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