The Daily Shot: 07-May-20
• The United States
• The United Kingdom
• The Eurozone
• Asia – Pacific
• China
• Emerging Markets
• Energy
• Equities
• Alternatives
• Credit
• Rates
• Food for Thought
The United States
1. According to the ADP private payrolls report, nearly a decade worth of job gains have been wiped out in a month.
Source: Reuters Read full article
Below is the ADP summary.
Source: ADP
And here is the distribution by sector.
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2. Initial jobless claims are moderating. Nonetheless, economists are estimating that another three million Americans filed for unemployment last week.
Source: Pantheon Macroeconomics
3. Mortgage applications to purchase a home continue to rebound.
And refi activity remains elevated amid record-low mortgage rates (second chart).
Source: Piper Sandler
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4. US retail activity is gradually recovering.
Source: Homebase
More states are lifting restrictions, even as some fall short of the White House reopening criteria.
Source: @bbgvisualdata Read full article
The number of new cases is still rising in many states.
Source: @axios Read full article
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5. The ISM non-manufacturing report showed an uptick in prices. See the comment below from Axios.
Source: @axios Read full article
6. Trucks outsold cars for the first time.
Source: @markets Read full article
7. As we saw last week (#6 here), the US fiscal response to the pandemic has been much larger and faster than it was after the financial crisis.
Source: @ISABELNET_SA, @GoldmanSachs
8. This chart compares the US and the UK debt-to-GDP ratio, including forecasts.
Source: The Economist Read full article
9. The trade deal with China increasingly looks like a pipe dream. The chart shows China’s targeted purchases of US goods.
Source: S&P Global Market Intelligence
The United Kingdom
1. Construction activity ground to a halt last month.
2. While the composite PMI already shows a massive GDP decline, …
Source: Pantheon Macroeconomics
The actual contraction could be even worse (it’s a nonlinear relationship).
Source: Goldman Sachs
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3. Without UK schools reopening, there is little hope for recovery.
Source: Pantheon Macroeconomics
4. Policy uncertainty is rising, especially with Brexit back on the radar.
Source: TD Securities
5. BoE’s quantitative easing is absorbing most gilts issued this year.
Source: ING
The Eurozone
1. The euro-area service sector has undergone devastation not seen in the post-WW-II era. These have been the lowest readings ever recorded by Markit PMI globally. Surely, this is the bottom.
• Italy:
• Spain:
• The Eurozone:
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2. Retail sales crashed in March.
Source: European Commission Read full article
Here is food vs. everything else.
Source: Pantheon Macroeconomics
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3. The euro-area savings ratio likely spiked this year to the highest level in decades.
Source: @nghrbi
4. Next, we have some GDP forecasts.
• 2020 and 2021:
Source: European Commission Read full article
• Germany, France, Italy, and Spain:
Source: European Commission Read full article
• Here is a long-term trend in the French GDP growth rate.
Source: @wb_kNOw_FUTURE
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5. The euro-area government debt-to-GDP ratio is expected to increase to 102.5%.
Source: @BloombergQuint Read full article
6. The euro hit the lowest level since 2016 against the yen.
h/t Robert Fullem
Asia – Pacific
1. South Korea’s corporate earnings are dependent on exports.
Source: Pavilion Global Markets
The nation’s unemployment rate is about to spike.
Source: Pavilion Global Markets
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2. Next, we have a couple of updates on Australia.
• The AIG service-sector index is at the lowest level on record.
• Trade surplus hit a record high as exports spiked (second chart). Part of the increase was due to iron ore shipments delayed by the lockdown.
This chart shows the tourism service trade balance.
Source: @Scutty
China
1. China’s service-sector remained in contraction last month (PMI < 50). Economists expected stabilization.
2. Exports unexpectedly increased, and trade surplus climbed (second chart).
Source: @markets Read full article
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3. Economists continue to downgrade their 2020 GDP forecasts.
Source: @DavidInglesTV
4. According to Pantheon Macroeconomics, China’s fiscal deficit probably blew out in the first quarter.
Source: Pantheon Macroeconomics
Emerging Markets
1. Let’s begin with Brazil.
• The central bank cut rates aggressively, with more easing on the way.
• Service sector ground to a halt last month.
• The number of new infections continues to accelerate.
Source: JHU CSSE
• The Brazilian real hit another record low.
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2. Argentina’s decline in construction activity was worse than what we saw after the 2001 debt default.
No vehicles were made last month.
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3. Mexico’s car sales tumbled but did not completely collapse.
4. Service-sector activity in India stopped in April.
Source: The Economic Times Read full article
5. Which countries rely most on remittances?
Source: @bopinion Read full article
Energy
1. US gasoline demand is recovering (second chart).
Source: Princeton Energy Advisors
• The spread between gasoline and diesel has become positive, which is also signaling stronger demand.
Source: Olivia Raimonde
• Gasoline inventories appear to have peaked.
• Refinery inputs have bottomed.
Source: Princeton Energy Advisors
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2. US crude oil production continues to slow.
3. Here is the 4-week average of fuel ethanol production.
4. Gasoline prices tend to be correlated with US economic activity.
Source: @Not_Jim_Cramer
5. This chart shows US energy consumption by source.
Source: @WSJ Read full article
Equities
1. Based on corporate earnings calls, financing concerns in April were worse than in 2008.
Source: Andrew Chen, Jie Yang (Federal Reserve Board) Read full article
2. Earnings sentiment appears to have bottomed.
Source: @ISABELNET_SA, @GoldmanSachs
3. US markets have outperformed peers on a stock-to-bond ratio basis since 2009.
Source: TD Securities
4. The equal-weighted S&P 500 performance is on par with the MSCI World ex-US Index this year (mega-cap tech shares have been driving US outperformance).
Source: TS Lombard
5. This chart shows the relative performance (2 years) of S&P 500 (SPX), Russell 2000 (RTY), transportation shares (TRAN), Nasdaq 100 (NDX), and Brent crude oil (CO1).
Source: @LizAnnSonders
6. Small-cap staples and utilities (defensives) have outperformed since the start of the 2020 correction, according to BofA.
Source: BofA Merrill Lynch Global Research
7. Large-cap quant funds have underperformed “fundamental” funds in the first quarter.
Source: Nomura Instinet, @markets Read full article
8. The AAII Bull-Bear spread hit the lowest level since 2016.
9. Analysts remain concerned about US equity valuations.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
This chart shows the current 12-month forward P/E vs. long-term averages by sector.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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10. Here is the monthly US equities trading volume.
Source: @WSJ Read full article
Alternatives
1. This chart shows the Venture Capital Barometer.
Source: @TaviCosta
2. Private equity and private credit dry powder keeps climbing.
Source: LCD, S&P Global Market Intelligence
Credit
1. The chart below shows the monthly issuance of leveraged finance debt.
Source: LCD, S&P Global Market Intelligence
2. Next, we have some updates on leveraged loans.
• Default rates:
Source: S&P Global Market Intelligence Read full article
Source: S&P Global Market Intelligence Read full article
• Returns:
Source: LCD, S&P Global Market Intelligence
• BB- vs. B-rated loan prices:
Source: LCD, S&P Global Market Intelligence
• The total leveraged loan market:
Source: Fitch Ratings
• Loan funds AUM:
Source: LCD, S&P Global Market Intelligence
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3. CCC-rated bonds have widened their underperformance.
Source: BCA Research
4. This chart shows the relative performance of Europen corporate bonds.
Source: Reuters Read full article
5. The largest high-yield bond ETF is getting some inflows.
Source: @markets Read full article
Rates
1. Is the massive US debt issuance starting to weigh on the Treasury market?
Source: @WSJ Read full article
The expected supply increase, including the introduction of the 20-year Treasury, nudged the 30-year yield higher. Below is the spread between the 30yr and the 10yr Treasuries.
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2. Money market funds have been absorbing the increased T-Bill supply.
Source: JP Morgan, {ht} Adam Kneller
3. Here is the evolution of the Fed’s balance sheet composition.
Source: BNP Paribas Securities, {ht} John Coleman
Food for Thought
1. Long-term care users:
Source: Deutsche Bank Research
2. Seeking non-COVID-19 treatments:
Source: Morning Consult Read full article
3. Political regimes:
Source: Our World In Data Read full article
4. Trump vs. Biden social media followers:
Source: @axios Read full article
5. US Postal Service volume, revenues/expenses (2 charts):
Source: @BW Read full article
Source: @BW Read full article
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6. Food freight prices:
Source: @WSJ Read full article
7. Online searches for “staying in”:
Source: Arbor Research & Trading
vs. going out:
Source: Arbor Research & Trading
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