Volatility Markets Show Unease with Nasdaq 100

The Daily Shot: 13-Jul-20
Equities
Credit
Rates
Commodities
Energy
Emerging Markets
China
The Eurozone
The United Kingdom
Canada
The United States
Food for Thought



 

Equities

1. Technical indicators point to further upside for the S&P 500.
 

Source: CNBC   Read full article  

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2. Tech mega-caps increasingly dominate the US benchmark.
 
Source: Yardeni Research  
 
3. The equal-weight S&P 500 index continues to underperform.
 
Source:   Further reading  
 
And market breadth indicators have been rolling over (2 charts).
 
Source: @LizAnnSonders  
Source: @Not_Jim_Cramer  

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4. Volatility markets are showing a bit of unease with Nasdaq’s largest stocks, as valuations increasingly look rich (second chart). VXN is the VIX-equivalent for the Nasdaq 100.
 

Source: @jessefelder   Read full article  

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5. Robinhood retail traders favor certain small-to-mid-cap value stocks, which has led to an above-market performance for those shares.
 
Source: SPDR Americas Research, @mattbartolini  
Source: SPDR Americas Research, @mattbartolini  
 
This chart shows the Goldman Sachs index of retail investors’ favorite shares.
 

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6. The S&P 500 has outpaced the increase in US disposable personal income.
 
Source: Caldan Partners   Read full article  
 
7. According to Citigroup’s market sentiment index, investors have been quite bullish.
 
Source: @ukarlewitz, @hmeisler  
 
8. Here is the P/E ratio of the Russell 2000 (small caps) relative to the S&P 500 P/E.
 
Source: @Not_Jim_Cramer  
 
9. Global companies with China exposure have been outperforming.
 

 
10. The gap between US and European indices continues to widen.
 
Source: Goldman Sachs  


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Credit

1. We’ve had a record number of large healthcare bankruptcies this year.
 
Source: @lisaabramowicz1, @joshfromalaska  
 
2. Credit quality for global retailers has deteriorated further in 2020.
 
Source: Credit Benchmark  
 
3. Next, we have some data on delinquencies in commercial real estate.
 
Delinquencies by property type:
 
Source: Mortgage Bankers Association  
 
CMBS portfolio delinquency changes since 2019:
 
Source: S&P Global Market Intelligence  


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Rates

1. Speculative investors are now net long the 10yr note futures.
 

 
2. Here are the trends in foreign vs. domestic demand for Treasuries.
 
Source: @markets   Read full article  
 
3. Does the improvement in economic data signal higher Treasury yields?
 
Source: Société Générale, @Schuldensuehner  
 
4. Here are some updates on the Fed’s stimulus programs.
 
The balance sheet continues to shrink.
 

 
Below are the reserve balances (following the balance sheet lower).
 

 
And this chart shows the composition of reserves.
 
Source: Liberty Street Economics   Read full article  
 
Liquidity facilities contributed to the drop in the US central bank’s balance sheet.
 

 
Liquidity swaps with other central banks:
 

 
The repo facility (ample liquidity diminished the need for this program):
 

 
The Fed’s corporate bond purchases have been tiny in comparison to its other programs.
 
Source: @markets   Read full article  


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Commodities

1. Steel and iron ore futures continue to rally.
 
Steel rebar (Shanghai):
 

 
Iron ore (Singapore):
 

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2. Copper has gone vertical as speculative accounts boost their bets (second chart).
 

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3. Next, we have some updates on precious metals.
 
Gold vs. silver:
 
Source: @jsblokland  
 
Gold fund flows:
 
Source: @ISABELNET_SA, @BofAML  
 
Gold/oil ratio:
 
Source: @jessefelder   Read full article  

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4. Speculative accounts have turned bullish on US soybeans.
 

 
5. US lumber futures continue to rally on improving demand.
 
Source: @WSJ   Read full article  


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Energy

1. Is the US rig count bottoming?
 

 
2. Last month’s Dallas Fed Energy survey showed that nearly 75% of energy and production firms are expected to restore their curtailed output over the next three months.
 
Source: Pavilion Global Markets  
 
3. Stockpiles of gasoline and distillate fuel (which includes diesel used in the transport sector) remain elevated. This is a sign that refiners will be slow to accept increased crude shipments from drillers, according to Pavilion Global Markets.
 
Source: Pavilion Global Markets  
 
4. Here is the US upstream oil & gas investment trend, by year.
 
Source: @WSJ   Read full article  
 
5. This chart shows US employment in oil field services (OFS).
 
Source: PESA, {ht} Princeton Energy Advisors   Read full article  


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Emerging Markets

1. Let’s start with some updates on Russia.
 
Key economic indicators:
 
Source: @financialtimes   Read full article  
 
Trade balance:
 

 
Support for Putin:
 
Source: The Economist, @adam_tooze   Read full article  

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2. Israel’s consumer confidence took a turn for the worse last month.
 

 
3. India’s coronavirus pandemic is exploding.
 
Source: JHU CSSE  
 
4. Mexico’s industrial production deteriorated further in May.
 


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China

1. Credit growth remains robust.
 
Bank loans:
 

 
Aggregate financing:
 

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2. Here is Goldman’s China macro policy proxy, with the latest easing driven by fiscal expansion.
 
Source: Goldman Sachs  
 
3. Foreign investors have been buying Chineses stocks via Stock Connect (Hong Kong – Mainland China link).
 
Source: @WSJ   Read full article  
 
4. China’s shares still look cheap relative to the US.
 
Source: The Economist, @adam_tooze   Read full article  
 
5. The renminbi’s share as an international payment currency has been relatively flat.
 
Source: ECB   Read full article  
 
Here is the currency’s share of reserves.
 
Source: @tracyalloway   Read full article  

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6. The Hong Kong dollar ended last week with some volatility.
 

Source: @markets   Read full article  

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7. Hong Kong’s interbank rates continue to decline.
 


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The Eurozone

1. Italian industrial production rebounded sharply in May.
 

 
French factory output also bounced.
 

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2. Germany’s exports to the rest of Europe have weakened this year.
 
Source: Pantheon Macroeconomics  
 
3. Greece is back in deflation.
 

 
4. Will the ECB’s balance sheet hit €5 trillion next year?
 
Source: @markets, {ht} @Schuldensuehner   Read full article  
 
5. The Eurozone’s interbank rates are back to pre-crisis levels as concerns about the banking system abate.
 
Source: @Isabel_Schnabel  
 
6. This spike in savings bodes well for consumption later this year.
 
Source: @fwred  
 
7. Several EU members have been seeking to join the Eurozone.
 
Source: @markets   Read full article  


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The United Kingdom

1. The GDP contraction this year has been unprecedented in recent centuries.
 
Source: Deutsche Bank Research  
 
2. Fiscal deficit spikes, …
 
Source: Barclays Research  
 
… but low rates should restrain debt interest expenses.
 
Source: Barclays Research  

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3. Britons don’t like to wear face masks.
 
Source: @YouGov   Read full article  
Source: @financialtimes   Read full article  

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4. Demand for German citizenship jumped ahead of Brexit.
 
Source: Statista  


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Canada

1. The June employment report surprised to the upside.
 
Employment change (2 charts):
 

Source: Scotiabank Economics  
 
The unemployment rate:
 

 
Labor force participation:
 

 
Hours worked:
 
Source: Scotiabank Economics  

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2. Housing starts were robust last month.
 

 
3. This chart shows the ratio of the Fed’s vs. BoC’s balance sheet.
 
Source: ING  


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The United States

1. Let’s begin with some updates on inflation.
 
Producer price inflation has been soft.
 

 
However, the core PPI ex. trade services (business markups), ticked higher last month.
 

 
Nomura’s estimates show the core CPI increasing in June.
 
Source: Nomura Securities  
 
Food inflation is moderating.
 
Source: Nomura Securities  
 
Nomura also expects rent CPI to slow as concerns persist about households’ ability to pay (second chart).
 
Source: Nomura Securities  
Source: Nomura Securities  
 
Here are the CPI trends for medical care and shelter.
 
Source: Pavilion Global Markets  
 
As the US population growth improves over the next decade, so should the velocity of money. As a result, some analysts expect inflation to pick up.
 
Source: Longview Economics  

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2. How does the US fiscal balance change compare to Europe?
 
Source: Oxford Economics  
 
3. Below is the Wall Street Journal’s survey of economists on risks to the GDP growth forecasts.
 
Source: @WSJ   Read full article  
 
4. This chart shows household wealth changes by age group.
 
Source: @financialtimes   Read full article  


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Food for Thought

1. Paying a ransomware demand:
 
Source: @WSJ   Read full article  
 
2. Top supercomputers:
 
Source: Statista  
 
3. Cloud adoption:
 
Source: Morgan Stanley Research  
 
4. Ban TikTok?
 
Source: @dwertime, @MorningConsult   Read full article  
 
5. US COVID-related restrictions status:
 
Source: @ISABELNET_SA, @GoldmanSachs  
 
6. Face mask usage:
 
Source: Gallup   Read full article  
 
7. Daily new COVID infections per million:
 
Source: Pantheon Macroeconomics  
 
8. Migrations of inventors:
 
Source: Kerr, Kerr, Özden, Parsons   Read full article  
 
9. Views on polygamy:
 
Source: Gallup   Read full article  

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