The Daily Shot: 25-Jun-20
• The United States
• Canada
• The Eurozone
• Europe
• Asia – Pacific
• Emerging Markets
• Energy
• Equities
• Rates
• Global Developments
• Food for Thought
The United States
1. Once again, let’s start with the housing market.
• Mortgage applications to purchase a house are holding at multi-year highs for this time of the year.
• Home price appreciation ticked lower in April, but still registered a 5.5% increase from a year ago.
Source:
• Mortgage rates are hovering near record lows, but they have lagged the declines in the 10-year Treasury yield (second chart).
Source: @WSJ Read full article
Source: Piper Sandler
• One of the reasons for the persistent gap between mortgage rates and Treasury yields is the elevated spread on mortgage-backed securities (MBS). This spread would have been even wider without the Fed’s rapid-fire MBS purchases since March (see chart).
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2. The Oxford Economics activity tracker shows the US recovery slowing.
Source: Oxford Economics
After a sharp post-reopening rebound, we are entering the slow phase of the recovery.
Source: Oxford Economics
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3. Here is the HPS-CS consumer sentiment indicator.
Source: @HPSInsight, @CivicScience
4. This chart shows cumulative spending across the various federal stimulus programs.
Source: Morgan Stanley Research
And there is more stimulus on the way.
Source: @bpolitics Read full article
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5. US-listed companies have raised record amounts of cash to get through the crisis.
Source: @WSJ Read full article
The bulk of that capital has been raised in the credit markets, pushing corporate debt to new highs (see chart).
Source: Jack Ablin, Cresset Wealth Advisors
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5. Currency traders are nervous about the November elections. This chart shows the spread between the six- and the 3-month implied volatility in dollar-yen.
Source: @markets Read full article
Canada
1. Fitch stripped Canada of its AAA rating in response to “the deterioration of Canada’s public finances resulting from the coronavirus pandemic.”
Source: Fitch Ratings Read full article
2. Consumer confidence continues to recover.
3. The market expects Canada to lead in hiking rates next year.
Source: CIBC Capital Markets
4. Just like in the US, mortgage applications to purchase a house have been rising rapidly.
Source: CIBC Capital Markets
5. Industries dominated by office work experienced further job losses in May.
Source: CIBC Capital Markets
The Eurozone
1. The Ifo indicator showed a sharp improvement in Germany’s business expectations (second chart).
This rebound was primarily driven by manufacturing (chart in the upper left).
Source: ifo Institute
Germany’s consumer sentiment is rebounding as well.
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2. The bounce in French manufacturing confidence was weaker than expected.
3. Italy has been issuing large amounts of bills to cover crisis-related expenses.
Source: Morgan Stanley Research
Bill issuance lowered the nation’s average debt maturity (WAM).
Source: Morgan Stanley Research
Italian spreads remain elevated relative to other debt markets, including corporate bonds.
Europe
1. Sweden’s sentiment indicators showed improvement in June.
• Consumer:
• Manufacturing:
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2. European household saving rates rose sharply this year.
Source: Barclays Research
3. Here is the distribution of fiscal stimulus measures in the EU.
Source: Eurofound Read full article
Asia – Pacific
1. Singapore faces a record fiscal deficit in 2020.
Source: ANZ Research
2. How much of a rebound in domestic demand will we see in Q3?
Source: ANZ Research
3. Next, we have some updates on Australia and New Zealand.
• The decline in Australia’s job vacancies through May was severe.
Source: Goldman Sachs
• Speculative accounts are adding to their long positions in Aussie and Kiwi dollars.
Source: ING
• Australia’s yield curve is the steepest in the developed world.
Source: Morgan Stanley Research
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4. Interest rate differentials between Japan and the G10 average have narrowed over the past few years.
Source: Fitch Solutions Macro Research
5. Capital inflows could support the yen.
Source: Fitch Solutions Macro Research
Emerging Markets
1. Brazil’s consumer confidence bounced from extreme lows.
2. The collapse in Colombia’s retail sales and consumer confidence has been devastating.
Source: CME Group Read full article
Colombia’s yield curve is the steepest since 2014, which could weigh on growth.
Source: CME Group Read full article
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3. South Africa’s inflation surprised to the downside.
4. Turkey’s business confidence bounced from extreme lows.
Capacity utilization remains depressed (66%).
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5. Here are the components of India’s June SMI. Business activity remains deep in contraction territory.
Source: World Economics
6. Indonesia’s unemployment has been surging.
Source: ANZ Research
7. Malaysia’s record deflation did not ease last month.
8. Here is a summary of EM central banks’ policy responses this year.
Source: IIF
Energy
1. Brent crude tumbled 5.4% on Wednesday and is testing support at $40/bbl.
Source: barchart.com
2. US crude oil production unexpectedly bounced last week.
3. Will US rig counts start increasing if oil prices recover further?
Source: Capital Economics
4. US gasoline demand continues to rebound.
Refinery runs are still soft.
Jet fuel demand appears to have bottomed.
Source: @DoneDraperClone
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5. US crude oil stockpiles hit another record high.
But inventories are drifting lower when measured in days of supply.
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6. US natural gas futures are nearing multi-year lows.
Equities
1. Wednesday was a tough day for stocks as pandemic-related concerns reemerged.
Source: @markets Read full article
The “stay-at-home” basket has been outperforming,
Source: @markets Read full article
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2. Earnings estimates appear to have stabilized.
Source: SunTrust Private Wealth Management
This chart shows the S&P 500 earnings forecasts from Yardeni Research (which are below consensus).
Source: Yardeni Research
And here are the growth estimates for Q2 2020 by sector.
Source: @FactSet Read full article
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3. The S&P 500 dividend yield remains above the 10yr Treasury yield.
Source: SunTrust Private Wealth Management
4. This chart compares the S&P 500 to the US truck tonnage index.
Source: @ISABELNET_SA
5. The US market’s outperformance vs. the rest of the world has been unprecedented.
Source: @topdowncharts Read full article
6. The equity market’s inverse correlation to the US dollar is near extreme levels.
h/t Michael Brown, Caxton
7. The value line median price-to-equity ratio reached an all-time high.
Source: @DavidTaggart
Rates
1. Bullish sentiment on Treasuries is nearing past cyclical peaks.
Source: BCA Research
2. Who are the largest foreign holders of Treasuries?
Source: Morgan Stanley Research
3. US real money supply growth hit the highest level since the early 1940s.
Source: @ISABELNET_SA, @MorganStanley
Global Developments
1. Service sector activity has been stabilizing.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
2. The IMF now sees a deeper 2020 recession than its April estimate.
Source: @markets Read full article
Here are the GDP trajectories for advanced and emerging economies.
Source: IMF Read full article
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3. Commercial property prices in the US and Europe are falling.
Source: Oxford Economics
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Food for Thought
1. US personal incomes derived from government benefits:
Source: @markets Read full article
2. Who has benefitted the most from the US stimulus bill?
Source: Morning Consult Read full article
3. The global tourism industry (2 charts):
Source: @adam_tooze, The Economist Read full article
Source: @financialtimes Read full article
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4. Changes in approval ratings of global leaders:
Source: Morning Consult Read full article
5. Perceptions of the most pressing problems in the US:
Source: The Daily Feather
6. Prime-age foreign-born people in the US (% of the prime-age population):
Source: CBO Read full article
7. Support for returning to lockdowns:
Source: @axios Read full article
8. Mask-wearing requirements:
Source: @jduchneskie, @phillyinquirer Read full article
9. The most popular sheet music:
Source: Musicnotes, Inc. Read full article
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