The Daily Shot: 03-Feb-21
• Administrative Update
• The United States
• The United Kingdom
• The Eurozone
• Asia – Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
Administrative Update
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The United States
1. January automobile sales exceeded forecasts.
US automotive products international trade hit a record at the end of last year.
Source: S&P Global Market Intelligence
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2. Next, we have some updates on housing.
• According to the AEI Housing Center, home price appreciation (HPA) is approaching 14% (per year).
Source: AEI Housing Center
Below is the breakdown by price tier.
Source: AEI Housing Center
• The Evercore ISI Homebuilders Survey hit a record high.
Source: Evercore ISI
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3. Here are some updates on inflation.
• Will home price appreciation boost rent inflation and owners’ equivalent rent (OER) costs? Rent has been a significant drag on the CPI.
Source: Pantheon Macroeconomics
• High-frequency indicators suggest that rent inflation is already rebounding.
Source: Pantheon Macroeconomics
• As discussed yesterday, manufacturers’ prices paid are expected to put upward pressure on consumer inflation in the near-term.
Source: @jsblokland
By the way, manufacturers’ prices-paid indicators have risen faster than prices received, suggesting some margin pressures.
Source: Yardeni Research
• Rising output prices in China could also push US inflation higher.
Source: @JeffreyKleintop
• What happens to the CPI if expenditure weights are rebalanced based on COVID-driven changes in spending patterns? See this discussion.
Source: @stlouisfed Read full article
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4. Next, let’s take a look at the labor market.
• US semiconductor employment never recovered after the dot-com crash.
Source: TS Lombard
• The Paychex/IHS Markit Small Business Employment Index shows no signs of recovery.
Source: Paychex | IHS Markit Small Business Employment Watch
• The Homebase small business employment index has been flat over the past month relative to the previous year. This would indicate a “flattish” payrolls report for January.
Source: @joinhomebase
And that is what the Oxford Economics’ projection shows.
Source: Oxford Economics
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5. What are the differences between the Gang of 10 and Biden’s stimulus plans?
• Dollar allocations:
Source: The Washington Post
• Impact on incomes:
Source: @ernietedeschi
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The United Kingdom
1. Home prices declined for the first time in months.
2. UK job losses have been concentrated in low-wage sectors.
Source: Pantheon Macroeconomics
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The Eurozone
1. Euro-area market-based inflation expectations climbed further as oil prices rise.
Similar to Germany and Spain, French CPI jumped in January.
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2. The Eurozone Q4 GDP surprised to the upside (the “double-dip” wasn’t as bad as expected).
The Italian economy contracted by 2%.
But Portugal avoided the double-dip altogether.
Here is the GDP map.
Source: @markets Read full article
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3. Ireland’s service sector activity tumbled last month.
Source: IHS Markit
4. Euro-area electricity usage has almost fully recovered.
Source: Pantheon Macroeconomics
5. Finally, we have Germany’s political polls.
Source: BCA Research
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Asia – Pacific
1. Singapore’s business activity is now firmly in growth mode.
Source: IHS Markit
2. Next, we have some updates in New Zealand
• The Q4 employment report surprised to the upside.
The unemployment rate unexpectedly declined.
• New Zeland’s home prices are up almost 13% from January of 2020.
• Combining the two trends above points to a strengthening economy. Bond yields are climbing rapidly.
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3. Australia’s residential building approvals exceeded economists’ forecasts.
Source: ANZ Research
Construction activity remains robust.
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China
1. As we saw in the official report, China’s service sector growth lost momentum last month.
2. The renminbi is at the highest level since early 2018 relative to a basket of currencies.
3. Semiconductor imports have been soaring.
Source: TS Lombard
4. Hong Kong’s retail sales have not recovered since the 2019 protests.
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Emerging Markets
1. Let’s begin with Mexico.
• The Q4 GDP (better than expected):
• Manufacturing activity through January (still soft):
Source: IHS Markit
• Budget deficit:
• Trade balance:
• Loan growth:
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2. Brazil’s industrial production soared in December.
3. Colombia’s manufacturing PMI strengthened last month.
Source: IHS Markit
But unemployment remains elevated.
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4. It will take time for Latin American economies to recover fully.
Source: Pantheon Macroeconomics
5. Turkey’s tourism industry is struggling.
6. Thai exports roared back in December.
But business sentiment deteriorated last month.
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7. India’s benchmark stock index hit a new high as the government prepares to spend heavily.
8. The MSCI Emerging Markets ETF (EEM) is at support relative to the SPDR S&P 500 ETF (SPY).
Source: Dantes Outlook
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Commodities
1. The largest silver ETF tumbled on Tuesday as the Reddit (retail) trade soured.
2. Shortages are creating a squeeze in tin markets as the curve hits massive backwardation.
Source: @business Read full article
3. Pulp prices are surging in China.
Source: @WSJ Read full article
4. China’s coal prices are tumbling.
5. US hog futures are climbing.
Source: Successful Farming Read full article
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6. Here are a couple of return charts.
• Year-to-date:
Source: S&P Global Market Intelligence
• 20 years:
Source: S&P Global Market Intelligence
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Energy
1. OPEC’s output has been climbing for months, but the January increase was lower than expected.
Source: @TheTerminal, Bloomberg Finance L.P.
Crude oil prices rose.
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2. Fitch expects higher gasoline demand this year.
Source: Fitch Solutions Macro Research
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Equities
1. The ratio of cyclical to defensive sectors hit a new high, …
… as flows into cyclical, expansionary US sectors continued to rise last month.
Source: SPDR Americas Research, @mattbartolini
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2. Bro, you told me GME is going to the moon …
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3. Cannabis stocks soared on Tuesday.
Source: MarketWatch Read full article
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4. Betting/gaming stocks jumped.
Source: Markets Insider Read full article
And Ark Innovation ETF is surging again.
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5. Tech earnings continue to surprise to the upside.
Source: Google.com
6. Short futures bets among asset managers are back near-decade lows, while risk positioning is at an extreme.
Source: BCA Research
7. Small-cap performance dispersion spiked last month due to the Reddit phenomenon.
Source: S&P Global Market Intelligence
8. This chart shows the percentage of stocks beating the S&P 500.
Source: @KailashConcepts Read full article
9. Investors are still buying call options on the “fabulous five.”
Source: TS Lombard
According to JP Morgan, “The balance of risks is for this retail impulse [options buying] to slow rather than accelerate further from here, potentially weakening one important support for the equity market.”
Source: JP Morgan, @tracyalloway
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10. Choppy returns ahead?
Source: LPL Research
11. Search activity for online brokers remains elevated.
Source: S&P Global Market Intelligence
12. 80% of IPOs have no earnings but have posted stellar returns over the past year.
Source: Alpine Macro
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Credit
1. Leveraged loan flows have been strong in recent weeks.
Source: @WSJ Read full article
Loans took in $1.7 billion in inflows – the highest monthly inflow total ever for this segment. Loans currently offer a yield on par with high-yield (around 4%), according to State Street.
Source: SPDR Americas Research, @mattbartolini
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2. European syndicated loan borrowers are highly leveraged.
Source: @WSJ Read full article
3. There was a rotation out of high-yield ETFs in January.
Source: SPDR Americas Research, @mattbartolini
4. Weaker aircraft valuations pose risks for securities collateralized by aircraft leases.
Source: @WSJ Read full article
5. Agency MBS spreads continue to tighten.
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Rates
1. The Treasury curve keeps steepening.
2. The US Treasury will be issuing fewer T-bills this year, tapping its cash balances at the Fed instead. The 12-month T-bill – OIS spread is now negative.
3. Here is the 3-month LIBOR – fed-funds spread.
Source: Mizuho Securities USA
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Global Developments
1. Below is the global fiscal stimulus by country vs. 2008.
Source: BCA Research
2. The next set of charts shows the impact of higher interest rates on debt-servicing costs.
Source: @bbgvisualdata Read full article
3. The US dollar is holding resistance.
Source: barchart.com
4. Market liquidity has not kept up with policy easing.
Source: ANZ Research
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Food for Thought
1. Changes in US home price appreciation over the past year:
Source: AEI Housing Center
2. Spending stimulus checks:
Source: Morning Consult Read full article
3. US household bills:
Source: doxo
4. Stock ownership trends by educational attainment:
Source: Heisenberg Report
5. US population growth:
Source: Wells Fargo Securities
6. Myanmar major ethnic groups:
Source: Al Jazeera Read full article
7. Israeli vaccination data:
Source: Statista
8. Will Donald Trump run for president again (betting markets’ odds):
Source: @Predictit
9. Attitudes towards Super Bowl ads:
Source: polici
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