U.S. Exports Register the Biggest Decline in Recent History

The Daily Shot: 06-May-20
The United States
The United Kingdom
The Eurozone
Europe
Asia – Pacific
Emerging Markets
Cryptocurrency
Energy
Equities
Credit
Global Developments
Food for Thought



 

The United States

1. Service-sector activity plummetted in April. Here is the non-manufacturing ISM PMI.
 

 
The decline in the headline ISM index should have been more severe, but it was distorted by unprecedented supply bottlenecks (similar to the manufacturing ISM). The index below shows supplier deliveries stalling.
 

 
The devastation was clearly visible in the sub-indices of the non-manufacturing ISM report.
 
New orders:
 

 
Employment:
 

 
The services index from IHS Markit also showed severe contraction.
 

 
One sector that performed well was healthcare.
 
Source: IHS Markit, @Callum_Thomas  

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2. The New York Fed’s weekly economic activity index (WEI) hit a new low.
 

 
3. Next, we have some updates on trade.
 
The March decline in exports was the largest in recent history.
 

 
US imports from China plummetted over the past year.
 
Source: @TCosterg  
 
Trade in services collapsed, with tourism being a key contributor.
 
Source: @GregDaco  
 
Americans are concerned about tariffs.
 
Source: @CivicScience   Read full article  

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4. Sentiment among US farmers has deteriorated sharply over the past couple of months.
 
Source: Purdue University / CME Group Ag Economy Barometer  
Source: Purdue University / CME Group Ag Economy Barometer  
 
There is rising concern about farmland prices.
 
Source: Purdue University / CME Group Ag Economy Barometer  

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5. The share of mortgages in forbearance keeps climbing. Will it peak this month?
 
Source: @axios   Read full article  
 
6. Here is a look at weekly (year-over-year) home price appreciation for select cities.
 
Source: American Enterprise Institute   Read full article  
 
7. Some economists do not see a quick (V-shaped) recovery, which is increasingly priced into the stock market.
 
Source: @adam_tooze, @izakaminska, @senoj_erialc   Read full article  
 
8. Managing the economy with counter-cyclical fiscal and monetary policy has helped reduce the GDP volatility, according to BCA Research.
 
Source: BCA Research  
 
9. The federal government’s borrowing this year will be unprecedented.
 
Source: @WSJ   Read full article  
 
Here is the amount of T-bills outstanding so far.
 
Source: @WSJ   Read full article  
 
Some economists think that the CBO’s federal deficit forecast is much too optimistic.
 
Source: Yardeni Research  


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The United Kingdom

1. New vehicle registrations came to a stop last month.
 

 
2. Is UK energy demand starting to recover?
 
Source: Pantheon Macroeconomics  


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The Eurozone

1. Let’s begin with Germany.
 
March factory orders registered the biggest decline in recent history.
 

 
Here is Germany’s service-sector PMI (business activity).
 

 
High-frequency metrics signal a slight recovery. The charts below show retail store visitors, truck traffic, and public transport usage.
 
Source: Commerzbank Research  

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2. Layoffs continue in Spain.
 

 
3. Eurozone retail sales probably collapsed in April.
 
Source: Pantheon Macroeconomics  
 
4. Here is the ECB’s TLTRO usage by country.
 
Source: @fwred  
 
5. Government debt seems to track the ECB’s balance sheet.
 
Source: Société Générale Group, @Schuldensuehner  


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Europe

1. Switzerland’s deflation worsens, driven by the strength of the Swiss franc. Most of Switzerland’s inflation has been in foreign goods and services.
 

Source: Morgan Stanley Research  

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2. The Norwegian krone is the most undervalued on record, according to Longview Economics.
 
Source: Longview Economics  
 
Norway’s 10yr bond yield hit a new low.
 

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3. According to ASR’s news flow index, analysts are much too optimistic about corporate earnings.
 
Source: Absolute Strategy Research  


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Asia – Pacific

1. Let’s start with Singapore.
 
Business activity shrunk further in April.
 

 
Banks are boosting loan loss provisions.
 
Source: @DavidInglesTV  
 
Singapore’s population is older, increasing vulnerability to the coronavirus.
 
Source: @bpolitics   Read full article  

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2. Many Asian economies rely heavily on small and medium-sized businesses (SMEs).
 
Source: Natixis  
 
This chart shows targeted fiscal support for SMEs.
 
Source: Natixis  

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3. New Zealand’s labor markets were relatively robust before the lockdown.
 

 
4. Next, we have some updates on Australia.
 
Q1 retail sales increased but were below consensus.
 
Source: @Scutty  
 
Consumers have been stocking up on groceries and liquor this year.
 
Source: @IFM_Economist  
 
Food sales offset declines elsewhere.
 
Source: Goldman Sachs  

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Housing finance is expected to show a sharp drop in April.
 
Source: Goldman Sachs  
 
The declines in jobs and wages appear to be slowing.
 
Source: ANZ Research  
 
Fixed income flows have been declining as Australian yields have converged to G3 peers.
 
Source: Morgan Stanley Research  
 
Are Australia’s stocks too expensive? The chart shows the ASX 200 forward PE ratio.
 
Source: Morgan Stanley, @Scutty  

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5. Finally, here are some updates on Hong Kong.
 
The all-sector PMI index bounced from the lows but remains deep in contraction territory (PMI < 50).
 

 
Rents continue to decline.
 
Source: @WSJ   Read full article  
 
Retail sales remain extremely weak.
 


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Emerging Markets

1. Brazil’s industrial production tumbled in March.
 

 
Support for Bolsonaro is deteriorating.
 
Source: TS Lombard  

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2. Chile’s vehicle sales plummetted.
 

 
3. Peru is better positioned to withstand the pandemic’s economic fallout than other LatAm nations.
 
Source: @WSJ   Read full article  
 
4. The Turkish lira continues to drift lower.
 

 
5. Philippine exports were down 25% in March (on a year-over-year basis).
 

 
6. EM dollar-denominated bond spreads remain elevated, especially for LatAm debt.
 
Source: Barclays Research  


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Cryptocurrency

1. Bitcoin has reversed the March crash, rising 80% from the lows.
 

 
2. Mentions of “halvening” (or halving) have increased over the past three months.
 
Source: Sanbase   Read full article  
 
Here is the Google search activity for bitcoin halving.
 
Source: Google Trends  

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3. It appears that the correlation between Bitcoin and the S&P 500 is starting to subside.
 
Source: Coin Metrics  


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Energy

1. Brent crude is above $30/bbl.
 

 
By the way, US corn prices seem to be rebounding with crude oil.
 
Source: Alkire Advisory  

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2. Traders have been rolling out of the June NYMEX crude contract into July much earlier than usual. Given what happened with the May contract, financial participants don’t want to be long close to maturity.
 
Source: @markets   Read full article  
 
3. Next, we have a couple of updates on coal.
 
US coal production:
 
Source: @business   Read full article  
 
Coal usage during the crisis:
 
Source: @business   Read full article  


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Equities

1. Relief rallies are common after a stock market crash. Is this one due for a pull-back?
 
Source: Longview Economics  
 
2. The Short Interest Index is off the highs.
 
Source: @WSJ   Read full article  
 
3. The S&P 500 earnings yield remains above the 10-year Treasury yield.
 
Source: BofA Merrill Lynch Global Research  
 
4. Next, we have some updates on corporate earnings.
 
S&P 500 earnings-per-share dispersion is matching levels last seen during the financial crisis.
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  
 
Are US earnings converging with the rest of the world?
 
Source: SunTrust Private Wealth Management  
 
Below are the year-over-year forward EPS changes by quarter.
 
Source: Yardeni Research  

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5. “Size” was the only factor to see positive excess returns in April, while low-vol lagged the most.
 
Source: SPDR Americas Research, @mattbartolini  
 
6. This is the largest drawdown in history for the US value factor.
 
Source: Two Centuries Investments   Read full article  
 
7. Equity long/short funds have been boosting their stock exposure.
 
Source: Credit Suisse, @markets   Read full article  
 
8. While S&P 500 volatility levels have subsided, only 23% of stocks are above their 200-day moving average. That’s an indication of low market breadth, according to State Street.
 
Source: SPDR Americas Research, @mattbartolini  
 
9. This chart shows March to April sector rotation based on E*Trade customer data.
 
Source: E*Trade Financial Corporation  


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Credit

1. US lending standards appear to be correlated with VIX.
 
Source: Cantor Fitzgerald Market Strategy Team  
 
2. The flow of cash through the private sector has been clogged as past-due accounts explode. Below is the NACM Dollar Collections Index (discussion here).
 

 
At the same time, lending standards to small firms have tightened.
 
Source: The Daily Feather  

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3. Convertible debt issuance has picked up this year.
 
Source: @WSJ   Read full article  
 
4. While CLOs’ CCC buckets are “overflowing” (as debt gets downgraded), we are unlikely to see extensive sales of distressed debt in the sector. Instead, CLOs will be in violation of their overcollateralization (OC) tests, forcing them to cut off payments to lower-rated tranches at the expense of paying down the AAA tranche (deleveraging).
 
Source: UBS, @markets   Read full article  


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Global Developments

1. Automobile shopping searches show improvements in some countries.
 
Source: Arbor Research & Trading  
 
2. Airfreight supply has fallen faster than demand.
 
Source: @WSJ   Read full article  
 
3. All asset classes, except broad commodities, saw positive performance this past month.
 
Source: SPDR Americas Research, @mattbartolini  
 
4. Cross-asset volatility remains high relative to one year ago, especially for oil.
 
Source: SPDR Americas Research, @mattbartolini  
 
5. AUD and JPY implied volatility is the most correlated with VIX.
 
Source: Morgan Stanley Research  


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Food for Thought

1. Is your government doing a good job containing the pandemic?
 
Source: Ipsos  
 
2. Spending on preparedness for bioterrorism vs. pandemic influenza:
 
Source: @WSJ   Read full article  
 
3. Google search frequency for “coronavirus”:
 
Source: Oxford Economics  
 
4. Projected statewide lockdowns:
 
Source: Evercore ISI Research, @LizAnnSonders  
 
5. The pandemic’s impact on people’s lives:
 
Source: Morning Consult   Read full article  
 
6. Driving, walking, and mass transit activity in the US:
 
Source: @WSJ   Read full article  
 
7. The Social Security trust will be broke a few years.
 
Source: @WSJ   Read full article  
 
8. Net savings across incomes:
 
Source: Deutsche Bank Research  
 
9. A survey of corporate executives (globally):
 
Source: WEF   Read full article  
 
10. Americans’ pastimes by income:
 
Source: Visual Capitalist   Read full article  

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