Morning Roundup

By Mark Masterson on January 24, 2024

Good morning,

Below are the news items moving markets today:

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Executive Summary:

Very busy night across capital markets, but the focus this morning remains on earnings.

It’s been a mixed bag, but companies with earnings beats are being rewarded, and those who miss – are being punished. 

It’s nice being able to focus on fundamentals for a week without the Fed talking heads.  Recall that we have no Fed speakers this week as they are in blackout ahead of their meeting next Wednesday.

China is pulling out the stops to boost their stock market and stop the bleeding…..

Earlier this week they announced a rescue package.

Prior to that, they attempted the ban on short selling. 

Last night – they rolled out a reserve cut for banks…..

• China surpYrises with 50bp RRR cut and says will boost property lending to support its slowing economy (Bloomberg, Reuters)
• China’s attempts to lift confidence in economy and market meet skepticism (Reuters, Bloomberg)
• China in focus as policy support headlines have driven a bounce in Greater China bourses over the last couple of session. Bloomberg recently reported Chinese authorities looking to mobilize ~$278B from offshore accounts of SOEs to stabilize the slumping stock market.
• PBoC on Wednesday announced a 50 bp RRR cut that it said would unleash CNY1T ($139B) in long-term liquidity to the market. PBoC Governor Pan suggested Fed easing could give central bank more flexibility this year.

Meanwhile, market based odds of a Fed cut in March are falling.   They started the year at 97%, and are now at 40%

The Daily shot 1 24 24

Perhaps Janet Yellen is unhappy that the odds of a rate cut are falling.  After all, she bet big that rates would fall in 2024.  Perhaps she knew something…..

Did you know that 85% of Treasury debt issued in 2023 is due within one year or less.

That is a big bet that rates are coming down.

Meanwhile…..in liquidity and monetary base land – things are turning up

While the Fed talks about tightening, the below chart of the total monetary base suggests that there is no tightening going on.  In fact, it looks just like the past episodes of QE as highlighted by Northmantrader.com

Northmantrader.com 1 24 24

More interesting charts below…..

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Articles of Interest:

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  Corporate:
  • Netflix soars after hours on big beat of adding more subscribers than expected (Axios, FT)
  • Sources say Tesla told suppliers it plans to build new electric vehicles in mid-2025 (Reuters)
  • ASML and SAP deliver big quarterly beats, as both signal booming demand in the industry (Bloomberg)
  • Apple increasing its AI capabilities with series of acquisitions, hires and updates (FT)
  • Apple to introduce car in 2028 at the earliest, scales back self-driving features (Bloomberg)
  • Boeing 757 loses nose wheel while preparing for takeoff in Atlanta (Reuters)
• China:
  • China tightens access to offshore investment funds (FT); stock rout sends local funds to safety of cheap bonds (Bloomberg)
• Economy:
  • Unemployment rates increased in 15 US states in December (Reuters)
• Markets:
  • Traders riding long Treasury positions start to feel the squeeze (Bloomberg)
  • Investors flock into peripheral Eurozone bonds in hunt for yield (FT)
• US politics:

• Trump declared winner in New Hampshire primary (Bloomberg, Axios, FT)
• Senators race to win support for border deal as Ukraine aid hangs in the balance (AP, Politico)
• Geopolitics:

• One-month Gaza truce the focus on intensive talks, Israel offers end if Hamas leaders exiled (Reuters)
• North Korea fires cruise missiles off its west coast (Reuters)
• US ramps up strikes on Iranian proxies in Iraq and Yemen (Bloomberg, Axios)
• China says working to de-escalate tensions in the Red Sea (AP, FT)

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Charts of the day:

An eclectic mix of charts today that I saw yesterday…..

First – look at the percentage of monthly jobs gains and the dominance of government jobs……

31% of total new jobs were government in the back half of 2023.  21% in the first half.

The average dating back to 2008 is 1%.

58% in October.  That is incredible, and speaks to the massive attempt to stack the deck ahead of an election.

Hedgeye 1 24 24

Opportunities elsewhere….

Below chart from RBA Advisors highlights the dominance of American stocks over international.

This has happened before as you can see.

It does not last, and eventually, there is a turn where other markets – international and emerging, will outperform for a period.

RBA Advisors 1 24 24

Below shows the same…..

US stocks are now 60% of the total world stock market cap.  That is very high historically.  (chart on left)

Largest 10 stocks are 30% of the index.  Very rare concentration.  (middle chart)

The best chart is the one on the right….It shows that US stocks are very expensive relative to the rest of the world at approximately 60% more expensive.  That too is historic.  That was green in 2009 when US was trading at a discount to international.

RBA Advisors 1 24 24

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Quote of the day:

“Thinking is the hardest work there is, which is probably the reason so few engage in it.”

— Henry Ford