Posted on by The Daily Shot Editor: Lev Borodovsky

Households’ expectations of personal finances deteriorate

The Daily Shot: 16-Aug-21
• The United States
• The Eurozone
• Europe
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Alternatives
• Credit
• Rates
• Global Developments
• Food for Thought

 

The United States

1. The U. Michigan’s consumer sentiment report was a shocker, with the composite index hitting the lowest level in a decade. Increased concerns about the resurgent pandemic and sharp price gains have taken a toll on household confidence.
 

 
Source: Reuters   Read full article  
 
• It was the worst negative surprise on record.
 
Source: @bespokeinvest   Read full article  
 
The Citi Economic Surprise Index declined further.
 

 
• Treasury yields and the dollar slumped in response to the U. Michigan report.
 
  Further reading  
 
• Households’ expectations of personal finances deteriorated sharply.
 

 
• Buying conditions for household durables and vehicles deteriorated further, driven by concerns about rising prices.
 

 

 
Source: @DataArbor  

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2. In addition to the U. Michigan report, the COVID situation …
 
Source: Reuters   Read full article  
 

 
… is starting to show up in other high-frequency data.
 
• OpenTable seated diners:
 

 
• The Evercore ISI business survey:
 
Source: Evercore ISI  
 
Economists are downgrading their 2021 GDP estimates, with growth pushed into 2022.
 

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3. Next, we have some updates on inflation.
 
• Consumer inflation expectations remain elevated.
 

 
• Economists continue to boost their inflation forecasts.
 
Source: @markets   Read full article  
 

 
• Gains in import prices appear to be peaking.
 

 
Here the import price index.
 

 
• Nordea expects inflationary pressures to fade before a spike of rent-of-shelter prices forces the Fed to taper later this year.
 
Source: Nordea Markets  
 
• Producer price increases have been outpacing consumer prices, potentially creating margin pressures in some sectors.
 

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4. The bipartisan infrastructure legislation is not expected to have a material impact on the deficit.
 
Source: Mizuho Securities USA  

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The Eurozone

1. German wholesale prices continue to surge.
 

 
2. Euro-area underlying inflation is rising longer than expected, which suggests further upside to core goods inflation, according to Deutsche Bank (2 charts)
 
Source: Deutsche Bank Research  
 
Source: Deutsche Bank Research  

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3. The French unemployment rate held at 8% in Q2.
 

 
4. The Eurozone’s June trade surplus surprised to the upside, and the May figure was revised higher.
 

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Europe

1. Sweden’s underlying inflation is back at 0.5%.
 

 
2. Poland’s GDP growth strengthened last quarter, …
 

 
… as exports hit record highs (for this time of the year).
 

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3. The MSCI Europe index has outperformed the US equivalent year-to-date.
 

 
European equity valuations continue to improve.
 
Source: @ISABELNET_SA, @GoldmanSachs  

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4. This map shows average wholesale electricity prices across Europe.
 
Source: @fbeirao  

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Japan

1. The Q2 GDP growth was a bit stronger than expected.
 

 
Private consumption and business investment surprised to the upside.
 

 

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2. The Nikkei 225 Index is testing minor support relative to the Topix Index. The Nikkei/Topix ratio reversed a long-term uptrend around March after the BoJ ended its decade-long buying of Nikkei ETFs.
 
Source: Dantes Outlook  
 
3. USD/JPY broke out of a 5-year downtrend with resistance around 113.
 
Source: Dantes Outlook  

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Asia – Pacific

1. Aussie-yen us testing support as global sentiment shifts to risk-off amid pandemic concerns. The situation in Afghanistan is also contributing to a cautious mood.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. Asian HY spreads to the US have blown out.
 
Source: @DavidInglesTV  

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China

1. The July data surprised to the downside, pointing to an ongoing economic slowdown.
 
• Retail sales unexpectedly declined last month.
 

 

 
• Growth in industrial production continues to trend lower.
 

 

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2. Home price appreciation slowed.
 

 
3. Foreign direct investment remains robust.
 

 
4. The PPI-CPI gap has blown out, which could pressure corporate margins.
 
Source: BCA Research  

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Emerging Markets

1. India’s exports hit a record high last month.
 

 
2. Malaysia, Thailand, and Vietnam continue to see higher COVID cases.
 
Source: BCA Research  
 
3. Russia’s economic growth remains anemic, with the Q2 GDP rising 1.7% vs. the second quarter of 2019.
 

 
4. Israel’s inflation was modestly stronger than expected as prices rise above pre-COVID levels.
 

 
5. Brazil’s economic activity increased in June, holding above pre-COVID levels.
 

 
6. Argentina’s unofficial exchange rate continues to diverge from the official one. Will the government accelerate the peso’s depreciation?
 
Source: @TheTerminal, Bloomberg Finance L.P., h/t @RobinBrooksIIF  

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Cryptocurrency

1. Bitcoin is holding above the 200-day moving average.
 

 
2. The total crypto market value is back above $2 trillion.
 
Source: @markets   Read full article  
 
Source: CoinGecko  

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3. A majority of Investopedia readers have reduced their crypto holdings along with other speculative activities over the past month.
 
Source: Investopedia   Read full article  
 
4. Media coverage of crypto markets has been slowing.
 
Source: Arbor Research & Trading  

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Commodities

1. Aluminum is trding near the highest level in a decade.
 

 
2. China’s coal industry faces strict import restrictions and constrained domestic production.
 
Source: ANZ Research  
 
3. Here is a look at 1-year excess returns across major commodities relative to the Bloomberg Commodity Total Return Index.
 
Source: Christian Gerlach  
 
4. The shift from fossil fuels will support a number of commodity markets.
 
Source: BCA Research  

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Energy

1. Global stockpiles of crude oil continue to trend lower.
 
Source: @BurggrabenH  
 
Source: @HFI_Research  

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2. Here is the US government’s forecast for petroleum liquids production.
 
Source: EIA  
 
3. Severe tightness in LNG supply is keeping European imports low, which contributes to surging gas prices. 
 
Source: ANZ Research  

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Equities

1. Small caps underperformed sharply last week.
 

 
Here is the year-to-date relative performance.
 

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2. Large-cap funds have been dominating fund inflows recently.
 
Source: Deutsche Bank Research  
 
3. S&P 500 revenue surprises are hitting new records.
 
Source: @FactSet   Read full article  
 
4. Share buyback activity is running at a near-record pace.
 
Source: Goldman Sachs; @SamRo  
 
5. SPAC issuance cooled in the second quarter.
 
Source: S&P Global Market Intelligence  
 
6. The decline in the 10-year Treasury real yield contributed to a higher S&P 500 price-to-earnings ratio.
 
Source: III Capital Management  
 
7. The underperformance of travel and leisure stocks has coincided with a decline in Treasury yields over the past few months.
 
Source: Acorn Macro Consulting  
 
8. Should investors be concerned about a negative Marshallian K?
 
Source: @markets   Read full article  
 
9. Equity analysts haven’t been this optimistic in years.
 
Source: @markets   Read full article  
 
10. VVIX (vol of vol) has diverged from VIX. Traders are buying call options on VIX as a hedge against a market downturn.
 
Source: Chris.L.Murphy  

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Alternatives

1. Here is a look at alternative investment performance between 1999 and 2018.
 
Source: J.P. Morgan Asset Management  
 
2. Roughly one-third of investors plan to increase their exposure to co-investments this year, according to a survey by JPMorgan.
 
Source: JP Morgan, h/t Zoetrope of Finance  
 
3. GP-led secondary transaction volumes have increased over the past few years.
 
Source: J.P. Morgan Asset Management  
 
4. VC funding hit a new record last quarter.
 
Source: @chartrdaily  
 
5. Nearly half of hedge fund managers surveyed by AIMA do not factor ESG into their investment decisions…
 
Source: AIMA, h/t Zoetrope of Finance   Read full article  
 
…and most have no plans to launch ESG oriented funds over the next 12 months.
 
Source: AIMA, h/t Zoetrope of Finance   Read full article  

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6. Global hedge funds’ assets under management have grown steadily.
 
Source: BofA Global Research, h/t Zoetrope of Finance  
 
7. Private credit funds’ assets and dry powder have been surging in recent years.
 
Source: Bloomberg   Read full article  

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Credit

1. The ratio of B-rated and BB-rated bond spreads has turned higher, as some caution returns into the credit markets.
 
Source: CreditSights  
 
2. The high-yield share of US corporate bond issuance hit a multi-year high this year.
 
Source: @lcdnews, @JakemaLewis   Read full article  
 
3. High-yield muni spreads declined relative to high-yield corporates as state and local government net savings turned positive. 
 
Source: BCA Research  
 
4. More muni debt has been sold through competitive auctions this year amid strong investor demand.
 
Source: @markets   Read full article  

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Rates

1. Markets expect the Fed’s taper to be completed at the beginning of 2023.
 
Source: Morgan Stanley Research  
 
2. JP Morgan’s clients are increasingly neutral on Treasuries.
 
Source: @markets   Read full article  
 
3. Treasury positioning is still net short despite the recent squeeze (2 charts).
 
Source: Nordea Markets  
 
Source: Longview Economics  
 
4. This chart shows short interest in the iShares 20+ Year Treasury ETF (TLT).
 
Source: @markets   Read full article  

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5. Treasury issuance has been almost fully absorbed by QE over the past 90 days, and will likely continue, according to Nordea.
 
Source: Nordea Markets  

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Global Developments

1. Gains in container rates appear to be slowing.
 

 
But dry bulk shipping costs hit a multi-year high last week.
 

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2. The dollar is holding long-term support.
 
Source: Acorn Macro Consulting  
 
3. What percentage of each country’s population is vaccinated?
 
Source: Desjardins  

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Food for Thought

1. US job vacancies vs. the number of people unemployed:
 
Source: @chartrdaily  
 
2. Video game player demographics:
 
Source: ESA   Read full article  
 
3. Talent pools of top tech markets:
 
Source: @axios   Read full article  
 
4. Support timeframes for Windows versions:
 
Source: Statista  
 
5. 200 fake Facebook accounts were created as part of an experiment. Half were posting pro-vaccine items, half were anti-vax. The chart shows how many were reported and removed by Facebook.
 
Source: @pkedrosky, u/TheB1gHamtard   Read full article  
 
6. Share of tax relief from SALT cap policy changes:
 
Source: Cornerstone Macro  
 
7. Republicans’ confidence in big business:
 
Source: Mehlman Castagnetti Rosen & Thomas   Read full article  
 
8. US coal production:
 
Source: @EIAgov   Read full article  
 
9. Shark meat exports:
 
Source: Statista  
 
10. Centers of origin of agriculture:
 
Source: Andrea Matranga   Read full article  

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