Retail sales top expectations

The Daily Shot: 18-Dec-24
The United States
Canada
The United Kingdom
The Eurozone
Japan
China
Emerging Markets
Commodities
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. Last month’s retail sales exceeded expectations, driven by strong vehicle and online sales (3 charts).
 

 

 

 
Source: @economics   Read full article  
 
Food services sales declined.
 

 
Here is a look at monthly gains in core retail sales.
 

 
The blue graph below shows the inflation-adjusted retail sales level.
 

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2. After two months of declines, manufacturing output increased less than expected in November.
 

 
Capacity utilization edged higher.
 

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3. The NAHB builder sentiment index was roughly unchanged in December.
 

 
While homebuilders are upbeat on sales next year, …
 

 
… buyer interest remains soft.
 

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4. The Atlanta Fed’s GDPNow Q4 growth estimate has been moving lower but remains above 3% (annualized).
 
Source: Federal Reserve Bank of Atlanta  
 
Here are the contributions.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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5. The market anticipates a Fed rate cut today, potentially followed by a pause.
 

 
Economists project an additional 75 bps of rate cuts next year (in addition to 25 bps today).
 
Source: @TheTerminal, Bloomberg Finance L.P.  


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Canada

1. The headline CPI dipped below 2% in November.
 

 
Core inflation measures were mixed.
 

 
Rent inflation remains elevated.
 

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2. The Canadian dollar dropped below 70 US cents for the first time since March 2020, …
 

 
… as the rate differential continues to widen.
 


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The United Kingdom

1. UK wage growth accelerated in the three months ending in October, …
 

 
… sending gilt yields higher.
 

 
Unemployment claims remain elevated, …
 

 
… while payrolls saw a sharp decline in November. However, this figure is subject to significant revisions.
 

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2. Here is Morgan Stanley’s forecast for the BoE rate over the next couple of years.
 
Source: Morgan Stanley Research  


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The Eurozone

1. Germany’s ZEW expectations of economic growth (2nd panel) improved this month.
 

 
However, the Ifo business expectations index (2nd panel) saw a sharp decline.
 

 
Here is Ifo by sector.
 
Source: ifo Institute  

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2. The French bond spread over Germany remains elevated due to political and budgetary uncertainty.
 

 
Source: @business   Read full article  

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3. The euro-area trade surplus narrowed sharply in October.
 

 
4. The euro’s share of SWIFT payments has decreased over the past few years.
 
Source: Gavekal Research  
 
5. Morgan Stanley sees the ECB’s terminal rate at 1% (reached in early 2026).
 
Source: Morgan Stanley Research  


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Japan

1. Exports have been steady over the past year.
 

 
2. Will the BoJ raise its policy rate to 0.75% next year? Here is a forecast from Morgan Stanley.
 
Source: Morgan Stanley Research  
 
3. Below is a projection for Japan’s power mix by 2040.
 
Source: @bpolitics   Read full article  


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China

1. Market rates have been declining across maturities. Here is the 1-year swap.
 

 
This is the swap curve shift over the past seven days.
 

 
The PBoC is trying to push back on falling yields. Will it work this time?
 
Source: @markets   Read full article  

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2. Industrial production has been tracking the pre-COVID trend, while retail sales have been falling further behind.
 
Source: @markets   Read full article  
 
3. Broad price declines continue.
 
Source: @economics   Read full article  
 
4. The slump in Hong Kong’s property market is taking its toll.
 
Source: SCMP   Read full article  
 

 


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Emerging Markets

1. The Brazilian real bounced from the lows as the central bank intervened.
 

 
Source: @economics   Read full article  
 
Brazil’s sovereign CDS spread has widened the most among EM peers.
 
Source: @markets   Read full article  

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2. Argentina reported another budget surplus.
 

 
Employment optimism in Argentina is low compared to other OECD countries.
 
Source: Gallup   Read full article  
 
Support for President Milei varies between the rich and poor, according to a Gallup survey.
 
Source: Gallup   Read full article  

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3. Chile’s central bank delivered another rate cut.
 

 
4. The Indian rupee continues to weaken, with USD/INR nearing 85.
 


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Commodities

1. Funds have been boosting their bets on corn futures.
 
Source: Deutsche Bank Research  
 
2. Have lumber futures finally bottomed?
 


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Equities

1. It’s been a while since the Dow registered nine consecutive daily losses.
 

 
2. Speculative stocks continue to outperform.
 
Meme stocks:
 

 
Unprofitable tech:
 

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3. The S&P 500 Shiller CAPE ratio has reached its highest level since the dot-com bubble, highlighting lofty valuations.
 
Source: GuruFocus.com  
 
4. Fund managers continue to view long positions in Magnificent 7 stocks as the most crowded trade.
 
Source: BofA Global Research  
 
Here is Deutsche Bank’s tech positioning indicator.
 
Source: Deutsche Bank Research  

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5. Is the Nasdaq 100 hitting resistance?
 

 
Here is the Nasdaq 100 performance relative to international stocks.
 
Source: @johnauthers, @opinion   Read full article  

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6. Next, we have some sector updates.
 
Sector fund flows indicate increasing demand for financials, …
 
Source: Deutsche Bank Research  
 
… with fund managers holding their highest overweight position in decades (2 charts).
 
Source: BofA Global Research  
 
Source: BofA Global Research  
 
The semiconductor sector premium has narrowed since the June peak.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The recent valuation moves within the sector have been uneven.
 
Source: @markets   Read full article  
 
The S&P 500 materials sector experienced declining breadth for most of the year and does not appear oversold.
 

 
The S&P 500 materials (XLB) and metals/mining sector (XLB) ETFs experienced new breakdowns in long-term relative strength. (2 charts)
 

 


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Credit

1. There was a slight increase in the share of active bond managers beating their benchmark this year vs. last year.
 
Source: State Street Global Advisors   Read full article  
 
2. HY market complacency has been rising.
 
Source: @WSJ   Read full article  


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Rates

1. What do investors see the Treasury curve doing over the next six months? This chart is from a survey by Alpine Macro.
 
Source: Alpine Macro  
 
2. Repo volumes have been surging, fueled in part by extensive cash-futures basis arbitrage activity in Treasuries.
 
Source: Simon White, Bloomberg Markets Live Blog  


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Global Developments

1. Tariff uncertainty is rising, albeit still below the 2019 peak.
 
Source: BlackRock Investment Institute  
 
2. The wide gap between US and non-US economic growth is starting to narrow, which could weigh on the dollar. (2 charts)
 
Source: MRB Partners  
 
Source: MRB Partners  

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3. Here is a look at the top 2500 global companies by R&D spend.
 
Source: @financialtimes   Read full article  


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Food for Thought

1 Total movie releases by firm:
 
Source: Wall Street Horizon   Read full article  
 
2. Literacy and numeracy proficiency among OECD adults:
 
Source: The Economist   Read full article  
 
3. Changes in active military personnel for the US and selected European countries:
 
Source: @financialtimes   Read full article  
 
4. City neighborhoods and urban counties with shifts toward Trump by racial and ethnic group:
 
Source: The New York Times   Read full article  
 
5. Four main types of AI and their subcategories:
 
Source: @genuine_impact  
 
6. 2024 search trends:
 
Source: r/dataisbeautiful  
 

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