The Daily Shot: 02-Dec-20
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Growth in the nation’s factory activity eased a bit in November.
• Here is the breakdown.
Source: Mizuho Securities USA
• The ISM new orders index remains near multi-year highs.
And export orders accelerated.
• One area of concern is a pullback in hiring. The employment PMI index has moved below 50 (contraction).
Source: Reuters Read full article
• Going forward, factory activity is expected to strengthen further.
– Orders vs. production:
Source: Piper Sandler
– US ISM vs. China’s manufacturing PMI:
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2. Survey data, such as the ISM index above, point to improvements in business investment.
Source: @ISABELNET_SA, @BofAML
3. US automobile sales lost some momentum in November.
Source: CNA Read full article
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4. Online sales have been robust.
Source: @technology Read full article
5. The divergence between residential and nonresidential construction spending continues to widen. It’s partially a reflection of the pandemic shift to a “home office” (2nd chart).
Source: @WSJ Read full article
Here is the divergence in dollar terms.
Source: Mizuho Securities USA
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6. As discussed previously, many small businesses are struggling.
• The Homebase index of businesses open and employees working:
Source: Homebase
• Business closures in November:
Source: Homebase
• The Paychex/IHS Markit Small Business Employment Index:
Source: Paychex/IHS Markit Small Business Employment Watch
• Risks of closing for good:
Source: Alignable
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7. Here are a couple of updates on inflation.
• US goods vs. services CPI:
Source: Piper Sandler
• Long-term market-based inflation expectations (now above 2%):
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8. Finally, we have the evolution of the Fed/Treasury emergency programs that Mnuchin is terminating (see story).
Source: @WSJ Read full article
Canada
1. The Q3 GDP rebound was a bit below estimates (chart shows annualized quarterly GDP changes).
Here are the contributions.
Source: Scotiabank Economics
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2. The Markit PMI report showed stable manufacturing growth last month.
We should see a sharp rebound in industrial production.
Source: IHS Markit
The United Kingdom
1. Home price gains have been accelerating, with the latest report exceeding forecasts.
But soft consumer confidence could pressure the housing market.
Source: Pantheon Macroeconomics
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2. Below is Goldman’s forecast for the UK CPI.
Source: Goldman Sachs
3. Here is how the pandemic changed the sectoral financial positions (see overview).
Source: TS Lombard
The Eurozone
1. There was no uptick in the November CPI, as some had expected.
The “underlying” inflation has also been soft.
Source: Deutsche Bank Research
But Danske Bank expects euro area inflation to pick up next year.
Source: Danske Bank
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2. Here are some of the manufacturing indices that weren’t in the flash PMI report.
• Spain (treading water):
Source: IHS Markit
• Italy (slower growth):
Source: IHS Markit
• The Netherlands (accelerating growth):
Source: IHS Markit
• Greece (back in contraction):
Source: IHS Markit
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3. Next, we have some updates on Germany.
• The October retail sales report surprised to the upside.
• The labor market continues to strengthen.
• Job vacancies are turning higher.
Source: Pantheon Macroeconomics
• Projected government debt and interest expenses:
Source: @heimbergecon
• The latest political polls:
Source: Deutsche Bank Research
• Germany’s concentrated innovation process:
Source: Danske Bank
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4. French consumer spending in services is under pressure.
Source: Pantheon Macroeconomics
5. It’s a “W-shaped” economic cycle.
Source: Deutsche Bank Research
6. Eurozone bond yields remain near record lows.
Source: Deutsche Bank Research
7. The euro broke above 1.20.
Europe
Let’s begin with Switzerland.
• The GDP rebound was firmer than expected.
• Manufacturing activity is picking up momentum.
• Swiss equities have been underperforming. A growing focus on cyclicals could look past the SMI’s safe-haven status.
Source: @timcraighead
Here is a long-term chart showing SMI overbought relative to the Euro Stoxx 50 Index.
Source: @dsassower, @DantesOutlook
• EUR/CHF is at resistance.
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2. Below are some manufacturing PMI trends.
• Sweden (very strong):
• Poland (treading water):
Source: IHS Markit
• The Czech Republic (gaining momentum):
Source: IHS Markit
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3. Here is a look at the RRF grants (Next Generation EU stimulus package).
Source: Deutsche Bank Research
Asia – Pacific
1. South Korea’s CPI bounced from the lows as the impact of the government’s mobile phone bill subsidies wanes.
2. Australia’s GDP bounced more than expected last quarter as the nation pulls out of its first recession in decades.
China
1. Increased defaults will lead to tighter liquidity for non-bank financial institutions, according to TS Lombard.
Source: TS Lombard
For now, Beijing has stabilized the situation, with spreads no longer climbing.
Source: Gavekal
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2. China’s coal prices spiked as the dispute with Australia dampens imports.
3. Hong Kong’s retail sales are rebounding.
4. Hong Kong tech stocks have lagged banking stocks over the past few months.
Source: @DantesOutlook
Emerging Markets
1. Let’s start with the November manufacturing PMI rundown.
• Russia (worsening contraction):
Source: IHS Markit
• India (very strong):
Source: IHS Markit
• Brazil (rapid expansion):
Source: IHS Markit
• South Africa (loss of momentum):
• Turkey (stalling):
Source: IHS Markit
• Mexico (extreme weakness):
Source: IHS Markit
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2. Mexico’s private credit continues to worsen.
Source: Goldman Sachs
Separately, remittances remain robust.
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3. Chile’s economic activity rebounded slower than expected in October.
4. Colombia’s unemployment rate is moderating (but is still massive).
5. South Africa’s car sales are rebounding.
6. November was a good month for FX carry trades.
h/t @liviayap11
7. Portfolio inflows hit a multi-year high.
Source: IIF
8. The population in EM countries is receptive to a COVID vaccine.
Source: TS Lombard
Cryptocurrency
Bitcoin held resistance at $20k.
Commodities
1. Miners are adding new projects as iron ore prices rise.
Source: Longview Economics
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2. Agricultural companies are increasingly mentioning sustainability in earnings transcripts.
Source: Fitch Solutions Macro Research
3. Rhodium price gains have been impressive.
Source: @WSJ Read full article
Energy
1. Brent crude dipped below $47/bbl on OPEC+ uncertainty.
2. Here are some of the largest oil company writedowns.
Source: @business Read full article
3. CapEx will remain soft.
Source: @davidfickling, @bopinion Read full article
4. The US energy sector’s default risk is much higher than in the UK and EU.
Source: Credit Benchmark Read full article
5. The UAE has over-complied with OPEC quotas since September.
Source: Longview Economics
Will the UAE leave OPEC?
Source: Arab News
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6. Traditional energy stocks have massively underperformed clean energy stocks over the past two years.
Source: Alpine Macro
7. Demand for hydrogen has picked up.
Source: @WSJ Read full article
8. Peak oil?
Source: @bbgvisualdata Read full article
Equities
1. Almost 93% of S&P 500 members are above their 200-day moving average.
2. Short sellers have been punished. Here is Goldman’s index of the most heavily shorted stocks.
Source: @LizAnnSonders, @GoldmanSachs, @Bloomberg
3. The value vs. growth trajectory has been quite different from what we saw in 2008.
Source: @ISABELNET_SA, @GoldmanSachs
4. VIX remains elevated vs. the equivalent measure in the Treasury market (MOVE).
Source: Gavekal
5. The largest companies have the best returns on capital.
Source: BCA Research
6. Wealthier investors get the best risk-adjusted returns.
Source: IMF
7. Will marijuana stocks follow the rally in bitcoin?
Source: Alpine Macro
8. Here are some sector performance updates (last five business days).
• Housing:
• Consumer Discretionary:
• Industrials:
• Transportation:
• Energy:
• Metals & Mining (see the commodities section):
• Tech:
• Communication Services:
• Semiconductors:
• US mortgage REITs are gradually recovering from March lows. The sector benefits from a steeper yield curve, according to BCA Research.
Source: BCA Research
Credit
1. Bankruptcy filings slowed again.
Source: @markets Read full article
2. Record global supply of credit has meaningfully expanded the global fixed income market this year.
Source: Deutsche Bank Research
3. Volatility remains elevated in investment-grade credit.
Source: Deutsche Bank Research
4. Muni bond sales have been robust.
Source: @markets Read full article
Below are some forecasts for next year.
Source: @markets Read full article
Rates
1. Here is the attribution of Treasury yield changes last month.
2. The 10yr Treasury yield continues to grind higher.
And PMI indicators suggest that the trend should continue.
Source: Nordea Markets
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3. TIPS are outperforming regular Treasuries again.
Source: @business Read full article
Global Developments
1. The US dollar decline has accelerated, …
… as the greenback broke its long-term uptrend.
Source: BCA Research
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2. Here is a look at the manufacturing PMI report, which bodes well for global industrial production.
Source: IHS Markit
Source: IHS Markit
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Food for Thought
1. Global GDP rankings (projection):
Source: @bw Read full article
2. US car loan originations by age:
Source: Federal Reserve Bank of New York
3. US minimum wage map:
Source: Economic Policy Institute, h/t Hightower Las Vegas, RCG Economics
4. Upward mobility by country:
Source: @adam_tooze, @OECDeconomy, @PIIE Read full article
5. More TV time:
Source: Morning Consult Read full article
6. The US fertility rate:
Source: @WSJ Read full article
7. US education CPI:
Source: Moody’s Analytics
8. Butter vs. margarine:
Source: @bopinion Read full article
9. Largest music festivals:
Source: Statista
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