The Daily Shot: 08-Oct-20
• The United States
• Canada
• The Eurozone
• Europe
• Asia – Pacific
• Emerging Markets
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. Let’s begin with the FOMC minutes, which continued to show a dovish stance. Later this year, the Committee will debate if the pace of economic recovery warrants an increase in securities purchases. Fed officials have been increasingly focused on layoffs, which may guide their decision on quantitative easing.
Source: Arbor Research & Trading
• Another massive stimulus from the federal government may also force more debt buying or shifting into longer-term Treasuries to keep yields from rising too much.
Source: FOMC Minutes
• Not all Fed officials were happy with the “enhanced forward guidance” to keep rates at zero for a very long time. This commitment may limit the Fed’s ability to react to asset bubbles or sudden acceleration in price gains.
Source: MarketWatch Read full article
• For now, inflation is not the Fed’s primary concern.
Source: Arbor Research & Trading
• High-frequency indicators show no improvement in economic activity since the September FOMC meeting.
– The Moody’s Analytics “Back to Normal” Index:
Source: Moody’s Analytics
– The Oxford Economics Activity Tracker:
Source: Oxford Economics
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2. The job market recovery has stalled.
• Job searches and recruitment:
Source: Arbor Research & Trading
• Job openings:
Source: @WSJ Read full article
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3. Consumer credit unexpectedly contracted in August.
The pace of car purchases and student borrowing slowed (nonrevolving credit), while consumers reduced their credit card balances (revolving credit).
Here are the year-over-year changes.
Source: Oxford Economics
• The average automobile loan size spiked in the second quarter, …
… and loan rates tumbled.
• The slowdown in student debt growth accelerated with the pandemic amid lower enrollment/attendance and reduced dorm occupancy.
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4. Mortgage activity remained robust last week.
• Purchase applications:
• Refi:
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5. Commercial and residential rents have declined this year.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
Canada
1. The Ivey PMI report showed a slower pace of recovery in business activity last month.
2. Commercial property rents took a hit in 2020.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
3. This chart shows what happened to e-commerce sales this year.
Source: Desjardins
The Eurozone
1. Spain’s industrial production rebound slowed in August – similar to what happened in Germany (second chart here).
2. French trade deficit remains elevated.
3. Next, we have some updates on Italy.
• Retail sales have fully recovered.
• Italian corporate loans and deposits spiked as companies boosted their liquidity positions.
Source: Prometeia
• Italy will be the largest beneficiary of the EU’s stimulus package.
Source: Prometeia
• Credit card usage in Italy has been lower than in other euro-area economies.
Source: @markets Read full article
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4. Finally, we have the “economically active” population in the Eurozone.
Source: @financialtimes Read full article
Europe
1. The Gilt – Bund 10-year spread is starting to recover following significant compression earlier this year.
Source: Variant Perception
2. Swiss foreign exchange reserves are nearing 140% of the annualized GDP as the SNB tries to keep the franc from appreciating.
3. Sweden’s industrial production has recovered to last year’s levels, but service companies are struggling.
By the way, the industry-services divergence is not unique to Sweden. This chart is an excellent illustration of the current situation in Europe.
Source: IHS Markit Read full article
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4. Corporate ratings downgrades have slowed.
Source: Fitch Ratings
Asia – Pacific
1. The South Korean won continues to grind higher.
Here is Bloomberg’s Asia currency index.
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2. Taiwan’s trade surplus hit a record high.
3. New Zealand’s business outlook has recovered.
Emerging Markets
1. Despite the recent rate hike, the Turkish lira keeps tumbling as capital outflows continue.
Source: TS Lombard
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2. EM Asia domestic banks have plenty of liquidity, …
Source: IIF
… which is being used to finance government deficits.
Source: IIF
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3. This chart shows the percentage of the population with bank accounts, mobile phones, and credit cards.
Source: Deutsche Bank Research
Energy
1. US oil production is back to 11 million barrels per day.
2. US oil and gasoline inventories have been moving lower.
3. Gasoline demand continues to normalize.
Source: Princeton Energy Advisors
4. This chart shows US electricity generation by major energy sources over time.
Source: BlackRock
5. Here is a forecast for US oil production with and without a ban on federal land drilling.
Source: Longview Economics
6. Next, we have some trends in renewable energy.
• New cars in the EU:
Source: @WSJ Read full article
• Capital costs of solar PVs have been reduced by more than 75% (2 charts).
Source: IEA
Source: @MaxCRoser, @_HannahRitchie Read full article
• US renewables:
Source: @TheStalwart, @pearkes Read full article
• Wind and solar power:
Source: Statista
Equities
1. Stocks rebounded amid renewed hopes for a “partial” stimulus package.
Source: Reuters Read full article
In particular, markets expect additional government support for the airline industry.
Source: Fox Business Read full article
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2. Hedge funds’ stock picks continue to outperform.
3. Are value stocks finally bottoming relative to growth?
Source: Alpine Macro
4. Momentum has outperformed other factors this year in both the US and Europe.
Source: Factor Research
5. How does the Nasdaq 100 perform in election years?
Source: @NautilusCap
6. Here is the average daily path of the S&P 500 since 1928.
Source: Deutsche Bank Research
7. This chart shows each sector’s relative market value over time.
Source: @ISABELNET_SA, @GoldmanSachs
8. The number of restatements of companies’ financials has been declining over the past decade. Will we see an increase this year?
Credit
1. Loan loss provisions are expected to diminish going forward.
Source: Deutsche Bank Research
2. Negative rating actions have been decreasing (2 charts).
Source: S&P Global Market Intelligence
Source: Moody’s Investors Service
Rating agencies have delivered the first net upgrade to ratings and positive/negative watch announcements since the start of the pandemic.
Source: BofA Global Research
However, certain sectors, such as airlines and hotels, face significant credit risk.
Source: S&P Global Market Intelligence
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3. Next, we have the 2020 bankruptcies by sector.
Source: S&P Global Market Intelligence
4. US investment-grade companies have been issuing more debt while taking precautions with greater cash levels.
Source: Moody’s Investors Service
5. US small and medium-size corporate debt has risen substantially this year.
Source: IIF
6. Since 2008, Fannie Mae and Freddie Mac have played an increasingly outsized role in the US CMBS market.
Source: @adam_tooze, @JARennison Read full article
7. The number of tax-exempt money market funds has been declining (low rates make these products much less profitable).
Source: @WSJ Read full article
Global Developments
1. This chart shows Q1 and Q2 contributions to GDP growth. Only China is net positive for the first half of the year.
Source: RBA
2. Home price increases have accelerated in several advanced economies.
Source: Deutsche Bank Research
3. The pace of central bank injections via QE is slowing.
Source: BofA Global Research
4. Central banks have been unable to meet inflation targets.
Source: Danske Bank
5. The OECD has raised its growth estimates.
Source: BCA Research
Food for Thought
1. Less spending money for the holidays:
Source: @business Read full article
2. Empty Manhattan offices:
Source: @WSJ Read full article
3. The recent changes in new US COVID cases appear to be inversely correlated with temperatures.
Source: JPMorgan, @carlquintanilla
4. Women in the workforce:
Source: @business Read full article
5. Weeks of severance for each year of service with a company:
Source: LHH Read full article
6. Greek vs. Turkish military strength:
Source: Statista
7. US cities with the highest economic output:
Source: HowMuch.net Read full article
8. Changes in states’ tax revenue:
Source: @TaxFoundation, @JaredWalczak Read full article
9. Some positive global trends:
Source: @SteveStuWill Read full article
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