The Daily Shot: 11-Feb-21
• The United States
• The Eurozone
• Europe
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The January CPI report was a bit weaker than the markets were expecting.
• Headline CPI:
• Core CPI:
Treasury yields pulled back.
Source: @WSJ Read full article
Services remain a drag on the core CPI. The pandemic-related divergence below …
Source: Piper SandlerÂ
… is the result of consumer spending pattern changes.
Source: Economics and Strategy Group, National Bank of Canada
• Shelter inflation keeps moderating.
Owners’ equivalent rent CPI has been under pressure, especially in large cities.
Source: Nomura Securities
• A couple of other items contributed to core CPI weakness in January.
– New cars:
– A massive decline in admission prices for sports events:
• Alternative measures of inflation continue to trend lower.
• Next, we have a select set of CPI components.
– Airline fare:
– Inpatient hospital services:
– Elderly care at home:
– Funeral expenses:
– Bank services:
– College tuition:
– Household paper products:
– Laundry equipment:
• Economists expect a rebound in inflation shortly. It’s unclear, however, just how sustainable the rebound will be.
Source: ING
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2. Mortgage applications for house purchase are holding up.
3. Here are a couple of updates on the labor market.
• Permanent employment drop relative to the previous two recessions:
Source: BofA Global Research, @WallStJesus
• Is the proposed minimum wage increase to $15/hr too much?
Source: Commerzbank Research
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4. Here is the cumulative (fiscal year-to-date) federal budget deficit.
5. Finally, we have some updates on international trade.
• Major trading partners:
Source: Oxford Economics
• The 2020 trade deficit by country:
Source: @wolfofwolfst Read full article
• Manufacturing trade deficit:
Source: @EconomicPolicy
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The Eurozone
1. The euro-area manufacturing output recovery has been uneven.
• The Netherlands:
• Finland:
• France:
• BCA Research expects a sharp recovery in Germany’s industrial production.
Source: BCA Research
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2. French wage growth has outpaced the rest of the Eurozone over the past couple of decades.
Source: Natixis
3. This chart shows Germany’s month-over-month core CPI components.
Source: @OliverRakau
4. The US – Eurozone gap in COVID-related fiscal stimulus levels has been remarkable.
Source: UniCredit, Octavian Adrian Tanase
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Europe
1. The Norges bank has been the largest buyer of the Norwegian krone since 2014 (on behalf of the government).
Source: Morgan Stanley Research
2. Czech industrial production surged in December.
3. Iceland’s unemployment rate continues to climb as the tourism sector remains depressed.
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China
1. The renminbi keeps grinding higher (the offshore yuan shown below).
2. Sales of household appliances have accelerated.
Source: Longview Economics
3. VC activity remains robust.
Source: Bloomberg Read full article
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Emerging Markets
1. Brazil’s retail sales tumbled in December.
2. Mexico’s same-store sales continue to shrink.
3. South Africa’s business confidence is holding up well.
4. This chart shows new COVID cases in select African nations.
Source: @financialtimes Read full article
5. Turkey’s unemployment rate remains elevated.
6. Israel’s consumer confidence is recovering amid vaccination progress.
7. This scatterplot shows investment-grade EM sovereign debt spreads vs. duration, …
Source: CreditSights
…and here are EM high-yield sovereign debt spreads.
Source: CreditSights
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Commodities
1. US corn futures tumbled after the key government report (WASDE) showed a smaller than expected drop in domestic stockpile estimates. Soy futures declined as well.
2. Chicago hog futures keep climbing.
Source: Reuters Read full article
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3. Tin prices have shot up, but Fitch Solutions expects a correction.
Source: Fitch Solutions Macro Research
4. Diamond prices have been rising since the COVID selloff.
Source: @WSJ Read full article
Source: @WSJ Read full article
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Energy
1. Technicals point to downside risk for WTI crude.
h/t Sophie Caronello
2. The US is expected to remain “energy independent.”
Source: @EIAgov
3. US refinery inputs are recovering.
Source: Princeton Energy Advisors
But gasoline demand remains about 10% below pre-pandemic levels.
Source: Princeton Energy Advisors
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4. Crude oil and gasoline inventories remain inside the 5-year range.
5. US natural gas futures are testing resistance at $3/mmbtu.
Source: barchart.com
6. Propane prices have risen sharply this year.
Source: @WSJ Read full article
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Equities
1. Popular short-squeeze stocks have almost fully reversed their Reddit-fueled surge.
Source: Alpine Macro
2. “Stuck at home with just some cash and free trades …”
Source: BofA Global Research, @WallStJesus
3. The Reddit crowd has set its sights on cannabis stocks.
• Online search activity:
Source: Google Trends
• Stock prices:
Source: Reuters Read full article
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4. Goldman’s non-profitable tech index is approaching 250% year-over-year performance.
5. Outperformance of the most shorted stocks has coincided with a surge in call option volume.
Source: Deutsche Bank Research
6. Japan has seen the largest forward earnings estimate revision so far this year.Â
Source: SunTrust Private Wealth Management
7. Cyclical sectors have seen the strongest upward earnings revisions.
Source: SunTrust Private Wealth Management
8. Based on the yield curve steepening, S&P 500 financials could have further room to run.
Source: Alpine Macro
9. The first phase of this bull market, which should be the strongest from a return standpoint, is likely over, according to SunTrust.
Source: SunTrust Private Wealth Management
The current bull market continues to track the 1982 and 2009 paths (nearing a pause).
Source: SunTrust Private Wealth Management
Investor complacency remains a near-term market risk.
Source: SunTrust Private Wealth Management
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Credit
1. Some of the most leveraged companies will be refinancing their debt as yields decline below coupon levels.
Source: @markets Read full article
2. Here is the relative performance (total return) of BB vs. BBB bonds, high-yield vs. investment-grade, and CCC vs. B-rated debt.
Source: CreditSights
3. Many US trucking companies failed last year.
Source: @WSJ Read full article
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Rates
1. The 10yr Treasury swapped into yen (via cross-currency swaps) looks attractive relative to JGBs.
2. At the current QE pace, the Fed won’t absorb much of the additional Treasury debt coming to market.
Source: Nordea Markets
3. The following charts show the real Fed’s policy rate in relation to the neutral rate of interest.
• Using headline PCE:
Source: Scotiabank Economics
• 5-year breakeven rate:
Source: Scotiabank Economics
• 5-year inflation swap rate:
Source: Scotiabank Economics
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Global Developments
1. New COVID cases are declining in most countries.
Source: Evercore ISI
2. Money market fund assets under management have surged over the past two years. This could mean risk-taking in markets has further room to run, according to Morgan Stanley.
Source: Morgan Stanley Research
3. Here is a summary of the fiscal response to COVID in advanced economies.
Source: Capital Economics
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Food for Thought
1. The global vaccination race:
Source: @chartrdaily
2. THC concentration in cannabis over time (getting more potent):
Source: @PotResearch, @KeithNHumphreys, @AddictionJrnl
3. US drug overdoses:
Source: @WSJ Read full article
4. Germany’s religion map:
Source: @nerdy_maps
5. US independents’ political ideology:
Source: Gallup Read full article
6. Teleworking due to the pandemic:
Source: @WSJ Read full article
7. US state income taxes:
Source: @financialtimes Read full article
8. Websites using Flash:
Source: Statista
9. Canine body language:
Source: Canine Strategies
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