The Daily Shot: 25-Sep-20
• Administrative Update
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
Administrative Update
On September 30th at 12:30 PM EST, Sandy Leeds will be conducting a webinar on the latest market trends and economic developments. This event is a collaboration between The Daily Shot and Texas Executive Education (University of Texas). Our subscribers can sign up here.
The United States
1. New home sales remain remarkably strong.
And inventories of new houses are at multi-year lows.
Builders have been selling more “starter” houses, while higher-end home sales saw a decline.
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2. According to the AEI Housing Center, home price appreciation will reach 11% next month. Is the housing market overheating?
Source: AEI Housing Center
3. Next, we have some updates on consumer confidence.
• Bloomberg’s consumer sentiment continues to recover. The second chart below is the “buying climate” index.
• Bloomberg’s report shows that Americans are much more upbeat about personal finances than the state of the economy.
Source: @TheTerminal, Bloomberg Finance L.P.
• An alternative sentiment index from Morning Consult shows a much more uneven recovery.
Source: Morning Consult Read full article
• There is a divergence between retail sales and consumer confidence.
Source: Moody’s Analytics
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4. A measure of consumer spending from Harvard University shows that wealthier households remain much more cautious than those with lower incomes.
Source: Opportunity Insights
5. Once again, more than a million Americans filed for unemployment benefits last week. Initial jobless claims remain stubbornly high.
Source: Oxford Economics
6. The Vistage CEO Confidence Index rebounded this quarter as small and medium-size firms feel more optimistic.
Source: Vistage
7. The Kansas City Fed’s factory activity gauge edged lower this month but remained robust.
The region’s manufacturers are increasingly upbeat about the future.
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8. It’s been a good week for the US dollar.
Source: @markets Read full article
Canada
1. The CFIB small and medium-sized business index was flat this month. To be sure, the overall activity is at pre-crisis levels.
The underlying trends were a mixed bag. Here are a couple of examples.
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2. This chart shows the daily new COVID cases by province.
Source: Scotiabank Economics
The United Kingdom
1. Retail sales rebounded sharply, according to CBI.
Source: Reuters Read full article
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2. But these improvements could be at risk as the number of new infections hits a record.
Some (but not all) of these increases in new cases are due to more testing.
Source: Gavekal
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3. Consumer sentiment remains depressed.
4. Analysts are skeptical about the latest job support scheme from the government.
• While the new program is relatively inexpensive, …
Source: @financialtimes Read full article
Source: @financialtimes Read full article
• … it relies on employers contributing to the scheme.
Source: Pantheon Macroeconomics
Why would companies pay part-time employees for hours they don’t work when they can hire full-time workers?
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5. Here is the latest mobility data.
Source: ING
6. UK shares appear to be extremely cheap relative to other European firms.
h/t @mikamsika
The Eurozone
1. The rebound in Germany’s Ifo business climate indicators is moderating.
Source: ifo Institute
Services, in particular, showed a loss of momentum due to the second wave of the pandemic.
Source: Pantheon Macroeconomics
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2. French manufacturing confidence continues to recover.
But just like in Germany, service businesses are becoming less upbeat.
Source: ING
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3. The pandemic has distorted the Eurozone’s wage metrics.
Source: Commerzbank Research
4. Here are some measures of uncertainty.
Source: ECB Read full article
Europe
1. Let’s take a look at some sentiment indicators.
• Denmark:
• Poland:
• The Czech Republic (2 charts):
Source: ING
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2. Norway has the lowest real rates in the developed world. Will the Norges Bank be the first to tighten?
Source: Deutsche Bank Research
3. This chart shows mobile data usage in Western Europe.
Source: @financialtimes Read full article
Asia – Pacific
1. Lately, the yen has been less of a “safe-haven” asset. Here is the correlation with VIX.
h/t Masaki Kondo
2. Japan’s department store dales remain depressed.
3. South Korea’s consumer confidence has deteriorated again.
4. New Zealand’s housing market has rebounded, in part due to the RBNZ’s dovish policies.
Source: Morgan Stanley Research
The recent lockdown in Auckland has temporarily weighed on economic activity.
Source: Morgan Stanley Research
China
1. Capital Economics expects the renminbi to pull up other Asian currencies in the months ahead.
Source: Capital Economics
For now, the correlation between the yuan and other Asian currencies has weakened.
Source: @markets Read full article
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2. China’s key stock market indicator is at support.
Source: @TheTerminal, Bloomberg Finance L.P.
3. The World Economics SMI report shows that the post-lockdown bounce in business optimism is waning.
Source: World Economics
4. China’s service sector share of the GDP continues to grow.
Source: Statista
Emerging Markets
1. Let’s begin with Turkey.
• The central bank surprised the markets with a massive rate hike to defend the lira.
Source: @financialtimes Read full article
The central bank has been spending a tremendous amount of F/X reserves to defend the currency, …
Source: Goldman Sachs
… but it can’t afford to do so for much longer as reserves dwindle (without boosting the lira). So it opted for a rate hike instead.
Source: Goldman Sachs
The lira jumped.
• Capacity utilization and business confidence have been improving.
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2. Egypt’s central bank cut rates as inflation eases.
Source: Nasdaq/Reuters Read full article
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3. Mexico’s central bank also cut rates despite higher inflation. The economy has been in such bad shape, Banxico had little choice.
4. Some EM central banks have been engaging in QE.
Source: IIF
5. EM corporate defaults have been rising.
Source: TS Lombard
Commodities
1. China’s demand for industrial commodities has been strengthening.
• Diffusion indices from the China Beige Book report:
Source: China Beige Book
• Steel demand:
Source: Goldman Sachs
• Aluminum imports:
h/t @PhoebeSedge
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2. Moderating inflation expectations (chart below) and a stronger dollar have been pressuring gold.
This chart shows declining interest in gold and inflation.
Source: Arbor Research & Trading
However, should real rates move lower, the rally in gold will resume.
Source: Deutsche Bank Research
Energy
1. BP shares closed at the lowest level in 25 years as energy-sector investors continue to sell.
Source: @JavierBlas
2. Brent has been consolidating.
3. Where do energy companies see WTI by the end of the year? Here is the Dallas Fed Energy Survey result.
Source: Federal Reserve Bank of Dallas
Equities
1. Stock valuations remain a concern.
Source: Deutsche Bank Research
2. IT was the only sector to hold onto positive returns (following a record run) so far this month.
Source: BCA Research
3. This chart shows how flows into tech-oriented ETFs have led the Nasdaq index, closely tracking growth in the Fed’s balance sheet.
Source: @VincentDeluard
4. Are we seeing a market rotation out of large tech and into industrials?
Source: Alpine Macro
5. On average, September tends to be a difficult month for the S&P 500, before a recovery in Q4.
Source: Yardeni Research
6. Will we see a decline in retail options frenzy after the recent selloff?
Source: @financialtimes Read full article
7. A much higher percentage of small firms have been unprofitable vs. larger companies.
Source: Bloomberg Finance L.P., @LizAnnSonders
Credit
1. US high-yield sales hit a new record.
Source: @markets Read full article
2. Below, we have the total US corporate liabilities as a percent of the GDP.
Source: CreditSights
3. This chart shows corporate defaults globally.
Source: Fitch Ratings
4. Commercial real estate mortgages that are 90+ days past due have been rising.
Source: S&P Global Ratings
Many retail properties have been struggling, and some are never coming back.
Source: @adam_tooze, @bbgvisualdata Read full article
Rates
1. Treasury implied volatility continues to hit new lows (chart below) as yields remain stuck in a range (2nd chart).
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2. Recently, we’ve been getting conflicting messages from key Fed officials.
Source: @TCosterg
3. This chart shows US government borrowing costs going back to 1786.
Source: Deutsche Bank Research
4. Globally, we are seeing record-low bond yields and record-high fixed-income valuations.
Source: Quill Intelligence
Global Developments
1. Let’s start with the September preliminary Markit PMI figures.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
2. Mortgage rate declines in the US have been the most pronounced.
Source: Deutsche Bank Research
3. Here is the distribution of projected five-year returns across asset classes.
Source: @ISABELNET_SA, @blackrock
4. The US dollar has been correlated with the global economic policy uncertainty index.
Source: Deutsche Bank Research
5. What are the components of global employment growth over the next few decades?
Source: OECD Read full article
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Food for Thought
1. US dietary intakes vs. recommendations:
Source: health.gov
2. Vaccine production goals:
Source: Longview Economics
3. Advanced economies securing vaccine supplies from multiple manufacturers:
Source: Deutsche Bank Research
4. Going out to eat:
Source: @CivicScience Read full article
5. US birth rates vs. the unemployment rate during the Great Recession (by state):
Source: The Brookings Institution Read full article
6. Ages and tenures of US Supreme Court justices:
Source: @bbgvisualdata Read full article
7. Political preferences by generation:
Source: Morning Consult Read full article
8. Business loan fraud in the US:
Source: @business Read full article
9. The comeback of vinyl records:
Source: Statista
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Have a great weekend!