The Daily Shot: 14-Jun-21
• The United States
• Canada
• The United Kingdom
• The Eurozone
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Food for Thought
The United States
1. The U. Michigan consumer sentiment index strengthened this month.
• Americans are increasingly confident in the jobs market.
• Inflation expectations pulled back, …
… as the “food at home” CPI component eased (2 charts).
Source: Pantheon Macroeconomics
Source: @jeffsparshott
• Buying conditions for vehicles tumbled amid shortages and rapid price increases (see #5 below).
By the way, the May Conference Board’s report also showed consumer unease with purchasing a vehicle.
Source: Morgan Stanley Research
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2. High-frequency indicators continue to show improvement.
• Air travel:
• COVID-related hospitalizations:
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3. Goldman’s US financial conditions index shows an extraordinary level of accommodation.
4. The US dollar jumped on Friday as traders lighten up on their bets against the greenback ahead of the FOMC meeting.
Source: @TheTerminal, Bloomberg Finance L.P.
5. Next, we have some updates on inflation.
• Alternative measures of core inflation (see comment):
Source: Cornerstone Macro
• Sticky vs. flexible CPI:
Source: Mizuho Securities USA
• Base effects and a forecast from Oxford Economics:
Source: @GregDaco
• The 2-year changes in core CPI (annualized) :
Source: @TCosterg
• US core CPI vs. other advanced economies:
Source: Capital Economics
• The decomposition of core CPI (month-over-month):
Source: Nomura Securities
• COVID-related components:
Source: Pantheon Macroeconomics
• Vehicle prices (CPI index):
• Car rental (CPI index):
• Shelter (CPI index):
• Gains in shelter inflation ahead (3 charts):
Source: Nordea Markets
Source: Evercore ISI
Source: ING
Here are a few additional trends:
• Freight rates are rising quickly, …
Source: Cass Information Systems
… boosting trucking companies’ sentiment.
Source: Evercore ISI
• Will the velocity of money begin to rise, becoming a tailwind for inflation?
Source: Danske Bank
• The Evercore ISI corporate pricing power index hit a new high.
Source: Evercore ISI
• The FOMC will be boosting its inflation estimates for 2021.
Source: Scotiabank Economics
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6. Household net worth has been surging.
Here are the trends in household financial assets.
Source: ING
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Canada
1. Canada’s labor market has outperformed the US.
Source: ING
2. Oxford Economics expects strong growth this year.
Source: Tony Stillo, Oxford Economics
3. Canadian investment-grade bonds have underperformed US peers.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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The United Kingdom
1. Service-sector output was stronger than expected in April.
• But manufacturing and construction output slowed.
• Here is the GDP estimate:
2. Trade with the EU continues to improve:
Source: @lizzzburden, @bbgvisualdata Read full article
3. Shoppers are returning to malls.
Source: huq Read full article
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The Eurozone
1. German wholesale prices have been surging.
Separately, superforecasters once again expect CDU/CSU to remain in power after the next election.
Source: Good Judgment
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2. We should see a sharp GDP rebound in Q2.
Source: @WSJ Read full article
3. The stock market has been surging.
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China
1. Export shipping costs continue to climb. At some point, this trend becomes a drag on sales.
2. Foreign buying of government bonds has capped yields (2 charts).
Source: MRB Partners
Source: TS Lombard
Chinese government bonds have been outperforming Treasuries recently.
Source: MRB Partners
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3. Foreign currency deposits in Chinese commercial banks have surged over the past year. By increasing the reserve requirements on foreign exchange deposits, the central bank forces commercial banks to hold forex on their balance sheet, which could ease upward pressure on the renminbi, according to Alpine Macro.
Source: Alpine Macro
4. The correlation between the trade-weighted renminbi and the dollar has weakened substantially over the past few years.
Source: Alpine Macro
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Emerging Markets
1. Russia’s central bank hiked rates again amid inflationary pressures.
2. Here is the situation with other EM central banks (3 charts).
Source: IIF
Source: IIF
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3. Turkey’s industrial output remains robust.
4. India’s industrial production is now in line with 2019 levels.
5. Israel’s trade deficit hit another record high.
6. Mexico’s manufacturing production pulled back in April.
7. Here is Brazil’s service sector output.
Separately, USD/BRL held support near the 5.0 level.
Source: barchart.com
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Cryptocurrency
1. Elon isn’t completely giving up on bitcoin, …
Source: CNBC Read full article
… sending the largest crypto higher over the weekend.
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2. The total crypto market cap could soon stabilize based on the 2017 parallel.
Source: Enigma Securities
3. Bitcoin is on track for its first down quarter since Q1 2020.
Source: @skewdotcom
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Commodities
1. US soybean oil is rolling over, sending palm oil sharply lower.
2. US grains are lower this morning.
3. Lumber futures are under pressure.
Source: barchart.com
Source: Bloomberg Read full article
The drop in lumber prices suggests recent inflation spikes will prove transitory, according to Cornerstone Macro.
Source: Cornerstone Macro
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4. Fitch expects near-term upside in gold prices before easing off as inflationary pressures wane.
Source: Fitch Solutions Macro Research
Gold is softer ahead of the FOMC meeting as the dollar climbs.
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5. Commodities are not very correlated with consumer goods prices.
Source: @Johan_E_Lof
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Energy
1. Brent is above $73/bbl.
2. The Brent-WTI spread has been tightening as US inventories shrink.
3. The US rig count and frac spread continue to grind higher.
Given the price rebound, we should see the number of rigs rising further.
Source: Chart and data provided by Macrobond
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4. US natural gas is above $3.30/MMBtu.
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Equities
1. Growth outperformed value last week, …
… with tech leading the way.
Speculative tech companies surged.
2. Here are a few other sector charts.
• Energy:
• Utilities (boosted by lower Treasury yields):
• Banks (hurt by lower Treasury yields):
• Industrials:
• Consumer discretionary:
• Consumer staples:
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3. Small caps and microcaps continue to outperform (boosted by the Reddit crowd).
4. Cyclical stocks contributed more than ten percentage points (85%) of the S&P 500’s gains so far this year, according to Evercore ISI.
Source: Evercore ISI
5. Which thematic portfolios will outperform this year on a risk-adjusted basis?
Source: S&P Global Market Intelligence
6. VIX has declined to its lowest point since the start of the pandemic (below 16).
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Rates
1. Treasury yields have further decoupled from the US core CPI …
Source: TS Lombard
… and from the copper-to-gold ratio.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. Treasury yields saw a substantial decline last week, …
… driven in part by short-covering.
Technicals suggest Treasuries are still oversold.
Source: BCA Research
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3. Fed officials have been in disagreement this year, which could signal an incoming hawkish shift.
Source: Arbor Research & Trading
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Food for Thought
1. Most valuable apparel brands:
Source: eCommerceDB Read full article
2. Las Vegas business activity (2 charts):
Source: @financialtimes Read full article
Source: Deutsche Bank Research
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3. US jobs share vs. GDP contribution, by sector:
Source: Mizuho Securities USA
4. Global vehicle fleet:
Source: Longview Economics
5. The economic cost of fake news:
Source: CHEQ, University of Baltimore Read full article
6. Vaccine opposition:
Source: Morning Consult Read full article
7. Distance from stroke care centers:
Source: KHN Read full article
8. Deaths in US Congress:
Source: @IanPrasad Read full article
9. Betting market odds for the NYC mayoral elections:
Source: @Predictit
10. Longest train journeys:
Source: Statista
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