Posted on by The Daily Shot Editor: Lev Borodovsky

Sharp increase in household wealth will accelerate economic growth

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 Sandler   

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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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