The Daily Shot: 05-Jun-20
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Commodities
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Initial jobless claims continue to slow, but the labor market remains under severe stress.
The regular state unemployment filings (shown above) don’t include the Pandemic Unemployment Assistance claims.
Source: @GregDaco
Similarly, continuing unemployment claims …
… are not telling the full story.
Source: Oxford Economics
——————–
2. Here is the share of income derived from wages vs. government programs.
Source: @lisaabramowicz1 Read full article
3. Vehicle sales have been surprising to the upside. Some have suggested that the reluctance to use public transportation boosted demand for automobiles.
Source: @WSJ Read full article
4. Despite the Fed taking the overnight rate down to zero, credit card rates remain elevated.
Source: Deutsche Bank Research
5. Bloomberg’s consumer sentiment indicator ticked up again.
There seems to be some divergence in confidence between older and younger Americans.
——————–
6. The inventory of homes for sale remains depressed, …
… while prices keep climbing.
——————–
7. Small businesses expect to start 2021 with less than three-quarters of employees they had before the crisis.
Source: Alignable
8. Next, we have some updates on trade.
• The US trade gap widened in April.
• Here is the overall trade as a share of the GDP.
h/t Sophie Caronello
• Travel restrictions constrained trade in services.
Source: Economics and Strategy Group, National Bank of Canada
——————–
9. A substantial portion of the federal stimulus funds has been spent.
Source: @WSJ Read full article
The United Kingdom
1. Consumer confidence deteriorated further in May.
2. Construction activity showed hopeful signs last month.
3. Automobile purchases remained exceptionally weak in May.
4. Polls show less support for the government.
Source: Statista
The Eurozone
1. The ECB came through with a ‘bazooka,’ massively boosting its QE program (as markets expected).
Source: CNBC Read full article
• Here is the projection for the central bank’s balance sheet from Pantheon Macroeconomics.
Source: Pantheon Macroeconomics
• Periphery bond spreads tightened further.
• The ECB does not see the GDP returning to pre-crisis levels until late 2022.
Source: ECB Read full article
• The central bank also sharply downgraded its medium-term inflation projections.
Source: @fwred
By the way, consumer and business inflation expectations have diverged.
Source: Gavekal
——————–
2. Despite the ECB’s easing action, the euro kept climbing.
Is the euro overbought now?
Source: ING
——————–
3. The Eurozone’s financial conditions continue to ease.
4. Online purchases provided some offset to the April crash in retail sales.
Source: Pantheon Macroeconomics
Source: Eurostat Read full article
——————–
5. Germany’s construction PMI showed some improvement in May.
6. The Bund curve continues to steepen as Germany embarks on an extensive fiscal stimulus program.
7. Ireland’s government budget is expected to move back into deficit.
Source: @financialtimes Read full article
8. Finally, we have the evolution of minimum wages across the Eurozone.
Source: Eurofound Read full article
Europe
1. Switzerland is in deflation.
Despite the ECB’s massive QE increase, the Swiss franc’s rally is fading, which should offset deflationary pressures.
——————–
2. Sweden’s business output points to a sharp contraction in the GDP.
Source: @MikaelSarwe
Has the decision to avoid lockdowns backfired?
Source: Statista
Nonetheless, the Swedish krona continues to rebound.
——————–
3. This chart shows Airbnb occupancy rates in select European cities.
Source: ANZ Research
Asia – Pacific
1. The Taiwan dollar hit a 2-year high.
2. The Aussie dollar is testing the USD 0.7 resistance. Is the rally overdone?
Source: barchart.com
This chart shows AUD’s correlations to various asset classes.
Source: ANZ Research
——————–
3. Australia’s service sector activity remains deep in contraction territory.
China
1. Construction is back in growth mode.
Source: Pantheon Macroeconomics
2. Below are China’s key lending rates.
Source: @WSJ Read full article
3. This chart shows China’s three phases of social distancing.
Source: Morgan Stanley Research
4. Gavekal expects firms’ return on capital to be higher than the cost of capital later this year, which should lead to a recovery in CapEx in 2021.
Source: Gavekal
Emerging Markets
1. EM currencies continue to rally as risk appetite returns.
• The Indonesian rupiah is back at pre-crisis levels.
• The Philippine peso keeps climbing.
——————–
2. Here are some of the worst-performing EM currencies since March 1st.
Source: Bruegel Read full article
Which EM currencies are the cheapest?
Source: Alpine Macro
——————–
3. Thailand’s consumer confidence remained depressed in May.
4. South Africa’s electricity production and consumption collapsed in April.
5. Driving trends have improved more in Russia than other EM economies.
Source: Morgan Stanley Research
6. India’s COVID-19 situation continues to worsen.
Source: JHU CSSE
Source: Statista
——————–
7. Headline inflation in most EM countries kept declining this year, despite pronounced currency weakness.
Source: Alpine Macro
Commodities
1. The rebound in copper continues amid improved risk appetite.
2. Gold and real Treasury yields have diverged.
Source: Scotiabank Economics
Equities
1. Trading volumes rose on Thursday, especially for Nasdaq.
Source: @sentimentrader
Source: @hmeisler
——————–
2. Corporate actions have shifted from share buybacks to equity sales.
Source: @jessefelder, @markets Read full article
3. Here are some updates on the healthcare sector.
• Flows into healthcare ETFs have reached an all-time high, according to State Street. ($ Billions).
Source: SPDR Americas Research, @mattbartolini
• Over the past 15-years, BlackRock’s health science fund has returned double the S&P 500.
Source: Investing.com
• The S&P small-cap healthcare ETF has underperformed biotechs, the overall healthcare sector, and the S&P 500 over the past three months.
Source: Daniel Moskovits; Koyfin
Credit
1. Flows into the largest high-yield bond ETF have accelerated.
Source: @lisaabramowicz1
2. US high-yield credit spreads are still elevated, but appear to be heading back toward historical averages.
Source: Danske Bank
3. Here are the sources of debt funding for US and European companies.
Source: Deutsche Bank Research
In the US, bank loans as a percent of total corporate debt have declined substantially since the 1980s.
Source: Deutsche Bank Research
——————–
4. Which industries are most at risk of more fallen angels?
Source: Fitch Ratings
5. High-rated munis continue to rally.
Rates
1. The Treasury curve keeps steepening.
2. Next, we have some updates on the Fed.
• The Fed’s balance sheet expansion has slowed.
• The central bank has financed much of the post-crisis Treasury issuance.
Source: Pantheon Macroeconomics
But issuance is expected to outstrip the Fed’s purchases going forward.
Source: Morgan Stanley Research
——————–
• The Fed’s and ECB’s programs have eased strains in funding markets.
Source: Deutsche Bank Research
• There is plenty of dry powder in the Fed’s lending facilities.
Source: Oxford Economics
——————–
3. Who has been unloading Treasuries?
Source: Capital Economics
4. Overnight repo volumes underlying SOFR have doubled since 2014.
Source: Piper Sandler
By the way, here are some key differences between SOFR and LIBOR (from Piper Sandler).
Source: Piper Sandler
Global Developments
1. The US dollar continues to tumble as risk appetite returns.
2. Currency market participants are still positioned defensively.
Source: Morgan Stanley Research
3. The average trading range over the past 30 days relative to the past 100 trading days has never been so low, according to Arbor Data Science (2 charts).
Source: Arbor Research & Trading
Source: Arbor Research & Trading
——————–
4. Here is a look at fund flows year-to-date (2 charts).
Source: BofA Merrill Lynch Global Research, @WallStJesus
Source: BofA Merrill Lynch Global Research, @WallStJesus
——————–
5. People are hitting the road in the US and Europe …
Source: Gavekal
… but they’re still not ready to fly (although that may be changing).
Source: Gavekal
——————–
Food for Thought
1. Self-storage occupancy rates:
Source: Moody’s Analytics
2. Student housing rent growth:
Source: Moody’s Analytics
3. Shopping outlet activity in the US and Europe:
Source: Deutsche Bank Research
4. Small business concerns:
Source: Alignable
5. Deaths at long-term care facilities:
Source: Mekko Graphics Read full article
6. The latest COVID-19 map:
Source: @axios Read full article
7. A long way from herd immunity:
Source: Statista
8. Changes in cable news viewership:
Source: @business Read full article
9. Presidential job approval ratings:
Source: Statista
10. Pet care stocks:
Source: @LizAnnSonders, @bcaresearch
——————–
Have a great weekend!