Residential construction activity strengthened in December

The Daily Shot: 20-Jan-25
The United States
Canada
The United Kingdom
Europe
Japan
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. US December manufacturing output exceeded expectations, …
 

 
… fueled by a rebound in aircraft production following the end of Boeing’s strike.
 

 
Source: @economics   Read full article  
 
Capacity utilization improved.
 

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2. Housing starts strengthened last month, …
 

 
… as multifamily construction rebounded.
 

 
Source: @economics   Read full article  
 
Here is the seasonally adjusted index.
 

 
The multifamily construction overhang has been easing but remains high.
 

 
The gap between total housing completions and building permits has been narrowing, signaling a positive trend for the housing market.
 

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3. The Citi US Economic Surprise Index increased sharply last week.
 

 
4. Next, we have some updates on inflation.
 
Despite a softer core CPI, December core PCE is expected to show acceleration driven by PPI components (more on the topic here).
 
Source: Nomura Securities  
 
The percentage of CPI components with year-over-year increases of 4% or more has been declining but remains elevated.
 

 
While the Fed’s preferred market-based PCE suggests stability, the rebound in acyclical PCE—which the Fed has limited influence over—signals potential upside risks to inflation.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
Import prices unexpectedly increased last month.
 

 
Housing inflation accelerated in December.
 

 
Dry December?
 

 
US farm labor costs for H-2A workers far exceed those in Canada and Mexico, with California leading at $19.97 per hour. Rising wages and potential deportations are adding pressure on farmers, increasing the likelihood of higher consumer costs.
 
Source: @business   Read full article  
 
Meanwhile, the US has grown increasingly reliant on imported fresh produce, with imports now accounting for nearly 60% of fresh fruit and over 25% of fresh vegetables. Escalating domestic labor challenges could further deepen this dependency.
 
Source: @business   Read full article  

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5. Service-providing industries are most exposed to AI. (2 charts)
 
Source: IIF  
 
Source: IIF  


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Canada

1. Housing starts slowed last month.
 

 
Source: Reuters   Read full article  

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2. The Canadian dollar has continued its sharp decline, hitting its lowest level since 2020. Trade policy risks and expectations of further easing by the Bank of Canada are contributing to the loonie’s underperformance against the USD.
 

 
Source: Newsweek   Read full article  

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3. The S&P/TSX Composite Index is testing resistance at the 50-day moving average.
 
Source: @TheTerminal, Bloomberg Finance L.P.  


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The United Kingdom

1. Home price appreciation climbed again this month.
 

 
2. Speculative accounts have flattened their positions in GBP futures.
 

 
The pound’s weakness has largely been driven by the strength of the US dollar.
 
Source: Simon White, Bloomberg Markets Live Blog  

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3. The FTSE 100 Index broke above a short-term downtrend after reaching oversold levels.
 

 
4. This graph illustrates the disparate impact of Brexit on UK companies of different sizes.
 
Source: @financialtimes   Read full article  


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Europe

1. French stocks are rebounding.
 

 
2. Sweden’s unemployment has been trending higher.
 

 
3. These graphs show US asset managers’ growing presence in European markets.
 
Source: @financialtimes   Read full article  
 
4. Here is a look at vaccination rates among older Europeans.
 
Source: Eurostat   Read full article  


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Japan

1. Machinery orders accelerated in November.
 

 
Source: Reuters   Read full article  

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2. Japan-focused equity funds registered strong inflows last week.
 
Source: BofA Global Research  
 
3. Japan has restarted 14 nuclear reactors since 2015.
 
Source: @EIAgov  


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China

1. Traders are boosting bets on FXI (the largest China-focused equity ETF).
 

 
Source: @markets   Read full article  

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2. Foreign direct investment remains soft.
 

 
3. Traffic congestion levels are roughly in line with last year’s levels.
 
Source: @BloombergNEF, @TheTerminal, Bloomberg Finance L.P.   Read full article  
 
4. This chart shows China’s total debt as a percentage of GDP.
 
Source: @WSJ   Read full article  


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Emerging Markets

1. Chilean exports finished the year on a strong note.
 

 
2. India’s FX reserves continue to decline.
 

 
3. Most EM countries are expected to see their population rise over the next 25 years.
 
Source: Deutsche Bank Research  
 
4. Next, we have some performance data from last week.
 
Currencies:
 

 
Bond yields:
 

 
Equity ETFs:
 


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Cryptocurrency

1. Bitcoin hit a record high, nearing $110k.
 

 
Source: @crypto   Read full article  

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2. Here is a look at the year-to-date performance for selected cryptocurrencies (through Jan 19th).
 


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Commodities

1. Copper held its near-term downtrend resistance.
 

 
CTAs are bearish on copper.
 
Source: Deutsche Bank Research  

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2. Speculative accounts continue to boost their bets on US cattle futures.
 

 
3. Grains are also seeing improving positioning.
 
Corn:
 

 
Soybeans:
 

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4. Here is last week’s performance.
 


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Energy

1. US fracking activity is rolling over.
 

 
The US oil and gas rig count has dropped to its lowest level since 2021.
 

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2. US natural gas production is projected to rise steadily, reaching 109.3 Bcf/d by December 2026.
 
Source: @BloombergNEF, @TheTerminal, Bloomberg Finance L.P.   Read full article  


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Equities

1. The S&P 500 posted strong gains last week.
 

 
Source: @markets   Read full article  

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2. The GS positioning index shifted to neutral.
 
Source: Goldman Sachs; @MikeZaccardi  
 
3. Here is a look at valuations for key US indices.
 
Source: Goldman Sachs; @MikeZaccardi  
 
4. Technicals suggest the S&P 500 is not yet overbought.
 
Source: MarketDesk Research  
 
5. Tech fund inflows have stalled, while financials are experiencing strong inflows.
 
Source: Deutsche Bank Research  
 
Source: Goldman Sachs; @WallStJesus  

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6. This chart shows the magnificent 7 stocks in perspective:
 
Source: Goldman Sachs; @MikeZaccardi  
 
7. The semiconductor sector got support from Intel last week, …
 

 

 
Source: SemiAccurate   Read full article  
 
… boosting Goldman’s index of leveraged firms.
 

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8. Foreigners bought almost $115 billion of US equities in November.
 

 
9. The S&P 500 has entered a seasonally favorable period, albeit short-term.
 
Source: Aazan Habib, Paradigm Capital  
 
10. Small caps typically outperform large caps when the S&P 500’s forecasted return is low/negative.
 
Source: MarketDesk Research  
 
11. Finally, we have some performance data from last week.
 
Sectors:
 

 
Factors/styles:
 

 
Macro basket pairs’ relative performance:
 

 
Thematic ETFs:
 

 
Largest US tech firms:
 


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Credit

1. Interest coverage on LBOs fell to record lows last year. According to PitchBook, issuers have relied heavily on first-lien debt, thinning the “debt cushion” in the capital structure, which protects senior lenders in case of default.
 
Source: PitchBook  
 
2. Here is last week’s performance.
 


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Rates

1. Foreign investors sold coupon Treasuries in November for the first time in 16 months.
 

 
2. Bond sensitivity to economic surprises has been rising.
 
Source: @markets   Read full article  
 
3. SOFR futures imply a 25% chance of at least one Fed rate hike by December, a contrarian view against the prevailing expectations for rate cuts. Inflation surprises and fiscal policies could shift this balance.
 
Source: @markets   Read full article  


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Global Developments

1. US dollar sentiment appears stretched.
 
Source: Barclays Research  
 
Positioning in the futures market has reached its highest level in over a decade.
 

 
Rate differentials point to downside risks for the dollar.
 
Source: Alpine Macro  

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2. Here is last week’s performance data.
 
Currencies:
 

 
Bond yields:
 

 
Equity indices:
 

 
USD-denominated equity ETFs:
 


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Food for Thought

1. The impact of NYC Congestion Pricing:
 
Source: Congestion Pricing Tracker  
 
2. Traffic delays per driver in major US cities:
 
Source: @chartrdaily  
 
3. Top contributors to global ocean plastic waste by country:
 
Source: Semafor  
 
4. Comparing payload capacities of selected carrier rockets in 2024:
 
Source: The Economist   Read full article  
 
5. John Deere’s revenue breakdown by segment:
 
Source: @chartrdaily  
 
6. Impact of Martin Luther King Jr.’s legacy on views of racial equality:
 
Source: Pew Research Center   Read full article  
 
Perceptions of Martin Luther King Jr.’s impact on the country:
 
Source: Pew Research Center   Read full article  
 

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