The Daily Shot: 12-Sep-24
• The United States
• The United Kingdom
• The Eurozone
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Alternatives
• Global Developments
• Food for Thought
The United States
1. The August headline CPI met expectations, …
… while the core index slightly exceeded forecasts, suggesting that consumer demand has not deteriorated significantly.
The year-over-year core CPI change held at 3.2%.
• Core services inflation accelerated, …
… while core goods remain in deflation.
• The upside surprise in core inflation was driven by housing and, to a lesser extent, travel-related sectors.
Source: Nomura Securities
Notably, owners’ equivalent rent (OER) saw a surge in August (2nd panel).
Here are the components of OER.
Source: Nomura Securities
• Hotels, airline fares, and auto insurance accounted for the majority of the increase in supercore CPI.
Source: Nomura Securities
• The medical care services CPI fell again.
• Used vehicle prices declined (2nd panel), …
… but leading indicators point to a rebound in the months ahead.
Source: Nomura Securities
• Groceries CPI was almost flat in August.
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2. Treasury yields climbed in response to firmer core inflation.
The yield curve (10s2s) almost inverted again.
• Stocks sold off initially but rebounded to close higher.
• The market has scaled back Fed rate cut expectations, …
… with the probability of a 50 bps cut this month dropping below 20%.
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3. Real wage growth improved in August.
• This chart shows wage growth by income category based on BofA’s internal data.
Source: Bank of America Institute
• Separately, real household incomes increased last year.
Source: @economics Read full article
Below are the trends by race/ethnicity.
Source: US Census Bureau Read full article
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4. Next, we have some updates on the housing market.
• Mortgage rates are approaching 6%.
• Mortgage applications during Labor Day week were slightly below the 2023 level.
Here is the rate lock count.
Source: AEI Housing Center
• The rebound in refi activity has paused in recent weeks.
• The increase in active listings has slowed.
Source: AEI Housing Center
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5. State spending is poised to decline sharply next year.
Source: BCA Research
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The United Kingdom
1. Services output rose less than expected in July.
Manufacturing production and construction activity declined, resulting in zero GDP growth.
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2. The trade deficit widened.
3. The RICS index registered a surprise rebound in the housing market last month.
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The Eurozone
1. ECB officials have been dovish in recent months.
Here’s an overview of economists’ forecasts for the ECB policy rate.
Source: @economics Read full article
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2. Euro-area publicly traded government debt balances are running below pre-Covid levels.
Source: @DanielKral1, @OxfordEconomics
3. Germany’s economy will face a fiscal drag next year.
Source: Nomura Securities
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Japan
1. Business conditions improved substantially this quarter.
2. Last month’s PPI surprised to the downside.
3. Tokyo office vacancies continue to trend lower.
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Asia-Pacific
1. South Korea’s unemployment rate hit a record low in August.
Source: Reuters Read full article
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2. Australian consumer inflation expectations edged lower this month.
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China
1. China’s provinces have been cautious about issuing new debt.
Source: @economics Read full article
2. Deflationary pressures persist amid soft domestic demand.
Source: @economics Read full article
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Emerging Markets
1. Brazil’s services output has accelerated in recent months.
2. Mexico’s manufacturing production declined in July.
3. Argentina’s inflation has been slowing, though from exceptionally high levels.
• US dollar deposits have been surging in Argentina, boosted by tax policy (see overviewhttps://buenosairesherald.com/economics/argentina-sets-in-motion-new-tax-amnesty-scheme**).
Source: @economics Read full article
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4. India’s equity derivatives trading has exploded in recent years.
Source: @GunjanJS, @WSJheard, @jackycwong Read full article
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Commodities
1. The platinum market is in deficit.
Source: @markets Read full article
2. Orange juice prices are at multi-year highs.
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Energy
1. Crude oil prices bounced from multi-year lows.
2. US crude oil and refined product inventories increased last week.
Here are the inventory levels.
• Jet fuel stockpiles are at multi-year highs.
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3. Demand for OPEC’s crude has been relatively soft, …
Source: @markets Read full article
… as China’s imports slow due to soft domestic demand and, to a lesser extent, illicit deliveries from Russia.
Source: @markets Read full article
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4. Energy stocks are at the lowest level relative to the S&P 500 since early 2022.
• Which equity indices are most exposed to energy?
Source: Capital Economics
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Equities
1. It’s relatively rare for the Nasdaq to be down more than 1% and then close up over 2%, as it did on CPI day.
Source: @Convertbond
2. It’s been a good couple of days for semiconductor stocks.
• Nvidia surged, reaching its 50-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
Here’s what the options market indicates about the probability of Nvidia reaching its peak of 140 or its recent low (near 90) by the end of the year.
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3. Retail investor net purchases have been running well above the typical levels seen over the past decade, but activity has started to slow.
Source: Vanda Research
• Options data suggests that retail investors have become more cautious.
Source: Vanda Research
• Retail investors are showing increased caution toward Nvidia.
Source: Vanda Research
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4. The stock-bond correlation continues to move into negative territory.
5. Buying the 10% dip has been lucrative in recent years.
Source: Goldman Sachs; @carlquintanilla
6. Here is a look at sector composition by company size.
Source: J.P. Morgan Asset Management
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Alternatives
1. This chart shows the growth of AI-related startups among Y Combinator companies.
Source: @chartrdaily
2. The market has significant dry powder available for secondary transactions.
Source: @markets Read full article
3. There has been a strong flow of take-private deal activity in the UK.
Source: PitchBook
4. The percentage of down rounds in US venture capital has peaked, indicating that startup fundraising is becoming more balanced.
Source: PitchBook
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Global Developments
1. Here is a look at rate cut expectations in advanced economies.
Source: Nomura Securities
2. This chart shows tourist arrivals relative to pre-COVID levels in select economies.
Source: Nomura Securities
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Food for Thought
1. Trends in US passenger travel via air, bus, and train:
Source: Statista
2. US students behind grade level by region:
Source: @axios Read full article
3. Average consumption of ultra-processed foods across selected countries:
Source: The Economist Read full article
4. Top tax credit claims for energy efficiency and renewable energy upgrades:
Source: The New York Times Read full article
5. Projected impact of policy proposals on US budget deficit (2025-2034):
Source: The Economist Read full article
6. Limits of LLM training data from human-generated text:
Source: The Economist Read full article
7. Cumulative change in visitors and staff at US national parks since 2008:
Source: @WSJ Read full article
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