How High Will the U.S. Unemployment Rate Get?

The Daily Shot: 27-Mar-20
The United States
Canada
The United Kingdom
The Eurozone
Europe
Asia – Pacific
China
Emerging Markets
Energy
Equities
Credit
Rates
Food for Thought



 

The United States

1. As many economists had estimated, about three million Americans filed for unemployment last week. This increase was unprecedented.
 

 
Below, we have some state-level data (3 charts).
 
Source: @markets   Read full article  
Source: Oxford Economics  
Source: CNBC   Read full article  
 
How quickly will the weekly unemployment filings decline going forward? Here are some scenarios from Pantheon Macroeconomics.
 
Source: Pantheon Macroeconomics  
 
How high will the unemployment rate get? The median estimate for Q2 is around 7% (which seems too low).
 
Source: @markets   Read full article  

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2. Consumer confidence has deteriorated. Will sentiment dip below the 2008 lows?
 
Source: Refinitiv  
 
Here are some of the activities that consumers have put on hold.
 
Source: Morgan Stanley Research  

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3. The Kansas City Fed’s regional manufacturing report showed factory activity collapsing in March.
 
The headline index:
 

 
New orders:
 

 
Employment:
 

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4. Businesses continued to cut inventories in February.
 

 
5. US exports have been slowing rapidly.
 
Source: @markets   Read full article  
 
6. How severe will the next quarter’s GDP decline be? Forecasts vary.
 
Source: @markets   Read full article  
 
Will we see a sharp rebound in the fourth quarter? Here is a forecast from Oxford Economics.
 
Source: Oxford Economics  

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7. Thursday was not a good day for the US in terms of the number of new infections.
 

 
The cumulative number of US cases has now exceeded that of China.
 
Source: @tracyalloway   Read full article  


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Canada

According to Pavilion Global Markets, the Canadian dollar is now undervalued by approximately 20% (from the perspective of purchasing power parity).
 
Source: Pavilion Global Markets  
 
Among the majors, the loonie has only materially risen against AUD year-to-date.
 
Source: Pavilion Global Markets  


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The United Kingdom

1. The pound had a good week, bouncing from its long-term support.
 

Source: @DantesOutlook  

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2. The markets cheered the BoE’s QE announcement.
 
Source: Pantheon Macroeconomics  
 
3. In addition to last week’s employment package (see story), the government has set up an initiative to support self-employed workers (see story).
 
Source: @bpolitics   Read full article  


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The Eurozone

1. Germany’s consumer confidence has collapsed.
 

 
2. French business output expectations have deteriorated, and further weakness is expected.
 

Source: ING  
 
Here are some initial estimates of activity losses by sector.
 
Source: ING  

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3. The ECB’s €750 bn QE announcement (PEPP) sharply lowered Italian bond spreads.
 
Source: CreditSights  
 
4. ANZ’s model suggests that the number of new infections in Italy should continue to decline.
 
Source: ANZ Research  
 
5. Traders wanted more volatility in the euro. They got it.
 


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Europe

1. Elsewhere in Europe, the Czech central bank cut rates again.
 

 
2. Sweden’s economic sentiment has been weakening, and there is more deterioration to come.
 

 
3. What do Europeans think about the economy and personal finances?
 
Source: Morgan Stanley Research  


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Asia – Pacific

1. South Korea’s consumer confidence hit the lowest level since 2009.
 

 
2. New Zealand’s consumer confidence also declined sharply.
 

 
3. The Aussie dollar rebound continues.
 


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China

1. This year’s industrial profits are down 38% from the same time a year ago.
 

 
2. Lockdowns in China have already caused more extensive and widespread damage to the economy than what occurred in 2008 and 2015.
 
Source: BCA Research  
 
3. Next, we have some economic activity metrics.
 
Auto sales are gradually recovering.
 
Source: Morgan Stanley Research  
 
Property sales are back to normal.
 
Source: Goldman Sachs  
 
Traffic congestion has nearly recovered.
 
Source: Deutsche Bank Research  
 
Economic output is normalizing.
 
Source: @business   Read full article  

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4. BCA Research estimates that Beijing’s stimulus efforts should boost investment.
 
Source: BCA Research  
 
5. China’s exports to the EU and the US are expected to plummet.
 
Source: Gavekal   


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Emerging Markets

1. India’s central bank cut rates by 75bps. Bond yields fell.
 

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2. The Pakistani rupee hit a new low as virus-related fears spread.
 

Source: BBC   Read full article  

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3. Iran’s new cases keep climbing.
 
Source: Longview Economics  


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Energy

1. The front end of the Brent curve continues to steepen (contango).
 

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2. US oil drilling activity is still trending up.
 
Source: Morgan Stanley Research  


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Equities

1. The Dow has officially exited bear market territory. Has the rebound been too quick?
 

 
Below are some statistics on recoveries from bear markets.
 
Source: Statista  

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2. Market breadth remains weak. Here is the percentage of S&P 500 stocks trading above the 200-day moving average.
 
h/t Sophie Caronello   
 
3. Goldman expects a massive decline in earnings in the second quarter.
 
Source: Goldman Sachs  
 
4. There has been more trading volume in VIX calls with strikes of 100 or more this year than in the entire history of VIX options, according to OptionMetrics.
 
Source: @OptionMetrics  


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Credit

1. US sub-investment-grade credit markets have bounced sharply from multi-year lows.
 
Corporate high-yield:
 

 
Leveraged loans:
 

 
High-yield munis:
 

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2. The Fed’s support for investment-grade (IG) bonds generated significant flows into the largest IG ETF (LQD).
 
Source: @lisaabramowicz1  
 
3. A number of investment-grade firms borrowed heavily in recent weeks.
 
Source: @JacquelinePoh2  
 
4. It’s been a rough few weeks for Asia’s high-yield bonds.
 
Source: @tracyalloway, @DeniseWee1   Read full article  
 
5. The US commercial paper market remains stressed. This chart shows the spread between bank commercial paper rates and OIS (the market’s projection of the fed funds rate).
 


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Rates

1. Treasury bill yields keep hitting record lows as money-market fund inflows spike (second chart).
 

Source: BofA Merrill Lynch Global Research, @TayTayLLP  

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2. On the other hand, bond fund outflows have been massive.
 
Source: BofA Merrill Lynch Global Research, @TayTayLLP  


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Food for Thought

1. Cigarette sales in the US:
 
Source: @WSJ   Read full article  
 
2. Plastic vs. glass:
 
Source: @WSJ   Read full article  
 
3. Satisfaction with the US position in the world:
 
Source: Gallup   Read full article  
 
4. Tech workers’ unions:
 
Source: Statista  
 
5. US tax rates by income group:
 
Source: @WSJ   Read full article  
 
6. Will New York City run out of hospital beds?
 
Source: @rachelholliday, @annjychoi, @yoavgonen, @J__Velasquez, @willcwelch   Read full article  
 
7. Americans’ support for a national quarantine:
 
Source: Morning Consult   Read full article  
 
8. Statewide shelter-at-home orders:
 
Source: @axios   Read full article  
 
9. Most popular Girl Scout cookies:
 
Source: @YouGovUS   Read full article  

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Have a great weekend!


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