The Daily Shot: 05-Nov-24
• The United States
• Canada
• The Eurozone
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought
The United States
1. US financial conditions have been tightening in recent weeks.
2. So far, holiday hiring has been relatively soft.
Source: Oxford Economics
3. Fed hikes have not slowed down the US consumer.
Source: Torsten Slok, Apollo
4. This chart bridges nominal and real hourly earnings growth (year-over-year).
Source: Arcano Economics
5. Next, we have some updates on the housing market.
• Here is a look at the distribution of outstanding mortgages by interest rate.
Source: Goldman Sachs; @MikeZaccardi
• Goldman anticipates that mortgage rates will ease only slightly in the coming months.
Source: Goldman Sachs; @MikeZaccardi
• Economists have been downgrading their forecasts for next year’s housing starts.
• The median sale price of existing homes has risen 5.5% compared to last year, according to Redfin.
Source: Redfin
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6. Leading indicators suggest upside risks to food prices in the coming months.
Source: Deutsche Bank Research
7. Childcare costs remain elevated. (2 charts)
Source: Bank of America Institute
Source: Bank of America Institute
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Canada
1. What challenges are constraining Canada’s small businesses? Here’s a summary from the CFIB.
Source: CFIB
2. Canada’s GDP-per-capita is lagging that of the US.
Source: @bpolitics Read full article
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The Eurozone
1. The EUR/USD 1-week implied volatility surged ahead of the US election.
• The EUR/USD appears undervalued compared to its historical average.
Source: Longview Economics
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2. French bond yields are now above that of Spain.
3. Investor sentiment edged higher this month.
4. Spain’s manufacturing activity accelerated last month, …
… outperforming Eurozone peers.
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5. Small-cap equity performance has diverged within the Eurozone in recent years.
Source: Longview Economics
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Asia-Pacific
1. South Korea’s consumer inflation is slowing sharply, suggesting further rate cuts ahead.
Source: @WSJ Read full article
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2. The RBA left rates unchanged, …
Source: Reuters Read full article
… pushing potential rate cuts further into next year.
• Bond yields have been climbing (2 charts).
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China
1. S&P Global’s services PMI for China exceeded expectations as stimulus measures begin to take effect.
• Deflationary pressures appear to be easing.
Source: Capital Economics
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2. As part of its stimulus package, Beijing is considering converting LGFV debt into on-balance-sheet local government debt to ease the burden on local authorities.
Source: David Qu, @TheTerminal, Bloomberg Finance L.P. Read full article
3. Stocks jumped on stronger services PMI and stimulus hopes (above).
Source: @markets Read full article
• By the way, an escalation in the US-China trade war could weigh on Chinese shares.
Source: UBS Asset Management
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4. The 1-week USD/CNH (offshore yuan) implied volatility hit a record high ahead of the US elections.
5. Hong Kong’s business activity accelerated last month.
6. Here’s an overview of changes in China’s trade relationships from Q1 2023 to Q1 2024.
Source: TS Lombard
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Emerging Markets
1. Mexico’s business investment has been slowing.
• Formal job creation remains soft.
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2. Brazil’s vehicle sales hit a multi-year high.
3. Next, we have some updates on Chile.
• Economic activity (growth stalling):
• Manufacturing output (below last year’s levels):
• Business confidence (grinding higher):
• Copper production (well above last year’s levels):
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4. Turkey’s inflation eased slightly last month but remained near 50%.
Source: @economics Read full article
• The BIST 100 (Turkey’s equity index) is testing support.
Source: @TheTerminal, Bloomberg Finance L.P.
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5. India’s credit growth has slowed.
Source: @markets Read full article
6. Pakistan’s central bank cut its benchmark rate by 250 bps.
Source: Reuters Read full article
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7. South Africa’s vehicle sales are rebounding.
• Here is a look at South Africa’s GDP projections.
Source: Codera Analytics
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8. This scatterplot displays the rate differentials of various EM currencies against the USD versus their implied volatility, illustrating potential carry versus risk.
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Cryptocurrency
1. Crypto funds saw inflows last week.
Source: CoinShares Read full article
• Here are the cumulative flows over the past 12 months.
Source: Deutsche Bank Research
• Ethereum-focused funds saw tepid inflows, although long-Bitcoin funds continue to attract the most capital.
Source: CoinShares Read full article
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2. Weak online search activity for ‘bitcoin’ indicates limited direct retail participation in the recent rally, …
Source: @0xGumshoe
… with gains primarily fueled by fund flows.
Source: Michael Green; @dailychartbook Further reading
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3. Ether continues to underperform.
4. CoinShares estimates the average cost to produce one Bitcoin across all listed miners is $49,500.
Source: CoinShares Read full article
5. The price of listed miners has trailed Bitcoin’s price this year.
Source: CoinShares Read full article
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Commodities
1. China still consumes more than half of global commodities. This is compared to a less than 30% share of global commodity demand in 2005, according to ANZ Research. (2 charts)
Source: @ANZ_Research
Source: @ANZ_Research
• China’s grain market deficit has narrowed in recent years.
Source: @ANZ_Research
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2. Copper is vulnerable to potential weakness in global demand.
Source: BCA Research
3. CME milk futures have been tumbling.
4. Palm oil has been trading at a premium to soybean oil, an uncommon occurrence.
Source: @SusanNOBULL, @Barchart Read full article
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Energy
1. Only Saudi Arabia and the UAE have substantial capacity to increase production.
Source: Capital Economics
2. Energy funds continue to see outflows.
Source: Deutsche Bank Research
3. Here is a look at the contributions to global nuclear electricity generation.
Source: US Global Investors
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Equities
1. November tends to be a favorable month for stocks, …
… including during election years.
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2. Investors have been buying index put options ahead of the elections.
3. S&P 500 breadth has weakened.
Source: Aazan Habib, Paradigm Capital
4. The market has been rewarding earnings and sales beats this season.
Source: BofA Global Research; @dailychartbook
5. Equity inflows have been exceptionally strong for an election year.
Source: Deutsche Bank Research
6. The S&P 500 futures have been testing support.
h/t @yuriymatso
• The NYSE Composite Index is trading near the upper bound of its long-term trend channel.
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7. The global stock/bond ratio remains in an uptrend alongside strong forward earnings.
Source: MRB Partners
8. The bet on utilities as an AI play is encountering some challenges.
Source: @technology Read full article
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9. Next, let’s take a look at factor/style valuations relative to long-term averages (2 charts). The S&P 500 Equal Weighted Index is no longer cheap compared to historical levels.
Source: Truist Advisory Services
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10. Earnings expectations for small caps continue to lag further behind those of large caps.
Source: @TheTerminal, Bloomberg Finance L.P.
11. Which sectors could benefit from potential deregulation under Trump?
Source: BofA Global Research; @dailychartbook
12. How much have tech megacaps contributed to the S&P 500’s year-to-date return?
Source: @awealthofcs Read full article
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Credit
1. Muni issuance was very strong last month.
Source: Truist Advisory Services
2. Here’s a look at asset yields compared to implied volatility (expected returns vs. perceived risk).
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Rates
1. Treasury market implied volatility continues to climb, …
… rising well above historical levels.
Source: Deutsche Bank Research
This chart shows bond volatility premiums ahead of the US elections.
Source: Deutsche Bank Research
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2. The open interest in TLT options has been surging.
Source: @TheTerminal, Bloomberg Finance L.P.
3. Here’s an overview of Fed funds rate forecasts under different election outcomes.
Source: Oxford Economics
4. Massive speculative short positions in Treasury futures (2 charts) suggest significant futures-cash arbitrage trades. Will regulators push back?
Source: Deutsche Bank Research
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Food for Thought
1. Time taken for AP to call each state’s presidential race in 2020:
Source: @axios Read full article
2. The education divide in US politics over time:
Source: @financialtimes Read full article
3. Popular vote spread between the candidate elected US President and the runner-up:
Source: Deutsche Bank Research
4. 2024 abortion-related ballot initiatives:
Source: @bpolitics Read full article
5. Number of states with single-party control over state legislative chambers and governorship (2 charts):
Source: @MaryEllenKlas, @opinion Read full article
Source: @MaryEllenKlas, @opinion Read full article
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6. US homicide rate:
Source: The New York Times Read full article
7. Consumer spending on sports events vs. concerts:
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