US business loan demand weakest since the financial crisis

The Daily Shot: 12-Nov-20
Credit
Equities
Energy
Cryptocurrency
Emerging Markets
China
Asia – Pacific.
Japan
Europe
The United Kingdom
The United States
Global Developments
Food for Thought



 

Credit

1. Let’s begin with the Fed’s Senior Loan Officer Opinion Survey.
 
Given the strength in the housing market, banks have been easing lending standards on mortgages.
 
Source: FRB  
 
As we’ve seen from the Mortgage Bankers Association data (see US section), mortgage demand has been strong. This is especially true for conforming loans, which are bought by Fannie Mae and Freddie Mac (GSEs).
 
Source: FRB  
 
Consumer credit demand (credit cards, auto loans, etc.) has rebounded.
 
Source: FRB  
 
Underwriting standards for business loans have eased somewhat but remain relatively tight.
 
Source: FRB  
 
Corporate loan demand is now at its weakest since the financial crisis. Small business demand is particularly soft.
 
Source: FRB  

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2. This chart shows the evolution of the Fed’s emergency programs (balances).
 
Source: @WSJ   Read full article  


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Equities

1. A substantial increase in Treasury yields could pose a risk for growth stocks, especially the tech mega-caps. A successful vaccine rollout, for example, could be a catalyst for higher rates.
 
Source: Alpine Macro  
 
This chart shows the “vaccine sensitivity” by sector.
 
Source: Goldman Sachs, @carlquintanilla  
 
Growth share valuations remain near multi-decade highs.
 
Source: Cross Asset Research – Societe Generale, @Theimmigrant84  

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2. On Monday, momentum had its largest drop versus value since 2002.
 
Source: @wjruss84  
 
3. Flows into passive funds continue as investors pull money out of active funds.
 
Source: @financialtimes, h/t @trevornoren   Read full article  
 
Source: @financialtimes, h/t @trevornoren   Read full article  

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4. Investopedia readers (mostly retail investors) are bullish on US stocks over the next three months. A majority of respondents expect 10% or higher returns next year.
 
Source: Investopedia   Read full article  
 
5. Here is a look at stock market performance globally.
 
Source: Morningstar  
 
Below, we have the 10-year annualized returns by country.
 
Source: S&P Global Market Intelligence  

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6. Some 85% of S&P 500 members are now above their 200-day moving average.
 

 
7. VIX has been declining since the election day.
 
Source: @johnauthers, @bopinion   Read full article  


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Energy

1. US gasoline demand is holding below the 7-year range.
 

 
Refinery inputs remain soft.
 

 
This chart shows US refinery inputs by region (see the last panel for region definitions). The Gulf Coast refinery activity has been particularly weak (second panel).
 
Source: @EIAgov  

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2. US crude oil inventories (absolute level) are back at the 5-year range.
 


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Cryptocurrency

1. Bitcoin has retested the $16k resistance. Should we be concerned about a double top here?
 
Source: barchart.com  
 
2. Below is the relative performance of Bitcoin, Ethereum, and XRP over the past month.
 


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Emerging Markets

1. Mexico’s industrial production continued to recover in September.
 

 
Construction has been a major drag on industrial activity.
 
Source: Goldman Sachs  
 
Separately, Mexican same-store sales are now up vs. 2019 (as of October).
 

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2. Brazil’s retail sales were strong in September, but not as good as markets were expecting.
 

 
3. Russia’s trade balance surprised to the upside, boosted by exports (as of September).
 

 
4. Next, we have some updates on Turkey.
 
Apparently, Erdogan gave the nod to higher rates in order to boost the lira (“bitter pill policies”).
 
Source: @markets   Read full article  
 
The lira jumped.
 

 
The stock market hit a record high.
 

 
The central bank’s “stealth tightening” this year has raised funding costs for banks, resulting in higher lending rates.
 
Source: TS Lombard  
 
Turkey’s current account balance continues to deteriorate.
 
Source: Goldman Sachs  


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China

1. Loan growth was a bit softer than expected last month. However, credit expansion has been robust year-to-date.
 

 
Here is the aggregate financing.
 

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2. The broad money supply (M2) growth missed estimates but remains above 10% (year-over-year).
 

 
3. China’s share of world exports has been rising despite higher tariffs from the US.
 
Source: Alpine Macro  


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Asia – Pacific.

1. Weak job creation points to further risks to South Korea’s labor market.
 
Source: Pantheon Macroeconomics  
 
2. Next, we have some updates on New Zealand.
 
Home sales remain robust, with prices continuing to rise.
 

 
Source: @WSJ   Read full article  

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New Zealand’s breakeven rates (inflation expectations) have not widened as much as in the US.
 
Source: Morgan Stanley Research  
 
The Reserve Bank of New Zealand has been the most dovish central bank relative to its G7 peers.  Perhaps that changed this week (see # 3 here)?
 
Source: Morgan Stanley Research  


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Japan

1. Machinery orders are recovering.
 

 
2. Producer prices remain soft.
 

 
3. Analysts are projecting more gains ahead for the Nikkei 225.
 
Source: @markets   Read full article  


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Europe

1. Sweden’s unemployment rate continues to ease.
 

 
2. The options market remains extremely bearish on the Norwegian Krone relative to history.
 
Source: Morgan Stanley Research  
 
The market is pricing in a higher probability of a rate hike next year.
 
Source: Morgan Stanley Research  

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3. The correlation between the 30-year Treasury and 30-year Bund declined last week, reaching its lowest level since 2002.
 
Source: Morgan Stanley Research  
 
4. Manufacturing recovery points to higher stock prices in Europe.
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  
 
5. However, here are Variant Perception’s recovery scores.
 
Source: Variant Perception  
 
6. Italian and Spanish bond spreads have been tightening.
 
Source: @bcaresearch, h/t @Scutty  
 
7. This chart shows the projected debt-to-GDP ratios for 2021.
 
Source: @WSJ   Read full article  


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The United Kingdom

1. The second wave of COVID-19 cases will likely weigh on economic growth.
 
Source: Scotiabank Economics  
 
But COVID-related deaths have not spiked the way they did at the beginning of the pandemic.
 
Source: Variant Perception  
 
How does the public feel about returning to the Tier-based lockdown?
 
Source: @YouGov   Read full article  

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2. Heathrow traffic has been depressed.
 
Source: Statista  


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The United States

1. Mortgage demand remains robust, although there has been some loss of momentum.
 

 
Here is the mortgage refinancing activity index.
 

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2. As we saw yesterday (#4 here), consumer sentiment has been softening.
 
Source: @HPSInsight, @CivicScience  
 
3. Below is the Chase debit/credit card spending tracker.
 
Source: JP Morgan, @carlquintanilla  
 
4. Goldman’s US exports tracker has been weakening.
 
Source: Goldman Sachs  


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Global Developments

1. This chart shows Morgan Stanley’s expected average monthly QE pace next year (as a percent of central banks’ balance sheet size).
 
Source: Morgan Stanley Research  
 
2. Global business activity expectations have improved.
 
Source: IHS Markit  
 
3. Here is Goldman’s estimate of the pandemic restrictions’ impact on the GDP.
 
Source: Goldman Sachs  
 
4. This chart shows the US dollar’s dominance across the global monetary landscape.
 
Source: Fitch Ratings  


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Food for Thought

1. US job postings by sector:
 
Source: @WSJ   Read full article  
 
2. Trending articles on Investopedia during the US election:
 
Source: Investopedia   Read full article  
 
3. COVID mortality rates:
 
Source: @adam_tooze   Read full article  
 
4. Positivity rates across the US:
 
Source: Apollo  
 
5. The latest pandemic uptrend:
 
Source: @TheStalwart, @jonathanjlevin   Read full article  
 
6. US foreign-born population over time:
 

 
7. US veterans, by state:
 
Source: @FactTank, @uscensusbureau   Read full article  
 
8. Giving gifts this holiday season:
 
Source: @CivicScience  
 
9. How Americans allocate time saved by not commuting:
 
Source: Snippet.Finance   Further reading  

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