The Daily Shot: 10-Jul-20
• The United States
• The Eurozone
• Asia – Pacific
• China
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Another 1.4 million Americans filed for unemployment benefits last week.
• While the headline initial claims figure has been gradually moderating, the situation is more troubling when the Pandemic Unemployment Assistance (PUA) program is taken into account.
Source: Oxford Economics
• PUA filings started climbing again as the pandemic worsened in a number of states.
Source: Pantheon Macroeconomics
• Maintaining the labor market recovery is challenging when over fifty thousand new COVID-19 infections are reported daily.
• The total number of Americans receiving unemployment benefits hit a new record.
Source: Economic Policy Institute
• Given this trend, shouldn’t the official unemployment figures be much higher? It’s a classification issue. The comment from ING (below) tells us why the monthly nonfarm payrolls report substantially understates the level of unemployment in the US.
Source: ING
We now have nearly 36 million workers who are either on or have recently applied for unemployment benefits. That’s about 23% of the US civilian workforce.
Source: Economic Policy Institute
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2. Next, we have some additional labor market data.
• Job losses by age cohort:
Source: @financialtimes Read full article
• Concerns about job loss by region and …
Source: YouGov Read full article
• … by age:
Source: YouGov Read full article
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3. Bloomberg’s consumer sentiment index declined for the first time since early May.
Source: Bloomberg
• Here is the buying climate index.
Source: Bloomberg
The fading rebound in consumer confidence is visible in JP Morgan’s credit/debit card spending data.
Source: JP Morgan, @carlquintanilla
• Sentiment worsened the most among older Americans.
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4. Next, we have some updates on the housing market, which has been remarkably resilient during this crisis.
• June has been an excellent month for new home sales, led by the Northeast and Florida, according to a survey of builders.
Source: John Burns Real Estate Consulting
• New home prices, buyer traffic, and sales expectations have been robust.
Source: John Burns Real Estate Consulting
• Community count growth is down 5% year-over-year, reflecting the substantial drop in inventories.
Source: John Burns Real Estate Consulting
• Existing housing inventories continue to shrink.
Source: Arbor Research & Trading
• New listings that sold in two weeks or less are up over 20%.
Source: Arbor Research & Trading
The Eurozone
1. Governments are starting to spend.
Source: Pantheon Macroeconomics
But low bond yields (with the help from the ECB) make it relatively inexpensive to finance rising deficits.
Source: Barclays Research
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2. The number of European “zombie” companies is on the rise.
Source: BofA Merrill Lynch Global Research, @jsblokland
Asia – Pacific
1. This chart shows key economic indicators for countries with early exposure to COVID-19.
Source: @axios Read full article
2. Retail investors have been buying the Australian stock market rally, while institutions remain net sellers.
Source: @johnnyshap Read full article
3. Australian corporate credit quality has worsened substantially this year.
Source: Credit Benchmark
China
1. The tech-heavy ChiNext index is nearing initial resistance and appears overbought.
Source: @DantesOutlook
The Shanghai Composite index is also at resistance but is not near extreme overbought levels such as in 2007 and 2014, …
Source: @DantesOutlook
…similar to the China large-cap ETF (FXI).
Source: @DantesOutlook
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2. The largest China ETF (based in China) had a considerable inflow this week.
h/t Charlie Zhu
Here are the overall fund flows.
Source: BofA Merrill Lynch Global Research, @WallStJesus
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3. The market fear/greed indicator is deep in greed territory.
Source: @markets Read full article
4. China’s stock market capitalization hit $9 trillion.
Source: @markets Read full article
5. Will China’s credit expansion boost global recovery?
Source: Barclays Research, @themarketear
6. Next, we have some updates on Hong Kong.
• Companies operating in Hong Kong:
Source: @WSJ Read full article
• Hong Kong’s central bank stepped in to weaken the currency amid hot IPO capital inflows.
Source: South China Morning Post, @adam_tooze Read full article
• A second wave?
Source: @bpolitics Read full article
Energy
1. US crude oil exports are rolling over.
2. US gasoline demand has almost recovered.
Source: Princeton Energy Advisors
And refinery inputs are improving.
Source: Princeton Energy Advisors
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3. US crude oil inventories remain elevated.
But gasoline stockpiles (measured in days of supply) keep falling.
Equities
1. The Nasdaq Composite and Nasdaq 100 hit new records.
• The Nasdaq 100 has outperformed the S&P 500 by 30% over the past 12 months, with most divergence taking place this year.
Here is the Nasdaq 100/S&P 500 ratio over the past couple of decades.
• And it’s the tech mega-caps that have been driving the outperformance. The equal-weight index is increasingly lagging.
• In fact, the Nasdaq Composite’s breadth is rolling over.
h/t Nancy Moran
• The giant tech companies’ remarkable rally is reflected in the “lockdown” portfolio outperformance.
Source: BofA Merrill Lynch Global Research, @WallStJesus
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2. How correlated is the S&P 500 with Treasury yields and credit spreads?
Source: @johnauthers, @bopinion Read full article
The inverse correlation between the S&P 500 and the US dollar has strengthened lately.
Source: Further reading
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3. Many companies slashed dividends this year.
Source: @WSJ Read full article
But investor expectations for dividend payments for 2020 through 2022 have become more optimistic as equities rallied from their March lows.
Source: CME Group Read full article
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4. Hedge funds have been short cyclical shares this year.
Source: @ISABELNET_SA, @BofAML
Credit
1. US investment-grade corporate spreads continue to tighten.
2. Middle-market borrowers’ credit quality has deteriorated in recent months.
Source: Moody’s Investors Service
3. A significant portion of middle-market CLO collateral is in moderately vulnerable sectors.
Source: Moody’s Investors Service
Rates
1. The 10yr Treasury yield has been consolidating.
h/t @themarketear
2. The new 30yr Treasury demand was stronger than expected on Thursday, with the auction yield near record lows.
Source: @lisaabramowicz1
Global Developments
1. This chart shows fund flow winners by year.
Source: BofA Merrill Lynch Global Research, @WallStJesus
2. Despite the risk-asset rally, defensive assets are in demand.
Source: @ISABELNET_SA, @MorganStanley
3. Previous pandemics point to a rise in income inequality as the burden of economic adjustment falls disproportionately on low-skilled workers, according to Oxford Economics.
Source: Oxford Economics
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Food for Thought
1. Displaced people worldwide (2 charts):
Source: The Economist Read full article
Source: Statista
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2. Trade openness index:
Source: @WSJ Read full article
3. US Postal Service workers:
Source: @pewresearch Read full article
4. Waiving the SAT:
Source: YouGov Read full article
5. Coronavirus death rates for the US and Mexico:
Source: @WSJ Read full article
6. SNAP participation:
Source: @markets Read full article
7. Key issues facing the US:
Source: @YouGovAmerica Read full article
8. Time spent on social media:
Source: Statista
9. Spending evenings reading:
Source: Gallup Read full article
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Have a great weekend!