Markets Live Blog

• The French 10-year sovereign yield now exceeds that of its Portuguese counterpart.

Here is the spread to Spain’s bond.

• French financial stocks have been under pressure relative to European peers.

• It should be noted that under Emmanuel Macron’s leadership, France has achieved lower inflation, stronger employment growth, and reduced poverty rates compared to many of its EU counterparts.

Source: @DanielKral1, @OxfordEconomics

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3. Economists have been lowering their 2024 growth forecasts for Ireland, …

… and boosting estimates for Portugal.

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4. Here is a look at the drivers of the euro-area CPI (year-over-year).

Source: @TheTerminal, Bloomberg Finance L.P.

5. Investors have been rotating into euro-area stocks this month.

Source: BofA Global Research

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Japan

1. The trade deficit was narrower than expected, …

… as exports jumped.

Source: @markets Read full article

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2. The number of shareholder proposals has increased in recent years.

Source: Torsten Slok, Apollo

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China

1. Hong Kong stocks are rebounding, but mainland shares continue to drift lower.

Source: @TheTerminal, Bloomberg Finance L.P.

2. Business sector output momentum has been soft.

Source: Gavekal Research

3. China’s overall R&D expenditure has surpassed Japan and Europe and is on par with the US.

Source: BCA Research

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Emerging Markets

1. The Brazilian real continues to sink relative to the US dollar.

2. Chile’s central bank slowed the pace of rate cuts.

Source: @economics Read full article

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3. Argentina’s government budget surplus hit a record high last month. Based on the blue-chip (unofficial) exchange rate, the surplus was USD 1.84 billion.

4. Colombia’s economic growth accelerated in April.

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5. India’s opposition parties performed surprisingly well in the latest election.

Source: The Economist Read full article

6. The Philippine trade deficit widened sharply in April.

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Commodities

1. Aluminum has been reversing the recent rally as industrial metals weaken.

• This chart show the year-to-date performance for industrial metals.

Source: ING

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2. Gold tends to be a good inflation hedge only when inflation is very high.

Source: Goldman Sachs; @MikeZaccardi

3. Silver is holding support at the 50-day moving average.

4. US soft red winter wheat futures dipped below $6 per bushel.

Source: VettaFi ETF Trends Read full article

• Soybeans have been under pressure as well.

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Energy

1. Brent crude is testing resistance at $85/bbl.

Source: @TheTerminal, Bloomberg Finance L.P.

2. Energy tends to be the best inflation hedge.

Source: Goldman Sachs; @MikeZaccardi

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Equities

1. US indices look overbought. Are we due for a pullback?

• The sharp rebound in the S&P 500 over the past year appears stretched …

Source: MRB Partners

… and the rally has been increasingly narrow.

Source: PGM Global

– The top-weighted S&P 500 stocks continue to make new highs while the majority of constituents are losing upside momentum.

Source: Aazan Habib, Paradigm Capital

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2. The US growth premium vs. G10 peers widened during the recent hiking cycle. Numera Analytics expects this premium to narrow next year, …

Source: Numera Analytics (@NumeraAnalytics)

… which could reduce the appeal of US stocks vs. DM stocks.

Source: MRB Partners

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3. The S&P 500 dividend yield continues to decline.

Here is the implied dividend yield compared to other markets.

Source: Goldman Sachs; @MikeZaccardi

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4. The implied correlation among large-cap stocks keeps sinking.

5. Investors are less concerned about companies improving their balance sheets and would like to see more cash returned as well as CapEx spending.

Source: BofA Global Research

6. Foreign investors bought $67.6 billion worth of US shares in April.

• Foreign investors are increasingly favoring US equities over other US financial assets.

Source: @Callum_Thomas, @topdowncharts

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7. Here is a look at the year-end forecasts for the S&P 500 (currently at 5,487).

Source: Yahoo Finance Read full article

8. NVIDIA’s market capitalization has surpassed that of both the UK and France.

Source: @DavidInglesTV

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Credit

1. The bulk of European refinancing requirements will be in the investment-grade space, mostly in the B and BB-rated bonds. According to PGM Global, a fast pace of rate cuts could ease refinancing pressure since roughly half of speculative-grade debt has a floating rate.

Source: PGM Global

2. Commercial real estate is still seen as the most likely source of a systemic credit event.

Source: BofA Global Research

By the way, this chart shows US office leasing activity.

Source: J.P. Morgan Asset Management

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Rates

1. Foreign investors and governments continue to buy US coupon Treasuries, with $75 billion purchased in April.

2. Treasury term premium has been moving lower.

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Food for Thought

1. Performance of “Tesla killer” EV companies compared to their all-time highs:

Source: @Marlin_Capital

2. Planned changes in social media usage among PR professionals, by platform:

Source: @axios Read full article

3. Declining birth rates:

Source: Visual Capitalist Read full article

4. 2024 has been a warm year so far.

Source: @axios Read full article

5. Perceptions of Indian identity among different religious groups:

Source: Pew Research Center Read full article

6. AI tool usage:

Source: Statista

7. Juneteenth celebration plans:

Source: @CivicScience Read full article

• Support for including Juneteenth in public school history curriculums:

Source: YouGov Read full article

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