The Daily Shot: 24-Oct-24
• The United States
• Canada
• The Eurozone
• Japan
• Asia-Pacific
• Emerging Markets
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. The Fed’s Beige Book Report continues to reflect sluggish conditions, though there was a modest improvement this month.
– Oxford Economics Beige Book Activity Index:
Source: Oxford Economics
– Bloomberg Intelligence Beige Book Sentiment Score:
– The BCA Research Beige Book Monitor (signaling downside risks for economic growth):
Source: BCA Research
• The latest Beige Book report featured extensive discussion on the housing market.
– Here is the word count summary.
Source: Oxford Economics
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2. Next, we have some updates on the housing market.
• Mortgage applications softened last week, …
… with refi activity declining further.
– Rising mortgage rates point to further declines this week.
• Existing home sales remained at multi-year lows in September.
– Here are the regional contributions (SAAR).
Source: @TheTerminal, Bloomberg Finance L.P.
– Total housing sales in 2024 could potentially be the lowest in years.
Source: @WSJ Read full article
– Prices are holding above last year’s levels.
– Inventories are rising (3 charts).
Source: AEI Housing Center
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3. Wage growth remains above pre-pandemic levels, especially in goods-producing industries.
Source: Torsten Slok, Apollo
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Canada
1. The BoC delivered a 50 bps rate cut.
Source: Reuters Read full article
• Here’s a look at the history of the Bank of Canada’s jumbo rate cuts.
Source: Scotiabank Economics
• The market is pricing in another 37 bps of rate cuts before the end of the year.
Source: @TheTerminal, Bloomberg Finance L.P.
• With the jumbo rate cut already priced in, the market reaction was muted.
– The market-implied rate trajectory shifted higher beginning next year over the past few days.
• The Taylor Rule suggests that the BoC has room to cut rates further.
Source: @JeffreyKleintop
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2. The Canadian economy is more sensitive to interest rates than the US, given its elevated household leverage.
Source: MRB Partners
• The mortgage refinance wave will continue over the next two years.
Source: MRB Partners
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The Eurozone
1. The October flash PMI report indicated that Germany’s business activity slump eased slightly but remained in contraction territory.
Conversely, France’s business activity contraction deepened this month.
Source: @markets Read full article
We will have more on the Eurozone PMI report tomorrow.
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2. Confirming the business activity slump in the PMI report, INSEE’s French manufacturing confidence dropped sharply this month, …
… pointing to downside risks for the nation’s industrial production.
Source: Pantheon Macroeconomics
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3. The euro-area consumer confidence report showed continued improvement this month, …
… supported by a rise in real wages.
Source: MRB Partners
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4. Economic growth has diverged across euro area countries.
Source: MRB Partners
• Here is a look at euro area member contributions to economic and market trends.
Source: MRB Partners
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5. Euro-area labor costs are expected to fall (2 charts).
Source: Simon White, Bloomberg Markets Live Blog
Source: Natixis
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Japan
1. The October flash PMI report indicated a slowdown in Japan’s economic activity, signaling a loss of momentum.
• Manufacturing:
• Services (back in contraction territory):
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2. Corporations are planning to raise output prices.
Source: PGM Global
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Asia-Pacific
1. South Korea’s Q4 GDP growth surprised to the downside.
Source: Reuters Read full article
• Business surveys also point to weakening activity. More rate cuts are on the way.
Source: ING
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2. Taiwan’s industrial production edged higher in September.
3. Singapore’s core CPI increased last month.
4. Here is a look at Australia’s flash PMI indicators.
• Manufacturing (deeper slump):
• Services (modest growth):
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Emerging Markets
1. EM currencies have reversed last month’s gains.
Here is the South African rand.
Source: Reuters Read full article
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2. South Africa’s inflation continues to moderate, though core CPI ticked up on a year-over-year basis last month.
Source: Reuters Read full article
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3. Turkey’s consumer confidence is improving.
4. Argentina’s economic activity unexpectedly increased in August.
5. Mexico’s retail sales held below 2023 levels.
6. EM index correlations to China’s CSI 300 Index have collapsed.
Source: PGM Global
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Energy
1. US crude oil and gasoline inventories increased last week.
– Weekly changes:
– Inventory levels:
• Refinery utilization hit a multi-year high.
Source: Reuters Read full article
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2. Options traders are highly bullish on crude oil, as evidenced by the 25-delta Brent call-put skew continuing to rise.
Source: @TheTerminal, Bloomberg Finance L.P.
Here is the evolution of the Brent skew in recent days.
Source: @TheTerminal, Bloomberg Finance L.P.
• The Brent options open interest surged recently.
Source: @markets Read full article
• Could Brent futures (front contract) surpass $90/bbl before the end of the year? Below are the probabilities implied by the options market.
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3. US imports of used cooking oil from China (to be used for biomass-based diesel production) surged this year.
Source: @SusanNOBULL, @Barchart Read full article
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Equities
1. After Wednesday’s selloff, stock futures are up, boosted by Tesla’s upbeat report (TSLA shares are up 12%).
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2. Here is a look at BofA’s estimates for the S&P 500 EPS growth.
Source: BofA Global Research; @MikeZaccardi
3. The QQQ (Nasdaq 100 ETF) has formed a rising wedge, a pattern that could signal a potential bearish reversal ahead.
4. Leveraged companies have been outperforming in recent days.
5. Companies with significant exposure to China sales initially saw strong gains following Beijing’s stimulus measures but are now underperforming once again.
6. Short interest in the US equity market has steadily declined throughout this month.
Source: Goldman Sachs; @SteamroomTrader
7. How might an upside US inflation surprise affect various sectors? Below is an AI-generated scenario showing potential impacts.
8. The S&P 500 typically delivers double-digit annualized returns regardless of who is President, though there have been a few notable exceptions.
Source: Deutsche Bank Research
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Credit
1. CLO managers continue to add fixed-rate bonds to their portfolios.
Source: Deutsche Bank Research
2. This chart shows corporate interest payments as a percentage of operating surplus.
Source: Torsten Slok, Apollo
3. Reorganizations increasingly dominate the US corporate bankruptcy landscape.
Source: S&P Global Market Intelligence
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Global Developments
1. Bloomberg’s US dollar index is up 3% month-to-date.
• The dollar is testing downtrend resistance, although momentum has improved.
• Real yield differentials point to downside risks for the US dollar.
Source: BCA Research
• An uptick in US inflation could lead to more dollar strength.
Source: Gavekal Research
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2. How will the US presidential election impact the rest of the world?
Source: TS Lombard
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Food for Thought
1. US chip imports:
Source: Deutsche Bank Research
2. Defense spending as a percentage of GDP in Europe for 2022 and 2024:
Source: Alpine Macro
3. Gender gap among STEM graduates:
Source: IMF Read full article
4. Americans’ trust in the mass media:
Source: @axios Read full article
5. Changes in election-week violence in 2024 compared to previous elections:
Source: The Economist Read full article
6. Metro areas with the fastest-selling homes:
Source: Premier Online Marketing, Realtor.com
7. Beef leads as America’s favorite taco filling, with cheese as the most popular topping.
Source: @CivicScience Read full article
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