The Daily Shot: 09-Oct-20
• The United States
• The Eurozone
• Japan
• Australia
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. According to Morgan Stanley, US households have built up substantial ‘excess’ savings.
Source: Morgan Stanley Research
Will this cash cushion help power the economy despite the lack of progress on stimulus? Here is a projection for the current quarter’s growth with and without additional government support.
Source: @jeffsparshott, @WSJ
One trend that allowed many households to save more was the postponement of liabilities: eviction moratoriums, mortgage forbearance programs, and student loan deferment (chart below).
Source: Yardeni Research
At some point, these liabilities will begin offsetting a portion of the ‘excess’ savings. Here are the balances of mortgages in forbearance (see comment below).
Source: Black Knight Technologies
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2. Total initial jobless claims are holding above one million per week.
Source: Oxford Economics
3. Bloomberg’s consumer sentiment index pulled back over the past couple of weeks as Americans became less upbeat about their personal finances.
4. Many small businesses are still struggling to pay their rent.
Source: Alignable
5. Nomura is estimating that the core CPI moderated further last month.
Source: Nomura Securities
• Rent inflation continues to slow.
Source: Nomura Securities
• Health insurance has been boosting the overall medical care services costs.
Source: Nomura Securities
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6. Finally, we have some updates on business investment.
• Business spending has shifted towards IT equipment, according to Capital Economics.
Source: Capital Economics
• Since the financial crisis, business investment has been falling further behind the long-term trend.
Source: Pantheon Macroeconomics
• Business surveys have been pointing to a rebound in CapEx.
Source: Goldman Sachs
• Goldman is forecasting a relatively steep recovery in business investment.
Source: Goldman Sachs
• A rebound in investment spending could lead to margin expansion.
Source: Denise Chisholm, Fidelity Investments
The Eurozone
1. Let’s begin with Germany.
• The downtrend in Germany’s trade surplus remains intact.
• Retail traffic is slowing again, …
Source: Deutsche Bank Research
… as new infections accelerate.
The second wave is impacting more young people.
Source: Deutsche Bank Research
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2. French industrial sentiment pulled back last month.
3. Netherlands’ CPI rose in September, bucking the trend.
4. Periphery government bond yields are hitting record lows.
• Italy (10yr):
• Portugal (30yr):
• Greece (10yr):
Japan
1. The Economy Watchers Survey outlook has rebounded, topping expectations.
2. Wage growth remains anemic.
This chart shows wage changes excluding bonuses.
Source: Goldman Sachs
3. Household spending is well below last year’s levels.
4. Similar to other countries, Japan offered guaranteed loans, which have seen a significant uptake (boosting loan balances).
Source: Variant Perception
Australia
1. Residential property finance has been exceptionally strong, driven by owner-occupied housing.
• Month-over-month:
• Levels:
Source: ABS, @Scutty
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2. Government debt as a percent of GDP is projected to rise. However, ANZ expects interest costs to remain below 1% of GDP over the next four years.
Source: ANZ Research
China
1. The renminbi is testing the highs reached early last year.
2. Bond yields continue to climb, boosting portfolio inflows (2nd chart below) and providing support for the yuan.
Source: IIF
Foreigners continue to increase their holdings of China’s domestic assets.
Source: @adam_tooze, @FT Read full article
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3. Service sector growth remains stable, with the September PMI figure exceeding expectations.
4. China’s production of industrial robots has accelerated this year.
Source: BCA Research
Emerging Markets
1. Brazil’s retail sales are up 6% from the same time last year.
2. Argentines are piling into US dollars at a record pace.
Source: @markets Read full article
3. Turkey’s FX reserves continue to deteriorate.
Source: Goldman Sachs
4. How depended are EM economies on agriculture?
Source: Pantheon Macroeconomics
Commodities
1. Silver is holding support.
Source: barchart.com
2. China’s exports of rare-earth metals are falling. This could be a problem for countries reliant on China for minerals used in the electric vehicle market.
Source: @bulldogholmes
• Projected demand for materials used in electric vehicle batteries:
Source: @bulldogholmes
• Typical electric vehicle battery:
Source: @bulldogholmes
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3. Aggregate net speculative positions in 17 major commodities have hit their highest level since early 2014. Could we begin to see more corrective action similar to gold and silver?
Source: BCA Research
4. US soybean exports to China continue to climb.
Soybean futures are soaring.
Here is Bloomberg’s agriculture index.
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5. US pork exports surged in recent weeks, driven by demand from China and Mexico. Hog futures are up sharply.
6. How much of the world’s greenhouse gas emissions are covered by carbon pricing?
Source: @WSJ Read full article
Energy
1. Oil futures jumped on bullish news from OPEC.
Source: @WSJ Read full article
Source: Reuters Read full article
Brent is testing resistance at the 50-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. The number of completed US oil & gas wells declined sharply this year.
Source: @WSJ Read full article
Equities
1. Stocks continue to rally on stimulus hopes?
Talks seem to be back on. Perhaps.
Source: @axios Read full article
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2. The elections are impacting niche areas of the market.
• Guns:
Source: Caleb Silver, Investopedia
• Cannabis:
Source: Reuters Read full article
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3. Rising demand for house rentals is evident in the stock market this year (see comment below).
Source: @WSJ Read full article
4. Next, we have some data on IPO activity from FactSet.
Source: @FactSet Read full article
5. Here are the trends in equity ownership by wealth bracket.
Source: @business Read full article
Credit
1. High-yield funds are seeing capital inflows again.
Source: BofA Global Research, @WallStJesus
2. Here is the distribution of loans (by type) held by US banks.
Source: Variant Perception
Global Developments
1. Currency markets are pricing in higher volatility in the dollar ahead of US elections while downplaying the risk of a hard Brexit.
Source: SPDR Americas Research, @mattbartolini
However, markets are becoming less concerned about the US election uncertainty.
Source: JPMorgan, @tracyalloway
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2. Business activity has recovered faster than what we saw after the financial crisis.
Source: Morgan Stanley Research
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Food for Thought
1. Where should the vaccine be made available first?
Source: The Economist Read full article
2. Obesity rates in the US:
Source: CDC
3. Women legislators:
Source: Pew Research Center Read full article
4. Voting by mail in the US:
Source: Danske Bank
5. Vice presidential debate buzz:
Source: Morning Consult Read full article
6. Social Security fund depletion:
Source: @WSJ Read full article
7. Uncertainty about financial retirement plans:
Source: Statista
8. Wages by age, marital status, race, and gender:
Source: On the Economy blog Read full article
9. Watching sports (by generation):
Source: @MorningConsult Read full article
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Have a great weekend!