Employers have been decreasing their reliance on temporary workers

The Daily Shot: 24-Jul-24
• The United States
• The Eurozone
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought

The United States

1. Let’s begin with the housing market.

• Existing home sales fell significantly below last year’s levels in June, surprising to the downside, and are now down 45% compared to the average of the previous eight years.

– Here are the regional trends (seasonally adjusted).

Source: @TheTerminal, Bloomberg Finance L.P.

– Inventories of existing homes for sale continue to rise, …

… while the median price has reached a record high.

Source: Reuters Read full article

• Redfin’s index of home price appreciation showed slower price gains last month.

Source: Redfin

• Housing market valuations look stretched.

Source: @WSJ Read full article

• An increasing share of homeowners are cutting prices to sell their properties.

Source: Redfin

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2. The Philly Fed’s regional service sector index has slipped back into contraction territory this month as sales weaken, …

… leading businesses to reduce staffing.

• The Richmond Fed’s services report also shows staff reductions.

3. The Richmond Fed’s regional manufacturing index dropped to the lowest level since the 2020 COVID shock as demand softens.

Hiring continues to slow.

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4. US employers have been decreasing their reliance on temporary workers.

Source: Oxford Economics

5. The Phillips Curve is moving back toward its pre-pandemic relationship.

Source: Alpine Macro

6. What should we expect from the Q2 GDP report this week?

• Pantheon Macroeconomics: 2.2% growth (annualized)

Source: Pantheon Macroeconomics

• Oxford Economics: 1.6%

Source: Oxford Economics

• The Atlanta Fed’s GDPNow model: 2.7%

Source: Federal Reserve Bank of Atlanta

Source: @TheTerminal, Bloomberg Finance L.P.

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The Eurozone

1. The German composite PMI fell back into contraction territory this month due to further deterioration in factory activity, while French manufacturing activity also saw an intensified contraction. We will have more details on the PMI report tomorrow.

2. Euro-area consumer sentiment improved again this month.

3. The French economy is expected to receive a boost this quarter from the summer Olympics.

Source: @economics Read full article

4. Forecasters now expect a more shallow ECB rate trajectory.

Source: ECB

5. The European corporate earnings recession is finally ending.

Source: @JeffreyKleintop

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Japan

1. The yen continues to rebound.

Source: Reuters Read full article

Hedge funds were forced into massive yen short covering last week following the BoJ’s intervention.

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2. Factory activity slipped back into contraction territory this month.

Input price increases have been accelerating due to the yen’s weakening.

• On the other hand, the services PMI rebounded sharply.

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3. Corporate profits received a strong boost from a weak yen.

Source: Gavekal Research

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Asia-Pacific

1. Taiwan’s June industrial production was softer than expected.

2. South Korea’s consumer confidence continues to rise.

3. Singapore’s core inflation dipped below 3% in June.

4. New Zealand’s economy has stagnated, underpinning the RBNZ’s dovish tone.

Source: Alpine Macro

5. Australia’s manufacturing PMI remained in contraction territory this month.

Services growth slowed.

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China

1. The Shanghai Property Index is stabilizing as copper approaches initial support.

Source: Aazan Habib, Paradigm Capital

2. Here is China’s credit impulse.

Source: Longview Economics

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Emerging Markets

1. Mexico’s economic activity climbed in May.

2. Global funds have been bullish on Indian stocks.

Source: Chiranjivi Chakraborty Read full article

3. Hungary’s central bank delivered another rate cut.

4. Nigeria’s central bank keeps raising rates to stem inflation, but the pace of increases is slowing.

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Cryptocurrency

1. Here is a recap of the first day of trading for US spot-Ether ETFs.

Source: @JSeyff

Source: CoinDesk Read full article

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2. ETH has underperformed month-to-date.

3. Grayscale simultaneously has the most expensive and cheapest Ethereum-based funds on the market.

Source: @KaikoData

4. ETH near-term implied volatility spiked over the weekend.

Source: @KaikoData

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Commodities

1. So far, industrial metals have seen no relief, with the selloff persisting.

Source: Reuters Read full article

• Copper has been down for eight days in a row.

• Copper often sees a bounce when China’s yield curve stops steepening.

Source: Longview Economics

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2. Sugar futures continue to struggle.

Source: barchart.com Read full article

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3. US egg prices are rising again.

Source: USDA; h/t @MikeZaccardi

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Energy

US crude oil volatility is near multi-year lows, …

… as WTI remains in a wedge pattern. Will we see a breakout?

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Equities

1. Mid- and small-caps continue to outperform, …

… but some strategists are concerned as the rally lacks strong earnings growth support.

Source: MarketWatch Read full article

• Demand for call options on the largest Russell 2000 ETF has been massive, pushing the 3-month skew to multi-year lows.

Source: @TheTerminal, Bloomberg Finance L.P.

• What is the probability of another 10% gain in small caps? Here is the options-implied distribution for the end of September and the end of the year.

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2. How much of the recent (post-CPI report) rally has been driven by short-covering? The most-shorted stocks have been outperforming.

• Meme stocks have also performed well.

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3. Regional banks have outperformed this month.

4. The tech sector dominates in the US, while financials have a greater weight outside of the US.

Source: MRB Partners

5. Hedge funds across most strategies are long the equity market, heightening the risk of downside gaps.

Source: Simon White, Bloomberg Markets Live Blog

6. Both in the US and Europe, mega-cap stocks have been driving index returns in recent years.

Source: Goldman Sachs; @MikeZaccardi

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Credit

1. Ba (BB)-rated bond spreads are at the lowest level in years, pointing to rising risk appetite.

2. Low default rates have allowed spreads to remain tight.

Source: Oxford Economics

3. CLO issuance remains robust this year.

Source: Deutsche Bank Research

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Rates

1. The $69 billion 2-year Treasury note auction saw robust demand.

• Indirect bidders:

• Auction yield vs. expected yield:

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2. Here is a look at the sensitivity of 2-year Treasury yields to inflation and payroll data. (2 charts)

Source: Oxford Economics

Source: Oxford Economics

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3. A declining term premium and market expectations for a rate cut contributed to the recent decline in the 10-year Treasury yield.

Source: Numera Analytics (@NumeraAnalytics)

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Food for Thought

1. Home insurance premiums:

Source: The New York Times Read full article

2. Employment rates for adults 65 and older in the United States:

Source: @axios Read full article

3. Top US industries for remote/hybrid job postings:

Source: Statista

4. Administrative divisions of China in 2024:

Source: The Economist Read full article

5. Warm weather:

Source: @axios Read full article

6. Concerns over political violence among Americans:

Source: @CivicScience Read full article

7. Following specific athletes vs. events in the Paris 2024 Summer Olympics:

Source: @CivicScience Read full article

• Plans to follow specific US athletes:

Source: @CivicScience Read full article

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