The Daily Shot: 19-Jul-21
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought
The United States
1. The U. Michigan consumer sentiment report showed confidence deteriorating this month. Analysts have attributed this decline to higher prices and the loss of emergency unemployment benefits.
• Buying conditions for durables and vehicles declined.
• Rising inflation expectations pushed households’ real income projections sharply lower.
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2. The June retail sales report was firmer than expected.
• Here is the breakdown by sector.
Source: @GregDaco
• Retail sales remain well above the pre-COVID trend.
• Despite all the complaints about high automobile prices, spending on vehicles remains highly elevated for this time of the year.
• Online spending slowed but is still above last year’s levels.
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3. Credit card spending has been robust.
• Hotels and restaurants:
Source: BofA Global Research
• Total spending:
Source: @WSJ Read full article
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4. Next, we have some updates on inflation.
• The U. Michigan consumer inflation expectations (above consensus):
• Google searches for “inflation” (peaking similar to 2008?):
Source: Alpine Macro
• Core PCE inflation vs. market-based inflation expectations (nearing peak?):
Source: Alpine Macro
• Core PCE vs. commodity prices:
Source: Alpine Macro
• CPI and bond yields decoupling:
Source: Deutsche Bank Research
• Core PCE vs. core CPI:
Source: Nomura Securities
• The attribution of CPI vs. PCE inflation differences:
Source: Scotiabank Economics
• Import prices:
• Retailers’ rising pricing power:
Source: Evercore ISI
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5. Next, we have some updates on the labor market:
• Job postings on Indeed continue to surge.
• There is more pressure to find work as unemployment benefits expire.
Source: Morning Consult
• Will returning to work result in higher income?
Source: Morning Consult
• Were emergency unemployment benefits an impediment to returning to work?
Source: Morning Consult
• Three million adults expect to re-enter the labor force within twelve months.
Source: Morning Consult Read full article
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6. The yield curve tends to flatten ahead of loss in economic momentum.
Source: @ISABELNET_SA, @GoldmanSachs
Is that the reason for lower long-term yields (chart below) and a flatter curve (2nd chart)?
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Canada
1. Housing starts remain robust.
2. The recent rise in earnings growth suggests further strength in retail sales.
Source: Deutsche Bank Research
3. Total employment is still below the pre-pandemic trend.
Source: BCA Research
4. The BoC taper decision could still leave CAD at 3-4% below fair value, according to Deutsche Bank.
Source: Deutsche Bank Research
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The United Kingdom
1. The market-based probability of a May 2022 BoE rate hike is now above 60%.
2. Housing asking price growth is not extreme.
3. The pound’s recent strength should get reflected in lower core goods inflation.
Source: Pantheon Macroeconomics
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The Eurozone
1. New car registrations remain relatively soft for this time of the year …
… and are lagging year-to-date.
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2. Economists expect inflation to accelerate in the months ahead.
3. Inflation divergence with the US …
… points to a weaker euro.
Source: @AndreasSteno Read full article
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4. Mobility trackers continue to improve.
Source: @CapEconEurope Read full article
5. The Eurozone is running a deficit with the rest of the EU.
Source: Pantheon Macroeconomics
6. Italian trade surplus keeps improving.
7. Germany’s two major parties continue to lose support.
Source: @BBGVisualData Read full article
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Asia – Pacific
1. COVID cases have surged in Asia ex. China.
Source: @biancoresearch
2. New Zealand’s service-sector growth remains robust.
3. The Aussie dollar is rolling over vs. USD.
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China
1. Local government bond vehicles’ (LGFV) credit spreads have narrowed this year, …
Source: Gavekal Research
… as issuance runs below last year’s pace.
Source: Variant Perception
• After spiking in Q1, defaults by state-owned enterprises declined as more provinces offered explicit support.
Source: Gavekal Research
• However, some provinces face significant maturity risk this year.
Source: Gavekal Research
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2. China’s bank loan growth has far outpaced the US.
Source: Yardeni Research
3. China’s rebalancing toward the private sector continues.
Source: Matthews Asia
4. Will Beijing respond to the latest surge in coal prices?
5. Tech shares have been a drag on Hong Kong’s stock market.
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Emerging Markets
1. The Philippine peso continues to tumble.
Other Asian currencies have been softer as well. Here is the Malaysian ringgit.
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2. Vietnam’s stock market has rolled over amid stricter COVID curbs.
3. The South African rand has outperformed over the past year as commodities rallied.
h/t @RobinBrooksIIF
4. Argentina continues to accumulate FX reserves due to capital controls and high commodity prices.
Source: @SergiLanauIIF
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Cryptocurrency
1. Ethereum-based transactions surged this year.
Source: @RyanWatkins_
2. Stablecoin volume also accelerated.
Source: @RyanWatkins_
3. Investors in leveraged crypto products saw spectacular volatility over the past year.
Source: FTX
4. Dogecoin is holding support.
Source: FTX
5. Crypto popularity continues to spread.
Source: @CivicScience Read full article
6. China’s electricity use for Bitcoin mining has been falling.
Source: @financialtimes Read full article
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Commodities
1. The recent commodity rally has been one of the strongest following a global economic recovery.
Source: Arbor Research & Trading
Commodities could trade sideways at this point in the recovery.
Source: Arbor Research & Trading
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2. US wheat futures are surging again amid unfavorable weather conditions in parts of the US and Russia.
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Energy
1. Brent futures are testing support at the 50-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
2. This chart shows US shale production per new well in the first month.
Source: EIA
What happens to output per well after the first month?
Source: EIA
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3. Energy stocks continue to underperform crude oil.
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Equities
1. Small-caps keep lagging larger firms.
• The correlation between small caps and growth stocks tumbled this year.
Source: @sentimentrader Read full article
• The valuation divergence between small and large caps has been unusual.
Source: @Not_Jim_Cramer
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2. Companies with higher pricing power have been outperforming.
Source: @kgreifeld, @markets, @cfb_18 Read full article
3. The S&P 500 remains highly correlated.
Source: @ISABELNET_SA
4. The global stock/bond ratio appears stretched. A pullback could coincide with rising volatility.
Source: BCA Research
5. The recent growth vs. value outperformance in the US is missing in China.
Source: S&P Global Market Intelligence
6. This year’s M&A activity has been unprecedented.
Source: Goldman Sachs; @SamRo
7. The thrill is gone …
Source: @axios Read full article
8. Individual investors remain active in the options market.
Source: @ISABELNET_SA
9. Over the past five years, the average S&P 500 implied correlation starts falling about three weeks before the start of earnings season.
Source: Chris Murphy; Susquehanna Derivative Strategy
10. The S&P 500 dividend yield is increasingly unattractive when adjusted for inflation.
11. The CNN Fear & Greed index is decisively in “fear” territory.
Source: CNN Business
12. Next, we have some sector updates.
• Retail:
• Consumer Staples:
• Transportation:
• Metals & Mining:
• Semiconductors:
• REITs:
• Banks:
Short-term breadth of S&P 500 bank stocks is very weak, which typically precedes a recovery (2 charts).
Source: Variant Perception
Source: Variant Perception
However, by some measures, bank valuations are not particularly cheap.
Source: Variant Perception
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Credit
1. Let’s start with credit spread changes by sector since Feb. 2020.
Source: Capital Economics
2. New money leveraged loan volume spiked this year.
Source: @bloomberglaw Read full article
3. European leveraged finance issuance saw a jump in volume recently.
Source: @lcdnews
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Rates
1. TIPS yields (US real rates) continue to drift lower.
2. New-issue Treasury demand seems to be moderating.
Source: Oxford Economics
3. Global bonds appear overbought at short-term resistance.
Source: Acorn Macro Consulting
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Food for Thought
1. US home improvement store visits:
Source: Placer.ai
2. Prices of high-mileage used vehicles:
Source: @axios Read full article
3. Advertising as a share of US GDP:
Source: NBER Read full article
4. Amazon’s biggest local markets:
Source: ecommerceDB Read full article
5. Bicycle boom:
Source: Statista
6. Binge vs. weekly-released shows:
Source: @axios Read full article
7. Business spending:
Source: Callum Thomas Read full article
8. Emotional assessments of US children and adults:
Source: Gallup Read full article
9. Vaccine rollout vs. earlier trends:
Source: Reuters Read full article
10. So that’s why the supply of semiconductors is so tight …
Source: @crampell Read full article
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