Jobless claims are on the rise

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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