The Daily Shot: 14-Aug-20
• The United States
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Commodities
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Import prices are rebounding. Excluding petroleum products, import prices are now up on a year-over-year basis.
This chart shows the changes in import prices from China.
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2. Next, we have a couple of other inflation-related trends.
• In May, the St. Louis Fed estimated a 75% likelihood of deflation, but that probability receded in June.
• Capital flows into inflation protection ETFs (which invest in TIPS) are hitting new records as investors prepare for faster growth in prices.
Source: @benbreitholtz
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3. Here are some updates on the labor market.
• US initial jobless claims continue to moderate.
Source: Oxford Economics
• Job postings are showing modest improvements.
Source: Barclays Research
• Manufacturing employment hasn’t kept pace with the recovery in manufacturing activity.
Source: Moody’s Analytics
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4. The Oxford Economics recovery tracker has stalled at about three-quarters of the pre-crisis levels.
Source: Oxford Economics
5. Bloomberg’s consumer sentiment index is rolling over.
Americans making over $50k/year are losing confidence in the recovery.
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6. Selling prices of homes have failed to keep pace with list prices.
Source: Arbor Research & Trading
7. “New economy” business investment is now half of the total CapEx.
Source: @NancyRLazar1
The Eurozone
1. The French unemployment rate hit a multi-decade low, but the lockdown had distorted the figures.
Source: Reuters Read full article
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2. As we saw earlier, Germany’s consumer inflation touched zero last month.
However, the CPI figures were distorted by the recent cut in sales tax (VAT).
Source: Pantheon Macroeconomics
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3. The spread between the US and German real yields has declined sharply this year, which provided support for the euro.
h/t Anil Varma
Europe
1. Here are a couple of updates on central Europe.
• The Czech CPI continues to trend higher.
• Poland’s exports are rebounding.
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2. In the UK, new homebuyer inquiries point to a sharp rebound in mortgage approvals.
Source: Pantheon Macroeconomics
Asia – Pacific
1. Asia-Pacific shares have fully recovered from the pandemic selloff.
2. Australia’s stock market is testing resistance.
3. Next, we have a couple of updates on New Zealand.
• House sales:
• Manufacturing activity (PMI > 50 means growth):
China
1. The July economic data was a bit disappointing, suggesting that the rebound momentum is slowing.
• Industrial production:
• Retail sales:
• Fixed asset investment:
Here is the breakdown between state and private investment.
Source: @TheTerminal
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2. Is the money supply growth peaking?
Source: @TaviCosta
3. Domestic travel has recovered.
Source: @WSJ Read full article
Emerging Markets
1. Let’s begin with India.
• Inflation remains stubbornly high.
And it’s not just food prices.
The CPI is above the RBI’s target range, and the core CPI is moving there as well.
Source: ANZ Research
• The government has been tapping the central bank for extra funds.
Source: @markets Read full article
• Indian banks’ profitability is expected to be the worst in Asia.
Source: @myrahulsatija, @TheTerminal
• The daily new coronavirus cases are hitting record highs.
Source: JHU CSSE
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2. Malaysia’s GDP collapsed in Q2.
3. Boosted by higher gold prices, Russia’s F/X and gold reserves exceeded $600 billion for the first time.
4. Banxico cut rates again.
Source: Reuters Read full article
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5. Colombia’s manufacturing output strengthened further in June, exceeding forecasts.
But retail sales were disappointing.
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6. EM bank stocks hit the lowest point in two decades relative to the broad EM market.
Source: Goldman Sachs, @jsblokland
Commodities
1. Let’s begin with precious metals.
• Gold’s premium to fair value is comparable to its peak in 2008, according to Deutsche Bank.
Source: Deutsche Bank Research
• The decline in the gold/silver ratio has been extremely rapid compared to history.
Source: Deutsche Bank Research
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2. US cattle futures continue to recover.
3. Only 35% of commodities are producing year-over-year gains at the moment.
Source: Arbor Research & Trading
Equities
1. The S&P 500 appears expensive versus commodities. Will we see a reversal?
Source: Stifel
2. This recovery has been the fastest on record, with the S&P 500 rising 25% in just 37 days. The 2009 recovery took three times longer.
Source: Morningstar
3. The Variant Perception’s leading index points to weakness in operating income for S&P 500 companies.
Source: Variant Perception
4. Here is the S&P 500 earnings yield (Bloomberg’s calculation).
5. The 10-day moving average of the CBOE’s put/call ratio is at multi-year lows, as complacency persists.
6. Next, we have a couple of charts on tech.
• Cisco (see story):
• The tech sector generates the highest percentage of international sales, while financials, utilities, and real estate are more domestically focused.
Source: MarketDesk Research
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7. Banks’ loan provisions point to higher stock market volatility ahead.
Source: Variant Perception
Credit
1. Leveraged loans have been outperforming as yields rise.
2. Investment-grade loan volume hit the lowest level in a decade.
Source: @LPCLoans
3. Private-equity-backed high-yield bond issuance has been robust.
Source: @WSJ Read full article
4. More Chapter 11 filings ahead?
Source: Variant Perception
5. Despite a modest rally, MBS spreads remain stubbornly wide.
Source: Pavilion Global Markets
6. Next, we have a couple of updates on state/municipal budgets.
• Cities’ revenues vs. expenditures:
Source: @axios Read full article
• State & local government spending:
Source: @WSJ Read full article
Rates
1. The $26 billion long-bond auction was a bit “sloppy,” pushing the 30yr yield higher.
Source: @lisaabramowicz1
2. Here are a couple of technical charts.
• The 10yr Treasury yield:
Source: @RMKOutFront
• The iShares 20+ Yr Treasury ETF (TLT):
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3. The market expects rates to remain at or below zero for the next few years.
Source: Morningstar
4. This chart shows the divergence between Treasury yields and inflation expectations. The widening gap has pushed real yields deep into negative territory.
Source: @meremortenlund
5. Below is a breakdown of the US broad money supply.
Source: Stifel
Global Developments
1. The July drop in the dollar was hardly unprecedented.
Source: Oxford Economics
2. This chart shows the performance of various asset classes and investment factors during prior periods of dollar weakness.
Source: MarketDesk Research
3. The dollar is elevated versus EM currencies.
Source: IIF
4. The interest rate differential between the US and international yields is shrinking.
Source: MarketDesk Research
5. Global tech and healthcare stocks have diverged from the rest of the market.
Source: BCA Research
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Food for Thought
1. Online consumer search activity by sector:
Source: Arbor Research & Trading
2. Tesla’s market value:
Source: @Schuldensuehner
3. Manhattan apartment rents:
Source: @markets Read full article
4. Herd immunity:
Source: Statista
5. US public school employment:
Source: @bpolitics Read full article
6. US labor force participation:
Source: @BLS_gov Read full article
7. The percentage of Americans with a side-hustle, by age:
Source: @chartrdaily
8. The overall cost of healthcare vs. prescription and nonprescription drugs:
Source: @WSJ Read full article
9. Most popular baby names:
Source: Nameberry
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Have a great weekend!