The Daily Shot: 16-Sep-20
• The United States
• The United Kingdom
• The Eurozone
• Japan
• China
• Emerging Markets
• Commodities
• Equities
• Credit
• Rates
• Food for Thought
The United States
1. Industrial production growth eased last month, …
Source: @WSJ Read full article
… as factory activity expanded at a slower pace (chart shows month-over-month changes).
Capacity utilization remains well below pre-crisis levels.
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2. The NY Fed’s regional manufacturing index showed an improvement in factory activity this month.
• New orders are growing again.
• Employment is strengthening.
• And CapEx expectations improved.
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3. Next, we have some updates on inflation.
• Deutsche Bank expects food CPI to moderate.
Source: Deutsche Bank Research
• The PPI for healthcare services is picking up, which could be a tailwind for PCE inflation.
Source: Deutsche Bank Research
• As we mentioned early this month, the US dollar weakness is putting upward pressure on import prices.
• However, the oil-to-gold ratio points to inflation remaining subdued (“breakeven” is a measure of market-based inflation expectations).
Source: Stifel
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4. Household income continued to climb in 2019.
Source: @WSJ Read full article
More recently, households got a massive infusion from the government.
Source: Longview Economics
Source: Longview Economics
5. But without another CARES package, incomes will come under pressure. And this retail sales forecast from Morgan Stanley may not materialize.
Source: Morgan Stanley Research
6. Credit and debit card spending in Pacific states is lagging the rest of the country.
Source: Oxford Economics
7. Finally, we have the year-over-year changes in US imports during the first half of the year (by origin).
Source: Jungle Scout
The United Kingdom
1. The furlough scheme (chart below) has artificially suppressed the unemployment rate (second chart).
Source: Goldman Sachs
But the labor market remains soft.
• Redundancies:
Source: Statista
• Google search activity related to redundancies:
Source: Pantheon Macroeconomics
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2. A higher percentage of Britons are working from home vs. what we see in the Eurozone.
Source: Morgan Stanley Research
Nonetheless, traffic congestion in London is back.
Source: Morgan Stanley Research
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3. Here is a quote from Macrobond on the UK’s trade with the EU.
… we can see that Germany was the UK’s biggest trading partner in terms of service exports, while France was the biggest in terms of service imports. More services were imported from Spain that exported to Spain during this period, something that stands out from most of the other trading partners to the UK.
Source: Macrobond
The Eurozone
1. Despite the COVID second wave and the looming no-deal Brexit, Germany’s ZEW expectations index hit the highest level in two decades.
Source: Reuters Read full article
Germany’s share prices also reflect this optimism.
Source: @WSJ Read full article
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2. Spain’s government spread to Germany continues to tighten.
3. The ECB’s new growth baseline is only moderately more optimistic than the June forecasts.
Source: Barclays Research
4. The Eurozone has too many bank branches.
Source: The Economist Read full article
Japan
1. Dollar-yen has been consolidating. Are we about to see a breakout?
Source: @markets Read full article
2. Exports are recovering.
3. Here is Goldman’s core CPI forecast.
Source: Goldman Sachs
4. The new prime minister will need to address persistent weakness in the labor market.
• Labor productivity remains very weak.
Source: Barclays Research
• Both real and nominal wages have declined, partly due to fewer work hours.
Source: Barclays Research
China
1. The renminbi has been outperforming EM currencies (vs. the dollar).
2. Export-related freight activity is at multi-year highs.
3. US-listed Chinese companies have outperformed shares listed domestically or at other exchanges.
Source: Seafarer Capital Partners Read full article
Emerging Markets
1. EM currencies continue to rebound.
2. India’s exports slumped in August.
3. Indonesia’s trade surplus remains elevated.
Source: ING
4. Nigeria’s inflation is accelerating again.
5. Russia’s industrial production remains soft.
6. According to ING, “Brazil’s inflation outlook should remain largely benign in the foreseeable future.”
Source: ING
7. Latin American stock market’s relative performance has been tracking US value vs. growth.
Source: @ISABELNET_SA, @GoldmanSachs
8. Finally, we have the trade balance for select EM economies.
Source: @CFR_org Read full article
Commodities
1. The rally in iron ore is fading.
2. This chart shows the relative performance across commodities sectors.
Source: Arbor Research & Trading
3. Cocoa futures were up sharply amid concerns about the black pod disease.
Source: @WSJ Read full article
4. Here is Bloomberg’s forecast for rare-earth elements consumption.
Source: Bloomberg Finance L.P., @RichardStubbe
Equities
1. Bank of America’s fund manager survey (FMS) continues to show investors’ love-hate relationship with tech.
• A record percentage of survey participants see “long tech” as the most crowded trade.
Source: BofA Securities, @WallStJesus
• At the same time, these fund managers are massively overweight tech in their portfolios. FOMO …
Source: BofA Securities, @WallStJesus
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2. Here are a couple of other trends from the survey.
• More managers want companies to boost CapEx.
Source: BofA Securities, @WallStJesus
• Fund managers expect corporate earnings to improve substantially.
Source: BofA Securities, @WallStJesus
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3. Tech shares are outperforming again.
4. Stock futures liquidity has deteriorated.
Source: JP Morgan, @RobinWigg
5. Transportation sector outperformance (recently driven by FedEx) tends to be a bullish sign for the market.
h/t Nancy Moran
6. How do different sectors perform during Republican vs. Democratic administrations?
Source: @ISABELNET_SA, @BofAML
7. How do stocks perform before and after joining the S&P 500?
Source: @markets Read full article
Credit
1. High-yield credit default swap spreads continue to tighten.
2. Leveraged loan issuance has slowed this year.
Source: @LPCLoans
Middle market loan volume has been particularly weak.
Source: @Refinitiv, @LPCLoans
And banks have pulled back on lending to smaller firms.
Source: @markets Read full article
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3. Non-financial commercial paper outstanding plummetted this year as companies term out their debt at extraordinarily low rates.
Rates
1. The 10yr Treasury yield has been remarkably stable.
Source: Yardeni Research
2. The amount of T-bills outstanding soared this year.
Source: Morgan Stanley Research
3. The US natural rate of interest (r-star) is near zero. In theory, this would suggest that the fed funds rate should be negative to make sure the Fed’s policy is not restrictive. Of course, the US central bank’s QE program is effectively a substitute for negative rates.
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Food for Thought
1. USPS first class mail deliveries:
Source: @WSJ Read full article
2. US postal service share of employment:
Source: Moody’s Analytics
3. Improved productivity of corporate meetings:
Source: NBER, Eeagli.com Read full article
4. US federal government debt (% of GDP):
Source: Commerzbank Research
5. Views on the US in select countries:
Source: Pew Research Center Read full article
6. Military spending:
Source: Alpine Macro
7. Daily pollution levels:
Source: The New York Times Read full article
8. Drug positivity rates (2 charts):
Source: Statista
Source: @WSJ Read full article
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9. Splitting each state into quadrants with equal populations:
Source: reddit
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