The Daily Shot: 05-Aug-21
• The United States
• The United Kingdom
• The Eurozone
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. The ISM Services PMI index hit a record high last month, pointing to rapid growth in the service sector.
Here are the components.
Source: Oxford Economics
• Hiring resumed after a pause in June.
• Supply-chain challenges persist.
– Inventory sentiment:
– Order backlog:
– Supplier delivery times:
• Price pressures show no signs of easing.
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2. Next, we have some additional updates on inflation.
• Google search activity for “hyperinflation” is down sharply.
Source: @LizAnnSonders
• The Fed continues to see inflation expectations as “well-anchored.”
• Wholesale used car prices have peaked, which will pull down the core goods CPI.
h/t @DiMartinoBooth, @Manheim_US
• More landlords are raising rents, which should boost the services CPI in the months ahead.
Source: Ed Hyman, Evercore ISI
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3. The Fed’s Clarida sounded a bit more hawkish (or more certain) than markets expected.
Source: CNBC Read full article
Treasury yields moved higher in response.
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4. The positive news from the ISM Services report was offset by soft ADP private employment data. According to ADP, the number of jobs created in July was less than half the level expected by economists.
Source: ADP Research Institute
Here is the breakdown by sector.
Source: ADP Research Institute
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5. Mortgage applications for house purchase are holding at 2019 levels.
Rate locks are running between 2019 and 2020 levels.
Source: AEI Housing Center
Mortgage rates continue to drift lower.
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6. Hotel occupancy is at pre-pandemic levels.
Source: Deutsche Bank Research
7. This chart shows sector PMI measures from IHS Markit.
Source: IHS Markit
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The United Kingdom
1. Service-sector growth remains strong.
Source: IHS Markit
2. Businesses are passing higher costs on to the consumer, which should boost services CPI.
Source: Pantheon Macroeconomics
UK inflationary pressures have sharply diverged from the Eurozone.
Source: Longview Economics
Here is the median CPI inflation rate.
Source: Longview Economics
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The Eurozone
1. Euro-area business activity is growing at the fastest pace since 2007.
Source: IHS Markit
Here are some service PMI trends.
• Spain (a bit softer than expected):
• Italy:
• Germany:
Source: IHS Markit
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2. Bund yields continue to fall, …
… with the whole curve dipping into negative territory.
Other Eurozone yields are also becoming more negative.
This trend is driving the global market value of negative-yielding debt higher.
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3. Italian retail sales are back at the pre-COVID trend.
But at the Eurozone level, retail sales have risen well above the multi-year trend.
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China
1. Gaming companies remain under pressure (2 charts).
Source: Gavekal Research
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2. Equity volatility has risen sharply.
Source: S&P Global Market Intelligence
3. Treaders are betting on PBoC easing, as short-term swap rates move lower.
4. Next, we have some data on mobile payments in China.
Source: BIS Read full article
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Emerging Markets
1. Let’s begin with Brazil.
• As expected, the central bank delivered another aggressive rate hike, …
… as inflation strengthens.
Source: Scotiabank Economics
Bond yields continue to climb (expectations of further tightening).
But how much will the central bank raise rates before shifting into neutral? Oxford Economics now expects BCB to overshoot before moving to neutral rate.
Source: Oxford Economics
• Growth in Brazil’s service-sector activity remains at multi-year highs.
Source: IHS Markit
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2. Mexican vehicle sales have been soft.
3. South Africa’s economy is in trouble.
Source: IHS Markit
4. Russia’s service sector grew at a slower pace last month.
5. India’s service-sector recession eased a bit, …
Source: IHS Markit
… as the number of new cases drops.
Source: @WSJ Read full article
The IMF sharply downgraded its outlook for India’s 2021 GDP growth.
Source: Truist Advisory Services
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Cryptocurrency
1. Ether has outperformed other large cryptocurrencies over the past week.
Source: FinViz
2. The recent decline in Bitcoin’s active supply suggests investors have been holding their coins, which further reduces the total supply available to be sold, according to Glassnode.
Source: Glassnode Read full article
3. The exchange reserves of altcoins AAVE and UNI have been declining, which could reflect investors’ preference to hold tokens in wallets instead of sell on exchanges.
Source: CryptoQuant Read full article
4. The BTC long/short ratio on the Binance exchange has risen over the past two weeks.
Source: The Block
5. Bitcoin’s 90-day correlation with gold turned negative for the first time since November 2017.
Source: Koyfin Read full article
6. Genesis Trading recorded increased demand for systematic put protection from crypto native hedge funds and corporate treasury counterparties during the Q2 sell-off.
Source: Genesis Trading
Genesis also reported a broadening of crypto assets supported on their platform as clients engaged in spread trades across BTC, ETH, and other cryptos – mostly led by increasing demand for large-cap DeFi products.
Source: Genesis Trading
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7. It’s the Wild, Wild West in cryptoland, according to Gary Gensler.
Source: @WSJ Read full article
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Commodities
1. Iron ore futures are down 6% today.
2. Platinum is underperforming amid concerns about slower EV production due to chip shortages.
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Energy
1. US gasoline demand is at multi-year highs for this time of the year.
And gasoline inventories are back at 2019 levels.
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2. Demand for jet fuel continues to rebound.
Source: @HFI_Research
3. The 3-2-1 crack spread (a proxy of refinery margins) keeps climbing.
Source: @HFI_Research
4. The September Henry Hub natural gas futures contract is now firmly above $4/mmbtu.
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Equities
1. “Stay at home” stocks have been outperforming this summer.
h/t @DRBCurtis Further reading
2. Early-cycle sectors have been underperforming.
Source: @ISABELNET_SA, @MorganStanley
3. The Russell 2000/Nasdaq 100 ratio continues its multi-year downward trend.
4. Small- and micro-caps have been stuck in a range.
Source: @granthawkridge
5. How do stocks perform through the presidential cycle?
Source: @ISABELNET_SA, @BofAML
6. Here is the S&P 500 relative to its seasonal pattern.
Source: @Callum_Thomas, @topdowncharts, h/t @ISABELNET_SA
7. The S&P 500 growth index is much more top-heavy than value.
Source: S&P Global Market Intelligence
8. The mother of meme stocks?
9. ETF inflows have already surpassed last year’s levels, driven by equity.
Source: @financialtimes, h/t @ISABELNET_SA Read full article
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Credit
1. US CLO issuance continues to surge.
Source: Deutsche Bank Research
AAA buyers (mostly banks) can still get a 50 bps pickup on CLO debt vs. corporate bonds.
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2. Issuance of commercial real estate collateralized loan obligations is hitting new highs.
Source: @WSJ Read full article
3. Banks are starting to ease lending standards on commercial real estate debt while demand is increasing.
Source: Federal Reserve Board
4. Undrawn lending commitments (to businesses) at large banks are surging.
Source: @WSJ Read full article
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Global Developments
1. Let’s start with some updates on housing markets.
• Housing price trends in the OECD:
Source: @financialtimes Read full article
• Real house prices in advanced economies since 1900:
Source: Oxford Economics
• House price upturns during different periods:
Source: Oxford Economics
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2. The business cycle has moved from the recovery phase to the expansion phase (2 charts).
Source: TS Lombard
Source: Fidelity Investments
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3. Economic surprise indices have been trending lower.
Source: Mizuho Securities USA
4. This scatterplot shows manufacturing PMIs (business activity) vs. vaccination rates.
Source: Our World in Data; @WilliamsonChris
5. Morgan Stanley expects the dollar to strengthen as US real rates rise and inflation expectations decline, typically associated with Fed hawkishness.
Source: Morgan Stanley Research
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Food for Thought
1. Potential costs of Biogen’s new Alzheimer’s drug:
Source: The New York Times Read full article
2. Common signs of heat exhaustion:
Source: @SacramentoOES
3. Confidence in the healthcare system to handle future emergencies:
Source: Pew Research Center Read full article
4. Chinese vaccine usage:
Source: Statista
5. New patents filed in renewable energy tech are grinding to a halt.
Source: Clarion Energy Read full article
6. Plastic production:
Source: Statista
7. Views on Pope Francis:
Source: @PewReligion Read full article
8. Gender pay gap in the US:
Source: Pew Research Center Read full article
9. Low-paid workers:
Source: EPI Read full article
10. Innovation cycles:
Source: Visual Capitalist Read full article
11. Comparing every sports ball:
Source: Visual Capitalist; h/t @HTLasVegas, @rcgeconomics Read full article
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