The Daily Shot: 08-Jul-24
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• Asia-Pacific
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. While the June headline payrolls figure exceeded expectations, …
… private sector job gains were much softer than anticipated.
– Here are the contributions to US job gains.
Source: @TheTerminal, Bloomberg Finance L.P.
– Job gains were relatively broad last month.
– Employment changes in the Household Survey were positive last month, but they are still lagging behind the official figures.
• The unemployment rate is back above 4%, …
… and is nearing the natural rate of unemployment.
• Prime-age labor force participation continues to rise.
Source: @TheTerminal, Bloomberg Finance L.P.
• Wage growth has been trending lower.
We will have more updates on the US jobs report tomorrow.
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2. The ISM Services PMI dipped back into contraction territory in June, …
… as demand deteriorated.
• The employment index was well below forecasts.
– ISM weakness could point to a pickup in cyclical unemployment.
Source: Numera Analytics (@NumeraAnalytics)
• The ISM index has diverged from a similar US indicator from S&P Global.
Source: @TheTerminal, Bloomberg Finance L.P.
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3. Softer employment and services PMI data sent Treasury yields sharply lower.
However, the recent curve steepening has not subsided.
• The market is pricing two Fed rate cuts by the end of the year, …
… likely in September and December.
Here is the evolution of market-based probabilities for the Fed’s target rate by the end of the year (based on the CME model).
• Will the Fed’s rate-cutting cycle be more aggressive than anticipated beyond this year?
Source: Fortune Read full article
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4. Here is a look at US PMI measures by sector from S&P Global.
Source: S&P Global PMI
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Canada
1. Canada’s employment unexpectedly declined last month.
• The unemployment rate continues to climb, …
… while the participation rate ticked lower.
• Wage growth remains strong.
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2. Rate cut expectations have been rising, with July, September, and October now in play.
Source: Reuters Read full article
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3. The trade gap was wider than expected in May.
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The United Kingdom
1. The UK has a new government.
Source: Reuters Read full article
The pound has been rallying as election uncertainty ends.
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2. Construction activity slowed but remained in growth mode last month.
3. The June composite PMI was revised higher.
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The Eurozone
1. French elections took a surprising turn.
Source: AP News Read full article
Source: Nomura Securities
French bond and CDS spreads tightened further.
However, the euro is lower.
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2. Germany’s industrial slump persists.
• Factory orders:
• Industrial production:
Source: @economics Read full article
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3. Service sector activity in Italy and Spain continues to grow.
4. Euro-area construction activity remains in recession.
Source: S&P Global PMI
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Japan
1. Real wage growth remains negative.
2. Household spending unexpectedly declined on a year-over-year basis.
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Asia-Pacific
1. Taiwan’s inflation is holding below 2%.
2. Australia’s trade surplus was smaller than expected in May.
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Emerging Markets
1. Brazil’s industrial production declined again in May.
• Brazil’s terms of trade have worsened alongside the significant BRL depreciation.
Source: Numera Analytics (@NumeraAnalytics)
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2. Argentina’s factory output continues to deteriorate.
3. Romania’s central bank finally delivered a rate cut.
4. South Africa’s inflation expectations have been easing.
5. Next, we have some performance data from last week.
• Currencies:
• Bond yields:
• Equity ETFs:
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Cryptocurrency
1. Bitcoin is now firmly below its 200-day moving average …
Source: @TheTerminal, Bloomberg Finance L.P.
… and is testing initial support at its 40-week moving average, although it is not yet oversold.
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2. Cryptos are off to a tough start this month, although bitcoin has outperformed top peers.
Source: FinViz
3. The Crypto Fear & Greed Index extended further into “fear” territory over the past week.
Source: Alternative.me
Source: CoinDesk Read full article
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Commodities
Here is a look at last week’s performance.
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Energy
1. Saudi crude oil exports slumped last month.
Source: Bloomberg Tanker Tracker Read full article
2. US natural gas futures have been under pressure, …
… despite robust LNG exports.
Source: BloombergNEF Read full article
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Equities
1. Sentiment remains very bullish.
• US households and advisors are heavily allocated to stocks.
Source: MarketDesk Research
Source: MarketDesk Research
Source: NAAIM
• Put/call ratio:
• Short-term implied vol:
Source: BofA Global Research; @MikeZaccardi
By the way, households’ heavy allocations to equities don’t bode well for long-term performance.
Source: @WillieDelwiche
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2. The underperformance of the equal-weight index has reached extreme levels. The S&P 500 no longer accurately represents the broad performance of US large-cap stocks.
Source: Source: Sébastien Page; T.Rowe Price
Large return gaps between US market cap vs. equal weight typically lead to underperformance of the former over the next three years.
Source: MarketDesk Research
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3. US market 52-week lows have been outnumbering 52-week highs.
4. Here is a look at the year-to-date performance by factor.
Source: Barclays Research; @WallStJesus
5. July is a big month for yearly preannouncements.
Source: Goldman Sachs; @WallStJesus
6. This chart shows sector capitalization and net income contributions to the S&P 500.
Source: Goldman Sachs; @MikeZaccardi
7. Finally, we have some performance data from last week.
• Sectors:
• Factors/styles:
• Macro basket pairs’ relative performance:
• Thematic ETFs:
• Largest US tech firms:
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Credit
1. Middle market unitranche deal yields continue to trend lower.
Source: VRC
2. Here is last week’s performance across credit markets.
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Global Developments
1. Here is a look at regional trade agreements over time.
Source: The Economist Read full article
2. Next, we have some performance data from last week.
• Currencies:
• Bond yields:
• Large-cap equities:
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Food for Thought
1. Aramco’s oil reserves in perspective:
Source: Visual Capitalist Read full article
2. Global electric car registrations by region:
Source: @financialtimes Read full article
3. US regional population distribution over time:
Source: EPI Read full article
4. CFA Level-I pass rate:
Source: @markets Read full article
5. Global high-impact scientific papers by region and discipline:
Source: The Economist Read full article
6. Inflation-adjusted hospital charges for pregnancy and childbirth procedures in the US:
Source: USAFacts
7. States with the highest employment rate for music industry professionals:
Source: Casino Alpha, US Bureau of Labor Statistics Read full article
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