Stock futures lower after President and First Lady test positive for COVID

The Daily Shot: 02-Oct-20
Equities
Credit
Rates
Commodities
Energy
Cryptocurrency
Emerging Markets
Asia – Pacific
The Eurozone
The United States
Food for Thought



 

Equities

1. The President and First Lady tested positive for COVID, sending jitters through the markets. Stock futures are heavy in early trading.
 
Source: Twitter  
 


 
The market-based probability of Pence winning the 2020 election jumped.
 

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2. The US broad money supply growth is approaching 25%. Many analysts are convinced that this trend will provide support for the stock market.
 

 
3. This chart shows the attribution of growth in earnings per share over time.
 
Source: @JPMorganAM  
 
And here is the attribution of global equity returns.
 
Source: @JPMorganAM  

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4. The CBOE Skew Index continues to fall amid increased demand for downside protection (deep out-of-the-money put options).
 

 
5. Next, let’s take a look at some sector performance trends.
 
Earnings growth estimates vs. last year:
 
Source: @JPMorganAM  
 
Year-to-date performance:
 
Consumer discretionary:
 

 
Pharma:
 

 
Housing (and related stocks) –
 

 
Transportation:
 


 
Real estate operators (REITs):
 

 
Energy:
 

 
Semiconductors:
 

 
Sports betting (3 months):
 

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6. Finally, we have some year-to-date style/factor performance charts.
 
Share buyback focus:
 

 
Dividend Dogs:
 

 
Equal-weight S&P 500:
 

 
Small caps:
 

 
ESG focus:
 

 
Growth vs. value:
 

 
Low vol:
 

 
Momentum:
 


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Credit

1. It was the best September on record for investment-grade debt issuance.
 
Source: @jtcrombie, Bloomberg Finance L.P.  
 
2. ESG debt issuance hit records in Q3.
 
Source: Goldman Sachs  
 
3. Many US hotels are in trouble.
 
Source: Nancy Moran, @TheTerminal, Bloomberg Finance L.P.  
 
4. Smaller banks are running substantial exposure to commercial real estate.
 
Source: @lisaabramowicz1, @WSJ   Read full article  


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Rates

1. Treasury bill supply is projected to decline into year-end.
 
Source: Deutsche Bank Research  
 
The US Treasury could raise enough cash from notes and bonds in Q4 without needing T-bills, according to Deutsche Bank.
 
Source: Deutsche Bank Research  
 
2. The increase in money-market fund assets has been much sharper during this recession.
 
Source: @ISABELNET_SA, @jpmorgan  
 
3. Someone is unloading TIPS. Is the rally over?
 
Source: @markets   Read full article  


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Commodities

1. Copper is rolling over.
 

 
Here is Bloomberg’s industrial metals index.
 

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2. Coffee futures continue to retreat.
 

 
3. US pork producers are still struggling.
 
Source: @WSJ   Read full article  


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Energy

1. Brent is below $40/bbl again and testing support.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. Credit quality for US-based oil and gas firms is trending lower, which increases the probability of more defaults.
 
Source: Credit Benchmark   Read full article  
 
3. Propane was one of the key drivers of the increase in US petroleum product exports.
 
Source: EIA  


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Cryptocurrency

Bitcoin is consolidating. Will we see a breakout?
 
Source: @TheTerminal, Bloomberg Finance L.P.  


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Emerging Markets

1. Let’s run through some manufacturing PMI data for September.
 
South Africa (very strong):
 

 
Russia (back in contraction):
 
Source: IHS Markit   Read full article  
 
Hungary (back in contraction):
 

 
Mexico (still struggling):
 

 
Brazil (very strong):
 

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2. Here are a couple of other updates on Brazil.
 
Trade balance:
 

 
Tax collections:
 

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3. Saudi Arabia’s GDP tumbled in Q2.
 

Source: Reuters   Read full article  

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3. Here are some updates on India.
 
The rupee rose sharply amid capital inflows.
 

 
Growth in core industries has been soft.
 

 
Manufacturing has been declining as a share of India’s GDP.
 
Source: Pantheon Macroeconomics  


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Asia – Pacific

1. New Zealand’s consumer sentiment is not recovering.
 

 
2. Here are some updates on Australia.
 
This chart shows the growth in deposits since the start of the crisis.
 
Source: UBS, @Scutty  
 
August retail sales declined after several months of strong gains.
 
Source: @ShaneOliverAMP  
 
Most of the decline in retail sales was driven by Victoria.
 
Source: @ShaneOliverAMP  

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3. Japan’s labor market remains fragile.
 


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The Eurozone

1. According to the latest PMI figures, manufacturing continues to expand.
 
Italy:
 

 
Spain:
 

 
The Eurozone (final numbers):
 

 
The PMI report bodes well for the Eurozone’s industrial output.
 
Source: Pantheon Macroeconomics  

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2. Italian new car registrations have recovered.
 

 
Italy’s government bond yields continue to drift lower.
 

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3. French consumer spending strengthened further in August.
 

 
This chart shows the evolution of retail sales in Spain, France, and Germany.
 
Source: @fwred  

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4. Portugal’s industrial production has recovered.
 

 
5. The euro-area jobless rate is climbing, but furlough programs have suppressed unemployment in this recession.
 


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The United States

1. Manufacturing continues to expand, but there was some loss of momentum in September.
 
The ISM PMI:
 

 
New orders:
 

 
Factory employment has stabilized.
 

 
Manufacturers see their customers’ inventories as too low.
 

 
Factory input prices are climbing faster.
 

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2. Consumer spending remained robust in August.
 

 
But incomes declined.
 

 
Here are the drivers of personal income swings.
 
Source: @GregDaco  
 
The loss of government benefits pressured incomes.
 
Source: Economics and Strategy Group, National Bank of Canada  
 
The weakness in consumer spending has been in services (2 charts).
 
Source: @GregDaco  
 
Source: Economics and Strategy Group, National Bank of Canada  
 
Here are the dollar levels of spending and income.
 
Source: @WSJ   Read full article  

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3. Next, we have some updates on the labor markets.
 
Initial unemployment claims (still above 1 million per week):
 
Source: Oxford Economics  
 
Job openings:
 
Source: @JedKolko, @indeed   Read full article  
 
Unemployment forecasts:
 
Morgan Stanley:
 
Source: Morgan Stanley Research  
 
Oxford Economics:
 
Source: Oxford Economics  
 
Capital Economics (longer-term):
 
Source: Capital Economics  

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4. PCE inflation rose more than expected in August.
 

 
A key driver of this increase in inflation was durable goods. And a substantial portion of that increase was used cars.
 

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5. US automobile sales have nearly recovered.
 


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Food for Thought

1. Student visas:
 
Source: @bopinion   Read full article  
 
2. Vaccine testing:
 
Source: @WSJ   Read full article  
 
3. Expected vaccine distribution:
 
Source: @adam_tooze   Read full article  
 
4. Household income and spending:
 
Source: @WSJ   Read full article  
 
5. Google searches for ATMs vs. payment apps:
 
Source: Liberty Street Economics   Read full article  
 
6. Average time for drive-thru orders:
 
Source: @business   Read full article  
 
7. Which small businesses are struggling?
 
Source: Yelp   Read full article  
 
8. Openness to political violence in the US:
 
Source: @politico   Read full article  
 
9. Equations that changed the world:
 
Source: @ProfFeynman  

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Have a great weekend!


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