What can we expect from the June CPI report on Thursday?

The Daily Shot: 10-Jul-24
The United States
The United Kingdom
Europe
Asia-Pacific
China
Emerging Markets
Commodities
Equities
Credit
Global Developments
Food for Thought



 

The United States

1. The NFIB small business sentiment index improved again in June.
 

 
However, employment indicators softened.
 

 
Small business hiring intentions point to weaker job growth ahead.
 
Source: Pantheon Macroeconomics  
 
Fewer firms plan to raise prices.
 

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2. Small business payroll gains have gradually eased, creating a wide gap with rent payment growth, according to BofA client data.
 
Source: Bank of America Institute  
 
3. Next, we have some updates on the US consumer.
 
Cash levels are no longer declining.
 
Source: Morgan Stanley Research  
 
The cash-to-income ratio is near pre-COVID levels.
 
Source: Morgan Stanley Research  
 
Lowest-income Americans are struggling with debt.
 
Source: Morgan Stanley Research  
 
Households’ non-mortgage interest payments have risen sharply since the Fed started hiking rates.
 
Source: The Economist   Read full article  
 
Consumer sentiment has decoupled from economic indicators.
 
Source: ABC News   Read full article  

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4. US air travel reached a new high this past weekend.
 

 
5. Finally, let’s look at some inflation data.
 
The CPI breadth continues to trend lower.
 
Source: BofA Global Research  
 
Here is Goldman’s inflation tracker.
 
Source: Goldman Sachs; @WallStJesus  
 
Wholesale used car prices continue to fall.
 

 
The increase in owners’ equivalent rent in May was driven by New York City (2 charts).
 
Source: Nomura Securities  
 
Source: BofA Global Research  
 
Morgan Stanley expects housing disinflation to accelerate in the second half.
 
Source: Morgan Stanley Research  
 
What can we expect from the June CPI report on Thursday? Here are some estimates of the core CPI change.
 
Morgan Stanley (0.27%):
 
Source: Morgan Stanley Research  
 
Wells Fargo (0.24%):
 
Source: Wells Fargo Securities  
 
Nomura (0.135%):
 
Source: Nomura Securities  
 
Here is Nomura’s forecast for the supercore CPI.
 
Source: Nomura Securities  


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The United Kingdom

1. Hedge funds have been boosting their bets on the pound.
 

 
2. UK voters have demanded more spending on social stability and have expressed growing concern about spending on overseas aid.
 
Source: BCA Research  


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Europe

1. Eurozone retail sales edged higher in May.
 

 
2. Sweden’s private sector output (services and manufacturing) increased in May, …
 

 
… but household consumption continues to deteriorate.
 

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3. Norway’s industrial production has been holding up well.
 

 
4. The Czech Republic’s industrial production declined sharply, reflecting the weakness seen in Germany.
 

 
5. Swiss core inflation in June surprised to the downside.
 

 
6. Here is a look at selected sector PMI trends in Europe.
 
Source: S&P Global PMI  
 
7. In 2023, wind energy surpassed gas generation to become the EU’s second-largest source of electricity.
 
Source: @EmberClimate   Read full article  


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Asia-Pacific

1. The euro-yen exchange rate reached a multi-decade high. The second panel displays economists’ forecasts for EUR/JPY at the end of the year.
 

 
2. Taiwan’s exports climbed last month, boosted by semiconductor sales.
 

 
The TSMC share price has been surging.
 

 
Source: Reuters   Read full article  
 
Source: @technology   Read full article  

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3. South Korea’s unemployment rate remains low.
 

 
South Korea is leading in granting AI patents relative to other countries.
 
Source: Deutsche Bank Research  

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4. New Zealand’s central bank left rates unchanged but struck a dovish tone.
 
Source: @WSJ   Read full article  
 
Expectations for rate cuts surged, …
 

 
… sending the Kiwi dollar and bond yields lower (4 charts).
 

 

 

 

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5. Australia’s consumer sentiment remains depressed.
 

 
But business confidence improved last month.
 


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China

1. Disinflationary pressures persist as the June CPI report surprised to the downside.
 

 
Source: Reuters   Read full article  
 
Core CPI:
 

 
Goods CPI:
 

 
Services CPI:
 

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2. Services led with stronger revenues versus last year while manufacturing decelerated.
 
Source: China Beige Book  
 
“Revenge spending” on travel, hospitality, and restaurants is improving.
 
Source: China Beige Book  
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Emerging Markets

1. Mexico’s headline inflation climbed last month, but core inflation continues to ease.
 

 

 
Source: @economics   Read full article  
 
Mexican consumer sentiment remains very strong.
 

 
Vehicle exports eased last month.
 

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2. India’s small caps have been outperforming.
 

 
3. Hungarian industrial production continues to deteriorate, mirroring Germany.
 

 
4. Here is an overview of GDP per capita growth among BRICS countries.
 
Source: Codera Analytics  


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Commodities

1. Robusta coffee prices hit a record high as supplies tighten due to a slowdown in shipments from Vietnam.
 

 
Here are the Arabica coffee futures in New York.
 

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2. Cocoa demand is slowing after massive price increases this year.
 
Source: @markets   Read full article  
 
3. US lumber prices continue to sink due to a softer housing market and increased output in Canada.
 

 
Source: @Lesprom   Read full article  
 
Source: @Lesprom   Read full article  

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4. The rebound in nickel prices has faded.
 


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Equities

1. The S&P 500 and Nasdaq 100 continue to hit record highs, …
 

 

 
… driven by tech megacaps.
 

 
However, the average S&P 500 stock has not hit a record high since March.
 

 
The Russell 2,000 Index (small-caps) has gone 667 days without a new all-time high, the longest streak since the financial crisis.
 

 
Source: @Todd_Sohn  

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2. The S&P 500 has diverged from market breadth, as measured by the advance-decline line.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. What kind of market reaction could we expect from the June CPI report this Thursday? Here are some scenarios from JP Morgan.
 
Source: JP Morgan Research; @markets   Read full article  
 
Below is the implied volatility curve.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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4. Growth stocks continue to outperform value.
 

 
5. The put-call ratio shows increased complacency in the market.
 

 
6. Weaker liquidity conditions could become a drag on share prices.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
7. Exchange rates were a drag on the S&P 500 sales in Q2 (2 charts).
 
Source: BofA Global Research; @MikeZaccardi  
 
Source: BofA Global Research; @MikeZaccardi  

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8. Regional banks continue to widen their underperformance.
 

 
9. Tech valuations haven’t been this high since the dot-com era.
 

 
10. Realized volatility continues to sink (2 charts).
 

 

 
11. Return dispersion has diverged from correlation among US stocks.
 
Source: Chris Murphy, Susquehanna International Group  


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Credit

1. US bankruptcy filings accelerated this year.
 
Source: S&P Global Market Intelligence  
 
2. Here is a look at US high-yield bond and leveraged loan issuance by quarter.
 
Source: @TheTerminal, Bloomberg Finance L.P.   Read full article  
 
3. This chart shows the US public credit market growth.
 
Source: Torsten Slok, Apollo  


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Global Developments

1. The chart below shows the daily transit trade volume through the Cape of Good Hope and the Suez Canal.
 
Source: Torsten Slok, Apollo  
 
2. The world’s growth engine (China) is sputtering as India and major DM countries improve.
 
Source: BCA Research  
 
3. Here is a look at trade as a percentage of GDP.
 
Source: Foreign Affairs   Read full article  


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Food for Thought

1. Millions of Texas residents remain without power after Hurricane Beryl.
 
Source: @PowerOutage_us  
 
Source: @WSJ   Read full article  
 
2024 hurricane season predictions:
 
Source: Statista  

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2. A warm June:
 
Source: Reuters   Read full article  
 
3. Lifetime earnings distribution in the US by age:
 
Source: Federal Reserve Bank of St. Louis   Read full article  
 
4. Median income by state:
 
Source: Visual Capitalist   Read full article  
 
5. States with the most students studying abroad:
 
Source: Miss Tourist  
 
6. Average age at first marriage in the US:
 
Source: Forbes Advisor   Read full article  
 
7. Preferred initial meeting scenarios for romantic relationships among Gen Z and Millennials:
 
Source: Eventbrite  
 

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