The Daily Shot: 17-Jul-24
• The United States
• Canada
• The Eurozone
• Europe
• Asia-Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Alternatives
• Rates
• Global Developments
• Food for Thought
The United States
1. June retail sales were flat month-over-month, …
… dragged down by weak vehicle sales. The decline was due to a two-week cyberattack on car dealer software company CDK, which caused widespread outages at car dealerships.
Source: Quartz Read full article
The decline in the value of gasoline sales was also a drag on retail sales.
However, the core measures of retail sales topped expectations.
Source: Reuters Read full article
• Online retail sales increased again.
• Sales of building materials rebounded.
• Below are the changes in last month’s retail sales by sector.
– Nominal:
Source: @GregDaco
– Real:
Source: @GregDaco
• Finally, here are the trends in nominal and real retail sales.
– Headline:
– Core:
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2. The Atlanta Fed’s GDPNow Q2 growth estimate climbed to 2.5% (annualized) in response to the retail sales report (2 charts).
Source: Federal Reserve Bank of Atlanta
Source: @TheTerminal, Bloomberg Finance L.P.
Goldman’s GDP tracker was adjusted higher as well.
Source: Goldman Sachs; @MikeZaccardi
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3. Despite the upside surprise in retail sales, Treasury yields declined again.
Short-term market-based inflation expectations eased further.
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4. Homebuilder sentiment edged lower this month, …
… with prospective buyer traffic slowing further.
There was a modest improvement in home sales expectations.
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5. Import prices unexpectedly increased in June.
6. Nearly $500 billion of the Bipartisan Infrastructure Law (BIL) remains unspent.
Source: UBS Asset Management
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Canada
1. Inflation continues to trend lower.
Here are the core CPI measures.
• Trimmed mean CPI:
• Median CPI:
• CPI ex food and energy:
Services inflation remains elevated (2 charts).
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2. The CPI report further boosted the probability of a BoC rate cut this month, …
Source: Reuters Read full article
… with another reduction in rates coming in September.
Bond yields declined.
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3. Existing home sales increased in June.
• But housing starts disappointed.
Source: Reuters Read full article
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The Eurozone
1. Credit conditions eased further in the second quarter.
• Credit standards on business loans:
Source: ECB
– by company size:
Source: ECB
– by sector:
Source: ECB
• Mortgages:
Source: ECB
• Consumer credit:
Source: ECB
• Here is the share of banks reporting an increase in household loan application rejections.
Source: ECB
Loan demand has been stabilizing.
• Business loans:
Source: ECB
• Consumer loans:
Source: ECB
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2. Germany’s ZEW expectations of economic growth declined this month.
Source: Reuters Read full article
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3. The euro-area May trade surplus was lower than expected.
Source: RTT News Read full article
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4. Global fund managers reduced their exposure to Eurozone stocks this month.
Source: BofA Global Research
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Europe
1. Poland’s core inflation continues to ease.
• The nation’s exports surprised to the downside.
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2. How much have European economies expanded since the start of the pandemic?
Source: Arcano Economics
3. Here is a look at college education attainment in Europe for ages 25-34.
Source: Eurostat Read full article
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Asia-Pacific
1. Japan’s service sector activity edged lower in May.
2. New Zealand’s second-quarter CPI report was softer than expected.
Source: @WSJ Read full article
• Bond yields have been falling.
• Separately, New Zealand’s house sales hit a multi-year low last month.
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3. Australia’s small business growth stalled in June.
Source: S&P Global PMI
• Australian real retail sales are back to the pre-COVID trend.
Source: Capital Economics
• Here is a look at China’s imports from Australia.
Source: The Economist Read full article
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China
1. The 2-year yield continues to sink.
2. The Chinese yuan is undergoing a larger depreciation in real terms and is far below its long-term trend.
Source: Schroders
3. Forward earnings estimates for China’s large-cap firms have been trending lower.
Source: Longview Economics
4. Fixed asset investment (mostly related to real estate) has flat-lined despite the growth in industrial production and retail sales. (2 charts)
Source: Schroders
Source: Schroders
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5. China’s tech industries are expected to contribute 23% to GDP by 2026, filling the gap from the property sector.
Source: @economics Read full article
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Emerging Markets
1. The earlier sell-off in Brazilian equities reflected capital outflows, driven by currency depreciation and weak sentiment rather than a drop in fundamentals.
Source: Numera Analytics (@NumeraAnalytics)
– The Bovespa Index held long-term support with improving momentum.
• USD/BRL continues to consolidate after breaking above a multi-year downtrend.
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2. Here is a look at equity market returns since the end of 2020.
Source: Capital Economics
• This chart displays the projected equity returns from Capital Economics.
Source: Capital Economics
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Commodities
1. Gold prices hit a record high.
Source: Reuters Read full article
• Shares of gold miners have been outperforming gold this month.
• India’s gold demand remains robust.
Source: @ANZ_Research
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2. Next, we have the leading global producers of key commodities.
Source: Capital Economics
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Energy
1. Crude oil prices are softer, with Brent testing support at the 200-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
Source: Reuters Read full article
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2. Global demand for jet fuel has been strong.
Source: David Doherty, @BloombergNEF Read full article
3. Rising incomes and adaptations for non-fossil-fuel energy will drive global oil demand.
Source: Goldman Sachs
• What is the impact of electric vehicle adoption rates?
Source: Goldman Sachs
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Equities
1. The recent small-cap outperformance has been remarkable, …
– Russell 2000 vs. the S&P 500:
– Russell 2000 vs. the Nasdaq 100:
… boosted by sharp declines in Treasury yields.
Source: @TheTerminal, Bloomberg Finance L.P.
– Small caps are much more sensitive to Treasury yields than large caps, especially tech.
• IWM, the largest Russell 2000 ETF, continues to experience robust inflows.
• The Russell 2000 breadth hasn’t been this high since 2021.
• IWM call option volume hit another record high.
– The 3-month, 25-delta call option implied volatility hasn’t been this high relative to puts in years.
Source: @TheTerminal, Bloomberg Finance L.P.
– What is the probability of another 10% gain for the Russell 2000 by the end of September? Here is the options-based probability.
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2. The S&P 600 small-cap index now looks very overbought.
The Dow is also in overbought territory.
Both of the above indices got a boost from surging bank shares.
Source: @TheTerminal, Bloomberg Finance L.P.
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3. US shares continue to widen their outperformance vs. international peers.
4. Positioning in US mega-cap growth/tech appears stretched. Weaker earnings growth relative to the overall market could trigger a rotation away from existing market leaders.
Source: Deutsche Bank Research
5. A warning from the credit markets? The single-B/CCC divergence hasn’t been this wide since the dot-com bubble.
Source: BofA Global Research; @dailychartbook
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Alternatives
1. The US venture capital market has likely bottomed out, according to PitchBook.
Source: PitchBook
• VC valuations are starting to recover.
Source: Carta
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2. The rise in AI foundation model funding has continued this year.
Source: PitchBook
3. PE investment in US IT service companies has cooled.
Source: PitchBook
4. US startup M&A activity is starting to improve.
Source: Carta
5. More private capital infrastructure investors are targeting emerging markets and APAC over the next 12 months.
Source: Torsten Slok, Apollo
6. PE fundraising remains weak in North America, although Europe is starting to recover.
Source: Torsten Slok, Apollo
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Rates
1. Speculative accounts have been positioned for a flatter/more inverted curve, fueling the recent steepening.
Source: Simon White, Bloomberg Markets Live Blog
2. Here is a look at market expectations for the evolution of the Treasury curve.
Source: @TheTerminal, Bloomberg Finance L.P.
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Global Developments
1. Geopolitical conflict is now seen as the biggest tail risk, replacing inflation.
Source: BofA Global Research
2. Here is a look at housing valuations in select cities.
Source: Torsten Slok, Apollo
3. Next, we have the IMF’s estimate of 2024 GDP growth among the G7 economies.
Source: @axios Read full article
4. Secondary watch market prices continue to sink due to weak demand from China.
Source: WatchEnthusiasts LLC
Source: @markets Read full article
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Food for Thought
1. US office visits (2 charts):
Source: Placer.ai
Source: Placer.ai
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2. US population growth projections:
Source: CBO
3. Projected changes in global working-age populations (2015-2050):
Source: BofA Global Research
4. Top 10 US states and top 10 countries with the highest incarceration rates:
Source: Prison Policy Initiative Read full article
5. Democrats’ approval of alternative candidates for the 2024 presidential election:
Source: Statista
6. The Happiness Score across the United States in 2024:
Source: World Population Review
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