The Daily Shot: 12-Jul-21
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The durable goods inventories-to-sales ratio (at the wholesale level) continues to move lower amid supply constraints.
Automobile inventories have been exceptionally tight.
Source: Yardeni Research
Supply chain pressures are likely a result of higher than expected consumer goods spending relative to pre-pandemic levels, according to Fitch.
Source: Fitch Ratings
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2. The recovery in retail sales has been faster than in previous post-recession environments.
Source: Truist Advisory Services
3. The “fiscal cliff” is already here as federal outlays moderate.
Source: Cornerstone Macro
4. Private investment is back to its pre-COVID trend.
Source: Deutsche Bank Research
But the recovery has been uneven, with industrial equipment lagging.
Source: Deutsche Bank Research Read full article
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5. The ratio of home prices to household income is nearing the housing bubble peak.
Source: @JeffWeniger
6. The percentage of Americans working from home is down by half since the 2020 peak. Employment in sectors with high work-from-home ratios has almost fully recovered.
Source: @JedKolko
7. Olympics viewing rights significantly raise US service imports.
Source: S&P Global Market Intelligence
8. Next, we have some updates on inflation.
• Will we see a sharp rise in rent inflation once the eviction moratorium ends?
Source: Nordea Markets
• Nomura expects slower month-over-month core CPI gain in June as used vehicle prices peak.
Source: Nomura Securities
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Canada
1. The June employment report surprised to the upside.
However, full-time employment declined.
• Recent employment gains have been dominated by services.
• The unemployment rate was in line with forecasts.
• Labor force participation ticked higher in June.
• It will be a while before employment returns to its pre-COVID trend.
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2. Fitch expects the Bank of Canada to raise rates during the second half of this year, driven by above-target inflation and a buoyant housing market.Â
Source: Fitch Ratings
3. The Canadian dollar is priced at a premium but is not yet overvalued, according to Richardson GMP.
Source: Market Ethos, Richardson GMP
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The United Kingdom
1. The May GDP estimate surprised to the downside.
• Manufacturing and construction output unexpectedly declined.
• Factory output remains on its downward trend.
• Service-sector expansion was below estimates.
• Here is the monthly GDP index.
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2. Trade with the EU continues to improve.
Source: @bbgvisualdata Read full article
3. The number of COVID-related deaths remains low even as new cases spike.
4. The market expects the BoE to hike in line with the Fed.
Source: Pantheon Macroeconomics
5. Hiring in hard-hit sectors is rebounding.
Source: ING
• Voluntary resignations are up.
Source: ING
• Salaries of newly-hired workers have been on the rise.
Source: Bloomberg Read full article
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The Eurozone
1. Italian industrial production unexpectedly declined in May.
But Dutch factory output is surging.
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2. Next, we have some updates on monetary policy.
• The ECB’s bond holdings as a percentage of eligible pool:
Source: Commerzbank Research
• The ECB’s mentions of climate vs. inflation.
Source: @adam_tooze, @deyris_j
• Policy transmission took a few years:
Source: Bruegel Read full article
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3. Here is a long-term chart of bond spreads in select economies.
Source: VOX EU Read full article
4. The Delta variant now dominates new cases across Europe.
Source: @financialtimes Read full article
The spike in new cases in Spain is driven by young people.
Source: @financialtimes Read full article
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Europe
1. Norway’s inflation continues to moderate.
2. Czech retail sales are now well above pre-COVID levels.
3. Home prices have been outpacing rents across the EU.
Source: Eurostat Read full article
4. VC investments in Europe have surged.
Source: @FactSet
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Asia – Pacific
1. Japan’s Economy Watchers Expectations index hit the highest level since 2017, topping forecasts.
2. New Zealand’s retail card spending is now above its pre-COVID trend.
3. Asian USD-denominated high-yield bonds have been underperforming their US counterparts.
Source: @ISABELNET_SA, @MorganStanley
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China
1. The PBoC cut the reserve requirement rate.
Source: Reuters Read full article
• Bond yields declined.
Short-term rates were lower as well.
The two-year rate swap differential with the US is moving lower.
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2. USD/CNH (US dollar – offshore yuan) may test resistance at the 200-day moving average (weaker yuan, stronger US dollar).
Source: barchart.com, h/t Tian Chen
3. Last month’s loan growth exceeded forecasts.
Money supply indicators were mixed.
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4. Growth in car sales is back in negative territory.
Source: @WSJ Read full article
5. Proceeds from local government bond issuance should benefit infrastructure spending, according to BCA Research.
Source: BCA Research
6. China increasingly dominates global spending on luxury goods.
Source: @JPMorganAM
7. Here is the distribution of China’s bond market by rating.
Source: Gavekal Research
8. China’s mega-caps have been underperforming US peers as Beijing cracks down on the tech industry.
Source: @ISABELNET_SA, @BofAML
9. Pantheon Macroeconomics expects China’s GDP growth to rebound in Q4.
Source: Pantheon Macroeconomics
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Emerging Markets
1. COVID cases in Vietnam rose sharply at the end of last week.
Source: Reuters Read full article
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2. When will India reach its goal of becoming a five trillion dollar economy?
Source: Bloomberg Read full article
3. EM countries have lagged the manufacturing recovery in developed markets.
Source: Truist Advisory Services
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Cryptocurrency
1. Bitcoin’s volatility has moderated recently.
Source: Pantheon Macroeconomics
2. This chart shows the series of events that occurred before the crypto top in May.
Source: BIS
3. Ethereum’s beta to the S&P 500 remains elevated.
Source: @jnordvig
Bitcoin’s correlation with the S&P 500 is starting to rise, while the correlation with commodities continues to fall.
Source: Koyfin Read full article
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4. Which governments have taken action against cryptocurrencies?
Source: @financialtimes Read full article
5. The number of cryptos is exploding (low barrier to entry).
Source: @financialtimes Read full article
6. Short positions on the Bitfinex exchange spiked last week.
Source: Delphi Digital Read full article
7. New weekly Twitter followers of crypto exchanges have risen this year but remain below 2018 levels.
Source: BIS
8. What are the main reasons for buying cryptos?
Source: @financialtimes Read full article
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Commodities
1. This chart shows the year-to-date performance for key commodity markets.
Source: @WSJ Read full article
2. Rhodium prices tumbled from the peak in recent weeks.
3. US corn crops look good this year (these photos are from SE Illinois).
Source: @kannbwx
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Energy
1. The recovery in the number of US oil rigs has been slowing, …
… lagging oil prices.
Source: Chart and data provided by Macrobond
The excess inventory of drilled but uncompleted (DUC) wells has been exhausted. Operators will need to accelerate drilling to stabilize DUC levels.
Source: Princeton Energy Advisors
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2. Shale companies’ free cash flow is at multi-year highs.
Source: @WSJ Read full article
3. US refining capacity declined this year.
Source: @EIAgov
4. Energy companies’ shares are not participating in the crude oil rally.
5. This chart shows US electricity generation by source.
Source: @robbie_andrew
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Equities
1. Peak economic momentum does not necessarily mean a peak in stock prices.
Source: Truist Advisory Services
2. US equity outperformance vs. the rest of the world (RoW) has diverged from the US dollar index.
Source: @Callum_Thomas, @topdowncharts Read full article
US stocks trade at a substantial premium vs. the rest of the world.
Source: Yardeni Research
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3. Hedge funds’ leverage remains elevated.
Source: Evercore ISI
4. Individual stock participation has weakened as the market makes new highs.
Source: Truist Advisory Services
5. Technicals show that the Nasdaq 100 rally is stretched.
6. The Q2 tech M&A activity was more than double the recent average.
Source: S&P Global Market Intelligence
7. There has been a great deal of interest in space tourism.
• News stories:
Source: @axios Read full article
• Virgin Galactic sentiment on Reddit:
Source: SwaggyStocks
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Credit
1. Business loan balances continue to moderate.
2. The loan-to-deposit ratio collapsed after the Fed launched its QE program last year.
Source: Morgan Stanley Research, h/t James W.
But it appears to have bottomed in recent weeks.
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3. Here is the composition of global corporate debt by region.
Source: @WSJ Read full article
4. Periods of low volatility in high-yield debt typically result in wider spreads within 3-6 months.
Source: Deutsche Bank Research
5. The spread between US high-yield bonds and the CPI is now negative.
Source: @WSJ Read full article
6. US corporate leverage has been moderating (as earnings rebound) but remains elevated.
Source: CreditSights
7. Here is the status of US student debt over time.
Source: @WSJ Read full article
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Rates
1. The 10-year Treasury yield has returned to its long-term trend channel. Will it hold support?
Source: Truist Advisory Services
2. The recent steepening trend is below the historical post-recession average.Â
Source: Truist Advisory Services
3. The massive uptake of the Fed’s RRP program has drained a substantial amount of liquidity, which should be a positive for the US dollar.
Source: Nordea Markets
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Global Developments
1. Let’s start with vaccination trends.
Source: @chartrdaily
2. This scatterplot shows fixed-income yields vs. correlations to the S&P 500.
Source: @JPMorganAM
3. The chart below shows foreign ownership of local assets.
Source: Morgan Stanley Research
4. How independent are the central banks in advanced economies?
Source: ECB Read full article
5. Private credit growth has declined sharply over the past year.
Source: Oxford Economics
6. Economies of countries with low vaccination rates are underperforming this year.
Source: World Bank Group
7. Finally, we have youth unemployment across OECD economies.
Source: @OECD Read full article
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Food for Thought
1. Taxing digital ads and the sale of personal data:
Source: The Pew Charitable Trusts Read full article
2. Corporate tax rates in select economies:
Source: @WSJ Read full article
• Countries with the lowest corporate tax rates:
Source: CNBC Read full article
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3. Productivity assessment of working from home:
Source: The Economist Read full article
4. Warehouse injury rates for Walmart and Amazon:
Source: Strategic Organizing Center Read full article
5. Wages and productivity:
Source: ProMarket Read full article
6. US teen employment-to-population ratio:
Source: @WSJ Read full article
7. Unicorn creation:
Source: @chartrdaily
8. Views on abortion:
Source: Gallup Read full article
9. Sources and targets of disinformation campaigns on Facebook:
Source: @axios Read full article
10. QAnon followers by party and religious affiliation:
Source: PRRI Read full article
11. US CO2 emissions from energy consumption:
Source: @WSJ Read full article
12. Showing up fashionably late to a party:
Source: FiveThirtyEight Read full article
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