The Daily Shot: 09-Aug-24
• The United States
• The Eurozone
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. Initial jobless claims eased last week, alleviating concerns about labor market weakness and recession risks.
Here is the seasonally adjusted index.
Source: @TheTerminal, Bloomberg Finance L.P.
• Stocks and Treasury yields jumped.
Credit spreads tightened.
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2. Wells Fargo’s forecasts for consumer spending, business investment, and unemployment show a slowdown over the next couple of quarters but no recession.
Source: Wells Fargo Securities
3. The elevated prime rate is putting pressure on small businesses, …
Source: BofA Global Research
… which has been a drag on job growth.
Source: BofA Global Research
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4. Commercial construction starts have been soft relative to the past decade.
Source: Wells Fargo Securities
5. The percentage of FHA mortgage borrowers in delinquency has been rising.
Source: Goldman Sachs; @MikeZaccardi
• Goldman anticipates higher overall mortgage delinquency rates, which are expected to return to pre-COVID levels.
Source: Goldman Sachs; @MikeZaccardi
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The Eurozone
1. French bond spreads remain elevated.
2. A lack of demand, more than labor shortages, has been constraining euro-area manufacturing growth …
Source: Nomura Securities
… and is beginning to impact the service sector as well.
Source: Nomura Securities
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3. Here is the relationship between government debt and budget deficits for selected European countries.
Source: @robin_j_brooks
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Japan
1. The equity market volatility has been extreme.
Source: @DavidInglesTV
Nonetheless, retail investors have been buying Japanese shares.
Source: @markets Read full article
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2. The Economy Watchers Survey expectations index edged higher in July, …
… but employment expectations continue to trend downward.
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3. Growth in Japan’s broad money supply dipped below 1% for the first time since 2009.
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Asia-Pacific
1. Taiwan’s exports were flat in July, a period when they typically increase.
2. Economists don’t expect the BoK to cut rates this year.
3. New Zealand’s 2-year inflation expectations continue to moderate.
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China
1. China’s CPI increased last month, surpassing expectations.
Source: @WSJ Read full article
The rise was driven by the end of food disinflation.
The core CPI and services inflation declined (2 charts).
• The year-over-year PPI changes remain in negative territory.
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3. Chinese stocks’ correlation with the rest of the world has fallen dramatically in recent years.
Source: Alpine Macro
• EM ex-China ETFs have attracted fresh capital as investors exited China-focused funds.
Source: Alpine Macro
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4. Export growth is recovering.
Source: MRB Partners
• The manufacturing sector has increased its reliance on exports since the start of the pandemic.
Source: @gdp1985, @TheTerminal, Bloomberg Finance L.P. Read full article
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5. China’s population growth has been negative.
Source: BCA Research
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Emerging Markets
1. Mexico’s central bank cut rates for the second time …
… despite an upside inflation surprise.
Source: AP News Read full article
• Bond yields declined sharply, …
… but the peso has been strengthening after the massive carry unwind.
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2. Chile’s CPI topped expectations.
3. Colombia’s core inflation is slowing.
4. Argentina’s economy continues to struggle.
5. Egypt’s inflation is moderating following the recent spike caused by the country’s massive currency devaluation.
6. South Africa’s factory output remains below pre-COVID levels.
7. How did emerging markets respond to the US equity market rally on Thursday?
• Currencies:
• Equity ETFs:
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Cryptocurrency
1. Bitcoin is back above $60k and is nearing its 50-day moving average.
2. The options market is pricing in a 24% probability of bitcoin closing above $70k by the end of September.
3. It has been a mixed week for cryptos, with XRP outperforming and Ether (ETH) underperforming top peers.
Source: FinViz
Source: CoinDesk Read full article
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4. The Crypto Fear & Greed Index returned to “neutral” territory after a sharp fall into “extreme fear” earlier this week.
Source: Alternative.me
5. Here is a look at crypto derivative ETFs with options available. There is hope that a spot bitcoin ETF with options could launch this year, according to Bloomberg Intelligence.
Source: @JSeyff
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Commodities
US grain futures continue to slide.
• Corn:
• Soybeans:
• Bloomberg’s grains index:
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Energy
1. US market-based inflation expectations are highly correlated to crude oil prices.
Source: @TheTerminal, Bloomberg Finance L.P.
2. EU power demand has trended lower over the past 15 years.
Source: Goldman Sachs
• However, power demand is expected to rise amid growing demand from datacenters. (2 charts)
Source: Goldman Sachs
Source: Goldman Sachs
• European investment in power grids could increase in the coming years.
Source: Goldman Sachs
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3. Next, we have a global comparison of net electrical capacity in nuclear power.
Source: @business Read full article
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Equities
1. Thursday was a good day for US stocks as initial jobless claims alleviated some concerns about labor market weakness and recession risks.
How did different sectors and equity factors perform during Thursday’s US market rebound?
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2. Realized volatility continues to climb.
Source: @TheTerminal, Bloomberg Finance L.P.
3. Breadth indicators are not at extreme lows. (2 charts)
Source: BCA Research
Source: BCA Research
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4. In real terms, the S&P 500 has deviated far above its long-term uptrend.
Source: BCA Research
5. Treasuries are once again acting as a hedge for stocks, with correlations moving into negative territory.
6. Earnings growth across S&P 500 sectors is starting to converge.
Source: Deutsche Bank Research
• Earnings growth for the median S&P 600 small-cap company is on track to turn positive for the first time in six quarters.
Source: Deutsche Bank Research
• Big tech earnings surprises have been less impressive.
Source: Barclays Research; @WallStJesus
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7. The “Magnificent 7” market cap has now exceeded that of China’s listed equities.
Source: BCA Research
8. Here is a look at the yen’s correlation to global equities (driven by the carry trade).
Source: Barclays Research
9. Assets in covered call ETFs continue to surge.
Source: @financialtimes Read full article
The S&P 500 covered call strategy has sharply underperformed the S&P 500 this year.
The rationale behind covered call investments is to capitalize on lower volatility, aiming for strong risk-adjusted returns. However, this hasn’t been the case lately.
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Credit
1. High-yield bonds and leveraged loans have experienced fund outflows. (3 charts).
Source: BofA Global Research
Source: @JSeyff
Source: BofA Global Research
Here are the cumulative flows for the largest leveraged loan ETF.
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2. How did credit assets perform on Thursday as US equities surged while Treasuries sold off?
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Global Developments
1. The decline in Treasury yields points to a lower dollar, especially versus EM currencies.
Source: Alpine Macro
2. How did DM currencies perform on Thursday?
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Food for Thought
1. Growth of trust and estate assets in the US:
Source: @GunjanJS, @robtfrank Read full article
2. The cost of full-coverage car insurance:
Source: @axios Read full article
3. Underwater mortgages:
Source: @economics Read full article
4. Demographic breakdown of childlessness among women aged 35 to 44 in the US:
Source: @WSJ Read full article
• Trends in childlessness and birth rates among women aged 35 to 44:
Source: @WSJ Read full article
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5. Approval ratings of the US Supreme Court’s performance by political affiliation:
Source: @axios Read full article
6. Most visited websites worldwide:
Source: Visual Capitalist Read full article
7. China’s athletes excel in indoor sports but underperform in contact sports.
Source: The Economist Read full article
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Have a great weekend!
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