Bottlenecks at West Coast ports persist

The Daily Shot: 28-Jul-21
The United States
The United Kingdom
The Eurozone
Asia – Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Global Developments
Food for Thought



 

The United States

1. Despite increasing COVID cases, the Conference Board’s consumer confidence index is holding near pre-pandemic levels (exceeding forecasts).
 

 
This indicator continues to diverge from U. Michigan’s measure.
 

 
The labor differential (“jobs plentiful” – “jobs hard to get”) remains elevated.
 

 
The “jobs hard to get” indicator suggests that the unemployment rate should be significantly lower.
 
Source: Mizuho Securities USA  

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2. Durable goods orders were weaker than expected.
 

 
Nonetheless, the rebound in capital goods orders during this recovery has been remarkably strong.
 
Source: Mizuho Securities USA  
 
This chart shows durable goods orders without seasonal adjustments.
 

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3. The Richmond Fed’s manufacturing index surprised to the upside this month, although new orders growth moderated.
 

 
CapEx expectations remain robust.
 

 
Indicators of hiring and wage increases are soaring.
 

 
Supply bottlenecks continue to plague manufacturers in the region.
 
Supplier lead times:
 

 
Inventories:
 

 
Price pressures are hitting extreme levels.
 

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4. At the national level, inventories-to-sales ratios are at record lows.
 
Source: Deutsche Bank Research  
 
Source: @WSJ   Read full article  
 
Here is the Evercore ISI business survey question about inventory levels.
 
Source: Evercore ISI  
 
Bottlenecks at West Coast ports persist.
 
Source: @markets   Read full article  
 
Some of the tightness is driven by consumer demand for imports. This chart shows US imports of toys, games, and sports equipment.
 
Source: @WSJ   Read full article  
 
And increased back-to-school spending expectations are adding to the need to rebuild inventories.
 
Source: @WSJ   Read full article  

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5. Once again, the Case-Shiller home price appreciation report surprised to the upside.
 

 
Here is a similar index from the FHFA.
 

 
The massive divergence between housing prices and wages is not sustainable. Home price appreciation should begin to moderate shortly.
 


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The United Kingdom

1. UK retail sales remain robust, with the July CBI report exceeding forecasts.
 

 
2. Bank shares continue to underperform EU peers.
 
Source: @financialtimes   Read full article  
 
3. COVID cases are rapidly declining.
 
Source: @bespokeinvest  


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The Eurozone

1. The whole Bund curve is about to go negative.
 

 
2. The market is becoming more upbeat about bank dividends.
 

 
3. The recent spike in positive economic sentiment points to a rebound in GDP growth.
 
Source: MRB Partners  
 
4. The rate of expansion in the euro-area broad money supply has been moderating.
 

 
Loan growth trends have diverged.
 

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5. The number of job seekers in France is declining but remains above pre-COVID levels.
 

 
6. Businesses have been reporting materials/equipment shortages limiting production.
 
Source: Evercore ISI  


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Asia – Pacific

1. South Korea’s consumer confidence pulled back from the recent highs.
 

 
Separately, South Korea has been leading Asia’s semiconductor equipment spending surge.
 
Source: S&P Global Market Intelligence  

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2. Australia’s inflation was firmer in Q2 (roughly in line with expectations).
 

 
Here is the breakdown by sector.
 
Source: ING  
 
Australia’s bond yields continue to sink.
 


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China

1. Evergrande’s bonds keep plummeting, …
 

 
… which is driving up the HY index yield (2 charts) …
 

Source: @Lvieweconomics  
 
… and pressuring China’s property stock index.
 

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2. In dollar terms, Chinese equities are testing long-term support relative to EM. Is the sell-off overdone?
 
Source: Alpine Macro  
 
3. A higher renminbi could weigh on industrial profits.
 
Source: BCA Research  
 
The renminbi softened this week due to the tech selloff.
 

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4. Hong Kong equity implied vol jumped this week.
 
Source: Naoto Hosoda  
 
5. The PBoC has been more conservative relative to other central banks over the past year.
 
Source: Gavekal Research  
 
But it’s only a matter of time until the central bank moves to cut policy rates, according to Gavekal.
 
Source: Gavekal Research  

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6. The surge in producer price inflation could reverse due to slower economic growth.
 
Source: BCA Research  
 
7. Manufacturing investment remains weak despite the recent rise in exports.
 
Source: BCA Research  
 
8. As we saw earlier, the World Economics SMI report showed an acceleration in business activity this month. The improvement was particularly strong in services.
 
Source: World Economics  


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Emerging Markets

1. Mexico’s economic activity is approaching pre-COVID levels.
 

 
The nation’s trade balance surprised to the downside again.
 

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2. Agriculture’s share of Brazil’s exports has been rising (2 charts).
 
Source: @financialtimes   Read full article  
 
Source: @financialtimes   Read full article  
 
Separately, foreign direct investment has been trending lower (collapsing in June).
 

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3. Hungary’s central bank hiked rates again.
 

 
4. Higher commodity prices typically result in tighter EM bond spreads.
 
Source: UBS Asset Management  


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Cryptocurrency

1. Cryptocurrencies have rallied over the past week, led by Bitcoin.
 
Source: FinViz  
 
2. Bitcoin’s drawdown narrowed to around 40% over the past week, which is roughly halfway through previous bear markets.
 
Source: Koyfin   Read full article  
 
3. Bitcoin’s short-squeeze rally triggered the most active trading session this quarter.
 
Source: Skew  
 
Short liquidations were unusually large.
 
Source: Valérie Noël, The Block  

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4. Bitcoin’s average transaction fee has been declining in recent months, but we should see a rebound shortly.
 
Source: The Block  
 
5. Bitcoin’s 1-month put-call options skew has declined sharply over the past week. This could mean investors are no longer seeking downside protection.
 
Source: Skew   Read full article  


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Commodities

1. Speculative bets on commodities have peaked.
 
Source: Arbor Research & Trading  
 
2. Some analysts see base metals prices moderating in the second half of the year.
 
Source: @FocusEconomics  
 
3. US orange juice futures are surging due to the weather situation in Brazil.
 


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Energy

1. US energy shares continue to underperform crude oil.
 

 
2. European natural gas prices have been surging amid a spike in electricity demand (heatwave).
 


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Equities

1. Small caps continue to underperform (chart shows the ratio of Russell 2000 ETF to S&P 500 ETF).
 

 
2. Equity ETF inflows have been impressive this year.
 
Source: @markets, h/t @DiMartinoBooth   Read full article  
 
3. Value ETFs saw some outflows recently.
 
Source: @LizAnnSonders, @Bloomberg  
 
4. Corporate margin growth remains robust.
 
Source: @FactSet   Read full article  
 
Source: @axios  

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5. M&A is becoming more challenging in the current environment.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Source: @WSJ   Read full article  

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6. Here is the S&P 1500 Automobiles subindex.
 
Source: S&P Global Market Intelligence  
 
7. Which sectors are investors more likely to avoid due to moral/ethical reasons?
 
Source: MagnifyMoney   Read full article  


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Credit

1. 1st-lien recovery expectations continue to trend lower due, in part, to more loan-only structures (lower debt cushion).
 
Source: @lcdnews   Read full article  
 
2. Muni bonds tend to be in the higher-rated portion of fixed-income markets.
 
Source: Quill Intelligence  
 
General government obligations comprise nearly half of the speculative-grade muni market.
 
Source: Quill Intelligence  
 
Higher property tax payments have boosted municipal revenues.
 
Source: Quill Intelligence  


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Global Developments

1. More global firms are mentioning rebounding consumer spending.
 
Source: Deutsche Bank Research  
 
2. OECD consumer confidence is approaching pre-pandemic levels.
 
Source: Deutsche Bank Research  
 
3. Higher commodity prices have benefitted net-export currencies.
 
Source: UBS  
 
4. Business activity growth in developed economies is peaking.
 
Source: JP Morgan; @dlacalle_IA  
 
5. Supplier delivery bottlenecks have been severe in major manufacturing hubs.
 
Source: @RobinBrooksIIF  


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Food for Thought

1. The most popular chat apps in the US:
 
Source: Statista  
 
2. Demand for China’s surveillance tech:
 
Source: @adam_tooze, @FT   Read full article  
 
3. Intel’s vs. AMD’s market share:
 
Source: @Noahpinion, @AlecStapp  
 
4. Artificial objects in orbit:
 
Source: Statista  
 
5. Ransomware attacks:
 
Source: Bloomberg   Read full article  
 
6. Emissions forecasts:
 
Source: Gavekal Research  
 
7. US COVID-related hospital admissions (2 charts):
 
Source: Longview Economics  
 
Source: @carlquintanilla, @fundstrat  

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8. New York City subway usage:
 
Source: Todd Schneider  
 
9. Prices paid for new vs. one-year-old used vehicles:
 
Source: @WSJ   Read full article  
 
10. Internet “may be a passing fad” (December 2000):
 
Source: @th3j35t3r  

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