Posted on by The Daily Shot Editor: Lev Borodovsky

Jobless claims point to a solid labor market

The Daily Shot: 20-Sep-24
• The United States
• Canada
• The United Kingdom
• Europe
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Energy
• Equities
• Credit
• Rates
• Food for Thought

 

The United States

1. Jobless claims do not indicate any deterioration in the labor market.
 
• Initial claims:
 

 
• Continuing claims:
 

 
• Seasonally adjusted indices:
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Source: @economics   Read full article  

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2. According to job postings on Indeed, US wage growth is no longer declining.
 
Source: @nick_bunker  
 
3. The Philly Fed’s regional manufacturing index edged back into growth territory.
 

 
Source: RTT News   Read full article  
 
• Factories resumed hiring.
 

 
• Companies reduced workers’ hours in September but anticipate increasing them in the coming months.
 

 
• More firms report rising costs.
 

 
• The index of CapEx expectations hit the highest level since 2022.
 

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4. Outside of recessions, the manufacturing PMI typically recovers after the first Fed rate cut.
 
Source: BofA Global Research  
 
5. Existing home sales dipped back below 2023 levels in August.
 

 
Source: Reuters   Read full article  
 
• Inventories remain well above last year’s levels.
 

 
• Sales prices are at record highs for this time of the year.
 

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6. The Conference Board’s index of leading economic indicators declined again last month and is now at its lowest level since 2016.
 

 
Source: MarketWatch   Read full article  
 
Here are the contributions.
 
Source: Wells Fargo Securities  

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7. The Treasury curve keeps steepening.
 

 
8. The Citi Economic Surprise Index continues to recover.
 

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Canada

1. Here is a forecast for the BoC policy rate from Oxford Economics.
 
Source: Oxford Economics  
 
2. The TSX Composite continued to make new highs, although upside momentum has waned and the index appears overbought.
 

 
• Financial, real estate and utilities have demonstrated strong relative strength and momentum vs. the TSX Composite (in the leading quadrant), while energy and industrials have lagged.
 
Source: Aazan Habib, Paradigm Capital  
 
• Breadth within the financial sector improved but appears overbought.
 

 
• The iShares MSCI Canada ETF (EWC) held long-term support relative to SPY, although EWC/SPY ratio is testing resistance at its 200-day moving average.
 

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The United Kingdom

1. The BoE left its benchmark rate unchanged and reduced the pace of bond buying.

BoE: – The Committee voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by £100 billion over the next 12 months, to a total of £558 billion.

Source: CNBC   Read full article  
 
• UK core inflation remains above that of the Eurozone.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. The pound hit its highest level since 2022.
 

 
Gilt yields moved higher.
 

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3. Consumer confidence declined this month.
 

 
4. UK dividend yield relative to gilts remains well below European peers.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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Europe

1. EU vehicle sales deteriorated sharply last month.
 

 
Here is the same index for the Eurozone.
 

 
Source: Reuters   Read full article  
 
Germany’s EV sales tumbled.
 
Source: @business   Read full article  
 
Source: ACEA   Read full article  

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2. Norway’s central bank kept its policy rate unchanged while maintaining a hawkish tone.
 
Source: @WSJ   Read full article  
 
Bond yields and the Norwegian krone climbed.
 

 

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3. Sweden’s unemployment rate surprised to the downside.
 

 
4. Poland’s labor market continues to soften.
 

 
5. Swiss watch exports were back at record highs last month.
 

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Japan

1. The BoJ is in no hurry to hike rates.
 
Source: Reuters   Read full article  
 
• The market sees an eight bps rate increase by the end of the year.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
• The yen declined, …
 

 
… and the yield curve steepened after the BoJ’s policy announcement.
 

 
• Demand for the yen carry trade reached levels not seen since before the financial crisis, based on cross-border lending data.
 
Source: MUFG Securities  
 
• Rate differentials signal a limited upside for the yen from here.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. Inflation edged higher last month.
 

 
Source: @WSJ   Read full article  

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3. Japanese investors have piled into foreign bonds.
 
Source: Alpine Macro  

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China

1. Longer-term yields are falling, …
 

 
… as the yield curve flattens. The market expects softer economic activity ahead.
 

 
• China’s government bonds have been outperforming their global counterparts.
 
Source: Gavekal Research  

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2. The renminbi is rallying vs. USD as the Fed begins its rate-cut cycle.
 

 
3. China’s STAR Market 50 Index (high-growth, innovative companies) continues to sink.
 

 
4. Here is a look at government grants to China’s listed companies.
 
Source: Rhodium Group   Read full article  
 
5. Private firms are unwilling to invest.
 
Source: Barclays Research  

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Emerging Markets

1. Let’s begin with Argentina.
 
• The economy contracted for the third quarter in a row.
 

 
Source: @economics   Read full article  
 
• The trade surplus surprised to the upside, …
 

 
… as imports slowed.
 

 
• Consumer confidence and government approval ratings have been holding up.
 
Source: Morgan Stanley Research  
 
• The primary budget balance remains in surplus.
 

 
• The unemployment rate edged lower in Q2.
 

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2. The Brazilian real is rallying after the BCB rate hike.
 

 
3. Asian currencies are surging as the Fed initiates its rate-cutting cycle.
 
• Indonesian rupiah:
 

 
• Malaysian ringgit:
 

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4. South Africa’s central bank cut its benchmark rate for the first time since the Covid shock.
 

 
Source: @economics   Read full article  
 
The rand has been rallying.
 

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Cryptocurrency

1. It has been a good week for cryptos, with bitcoin (BTC) and ether (ETH) outperforming top peers.
 
Source: FinViz  
 
2. There was a relatively minor spike in short liquidations as BTC rose above $60K.
 
Source: Coinglass  
 
3. Here is a look at crypto correlations with equities over time.
 
Source: Deutsche Bank Research  
 
• Bitcoin has not provided much diversification for equity portfolios.
 
Source: Gavekal Research  

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Energy

1. US natural gas inventories continue to normalize.
 

 
2. Here is a look at energy transition investment.
 
Source: @climate   Read full article  

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Equities

1. The S&P 500 reached its first record high since July, marking the 39th record high of the year, as the Fed began its easing cycle.
 

 

 
• Tech megacaps surged.
 

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3. S&P 500 at 6,100 by year-end?
 
Source: CNBC   Read full article  
 
The options market assigns an 18% probability of such an outcome.
 

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3. BofA reports a surge in corporate clients’ share buyback activity over the past 12 months.
 
Source: BofA Global Research; @AyeshaTariq  
 
4. Dividend growers have been performing well.
 

 
5. Historically, the first Fed rate cut has been associated with corrections in the S&P 500, particularly within the first six months after a 50 bps cut, according to Fairlead Strategies
 
Source: @StocktonKatie  
 
6. Investor sentiment improved this week.
 
• Investment managers:
 

 
• Retail investors:
 

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7. Bank reserves are trending lower as the Fed continues its QT, potentially creating a headwind for stocks.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
8. A lot of options expire today.
 
Source: Asym 500; @markets   Read full article  
 
• VIX has faded back to average levels and is testing support.
 

 
• VIX typically remains elevated into US elections.
 
Source: MUFG Securities  

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9. While the stock-bond correlation has turned negative in recent weeks, it remains positive when viewed over a 12-month window. These plots show sector and factor correlations to both Treasuries and the S&P 500.
 

 

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Credit

1. Investment-grade bond funds continue to see inflows.
 
Source: BofA Global Research  
 
2. Here’s an overview of the high-yield markets’ exposure to the energy sector.
 
Source: TS Lombard  
 
3. Leveraged loan issuance has been robust (2 charts).
 
Source: Bloomberg Law   Read full article  
 
Source: @markets   Read full article  

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Rates

1. Treasury volatility has been elevated for most of the Fed’s tightening cycle. MUFG expects higher volatility across the curve, which is typical during policy transitions.
 
Source: MUFG Securities  
 
3. Significant outflows from money market funds are unlikely following Fed rate cuts. According to BofA, money market funds typically experience outflows only when the fed funds rate drops below 2%.
 
Source: BofA Global Research; @dailychartbook  
 
• When money market fund outflows do occur, they have historically flowed into bonds rather than stocks.
 
Source: BofA Global Research; @dailychartbook  

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Food for Thought

1. Battery pack prices:
 
Source: The Economist   Read full article  
 
2. Computational capacity of the fastest supercomputer:
 
Source: BofA Global Research; @MikeZaccardi  
 
3. Google’s market share in US search by device type:
 
Source: Statista  
 
4. Young adults are the leading users of TikTok for politics and news.
 
Source: Pew Research Center   Read full article  
 
5. US work-related visas issued:
 
Source: Wells Fargo Securities  
 
6. Mental health challenges among US seniors by sociodemographic factors:
 
Source: Census Bureau   Read full article  
 
7. Most searched workplace abbreviations:
 
Source: QR Code Generator  
 

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Have a great weekend!

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