The Daily Shot: 16-Jul-21
• The United States
• Canada
• The United Kingdom
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Last month’s industrial production report was weaker than expected as factory output declined.
Manufacturing production remains below pre-COVID levels.
Much of the weakness was due to slowing motor vehicle production (4 charts).
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2. The first two regional Fed manufacturing surveys of the month continue to show strong growth, but the changes from June were mixed.
• The NY Fed’s index (Empire) surged to a record, …
… but many analysts suggested that it’s an outlier. Here is a comparison with China’s manufacturing PMI.
Source: Pantheon Macroeconomics
– Employment growth is near multi-year highs while hiring plans (2nd chart) hit a new record.
– Supply-chain constraints remain severe, but fewer companies see rising delivery times.
– Price pressures persist, but manufacturers have gained pricing power …
… and plan to use it.
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• The Philly Fed index, on the other hand, was disappointing, which makes the Empire spike that much more suspect.
– Delivery bottlenecks and price pressures persist.
But the “unfilled orders” index is down sharply from the highs.
– Just like in the Empire report, the percentage of firms expecting to hire more workers is surging.
– CapEx expectations look impressive.
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3. Initial jobless claims have not changed much since May.
Source: @GregDaco
But as states canceled the emergency unemployment benefits, consumer confidence took a hit (as households worry about personal finances).
And spending among those who lost government support has underperformed.
Source: BofA Global Research
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4. Corporate tax receipts have surged as earnings rebound.
Source: @TCosterg
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Canada
1. Existing home sales have declined for three months in a row.
2. This chart shows the number of BoC rate hikes currently priced in.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
3. These charts from Oxford Economics show the growth and composition of households’ excess savings.
Source: Oxford Economics
Source: @OxfordEconomics Read full article
Most of the excess savings are held by higher-income households.
Source: Oxford Economics
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The United Kingdom
The labor market continues to heal (2 charts).
Source: @jeffsparshott
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Europe
1. The French public has become more open to getting vaccinated.
Source: @abarrous, @elabe_fr
2. The EU’s emergency programs should substantially improve growth and employment in most euro-area economies.
Source: TS Lombard
3. Swiss house price appreciation is above 7% for the first time in decades.
4. Minimum wage levels vary substantially across Western Europe.
Source: Eurostat Read full article
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Asia – Pacific
1. Japan’s service-sector activity tumbled in May.
2. New Zealand’s Q2 CPI report surprised to the upside, nearly cementing a rate hike next month. Here is the market-based probability.
The Kiwi dollar and bond yields rose further.
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China
1. Deutsche Bank expects China’s credit impulse to recover in the months ahead, which should help stabilize manufacturing conditions (2 charts).
Source: Deutsche Bank Research
Source: Deutsche Bank Research
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2. Variant Perception’s China leading indicator has been held up by external factors, even as domestic liquidity data has slowed materially.
Source: Variant Perception
Source: Variant Perception
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3. Flights to the US have collapsed and show few signs of recovery.
Source: Bloomberg Read full article
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Emerging Markets
1. The Chilean peso remains under pressure.
Separately, Chile’s interest expense relative to revenues has been declining.
Source: Mizuho Securities USA
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2. Colombia’s manufacturing output took a hit in May.
3. LatAm external debt issuance remains robust.
Source: Fitch Ratings
Which countries have the highest percentage of external (FX) debt?
Source: Fitch Ratings
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4. India’s exports are now well above 2019 levels.
Separately, investment in India’s tech sector hit a new high last quarter, driven by the US.
Source: @financialtimes Read full article
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5. The rally in EM currencies appears stretched.
Source: Fitch Solutions Macro Research
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Commodities
This year’s price action in US lumber futures has been spectacular.
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Energy
1. Is Brent crude about to test the 50-day moving average support?
Source: @TheTerminal, Bloomberg Finance L.P.
2. OECD oil inventories are below the 5yr average and headed lower.
Source: Cornerstone Macro
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Equities
1. Stocks that perform well in a rising inflation environment have underperformed substantially in recent weeks – despite the upside CPI surprises.
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2. Related to the above, companies with weak balance sheets had a rough 30 days.
3. Small caps continue to struggle.
4. Goldman’s “retail favorites” basket had a tough couple of weeks.
5. Growth stocks appear overbought over the short term.
Source: Acorn Macro Consulting
Cyclicals are not yet overbought relative to defensives.
Source: Acorn Macro Consulting
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6. It’s been an amazing first half of the year for ETF inflows.
Source: Bloomberg Read full article
7. The S&P 500 tends to recover 6-months after a capital gains tax increase.
Source: JP Morgan Asset Management
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Credit
1. Here are some updates on the leveraged finance market from S&P Global Market Intelligence (LCD).
• Bonds and leveraged loans outstanding:
Source: S&P Global Market Intelligence
• US HY bond volume by use of proceeds:
Source: S&P Global Market Intelligence
• M&A-related issuance:
Source: S&P Global Market Intelligence
• Volume coming from first-time borrowers:
Source: S&P Global Market Intelligence
• HY Oil & Gas issuance:
Source: @WSJ Read full article
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2. ESG bond sales are headed for $1 trillion.
Source: @business Read full article
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Rates
1. The 10yr Treasury yield held support at the 200-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
2. CTA funds have bought more duration during the recent bond rally.
Source: Deutsche Bank Research
3. Curve flattening has started before a Fed taper.
Source: Nordea Markets
4. The recent decline in yields suggests investors are nervous about economic growth.
Source: TS Lombard
5. US real yields are well below that of the rest of G10.
Source: BCA Research
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Global Developments
1. Shipping containers from China continues to get more expensive.
Source: @markets Read full article
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2. This chart shows the semiconductor industry’s global market share of demand and supply.
Source: Natixis
3. BlackRock expects China to lead global GDP growth, with the US returning to pre-pandemic growth levels.
Source: BlackRock
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Food for Thought
1. CEO-to-worker pay ratio by industry:
Source: Statista
2. Employees’ hopes and fears:
Source: McKinsey Read full article
3. Searches for jobs at companies after wage hike announcements:
Source: @nick_bunker, @indeed Read full article
4. Sales jobs listings:
Source: @WSJ Read full article
5. Slow return to the office in NYC:
Source: Bloomberg Read full article
6. Labor-force participation among women in advanced economies:
Source: @WSJ Read full article
7. Chip shortage impact on US autos:
Source: Visual Capitalist Read full article
8. Support for same-sex marriage:
Source: Gallup Read full article
9. US political polarization:
Source: FiveThirtyEight Read full article
10. Chicken sandwiches:
Source: @AdamSinger
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Have a great weekend!
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