The Daily Shot: 23-Jul-21
• The United States
• The United Kingdom
• The Eurozone
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Food for Thought
The United States
1. Let’s begin with the housing market.
• Existing home sales hit a multi-year high last month but were still below forecasts.
• Inventories remain exceptionally low for this time of the year.
This chart shows inventories by price tier.
Source: AEI Housing Center
• The median price of sold existing homes hit $363k, a new high.
– Here is the breakdown by price point.
Source: @Not_Jim_Cramer
– The AEI Housing Center shows substantial year-over-year gains across all price tiers.
Source: AEI Housing Center
– Will we see the widely-followed Case-Shiller housing index exceed 25% in June?
Source: @Not_Jim_Cramer
– This chart shows the ratio of home prices to annual wages.
Source: @TCosterg Read full article
• The 30yr mortgage rate is now firmly below 3%.
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2. The Kansas City manufacturing index was firmer than expected in July.
• More companies are reporting increased export orders.
• Employment metrics are remarkably strong.
• Supplier bottlenecks remain acute.
– Delivery times:
– Order backlog:
• Price pressures persist.
And a record percentage of manufacturers expect to boost prices in the near future.
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3. At the national level, the World Economics SMI report shows further improvements in business activity this month. Hiring has accelerated.
Source: World Economics Read full article
4. Initial jobless claims remain stubbornly high relative to pre-pandemic levels.
Source: @GregDaco, @OxfordEconomics
Continuing claims are moving lower. We should see sharp declines ahead as states’ cancellations of emergency benefits are incorporated in the data.
Source: @GregDaco, @OxfordEconomics
Source: Oxford Economics
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5. As we saw yesterday, consumer sentiment has deteriorated lately.
6. Business travel is recovering.
Source: Evercore ISI
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The United Kingdom
The CBI Trends report showed continuing strength in industrial orders.
Source: Reuters Read full article
We should see substantial gains in manufacturing output in the months ahead.
Source: Pantheon Macroeconomics
Producer price inflation will accelerate, according to the CBI report.
Source: Pantheon Macroeconomics
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The Eurozone
1. The ECB slightly adjusted its forward guidance based on the new strategy. The central bank is now even more dovish, with tapering unlikely to be announced this quarter.
Source: CNBC Read full article
The statement language was shorter and more direct.
Source: Danske Bank
The word “inflation” appeared more frequently.
Source: Danske Bank
The euro jumped at first (partially due to the language change) but retreated shortly after.
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2. Unlike in the US, the market expects the Eurozone’s inflation to remain below 2% for years to come.
Source: Nordea Markets
3. Bund yields resumed their decline as the curve flattens. The whole curve may become negative shortly.
The Italian 5-year bond yield is back in negative territory.
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4. Euro-area consumer sentiment unexpectedly declined this month.
5. French manufacturing confidence surprised to the upside.
6. Dutch unemployment is approaching pre-COVID levels.
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Asia – Pacific
1. Taiwan’s unemployment rate has been surging.
Source: Taiwan News Read full article
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2. Australia’s manufacturing growth moderated this month.
Service-sector activity contracted sharply (PMI < 50) amid lockdowns.
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China
1. The Evergrande situation is pressuring regional high-yield indices (charts show index yields).
2. The Shanghai Shenzhen CSI benchmark index is in a wedge pattern. More penalties on DiDi and Evergrande risks pulled the market lower this morning.
3. Lower trade policy uncertainty has been a positive for the renminbi.
Source: ANZ Research
4. Hong Kong’s inflation remains subdued.
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Emerging Markets
1. Mexico’s core inflation continues to grind higher.
2. Country risk premium doesn’t seem to play a role in Brazil’s stock market valuation.
Source: McKinsey Read full article
3. Russia’s industrial production is running in line with the 2019 levels.
4. Thai exports are approaching record highs.
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Cryptocurrency
1. Bitcoin held support at the 55-week moving average.
h/t @ericlamTO
2. Bitcoin’s dominance ratio, which measures its market cap relative to the total market cap of major cryptocurrencies, is stabilizing around 46%.
Source: CoinDesk Read full article
3. Short-term holders who were underwater (holding Bitcoin significantly below the acquisition cost) have been in capitulation mode.Â
Source: @glassnode
4. ETH/BTC has been consolidating over the past two months. Will we see a breakout?
Source: Dantes Outlook
By the way, ether (ETH) has been outperforming major cryptocurrencies over the past week.
Source: FinViz
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5. Bitcoin is not an effective hedge against inflation.
Source: @WSJ Read full article
6. Which central banks are considering a digital currency?
Source: @axios Read full article
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Commodities
1. Coffee futures soared in response to the situation in Brazil
Source: Reuters Read full article
Orange juice futures are higher as well.
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2. Bloomberg’s broad commodity index hit a multi-year high.
3. Copper has pulled back along with inflation expectations.Â
Source: Yardeni Research
4. The nickel market is in deficit.
Source: Macquarie; @Scutty
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Energy
1. US frackers are not drilling enough to stabilize the number of drilled but uncompleted (DUC) wells.
Source: Princeton Energy Advisors
2. The active NYMEX natural gas contract is above $4.0/mmbtu.
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Equities
1. The percentage of bullish investors declined sharply this week.
2. Large growth stocks continue to lead the rally. Here is the ratio of the Nasdaq 100 ETF to the S&P 500 ETF.
3. The S&P 500 has been in a solid up channel over the past six months.
Source: Market Ethos, Richardson GMP
4. Small-caps began to underperform large-caps as the 10-year term premium declined.
Source: Variant Perception
5. Buyback activity has been recovering this year.
Source: @ISABELNET_SA, @jpmorgan
Source: @ISABELNET_SA, @JPMorganAM
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6. Despite lower implied vol, skew remains elevated as investors hedge against “tail risk.”
Source: S&P Global Market Intelligence
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Rates
1. The Fed’s securities holdings are approaching $8 trillion.
2. The Fed’s reverse repo balances are approaching $900 billion, allowing the central bank to limit liquidity growth in the financial system.
3. Deposit growth at US banks has slowed substantially, suggesting that bank buying of Treasuries could decline in the coming weeks, according to Deutsche Bank. This could result in higher yields.Â
Source: Deutsche Bank Research
4. The 10-year term premium is back near zero, along with relatively low volatility.
Source: Variant Perception
5. The iShares 20+ Year Treasury ETF (TLT) has broken above a year-long downtrend.
Source: Dantes Outlook
6. Treasury yields are tracking previous mid-cycle slowdowns, defined by decelerating industrial production growth.
Source: Deutsche Bank Research
7. Investors have been buying intermediate-term and long-term Treasury ETFs over the past month.
Source: Arbor Research & Trading
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Food for Thought
1. Rising US import prices:
Source: @WSJ Read full article
2. US casual dining winners and losers:
Source: Placer.ai
3. Apparel store visits (still below 2019 levels but not by much):
Source: Placer.ai
4. Largest US movie-theater operators:
Source: @WSJ Read full article
5. Sports betting legislation status:
Source: Forbes Read full article
6. Projected EV sales:
Source: US Department of Energy Read full article
7. Shopping differently going forward:
Source: Signifyd Read full article
8. Opposition to Tokyo Olympics:
Source: Statista
9. Access to electricity:
Source: The Energy Progress Report Read full article
10. US COVID cases:
Source: @axios Read full article
11. Wearing a mask:
Source: The Economist Read full article
12. Popular Olympians in 2021:
Source: Sports Business Journal Read full article
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Have a great weekend!
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