The Daily Shot: 05-Sep-24
• The United States
• Canada
• The Eurozone
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Food for Thought
The United States
1. The July job openings report came in below expectations, indicating further cooling in the labor market (2 charts).
Source: @TheTerminal, Bloomberg Finance L.P.
Source: Reuters Read full article
• The June job openings figure was revised sharply lower, a trend that has been occurring with higher frequency lately.
Source: @TheTerminal, Bloomberg Finance L.P.
• The number of job openings per unemployed person is now firmly below pre-COVID levels.
Similarly, here is the number of quits (voluntary resignations) per unemployed person.
• The Beveridge curve indicates that the labor market has returned to more “typical” conditions.
Source: @TheTerminal, Bloomberg Finance L.P.
• Sectors that have contributed significantly to US job gains, including healthcare, local government, and hotels/restaurants, experienced declines in job openings in July (2 charts).
– There was another significant drop in construction job openings, signaling continued softness in the housing market.
• Layoffs remain subdued.
Source: @TheTerminal, Bloomberg Finance L.P.
• Share prices of recruiting firms suggest that job openings may have stabilized in August.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. Following the softer job openings data, the market is now assigning even odds to a 50 bps rate cut this month. The key data point will be the August jobs report on Friday (more on this tomorrow).
Source: Reuters Read full article
In fact, the market has priced in a substantial probability of 50 bps rate cuts for each of the next several FOMC meetings.
• The Treasury curve has disinverted as soft labor data fuels expectations of Fed rate cuts.
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3. The Fed’s Beige Book sentiment index from Oxford Economics indicates a slowdown in economic activity.
Source: Oxford Economics
The word count for “decline” jumped in the latest report.
Source: Eliza Winger Read full article
• The word count for “inflation” and related terms reflects diminished concerns about inflation.
• Here is the word count summary.
Source: Oxford Economics
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4. Market-based inflation expectations are near the lowest levels since early 2021 amid soft oil prices.
5. The trade deficit widened in July as imports surged.
Source: @TheTerminal, Bloomberg Finance L.P.
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5. An illustration of the growing divide among US consumers can be seen in the contrasting performance of Tapestry, which owns luxury brands like Coach and Kate Spade, and Dollar General, which tends to serve rural and lower-income households.
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Canada
1. As expected, the BoC cut rates again.
Source: @WSJ Read full article
• Economists expect another 25 bps rate cut this year and 100 bps of reductions in 2025.
Source: @TheTerminal, Bloomberg Finance L.P.
However, the market sees another 60 bps of rate cuts this year, …
Source: @TheTerminal, Bloomberg Finance L.P.
… with a possibility of 50 bps rate reductions in October and December.
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2. Bond yields shifted lower.
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3. The trade balance swung into surplus in July.
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The Eurozone
1. Germany’s factory orders unexpectedly jumped in July, boosted by large-scale items.
Source: @economics Read full article
• Consumer and capital goods orders have been moving in opposite directions.
Source: @TheTerminal, Bloomberg Finance L.P.
2. The 2-year Bund yield reached its lowest level since 2022.
3. The final euro-area services PMI was revised slightly lower, but it continues to signal growth.
Here are the services PMI trends for Italy and Spain.
Source: S&P Global PMI
Source: S&P Global PMI
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4. The euro-area producer price report surprised to the upside.
5. Estimates of relative neutral rates (r*) point to a widening gap between the US and Europe, potentially favoring USD vs. EUR.
Source: Deutsche Bank Research
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Japan
1. Real wage growth unexpectedly stayed above last year’s level, defying market expectations of a decline.
Source: @economics Read full article
• The yen strengthened further.
• The market is pricing in about seven bps of rate hikes this year.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. Here is a look at Japan’s international net asset investment surplus.
Source: ICICI Bank Research
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China
1. Bank margins remain under pressure, making it difficult for the PBoC to implement further rate cuts.
Source: @business Read full article
2. Consumption remains weak.
Source: Alpine Macro
3. China’s beef prices have been falling.
Source: USDA Read full article
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Emerging Markets
1. Let’s begin with Brazil.
• Brazil’s Q2 GDP growth exceeded expectations, leading some economists to advocate for a rate hike.
Source: Reuters Read full article
• Short-term market rates have been moving higher.
• Industrial production eased in July.
Source: @economics Read full article
• The services PMI remains in growth territory.
• The unemployment rate is at multi-year lows.
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2. Argentina’s vehicle sales climbed above last year’s levels.
3. Vietnam’s currency has been rebounding.
4. Here is a look at EM currencies’ rate differentials (relative to USD) and implied volatility.
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Cryptocurrency
1. Crypto investors are more confident in making investment decisions than non-crypto investors, according to a Morningstar survey.
Source: Morningstar Read full article
2. “Casual” crypto investors (with 1-9% of investable assets in crypto) have higher incomes, more diversified portfolios, and more experience. (2 charts)
Source: Morningstar Read full article
Source: Morningstar Read full article
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3. Litecoin has been outperforming in recent days.
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Commodities
Grain prices have been falling for months.
Source: @JavierBlas, @opinion Read full article
But wheat prices are starting to rebound.
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Energy
1. The American Petroleum Institute’s estimate of US crude oil inventories showed a sharp decline last week, …
Source: OilPrice.com Read full article
… stabilizing crude oil prices. The Department of Energy’s inventory report is out later today.
Source: @TheTerminal, Bloomberg Finance L.P.
Will OPEC postpone its output increase in light of depressed crude prices?
Source: Reuters Read full article
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2. Oil volatility could rise in the event of a prolonged drop in prices.
Source: Alpine Macro
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Equities
1. The August jobs report will determine whether the Fed opts for a 25 bps or 50 bps rate cut. Here is the short-term volatility curve.
Source: @TheTerminal, Bloomberg Finance L.P.
2. US earnings surprises have diverged from economic surprises.
Source: PGM Global
• Earnings-day volatility reached a new peak during the latest earnings season.
Source: Goldman Sachs; @dailychartbook
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3. The share of S&P 500 members outperforming the index hit a multi-decade high.
Source: @KevRGordon
4. Here is a look at the largest single-day market cap falls and gains throughout history. (2 charts)
Source: Deutsche Bank Research
Source: Deutsche Bank Research
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5. Turning points in S&P 500 price momentum typically coincide with peaks and troughs in US leading indicators (6-month change).
Source: Damanick Dantes; Bloomberg
6. This chart illustrates the sensitivity of large-cap and small-cap companies, as well as various sectors, to changes in the US corporate tax rate
Source: Goldman Sachs; @MikeZaccardi
7. Here is a look at valuations (forward P/E ratio) compared to the past decade.
8. A rotation from Nvidia to Tesla by the Reddit crowd?
Source: @TheTerminal, Bloomberg Finance L.P.
9. Nippon Steel picked the wrong year for this deal.
Source: ABC News Read full article
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Credit
1. Investment-grade bond deal volume surged this week.
Source: MUFG Securities
2. Here’s an overview of credit markets’ yields and implied volatility, illustrating expected returns versus perceived risk.
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Food for Thought
1. Growth in Nasdaq’s revenue by segment:
Source: @WSJ Read full article
2. Legal status of sports betting:
Source: Baker, Balthrop, Johnson, Kotter, Pisciotta Read full article
• Sports betting has been crowding out households’ stock investing.
Source: Baker, Balthrop, Johnson, Kotter, Pisciotta Read full article
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3. Shopping for car insurance:
Source: @economics Read full article
4. Top countries in global remittances over the past two decades:
Source: Visual Capitalist Read full article
5. Changes in bachelor’s degrees issued:
Source: The Washington Post Read full article
6. Data on US mass killings:
Source: AP News Read full article
7. Trends in US cancer incidence and mortality rates since 1975:
Source: @financialtimes Read full article
8. Comparison of Paralympics and Olympics records and participation:
Source: Statista
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