Report on Trump aides’ targeted tariffs weakens dollar

The Daily Shot: 07-Jan-25
The United States
Canada
The Eurozone
Asia-Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Rates
Food for Thought



 

The United States

1. US factory orders fell in November, weighed down by a decline in aircraft orders.
 

 
Source: Reuters   Read full article  
 
Manufacturing orders, excluding transportation, increased for the third consecutive month (the second chart shows the orders’ level).
 

 

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2. Despite steady growth in consumer spending and GDP, industrial production began to lag noticeably following China’s entry into the WTO in 2001. This lag highlighted structural shifts in global manufacturing and trade dynamics, reflecting the decoupling of industrial output from overall economic growth.
 
Source: J.P. Morgan Asset Management  
 
3. The December US Services PMI from S&P Global was revised lower but continued to signal stronger growth in the nation’s services sector.
 

 
4. The Washington Post reported that Trump aides are planning targeted tariffs aimed at specific sectors. The dollar fell on the news, though Trump later denied the report.
 
Source: The Washington Post    Read full article  
 

 
Source: Truth Social  


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Canada

1. The combination of Trudeau’s resignation and the Washington Post report on tariffs (above) sent the loonie sharply higher.
 
Source: @WSJ   Read full article  
 
Source: Reuters   Read full article  
 

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2. Consumer confidence appears to be stabilizing.
 

 
3. The services PMI dipped into contraction territory in December as demand softened.
 

 
4. The GDP per capita gap between the US and Canada has widened significantly since 2015.
 
Source: @bpolitics   Read full article  
 
5. Canada’s yield curve has been steepening.
 

 
The market is now pricing in 71 bps of BoC rate cuts in 2025, …
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
… starting this month.
 


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The Eurozone

1. The December services PMIs were revised higher, with the euro area entering expansion mode.
 
Eurozone:
 

 
Germany:
 

 
France (still contracting):
 

 
Italy:
 

 
Spain (rapid growth):
 

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2. The Sentix investor confidence index was roughly unchanged this month.
 

 
3. Germany’s December CPI topped forecasts.
 

 
Source: CNBC   Read full article  
 
Bund yields climbed (2 charts).
 

 

 
German economic sentiment remains far below pre-pandemic levels.
 
Source: Nomura Securities  

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4. The market is pricing in 105 bps of ECB rate cuts this year.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The market still anticipates an ECB rate cut this month as well as in March and April, but expectations for jumbo reductions have faded.
 


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Asia-Pacific

1. JGB yields continue to climb.
 

 
2. Bloomberg’s index of Asian currencies hit a multi-year low this month, …
 

 
… but signs of stabilization have emerged on hopes for less severe tariffs from the Trump administration.
 
South Korean won:
 

 
Taiwan dollar:
 

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3. Australia’s building approvals are very low for this time of the year.
 


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China

1. The gap between US and China bond yields continues to widen.
 

 
2. The Shanghai Shenzhen CSI 300 Index is nearing support.
 

 
3. The USD/CNH pair (US dollar vs. offshore yuan) has been steadily climbing (yuan weakening) within an upward channel since early September.
 

 
4. Developers are sitting on large inventories of unsold homes and unused land. Will local governments step in as buyers?
 
Source: Capital Economics  
 
5. China’s total private debt service ratio hit a record high.
 
Source: @WSJ   Read full article  


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Emerging Markets

1. Brazil’s service sector growth has been slowing.
 

 
Exports were down in December relative to 2023.
 

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2. Argentina’s domestic vehicle sales have accelerated.
 

 
3. Mexico’s consumer confidence eased again last month.
 

 
4. Here is an overview of projected policy rate changes for LatAm central banks.
 
Source: @economics   Read full article  

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5. Turkey’s inflation continues to moderate.
 

 
6. The Philippine CPI topped expectations last month.
 


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Cryptocurrency

1. Bitcoin is back above $100k.
 

 
2. Crypto funds saw modest outflows last week after attracting a record $44 billion in fresh capital last year.
 
Source: CoinShares   Read full article  
 
Ethereum-focused funds accounted for most outflows last week, although investors exited short-bitcoin products as well.
 
Source: CoinShares   Read full article  

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3. The Crypto Fear & Greed Index returned to “extreme greed” territory.
 
Source: Alternative.me  
 
4. MicroStrategy increased its bitcoin holdings, now totaling 447,470 BTC.
 
Source: CoinDesk   Read full article  


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Commodities

1. Gold is holding its uptrend support.
 

 
Gold ETF assets have plateaued.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
Goldman no longer expects gold to reach $3,000 an ounce by year-end, shifting the forecast to mid-2026 due to expectations of fewer Fed rate cuts.
 
Source: @markets   Read full article  
 
According to the options market, there is a 19% probability of gold reaching $3,000 by the end of Q2.
 

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2. Chicago cattle futures continue to surge.
 

 
Source: mint   Read full article  

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3. Improving global manufacturing PMIs could indicate a rise in commodity prices.
 
Source: MRB Partners  


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Energy

1. WTI crude held resistance at the 200-day moving average.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. Here is a look at the top 10 oil-producing nations.
 
Source: @JavierBlas  
 
3. EU purchases of Russian LNG hit a record high in 2024.
 
Source: @A_Schroeder1985  


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Equities

1. Semiconductor shares surged on Monday.
 

 
Source: Reuters   Read full article  
 
Here is the VanEck Semiconductor ETF.
 

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2. The S&P 500 average stock (Equal Weight Index) valuation discount to the S&P 500 continues to widen.
 
Source: Sebastian Boyd, @TheTerminal, Bloomberg Finance L.P.  
 
Has the S&P 500 Equal Weight Index reached its bottom relative to the S&P 500?
 
h/t @KevRGordon  

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3. The S&P 500 has deviated far above its long-term average.
 
Source: Damanick Dantes; Bloomberg  
 
4. Earnings revisions could follow a downward path this year.
 
Source: MarketDesk Research  
 
5. The put-call ratio is exceptionally low, indicating growing complacency in the market.
 

 
6. The S&P 500 risk premium is in negative territory for the first time in over two decades.
 

 
7. Here is a look at valuations relative to the 20-year averages.
 
Size (NTM P/E):
 
Source: Truist Advisory Services  
 
Sectors (long-term P/E):
 
Source: Sebastian Boyd, @TheTerminal, Bloomberg Finance L.P.  
 
This chart shows US bank valuations over time.
 
Source: Reuters   Read full article  

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8. The scatterplots below depict earnings yields versus implied volatility, illustrating expected performance relative to perceived risk.
 
Factors/styles:
 

 
Sectors:
 

 
International:
 

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9. Total US ETF assets exceeded $10 trillion in 2024.
 
Source: @WSJ   Read full article  


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Rates

1. The 10-year Treasury yield is closely tracking the 1981 rate-cut cycle. At that time, the US entered a recession after a period of high inflation and aggressive rate hikes.
 
Source: Deutsche Bank Research  
 
2. Longer-dated Treasuries remain under pressure, …
 

 
… with the yield curve steepening.
 

 
TLT is down 14% from the September 2024 peak.
 

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3. The 10-year Treasury term premium hit the highest level in almost a decade.
 

 
MRB Partners expects the 10-year Treasury yield to break above 5% amid growing uncertainty about inflation and Fed policy.
 
Source: MRB Partners  

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4. SOFR swap spreads moved sharply higher following news of Federal Reserve Vice Chair for Supervision Michael Barr’s planned departure on Feb. 28, which has sparked market speculation about potential changes to bank capital requirements, including the supplementary leverage ratio. The market started pricing in a more favorable outlook for banks holding Treasuries.
 


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Food for Thought

1. Fertility rates in Western Europe:
 
Source: @financialtimes   Read full article  
 
2. Declining fish consumption in Japan:
 
Source: The Economist   Read full article  
 
3. Consumption of ultra-processed foods:
 
Source: The Economist   Read full article  
 
4. Drivers of growth in US federal spending:
 
Source: Wells Fargo Securities  
 
5. Support for free speech rights across US generations:
 
Source: Jean M. Twenge   Read full article  
 
6. Penalties per play increase with each down in both college football and the NFL.
 
Source: r/DataIsBeautiful  
 

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