Record goods trade deficit and inventory drop cut nearly 1% from Q4 growth estimate

The Daily Shot: 30-Jan-25
The United States
Canada
The Eurozone
Europe
Japan
Emerging Markets
Commodities
Energy
Equities
Credit
Food for Thought



 

The United States

1. As expected, the FOMC held rates steady this month. The Fed sees the labor market as robust, with unemployment stabilizing “at a low level.” Additionally, the FOMC removed language about progress toward the 2% inflation target, signaling concerns about upside inflation risks.

Source: @axios   Read full article  

Economists (chart below) and the market (2nd chart) anticipate two Fed rate cuts this year.

Source: @TheTerminal, Bloomberg Finance L.P.  

Source: @TheTerminal, Bloomberg Finance L.P.  

Treasury yields spiked following the FOMC statement but quickly pulled back.

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2. Mortgage applications dropped to multi-year lows for this time of year.

Here is the rate lock count.

Source: AEI Housing Center  

Refi activity dipped to last year’s levels.

Housing listings have been climbing this year.

Source: AEI Housing Center  

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3. The US trade deficit in goods reached a record high as importers rushed to front-run tariffs while exports weakened.

Source: @TheTerminal, Bloomberg Finance L.P.  

Source: Reuters   Read full article  

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4. Inventories unexpectedly declined last month.

5. The record goods trade deficit and the unexpected inventory decline drove the Atlanta Fed’s GDPNow Q4 growth estimate sharply lower.

Source: Federal Reserve Bank of Atlanta  

Here are the contributions.

Source: @TheTerminal, Bloomberg Finance L.P.  


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Canada

1. As expected, the BoC cut rates again.

Source: Reuters   Read full article  

The market expects another two rate reductions this year.

Source: @TheTerminal, Bloomberg Finance L.P.  

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2. The market-implied BoC rate trajectory has been repriced sharply lower in recent days.

The 2-year yield continues to fall.

The Canada-US 2-year yield differential has fallen to its lowest level since 1997.

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3. Driven by Trump’s tariff threats, the USD/CAD 1-month 25-delta risk reversal has surged as market participants hedge against CAD depreciation.

Here is the 1-month implied volatility.

Could USD/CAD reach 1.5 within the next three months? The market currently assigns a 16% probability to this scenario.


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The Eurozone

1. Spain’s economy grew more than expected last quarter.

Source: @economics   Read full article  

Germany and France saw economic contractions, while Italy’s GDP remained flat—mirroring the broader Eurozone GDP. Details on euro-area GDP data will follow tomorrow.

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2. Germany’s consumer confidence declined this month.

Source: @WSJ   Read full article  

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3. Italian consumer confidence improved.

Manufacturing sentiment also edged higher.

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4. Swedish manufacturing orders less inventories, a leading indicator, suggest a rebound in euro-area factory activity.

Source: Longview Economics  

5. Euro-area broad money supply growth unexpectedly slowed last month, …

… while narrow money supply continued to expand.

Private credit growth is rebounding.

Source: @DanielKral1, @OxfordEconomics  

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6. EUR/USD is testing a key support zone.

The recent pullback in EUR/USD has not been confirmed by falling interest rate differentials.

Source: Longview Economics  

EUR/USD sentiment is extremely bearish.

Source: Longview Economics  


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Europe

1. Sweden’s central bank delivered another rate cut this week.

One more rate reduction ahead?

Source: Scotiabank Economics  

Source: @WSJ   Read full article  

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2. Will we see more rotation into European stocks?

Source: Gavekal Research  


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Japan

1. The BoJ’s lending program has steadily expanded, reaching ¥80 trillion, but is now set to wind down as part of its broader balance sheet reduction. This marks a significant step toward policy normalization after years of aggressive monetary easing.

Source: @economics   Read full article  

The BoJ’s balance sheet is massive.

Source: Simon White, Bloomberg Markets Live Blog  

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2. JGB yields rose again.

3. Bank shares continue to outperform as rates climb.

4. The yen strengthened.


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Emerging Markets

1. Brazil’s central bank delivered another 100 bps rate hike.

Source: @WSJ   Read full article  

Food Inflation has been rising.

Source: @economics   Read full article  

USD/BRL is testing support.

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2. Economists have been downgrading Chile’s growth forecasts for 2025.

3. Mexico’s unemployment rate remains very low.

4. The Philippines’ GDP growth has been strong, though last quarter’s expansion fell short of expectations.

5. Saudi Arabia’s economic growth has been gaining momentum.


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Commodities

1. US corn futures have been surging.

Source: Reuters   Read full article  

Here is Bloomberg’s grains index.

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2. US farm incomes are declining from their 2022 peak.

3. Coffee futures continue to soar.

4. COPX (copper miners ETF) is holding support.


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Energy

1. US crude oil and gasoline inventories surged last week, while distillate stockpiles dropped sharply.

Here are the inventory levels.

Refinery utilization has been running below last year’s levels.

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2. Crude oil has reversed a substantial portion of this year’s gains.

3. Well productivity in the non-OPEC world peaked in 2019.

Source: The Crude Chronicle  


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Equities

1. Retail investors bought the dip this week.

Source: Vanda Research  

2. This chart shows the earnings progression of the largest ten S&P 500 companies.

Source: Deutsche Bank Research  

3. Trade policy uncertainty is expected to be a source of volatility.

Source: MUFG Securities  

4. Investors are increasing bullish options bets through index products.

The total equity options volume continues to climb.

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5. Deutsche Bank expects share buyback activity to keep climbing with earnings.

Source: Deutsche Bank Research  

6. Corporate margins remain elevated.

Source: @FactSet   Read full article  

7. Large-cap stocks dominate analyst coverage.

Source: @chartrdaily  

8. The average lifespan of companies in the S&P 500 has been declining, dropping from nearly 35 years in the late 1960s to just over 18 years projected for the 2020s. This trend underscores the accelerating pace of disruption and turnover among market leaders.

Source: BofA Global Research  

9. What should we expect from the Year of the Snake?

Source: @LarryAdamRJ, @RaymondJames  


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Credit

1. CLO liability spreads are exceptionally tight, indicating strong CLO activity ahead.

Source: @markets   Read full article  

2. Short bets on HY ETFs have been rising.

Source: @markets   Read full article  


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Food for Thought

1. Breakfast price index:

Source: @M_McDonough  

2. Red Sea attacks:

Source: @financialtimes   Read full article  

3. DeepSeek app downloads:

Source: Goldman Sachs; @MikeZaccardi  

4. Surging demand for AI data centers outpaces capacity growth.

Source: UBS Research; @WallStJesus  

5. Women seek emotional support from a wider range of sources than men.

Source: Pew Research Center   Read full article  

6. Chinese New Year animals and elements from 1924 to 2043:

Source: r/DataIsBeautiful  

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