Consumers are bearish on business conditions but bullish on stocks

The Daily Shot: 26-Jun-24
The United States
Canada
The Eurozone
Europe
Japan
Australia
China
Emerging Markets
Cryptocurrency
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. The Conference Board’s consumer confidence indicator edged lower this month.
 

 
The spread between expectations and current conditions remains in recession territory.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Consumers are not optimistic about growth in job opportunities, …
 

 
… but the labor differential index moved up.
 

 
Very few consumers anticipate better business conditions ahead, yet they are increasingly bullish on stocks (see the equities section).
 

 
Source: @economics   Read full article  

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2. The Philly Fed’s regional non-manufacturing index is back in positive territory, …
 

 
… as demand picks up.
 

 
Price pressures continue to moderate.
 

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3. The Richmond Fed’s manufacturing index showed factory demand deteriorating this month.
 

 
4. Home prices continued to climb across the largest metro areas in April.
 

 
Source: @WSJ   Read full article  
 
Nationally, home price increases have slowed.
 

 
Here is the house price index from the Federal Housing Finance Agency.
 

 
The gap between home price gains and wage increases continues to widen.
 

 
The rise in real estate prices has boosted household asset/liability ratios, particularly among Boomers.
 
Source: TS Lombard  

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5. Real bank deposits have deteriorated for those at the bottom end of the income distribution.
 
Source: BCA Research  


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Canada

1. The May CPI report surprised to the upside.
 

 
Core inflation measures all moved higher.
 

 
Rent inflation continues to surge.
 

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2. The hot CPI report sent the market-implied probability of a BoC rate cut next month plummeting.
 

 
Source: Reuters   Read full article  
 
Bond yields jumped.
 

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3. Speculative accounts have never been this bearish on the loonie. Could hotter inflation result in a short squeeze?
 


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The Eurozone

1. Generally, risks surrounding monetary policy, inflation, and geopolitics remain elevated but have abated relative to other advanced economies.
 
Source: ECB  
 
2. The euro area general government budget balance is expected to improve moderately (2 charts).
 
Source: ECB  
 
Source: @DanielKral1, @OxfordEconomics  

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3. The French Far Right performed best among disaffected voters in the EU parliament elections.
 
Source: Reuters   Read full article  


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Europe

1. Economists now expect only one Norges Bank rate cut before the end of the year (from 4.5%).
 

 
2. Economists are increasingly upbeat on Sweden’s growth this year.
 

 
3. Here is a look at Google search activity on conflicts, cost of living, environment, and retirement.
 
Source: The Economist   Read full article  


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Japan

1. Dollar-yen continues to trade near 160, …
 

 
… but intervention is unlikely until the US PCE inflation report this Friday.
 
Source: @markets   Read full article  
 
Institutional investors are heavily short on the yen, which could lead to a rapid rebound in case of intervention.
 

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2. Traders have been increasing leverage in their bets on Japanese stocks.
 
Source: @markets   Read full article  


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Australia

1. Similar to Canada, Australia’s May CPI report surprised to the upside.
 

 
However, the “supercore” CPI edged lower (on a year-over-year basis).
 

 
2. Nonetheless, the market put the possibility of an RBA rate hike back on the table.
 
Source: The Guardian   Read full article  
 

 
The Aussie dollar edged higher …
 

 
… and bond yields jumped.
 

 


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China

1. Economists have been upgrading their estimates for China’s GDP growth this year.
 

 
2. Converts issuance has stalled.
 
Source: Bloomberg Law   Read full article  
 
3. China faces overcapacity in new energy vehicles.
 
Source: ING  


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Emerging Markets

1. India’s yield curve has been flat this year.
 

 
2. South Africa’s employment contracted again last quarter.
 

 
3. Ukraine’s Q1 GDP growth topped expectations.
 

 
4. Which currencies are most vulnerable to US dollar strength?
 
Source: TS Lombard  


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Cryptocurrency

1. Similar to equities, Bitcoin’s price rallies have responded to dovish Fed pivots.
 
Source: Stifel  
 
2. By some measures, Bitcoin’s latest rally may have marked a cyclical peak.
 
Source: Stifel  
 
3. Here is a look at select crypto fund performance so far this month.
 
Source: Nilsson Hedge   Read full article  


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Energy

1. China’s LNG demand continues to rise.
 
Source: Bloomberg Law   Read full article  
 
2. The US and Qatar are driving growth in global LNG supply.
 
Source: Lujia Cao, BloombergNEF   Read full article  
 
3. Russia increasingly relies on its shadow fleet of tankers to move crude oil.
 
Source: @markets   Read full article  
 
4. Uranium prices have been moving lower.
 

 
Here is a look at construction costs and reactor numbers during the three decades of nuclear power drought in the US.
 
Source: MacroPolo   Read full article  
 
This chart shows nuclear power plant costs vs. coal plant costs in select countries.
 
Source: MacroPolo   Read full article  


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Equities

1. US households are increasingly bullish on stocks, despite their growing pessimism about future business conditions (see the US section).
 

 
Source: @KevRGordon, @NDR_Research  

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2. The free cash flow yield of the S&P 500 tech sector has been declining over the past decade.
 
h/t @KevRGordon  
 
3. US companies that focus on onshoring or primarily depend on domestic production have significantly outperformed those that rely on international supply chains or have a substantial international manufacturing footprint.
 

 
4. Here is a look at the percentage of time US bull markets were in overbought territory.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
5. Hedge funds are seeing outflows.
 
Source: BofA Global Research; @dailychartbook  
 
6. The US market looks expensive on a price-to-book basis relative to the rest of the world.
 
Source: @TaviCosta  
 
Forward earnings are improving in non-US markets
 
Source: MRB Partners  

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7. Transportation stocks continue to lag.
 

 
8. Shares of US regional banks are still struggling.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The largest financials ETF has been seeing robust inflows.
 
Source: Chris Murphy, Susquehanna International Group  

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9. The VIX futures curve continues to reflect election risks, including concerns about a hung or contested outcome.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
However, the volatility skew still shows bullish sentiment.
 
Source: Goldman Sachs; @Yankees, @WallStJesus  


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Credit

1. US small and large-bank lending growth has slowed.
 
Source: Torsten Slok, Apollo  
 
2. US corporate liquidations are declining while reorganizations are rising.
 
Source: Torsten Slok, Apollo  


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Rates

1. Someone is placing significant bets on 200 to 300 basis points of Fed rate cuts by next spring, as indicated by the call activity in March SOFR futures.
 
Source: @markets   Read full article  
 
2. This chart shows the relationship between the federal budget deficit and Treasuries outstanding.
 
Source: Yardeni Research  


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Global Developments

1. Here is Wells Fargo’s forecast for policy rates in advanced economies.
 
Source: Wells Fargo Securities  
 
2. How correlated are inflation measures across advanced economies to that of the US?
 
Source: Simon White, Bloomberg Markets Live Blog  


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Food for Thought

1. Addressing excess office capacity:
 
Source: J.P. Morgan Asset Management  
 
2. Share of renters spending over 40 percent of disposable income on rent in selected countries:
 
Source: The Economist   Read full article  
 
3. States with the highest rates of traumatic brain injury:
 
Source: Zinda Law Group, CDC  
 
4. Trends in democratic stability from 1900 to 2023:
 
Source: Our World in Data  
 
5. US election-related topic searches over time:
 
Source: AP News   Read full article  
 
6. Busy tornado season:
 
Source: @axios   Read full article  
 
7. Evolution of Google’s logo:
 
Source: Webflow   Read full article  

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