Posted on by The Daily Shot Editor: Lev Borodovsky

The US dollar rally could dampen the mood in risk assets

The Daily Shot: 11-Nov-24
• The United States
• Canada
• The Eurozone
• Europe
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought

 

The United States

1. The initial November reading of the U. Michigan Consumer Sentiment Index surprised to the upside, with a sharp rise in the expectations index.
 

 
• One-year inflation expectations declined further while the longer-term measure edged higher.
 

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2. US financial conditions eased sharply last week as equities rallied, credit spreads tightened, and volatility eased across the board.
 

 
Here is the Treasury market implied volatility index.
 

 
However, the US dollar has resumed its rally, which could weigh on risk assets this week.
 

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3. The FOMC has been assigning a lower upside risk to inflation. Is the central bank too complacent?
 
Source: MRB Partners  
 
4. Americans continue to move away from coastal areas with less affordable housing, according to BofA customer data.
 
Source: Bank of America Institute  
 
5. More Americans would prefer to rent if they were to move.
 
Source: @economics   Read full article  
 
6. Favorable views on the Affordable Care Act (ACA) have improved across party lines.
 
Source: MRB Partners  
 
ACA enrollment increased after the pandemic, partly boosted by enhanced subsidies.
 
Source: MRB Partners  

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Canada

1. The October job gains were softer than expected, with weakness driven by part-time positions.
 

 
Here are the contributions.
 
Source: Scotiabank Economics  
 
• The unemployment rate held steady.
 

 
• Labor force participation continues to sink.
 

 
• Wage growth surprised to the upside.
 

 
Source: Reuters   Read full article  

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2. The Ivey PMI report showed weaker activity growth last month.
 

 
Hiring has slowed.
 

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The Eurozone

1. Last week was challenging for the euro.
 

 
2. European shares are trading at a record discount to the S&P 500.
 

 
3. French shares continue to widen their underperformance vs. Germany.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
• Analysts have been less optimistic about French corporate earnings compared to the STOXX 600.
 

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4. The French trade deficit widened again in September.
 

 
5. Italian industrial production continues to sink.
 

 
But retail sales jumped in September.
 

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6. German and French households have continued to accumulate excess savings since the pandemic.
 
Source: MRB Partners  
 
7. Nearshoring and an increase in Chinese companies relocating their production to Europe have boosted foreign direct investment, possibly in anticipation of rising trade tensions with the US. (2 charts)
 
Source: ECB  
 
Source: ECB  

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Europe

1. Sweden’s industrial production climbed in September.
 

 
• Services output reached a record high.
 

 
• But household consumption edged lower.
 

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2. European corporate cash levels have fallen this year.
 
Source: ING  
 
3. Here is the breakdown of enterprises, employment, and turnover by industry and company size in the EU.
 
Source: Eurostat   Read full article  

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Asia-Pacific

1. Japan’s current account surplus tanked in September but showed strong performance for the first half of the fiscal year.
 

 
2. Taiwan’s exports held at record highs last month.
 

 
3. Asian currencies have become more correlated to US Treasury prices.
 

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China

1. China continues to face disinflationary pressures from overcapacity.
 

 
Source: Reuters   Read full article  
 
• The core CPI edged higher, …
 

 
… due to services inflation, …
 

 
… while core goods inflation is approaching zero again.
 

 
• Producer prices remain stuck in deflation, with October’s PPI reading coming in more negative than anticipated.
 

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2. Beijing announced a $1.4 trillion debt swap to refinance local off-the-balance-sheet government debt.
 
Source: @bpolitics   Read full article  
 
Source: Nikkei Asia   Read full article  
 
• Investors had hoped for more stimulus, but Beijing seems to be reserving it to address Trump 2.0 tariffs. Stocks declined in Hong Kong.
 

 
Source: @markets   Read full article  

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3. The renminbi has been increasingly correlated to other Asian currencies.
 

 
4. First-time home buyers account for a lower share of housing demand.
 
Source: SOM Macro Strategies  

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Emerging Markets

1. The Indian rupee hit a record low vs. USD as the dollar rally resumed.
 

 
2. Ukraine’s inflation is nearing 10% again.
 

 
3. Brazil’s inflation is on the rise.
 

 
4. Chile’s CPI surprised to the upside.
 

 
5. Colombia’s inflation continues to ease.
 

 
6. Outflows from EM bond funds accelerated last week.
 
Source: BofA Global Research; @dailychartbook  
 
7. Next, we have last week’s performance data.
 
• Currencies:
 

 
• Bond yields:
 

 
• Equity ETFs:
 

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Cryptocurrency

1. Bitcoin continues to surge, nearing $82k this morning.
 

 
2. The correlation between bitcoin and stocks continues to rise.
 

 
• Bitcoin is becoming increasingly inversely correlated with Asian currencies.
 

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3. BlackRock’s bitcoin ETF assets have surpassed those of the firm’s gold fund.
 
Source: @markets   Read full article  
 
4. Dogecoin has gone vertical.
 
Source: @DavidInglesTV  
 
5. Here is a look at crypto performance over the past seven days.
 

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Commodities

1. Iron ore is down this morning, with the market disappointed by Beijing’s stimulus announcement.
 

 
Source: @markets   Read full article  

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2. Gold appears overbought within a long-term uptrend. (2 charts)
 

 
Source: MRB Partners  
 
• Gold funds saw some outflows last week.
 

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3. US corn futures have been up for six consecutive sessions.
 

 

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4. US HRW wheat futures have been selling off.
 

 
5. Here is a look at last week’s performance.
 

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Energy

1. US retail gasoline prices continue to fall.
 

 
2. Hedge funds are more bullish on crude oil.
 
Source: @markets   Read full article  
 
3. US natural gas in storage is near the five-year high again.
 
Source: @EIAgov  
 
4. Europe is reporting substantial withdrawals from natural gas storage.
 
Source: @JavierBlas, @Opinion   Read full article  
 
5. Clean energy shares underperformed sharply last week.
 

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Equities

1. The S&P 500 hit its 50th record high of the year on Friday,…
 

 
… as the index approached 6,000.
 

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2. Small-cap funds saw substantial inflows last week, …
 

 
… with regional bank shares seeing robust demand.
 

 
• The QQQ (Nasdaq 100 ETF) saw strong inflows last week.
 

 
Here are the cumulative flows over the past five years.
 

 
• This chart shows the cumulative flows into SPY (the largest S&P 500 ETF).
 

 
• Here are fund flows by sector.
 
Source: Deutsche Bank Research  

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3. Deutsche Bank’s positioning indicator surged last week, …
 
Source: Deutsche Bank Research  
 
… exceeding positioning trends observed around recent elections.
 
Source: Deutsche Bank Research  

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4. Goldman’s sentiment indicator soared last week and is now deep in “stretched” territory.
 
Source: Goldman Sachs; @MikeZaccardi  
 
5. The gap down in the VIX following the US election was extreme.
 
Source: SentimenTrader  
 
• Here is the short-term S&P 500 volatility curve.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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6. Historically, Republican victories have triggered a bullish response in the S&P 500, although the impact typically fades.
 
Source: TS Lombard  
 
7. Companies focused on international sales underperformed last week.
 

 
8. Small caps are holding their post-election outperformance.
 

 
9. Consumer staples continue to outperform the consumer discretionary sector.
 

 
10. Momentum stocks have been surging.
 

 
11. Next, we have some performance data from last week.
 
• Sectors:
 

 
• Equity factors:
 

 
• Macro basket pairs’ relative performance.
 

 
• Thematic ETFs:
 

 
• Largest US tech firms:
 

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Credit

1. The average spread for US investment-grade bonds has fallen to its lowest level since 1997.
 

 
Goldman expects credit spreads to widen by the end of the year.
 
Source: Goldman Sachs; @MikeZaccardi  

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2. Leveraged loan funds are seeing strong inflows.
 

 
Source: BofA Global Research; @dailychartbook  
 
• HY bonds are also seeing inflows.
 

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3. Here is a look at last week’s performance.
 

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Global Developments

1. How do equity indices respond to tariff announcements?
 
Source: Goldman Sachs  
 
2. Here is a look at last week’s performance.
 
• Currencies:
 

 
• Bond yields:
 

 
• Equity indices:
 

 
• USD-denominated equity ETFs:
 

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Food for Thought

1. US voter turnout over time:
 

 
2. Google search activity for “tubal ligation”:
 

 
3. Perceptions of social judgment on weight loss using medications vs dieting:
 
Source: @CivicScience   Read full article  
 
4. Russia’s territorial gains in Ukraine:
 
Source: @bpolitics   Read full article  
 
5. Cuba’s crude oil imports:
 
Source: The Economist   Read full article  
 
6. Evolution of world map accuracy through history:
 
Source: Visual Capitalist   Read full article  
 

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