The Daily Shot: 06-Aug-20
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. Service-sector growth accelerated in July, with the ISM Services index topping economists’ forecasts.
• Lockdown-driven supplier bottlenecks have eased.
• The index of new orders hit a record high.
• However, service-sector businesses continue to shed jobs.
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2. The ADP private payrolls report surprised to the downside. Economists expected to see 1.2 million jobs created in July, but we got 167k.
• This chart shows the absolute level of private payrolls.
Source: @EPBResearch
• Here is the breakdown by sector.
Source: @markets Read full article
• The ADP trajectory is consistent with the small-business employment trend tracked by Homebase (see #3 here).
Source: Pantheon Macroeconomics
• Another indicator pointing to a pause in the labor market recovery is the online search activity for unemployment benefits.
Source: Arbor Research & Trading
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3. Next, we have some updates on inflation.
• Most sectors have been reporting rising input and output prices (PMI > 50).
Source: IHS Markit Read full article
• Despite weak inflation readings in recent months, investors are chasing Treasury Inflation-Protected Securities (TIPS). The iShares TIPS ETF is hitting new highs.
• Market-based inflation expectations continue to climb.
• Google search activity for “inflation” is soaring.
Source: Arbor Research & Trading
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4. US financial conditions have eased to pre-crisis levels.
Source: Goldman Sachs
5. Mortgage applications for house purchase remain elevated.
6. Higher-income household expenditures continue to lag the overall spending recovery.
Source: Opportunity Insights
The United Kingdom
1. New car registrations have rebounded sharply.
Here is the online search activity for the best selling cars.
Source: Pantheon Macroeconomics
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2. UK service-sector activity is now firmly in growth mode.
Source: IHS Markit Read full article
3. Job placements are yet to stabilize.
Source: IHS Markit Read full article
And downside risks to the labor market persist.
Source: Pantheon Macroeconomics
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4. Deutsche Bank expects the 2020 economic contraction to be the worst since 1710.
Source: Deutsche Bank Research
5. The market continues to price in the possibility of negative rates in the UK.
6. London rents are declining.
Source: @markets Read full article
7. Finally, this chart shows COVID-related fatalities by age.
Source: Deutsche Bank Research
The Eurozone
1. The euro continues to grind higher.
• Interest rate differentials suggest further upside for EUR/USD.
Source: Morgan Stanley Research
• Some of the gains are due to the overall US dollar weakness. The euro trade-weighted index hasn’t risen as much as EUR/USD.
Source: @TheTerminal
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2. The 10-year Bund yield is holding support.
Source: @DantesOutlook
3. PMI reports show service-sector activity back in growth mode.
• Germany:
Source: IHS Markit Read full article
• France:
Source: IHS Markit Read full article
• Italy:
Source: IHS Markit Read full article
• The Eurozone:
Here are the composite PMI indicators (manufacturing + services).
Source: Goldman Sachs
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4. Germany’s advance notifications for VAT (sales tax) submitted by companies are recovering, indicating firmer sales.
Source: Commerzbank Research
5. Retail sales rebounded in June, exceeding forecasts.
• Year-over-year % changes:
• Sales level:
Source: Eurostat Read full article
But weak sentiment could drag sales lower in the months ahead.
Source: Pantheon Macroeconomics
Europe
1. Sweden’s services PMI shows strengthening growth.
On the other hand, private sector output barely budged in June.
New industrial orders remained soft.
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2. Czech retail sales are still fragile.
3. This chart compares online retail sales trends across several European economies.
Source: Deutsche Bank Research
4. Finally, we have retail sales growth by product group, between February and June.
Source: Eurostat Read full article
Japan
1. The US-Japan 10yr bond spread hit a multi-year low.
2. For now, USD/JPY is holding long-term support above 103.
Source: @DantesOutlook
Short-end Japanese government bond yields have been closely correlated with USD/JPY and have tended to rally with strong yen. That has fueled speculation of a possible BoJ rate cut, according to Morgan Stanley.
Source: Morgan Stanley Research
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3. The Nikkei 225 is holding support from its 200-week moving average.
Source: @DantesOutlook
4. Japanese pension funds continue to boost their foreign debt holdings.
Source: @WSJ Read full article
China
1. The bond-equity correlation has been climbing.
Source: Gavekal
2. This chart shows US exports to China on a rolling 12-month basis, along with the implied Phase-1 targets for 2020 and 2021.
Source: NY Fed
3. China’s hydroelectric power generation is massive.
Source: @adam_tooze, @business Read full article
Emerging Markets
1. EM central banks continue to ease.
• Romania:
• Brazil:
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2. Now let’s take a look at some service-sector PMI trends.
• Brazil (still in contraction territory):
Source: IHS Markit Read full article
• Russia (back in growth):
Source: IHS Markit Read full article
• South Africa:
• Saudi Arabia:
India’s composite PMI shows persistent weakness in business activity.
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3. Here is Argentina’s sovereign debt profile.
Source: @SergiLanauIIF
Separately, Argentina’s industrial production is recovering.
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4. Next, we have some updates on Mexico.
• Remittances:
Source: @financialtimes Read full article
• Credit growth:
Source: Goldman Sachs
• Formal job creation (year-over-year):
Source: Goldman Sachs
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5. The Turkish lira is struggling.
Foreign holdings of Turkish assets have fallen sharply.
Source: Alpine Macro
Commodities
1. Once again, let’s begin with precious metals.
• Gold vs. silver:
• Gold priced in bitcoin:
• Gold has been up 13 out of 14 days.
Source: @sentimenttrader
• Gold vs. the CRB commodities index (since 1970):
Source: @jessefelder Read full article
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2. Iron ore futures continue to rally on strengthening demand from China.
3. US lumber futures are soaring.
4. Coffee prices have been recovering, despite ample supplies (chart 2 and 3 below).
Source: @WSJ Read full article
Source: @WSJ Read full article
Energy
1. US demand for gasoline and refined products remains below the 5-year range.
Source: Princeton Energy Advisors
Refinery inputs continue to recover.
Source: Princeton Energy Advisors
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2. Gasoline inventories have leveled off.
3. US natural gas price rebound has been impressive.
Equities
1. The S&P 500 is 2% away from its record high.
Source: @kgreifeld
2. Volatility has collapsed.
3. Here is the S&P 500 priced in gold.
Source: Variant Perception
4. FAANMG stocks are now worth $7 trillion – more than the financial, energy, industrial, and material sectors combined.
Source: @VincentDeluard
5. Here is the sector performance for July.
Source: S&P Global Market Intelligence Read full article
6. When valuation dispersion is elevated and the correlation within the sector is relatively low, stock picking makes sense. On the other hand, lower P/E dispersion and higher correlation suggest that using a sector ETF will do the job.
Source: MarketDesk Research
Credit
1. The iShares high-yield ETF (HYG) is approaching long-term resistance.
Source: @DantesOutlook
2. High-yield ETF flows have outpaced investment-grade ETF flows this year.
Source: SPDR Americas Research, @mattbartolini
3. US corporate bonds are attractive when hedged into yen.
Source: @WSJ Read full article
4. Foreign investors in US corporate bonds have not been sensitive to longer-term movements in the dollar.
Source: Goldman Sachs, @ISABELNET_SA
5. Yields on high-rated US muni bonds are hitting new lows.
h/t @amanda_albright
Global Developments
1. How do parents around the world feel about sending kids back to school/daycare?
Source: Ipsos
2. This heatmap shows mobility trends by country.
Source: Deutsche Bank Research
• The Q2 GDP change is correlated with the Google mobility index.
Source: @PkZweifel
• Mobility has leveled off and so has the easing of lockdowns globally.
Source: Capital Economics
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3. Container shipping costs have risen recently.
Source: @JeffWeniger
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Food for Thought
1. US box-office sales:
Source: Moody’s Analytics
2. Traditional media is under pressure:
Source: @chartrdaily
3. Online search activity for consumer items and services:
Source: Arbor Research & Trading
4. Unemployment insurance (excl. the $600 boost) vs. household expenses:
Source: Morning Consult Read full article
5. Homicides in US cities:
Source: Statista
6. Key issues for the US 2020 election:
Source: Morning Consult Read full article
7. How much do you have to earn to be rich?
Source: YouGov Read full article
8. How heterosexual couples have met:
Source: Rosenfeld, Thomas, Hausen (Proceedings of the National Academy of Sciences)
9. The share of global GDP since AD 1:
Source: @adam_tooze, @TheEconomist Read full article
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