The Daily Shot: 19-Jul-24
• The United States
• The United Kingdom
• The Eurozone
• Japan
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Rates
• Food for Thought
The United States
1. Initial jobless claims surged last week. Is this just noise or a sign of weakness in the labor market?
Source: Reuters Read full article
Continuing claims keep trending higher.
Here is the seasonally adjusted index.
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2. The Conference Board’s index of leading economic indicators fell again last month, but the pace of declines appears to be slowing.
3. The Philly Fed’s regional manufacturing index showed a surprising surge in activity this month.
• Demand accelerated, …
… and so did hiring.
By the way, here is the Philly Fed’s district map (covering PA, DE, and southern NJ).
Source: Federal Reserve Bank of Philadelphia
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4. Here is a look at Goldman’s forecast for CapEx growth.
Source: Goldman Sachs; @MikeZaccardi
• Mega-cap companies plan to boost spending on data centers.
Source: UBS Asset Management
• AI is projected to substantially enhance US productivity growth over the next few decades.
Source: Oxford Economics
• US potential GDP growth increasingly relies on productivity gains.
Source: CBO Read full article
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The United Kingdom
1. Let’s begin with the labor market.
• Wage growth is moderating.
– UK wage growth has been outpacing that of the US and Eurozone, …
Source: Indeed Read full article
… but real wage growth remains subdued.
Source: Nomura Securities
• Unemployment claims have been trending higher.
• Has the unemployment rate stabilized?
– The BoE expects unemployment to keep climbing.
Source: Nomura Securities
• Remote and hybrid work job postings are holding up.
Source: Indeed Read full article
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2. Consumer sentiment inched higher this month.
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The Eurozone
1. The ECB held rates steady as expected, providing little transparency about its plans for September.
Source: Reuters Read full article
– Could we end up with just one more rate cut amid persistently high wage growth?
Source: @economics Read full article
– Pantheon Macroeconomics estimates that wage growth slowed in Q2.
Source: Pantheon Macroeconomics
• The market assigns a high probability to rate reductions in September and December, …
… with a total of 44 basis points of cuts priced in between now and the year-end.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. Euro-area construction output slowed further in May.
3. The post-election rebound in French shares has been tepid.
Source: Capital Economics
• Separately, French nuclear power output has been rebounding.
Source: @DanielKral1, @OxfordEconomics
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Japan
1. Japan’s headline CPI was almost unchanged in June (year-over-year), …
… but core inflation moved higher.
Source: Nikkei Asia Read full article
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2. Foreign purchases of Japanese stocks remain robust, …
… with Japan’s stock market being the top destination for BofA’s private clients.
Source: BofA Global Research
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3. This chart illustrates Japan’s demographic challenge.
Source: BIS Working Papers # 1193
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China
1. China’s weak money supply growth signals soft economic activity ahead.
Source: TS Lombard
2. Public debt levels continue to rise (as a share of GDP), …
Source: Nordea Markets
… amid an elevated budget deficit.
Source: Longview Economics
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3. China continues to lead in electric vehicle ownership.
Source: @ANZ_Research
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Emerging Markets
1. Argentina’s economic activity unexpectedly jumped in May.
Source: @economics Read full article
• The June trade surplus topped expectations.
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2. Malaysia’s exports surged in May.
3. Some EM central banks have paused their easing cycles as the Fed keeps rates steady.
Source: Alpine Macro
4. Here is a look at GDP growth forecasts from Capital Economics.
Source: Capital Economics
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Commodities
Beijing’s absence of a meaningful new stimulus agenda has pushed industrial commodities lower.
Source: @markets Read full article
• Copper:
• Iron ore:
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Energy
1. Crude oil backwardation has been intensifying, indicating a tighter market.
2. Crack spreads have been moving lower.
3. Here is a look at US primary energy production by source.
Source: @EIAgov
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Equities
1. Implied volatility indicators have been rising amid a pullback in prices.
2. Fund flows have been strong, …
Source: BofA Global Research; @MikeZaccardi
… boosted by small caps.
Source: BofA Global Research
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3. Retail investor equity purchases picked up momentum in recent days, driven by ETF buying, …
Source: Vanda Research
… particularly IWM.
Source: Vanda Research
• Retail investors have also been increasing their call option activity.
Source: JP Morgan Research; @GunjanJS
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4. The correlation between the S&P 500 and indices tracking smaller-cap shares has broken down as investors have rotated out of tech mega-caps.
• S&P 500 vs. S&P 500 Equal Weight Index:
• S&P 500 vs. S&P 400 (midcaps):
This breakdown in correlation was detrimental for long/short hedge funds, as both their long and short positions have moved against them.
Source: Goldman Sachs
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5. Semiconductor shares tend to recover quickly after selloffs.
Source: BofA Global Research; @dailychartbook
6. For the small-cap rally to continue, we need to see an improvement in earnings, …
Source: Truist Advisory Services
… which may take some time.
Source: BofA Global Research; @dailychartbook
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7. Foreigners sold $61 billion worth of US shares in May.
8. Homebuilder shares have been outperforming.
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Rates
1. Foreign holdings of Treasury notes and bonds have been rising.
• China’s direct holdings of longer-term Treasuries have been trending lower.
However, these figures don’t include China’s holdings through Euroclear (Belgium) and Clearstream (Luxembourg).
– This chart shows China’s total US asset holdings.
Source: @markets Read full article
• UK holdings of Treasury notes and bonds keep rising.
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2. According to Goldman, Treasury liquidity has been improving.
Source: Goldman Sachs; @MikeZaccardi
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Food for Thought
1. Magnificent 7 share buybacks:
Source: Visual Capitalist Read full article
2. Manhattan real estate cash buyers:
Source: The New York Times Read full article
3. Modern family living arrangements in the US:
Source: @chartrdaily
4. Older Americans saving/paying for grandkids’ college:
Source: Bank of America Institute
5. US green-card applications:
Source: The Economist Read full article
6. Betting market probabilities for the 2024 Democratic presidential nomination:
Source: @TheTerminal, Bloomberg Finance L.P.
7. The most searched-for phobias in the US:
Source: QR Code Generator
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Have a great weekend!
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