The Daily Shot: 11-Mar-21
• The United States
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Global Developments
• Food for Thought
The United States
1. The CPI report was a bit softer than expected as the core inflation (2nd chart) continues to drift lower.
• The Dow hit a new record in response to the tepid inflation data.
Source: @WSJmarkets Read full article
• On a year-over-year basis, rent CPI continues to trend lower, while the owners’ equivalent rent (OER) stabilized last month.
On a monthly basis, however, these measures ticked higher. Here is the OER breakdown.
Source: Nomura Securities
A substantial portion of the drag on core inflation in February came from three sectors: airline fares, used cars, and hotels.
Source: Nomura Securities
Here are the three trends.
But as we saw yesterday (#2 here), these trends are reversing.
– Hotels:
Source: Nomura Securities
– Used cars:
Source: Moody’s Analytics
– Higher jet fuel costs will force airlines to boost prices this spring.
• Here are some inflation forecasts.
– ING:
Source: ING
– Oxford Economics:
Source: @GregDaco
– Morgan Stanley (core PCE):
Source: Morgan Stanley Research
The five-year breakeven rate (market-based inflation expectations) keeps climbing.
• The public’s interest in inflation has spiked this year. Here is inflation-related Google search activity since 2004.
Source: Google Trends
• Staying with our tradition, here are a few other CPI components. Most of the latest trends are due to pandemic-related sector changes and spending patterns.
– Hospital services and medications:
– Car rentals:
– Appliances:
– Cleaning products:
– Men’s apparel:
– Veterinary services:
– Booze:
– Indoor plants:
– Haircuts (a leading indicator for inflation?):
Source: @TCosterg
– Energy services popped due to the Texas deep freeze.
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2. Government stimulus is expected to generate the fastest annual growth in nearly four decades.
Source: @WSJ Read full article
Source: @bpolitics Read full article
Almost all new government payments are now boosting incomes (as wage loss slows).
Source: Morgan Stanley Research
Savings have risen sharply. Houses and stocks have seen massive price gains. Can the ongoing increase in household wealth catapult the GDP to double-digit growth this year? What are the implications for inflation and bond yields? Here is a chart from Pervalle Global.
Source: @TeddyVallee
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3. Overall, Americans don’t think that the $1.9 trillion package is too much stimulus.
Source: Morning Consult Read full article
4. The budget deficit continues to widen. We will have more on the topic shortly.
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The Eurozone
1. French industrial production topped economists’ forecasts.
2. Dutch industrial sales are still down 10% from a year ago.
3. Italy’s demographic trends continue to worsen.
Source: @financialtimes Read full article
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Europe
1. The UK’s housing market is holding up well.
2. Here is the distribution of new car sales in Europe (by fuel type).
Source: @WSJ Read full article
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Asia – Pacific
1. Japan’s machine tool orders have accelerated.
2. Consumer inflation expectations in Australia are rebounding.
Separately, Australia’s benchmark stock index is at support.
h/t @ThuyOng
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3. New Zealand’s housing market remains hot.
• Sales:
• Prices:
Source: ANZ Research
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China
1. Last month’s credit expansion topped forecasts. Here is the year-to-date bank loan growth.
This chart shows the “aggregate” financing, which includes bonds.
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2. Will we see a spike in CapEx this year?
Source: Gavekal Research
3. Here are the urbanization and industrialization trends for China.
Source: BCA Research
4. Mainland investors have been pulling out of Hong Kong stocks.
Source: @JeannyYu, @TheTerminal
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Emerging Markets
1. EM currencies bounced on improved risk appetite.
The Brazilian real was up over 2%.
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2. Brazil is struggling to contain the pandemic.
Source: @axios Read full article
• New cases:
Source: Morgan Stanley Research
• Deaths:
Source: Johns Hopkins University & Medicine
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3. Mexico’s same-store sales rebounded last month.
4. Israel’s consumer confidence is recovering in response to the vaccination success.
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Cryptocurrency
1. This chart shows corporate treasury Bitcoin balances and average buy-in prices. The corporate Bitcoin buying trend has spread from the US to Hong Kong and Scandinavia.
Source: Arcane Crypto Read full article
Source: @axios Read full article
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2. Bitcoin has strong support from the $48,000 level, which coincided with unusually large withdrawals from Coinbase Pro wallets (movement from wallet to storage could signal intention to hold instead of trade).
Source: CryptoQuant Read full article
Bitcoin is holding support, but the uptrend from January is slowing as seen by the RSI divergence.
Source: Dantes Outlook
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3. Bitcoin is now more volatile than ether, based on the 1-month realized vol spread.
Source: @skewdotcom
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Commodities
1. Lithium prices are rebounding as the market tightens (2nd chart).
Source: @WSJ Read full article
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2. This chart shows China’s imports of crude oil and iron ore.
Source: Alpine Macro
3. European emissions futures are rallying amid stronger environmental regulations in the EU.
4. The S&P GSCI Agriculture Index soared to the highest level since 2014.
Source: Rabobank
Most of the rise in agriculture performance over the past year has been driven by soybeans, palm oil, and corn, …
Source: Rabobank
… boosted by strong Chinese demand.
Source: Rabobank
• That demand sent US farm exports to China to a new record.
Source: @WSJ Read full article
• Speculative long positioning in agriculture futures appears stretched.
Source: Rabobank
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5. Related to the trends above, US hog futures continue to climb.
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Energy
1. The Texas “deep freeze” impact is still visible in the US energy markets. Refinery inputs have not yet recovered.
Crede oil inventories are still elevated.
Source: @bespokeinvest Read full article
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2. US crude oil production is back to 11 million barrels per day.
Will we see US output rise further as OPEC holds back and prices keep rising?
Source: @EIAgov
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3. Will weak refinery margins cap crude oil price gains?
Source: @aeberman12 Read full article
4. US gasoline demand has rebounded.
5. This chart shows US natural gas exports.
Source: Fitch Solutions Macro Research
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Equities
1. The market is increasingly pricing in higher inflation ahead. Stocks sensitive to rising prices have outperformed sharply since the vaccine announcement.
2. It’s been a good month for value stocks.
Source: @ISABELNET_SA, @BofAML
3. Retail investor sentiment is extremely bullish.
Source: Arbor Research & Trading
And retail investors have been right.
Source: Arbor Research & Trading
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Rates
1. Long-term inflation expectations have increased by only 40 basis points since August when the breakeven yield curve inverted. The market is expecting a temporary boost to inflation. By the way, some have suggested that the curve inversion is driven by a steeper backwardation in the crude oil curve.
Source: Piper SandlerÂ
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2. The rise in bond yields (and higher equity prices) has led to an increase in the US pension funding ratio (around 95%), according to III Capital Management.
Source: III Capital Management
3. The Fed remains the biggest buyer of Treasuries.
Source: @financialtimes Read full article
4. Trades betting on higher rates and a steeper yield curve appear crowded.
Source: III Capital Management
5. This chart shows Treasury debt auction sizes.
Source: @WSJ Read full article
6. Yields have risen globally.
Source: LPL Research
7. Finally, we have the fed funds rate vs. market expectations.
Source: JP Morgan; @tracyalloway
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Global Developments
1. Household savings have surged during the pandemic.
Source: @BBGVisualData Read full article
2. The dollar is testing resistance at its 200-day moving average.
Source: Dantes Outlook
3. Have freight costs peaked?
Source: Statista
4. Here is a look at market phases since the March 2020 crash, according to BofA.
Source: BofA Global Research
5. This chart shows the contributions to global growth.
Source: @WSJ Read full article
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Food for Thought
1. Spending intentions for the third stimulus check:
Source: CivicScienc Read full article
Renters with financial hardships:
Source: Apartment Guide
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2. US deposit trends by gender:
Source: cardify Read full article
3. AMC’s pre-COVID revenues and expenses (thin margins):
Source: @chartrdaily
4. Where do young investors hold their investments?
Source: MagnifyMoney Read full article
5. US federal legislation trend:
Source: @FactTank Read full article
6. Strongest carbon emission policies:
Source: @business Read full article
7. The distribution of global biomass:
Source: Chatham House Read full article
8. No vaccine intentions:
Source: @business Read full article
9. Ship log entries from 1740 to 1855:
Source: Peter Atwood
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