US economic growth strengthened last quarter

The Daily Shot: 26-Jul-24
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought

The United States

1. The GDP expanded by 2.8% last quarter, topping expectations.

Source: @WSJ Read full article

• Consumer spending and business investment strengthened.

• Inventory building also contributed to GDP growth.

• After three consecutive quarters of gains, housing investment declined.

• Net exports also weighed on GDP growth as imports increased.

Growth in real final sales to private domestic purchasers (“core” GDP) was roughly in line with the first quarter.

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2. The core PCE inflation was stronger than expected last quarter.

3. Durable goods orders tumbled last month, …

… driven by declines in aircraft sales …

… amid ongoing challenges at Boeing.

Source: MarketWatch Read full article

• Excluding transportation, durable goods orders exceeded forecasts.

• Capital goods orders rebounded, …

… but remain in a downward trend on a real basis.

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4. Initial jobless claims eased last week but remain elevated compared to recent years.

This chart shows continuing jobless claims.

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5. The Kansas City Fed’s regional manufacturing index hit the lowest level since the COVID shock as demand weakened.

Factories are cutting back on staffing levels.

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Canada

1. The CFIB medium/small-business indicator continues to signal improving performance, …

… with all sectors and provinces in growth territory (> 50).

• Price and wage plan indicators edged higher.

Source: CFIB

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2. Canadian companies tied to discretionary consumer spending report declining sales indicators.

Source: BoC

3. Unemployment has been rising more than the US and UK.

Source: RBC Economics

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The United Kingdom

1. Industrial orders softened this month, according to the CBI survey.

• Business optimism declined.

• Very few firms plan to raise prices.

• Companies expect stronger output in the next three months.

Source: Reuters Read full article

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2. The Citi UK Economic Surprise Index is significantly higher than its US counterpart.

Source: @TheTerminal, Bloomberg Finance L.P.

3. One year between the last BoE rate hike and its first cut is not unusual.

Source: Nomura Securities

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The Eurozone

1. Germany’s business outlook unexpectedly fell this month, according to the Ifo report.

Source: ifo Institute

2. French business sentiment tumbled amid political uncertainty.

Source: @economics Read full article

• French bond spreads remain elevated.

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3. The weak PMI report sent the Citi Economic Surprise Index tumbling.

Source: @TheTerminal, Bloomberg Finance L.P.

• Here is Bloomberg’s Q2 growth nowcast index (below 0.2%).

• Are the PMI indicators too pessimistic?

Source: Pantheon Macroeconomics

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4. The broad money supply is rebounding.

But loan growth remains tepid.

Source: RTT News Read full article

This chart shows the private sector credit flows.

Source: @DanielKral1

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5. European companies exposed to China have been underperforming.

Source: @TheTerminal, Bloomberg Finance L.P.

Source: @markets Read full article

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Japan

1. Tokyo’s inflation, which leads the national CPI data, eased this month.

• At the national level, the services PPI has been accelerating.

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2. Dollar-yen held support at 152.

3. Stocks are in correction territory.

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China

1. The 10-year government bond yield hit a record low.

2. Economists have been boosting their forecasts for this year’s growth in industrial production, …

… while lowering estimates for retail sales.

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3. Second-quarter GDP growth was dominated by investment, while consumption gains were the lowest since 2022.

Source: Wells Fargo Securities

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Emerging Markets

1. Brazil’s inflation was a bit firmer this month.

• Bond yields have been rising.

• Consumer confidence remains strong.

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2. South Africa’s inflation edged lower in June.

3. Turkey’s manufacturing confidence is deteriorating.

4. EM debt spreads remain tight as global trade strengthens.

Source: MRB Partners

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Cryptocurrency

1. It has been a mixed week for cryptos, with XRP outperforming top peers and Ether (ETH) underperforming as ETF hype cools.

Source: FinViz

2. Jersey City’s pension fund intends to include exposure to Bitcoin ETFs.

Source: CryptoSlate Read full article

3. Here is a look at possible improvements from asset tokenization.

Source: Bain & Company

4. Bitcoin’s correlation with stocks has turned negative.

Source: @markets Read full article

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Energy

1. Crude oil implied volatility remains low.

Source: Goldman Sachs; @MikeZaccardi

2. Global oil and gas consumption per capita remains below its 2019 peak.

Source: The Crude Chronicles

To some extent, oil and gas demand can rise alongside productivity growth.

Source: The Crude Chronicles

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Equities

1. The rotation from tech mega-caps to smaller firms continued on Thursday.

• Tech remained under pressure, with semiconductor shares experiencing significant declines.

• Growth shares continue to underperform value, …

… which has also been true for small caps.

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• The S&P 500 tech index entered correction territory.

– Here is the drawdown for the Magnificent 7 stocks.

• This chart shows the rotation from the current tech sell-off, which started on July 11th.

Source: Deutsche Bank Research

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2. On average, 3% dips in the S&P 500 happen roughly seven times per year.

Source: @RyanDetrick

3. The divergence between earnings and revenue beat rates points to the market’s increased reliance on strong margins.

Source: @KevRGordon

4. Equity futures positioning has been extremely bullish, …

Source: Goldman Sachs; @WallStJesus

… which explains the recent market weakness.

Source: Goldman Sachs; @WallStJesus

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5. Insiders have become bearish.

Source: InsiderSentiment.com

6. Strong economic growth and positive sentiment supported US stocks during the first-half of the year.

Source: Numera Analytics (@NumeraAnalytics)

7. Increasing market concentration makes diversifying using cap-weighted indices challenging.

Source: @johnauthers, @opinion Read full article

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Credit

1. How might various asset classes perform in soft landing or recession scenarios?

Source: BCA Research

2. Demand for downside protection on investment-grade CDX has risen recently.

Source: JP Morgan Research; @GunjanJS

3. Here is a look at ESG bond issuance.

Source: @axios Read full article

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Global Developments

1. Here is a look at government debt-to-revenue ratios for select economies.

Source: Codera Analytics Read full article

2. Variant Perception’s leading inflation indicator signals that inflation is set to accelerate in the coming months.

Source: Variant Perception

3. Wells Fargo expects the US dollar to decline against the currencies of other advanced economies next year.

Source: Wells Fargo Securities

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Food for Thought

1. How does Match Group make money?

Source: @chartrdaily

2. Swatch Group performance during Hang Seng Index price trends:

Source: Mensur Pocinci; Julius Baer

3. Trends in household spending:

Source: The Washington Post Read full article

4. The median age of US homebuyers:

Source: Torsten Slok, Apollo

5. Public trust in US government:

Source: @financialtimes Read full article

6. Plastic waste per capita:

Source: Visual Capitalist Read full article

7. Colonial period of Formosa (Taiwan):

Source: The Economist Read full article

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Have a great weekend!

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