China’s DeepSeek spooks US investors

The Daily Shot: 27-Jan-25
Equities
Credit
Rates
Commodities
Energy
Emerging Markets
India
China
Asia-Pacific
The Eurozone
The United Kingdom
The United States
Global Developments
Food for Thought



 

Equities

1. Despite restricted access to advanced chips, China’s latest AI advancement, DeepSeek, surprised the markets. This progress could present challenges for NVIDIA and other US tech firms.

Source: BI   Read full article  

Source: Reuters   Read full article  

US futures are tanking this morning.

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2. The US market is ripe for a pullback, given aggressive positioning.

Deutsche Bank’s positioning index:

Source: Deutsche Bank Research  

Net call option volume:

Source: Deutsche Bank Research  

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3. A large increase in bond yields is viewed as potentially the most bearish development this year.

Source: BofA Global Research  

4. Companies exceeding EPS estimates have been rewarded during this earnings season.

Source: @markets   Read full article  

5. Insiders have been selling.

Source: @markets   Read full article  

6. Goldman’s longer-term US market breadth indicator has been deteriorating.

Source: Goldman Sachs; @WallStJesus  

The S&P 500 financials sector experienced a strong uptick in breadth.

Source: SentimenTrader  

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7. Most S&P 500 market gains have occurred outside regular trading hours.

Source: @bespokeinvest  

8. Will the uptrend channel hold?

Source: Deutsche Bank Research  

9. Another breakout in Treasury yields could cause trouble for the S&P 500, according to MRB Partners.

Source: MRB Partners  

10. Next, we have some performance data from last week.

Sectors:

Equity factors/styles:

Macro basket pairs’ relative performance:

Thematic ETFs:

Largest US tech firms:


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Credit

1. Although rare, several California utility companies sponsored wildfire-only catastrophe (cat) bonds up to 2021 that have subsequently matured. According to Fitch, municipalities and corporations could spur rapid growth of the market by issuing cat bonds, as utilities have done.

Source: Fitch Ratings   Read full article  

The broad-based Swiss Re Cat bond total return index saw a minor pullback since the beginning of the CA wildfires.

Source: @TheTerminal, Bloomberg Finance L.P.  

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2. Here is a look at last week’s performance.


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Rates

1. Treasury market implied volatility has been moving lower.

2. CTAs are underweight bonds.

Source: Deutsche Bank Research  

3. Goldman believes the market is overestimating the probability of a Fed rate hike within the next 12 months.

Source: Goldman Sachs; @MikeZaccardi  


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Commodities

1. Global rice prices have been tumbling.

2. CTAs are downbeat on copper.

Source: Deutsche Bank Research  

3. Here is a look at last week’s performance.


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Energy

1. US fracking activity continues to deteriorate.

Frac spread:

Rig count:

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2. Saudi oil exports have been trending lower.


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Emerging Markets

1. Let’s begin with Argentina.

Consumer confidence continues to climb.

Wage growth has been moderating.

Economists are raising their forecasts for Argentina’s GDP growth this year …

… while lowering their projections for the nation’s CPI.

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2. Brazil’s inflation topped expectations.

Economists see inflation rising further this year, …

… forcing the central bank to hike rates by 275 bps.

Source: @TheTerminal, Bloomberg Finance L.P.  

Here is the consensus estimate for Brazil’s unemployment rate.

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3. Next, we have some performance data from last week.

Currencies:

Bond yields:

Equity ETFs:


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India

1. The January flash manufacturing PMI indicated an acceleration in growth.

But expansion in services activity slowed.

Hiring continues to strengthen.

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2. FX reserves keep falling amid capital outflows.

3. Stocks are struggling.

Source: @markets   Read full article  

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4. Bond yields have been falling.


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China

1. The official manufacturing PMI unexpectedly dipped into contraction territory

Source: SCMP   Read full article  

Non-manufacturing growth is stalling.

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2. Industrial profits were down again in 2024, …

Source: @economics   Read full article  

… but showed some strength in December.

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3. Hong Kong shares are up, driven by enthusiasm surrounding DeepSeek.

Source: @TheTerminal, Bloomberg Finance L.P.  

4. Bond yields are falling again.


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Asia-Pacific

1. Tawian’s GDP growth was softer than expected last quarter.

Source: Reuters   Read full article  

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2. Singapore’s factories finished the year on a strong note, with the December industrial production topping expectations.

3. Asian HY bonds have been underperforming.

Source: @markets   Read full article  

4. The Nikkei has been range-bound since September.


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The Eurozone

1. The slump in euro-area factory activity eased somewhat this month.

Germany:

France:

Manufacturing outlook is improving.

German services activity growth accelerated this month.

But the French service sector continues to struggle.

The euro-area composite PMI returned to growth mode.

Source: Reuters   Read full article  

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2. Private equipment investment in Germany remains weak.

Source: @WSJ   Read full article  

3. Euro area households are increasingly worried about unemployment.

Source: Deutsche Bank Research  


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The United Kingdom

1. The UK manufacturing contraction eased somewhat this month.

However, factory employment continued to deteriorate.

The service sector keeps growing.

The composite PMI edged higher, …

… though the outlook is less optimistic.

Price gains accelerated this month.

Source: Reuters   Read full article  

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2. UK retailers are reporting soft demand.

3. Here is a look at rising homelessness in England by category.

Source: The Economist   Read full article  


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The United States

1. According to S&P Global, US factory activity resumed growth this month.

Manufacturing outlook improved.

Service sector growth eased.

However, service firms still report robust demand.

And hiring has accelerated.

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2. Growth in earnings points to a stronger ISM Manufacturing PMI.

Source: BofA Global Research  

3. The U. Michigan consumer sentiment indicator eased this month, …

… amid concerns about future household income.

Inflation expectations rose, …

… though perspectives on inflation differed depending on views regarding tariffs …

Source: U. Michigan  

… and on political affiliation.

Source: @M_McDonough  

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4. Existing home sales in 2024 were the lowest in years.

Source: NPR   Read full article  

However, the year ended on a strong note, with December sales rising nearly 11% compared to 2023.

Here is the breakdown by region (seasonally adjusted)

Source: @TheTerminal, Bloomberg Finance L.P.  

The median price was up 6% year-over-year.

Source: Reuters   Read full article  

Inventories held above 2023 levels.

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5. The US dollar dropped last week as concerns about tariffs eased.

More downside ahead for the dollar?

Financial conditions eased.


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Global Developments

1. Risk appetite remains high despite global economic uncertainty.

Source: Aazan Habib, Paradigm Capital  

2. Fund managers expect US equities to outperform other asset classes this year.

Source: BofA Global Research  

3. Here is a look at last week’s performance.

Currencies:

Bond yields:

Equity indices:

USD-denominated equity ETFs:


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Food for Thought

1. The most profitable companies globally:

Source: Visual Capitalist   Read full article  

2. UnitedHealth Group FY24 income statement breakdown:

Source: r/DataIsBeautiful  

3. Utah leads the US in volunteer rates, with nearly half of residents participating.

Source: USAFacts  

Volunteer rates by generation show Gen X leading in formal roles, while baby boomers excel in informal assistance.

Source: USAFacts  

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4. Knowledge-intensive jobs concentration in G7 nations:

Source: @financialtimes   Read full article  

5. Solar module prices:

Source: BofA Global Research  

6. Top 4 NFL teams’ 4th-down conversion rates exceed 70%.

Source: u/JPAnalyst  

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