US services sector activity surged in December

The Daily Shot: 17-Dec-24
The United States
Canada
The United Kingdom
The Eurozone
Asia-Pacific
China
India
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Rates
Global developments
Food for Thought



 

The United States

1. The PMI report from S&P Global was mixed, showing a further slowdown in factory activity …
 

 
Source: Reuters   Read full article  
 
… while service sector growth accelerated this month.
 

 
Source: @economics   Read full article  
 
Service sector price pressures have been moderating.
 

 
Here is the composite index.
 

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2. The New York Fed’s manufacturing index, the first regional indicator of the month, pulled back more than expected. This survey has been volatile, partly due to its relatively small sample size.
 

 
The region’s factory employment is back in contraction mode.
 

 
Cost pressures have eased.
 

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3. Looser financial conditions may hinder efforts to bring inflation back to the 2% target
 
Source: Economics and Strategy Group, National Bank of Canada  


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Canada

1. Canada’s consumer sentiment fell further amid US tariff threats and rising domestic political uncertainty.
 

 
Source: BBC   Read full article  

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2. Last month’s housing starts topped expectations.
 

 
3. The market anticipates two more BoC rate cuts by June (including the June meeting).
 
Source: @TheTerminal, Bloomberg Finance L.P.  


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The United Kingdom

The UK manufacturing PMI sunk deeper into contraction territory this month as demand crashes.
 

 
Services growth improved, but firms in the sector have accelerated staff reductions.
 

 
The composite PMI (services + manufacturing) indicates weaker demand, particularly from abroad.
 

 
The composite employment index does not bode well for the labor market.
 

 
Output price gains accelerated.
 

 
Source: Reuters   Read full article  


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The Eurozone

1. The manufacturing slump continues to weigh on the Eurozone economy.
 
Germany:
 

 
France:
 

 
Services indicators showed improvement.
 
Germany (back to growth amid persistently soft demand):
 

 
France (slower contraction but tumbling employment):
 

 
The Eurozone’s labor markets may be encountering fresh headwinds.
 

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2. Only one ECB rate cut is now priced in for January.
 

 
3. Spain’s home sales have accelerated.
 

 
4. Will Friedrich Merz become Germany’s next chancellor?
 
Source: @bpolitics   Read full article  


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Asia-Pacific

1. The yen appears significantly undervalued based on the real effective exchange rate.
 
Source: MRB Partners  
 
Narrower interest rates between Japan and “weak link” economies such as Australia, Canada, and the UK could benefit the yen in relative terms.
 
Source: MRB Partners  

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2. Singapore’s new home sales surged last month.
 
Source: @economics   Read full article  


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China

1. China may implement its most substantial interest rate cuts in a decade by 2025, with a projected 40-basis-point reduction in the PBOC’s seven-day reverse repo rate. This would continue the trend of monetary easing since 2015, aiming to stimulate economic growth amid sluggish domestic demand and potential US tariff increases.
 
Source: @economics   Read full article  
 
2. Financial conditions have eased substantially.
 
Source: BofA Global Research  
 
3. Here is a look at the number of protests across China.
 
Source: The Economist   Read full article  


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India

1. The trade deficit hit a new record, …
 

 
… as imports surged while exports softened.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Source: Reuters   Read full article  

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2. The rupee continues to weaken.
 


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Emerging Markets

1. Brazil’s markets have been under pressure.
 
The real (record low vs. USD):
 

 
Source: @markets   Read full article  
 
10yr bond yield:
 

 
Equities (2 charts):
 

 

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2. Argentina exited its recession last quarter.
 

 
Source: @economics   Read full article  

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3. Mexico’s factory output has not grown in two years.
 

 
Mining production continues to deteriorate.
 

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4. Colombia’s retail sales growth accelerated in October.
 

 
5. Nigeria’s inflation hit a multi-decade high.
 

 
Source: @economics   Read full article  

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6. Russia’s equity market has been weakening since May.
 

 
Source: AP News   Read full article  


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Cryptocurrency

1. Bitcoin is trading near $107k, it’s 22nd record high of the year.
 

 
2. ETH/USD is breaking above initial resistance with improving long-term momentum.
 
Source: @StocktonKatie  
 
3. The ETH/BTC price ratio also displays improving momentum within its downtrend.
 

 
4. SOL (Solana) is breaking down against BTC.
 

 
5. The Crypto Fear & Greed Index moved deeper into “extreme greed” territory.
 
Source: Alternative.me  
 
6. Crypto funds saw additional inflows last week led by Ethereum-focused products.
 
Source: CoinShares  
 
Source: CoinShares  


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Commodities

1. Central banks’ demand for gold surged after Western nations froze Russia’s central bank assets.
 
Source: Goldman Sachs; @WallStJesus  
 
2. Orange juice futures continue to hit record highs.
 


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Energy

1. Uranium prices continue to sink.
 

 
2. US LNG export capacity is expected to rise as approved projects come online.
 
Source: Capital Economics  
 
3. A global crude oil surplus is set to hit the market next quarter.
 
Source: @JavierBlas, @IEA  


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Equities

1. Any sector without Magnificent 7 stocks is down for the month. Notably, gains in the Consumer Discretionary sector have been driven by Tesla and Amazon.
 

 
Magnificent 7 stocks are now a third of the S&P 500 market cap.
 
Source: Goldman Sachs; @dailychartbook  

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2. Market breadth has deteriorated across the board.
 
Source: Aazan Habib, Paradigm Capital  
 
The number of declining stocks in the S&P 500 has outpaced advancers for 11 consecutive days, marking the first such streak in recent decades.
 

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3. Value stocks have underperformed growth by over 30% year-to-date.
 

 
The S&P 500 Value Index has been down for 11 consecutive days.
 

 
The value-growth divergence is reflected in major US indices.
 

 

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4. Institutional investor optimism toward stocks has reached extreme levels, …
 
Source: BofA Global Research  
 
.. as cash levels dwindle (2 charts).
 
Source: BofA Global Research  
 
Source: BofA Global Research  

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5. US households’ exposure to stocks continues to grow.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
6. Some investors are buying out-of-the-money downside protection on stocks. Here is the 5%/50% VIX call skew.
 
Source: Goldman Sachs; @dailychartbook  


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Credit

1. Similar to the US, the European CLO market remains robust.
 
Source: PitchBook  
 
2. European corporate defaults have accelerated.
 
Source: @WSJ   Read full article  


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Rates

1. According to Capital Economics, the market is pricing in the correct Fed terminal rate, but the market-implied pace of rate cuts is too slow.
 
Source: Capital Economics  
 
Resilient growth may nudge the Fed’s neutral rate higher. Will policy hawks dominate 2025’s dot plot revisions?
 
Source: @ANZ_Research  
 
Markets are betting the Fed funds rate won’t drop below 3.5% for the foreseeable future.
 
Source: Torsten Slok, Apollo  

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2. As bond volatility drops, Risk Parity models are heavily reallocating toward bonds. However, historical patterns show that this behavior has often coincided with sudden reversals.
 
Source: PGM Global  


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Global developments

1. The dollar is testing resistance within a wide trading range.
 

 
2. Very few investors expect a hard landing over the next year.
 
Source: BofA Global Research  
 
According to a Deutsche Bank survey, investors see a significantly lower chance of a US hard landing and a real estate slump/credit defaults, while risks of a global trade war and plunging tech valuations are heightened compared to last year.
 
Source: Deutsche Bank Research  


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Food for Thought

1. Box office market share by MPAA rating in North America, highlighting the rise of PG-rated movies:
 
Source: @chartrdaily  
 
Top-grossing PG movies adjusted for inflation, showcasing popular sequels and animated hits:
 
Source: @chartrdaily  

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2. Sports betting availability across US states by operational status since 2018:
 
Source: The Economist   Read full article  
 
3. Comparison of average and median wealth across the top 20 countries:
 
Source: Visual Capitalist   Read full article  
 
4. NATO fighter and ground attack aircraft numbers by type and origin:
 
Source: @financialtimes   Read full article  
 
5. Density of RV parks and campgrounds per 100 square miles across the United States:
 
Source: maps.com  
 

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