Stock futures up sharply on election outcome and reduced uncertainty

The Daily Shot: 09-Nov-20
Equities
Rates
Commodities
Emerging Markets
China
Japan
The Eurozone
Canada
The United States
Global Developments
Food for Thought



 

Equities

1. The US election is finally over, with political uncertainty quickly dissipating. While there still may be some ballot-counting adjustments at the margin, the key results are in.
 
Source: @WSJ   Read full article  
 
Here are the betting market odds for the Electoral College.
 
Source: @PredictIt  
 
The market is pleased with the election outcome and reduced uncertainty (for now). Stock futures are up sharply in early trading.
 

 
The collapse in vol (less uncertainty) has been supporting the post-election bounce, according to Deutsche Bank.
 
Source: Deutsche Bank Research  
 
The put-call ratio declined last week.
 
Source: Deutsche Bank Research  

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2. The MSCI World Index is testing all-time highs.
 
h/t @toddwhitebloomb  
 
3. How would the US market have performed without the Fed’s QE?
 
Source: @ISABELNET_SA, @SocieteGenerale  
 
4. S&P 500 CEOs are most upbeat in years.
 
Source: BofA Global Research, @WallStJesus  
 
Guidance is at extremes relative to expectations.
 
Source: BofA Global Research, @WallStJesus  

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5. Thematic funds have been popular this year.
 
Source: @WSJ   Read full article  


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Rates

1. The 10-year Treasury futures volume spiked in recent days.
 
Source: FHN Financial  
 
2. The amount of negative-yielding debt globally is now above $17 trillion (a record).
 


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Commodities

1. Bloomberg’s industrial metals index hit the highest level since 2018.
 

 
Steel futures in China are soaring.
 

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2. Gold has been correlated with stocks recently, which makes it less effective as a hedge.
 
Source: @WSJ   Read full article  
 
3. US soybean futures continue to climb.
 


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Emerging Markets

1. Erdogan fired Turkey’s central bank governor.
 
Source: @WSJ   Read full article  
 
And Tukey’s finance minister, Murat Uysal (Erdogan’s son-in-law), resigned.
 
Source: ABC News   Read full article  
 
The market was happy with Uysal’s resignation, sending the lira higher. Let’s see how long that lasts.
 

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2. Russia’s car sales surprised to the upside.
 

 
3. The Indonesian rupiah continues to climb as investment funds flow into the country.
 

 
4. India’s weekly deaths from COVID-19 are falling.
 
Source: TS Lombard  
 
India’s service exports have been dragged lower by the tourism and transportation sectors.
 
Source: @SergiLanauIIF  

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5. Brazil’s vehicle production keeps climbing.
 

 
Separately, new membership in Bolsonaro’s party didn’t have a large gender divide until Bolsonaro became President.
 
Source: Barros and Silva (2020)  

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6. Here is a look at EM currency performance over the past month.
 
Source: TS Lombard  
 
7. EM manufacturing growth has been outperforming advanced economies.
 
Source: @topdowncharts   Read full article  


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China

1. The renminbi is up sharply on US election outcome.
 

 
2. The stock market broke above the recent trading range.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. China’s exports are 11% above last year’s levels, …
 

 
… outperforming global trade.
 
Source: Gavekal   
 
Here is the trade balance vs. previous years (year-to-date).
 

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4. Inflation data remains weak for now, and real yields will climb higher as food prices ease, according to Variant Perception.
 
Source: Variant Perception  
 
6. China will soon join the ranks of high-income countries.
 
Source: TS Lombard  


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Japan

1. Service-sector recovery continues to lag manufacturing.
 
Source: Goldman Sachs  
 
2. Japanese equities have been shunned by international investors for the past five years.
 
Source: Variant Perception  


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The Eurozone

1. French payrolls rebounded more than expected in Q3.
 

 
2. Italian retail sales held up well in September.
 

 
3. Spain’s manufacturing output is almost back to last year’s levels.
 

 
4. Germany’s intermediate goods orders point to further gains in industrial production.
 
Source: Pantheon Macroeconomics  
 
5. This chart shows the unemployment rate plus the share of workers in job retention schemes.
 
Source: ECB   Read full article  
 
6. The ease of laying off and rehiring workers in the US makes US employment more volatile than what we see in the Eurozone.
 
Source: BCA Research  


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Canada

1. The October jobs report was a bit stronger than expected.
 

 
Here is Canada’s employment vs. pre-COVID levels.
 
Source: Scotiabank Economics  
 
The unemployment rate dipped below 9%.
 

 
The participation rate continues to recover.
 

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2. The Ivey PMI measure of business activity remained stable last month.
 

 
3. Here is the Oxford Economics Recovery Tracker.
 
Source: Oxford Economics  
 
4. Consumer insolvency filings continued to climb in September. Note that debt payment deferrals kept insolvencies at all-time lows during the height of the pandemic.
 
Source: Scotiabank Economics  
 
Business insolvencies picked up in September but remained below the long-term average.
 
Source: Scotiabank Economics  

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5. USD/CAD is at support (1.30).
 


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The United States

1. The October employment report was stronger than the market was expecting, particularly in private payrolls (second chart).
 

 
But the recovery is slowing, …
 
Source: Apollo  
 
… and there are substantial risks ahead – see comments below from Pantheon Macroeconomics.
 
Source: Pantheon Macroeconomics  
 
Let’s take a look at some labor market trends.
 
Current recovery vs. 2008:
 
Source: Mizuho Securities USA  
 
Employment level by wage category:
 
Source: Morgan Stanley Research  
 
Services vs. goods:
 
Source: Apollo  
 
The unemployment rate (chart below) and underemployment (2nd chart):
 


 
Underemployment excluding temporary layoffs (this is a key indicator to watch going forward):
 
Source: @GregDaco, @JedKolko  
 
Permanent job losses:
 
Source: Mizuho Securities USA  
 
Long-term unemployment:
 
Source: Piper Sandler   
 
Labor force participation rate:
 

 
Men vs. women:
 
Source: @markets   Read full article  
 
Prime-age participation:
 

 
Employment-to-population ratio:
 

 
Unemployment by reason:
 
Source: Morgan Stanley Research  
 
Best- and worst-performing sectors last month:
 
Source: @bbgvisualdata   Read full article  
 
A widening divergence between ADP private payrolls and the government’s employment data:
 
Source: Yardeni Research  

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2. Consumer credit bounced in September, …
 

 
… driven by higher credit card usage (revolving credit).
 

 
But credit card balances remain depressed relative to pre-pandemic levels.
 
Source: Oxford Economics  

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3. The US dollar continues to weaken. With the election uncertainty mostly behind us, rising risk appetite is pressuring the greenback.
 

 
4. The 30yr mortgage rate hit another record low after Treasury yields tumbled last week.
 

 
5. US daily COVID cases spiked to a new record, …
 

 
… with hospitalization rates continuing to climb.
 
Source: CovidTracking.com  
 
The pandemic is increasingly becoming a drag on growth.
 
Source: @GregDaco, @OxfordEconomics  


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Global Developments

1. Businesses curbed their economic growth expectations last month.
 
Source: Oxford Economics  
 
2. For now, there remains ample room for central banks to draw on the Fed’s dollar liquidity facility. This suggests that a potential dollar bounce could be short-lived, according to BCA Research.
 
Source: BCA Research  
 
3. Fiscal balances should improve next year.
 
Source: IMF   Read full article  
 
4. Here are the most “zombified” equity markets (stocks with interest coverage ratios below one), according to Factor Research.
 
Source: Factor Research  


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Food for Thought

1. Fast food restaurants’ breakfast sales:
 
Source: @WSJ   Read full article  
 
2. Bank account fees:
 
Source: @axios   Read full article  
 
3. US auto manufacturing jobs moving abroad:
 
Source: @BW   Read full article  
 
4. Interest rates and fertility rates:
 
Source: @DavidBeckworth  
 
5. “Distress” levels across the US:
 
Source: Reuters   Read full article  
 
6. The shift in voter margins (Republican vs. Democrat) from 2016, by education:
 
Source: The New York Times   Read full article  
 
7. Plastic importers and exporters:
 
Source: Statista  
 
8. Migration in OECD countries:
 
Source: @business   Read full article  
 
9. The economics of a cup of coffee:
 
Source: Visual Capitalist   Read full article  

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