The Daily Shot: 04-Jun-21
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Asia – Pacific
• Emerging Markets
• Cryptocurrencies
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The ADP private payrolls report showed a gain of almost a million new jobs in May. That was well above forecasts.
Source: ADP Research Institute
Strong job gains could put QE taper in play earlier than expected. Bond yields and the dollar climbed, while gold sold off.
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• Job gains were broad.
Source: ADP Research Institute
• What does it mean for the official jobs report this morning?
Source: Mizuho Securities USA
Economists think that the ADP figure is overstating payroll gains.
Source: Pantheon Macroeconomics
Morgan Stanley sees 600k jobs created in May (consensus is 674k).
Source: Morgan Stanley Research
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2. Initial jobless claims continue to trend lower.
Source: Oxford Economics
Continuing claims are moving down as well, but there are still more than 15 million Americans receiving unemployment benefits.
Source: Piper Sandler
However, according to Oxford Economics, “roughly 4.1 million individuals will lose access to emergency unemployment benefits over the coming month” (an income cliff).
Source: @GregDaco
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3. The ISM Services PMI remains exceptionally strong as the service-sector activity accelerates.
Source: Mizuho Securities USA
But inventories are dwindling rapidly amid supplier delays, …
… while prices are surging.
Worker shortages are becoming a drag on hiring.
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The ISM results are consistent with a similar report from IHS Markit.
• Headline PMI:
• Backlog of orders:
• Prices:
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4. CEO confidence points to further gains in business investment.
Source: Gavekal Research
As a result, Oxford Economics expects productivity growth to rebound in the coming years, accounting for two-thirds of long-run GDP growth by 2025.
Source: Oxford Economics
By the way, some of the hardest-hit industries during the pandemic have the lowest levels of productivity.
Source: Oxford Economics
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5. Chase card data indicate robust consumer spending last month.
Source: JP Morgan; @bobbyeubank
6. Finally, we have some updates on the pandemic.
• New cases:
• Daily completed vaccinations:
• Total vaccinations:
Source: CNBC Read full article
• Vaccination uptake:
Source: Deutsche Bank Research
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Canada
1. Building permits remained robust in April.
2. The number of Canadian dividend funds has increased over the past decade.
Source: Market Ethos, Richardson GMP
3. The TSX index appears overbought relative to long-term government bonds.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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The United Kingdom
1. The final service-sector PMI from Markit was even stronger than the earlier release.
• We are looking at a substantial pickup in GDP growth.
Source: Pantheon Macroeconomics
• Service companies are rapidly boosting prices, which will feed into consumer inflation.
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2. The labor market has tightened in May.
Source: IHS Markit
3. There is plenty of available office space in central London.
Source: Barclays Research
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The Eurozone
1. Service-sector activity continues to surprise to the upside.
• Italy:
• Spain:
Here is the final composite PMI chart.
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2. Deutsche Bank estimates a temporary inflation spike in Q4, year-over-year, driven by energy prices (2 charts).
Source: Deutsche Bank Research
Source: Deutsche Bank Research
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3. Real yield differentials with the US point to downside risks for the euro.
Source: @ISABELNET_SA, @SocGen_US, @DoejiStar
4. An “orderly” QE tapering will have a gradual impact on bond yields, according to Barclays Research.
Source: Barclays Research
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Asia – Pacific
1. This chart shows the sector PMI rankings across Asia.
Source: IHS Markit
2. Next, we have some updates on Australia.
• The Aussie dollar vs. commodities:
Source: Arbor Research & Trading
• Hawkish sentiment from the RBA:
Source: Arbor Research & Trading
• Mortgage lending (regional trends):
Source: @Scutty, @APRAinfo, @RBAInfo
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Emerging Markets
1. India’s service-sector activity contracted sharply in May amid lockdowns.
Separately, Indian households’ ownership of equities is still relatively low.
Source: @DriehausCapital
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2. Russia’s service-sector activity strengthened further last month.
Source: IHS Markit
Russia’s FX reserves hit a record high.
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3. Inflation is accelerating in a majority of EM markets due to base effects.
Source: IMF
4. This chart shows the GDP per capita for select economies.
Source: @WSJ Read full article
5. Will China’s slowing credit impulse put downward pressure on EM currencies?
Source: @macro_daily
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Cryptocurrencies
1. Bitcoin is lower after another tweet from our friend Elon.
Source: MarketWatch Read full article
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2. This chart shows investor risk appetite for cryptos.
Source: @axios Read full article
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Commodities
1. Soybean oil continues to rally amid massive demand from global restaurants.
Source: @kannbwx
2. A wedge has formed in US lumber futures.
Source: barchart.com
3. Gold and TIPS (inflation-linked Treasuries) are converging again.
4. How do carbon offset markets work?
Source: @BBGVisualData Read full article
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Energy
1. US crude oil inventory is now at 2019 levels.
Here is crude and gasoline inventory measured in days of supply.
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2. US crude oil production has been anchored at 11 million barrels per day.
And gross exports have leveled off at around 3 million barrels per day (average).
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3. US refinery inputs remain well below pre-COVID levels.
Source: Princeton Energy Advisors
4. This chart shows electricity generation mixes in select countries.
Source: Bruegel Read full article
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Equities
1. Markets have been sleepy lately.
Source: Tim Edwards, S&P Global Market Intelligence
2. Will the S&P 500 test support at the 50-day moving average this month?
Source: barchart.com
3. Stocks, especially tech (white in the chart below), continue to move with Treasuries (blue) amid QE taper uncertainty.
Source: @TheTerminal, Bloomberg Finance L.P.
4. Tech fund outflows in May were the worst since 2018.
Source: BofA Global Research
5. Earnings revisions breadth hit a record high.
Source: @ISABELNET_SA, @MorganStanley
6. Which S&P 500 sectors are most concentrated?
Source: Tim Edwards, S&P Global Market Intelligence
7. During low volatility periods, demand for downside protection (SKEW) typically increases.
Source: @macro_daily
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Credit
1. Energy-sector high-yield spreads hit the lowest level since 2018.
2. US CLO activity has been robust this year.
Source: Moody’s Investors Service
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Rates
1. The US inflation swap curve is highly inverted, partially due to strong backwardation in crude oil.
Source: Nordea Markets
2. The Fed will have the ability to quickly shrink its bond portfolio without selling any securities (just letting them mature).
Source: Barclays Research
3. This chart shows US 10yr Treasury yields vs. other advanced economies (since 1870).
Source: Barclays Research
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Global Developments
1. Currency markets’ implied volatility continues to drift lower.
2. The combination of higher inflows into US securities and a marginal shift in implied rate expectations could be positive for the dollar (2 charts).
Source: Variant Perception
Source: Variant Perception
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3. Get ready for rising mass protests around the world. Global food prices are up 40% from a year ago.
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Food for Thought
1. US car models worst hit by chip shortages:
Source: Statista
2. US consumer sentiment vs. gas prices:
Source: Morning Consult Read full article
3. Household wealth by generation:
Source: @chartrdaily
4. The most expensive toll roads:
Source: Statista
5. Pandemic-related productivity acceleration potential:
Source: McKinsey Global Institute, h/t Garrett Roche Read full article
6. Views on the lab-leak theory:
Source: @YouGovAmerica Read full article
7. COVID deaths vs. obesity rates:
Source: The New York Times Read full article
8. US migrants who are not from Mexico or the Northern Triangle:
Source: @axios Read full article
9. Remembering D-Day:
• Departure points:
Source: historyextra.com Read full article
• Taking territory:
Source: BBC Read full article
• D-Day data:
Source: D-Day Overlord Read full article
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Have a great weekend!
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