April Rent and Mortgage Payments Are Due

The Daily Shot: 01-Apr-20
The United States
The Eurozone
Asia – Pacific
China
Emerging Markets
Commodities
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. The Conference Board’s consumer confidence indicator declined less than the market was expecting.
 

 
Considering the collapse in US economic activity (see Goldman’s Current Activity Indicator below), consumer sentiment has been remarkably resilient.
 
Source: Goldman Sachs  
 
But we are likely to see consumer confidence deteriorate further in April.
 
Source: Pantheon Macroeconomics  

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2. Based on Google search data, consumer activity has declined sharply.
 
Source: Arbor Research & Trading  
 
For example, here is the search frequency for the word “shoes.”
 
Source: Google Trends  
 
Below is Goldman’s consumer activity tracker for China and the US.
 
Source: Goldman Sachs  

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3. April rent and mortgage payments are due.
 
Source: @YouGovUS   Read full article  
Source: The New York Times   Read full article  
 
Here is the search frequency for the phrase “skip mortgage.”
 
Source: Google Trends  

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4. Americans are having trouble obtaining certain goods, partially as a result of hoarding. In some cases, resupplying stores has been challenging.
 
Source: @axios   Read full article  
 
5. Morgan Stanley expects the latest initial unemployment claims to hit 4.45 million.
 
Source: Morgan Stanley Research  
 
6. Automobile sales have declined sharply.
 
Source: @technology   Read full article  
 
7. Below is an updated set of Q2 GDP growth estimates.
 
Source: @LizAnnSonders  
 
The equity-bond ratio is down 30%, which is on par with the 2001 recession and implies the US economy could contract 1-2% this year, according to Alpine Macro.
 
Source: Alpine Macro  
 
Here is the GDP trajectory projection from Morgan Stanley.
 
Source: Morgan Stanley Research  

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8. The Chicago PMI index, which is an indicator of factory activity in the Midwest, was relatively stable in March. That result is unlikely to be repeated in April.
 

 
9. How much will the federal deficit increase as a result of the crisis? Here is an estimate from Alpine Macro.
 
Source: Alpine Macro  
 
10. Finally, we have some updates on the epidemic.
 
The number of new cases spiked again.
 

Source: CNBC   Read full article  
 
Testing remains a challenge.
 
Source: @financialtimes, {ht} [email protected]   Read full article  
 
Models show that the number of new US cases will peak in a couple of weeks. By then, over 200k will be hospitalized, with over two thousand people dying per day.
 
Source: Institute for Health Metrics and Evaluation  
 
While, mid-April is the expected peak at the national level, the number of new infections will peak at different times for each state.
 
Source: @axios   Read full article  
 
Would abandoning lockdowns too early lead to greater economic damage?
 
Source: IGM Forum   Read full article  


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The Eurozone

1. Inflation across the euro area declined as oil prices fell.
 
France:
 

 
Italy:
 

 
The Eurozone:
 

 
CPI summary:
 
Source: Scotiabank Economics  

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2. Germany’s latest employment report was remarkably upbeat.
 


 
The key reason is Kurzarbeit (“short-time work”).
 
Source: Pantheon Macroeconomics  


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Asia – Pacific

1. Japan’s Tankan manufacturing index declined less than expected (but there will be further deterioration in April).
 

 
2. What’s the economic impact of postponed Olympic games?
 
Source: @financialtimes   Read full article  
 
3. South Korea’s manufacturing PMI hit the lowest level since 2009.
 
Source: @IHSMarkitPMI   Read full article  
 
4. Taiwan’s factory activity has been resilient.
 
Source: @IHSMarkitPMI   Read full article  
 
5. Next, we have a couple of updates on Australia.
 
Building approvals rose by 20% in February, the highest monthly increase since 2013.
 

 
Manufacturing activity jumped in March as households stocked up on essential goods (including food and chemical products) in response to the pandemic.
 

Source: Goldman Sachs  


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China

1. The Markit manufacturing PMI confirmed a rebound in China’s factory activity.
 
Source: @IHSMarkitPMI   Read full article  
 
While new orders are still in contraction territory (PMI < 50), the improvement was remarkable.
 

 
Here is how China’s PMI compares to other Asian economies.
 
Source: ING  

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2. China’s government bonds have been less volatile than debt markets elsewhere.
 
Source: Gavekal   
 
3. The private sector accounts for a growing majority of China’s jobs.
 
Source: @WSJ   Read full article  


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Emerging Markets

1. Let’s begin with Chile.
 
The central bank cut rates by 50 bps.
 

 
Economic activity was rebounding in February.
 
Commercial activity:
 

 
Retail sales:
 

 
Industrial production:
 

 
However, the unemployment rate rose more than expected.
 

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2. Brazil’s debt-to-GDP ratio has been moving lower. However, it will likely be on an upward trajectory in the near-term.
 

 
3. Mexico’s credit growth has been slowing.
 
Source: Goldman Sachs  
 
4. The South African rand hit a record low after the downgrade.
 
Source: @financialtimes   Read full article  
 
USD/ZAR is testing resistance at 18 rand to the dollar.
 

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5. Manufacturing activity stalled across Asia. Here are the PMI indices.
 
Indonesia:
 
Source: @IHSMarkitPMI   Read full article  
 
Thailand:
 
Source: @IHSMarkitPMI   Read full article  
 
The Philippines:
 
Source: @IHSMarkitPMI   Read full article  
 
Vietnam:
 
Source: @IHSMarkitPMI   Read full article  

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6. Here is Fitch Solutions’ Asia vulnerability heat map.
 
Source: Fitch Solutions Macro Research  
 
7. Which nations depend most on exports of manufactured goods and commodities?
 
Source: Gavekal   


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Commodities

1. China’s iron ore and steel futures have been selling off.
 

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2. Hoarding and export bans in some countries have pushed wheat and rice prices higher.
 
Source: @WSJ   Read full article  
 
3. Sugar futures in New York resumed their declines.
 

 
4. Restaurant closures put US pork belly prices under pressure.
 
Source: Michael Hirtzer, @TheTerminal   Read full article  


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Energy

1. NYMEX crude continues to test support at $20/bbl.
 

 
2. BCA Research expects the Brent oil price to fall lower before staging a rebound above $60 per barrel.
 
Source: BCA Research  
 
3. Here is a comparison of oil prices now versus 2008.
 
Source: Deutsche Bank Research  
 
4. The gasoline crack spread in the US has been near zero amid weak demand.
 
Source: @WSJ   Read full article  
 
5. Ethanol prices have declined sharply.
 
Source: @business   Read full article  


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Equities

1. US futures are heavy in early trading amid White House warnings.
 

Source: Fox News   Read full article  

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2. Here is the Dow vs. 1929.
 
Source: @NautilusCap  
 
3. When will equities bottom?
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  
 
4. In 2008, the S&P 400 (mid-caps) made a relative low during the initial phase of the market crash and then rebounded before the S&P 500 was able to recover.
 
Source: Longview Economics  
 
Here’s how the S&P 400 performed relative to the S&P 500 during past bear markets.
 
Source: Longview Economics  

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5. It was a rough quarter for small caps, which registered the biggest decline on record.
 
h/t Sophie Caronello, @TheTerminal  
 
6. March was the most volatile month on record.
 
Source: @bespokeinvest  
 
7. Here is VIX now versus 2008.
 
Source: Deutsche Bank Research  
 
8. The illustration below shows the drivers of each stage of the market cycle.
 
Source: Morgan Stanley Research  


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Credit

1. Credit downgrades are accelerating.
 
Source: CreditSights  
 
2. There’s been a modest recovery in energy sector credits (tighter option-adjusted spreads) over the past week. More pain ahead?
 
Source: Arbor Research & Trading  
 
3. European investment-grade spreads haven’t tightened as quickly as US counterparts, which were helped by the Fed.
 


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Rates

1. Treasury bill yields pulled out of negative territory as the curve flattened (the Fed is now buying Treasuries across maturities).
 

 
2. The Fed launched a new program to provide dollars to other central banks via repo financing.
 
Source: AP   Read full article  
 
The cross-currency swap basis is in uncharted territory amid rising supplies of dollars outside the US.
 


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Global Developments

1. Let’s start with some updates on the US dollar.
 
The dollar has run up to the top of its valuation bands.
 
Source: Deutsche Bank Research  
 
The US currency has diverged from speculative investors’ bets.
 
Source: ING  
 
Here is the USD share of reserve currencies.
 
Source: Goldman Sachs  

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2. Based on financial Twitter activity, bearish sentiment has bottomed.
 
Source: Arbor Research & Trading  
 
3. Capital Economics expects 2020 to be the first negative GDP year since WW-II.
 
Source: Capital Economics  
 
But the rebound is expected to be faster than during previous contractions.
 
Source: Capital Economics  


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Food for Thought

1. Who can work from home?
 
By age:
 
Source: Economic Policy Institute  
 
By income:
 
Source: The Brookings Institution   Read full article  

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2. Pension liabilities of large US cities:
 
Source: @WSJ   Read full article  
 
3. Skipping medications due to cost:
 
Source: HighTower Advisors, RCG Economics, Pawn Guru  
 
4. Adolescent risk behaviors:
 
Source: HighTower Advisors, RCG Economics, statistics_data_facts  
 
5. Gallup’s job satisfaction survey:
 
Source: @WSJ   Read full article  
 
6. Third-party sellers on Amazon:
 
Source: @WSJ   Read full article  
 
7. Video game streaming:
 
Source: The Washington Post   Read full article  
 
8. Anti-government protests:
 
Source: The Economist   Read full article  
 
9. Do-it-yourself (DIY) haircuts:
 
Source: Statista  

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