The Daily Shot: 17-Sep-24
• The United States
• Canada
• The Eurozone
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Global Developments
• Food for Thought
The United States
1. The surprise component of this week’s Fed rate decision is at its highest level in over 15 years, as both a 25 bps cut and a 50 bps cut would “surprise” the market (2 charts).
Source: Deutsche Bank Research
• Many economists remain confident that we will see a 25 bps rate reduction. Here are two FOMC statement projections for this week’s meeting: Note that the Fed could deliver a dovish signal by pairing a quarter-point rate cut with more accommodative forward guidance.
– Morgan Stanley:
Source: Morgan Stanley Research
– Goldman:
Source: Goldman Sachs; @MikeZaccardi
• While inflation projections are crucial, the Fed’s data dependence means the central bank is still closely weighing the latest inflation figures, which remain elevated compared to previous rate-cut cycles.
Source: @WSJ Read full article
• Market expectations for the pace of rate cuts over the next 12 months suggest a recessionary outlook.
Source: Goldman Sachs; @MikeZaccardi
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2. Over half of fund managers surveyed by BofA do not expect a recession in the next 18 months.
Source: BofA Global Research
3. What happens to the US dollar after the first Fed rate cut?
Source: Barclays Research
4. The NY Fed’s regional manufacturing report, the first of the month, surprised to the upside as demand rebounded.
Source: @economics Read full article
• Companies’ outlook has been improving.
• Workers’ hours increased.
• However, the region’s manufacturers continue to reduce staff.
• More firms expect costs to rise.
• Companies expect to decrease CapEx spending.
By the way, regional Fed surveys point to downside risks for business investment at the national level.
Source: Oxford Economics
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5. US freight rates continue to fall.
Source: Cass Information Systems
6. Services dominated credit/debit card spending growth this year, according to BofA’s internal data.
Source: Bank of America Institute
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Canada
1. Existing home sales increased last month.
Source: MarketWatch Read full article
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2. The July wholesale trade topped expectations.
• Manufacturing sales were above last year’s level.
3. Industrial capacity utilization improved in the second quarter.
4. Bond yields continue to sink, with the 2-year rate dipping below 3%.
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The Eurozone
1. The 1-day EUR/USD risk reversal hit the highest level since the 2020 COVID shock ahead of the FOMC decision.
2. The euro-area trade surplus was roughly in line with expectations in July.
3. Deutsche Bank explores ways to block a UniCredit-Commerzbank combination, which would create a giant competitor in its home market.
Source: @business Read full article
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China
1. Goldman has downgraded its 2024 growth forecast for China, …
Source: Goldman Sachs; @MikeZaccardi
… with the country now expected to miss its GDP growth target for this year.
Source: @bpolitics Read full article
• Fund managers are not optimistic about China’s growth.
Source: BofA Global Research
• By the way, China’s 2023 GDP growth was driven by green tech and industrial digitalization.
Source: Barclays Research
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2. Foreign direct investment has been redirected to ASEAN countries.
Source: Alpine Macro
3. Fiscal measures could support further infrastructure spending. (2 charts)
Source: Schroders
Source: Schroders
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4. China’s household wealth is dominated by housing.
Source: Barclays Research
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Emerging Markets
1. Colombia’s factory output is rebounding.
2. Speculative accounts are boosting bets on the South African rand.
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Cryptocurrency
1. Ether (ETH) is underperforming top cryptos so far this month, while XRP is outperforming.
Source: FinViz
2. The Crypto Fear & Greed Index remains in “fear” territory.
Source: Alternative.me
3. Crypto funds experienced significant outflows last month as investors shifted to short-bitcoin products.
Source: CoinShares Read full article
Source: CoinShares Read full article
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Commodities
1. Gold remains decoupled from real rates amid extensive central bank buying.
• The link between real gold prices and the US debt-to-GDP ratio persists.
Source: Societe Generale’s Cross Asset Research; @WallStJesus
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2. Fund managers have been bearish on commodities.
Source: BofA Global Research
3. Cotton futures surged on Monday, …
Source: barchart.com Read full article
… amid extremely bearish positioning.
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4. Grain prices have significantly diverged from softs.
Source: Capital Economics
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Energy
1. The WTI oil price is testing resistance after rising from short-term oversold levels.
2. Oil prices are well below Saudi Arabia’s fiscal breakeven price.
Source: Capital Economics
3. US crude oil production continues to outpace that of Saudi Arabia.
Source: @TheTerminal, Bloomberg Finance L.P.
4. China’s crude oil inventories are running well below last year’s levels.
Source: @lzab1453
5. Fund managers are bearish on energy shares.
Source: BofA Global Research
6. European natural gas futures broke below the uptrend support.
Source: @TheTerminal, Bloomberg Finance L.P.
7. Russia is the second largest supplier of uranium to the EU.
Source: @DanielKral1, @OxfordEconomics
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Equities
1. The S&P 500 Equal Weight Index hit a record high.
• On average, the S&P 500 equal-weight index tends to recover relative to the market-cap-weighted index after Fed rate cuts.
Source: Damanick Dantes; Bloomberg
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2. All eyes are on this week’s FOMC decision. Here’s the short-term volatility curve for the S&P 500.
Source: @TheTerminal, Bloomberg Finance L.P.
• Below is the 97.5% moneyness implied vol for the September options (maturing on the 20th).
• The market is pricing in higher volatility for this FOMC day than at any point since March of last year.
Source: Citi; @markets Read full article
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3. Market breadth has been improving.
Source: @KevRGordon
A significantly higher percentage of S&P 500 members are trading above their 200-day moving average compared to the Nasdaq 100.
Source: @TheTerminal, Bloomberg Finance L.P.; h/t @KevRGordon
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4. Cyclicals remain near the lowest level of the year relative to defensives, …
… which is reflected in fund managers’ positioning.
Source: BofA Global Research
• Utilities continue to outperform.
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5. Companies with higher domestic sales have been outperforming.
6. This chart shows the relative performance of Goldman’s equity baskets tracking Republican and Democratic policies.
7. Hedge funds are buying tech megacaps again.
Source: Morgan Stanley Research; @WallStJesus
8. The Goldman Sachs Bull-Bear Index remains firmly within bull market territory.
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Rates
1. Inflation-linked Treasuries (TIPS) continue to see outflows.
Source: BofA Global Research
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2. The recent front-running of Fed rate cuts has been unprecedented.
Source: MRB Partners
3. Fund managers increasingly expect global yield curves to steepen.
Source: BofA Global Research
4. How did the 10-year Treasury perform around US elections?
Source: Goldman Sachs; @MikeZaccardi
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Global Developments
1. Global fund managers view a US recession as the biggest tail risk.
Source: BofA Global Research
2. Real yields across major economies have lost significant momentum.
Source: Aazan Habib, Paradigm Capital
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Food for Thought
1. Percentage of US adults facing challenges with household expenses by state:
Source: @axios Read full article
2. Life expectancy trends across Anglophone countries:
Source: The Economist Read full article
3. US population growth across racial and ethnic groups:
Source: @financialtimes Read full article
4. Percent change in deaths from synthetic opioids:
Source: @bpolitics Read full article
• US drug overdose fatalities:
Source: Statista
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5. Availability of fresh water:
Source: The Economist Read full article
6. Impact of Texas’ 2021 abortion ban on infant and neonatal mortality:
Source: Gemmill, Margerison, Stuart; et al; JAMA Pediatrics Read full article
7. Trends in how dog owners acquired their pets:
Source: @CivicScience
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