The Daily Shot: 07-Dec-20
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Sweden
• Asia – Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. The November employment report was a stark reminder that the nation’s labor market recovery has a long way to go. The headline payrolls figure was well below market expectations.
Here is the evolution of payroll employment.
Source: Oxford Economics, @GregDaco
And this chart shows a comparison to previous downturns.
Source: @jeffsparshott
The small business employment data from Homebase has been a good predictor of total service jobs – and it points to further deterioration.
Source: Pantheon Macroeconomics
Moreover, a substantial portion of the November job gains is related to online shopping. Here is a comment from TS Lombard.
With near 40% of November job gains tied to on-line retail, a negative employment number in January or February is more likely.
Source: TS Lombard
There were other troubling aspects of the jobs report.
• The household survey showed a loss in jobs.
Source: Reuters Read full article
• Long-term unemployment continues to climb.
• The prime-age labor force participation rate is deteriorating.
The lack of childcare options is part of the reason for the trend above.
Source: @FactTank Read full article
Below is a long-term chart of labor force participation.
• The number of permanent layoffs remains elevated.
Source: Reuters Read full article
• The number of Americans who are not in the labor force but want a job climbed.
The number of discouraged workers keeps rising.
Source: Reuters Read full article
Here are a couple of other updates on the employment report.
• Someone is measuring the total number of private payrolls incorrectly. Is it ADP (the largest payroll service provider) or the government?
Source: Yardeni Research
• Here is the unemployment rate adjusted for the massive labor force contraction.
Source: Pantheon Macroeconomics
• The best- and worst-performing sectors:
Source: @bbgvisualdata Read full article
• The participation rate by educational attainment:
Source: @WSJ Read full article
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2. US small business revenues are drifting lower.
Source: ANZ Research
However, the year-over-year decline in private inventories is one of the steepest on record. Businesses will eventually have to replenish their stock if consumption returns to normal.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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3. The trade deficit remains elevated.
Source: Mizuho Securities USA
Excluding petroleum, the deficit is close to a record high.
Trade in goods has diverged from services.
Source: Oxford Economics
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4. Long-term market-based inflation expectations are grinding higher.
5. A roaring stock market, tighter credit spreads, and a weak US dollar continue to ease the US financial conditions.
6. The COVID situation remains ugly.
• Total new cases (daily):
• COVID-related deaths (daily):
Source: ANZ Research
Canada
1. Canada’s employment report topped economists’ forecasts.
• There were nearly 100k new full-time jobs in November.
• The unemployment rate was lower than expected.
• However, the participation rate ticked down.
• Here is the sector breakdown.
Source: Oxford Economics
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2. Canada’s trade deficit remains elevated.
3. Will Canadian equities begin to outperform US equities?
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
The MSCI Canada ETF is at resistance. Will we see a breakout?
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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The Canadian dollar is moving higher amid firmer commodity prices.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
The United Kingdom
1. The pound held resistance as trade negotiations continue.
2. Car registrations weakened again.
3. Mobility metrics remain soft.
Source: Huq
Source: S&P Global Market Intelligence
This chart shows the comfort level of returning to public spaces.
Source: @YouGov Read full article
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4. The labor market faces substantial downside risks.
Source: Pantheon Macroeconomics
The Eurozone
1. Let’s begin with Germany.
• Factory orders and industrial production topped market expectations.
• Construction activity remains soft.
• Here is a recent survey on personal spending.
Source: Deutsche Bank Research
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2. Greek economic recovery will take a long time.
3. Italian bond spreads are near the lowest levels since 2018.
Source: @markets Read full article
Here is the V-shaped recovery in Italian retail sales.
Sweden
The COVID situation has deteriorated markedly.
Source: @WSJ Read full article
Source: Deutsche Bank Research
Source: The Guardian Read full article
Asia – Pacific
1. Taiwan’s stock market is soaring.
2. Singapore’s retail sales remain soft.
3. Asset managers are boosting their bets on the Kiwi dollar.
Source: ANZ Research
4. Next, we have some updates on Australia.
• Service-sector activity (accelerating):
• Job ads (monthly changes):
• The government’s budget balance:
Source: RBA
China
1. Exports accelerated last month, exceeding forecasts.
The trade surplus hit a record high.
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2. Bond issuance spiked this year.
Source: Longview Economics
But corporate dollar bond sales slowed in November.
Source: @markets Read full article
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3. Tighter liquidity could pressure Chinese equities relative to the EM benchmark.
Source: Alpine Macro
Emerging Markets
1. Let’s begin with Mexico.
• Vehicle exports have recovered (on the back of strong US demand).
• Consumer confidence turned lower in recent days.
• The peso has been outperforming.
Source: Goldman Sachs
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2. Colombia’s inflation continues to soften.
3. Russia’s inflation is grinding higher.
4. Hungarian industrial production surprised to the upside.
5. EM currencies continue to rally.
Will we see a breakout against the dollar.
Source: BCA Research
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6. EM rate-cutting cycle appears to be over for now.
Source: Reuters Read full article
Commodities
1. Iron ore is at multi-year highs.
h/t Alpana Sarma
China’s steel prices continue to climb.
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2. Copper prices have moved in tandem with shipping activity.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
3. Gold outflows have been extreme.
Source: @ISABELNET_SA, @BofAML
CTAs have been paring down their gold exposure.
Source: Deutsche Bank Research
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4. US wheat prices are lower.
Source: @WSJ Read full article
Energy
1. Deutsche Bank expects WTI crude oil prices to reach “fair value” at around $75/bbl next year.
Source: Deutsche Bank Research
2. US natural gas futures continue to tumble.
Source: NOAA
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3. Propane prices are near a 52-week high. Demand is rising as restaurants keep outdoor dining facilities warm.
Source: MarketDesk Research
Equities
1. Speculative demand for call options remains elevated, which is supporting the overall market rally. It’s not going to be pretty on the way down.
• Call option volume:
Source: Deutsche Bank Research
• Small trader volume:
Source: @sentimentrader
• Put-call ratio:
Source: Deutsche Bank Research
Single stock vs. index put-call ratio:
Source: Deutsche Bank Research
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2. Citi’s sentiment index is deep in euphoria territory.
Source: Citi, @Scutty
2. The global stock market capitalization is now above $100 trillion.
3. The S&P 500 is at the upper Bollinger band.
h/t Cormac Mullen
4. The Nasdaq Composite is at resistance.
Source: @ThePainReport
Flows into QQQ (Nasdaq 100 ETF) spiked this year.
h/t @JPBarnert
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5. All sectors are above their 200-day moving average.
Source: @bespokeinvest Read full article
6. Companies with weak balance sheets have been outperforming.
Source: @markets Read full article
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7. Equity valuations still look compelling relative to bonds.
Source: @WSJ Read full article
Source: BCA Research
Here is the relative performance of stocks vs. bonds (globally).
Source: @episodeblog Read full article
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8. Small-cap earnings and price trends are improving relative to large-caps.
Source: SunTrust Private Wealth Management
9. Luxury stocks are outperforming consumer staples.
Source: S&P Global Market Intelligence
10. The rotation out of mutual funds into ETFs continues.
Source: @mbarna6, @EricBalchunas
11. The equal-weighted S&P 500 index is outperforming by the greatest margin since 2009.
Source: SunTrust Private Wealth Management
Credit
1. US high-yield bond returns are not yet extreme versus investment-grade.
Source: MarketDesk Research
2. US securitized products on dealer balance sheets have dropped by $17 billion since March.
Source: Deutsche Bank Research
3. CLO issuance rebounded over the past few months.
Source: Moody’s Investors Service
4. Convertible bonds are experiencing a resurgence as investors search for a combination of higher yields and equity market exposure, according to MarketDesk Research.
Source: MarketDesk Research
Global Developments
1. Here is the regional breakdown of COVID-related deaths.
Source: @westermangroup
2. FedEx’s performance points to gains in trade.
Source: @AndreasSteno
3. This chart shows how speculative accounts are positioned in currency futures.
Source: Deutsche Bank Research
4. Here is a look at large-cap equity performance this year.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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Food for Thought
1. Tesla’s market value vs. the next four largest automakers combined:
Source: @Breakingviews, @CGAThompson Read full article
2. Aircraft orders (Boeing vs. Airbus):
Source: @WSJ Read full article
3. Global ad spending:
Source: Visual Capitalist Read full article
4. The largest US banks:
Source: @WSJ Read full article
5. The movie industry:
Source: @chartrdaily
6. US household debt by product and age:
Source: Federal Reserve Bank of New York
7. Foreign enrollment at US colleges:
Source: @business Read full article
8. Wind turbine capacity:
Source: @EIAgov Read full article
9. When is it acceptable to start playing Christmas music?
Source: Data Is Beautiful
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