The Daily Shot: 04-Aug-21
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Asia – Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. June factory orders topped forecasts, hitting the highest level since 2014.
The latest capital goods orders figures point to a substantial increase in business investment.
Source: Reuters Read full article
And low inventories indicate further gains in investment going forward.
Source: @RenMacLLC
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2. US supply chain disruptions have been the most severe globally.
Source: @RobinBrooksIIF
But the drop in the number of days West Cost port vessels have been delayed points to some easing in supply-chain bottlenecks.
Source: @CPesti
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3. Next, we have some updates on housing.
• Freddie Mac’s home price index is up 19% from a year ago.
h/t @lenkiefer
• But according to CoreLogic, home price appreciation has peaked, and we should return to more sustainable growth over the next 12 months.
Source: CoreLogic
• The updated U. Michigan sentiment report shows that consumers are most negative on buying conditions for homes since the early 1980s.
• Rental housing demand is surging.
Source: @wealth Read full article
• Fewer tenants are moving out of apartments to buy a home.
Source: Evercore ISI
• Companies focused on apartment rentals have been outperforming.
Source: @WSJ Read full article
• Where will we see the highest share of evictions once the moratorium ends?
Source: Redfin
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4. US automobile sales declined more than expected in July amid tight inventories and rising prices.
5. Oxford Economics expects to see over a million new jobs created in July.
Source: Oxford Economics
6. Americans have become pessimistic about the coronavirus situation.
Source: Gallup Read full article
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Canada
1. Manufacturing growth has been moderating but remains healthy.
2. Consumer confidence has peaked.
3. Bond yields continue to fall.
4. The share of gold mining stocks in the TSX Index has declined over the past few years.
Source: Market Ethos, Richardson GMP
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The United Kingdom
1. Let’s begin with the labor market.
• Layoffs will hit the lowest level in years, according to Google search data.
Source: Pantheon Macroeconomics
• Furloughs continue to moderate.
Source: Pantheon Macroeconomics
• Job openings are rising.
Source: Bloomberg Read full article
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2. The BoE is likely to boost its inflation forecast this month.
Source: Derek Holt, Scotiabank Economics
3. Terrorism and immigration contributed to the Brexit win in 2016.
Source: BCA Research
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The Eurozone
1. Longer-term rates continue to fall.
The current 30yr Bund has a coupon of zero and is trading above par again.
Here is what it will be worth over time in real terms under different inflation assumptions.
Source: Deutsche Bank Research
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2. The euro has been weakening against the Swiss franc.
3. Spain’s unemployment declined sharply in July.
4. Italian polls suggest that the Brothers of Italy party is rapidly gaining support at the expense of Lega. While both parties are Eurosceptics, Brothers of Italy poses less risk to the EU/EMU than Lega.
Source: Europe Elects
5. The Eurozone PPI index is in the upper end of its multi-year range.
6. Equipment shortages have become a significant drag on production.
Source: Henry H. McVey, KKR
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Asia – Pacific
1. The yen should be much stronger, given the drop in the US-Japan real yield differential.
Source: @ISABELNET_SA, @MorganStanley
3. Singapore Whole Economy PMI shows business activity accelerating.
Source: IHS Markit
4. Next, we have some updates on Australia.
• Given the spike in new COVID cases, markets expected the RBA to backtrack on its “taper” plans. It didn’t. The Aussie dollar moved higher.
• The RBA’s commodity price index is surging.
• The GDP will be approaching its pre-COVID trend over the next couple of years.
Source: Livewire Read full article
• Investors once again dominate new mortgage lending activity.
Source: @CallamPickering
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5. New Zealand’s unemployment rate unexpectedly dipped back to 4%.
And wage growth shot up.
A rate hike this month is now a near certainty. Moreover, the market is quite sure that the RBNZ will hike again in October and perhaps in November.
The Kiwi dollar jumped.
Bond yields continue to climb.
Here is the OIS curve.
Source: Bloomberg
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China
1. Markit’s services PMI rebounded in July but the index has been volatile.
2. Housing prices have fallen below the long-term trend this year.
Source: Gavekal Research
Housing sales growth is also slowing.
Source: Gavekal Research
The steady decline in housing inventory, now at a historical low relative to sales, could push developers to replenish their pipeline, according to Gavekal.
Source: Gavekal Research
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3. Electric vehicle stocks have held up even as education shares sold off during the latest regulatory crackdown.
Source: Koyfin; Dantes Outlook
4. Here is the expected shift in China’s energy mix in the decades ahead.
Source: Henry H. McVey, KKR Read full article
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Emerging Markets
1. Let’s begin with Brazil.
• Exports remain robust.
• Manufacturing growth is holding up well.
• Industrial production is holding at pre-COVID levels.
• Automobile sales have been soft and are now at 2020 levels.
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2. Chilean car sales are surging.
• The Citi Economic Surprise Index for Chile is at multi-year highs.
• The Chilean peso is tumbling, …
… due to the Escondida situation.
Source: @WSJ Read full article
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3. Next, we have some updates on Mexico.
• Second-quarter GDP growth was below forecasts.
• Consumer confidence held steady last month.
• Remittances remain unusually high.
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4. Colombia’s unemployment rate is still elevated.
5. Russia’s 2-year government bond yield has risen along with inflation expectations over the past year.
Source: Morgan Stanley Research
Meanwhile, Russia’s economic recovery remains frail.
Source: BCA Research
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6. Turkey’s inflation hit 19%.
7. India’s eight core industries’ performance is running below 2019 levels.
India’s stock index is hitting record highs.
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8. Thailand’s business sentiment deteriorated last month as the pandemic takes a toll.
Thai exports have been holding near record highs.
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9. Vietnam’s economic activity is deteriorating due to COVID.
Source: ANZ Research
10. EM currencies have underperformed G10 in recent years.
Source: @RobinBrooksIIF
11. EM local currency bonds have historically performed well at the end of a hiking cycle, which could support duration risk, according to Morgan Stanley.
Source: Morgan Stanley Research
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Commodities
1. US wholesale dairy prices have been under pressure due to increased global competition, elevated inventories, and somewhat weaker domestic demand.
2. Which commodities will be impacted by the soaring demand for lithium-ion batteries?
Source: @financialtimes Read full article
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Energy
1. Brent crude is trading below the 50-day moving average.
2. US retail gasoline prices continue to grind higher.
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Equities
1. The market is not concerned about tax policy risks. Goldman’s high-tax-rate names have been outperforming.
2. The most-shorted stocks have been struggling as the Reddit crowd loses interest.
3. “Reopening” stocks underperformed this week.
Below are several additional sector trends.
• Healthcare:
• Housing:
• Banks:
• Industrials:
• Communication Services:
• Consumer Staples:
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4. Here are a couple of thematic portfolios.
• Solar energy:
• Sports betting:
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5. BofA’s private clients’ equity allocations are at record highs.
Source: @ISABELNET_SA, @BofAML
6. The correlation between FAANG stocks and Treasury bond prices has been elevated.
Source: Alpine Macro
7. This chart shows the July performance of large-cap shares around the world.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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Credit
1. US banks’ lending standards for business loans are the easiest in at least three decades. Demand remains tepid.
Source: Federal Reserve Board
2. Auto ABS recoveries hit record levels amid elevated automobile prices.
Source: Fitch Ratings
3. This chart shows European high-yield bond issuance led by private-equity sponsors.
Source: @lcdnews Read full article
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Rates
1. The market expects slower Fed rate hikes after liftoff.
Source: Morgan Stanley Research
2. Long-term expectations of short-term rates are a significant driver of Treasury yields relative to term premiums.
Source: Morgan Stanley Research
3. Fixed-income assets tend to perform well in August.
Source: LPL Research
4. This chart shows the gap between global PMIs (business activity) and Treasury yields.
Source: @AndreasSteno
5. Bank lending has flatlined this year. As a result, banks have been holding more Treasury securities, boosting demand.
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Global Developments
1. Here is a look at July manufacturing PMIs by country.
Source: IHS Markit
2. Which manufacturers have the most pricing power?
Source: @RobinBrooksIIF
3. Semiconductor sales have been surging.
Source: @RichardDias_CFA
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Food for Thought
1. Views on automation:
Source: Morning Consult Read full article
2. Perceived influence of religion:
Source: Gallup Read full article
3. Monthly traffic on media websites:
Source: @axios Read full article
4. Transportation modes for each country’s daily commute:
Source: Statista
5. Sea surface temperatures in the Great Barrier Reef:
Source: @chartrdaily
6. Views on government pandemic response vs. COVID deaths:
Source: Pew Research Center Read full article
7. A sudden jump in US vaccination rates:
Source: @carlquintanilla, @fundstrat
8. When will business travel spending return to 2019 levels?
Source: Deloitte Insights Read full article
9. The smallest capitals in the world:
Source: Statista
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