The Daily Shot: 17-Nov-20
• Equities
• Alternatives
• Credit
• Rates
• Commodities
• Energy
• Cruptocurrency
• Emerging Markets
• China
• Asia – Pacific
• The Eurozone
• Canada
• The United States
• Food for Thought
The vaccine-induced equity rotation accelerates
Equities
1. Moderna’s vaccine news sent the Dow to a new record as we approach 30k.
Source: The New York Times Read full article
Will we see the first two vaccines approved in December?
Source: Barclays Research
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2. Let’s take a look at some sector dynamics.
• The lockdown trade:
• The reopening/reflation trade:
– Banks:
– Energy:
Energy and financials are attracting larger inflows.
Source: MarketDesk Research
– Industrials:
– Transportation:
Here is the Dow Jones Marine Transport Index.
h/t Walter
– Metals & Mining:
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3. The rotation has been out of large caps and growth into small caps and value (supported by higher Treasury yields).
Source: @ISABELNET_SA, @BofAML
Out of …
• Momentum:
Into …
• Small caps:
• Value:
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4. Stocks favored by retail investors are on fire.
And retail investors got more good news after the close.
Source: CNBC Read full article
Source: Google
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5. Valuation dispersion has widened sharply this year. Will the current rotation help narrow the gap?
Source: Goldman Sachs, @TeddyVallee
Alternatives
1. US public pensions are among the world’s biggest private-equity investors.
Source: Institutional Investor Read full article
2. Here are the top sovereign wealth funds investing in private equity.
Source: Institutional Investor Read full article
3. The demand for alternatives is pushing private equity managers’ AUM higher.
Source: MarketDesk Research
Credit
1. High-yield bonds have been outperforming investment-grade.
2. The chart below shows some performance data for high-yield bonds.
Source: @WSJ Read full article
3. US default rates appear to have peaked.
Source: Torsten Slok, Apollo
Relative to 2008, the increase in bankruptcies has been limited.
Source: Torsten Slok, Apollo
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4. The AAA spread curve for US commercial mortgage-backed securities (CMBS) shows strong demand for long duration. News of the COVID-19 vaccine led to a 3-9 basis point rally for AAA spreads, with the long-end outperforming, according to Deutsche Bank.
Source: Deutsche Bank Research
5. US dealer inventories across asset-backed securities, non-agency CMBS and residential mortgage-backed securities (RMBS) declined by $12 billion since early March.
Source: Deutsche Bank Research
6. Consumer ABS bonds (credit cards, auto loans, etc.) have outperformed.
Source: @WSJ Read full article
Rates
1. The copper-to-gold ratio is signaling higher Treasury yields.
Source: @TheTerminal, Bloomberg Finance L.P.
2. It appears that the Fed may not boost the pace of its securities purchases as a result of the vaccine news.
Source: Reuters Read full article
Here is Morgan Stanley’s forecast for the Fed’s balance sheet.
Source: @ISABELNET_SA, @MorganStanley
Commodities
1. Iron ore and steel prices continue to rally.
• Singapore:
• Shanghai:
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2. The vaccine news made gold less attractive for investors.
h/t Yvonne Yue Li
3. Platinum futures are breaking above a three-month downtrend.
Source: @DantesOutlook
4. So far, Palladium futures are holding support.
Source: @DantesOutlook
5. Sugar and coffee prices are up sharply as Iota pummels Central America.
The December coffee futures contract held support.
Source: @DantesOutlook
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6. US soybean futures continue to rally on tight global supplies.
Energy
1. Brent crude is testing resistance at $45/bbl.
2. Libya’s oil output is almost back to normal.
Source: Commerzbank Research
3. US natural gas futures are down sharply as the weather across the country remains warmer than normal.
Source: NOAA
Cruptocurrency
Bitcoin continues to rally, diverging from gold.
Source: @TheTerminal, @Schuldensuehner
Emerging Markets
1. Demand for EM local-currency bonds has been increasing. Indonesia’s 5-year yield hit a multi-year low.
2. The number of active COVID infections in India has been declining.
Source: Goldman Sachs
This chart shows some high-frequency indicators for India.
Source: Goldman Sachs
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3. Mobility indicators in the Philippines remain depressed.
Source: Barclays Research
4. The market is currently pricing more than 600 basis points of rate hikes in Turkey over the next three months.
Source: BCA Research
Barclays expects a 475 bp rate hike this month. It will get ugly if the central bank disappoints.
Source: Barclays Research
Separately, home sales in Turkey are declining again.
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5. Israel’s Q3 GDP rebound surprised to the upside, driven by consumption and exports.
6. Russia’s non-fuel revenues improved in October.
Source: ING
7. Nigeria’s CPI is soaring, driven by food prices.
8. Brazil’s industrial confidence has been improving.
But consumer sentiment turned lower.
Source: Goldman Sachs
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9. The pandemic hit Peru’s economy particularly hard.
10. EM equities are starting to outperform developed markets.
Source: Longview Economics
11. This chart shows EM currency performance by factor.
Source: Morgan Stanley Research
China
1. China is letting some corporate bonds default.
Source: @BloombergQuint Read full article
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2. Consumer activity is almost back to normal.
Source: Gavekal
3. The US power advantage over China has narrowed.
Source: Gavekal
Asia – Pacific
1. Asian currencies continue to climb vs. USD.
• The South Korean won:
• The Chinese renminbi:
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2. Singapore’s exports unexpectedly declined.
3. The inclusion of more “new-economy” tech stocks has pushed the Hang Seng Index market value (not the level) to a record high.
Source: SCMP Read full article
4. New Zealand’s bond yields continue to rise.
This chart shows the non-resident holdings of New Zealand’s government bonds (% of total).
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5. Australia’s consumer confidence is up again.
Card spending in Australia remains elevated.
Source: CBA, @CommSec
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6. The Nikkei 225 looks overbought.
Source: barchart.com
7. Next, we have some data on RCEP.
• The world’s largest trade bloc:
Source: Statista
• A third of the global economy (3 charts):
Source: @adam_tooze, @financialtimes Read full article
Source: @WSJ Read full article
Source: Commerzbank Research
The Eurozone
1. Here is the evolution of the Q4 GDP growth consensus forecast (Bloomberg survey).
And this is the GDP forecast for 2021 (the Eurozone and Germany).
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2. The trade-weighted euro index has outpaced EUR/USD.
Source: @RobinBrooksIIF, @TheTerminal
3. The Greek 5-year bond yield is approaching zero.
4. Forecasts show a substantial decline in the euro-area prime-age workforce over the next two decades (which will drag down growth).
Source: Pantheon Macroeconomics
Canada
1. Manufacturing sales were up in September.
2. Home sales declined slightly last month.
3. Canada’s outstanding vaccine orders are impressive.
Source: The Economist Read full article
The United States
1. The NY Fed’s November regional manufacturing report surprised to the downside. However, it doesn’t necessarily indicate softer manufacturing activity at the national level.
• The headline index:
• New orders:
• Employment:
• Employee workweek:
More firms are raising prices.
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2. US consumer balance sheets are relatively healthy due to a boost in the savings rate and lower interest rates. The chart below shows the financial obligations ratio and the mortgage debt service ratio.
Source: @business Read full article
3. The year-over-year growth in rents appears to have bottomed (except for the low-tier housing).
Source: CoreLogic
4. Office vacancy rates have risen sharply.
Source: @markets Read full article
5. US financial conditions continue to ease, helped by the stock market rally.
Source: Goldman Sachs
6. Finally, this map shows the rates of new infections by county.
Source: @WSJGraphics Read full article
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Food for Thought
1. US student performance in 2020 by household income:
Source: ECB Read full article
2. Degrees with the most student debt:
Source: Statista
• Student debt by educational attainment:
Source: @PplPolicyProj Read full article
• Student debt distribution by age:
Source: @PplPolicyProj Read full article
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3. Short-term rentals vs. 2019:
Source: Statista
4. Limited US grocery supplies:
Source: @WSJ Read full article
5. Urban vs. rural COVID infection rates:
Source: @axios Read full article
6. Having fewer kids in 2020:
Source: The Economist Read full article
7. The 10 pm curfew for bars and restaurants:
Source: YouGov America
8. Apprehensions at the US-Mexico border:
Source: Pew Research Center Read full article
9. Reintroducing wild animals in the UK:
Source: @YouGov Read full article
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