Nearly 20 million US homeowners are eligible to refinance as mortgage rates hit record lows

The Daily Shot: 11-Sep-20
The United States
The United Kingdom
The Eurozone
Europe
Japan
New Zealand
China
Emerging Markets
Commodities
Energy
Equities
Food for Thought



 

The United States

1. Let’s begin with producer prices, which rose a bit more than expected.
 

 
A large portion of the core PPI increase was due to the rebound in business markups (“trade services”).
 

 
The year-over-year growth rate in the core PPI ex. trade services is barely above zero.
 

 
Next, let’s take a look at some transportation-related PPI trends, which tend to be sensitive to economic activity.
 
Truck transportation of freight PPI:
 

 
Semi truck prices:
 

 
By the way, heavy truck orders remain robust.
 
Source: FTR, Snippet.Finance   Read full article  
 
Air transportation of freight (the spike is due to limited transport capacity globally):
 

 
Air passenger transportation PPI:
 

 
Passenger car rental:
 

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Finally, here are a couple of other trends we are following.
 
Wireless telecom services PPI:
 

 
Office and warehouse construction PPI:
 

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2. The sharp increase in used car prices could give a boost to the August CPI.
 
Source: Pantheon Macroeconomics  
 
3. The latest weakness in the US dollar has been good for smaller US manufacturers by helping them compete on price. Smaller industrial firms have outperformed (the equal-weight stock index below gives smaller industrial firms more weight).
 

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4. Since we are on the topic of currencies, the dollar-yen volatility market is pricing in a substantial US election risk (2-month – 1-month vol spread).
 
Source: @vkaramanis_fx, @TheTerminal, Bloomberg Finance L.P.  
 
5. The US wholesale inventories-to-sales ratio is back at pre-crisis levels.
 

 
Car inventories have tightened.
 

 
By the way, here is another pandemic-related development. Wholesalers are running low on booze.
 

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6. Consumer confidence continues to recover.
 
Bloomberg’s sentiment indicator:
 

 
Refinitiv/IPSOS index:
 
Source: Refinitiv/Ipsos Consumer Sentiment Index.  
Source: Refinitiv/Ipsos Consumer Sentiment Index.  

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7. The NY Fed’s national economic activity index keeps climbing.
 

 
8. The labor market remains soft, as new unemployment claims move higher.
 
Source: Oxford Economics  
 
This chart shows the existing jobless claims (the total number of Americans receiving unemployment benefits).
 
Source: Oxford Economics  

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9. Mortgage rates hit another record low.
 

 
As a result, nearly 20 million homeowners can now refinance their mortgage.
 
Source: Black Knight  


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The United Kingdom

The no-deal Brexit risk continues to rise.
 
Source: The New York Times   Read full article  
 
Below is the timeline.
 
Source: ING  
 
The pound remains under pressure.
 

 
Here is the euro rising against the pound.
 

 
The GBP/USD sentiment in the options market has deteriorated.
 


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The Eurozone

1. The ECB did not deliver the stimulus boost the market was expecting.
 
Source: Reuters   Read full article  
 
Moreover, the central bank boosted its inflation forecasts for the next two years.
 
Source: Pantheon Macroeconomics  
 
The euro rose initially but then sold off. The long-euro trade remains very crowded.
 

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2. Next, we have some updates on France.
 
Manufacturing output is rebounding (as of July).
 

 
Home price appreciation has accelerated.
 
Source: INSEE   Read full article  
 
The budget has deteriorated:
 
Source: Pantheon Macroeconomics  

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3. Italian industrial production is recovering rapidly (as of July).
 

 
4. Germany’s activity index is up sharply.
 
Source: Longview Economics  


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Europe

1. Norway’s inflation surprised to the upside.
 

Source: Nasdaq   Read full article  
 
2. On the other hand, Sweden’s CPI remains benign amid soft demand (second chart).
 

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3. The S&P Europe 350 is relatively underweight technology versus the S&P 500.
 
Source: S&P Global Market Intelligence  
 
4. The Icelandic krona had the best day in years (vs. EUR).
 


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Japan

1. Producer prices are gradually recovering.
 

 
2. The dollar-yen correlation with Japan’s shares has weakened recently, which makes the stock market less vulnerable to currency fluctuations.
 
h/t @shoko_oda  
 
3. Next, we have some updates on Japan’s political situation.
 
Suga is likely to be the next PM.
 
Source: Reuters   Read full article  
Source: ANZ Research  
 
Suga does not see a need for another consumption tax hike over the next decade.
 
Source: @BloombergQuint   Read full article  
 
Support for Abe rose sharply since the resignation news.
 
Source: Morning Consult  


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New Zealand

1. New Zealand joined the negative-rate club this week.
 

 
2. Home sales remain robust.
 

 
3. Manufacturing expansion slowed sharply last month after the post-lockdown rebound.
 


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China

1. Investors are getting nervous about China’s tech stocks.
 
Source: @markets   Read full article  
 
2. Stock trading activity has moderated.
 
Source: @markets   Read full article  
 
3. Coal imports have slowed due to Beijing’s controls.
 
Source: Feifei Shen, @TheTerminal, Bloomberg Finance L.P.  


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Emerging Markets

1. Brazil’s retail sales have rebounded sharply, outperforming peers.
 

Source: @SergiLanauIIF  

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2. Mexico’s same-store sales are improving.
 

 
3. South Africa’s industrial output surprised to the upside.
 
Manufacturing:
 

 
Mining:
 

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4. Israel’s consumer confidence remains depressed.
 

 
5. Egypt’s CPI has been trending lower.
 

 
6. Indonesia’s stock market has been underperforming.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
7. Here are the components of Thailand’s GDP.
 
Source: ING  
 
8. This chart shows COVID-19 cases in Southeast Asia.
 
Source: ING  


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Commodities

1. Hedge funds are boosting their bets on copper.
 

 
2. Next, we have some updates on US agricultural commodities.
 
Lean hogs:
 

Source: Successful Farming   Read full article  
 
Corn:
 

 
US soy exports to China:
 


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Energy

1. Brent is testing support at $40/bbl.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. US gasoline demand remains at the lower end of the multi-year range.
 

 
3. This chart shows US crude oil and gasoline demand, measured in days of supply.
 

 
4. Alternative energy stocks have outperformed the broader energy space this year (2 charts).
 
Source: Gavekal   
Source: Schroders Economics Team, @Callum_Thomas  


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Equities

1. The S&P 500 is back at its 50-day moving average. And based on stock futures, it appears that the support will hold again.
 
Source: barchart.com  
 
2. Here is who bought the market since the lows.
 
Source: BofA Securities, @WallStJesus  
 
Retail investors have been punching above their weight by using options, which provide substantial leverage and can influence the market.
 
Source: @jessefelder, @FT   Read full article  
 
Millennials and GenXers have increased their amount invested in the market.
 
Source: Investopedia   Read full article  

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3. This chart shows momentum and relative strength of sectors versus the S&P 500.
 
Source: BofA Securities  
 
4. The gap between the best and the worst-performing sector has been unusually wide this year.
 
Source: @TeddyVallee  
 
5. The US has the largest market cap relative to the M2 money supply versus other developed markets.
 
Source: Gavekal   
 
6. Capital-scarce industries have been outperforming capital-abundant sectors this year.
 
Source: Variant Perception  


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Food for Thought

1. US road traffic over time:
 
Source: Statista  
 
2. New York City’s anemic recovery:
 
Source: Investopedia   Read full article  
 
Manhattan rental apartment glut:
 
Source: @luxury   Read full article  

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3. CEO compensation vs. the stock market:
 
Source: @acemaxx, @LarryMishel, @EconomicPolicy   Read full article  
 
4. Prices paid by consumer per billion dollars worth of content:
 
Source: @adam_tooze, @profgalloway   Read full article  
 
5. Tech employees’ political donations:
 
Source: BCA Research  
 
6. Worn out by political posts on social media (2 charts):
 
Source: @pewresearch   Read full article  
Source: @CivicScience   Read full article  

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7. World Trade Center-related FDNY deaths by year:
 
Source: Statista  
 
8. College students driving the COVID spike:
 
Source: @JedKolko, @indeed  
 
9. NFL betting:
 
Source: American Gaming Association  

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Today’s edition of The Daily Shot is dedicated to all the men and women who lost their lives on 9/11.
 
Have a great weekend.


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