The Daily Shot: 08-Oct-24
• The United States
• Canada
• The Eurozone
• Europe
• Japan
• Australia
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The market continues to scale back Fed rate cut expectations, …
… with a 50 bps rate cut in November now off the table.
• Mortgage rates jumped since the blowout US employment report.
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2. Consumer credit increased less than expected in August, …
… with the gains primarily driven by student loans (chart below).
• Credit card balances edged lower.
This chart displays credit card balances as a percentage of disposable income.
• Credit card rates hit new highs in August.
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3. Next, we have some updates on the labor market.
• It is unusual to see a strong payrolls report as the Fed starts easing rates. (2 charts)
Source: Deutsche Bank Research
Source: Deutsche Bank Research
• Employment growth has been slowing but remains within the pre-pandemic range.
• As we mentioned yesterday, the September seasonal adjustment was substantial.
Source: MUFG Securities
• Small business hiring intentions suggest downside risks for future payroll growth.
Source: Pantheon Macroeconomics
• The drop in the unemployment rate was primarily driven by younger workers.
Source: Oxford Economics
• The Boeing strike could be a drag on the October employment report.
Source: Oxford Economics
• Excess retirements remain elevated.
Source: Deutsche Bank Research
• The unemployment rate could fall below the Fed’s Q4 forecast.
Source: Oxford Economics
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4. Goldman revised its estimate for the probability of a US recession over the next 12 months back to 15%.
Source: Goldman Sachs; @MikeZaccardi
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Canada
1. Consumer confidence continues to improve.
2. The Ivey PMI, which includes public organizations, returned to growth mode last month.
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The Eurozone
1. Germany’s industrial production jumped in August, …
… primarily driven by capital goods, with a significant contribution from the vehicle sector.
Source: Pantheon Macroeconomics
Source: @economics Read full article
2. Euro-area share prices have diverged from Germany’s factory orders.
Source: BCA Research
• Shares of European automakers have been plunging amid the escalating trade tensions with China.
Source: @economics Read full article
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3. The Sentix investor confidence index edged higher this month.
4. Retail sales showed a modest improvement in August.
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Europe
1. Norway’s factory output remains robust for this time of the year.
2. Czech industrial production increased in August.
3. Here is a look at overcrowding rates for young people in the EU.
Source: Eurostat Read full article
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Japan
1. Growth in base salaries has been accelerating.
Source: @economics Read full article
• However, household spending remains soft.
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2. Japan’s current account surplus hit a record high.
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Australia
1. Consumer confidence is rebounding.
• Business sentiment edged higher last month.
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2. Job ads increased slightly in September.
3. Bond yields are climbing.
4. The Aussie dollar appears undervalued relative to the current level of commodity prices and expectations for short-term interest-rate spreads, according to Alpine Macro.
Source: Alpine Macro
• Speculative accounts are increasingly bullish on the Aussie dollar.
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China
1. The Shanghai Shenzhen CSI 300 Index is having its best couple of weeks on record.
2. Bond yields have risen since Beijing launched a series of easing measures..
3. Beijing wants a weaker renminbi.
4. Income growth slowed sharply in Q2.
Source: Capital Economics
5. TS Lombard expects modest growth in economic activity and money supply despite recent stimulus measures.
Source: TS Lombard
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Emerging Markets
1. Chile’s trade surplus hit a new high for this time of the year.
Copper exports have been surging.
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2. Brazil’s broad inflation measure, which includes producer prices, surprised to the upside.
3. Colombia’s inflation continues to moderate.
4. Mexico’s formal job creation is very low for this time of the year.
5. Here is a look at manufacturing as a percentage of total employment in select economies.
Source: The Economist Read full article
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Cryptocurrency
1. Momentum behind the total crypto market cap has slowed in recent months.
2. Crypto funds saw a third consecutive week of inflows, although sentiment is mixed as investors exited some altcoin-focused funds and added to short-bitcoin funds. (2 charts)
Source: CoinShares Read full article
Source: CoinShares Read full article
• Here is a look at cumulative flows into crypto funds.
Source: Deutsche Bank Research
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Commodities
1. Industrial commodities declined this morning as the market was disappointed by the absence of additional stimulus measures from China.
• Iron ore:
• Copper:
Source: @markets Read full article
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2. Copper smelting capacity is outpacing copper ore output, putting downward pressure on smelter fees.
Source: @markets Read full article
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Energy
1. Brent crude blasted past $80/bbl but is lower this morning.
• Below is Bloomberg’s model attribution for the year-to-date performance in crude oil. It’s somewhat surprising that geopolitical risks haven’t contributed more significantly to recent price gains.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. Here is a look at US natural gas power plants announced in 2024.
Source: @BBGVisualData Read full article
3. New solar capacity is expected to meet Europe’s increased winter electricity demand in 2024/25.
Source: @climate Read full article
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Equities
1. Let’s begin with the volatility market.
• VIX has been rising.
• The S&P 500 option skew is also the highest since the August market selloff.
Source: @TheTerminal, Bloomberg Finance L.P.
• The VIX futures backwardation has intensified.
• The market has shifted to a high-volatility regime.
Source: Goldman Sachs; @MikeZaccardi
• What is the options market implied probability of VIX exceeding 30 next month?
• Realized earnings moves for individual stocks have been exceeding implied volatility.
Source: BofA Global Research; @MikeZaccardi
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2. The Fed’s quantitative tightening, which is reducing reserve balances, is a headwind for stocks.
Source: @TheTerminal, Bloomberg Finance L.P.
3. US companies most sensitive to higher labor costs have been underperforming this year.
4 .Below is Bloomberg’s model attribution for the year-to-date performance in the S&P 500.
Source: @TheTerminal, Bloomberg Finance L.P.
5. How do value and growth factors perform under different rate regimes?
Source: J.P. Morgan Asset Management
6. Office REITs have been outperforming the overall REIT index..
Source: @TheTerminal, Bloomberg Finance L.P.
• Real estate positioning surged in recent weeks.
Source: Deutsche Bank Research
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7. “Buffered” funds that promise protection against loss have attracted an influx of capital.
Source: @WSJ Read full article
8. A sign of froth?
Source: @markets Read full article
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Credit
1. Corporate credit spreads have been tightening.
2. There are currently few fallen angels in the credit markets.
Source: Goldman Sachs
3. Leveraged loan issuance surged this year.
Source: @TheTerminal, Bloomberg Finance L.P. Read full article
4. Rating actions have been net positive this year, with a notable improvement in EM. (2 charts)
Source: S&P Global Ratings
Source: S&P Global Ratings
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Rates
1. There has been an increase in fails in 20-year Treasuries, driven by reduced relative supply.
Source: @markets Read full article
3. Below is Bloomberg’s model attribution for the year-to-date changes in the 10-year Treasury yield.
Source: @TheTerminal, Bloomberg Finance L.P.
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Global Developments
1. More upside for the US dollar?
Source: BCA Research
• This chart illustrates Bloomberg’s model attribution of the US dollar’s year-to-date performance.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. Global M&A flows have been hit by rising rates. Could we see a reversal?
Source: Oxford Economics
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Food for Thought
1. Agricultural yields for cattle and sheep across selected economies:
Source: Codera Analytics
2. Chinese firms deemed harmful to US interests:
Source: Rhodium Group Read full article
3. Support for more high-skilled immigration in the US:
Source: EIG Read full article
4. Parents often feel judged by those closest to them.
Source: The New York Times Read full article
5. Wind turbine installations:
Source: Visual Capitalist Read full article
6. Americans favor increasing regulation across most industries.
Source: YouGov Read full article
7. US soccer viewership struggles to compete with NFL, NBA, and international soccer leagues.
Source: @business Read full article
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