US manufacturing activity has resumed growth

The Daily Shot: 04-Feb-25
The United States
Canada
The United Kingdom
The Eurozone
Asia-Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Rates
Food for Thought



 

The United States

1. According to the ISM Manufacturing PMI, US factory activity returned to growth in January …
 

 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
…as demand strengthened.
 

 
Factory employment stabilized.
 

 
The ISM PMI index now aligns with the US manufacturing PMI from S&P Global.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The gap between orders and inventory indices suggests a further acceleration in US factory activity.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. US construction spending rose in December, …
 

 
… driven primarily by private residential investment.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Growth in residential construction spending was fueled by home improvement.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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3. Vehicle sales softened in January.
 

 
Below is a comment from Oxford Economics.

The decline in vehicle sales in January likely reflected the unseasonably cold weather last month and the fading of hurricane replacement demand rather than a new trend. Tariffs and the potential removal of EV tax credits remain a huge wildcard for sales in 2025 – the threatened but now postponed tariffs may lead some consumers to bring forward purchases into February.

Vehicle inventories remain relatively low.
 

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4. The tariff situation has eased for now, …
 
Source: @bpolitics   Read full article  
 
… sending the dollar lower.
 

 
If the newly announced tariffs take effect, US tariff levels could revert to those last seen in the 1940s, marking a significant shift in trade policy.
 
Source: Deutsche Bank Research  
 
Below are the top US goods imports from Mexico, Canada, and China.
 
Source: @economics   Read full article  
 
Here is a look at the US trade deficit with key trading partners.
 
Source: @bpolitics   Read full article  

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5. Market-based inflation expectations have been rising.
 


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Canada

1. The loonie rebounded on tariff pause.
 
Source: @markets   Read full article  
 
Source: CNBC   Read full article  

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2. Factory activity continued to grow in January, …
 

 
… with demand improving slightly.
 

 
Manufacturers’ outlook softened last month.
 

 
Cost increases have been picking up momentum.
 

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3. Small business optimism eased again in January.
 

 
Here is the CFIB index by sector:
 

 
and by province:
 

 
More companies are reporting insufficient demand.
 
Source: CFIB  


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The United Kingdom

1. The housing market lost some momentum in January.
 

 
2. Here is a look at UK trade with the US.
 
Source: Capital Economics  


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The Eurozone

1. The January euro-area manufacturing PMI was revised slightly upward but remains deep in contraction territory.
 

 

 
Spain’s manufacturing growth slowed sharply.
 

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2. Germany’s unemployment continues to trend higher.
 

 
Source: Reuters   Read full article  
 
Retail sales declined sharply in December.
 

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3. Eurozone inflation was a bit higher than expected in January.
 

 
Source: CNBC   Read full article  
 
Italy:
 

 
Spain:
 

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4. The euro is declining again this morning, …
 

 
… marking its seventh consecutive daily loss.
 


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Asia-Pacific

1. Japan’s monetary base is shrinking as the BoJ moves toward policy “normalization.”
 

 
2. New Zealand’s exports were very strong in December.
 

 
3. Next, we have some updates on Australia.
 
Household spending was firmer than expected in December.
 

 
Building approvals were at multi-year lows.
 

 
Home prices declined again in January.
 


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China

1. China’s household consumption remains unusually low as a share of GDP compared to both upper-middle and high-income economies, highlighting a structural imbalance in domestic demand.
 
Source: BofA Global Research  
 
2. Hong Kong’s GDP growth held up well in Q4.
 

 
3. Hong Kong’s retail sales fell 11.5% in December compared to the same period in 2023.
 


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Emerging Markets

1. Let’s begin with some updates on Brazil.
 
The debt-to-GDP ratio is holding above 61%.
 

 
Manufacturing growth improved slightly in January.
 

 
Here is Brazil’s unemployment rate.
 

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2. Next, we have some updates on Chile.
 
Economic activity (accelerating):
 

 
Manufacturing output (well above forecasts):
 

 
Copper production (record high):
 

 
Commercial activity (strengthening):
 

 
Retail sales (better than expected):
 

 
Unemployment (below 2023 levels):
 

 
Stock returns:
 
Source: @markets   Read full article  

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3. Turkey’s inflation continues to moderate.
 

 
Manufacturing moved deeper into contraction territory in January.
 

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4. Indonesia’s consumer inflation is accelerating.
 


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Cryptocurrency

1. Tariff announcements weighed on bitcoin.
 
Source: @KaikoData  
 
2. Bitcoin and Ether saw spikes in long liquidations during their recent price drops. (2 charts)
Source: Coinglass  
 
Source: Coinglass  

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3. The Crypto Fear & Greed Index briefly entered “fear” territory over the weekend.
 
Source: Alternative.me  
 
4. Crypto funds saw softer inflows last week.
 
Source: CoinShares   Read full article  
 
Long-bitcoin funds accounted for most inflows, although short-BTC funds saw a second straight week of inflows.
 
Source: CoinShares   Read full article  


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Commodities

1. Gold hit a record high.
 

 

 
Here are the monthly returns.
 
Source: @markets   Read full article  

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2. US cattle inventories are at the lowest level in decades.
 


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Energy

1. US LNG supply continues to climb.
 
Source: @business   Read full article  
 
2. The European summer gas price premium continues to rise …
 
Source: @markets   Read full article  
 
… as inventories tighten.
 
Source: @markets   Read full article  


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Equities

1. Stock futures are down again amid trade concerns.
 

 
Source: @WSJ   Read full article  
 
How did the market respond to tariff risks on Monday?
 

 
This chart shows the impact of previous US trade war announcements on S&P 500 volatility.
 
Source: Barclays Research  
 
The previous trade war also began around record market highs and preceded a volatile trading range.
 
Source: Deutsche Bank Research  

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2. The first half of February is typically positive for stocks, while the second half has historically led to losses.
 

 
3. The Russell 3000 (broad US market index) is holding resistance at 3500.
 

 
4. Analysts have been cutting US earnings forecasts.
 
Source: @markets   Read full article  
 
5. Sentiment among large-cap firms continues to improve, …
 
Source: BofA Global Research; @MikeZaccardi  
 
… but small firms are less upbeat.
 
Source: BofA Global Research; @MikeZaccardi  

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6. Last year, S&P 500 volatility was partly a function of elevated returns and low correlation.
 
Source: Barclays Research  
 
7. The S&P 500 is in the middle of its post-financial crisis trend channel.
 
Source: Deutsche Bank Research  
 
8. The wealthiest households have significantly expanded their stock holdings since Q3 2022.
 
Source: Simon White, Bloomberg Markets Live Blog  


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Credit

1. Corporate bond spreads remain very low.
 
Source: Deutsche Bank Research; @WallStJesus  
 
2. On average, US high yield credit managers have mitigated downside risk without upside capture, especially as recent market downturns have been followed by quick rebounds.
 
Source: BlackRock Investment Institute  


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Rates

1. Let’s begin with the attribution of Treasury yield changes in January.
 

 
2. The Treasury curve flattened on Monday.
 

 
3. Hedge funds are increasing short positions in SOFR futures, anticipating fewer rate cuts-or possibly a hike.
 

 
Bets against long-term Treasuries have risen as well.
 
Source: @SubuTrade  
 
And yet, bond funds continue to see inflows.
 
Source: Deutsche Bank Research  


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Food for Thought

1. Research and development spending:
 
Source: The Economist   Read full article  
 
2. Hawaiian Airlines leads US in on-time arrivals.
 
Source: @chartrdaily  
 
3. Used Tesla Model 3 price index:
 
Source: CarGurus  
 
4. Average emergency room visit times:
 
Source: Visual Capitalist   Read full article  
 
5. Individuals with Temporary Protected Status:
 
Source: @bpolitics   Read full article  
 
6. Dating app matches are less likely to get a second chance.
 
Source: AEI   Read full article  
 

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