Posted on by The Daily Shot Editor: Lev Borodovsky

US inflation surprises have outpaced the rest of the world

The Daily Shot: 15-Feb-21
• The United States
• Canada
• The United Kingdom
• Europe
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought

 

The United States

1. The February U. Michigan consumer sentiment report was surprisingly soft (economists were projecting an uptick).
 

 
• The index of expected changes in personal finances hit the lowest level since 2014.
 
Source: Piper Sandler   
 
• Survey participants are reporting higher home prices.
 

 
• The indicator of buying conditions for vehicles continues to deteriorate. It’s a bit surprising, given that vehicle sales held up relatively well last year despite the massive job losses.
 

 
• As with other sentiment indicators, politics plays a significant role in the U. Michigan index.
 
Source: Piper Sandler   

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2. Next, we have some updates on inflation.
 
• The U. Michigan survey (above) points to higher inflation ahead.
 
Source: Pantheon Macroeconomics  
 
• Market-based inflation expectations also keep climbing.
 
Source: ANZ Research  
 
• The US dollar weakness is yet to be fully reflected in inflation figures.
 
Source: Pantheon Macroeconomics  
 
• Inflation surprises have been greater in the US than in the rest of the world.
 
Source: Variant Perception  
 
• Inflation volatility has risen sharply.
 
Source: Variant Perception  

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3. Households have been saving more since the financial crisis. 
 
Source: TS Lombard  
 
Consumers are more likely to save the third stimulus check vs. how they used funds from the first check.
 
Source: @business   Read full article  

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4. This chart shows mortgage delinquencies by loan type.
 
Source: Mortgage Bankers Association   
 
5. US mobility recovery is increasingly uneven.
 
Source: ANZ Research  
 
6. Finally, we have the US population share that has received at least one vaccine dose.
 
Source: The New York Times   Read full article  

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Canada

1. After seven consecutive increases, wholesale trade declined in December
 

 
2. Here is Scotiabank’s forecast for vaccination rollout.
 
Source: Scotiabank Economics  

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The United Kingdom

1. Longer-term rates are climbing.
 

 
2. The pound is approaching $1.40.
 

 
3. The Q3 GDP growth was firmer than expected.
 

 
Government spending was particularly strong.
 

 
On an annual basis, the GDP decline was the worst in centuries.
 
Source: @WSJ   Read full article  
Source: @WSJ   Read full article  

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4. December manufacturing output surprised to the upside.
 

 
5. Home asking prices have pulled back over the past couple of months.
 

 
6. This chart shows the divergence between EU and UK in-store clothing retail activity.
 
Source: Huq   Read full article  
 
7. ATM usage remains soft relative to previous years.
 
Source: Statista  
 
8. The public mostly approves of the government’s vaccine rollout.
 
Source: @financialtimes   Read full article  
 
Here are the latest voting intentions poll numbers.
 
Source: @financialtimes   Read full article  

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Europe

1. Italy may see an economic rebound in Q1.
 
Source: Pantheon Macroeconomics  
 
2. Switzerland is pulling out of deflation.
 

 
3. This chart shows the expected GDP levels at the end of 2021 and 2022 relative to 2019-Q4.
 
Source: EC   Read full article  
 
4. Finally, we have European importers and exporters of electricity.
 
Source: IEA  

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Japan

1. The Nikkei breached 30k for the first time in decades.
 
Source: CNBC   Read full article  
 

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2. The Q4 GDP growth surprised to the upside.
 

 
Business spending was particularly strong.
 

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3. Government bond yields have followed nominal GDP lower.
 
Source: Quill Intelligence  
 
The government has added more debt as the economy faces structural weakness.
 
Source: Quill Intelligence  

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Asia – Pacific

1. Singapore’s Q4 GDP topped economists’ forecasts.
 

 
2. New Zealand’s service sector continued to weaken last month.
 

 
3. Australia’s 10yr yield climbed above 1.3%
 

 
4. Taiwan’s citizens increasingly think of themselves as Taiwanese rather than “Chinese,” which may further heighten tensions with China.
 
Source: Noah Smith   Read full article  

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China

1. The offshore renminbi keeps climbing.
 

 
2. Household savings remain elevated.
 
Source: Gavekal Research  
 
3. Unlike in some other countries, China’s citizens have been mostly avoiding travel during the holidays.
 
Source: Evercore ISI  
 
4. Pantheon Macroeconomics expects producer inflation to climb sharply this year.
 
Source: Pantheon Macroeconomics  

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Emerging Markets

1. Brazil’s economic activity fully recovered in December (topping expectations).
 

 
2. Colombia’s factory output has rebounded.
 

 
But retail sales deteriorated in December.
 

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3. Romania’s industrial production surprised to the upside.
 

 
Inflation jumped.
 
Source: ING  

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4. Turkey’s industrial production remains robust.
 

 
5. Here is Thailand’s year-over-year GDP growth.
 

 
6. EM stocks have been outperforming the S&P 500 in US-dollar terms.
 

 
7. EM currencies keep grinding higher.
 

 
8. EM funding conditions continue to ease amid foreign investors’ search for yield.
 

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Cryptocurrency

1. News of wider adoption sent Bitcoin toward $50k.
 
Source: Fox Business   Read full article  
 
Source: @business   Read full article  
 

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2. Bitcoin and cannabis stocks have been correlated.
 
Source: @markets   Read full article  

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Commodities

1. Platinum is soaring.
 
Source: @WSJ   Read full article  
 

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2. Fitch Solutions suggests that iron ore prices have peaked.
 
Source: Fitch Solutions Macro Research  
 
3. US cotton futures keep climbing as analysts expect lower planted acres (as farmers shift to corn and soybeans). Stong exports also help.
 

 
4. US meat futures are surging.
 
• Cattle:
 

 
• Hogs:
 

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5. European carbon emission allowances have been soaring in response to stricter environmental rules in the EU. Is the rally overdone?
 
Source: Fitch Solutions Macro Research  

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Energy

1. WTI crude futures breached $60/bbl.
 
Source: barchart.com  
 
2. Are we entering the next resource supercycle? 
 
Source: The Australian Financial Review   Read full article  
 
How tight will oil supplies get over the next couple of years?
 
Source: Princeton Energy Advisors  

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3. Oil producer earnings are starting to recover. 
 
Source: Longview Economics  
 
Rising oil prices could encourage greater capital spending by producers. 
 
Source: Longview Economics  

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4. US energy stocks continue to lag crude oil futures.
 
Source: S&P Global Market Intelligence  
 
5. US cold weather is sending natural gas prices sharply higher, with Henry Hub futures exceeding $3/mmbtu.
 
Source: The Weather Channel  
 

 
Natural gas prices soared in Texas amid tight supplies.
 

 
While Asia’s gas prices dropped from the highs, global natural gas prices remain elevated.
 
Source: @WSJ   Read full article  

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6. Uranium stocks rose sharply in recent months.
 

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Equities

1. Micro-cap stocks have been outperforming small caps.
 

 
2. Equity fund inflows have accelerated.
 
Source: BofA Global Research  
 
3. According to Google Trends, interest in day trading hit a new high.
 
Source: Google Trends; h/t @JohnKicklighter   Read full article  
 
4. Dark trading has exceeded 47% of total volume (see comment below from the Wall Street Journal).
 
Source: @WSJ   Read full article  
 
5. What are investors’ concerns?
 
Source: Evercore ISI  
 
6. Next, we have some updates on volatility.
 
• Call option volume keeps climbing.
 
Source: ANZ Research  
 
• Stocks with the highest call option volume have outperformed massively.
 
Source: Deutsche Bank Research  
 
• Small-cap implied volatility (RVX) rose sharply relative to VIX in recent days.
 

 
• Shares outstanding in the largest leveraged VIX ETF (UVXY) have gone vertical.
 

 
And call option interest on this security has far outpaced put options. Someone is betting on higher volatility ahead.
 
Source: @iv_technicals  
 
• The VIX curve has steepened further (deep in contango).
 
– 3-month vol / 1-month vol ratio:
 

 
– VIX futures curve:
 

 
• Trading volume has diverged from VIX.
 
Source: ANZ Research  

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Credit

1. US high-yield bond spreads are approaching multi-year lows.
 

 
2. CCC bond yields hit a record low.
 
h/t Anastasios Avgeriou  

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Rates

1. The Treasury curve keeps steepening.
 

 

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2. US banks’ holdings of Treasury and Agency debt hit a record high as a percentage of bank credit.
 

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Food for Thought

1. Drivers of lower emissions in 2020:
 
Source: @chartrdaily  
 
Source: @financialtimes   Read full article  

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2. COVID research publications:
 
Source: @OECD   Read full article  
 
3. Flu vaccination rates:
 
Source: Deutsche Bank Research  
 
4. Willingness to get the vaccine:
 
Source: Gallup   Read full article  
 
5. Support for provisions in Biden’s stimulus package:
 
Source: @DataProgress  
 
6. Media restrictions globally:
 
Source: PressGazette   Read full article  
 
7. News sources in the US:
 
Source: Pew Research Center   Read full article  
 
8. Coups in South America:
 
Source: @stats_map  
 
9. Learning geography terms from Super Mario Bros:
 
Source: @simongerman600  

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