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[FREE ALL ACCESS DAY] The Morning Shift: Election / China COVID / Mortgage Apps -41% / CPI Tomorrow - macro efts

Mortgage Purchase Applications Down -41% Y/Y, While Yield Curve Inversion Remains At Lows

  • U.S. Mortgage Purchase Applications were up +1.3% W/W and the total index was down -0.1% W/W
    • Purchase Applications are down -41% Y/Y, so demand for buying homes remains dismal
  • While the outcome of the election is not final yet, in general the Democrats did better than expected
    • At the moment, PredictIt (the political betting market) has an 83% chance of the Democrats winning the Senate
    • Neither Nevada or Georgia have been called yet by the AP and are likely to be the States that shift the balance of power in the Senate
    • PredicitIt also has a 79% chance of a Republican House and Democratic Senate, so it seems likely the Republicans will win the House
      • Currently the Republicans have 199 seats that have been called and the Democrats have 174, with 218 needed for a majority
  • Tomorrow we get October U.S. CPI and we have it declining from September, although only marginally so
  • The U.S. Yield Curve (10s and 2s) remains near 40-year lows of inversion at -0.54
  • Two items of note from yesterday: 1) U.S. Weekly Redbook Retail Sales Slowed to their lowest point in a year+ at +7.6% Y/Y and 2) NFIB Small Business Survey slowed M/M to 91.3, with 33% of business owners citing inflation as a major issue (a level last seen in 1979)
  • Most U.S. equity subsectors continue to have IVOL discounts (typically a sign of complacent longs) -> full table below

China COVID Cases Accelerate, But China Inflation Slows

  • The ECB’s Consumer Expectations survey for October had inflation expectations for 12 months from now up slightly to +5.1% (from +5.0%), but longer-term expectations remained at 3%
    • Net positive that inflation expectations are getting somewhat anchored in Europe
  • China COVID cases accelerated again D/D from 7,600 -> 8,300
    • Despite recent rumors to the contrary, lockdowns continue to increase with this acceleration in cases
    • Guangzhou, which is known as the factory floor of the world, is the epicenter of this recent surge and locked down another district overnight
  • On the positive in China, inflation is slowing (at least based on their numbers):
    • October CPI decelerated to +2.1% Y/Y, from +2.8% Y/Y -> lowest since May 2022
    • October China PPI slowed to -1.3% Y/Y, from +0.9% -> first drop since December 2020
  • In the category of something to keep your eyes on, Hong Kong CDS has spiked back to levels last seen during the midst of the pandemic in 2020 (chart below)

[FREE ALL ACCESS DAY] The Morning Shift: Election / China COVID / Mortgage Apps -41% / CPI Tomorrow - msch1

[FREE ALL ACCESS DAY] The Morning Shift: Election / China COVID / Mortgage Apps -41% / CPI Tomorrow - msch2

[FREE ALL ACCESS DAY] The Morning Shift: Election / China COVID / Mortgage Apps -41% / CPI Tomorrow - msch3

[FREE ALL ACCESS DAY] The Morning Shift: Election / China COVID / Mortgage Apps -41% / CPI Tomorrow - msch4