The Daily Shot: 26-Aug-21
• The United States
• Canada
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Global Developments
• Food for Thought
The United States
1. Outside of some weakness in aircraft parts, US durable goods orders improved further in July.
Capital goods orders were flat (at elevated levels), but shipments continued to march higher.
——————–
2. Mortgage applications to buy a home typically decline this time of the year. Instead, we got an increase, with the purchase index now well above 2019 levels.
Rate locks moved higher as well.
Source: AEI Center on Housing Markets and Finance
Housing demand remains exceptionally strong.
Source: Redfin
——————–
3. Retail sales have been running well above average levels.
Source: FHN Financial
Adjusted for inflation, retail sales have been moderating from record highs. We are likely to see further easing toward the pre-pandemic trend.
Source: MRB Partners
——————–
4. Oxford Economics expects inflation to cool next year, driven by a gradual unwind of supply constraints and moderating demand growth.
Source: Oxford Economics
Danske Bank also expects US inflation to moderate and converge with Europe next year.
Source: Danske Bank
——————–
5. Despite the COVID spike, Americans don’t seem to be too concerned about losing their job.
Source: @axios Read full article
Back to Index
Canada
1. According to BCA Research, supply constraints pose a lingering upside risk for inflation.
Source: BCA Research
2. The Oxford Economics Recovery Tracker is off the highs due to an increase in COVID cases.
Source: Oxford Economics
3. This chart shows Canada’s poll tracker.
Source: Scotiabank Economics
What do Canadians see as the most important issues facing their country?
Source: BCA Research
Back to Index
The Eurozone
1. Bund yields jumped on Wednesday.
Longer-term inflation expectations are grinding higher.
——————–
2. French equities have been outperforming the Nasdaq Composite this year.
Source: Richard Bernstein Advisors
3. Germany’s Ifo Business Expectations index slumped this month. Supply constraints are taking a toll on the nation’s industry.
Source: Reuters Read full article
Source: ifo Institute
Back to Index
Europe
1. Swiss economic expectations plunged in August.
2. European tech firms continue to outperform the broader market.
h/t @_kitrees
Back to Index
Asia – Pacific
1. Japan’s service-sector PPI declined last month.
2. South Korea’s central bank hiked rates (from record lows) for the first time since 2018. This was a surprise to many economists who expected tightening to come later this year.
The central bank is concerned about rising household debt, …
… and surging housing prices.
Source: ING
The central bank Governor Lee Ju-yeol indicated that policy remains highly accommodative. The won declined.
——————–
3. Asian investment-grade bond spreads continue to tighten.
Source: Kyungji Cho
4. Exports from Asia surged since the start of the pandemic.
Source: Longview Economics
5. Next, we have some updates on Australia.
• Mobility has been deteriorating.
Source: ANZ Research
• Business investment was stronger than expected last quarter.
• According to ANZ, the budget deficit is likely to be much worse than the government’s projection.
Source: ANZ Research
Back to Index
China
1. Construction activity has been moderating,
Source: Gavekal Research
Housing sales growth has slowed.
Source: Gavekal Research
——————–
2. Next, we have some updates on China’s demographics.
• Number of births:
Source: @business Read full article
• Fertility rate:
Source: Alpine Macro
• GDP per capita and population growth:
Source: Alpine Macro
• Agriculture employment:
Source: Alpine Macro
• Younger children and older adults:
Source: Yardeni Research
• Migrant workers (numbers and age trends):
Source: @WSJ Read full article
Source: @WSJ Read full article
——————–
3. Protests by workers in the education sector have been rising.
Source: @bpolitics Read full article
Back to Index
Emerging Markets
1. Let’s begin with Brazil.
• Federal revenue surged this year.
• Inflation continues to climb.
• Brazil’s 10-year yield has risen significantly this year, more so than in Russia and Mexico. The market is pricing in sustained rate hikes ahead.
Source: Variant Perception
——————–
2. Mexico had a strong second quarter, but there was a pullback in June.
This chart shows Mexico’s goods and services CPI trends.
Source: Scotiabank Economics
——————–
3. Russia’s industrial production weakened in July.
4. Turkey’s manufacturing confidence and capacity utilization remain resilient.
5. Thailand’s car sales hit a multi-year low in July (for this time of the year).
Source: Bangkok Post Read full article
——————–
6. The return profile of hedged EM local currency debt is similar to Treasuries.
Source: Variant Perception
As the dollar rebounded, local-currency bonds underperformed USD-denominated debt (in dollar terms).
Back to Index
Cryptocurrency
1. Bitcoin’s move above 50k was not sustained.
2. Leveraged funds piled into bearish bets on bitcoin last week, most likely to hedge long spot positions.
Source: CoinDesk Read full article
3. Bitcoin’s spot trading volume remains subdued and is roughly half of what the market experienced the last time BTC traded around $50K, according to Arcane Research.
Source: Arcane Research Read full article
4. Cardano’s ADA appears overbought after a strong breakout to all-time highs.
Source: Dantes Outlook
ADA has also broken out relative to ETH (viewed as direct competitors).
Source: Dantes Outlook
The article below provides an overview of the situation.
Source: WCCF TECHÂ Read full article
——————–
5. Here is Coinbase’s market cap alongside other leading exchanges.
Source: Richard Bernstein Advisors
6. DeFi stablecoin lending rates are rising.
Source: Skew
7. NFT sales are surging.
Source: Reuters Read full article
Source: CoinGecko
Back to Index
Commodities
1. China’s steel demand saw a substantial drop recently, pressuring iron ore prices.
Source: Macquarie; @Scutty
Mills are not planning to raise their iron ore purchases.
Source: Macquarie; @Scutty
——————–
2. China’s fundamentals don’t bode well for copper.
Source: Longview Economics
Back to Index
Energy
1. US gasoline demand is back at the top of the seven-year range.
Gasoline inventories continue to shrink (2 charts).
Source: Fundamental Analytics
——————–
2. Refinery utilization remains at the low end of the seven-year range.
3. Measured in days of supply, US oil inventories are holding near 2017 levels.
This chart shows oil stocks at Cushing, OK (the settlement hub for NYMEX crude).
——————–
4. There is no more oil drilling in Venezuela.
Source: Longview Economics
Back to Index
Equities
1. Post-IPO stocks surged this week.
2. Follow-on stock offerings hit the highest level since 1996. This article describes the process of “at-the-market share offerings.”
Source: @WSJ Read full article
3. Strong and stable earnings growth helps explain higher valuations on US shares relative the rest of the world.
Source: Alpine Macro
4. Low levels of free credit balances (unlevered accounts) pose a risk for the market, according to BofA.
Source: BofA Global Research
5. Growth companies remain exposed to an increase in real rates.
Source: @macro_daily
6. Cyclical sectors have seen upward earnings revisions in Q2.
Source: MarketDesk Research
The following two charts show sector positioning (from Evercore ISI).
• Institutional equity managers:
Source: Evercore ISI
• Hedge fund managers:
Source: Evercore ISI
——————–
7. Momentum and growth factors tend to outperform when operating earnings per-share grow more than 20% year-over-year.
Source: MarketDesk Research
8. Rate hike cycles tend to see P/E contraction but positive stock returns, according to Cornerstone Macro.
Source: Cornerstone Macro
9. Trading volumes are near the lowest levels since the start of the pandemic.
h/t @Matt_Turnerr
Back to Index
Rates
1. Treasury market implied volatility remains elevated relative to equity vol.
2. This chart shows the Fed ownership of Treasuries as a percentage of outstanding (by maturity, as of July).
Source: Richard Bernstein Advisors
3. The market expects inflation to decline over the long term, which is one reason bond yields remain depressed, according to BCA Research. By the way, the deep backwardation in crude oil also contributes to the inflation curve inversion.
Source: BCA Research
4. Here is FHN Financial’s yield forecast under a faster Fed hiking scenario (2 charts).
Source: FHN Financial
Source: FHN Financial
Back to Index
Global Developments
1. Shipping costs continue to surge.
• Dry bulk shipping costs:
– Capesize vessels:
Source: TradeWinds Read full article
– Smaller ships:
– As a reference, here is an illustration of bulk carrier sizes.
• Container rates:
——————–
2. How many months of carry are needed to withstand a vol shock?
Source: Morgan Stanley Research
3. Finally, we have the vaccinated population share in select economies.
Source: Commerzbank Research
——————–
Food for Thought
1. Evacuations from Afghanistan:
Source: @financialtimes Read full article
2. Relocating Afghans to the US or elsewhere:
Source: Morning Consult Read full article
3. Defense spending in select economies (2 charts):
Source: @financialtimes Read full article
Source: The Economist Read full article
——————–
4. The military balance of power between North and South Korea:
Source: Statista
5. Food shortages in North Korea:
Source: Statista
6. ICU bed utilization in the US:
Source: @axios Read full article
7. The number of drug overdose deaths surged during the pandemic (3 chats).
Source: National Center for Health Statistics
Source: @WSJ Read full article
Source: The New York Times Read full article
——————–
8. US cigarette sales vs. lung cancer mortality:
Source: Our World in Data; @TheBrowser
9. 2022 Senate and House control odds in the betting markets:
Source: Election Betting Odds; @bespokeinvest
10. Back to working outside of the home:
Source: BCA Research
11. World’s oldest astronauts:
Source: Statista
——————–
Back to Index