Sharp Declines in Household Survey Participation Clouds the Latest Employment Report

The Daily Shot: 10-Jun-20
The United States
Canada
The United Kingdom
The Eurozone
Asia – Pacific
China
Emerging Markets
Equities
Alternatives
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. Let’s begin with the April job openings report.
 
Job vacancies declined further.
 

 
Construction registered a small increase, …
 

 
… but most other sectors saw deterioration in demand.
 
Hotels and restaurants:
 

 
Retail:
 

 
Layoffs moderated, while the quits rate continued to fall.
 

 
Here is the Beveridge curve.
 

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2. The uncertainty surrounding the May employment report was exacerbated by much lower participation in the household survey. The process was also modified due to safety issues.
 
Source: Deutsche Bank Research  
 
3. The NFIB small business sentiment index improved in May.
 

 
Below are some of the NFIB index components.
 
Hiring:
 

 
Sales expectations:
 

 
CapEx expectations:
 

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4. This map shows the percentage of PPP loans that have been approved.
 
Source: S&P Global Market Intelligence  
 
5. The wholesale inventories-to-sales ratio hit a record high. The second and third charts below show the ratio for durable and nondurable goods.
 

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6. The rate lock volume is up 18% year-over-year as homebuyers rush to lock in record-low mortgage rates.
 
Source:  AEI Housing Center  
 
Rate lock activity was terrible at the peak of the pandemic but has recovered quite well since then.
 
Source:  AEI Housing Center  

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7. Drawing a straight line through the rebound in air travel suggests that activity will fully recover in August. Analysts are skeptical.
 
Source: @carlquintanilla, @fundstrat  
 
8. US consumers are gradually getting more comfortable with resuming some activities, but it will be a long time before confidence is fully restored.
 
Source: Morning Consult   Read full article  
 
9. The Fitch Ratings GDP tracker has bounced from extreme lows.
 
Source: Fitch Ratings  
 
However, the NY Fed’s weekly economic activity index declined last week.
 

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10. The US dollar’s slide continues, which should aid the recovery.
 


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Canada

1. Here is the number of Canadians (% of labor force) who have received CERB
payments.
 
Source: Institute for Government   Read full article  
 
2. Short covering and retail investors’ appetite for stocks has pushed equities higher, according to Scotiabank.
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  
 
The MSCI Canada growth/value relative performance is approaching prior extremes. (Chart shows 13-week relative return).
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  


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The United Kingdom

1. The pound has been rallying, although it’s mostly the weakening dollar story.
 

 
2. Downside risks to the housing market remain elevated.
 
Source: Pantheon Macroeconomics  
 
3. The BoE QE program has kept up with the government’s debt issuance.
 
Source: Pantheon Macroeconomics  
 
4. Is the UK ready for the “no-deal” WTO option?
 
Source: Institute for Government   Read full article  


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The Eurozone

1. Let’s begin with Germany.
 
The nation’s trade surplus collapsed in April as exports plummetted (2nd chart).
 


 
Truck toll mileage is recovering.
 
Source: Destatis  
 
The Rhine’s water levels are quite low, which may create the shipping bottlenecks we saw a couple of years ago (see story).
 
Source: @business   Read full article   Further reading  

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2. In France, industrial output plummetted in April.
 

 
However, industrial sentiment improved sharply last month.
 

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3. Home prices are at risk.
 
Source: Pantheon Macroeconomics  
 
4. Banks’ credit default swap spreads have been tightening.
 
Source: @WSJ   Read full article  


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Asia – Pacific

1. Japan’s producer prices continue to decline.
 

 
Machine tool orders were down over 50% from May of last year.
 

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2. South Korea’s labor market showed a modest improvement last month.
 
Source: Goldman Sachs  
 
But the unemployment rate climbed.
 

 
The won rebound continues.
 

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3. Australia’s consumer confidence is approaching pre-crisis levels.
 


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China

1. The CPI declined more than expected last month as meat prices stabilized.
 


 
The core CPI remained steady.
 

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2. Producer prices moved deeper into deflation territory, which points to further weakness in industrial profits.
 

Source: World Bank   Read full article  

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3. ChiNext has massively outperformed large-caps this year.
 

 
4. Many migrant workers haven’t returned to cities.
 
Source: @WSJ   Read full article  


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Emerging Markets

1. India’s high-frequency indicators have been tanking.
 
Source: ANZ Research  
 
2. EM gross government debt is at a historical high as primary balances have worsened significantly.
 
Source: Barclays Research  
 
Sovereign hard-currency bond issuance is running at a record pace.
 
Source: Barclays Research  
Source: Barclays Research  
 
This chart shows EM external debt-to-GDP ratios by region.
 
Source: Bruegel   Read full article  
 
Foreign holdings of EM Asia government debt vary significantly by country.
 
Source: World Bank   Read full article  


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Equities

1. About 74% of equity indices globally are now at least 20% above this year’s lows.
 
Source: @topdowncharts  
 
2. The S&P 500 has diverged from corporate margins.
 
Source: @TaviCosta  
 
3. This chart shows sector weights in the low-volatility factor ETF (USMV) versus the S&P 500.
 
Source: Factor Research  
 
Overweight positions in utilities and real estate, as well as underweight positions in tech, detracted from year-to-date returns.
 
Source: Factor Research  

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4. Nasdaq is ahead of the New York Stock Exchange in IPO volume.
 
Source: @WSJ   Read full article  
 
5. The smallest companies of the small-cap index have been outperforming.
 
Source: Yardeni Research  


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Alternatives

1. Hedge funds’ exposure to the market is rising.
 
Source: @ISABELNET_SA, @GoldmanSachs  
 
2. KKR has been writing a lot of checks since the start of the crisis.
 
Source: @BloombergQuint, @Redfin, @wsj, @ISABELNET_SA, @LizAnnSonders, @USDOL, @GregDaco, @tracyalloway, @dlacalle_IA, @RobinBrooksIIF, @M_C_Klein  
 
3. Private equity is finding its way into 401k accounts (as part of diversified funds).
 
Source: Bloomberg Law   Read full article  
 
4. Next, we have some data on space startup financing.
 
Source: Bryce Space and Technology   Read full article  
 
5. Private credit AUM has been climbing rapidly in recent years.
 
Source: @WSJ   Read full article  
 
Who owns private credit?
 
Source: Deutsche Bank Research  


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Credit

1. According to a survey from Absolute Strategy Research, institutional investors are overwhelmingly optimistic about high-yield and investment-grade corporate credit. (2 charts)
 
Source: Absolute Strategy Research  
Source: Absolute Strategy Research  

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2. Banks issue the bulk of the Eurozone’s commercial paper. But over time, non-financial corporations have become more active in the market.
 
Source: ECB   Read full article  
 
The average maturity of recent commercial paper issuances has decreased markedly since January.
 
Source: ECB   Read full article  

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3. Since the start of the crisis, borrowers with top credit scores have increasingly dominated the US auto loan market.
 
Source: J.D. Power  


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Rates

Treasuries are starting to look attractive for yen-based investors.
 
h/t @mccormickliz  


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Global Developments

1. Global manufacturing PMIs are improving but remain at depressed levels.
 
Source: SunTrust Private Wealth Management  
Source: Alpine Macro  

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2. Next, we have some data on fiscal stimulus around the world (4 charts).
 
Source: Fitch Ratings  
Source: @WSJ   Read full article  
Source: McKinsey & Company   Read full article  
Source: McKinsey & Company   Read full article  

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3. Here is the number of new coronavirus cases by region.
 
Source: @jessefelder, CNN   Read full article  
 
4. Based on the 12-month forward earnings expectations, stock valuations look rich.
 
Source: @markets   Read full article  


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Food for Thought

1. Smartphone shipments:
 
Source: Statista  
 
2. The most effective ads:
 
Source: Morning Consult   Read full article  
 
3. US automobile sales vs. leases since the start of the crisis:
 
Source: J.D. Power  
 
4. Largest cities by population:
 
Source: UN   Read full article  
 
5. According to the Economist, democracies have limited movement more effectively during lockdowns.
 
Source: The Economist   Read full article  
 
And autocratic governments may be cooking their COVID-19 statistics.
 
Source: The Economist   Read full article  

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6. K-12 employment in the US:
 
Source: EPI   Read full article  
 
7. Support for the protests:
 
Source: Morning Consult   Read full article  
 
8. The structure of China’s government:
 
Source: ANZ Research  
 
9. The best-selling arcade games:
 
Source: Statista  

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