Posted on by The Daily Shot Editor: Lev Borodovsky

Chair Powell’s hawkish tone dampens the post-election euphoria

The Daily Shot: 15-Nov-24
• The United States
• The United Kingdom
• The Eurozone
• Japan
• China
• India
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Global Developments
• Food for Thought

 

The United States

1. Chair Powell struck a hawkish tone on Thursday, tempering market expectations for rate cuts. He emphasized the strength of economic activity, signaling caution toward policy easing.

Chair Powell: – The recent performance of our economy has been remarkably good, by far the best of any major economy in the world. … The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.

Other Fed officials have also been cautious on the trajectory of rate reductions. Here is Bloomberg’s Fed sentiment indicator.
 

 
• Market expectations for a December rate cut retreated (2 charts).
 

 

 
• The market is now pricing in only 54 bps of rate reductions next year.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
• Treasury yields climbed.
 

 

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2. The core PPI came in stronger than expected, reflecting some upward pressure in healthcare, airfares, and portfolio management.
 

 
Source: Reuters   Read full article  
 
• The portfolio management PPI component is highly correlated to stock market performance.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
• The CPI and PPI reports suggest strong gains in the core PCE measure for October, the Fed’s preferred inflation gauge.
 
Source: Pantheon Macroeconomics  

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3. Below are some additional trends on the CPI report.
 
• CPI components’ year-over-year changes and their weight in the CPI index:
 
Source: Arcano Economics  
 
• CPI components in which the 3-month changes are higher than the 12-month changes:
 
Source: TS Lombard  
 
• CPI reacceleration concerns:
 
Source: @MikaelSarwe  
 
• CPI by metro area:
 
Source: @economics   Read full article  
 
Separately, online food prices declined in October for the first time since 2020.
 
Source: @economics   Read full article  

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4. Initial jobless claims remained relatively low last week.
 

 
Here is the seasonally adjusted index.
 

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5. The federal budget deficit in October was wider than expected, mirroring the 2021 trajectory.
 

 
The key driver continues to be high interest expenses.
 

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6. US-dollar-denominated money market fund assets continue to surge.
 

 
7. Relatively low electricity prices give US-based companies an advantage over international peers.
 
Source: @mmjukic  

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The United Kingdom

1. The Q3 GDP growth was softer than expected.
 

 
Source: CNBC   Read full article  
 
The monthly UK GDP estimate unexpectedly contracted, driven by weaker industry and services output.
 

 

 
We will have more on the GDP report next week.

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2. Declines in UK landlord instructions during autumn reflect tightening rental supply.
 
Source: @financialtimes   Read full article  
 
3. Payrolls in non-government sectors have been declining.
 
Source: ING  

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The Eurozone

1. The updated GDP report confirmed growth strengthening last quarter.
 

 
• The Dutch GDP growth surprised to the upside.
 

 
– Exports strengthened.
 

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2. Euro-area employment growth edged higher in Q3.
 

 
Source: Reuters   Read full article  

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3. Euro-area industrial production deteriorated further in September.
 

 
The decline was even more pronounced when Ireland is excluded from the calculation.
 
Source: @DanielKral1, @OxfordEconomics  

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4. ECB officials’ comments have turned less dovish this month.
 
Source: Nomura Securities  

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Japan

1. The Q3 GDP growth print was firmer than expected, …
 

 
… as consumer spending strengthened.
 

 
Source: Nikkei Asia   Read full article  
 
• Net exports unexpectedly detracted from the GDP last quarter.
 

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2. Retail investors sold stocks last week.
 
Source: @markets   Read full article  

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China

1. Last month’s retail sales topped expectations.
 

 
• However, industrial production was softer than expected.
 

 
• Real estate investment continues to deteriorate.
 

 
Source: Reuters   Read full article  

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2. The declines in housing prices slowed in October.
 

 
3. China-focused equity funds saw substantial outflows in recent weeks.
 
Source: BofA Global Research  
 
4. Leveraged equity trades have been rising.
 
Source: @markets   Read full article  

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India

1. The trade deficit was wider than expected.
 

 
• Exports surged, …
 

 
… while imports reached a record high.
 

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2. Food inflation has been rising.
 
Source: @andymukherjee70, @opinion   Read full article  

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Emerging Markets

1. Mexico’s central bank cut rates again.
 

 
Source: Reuters   Read full article  

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2. Brazil’s economic activity accelerated in September.
 

 
3. Here are some updates on Colombia.
 
• Consumer confidence (improving):
 

 
• Manufacturing production (now well below 2023 levels):
 

 
• Retail sales (a slowdown in September):
 

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4. South Africa’s mining output jumped in September.
 

 
5. The Russian ruble continues to weaken, with USD/RUB back above 100.
 

 
6. Romania’s GDP growth unexpectedly stalled last quarter.
 

 
7. Indonesia’s exports surprised to the upside.
 

 
8. The MSCI EM equity index is at its 200-day moving average.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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Cryptocurrency

1. The Bitcoin/Gold price ratio reached a new high.
 

 
2. XRP outperformed top cryptos this week.
 
Source: FinViz  
 
Source: CoinGape   Read full article  

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3. Crypto funds registered their largest weekly inflow on record.
 
Source: BofA Global Research  
 
4. Crypto ETFs’ trading volumes continue to climb.
 
Source: @EricBalchunas  

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Commodities

1. China’s steel prices are falling amid concerns about demand.
 

 
2. Gold funds are seeing outflows.
 
Source: BofA Global Research  
 
3. Cocoa futures are surging on supply concerns.
 

 
Source: barchart.com   Read full article  

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4. Arabica coffee prices hit a multi-year high.
 

 
Source: barchart.com   Read full article  

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Energy

1. US crude oil inventories rose more than expected last week, while refined product stockpiles, particularly gasoline, saw significant declines.
 

 
Here are the inventory levels.
 

 
• Gasoline demand surged during US election week.
 

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2. Despite sharp declines in US gasoline inventories, Brent crude is back below $72/bbl.
 

 
Source: @markets   Read full article  

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3. European natural gas futures are surging.
 

 
Source: @markets   Read full article  

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Equities

1. Stock futures are down this morning after Chair Powell dampened sentiment with hawkish remarks.
 

 
2. S&P 500 breadth has weakened.
 
Source: Damanick Dantes; Bloomberg  
 
3. US companies with substantial international sales have widened their underperformance.
 

 
4. Large-cap equity funds saw record inflows following the US election.
 
Source: BofA Global Research  
 
5. Next, we have some sector updates.
 
• EV and battery-related stocks underperformed sharply this week.
 
Source: Reuters   Read full article  
 

 

 
• Financials are seeing large inflows, …
 
Source: BofA Global Research  
 
… resulting in outperformance.
 

 
• Utilities registered sharp outflows, …
 

 
… with BofA’s private clients exiting the sector (replacing utilities with MLPs).
 

 
• Materias are seeing strong inflows, …
 
Source: BofA Global Research  
 
… even as the sector underperforms.
 

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6. 96% of ETFs registered gains over the past 12 months.
 
Source: @psarofagis, @TheTerminal, Bloomberg Finance L.P.  
 
7. Investment managers are increasingly optimistic about stocks.
 

 
8. Current market conditions are vastly different from the 2016 election.
 
Source: MRB Partners  
 
• The US now accounts for roughly 65% of the total global equity market cap.
 
Source: MRB Partners  
 
9. US stocks’ outperformance relative to the rest of the world has reached extreme levels.
 
Source: BofA Global Research  

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Global Developments

1. The dollar is approaching resistance.
 

 
2. Productivity growth in the US and China has diverged in recent years.
 
Source: MRB Partners  
 
3. How will Trump 2.0 policies impact the rest of the world?
 
Source: TS Lombard  

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Food for Thought

1. Rising median age of US first-time and repeat homebuyers in the US:
 
Source: @chartrdaily  
 
2. Changes in US household composition from 1960 to 2023:
 
Source: Visual Capitalist   Read full article  
 
3. Screen time habits of American teenagers:
 
Source: @chartrdaily  
 
4. Weight loss approaches in 2023 vs. 2024:
 
Source: @CivicScience   Read full article  
 
5. Political ad spending on Meta platforms in swing states:
 
Source: Bellingcat   Read full article  
 
6. Variation in interpersonal trust levels across countries:
 
Source: Our World in Data  
 
7. The biggest chocolate exporters:
 
Source: Visual Capitalist   Read full article  
 

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Have a great weekend!

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