The Daily Shot: 24-Jul-20
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia – Pacific
• China
• Commodities
• Energy
• Equities
• Rates
• Global Developments
• Food for Thought
The United States
1. Unemployment applications remain above 2 million per week.
Source: Oxford Economics
Here is the total number of Americans receiving jobless benefits (about 20% of the labor force).
Source: @wolfofwolfst Read full article
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2. The Conference Board’s index of leading indicators improved again in June, but at this point, the result is already stale.
3. Bloomberg’s consumer sentiment indicator ticked higher, but the improvements in the ‘buying climate’ index (2nd chart) have stalled.
There is some divergence in Bloomberg’s report between full-time and part-time employees.
Source: @TheTerminal
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4. The Kansas City Fed’s regional manufacturing report shows factory activity improving further this month.
The charts below show the new orders and employment indices.
The July regional Fed surveys (including the one above) point to further improvements in business activity at the national level (ISM).
Source: @Not_Jim_Cramer
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5. Permanent business closures continue to climb.
Source: @jessefelder, The Washington Post Read full article
Restaurants and retail stores have been hit the hardest.
Source: The Daily Feather
Business reopenings have stalled.
Source: @WSJ Read full article
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6. The federal government is expected to continue replacing lost income.
Source: @joebrusuelas
7. Business activity and improving mobility have been holding the Oxford Economics Recovery Tracker relatively steady – even as the health component worsened.
Source: Oxford Economics
By the way, is the number of new cases in the US about to peak?
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8. The housing market remains resilient.
• Google search activity for house inspection and appraisal is soaring.
Source: Arbor Research & Trading
• New listings are almost back to normal.
Source: Redfin
• The overall housing inventory in the largest metro areas is shrinking rapidly.
Source: Arbor Research & Trading
• Home improvement sales have remained steady throughout this crisis.
Source: Refinitiv
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9. The decline in investment growth could reduce productivity and hence wage growth, according to Deutsche Bank. (2 charts)
Source: Deutsche Bank Research
Source: Deutsche Bank Research
Canada
Here are some updates on the loonie.
• USD/CAD is at long-term resistance, and upside momentum is slowing.
Source: @DantesOutlook
• The Canadian dollar appears undervalued …
Source: Market Ethos, Richardson GMP
• … and remains supported by interest rate differentials.
Source: Market Ethos, Richardson GMP
• CAD is most correlated with the 2-year rate differential.
Source: Market Ethos, Richardson GMP
The United Kingdom
1. Retail sales rebounded sharply last month, topping expectations.
2. Consumer confidence improvements stalled this month.
3. July industrial orders indicator from CBI was soft, but manufacturing sentiment is improving.
Source: Reuters Read full article
Investment intentions rebounded from extreme lows but remain fragile.
Source: Pantheon Macroeconomics
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4. Manufacturers expect more layoffs ahead.
Source: @financialtimes Read full article
The Eurozone
1. Germany’s consumer confidence improved sharply this month.
However, at the Eurozone level, the rebound has stalled.
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2. French business confidence is recovering, but it may be some time before we get to pre-crisis levels.
3. The Citi Economic Surprise index hit the highest level since early 2018.
4. The ECB’s asset purchases have been slowing.
Source: Barclays Research
5. Germany’s PMI indicators surprised to the upside, showing business activity (both manufacturing and services) back in growth mode (PMI > 50). Services were especially strong this month. More on this next week.
Europe
Elsewhere in Europe, Sweden’s unemployment rate surprised to the upside.
Source: The Local Read full article
Japan
1. The yen has been strengthening as global sentiment turns more cautious.
2. Unlike the 2008 financial crisis, firms aren’t facing severe lending conditions, although large firms have been operating in a less accommodative environment over the past year or so.
Source: Pantheon Macroeconomics
3. Corporate investment plans have not been shelved.
Source: Pantheon Macroeconomics
Asia – Pacific
1. Taiwan’s stocks are trading near all-time highs, amid capital inflows.
Source: @DavidInglesTV
And the Taiwan dollar continues to rally.
Taiwan’s industrial production topped economists’ forecasts.
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2. Singapore has been in deflation.
3. Many Asian firms cut dividends this year.
Source: @markets Read full article
4. Next, we have a couple of updates on Australia.
• Markit PMI indicators point to accelerating growth in business activity.
• Nonetheless, business confidence has been weak.
Source: @MacrobondF Read full article
China
1. The stock market rally has faded.
China’s currency rebound has stalled as well.
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2. Pantheon Macroeconomics expects China’s recovery to lose steam in the second half of this year.
Source: Pantheon Macroeconomics
But the spike in the M1 money supply suggests a fast start to 2021.
Source: Pantheon Macroeconomics
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3. Hong Kong’s stocks have been underperforming.
Source: @financialtimes Read full article
Commodities
1. Gold is nearing record highs.
Source: @WSJ Read full article
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2. Fitch Solutions expects further tightness in copper supply.
Source: Fitch Solutions Macro Research
Energy
1. Investor sentiment has been struggling to rise for Brent oil. (The charts below shows managed money net speculative positions)
Source: Fitch Solutions Macro Research
2. WTI crude is testing resistance.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
3. Crude oil futures volume has deteriorated.
Source: @JavierBlas
Equities
1. The Nasdaq 100 is underperforming, …
… with Intel exacerbating Friday’s losses (see story).
Source: Google
It’s been a good run for Nasdaq.
Source: @jsblokland
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2. Let’s take a look at some valuation trends.
• Relative to the dot-com bubble, the Nasdaq and tech rally hasn’t been extreme (3 charts).
Source: SunTrust Private Wealth Management
Source: SunTrust Private Wealth Management
• Bullish analysts continue to say that we should look past stretched valuations.
Source: @ISABELNET_SA, @GoldmanSachs
• The S&P 500 dividend yield looks attractive relative to Treasuries.
But many view Treasuries as overvalued.
Source: @ISABELNET_SA, @GoldmanSachs
• Another metric to consider is the spread between the S&P 500 earnings yield and the BBB corporate credit (which makes stocks look attractive).
It’s worth noting that BBB yields are at record lows.
Source: @TheTerminal
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3. Investor surveys continue to show caution. Perhaps wrong investors have been surveyed.
Source: BCA Research
68% of investors surveyed by Investopedia expect a market drop in the next three months.
Source: Investopedia Read full article
However, 51% of respondents expect IT to lead market gains over the next five years.
Source: Investopedia Read full article
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4. Dealmaking has rebounded (2 charts).
Source: @markets Read full article
Source: @axios Read full article
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5. Are value stocks finally bottoming relative to growth?
Source: @topdowncharts Read full article
h/t Abhishek Vishnoi
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6. The ratio of cyclicals to defensives continues to indicate a pause in economic recovery.
Source: Gavekal
7. Finally, we have US equity ownership by age.
Source: Goldman Sachs, @GunjanJS
Rates
1. The Treasury curve is flattening.
2. Treasury implied volatility index (MOVE) is nearing record lows.
Traders have discounted volatility in the short end of the curve, convinced that the Fed is on hold for years. Could we get a surprise from the Fed down the road? The 2Y5Y/2Y30Y vol ratio is at an all-time low.
Source: Deutsche Bank Research
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3. Inflation expectations continue to climb, even as Treasury yields are holding in place. As a result, real rates keep moving deeper into negative territory.
Source: Morgan Stanley Research
4. The Fed is no longer absorbing all the new Treasury supply.
Source: Pantheon Macroeconomics
Global Developments
1. The dollar index hit a 22-month low.
Source: barchart.com
2. Other than the yen and the Swiss franc, G10 currencies are correlated with the S&P 500.
Source: Morgan Stanley Research
3. Here is Goldman’s estimate of the global GDP trajectory and its regional components.
Source: Goldman Sachs
4. More than one-third of sovereign ratings are on negative outlook, with weakness led by Latin America, the Middle East, and Africa, according to Fitch.
Source: Fitch Ratings
The pandemic has led to a rise in sovereign bond rating volatility.
Source: Fitch Ratings
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Food for Thought
1. What percentage of the biggest accounting firms’ revenue comes from audit work?
Source: @financialtimes Read full article
2. North Korea vs. South Korea military stats:
Source: @WSJ Read full article
3. Views on different global security issues:
Source: @adam_tooze Read full article
4. CO2 reductions needed to curtail global warming:
Source: IIF
5. The impact of US voter turnout on 2020 presidential elections:
Source: Moody’s Analytics
6. Views on immigration:
Source: Gallup Read full article
7. Views on voice technology:
Source: @MorningConsult Read full article
8. Video game streaming:
Source: @chartrdaily
9. The survival curve in London and the countryside during the 1730s (80% of Londoners didn’t make it to 45):.
Source: @MaxCRoser Read full article
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Have a great weekend!