The Daily Shot: 23-Oct-24
• Administrative Update
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Japan
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
Administrative Update
As a reminder, please do not reply to this email if you need assistance. Instead, kindly email [email protected].
Back to Index
The United States
1. US market-based inflation expectations have risen to their highest level since June, …
… driving Treasury yields higher.
• A repeat of 1995?
Source: @markets Read full article
• Some economists are expressing concerns about a potential rebound in inflation.
Source: Gavekal Research
• The US dollar continues to rally and is now in overbought territory.
——————–
2. Mortgage rates keep climbing, which is likely to significantly reduce mortgage applications (in next week’s report), particularly refinancing activity.
3. The Fed’s forward guidance on rates and growth expectations has been off the mark.
Source: MRB Partners
4. The Philly Fed’s regional services index returned to growth in October, driven by a surge in demand.
5. The Richmond Fed’s regional manufacturing index remained subdued this month, but forward-looking indicators suggest improvements are on the horizon.
– New orders:
– Employment:
• A similar trend was visible in the Richmond Fed’s services report.
– Demand:
– Revenues:
Back to Index
Canada
1. The Canada-US 10-year bond spread has reached -1% for the first time in decades.
• The divergence between BoC and Fed policy rates is increasingly stretched relative to history.
Source: MRB Partners
• Easing inflation expectations could encourage further BoC rate cuts.
Source: MRB Partners
——————–
2. The TSX small-cap index is attempting to break out.
Source: Aazan Habib, Paradigm Capital
Back to Index
The United Kingdom
1. Government borrowing in September came in below economists’ forecasts but exceeded both last year’s levels …
… and the OBR’s estimates.
Source: Pantheon Macroeconomics
Source: Reuters Read full article
——————–
2. The actual mortgage default rate remains historically low.
Source: Capital Economics
Back to Index
The Eurozone
1. Here is a look at the pandemic-era changes in government debt as a percentage of GDP.
Source: @DanielKral1, @OxfordEconomics
2. Germany’s economy has barely grown since 2019.
Source: The Economist Read full article
3. Portugal’s bond spreads are now lower than Belgium’s and are approaching those of the Netherlands.
Source: @DanielKral1, @OxfordEconomics
Back to Index
Europe
1. New car registrations were 6% below last year’s levels in September.
Source: @WSJ Read full article
——————–
2. Poland’s retail sales tanked last month.
Source: RTT News Read full article
——————–
3. BofA’s Europe macro indicator has stabilized, potentially ending a long downturn.
Source: BofA Global Research
4. This chart illustrates housing difficulties experienced by people in the EU.
Source: Eurostat Read full article
Back to Index
Japan
1. The yen continues to sink, with USD/JPY blasting past 152.
2. Long-dated JGB yields are climbing.
Source: @markets Read full article
Back to Index
China
1. How are international equity investors responding to China’s stimulus announcements?
Source: Alpine Macro
2. Stimulus measures are becoming increasingly costly for Beijing.
Source: @shuli_ren, @opinion Read full article
3. This scatterplot illustrates the potential for growth in Chinese household consumption compared to other large economies.
Source: BofA Global Research
4. It will take longer than anticipated for China’s economy to surpass that of the US.
Source: Arcano Economics
Back to Index
Emerging Markets
1. Mexico’s economic activity edged lower in August but remained near record levels.
2. How closely correlated are emerging market bonds with Treasuries?
Source: Marcus Wong; @TheTerminal, Bloomberg Finance L.P.
3. EM currency market implied volatility is rising.
Back to Index
Commodities
1. Iron ore continues to relinquish the gains driven by China’s stimulus measures.
2. Investors are chasing inflation bets ahead of the US election (SLV = silver ETF).
Source: Chris Murphy, Susquehanna International Group
3. Chicago hog futures have been rallying.
Back to Index
Energy
1. Iran’s crude oil exports keep trending higher.
Source: The Economist Read full article
2. OPEC continues to downgrade its projections for global crude oil demand.
Source: @markets Read full article
3. Here is a look at the EU’s natural gas imports from Russia.
Source: Bruegel Read full article
Back to Index
Equities
1. The equity market rally is inconsistent with the recent surge in bond yields …
Source: @TheTerminal, Bloomberg Finance L.P.
… and rising Treasury market implied volatility.
Source: BCA Research
It’s also not consistent with tightening financial conditions.
——————–
2. The equity market is pricing in higher inflation, as companies that benefit from rising prices outperform.
3. Speculative shares, such as meme stocks, have been outperforming this month.
4. Current S&P 500 valuations imply low excess returns over the next decade.
Source: Capital Economics
5. Improving liquidity could support equities.
Source: BofA Global Research
6. This chart shows value vs. growth month-to-date performance across US and international markets.
Source: S&P Dow Jones Indices
7. Here is a look at corporate margins in advanced economies.
Source: Capital Economics
8. Global investors have piled into US equity ETFs.
Source: @markets Read full article
9. Small caps benefit more from falling short-term rates than large caps.
Source: Torsten Slok, Apollo
Back to Index
Credit
1. CLO liabilities’ secondary spreads continue to tighten.
Source: Deutsche Bank Research
2. US CMBS new issuance is about to overtake 2022 levels.
Source: Deutsche Bank Research
3. US corporate credit spreads have been tightening, with current levels suggesting a period of disappointing long-run excess returns.
Source: Capital Economics
Back to Index
Rates
1. Options traders have adopted an increasingly bearish stance on Treasury futures.
Source: @markets Read full article
2. This chart shows the divergence between Treasury yields and the copper-to-gold ratio. Something’s got to give.
Source: @TheTerminal, Bloomberg Finance L.P.
3. The Treasury term premium is rising.
4. A new regime for rates?
Source: Gavekal Research
Back to Index
Global Developments
1. Government bond markets are having a challenging month.
Source: S&P Dow Jones Indices
2. Here is a look at projected fiscal deficits in select economies.
Source: @economics Read full article
3. The OECD composite leading indicator stands at a top-quartile reading.
Source: BofA Global Research
4. The global economy has splintered into economic blocs.
Source: @bbgvisualdata Read full article
——————–
Food for Thought
1. Housing bubble risk in selected cities:
Source: @chartrdaily
2. Where do Americans move when they leave the largest states?
Source: @axios Read full article
3. Growth in US worker and employer contributions to family coverage premiums since 2000:
Source: @WSJ Read full article
4. The 2024 US presidential election swing state polling trends:
Source: MUFG Securities
5. Processing times for US citizenship applications:
Source: Torsten Slok, Apollo
6. Global innovation index scores and GDP per capita by country in 2024:
Source: The Economist Read full article
7. Americans’ favorability ratings of famous ancient people:
Source: YouGov Read full article
——————–
Back to Index