The Daily Shot: 29-Aug-24
• The United States
• The United Kingdom
• The Eurozone
• Europe
• China
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. Fed officials’ comments are becoming increasingly less hawkish.
• The market is now pricing in 225 bps of Fed rate cuts by the end of 2025, …
Source: @TheTerminal, Bloomberg Finance L.P.
… pushing short-term bond yields lower.
• Here is a look at previous easing cycles.
Source: Jack Ablin, Cresset Wealth Advisors
• The Treasury curve inversion is nearing its end …
… after a record streak of negative 10s/2s, spanning 540 trading sessions..
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2. The Atlanta Fed’s wage growth tracker showed further moderation in July, although wage growth remains above pre-COVID levels.
• After a rapid acceleration, the pay for lower-skilled workers is now slowing faster than that of high-skill workers.
Source: @TheTerminal, Bloomberg Finance L.P.
• Job hopping has become less lucrative.
Source: @TheTerminal, Bloomberg Finance L.P.
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3. Next, we have some updates on the housing market.
• Despite ongoing declines in mortgage rates, …
… we are not seeing significant improvements in purchase mortgage applications.
Here is the rate lock count.
Source: AEI Housing Center
• Affordability remains a drag on the market, with the down payment percentage reaching its highest level in over a decade.
Source: Redfin
• Refi applications, however, are well above 2022 levels.
• Housing inventories are grinding higher.
Source: AEI Housing Center
• Home price appreciation slowed sharply in some metros, as measured by 6-month changes.
Source: @NickTimiraos
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4. Job quits and business applications tend to shift together around business cycle turning points.
Source: St. Louis Fed Read full article
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The United Kingdom
1. UK housing prices are nearing equilibrium, according to a model from Bloomberg Economics.
Source: @economistniraj, @TheTerminal, Bloomberg Finance L.P. Read full article
2. Weaker employment conditions could give the BoE more scope to cut rates.
Source: Variant Perception
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The Eurozone
1. Loan growth remains tepid, though there is an upturn in household lending.
• Demand for residential mortgage loans is now rising, while business loan demand remains in contraction territory.
Source: @TheTerminal, Bloomberg Finance L.P.
• The expansion in the broad money supply was slower than expected through July.
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2. French consumer sentiment continues to improve.
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Europe
1. The Swiss economic expectations index is rolling over.
2. Here is a comparison of economic indicators between London and Paris.
Source: Resolution Foundation Read full article
3. This chart shows irregular border crossings into the European Union by route.
Source: The Economist Read full article
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China
1. The offshore yuan reached its highest level against the US dollar in over a year.
2. China’s industrial shares have been underperforming since 2022.
• Hong Kong-listed tech shares are struggling.
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3. Earnings outside the real estate sector have stabilized, mostly in consumer goods and services. (2 charts)
Source: Gavekal Research
Source: Gavekal Research
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4. This chart shows the sources of China’s steel demand.
Source: @markets Read full article
5. China has made significant progress in combating pollution.
Source: @climate Read full article
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Commodities
1. September tends to be a strong month for gold.
2. Bloomberg’s softs index hit the highest level in almost a decade.
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Energy
1. US crude oil and gasoline inventories declined again last week, while distillates stockpiles edged higher.
Here are the inventory levels.
• US jet fuel stockpiles hit a record high last week.
Jet fuel prices in the Midwest are at multi-year lows.
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2. Low global crude oil inventories point to upside risks for prices.
Source: @ANZ_Research
However, OPEC’s spare capacity remains elevated.
Source: @ANZ_Research
• Libya’s oil output tends to be volatile due to political instability.
Source: @markets Read full article
3. US oil service stocks have closely tracked the gradual turnaround in energy capex from the pandemic low.
Source: PGM Global
4. European natural gas imports have slowed sharply.
Source: @JavierBlas, @opinion Read full article
• Gas inventories remain near multi-year highs, but much will depend on how cold the European winter will be.
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Equities
1. NVIDIA delivered robust earnings, significantly exceeding revenue forecasts.
Source: @technology Read full article
However, the market wanted more fireworks, sending NVIDIA’s stock price sharply lower. Equity futures sold off after the close but have rebounded this morning.
Source: CNBC Read full article
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2. Retail investors have shifted their focus from Tesla to NVIDIA, purchasing record amounts of NVIDIA shares.
Source: Vanda Research
• Retail investors successfully bought the dip during the latest market selloff.
Source: Vanda Research
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3. Driven by AI demand, big tech CapEx is accelerating (2 charts).
Source: BofA Global Research; @dailychartbook
Source: Goldman Sachs; @MikeZaccardi
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4. September tends to be a challenging month for US stocks.
5. Here is a look at Goldman’s equity baskets linked to expected Democratic and Republican policies.
Source: @bpolitics Read full article
6. Shares with significant government-linked revenues have been outperforming recently.
7. Shares of regional banks continue to lag behind large banks.
Source: @TheTerminal, Bloomberg Finance L.P.
8. Small caps are vulnerable to US economic downturns.
Source: Truist Advisory Services
9. Upside momentum behind the S&P 500 is starting to fade as the index tests resistance.
• Short-term breadth appears overbought.
10. The iShares Momentum ETF (MTUM) continues to weaken relative to the S&P 500 despite a strong bounce earlier this year.
11. On an equal-weight basis, the S&P 500 discretionary sector is testing key support relative to the staples sector.
Source: Aazan Habib, Paradigm Capital
12. Generally, the US continues to outperform international markets.
Source: PGM Global
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Credit
1. US investment-grade bond issuance has been consistently above the pre-COVID average.
Source: MUFG Securities
2. Fixed income volatility remains elevated despite the decline in investment-grade spreads.
Source: PGM Global
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Global Developments
1. September tends to be a challenging month for the US dollar.
2. Global export growth is improving, which could benefit EM trade. (2 charts)
Source: MRB Partners
Source: PGM Global
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3. Here is a look at advanced economies’ GDP growth and core inflation trends (2019 to 2024).
Source: CEA Read full article
4. Manufacturers in advanced economies are once again struggling with high freight costs.
Source: Numera Analytics (@NumeraAnalytics)
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Food for Thought
1. Eroding democracies:
Source: Our World in Data
2. Maritime connectivity:
Source: @business Read full article
3. How much money does it take to be rich?
Source: @wealth Read full article
4. What’s driving healthcare costs for employers?
Source: @axios Read full article
5. Children under five who are abnormally short for their age:
Source: The Economist Read full article
6. College closures:
Source: @chartrdaily
7. Comparison of original and re-recorded versions of Taylor Swift’s albums:
Source: The Economist Read full article
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