Ready for another dockworkers’ strike?

The Daily Shot: 03-Jan-25
The United States
Canada
The United Kingdom
Europe
China
Emerging Markets
Commodities
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. Construction spending was unchanged in November, weighing on Q4 GDP growth.
 

 
Source: @WSJ   Read full article  
 
Here are the trends in private construction spending.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Home improvement growth remains robust.
 
Source: Eliza Winger; @TheTerminal, Bloomberg Finance L.P.   Read full article  
 
The surge in manufacturing construction spending has stalled.
 

 
Spending on data centers continues to soar.
 

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2. Next, we have some updates on the housing market.
 
Last week’s mortgage applications reached a multi-year low for this time of year, …
 

 
… as mortgage rates climbed.
 

 
Below is the rate lock count.
 
Source: AEI Housing Center  
 
Refi activity was also very soft.
 

 
Home price appreciation held up well in November.
 
Source: AEI Housing Center  
 
This chart compares home price gains in 2024 versus 2023 across different price tiers.
 
Source: AEI Housing Center  
 
This metro-area scatterplot illustrates the relationship between home price appreciation and housing inventories.
 
Source: AEI Housing Center  

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3. Initial jobless claims were slightly above 2022 and 2023 levels but remained low for this time of year, …
 

 
… while continuing claims fell below 2023 levels.
 

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4. Will dockworkers on the East and Gulf Coasts stage another strike?
 
Source: @economics   Read full article  
 
East and Gulf Coast ports handle a significant share of US maritime trade.
 
Source: Morgan Stanley Research  
 
With the relatively low inventories-to-sales ratio, food prices could increase if the strike persists.
 
Source: Morgan Stanley Research  

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5. The US dollar continues to climb.
 

 
Source: CNBC   Read full article  


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Canada

1. Manufacturing growth continued in December, with factories’ outlook improving (2nd panel).
 

 
Manufacturing input prices have risen at a faster pace.
 

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2. The market anticipates 64 bps of BoC rate cuts in 2025, …
 

 
… beginning with a cut this month.
 

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3. The TSX Composite Index is testing resistance at the 50-day moving average.
 


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The United Kingdom

1. The final November manufacturing PMI indicated worsening factory activity in December as demand slumped.
 

 
2. Home price appreciation is accelerating.
 

 
3. The pound started the year on a weak note.
 

 
4. Here is a look at long-term immigration and emigration trends in the UK.
 
Source: ONS   Read full article  


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Europe

1. EUR/USD remains in a long-term downtrend and is breaking below support.
 

 
2. The final euro-area manufacturing PMI highlighted a continued downturn in factory activity.
 

 
Source: Reuters   Read full article  
 
Spain is bucking the trend with robust growth.
 

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3. Central European manufacturing hubs remain under pressure, weighed down by Eurozone weakness.
 


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China

1. The 10-year yield hit 1.6% for the first time.
 

 
What does that mean for GDP growth?
 
Source: Alpine Macro  
 
The Shanghai Composite has diverged from the 10-year government bond yield.
 
Source: TS Lombard  

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2. Capital Economics expects a few more years for the decline in property starts and real investment to stabilize.
 
Source: Capital Economics  
 
Here is a look at residential construction and sales.
 
Source: @WSJ   Read full article  
 
However, the intensity of work on existing projects is recovering.
 
Source: Capital Economics  

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3. Recent stimulus rounds have failed to have an immediate impact on the housing sector.
 
Source: Longview Economics  
 
However, the decline in mortgage rates points to a recovery in housing prices.
 
Source: Longview Economics  

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4. Hong Kong’s retail sales remained weak in November, well below 2023 levels.
 


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Emerging Markets

1. Brazil’s manufacturing activity growth is stalling.
 

 
2. Mexico’s manufacturing activity continues to stagnate (2 charts).
 

 

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3. Next, we have some updates on Chile.
 
The peso has fallen to its weakest level against the USD since mid-2022.
 

 
Manufacturing output was almost unchanged in November compared to 2023.
 

 
Copper production remains strong.
 

 
Retail sales topped expectations.
 

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4. South Africa’s trade surplus remained well above 2023 levels in November.
 

 
5. This chart compares the performance of emerging market stocks from Election Day to Inauguration Day during President Trump’s 2016 transition versus the 2024 election period.
 
Source: @JeffreyKleintop  


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Commodities

1. Iron ore futures in Singapore and steel prices in Shanghai are under pressure due to concerns about China’s prolonged housing slump.
 

 

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2. Chicago cattle futures are surging.
 


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Energy

1. Brent crude is nearing $76/bbl.
 

 
Source: Reuters   Read full article  

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2. European natural gas futures have reached their highest level in over a year.
 

 
Source: ABC News   Read full article  


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Equities

1. Tech mega-caps have lagged in recent days, …
 

 
… while smaller firms have outperformed.
 

 
2. The S&P 500 has been down for five sessions in a row.
 

 
Market performance between Christmas and New Year’s was notably weak.
 
Source: @bespokeinvest  

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3. Market breadth remains soft.
 

 
US stocks appear oversold based on short-term breadth measures but not as stretched compared to the October 2023 low.
 
Source: Aazan Habib, Paradigm Capital  

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4. January tends to be a good month for US stocks.
 

 
5. The S&P 500 Value Index is testing support at the 200-day moving average.
 

 
6. Here is a look at the 2024 ETF flows by sector.
 
Source: Goldman Sachs; @WallStJesus  
 
7. This chart illustrates R&D and CapEx spending trends across various sectors.
 
Source: J.P. Morgan Asset Management  
 
8. Sentiment has slumped in recent days.
 
Investment managers:
 

 
Retail investors:
 

 
The Fear & Greed Index.
 
Source: CNN Business  

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9. The S&P 500 Quality Index registered an uptick in momentum relative to the S&P 500 in recent weeks, although it is lagging in terms of relative strength alongside some defensive factors.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The iShares MSCI Quality ETF (QUAL) is testing short-term support relative to the S&P 500.
 

 
The S&P 500 high-quality factor appears expensive based on relative yield differentials.
 
Source: Denise Chisholm; Fidelity InvestmentsĀ   
 
Top-quartile performance of S&P 500 high-quality coupled with elevated valuation levels could limit a sustained upside move for the factor.
 
Source: Denise Chisholm; Fidelity InvestmentsĀ   

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10. The median American family now holds more than $250k in equities, marking a record high.
 
Source: Goldman Sachs; @WallStJesus  


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Credit

1. This chart compares the ratings distribution of the US high-yield index before the Global Financial Crisis and the present.
 
Source: J.P. Morgan Asset Management  
 
2. Charter school debt impairments reached a record high in 2024, driven by inflation, declining enrollment, and the end of COVID-era stimulus.
 
Source: @markets   Read full article  


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Rates

1. Reserve balances at the Fed have fallen below $3 trillion for the first time since 2020.
 

 
Source: @economics   Read full article  

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2. Primary dealers’ holdings of Treasuries hit a record high.
 
Source: Deutsche Bank Research  
 
3. Based on the current yield, the Bloomberg US Aggregate Total Return Index is expected to return about 5% annualized over the next five years.
 
Source: J.P. Morgan Asset Management  
 
4. The US Treasury holds an unusually large cash balance ahead of the debt ceiling limit, providing more flexibility before reaching the X-date (likely in the summer unless Congress raises the limit).
 
Source: Oxford Economics  


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Global Developments

1. The dollar broke above resistance.
 

 
Leveraged funds’ net-long dollar positioning appears stretched.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Here is a breakdown of the DXY US dollar index, which is heavily weighed against the euro.
 
Source: ICE  

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2. Manufacturing activity slipped into contraction in December.
 
Source: S&P GlobalĀ PMI  
 
Consumer goods manufacturing improved, while activity in intermediate and capital goods declined.
 
Source: S&P GlobalĀ PMI  
 
Here are the December PMI measures by country.
 
Source: S&P GlobalĀ PMI  


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Food for Thought

1. US vs. international spending at Netflix:
 
Source: @chartrdaily  
 
2. The number of babies born every hour by country:
 
Source: Visual Capitalist   Read full article  
 
3. Changes in adult literacy and numeracy in select countries since 2012:
 
Source: OECD   Read full article  
 
4. European NATO members’ defense spending:
 
Source: @bpolitics   Read full article  
 
5. US cancer death rates adjusted for the aging population:
 
Source: Our World in Data  
 
6. The raw materials in your laptop:
 
Source: voronoi   Read full article  
 

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Have a great weekend!


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