The Daily Shot: 20-Sep-21
• Equities
• Credit
• Energy
• Commodities
• Rates
• Cryptocurrency
• Emerging Markets
• China
• Asia – Pacific
• The Eurozone
• Europe
• The United Kingdom
• Canada
• The United States
• Global Developments
• Food for Thought
Equities
1. Global sentiment is decidedly in risk-off mode, partly driven by credit developments in China. The Hang Seng Index is down 3.5%.
Aussie-yen, a proxy for global risk appetite, has been falling.
US futures are heavy this morning, …
… with the active S&P 500 contract dipping well below the 50-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. The Reddit crowd bid up speculative tech companies last week. It’s not going to be pretty on the way down.
3. Equity inflows have been impressive.
Source: BofA Global Research
Source: BofA Global Research
However, the iShares Russell 2,000 small-cap ETF (IWM) saw its second-largest outflow since February last week.
Source: SentimenTrader
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4. Variant Perception’s market tops and bottoms checklist is flashing signs of a top.
Source: Variant Perception
5. Next, we have last week’s sector moves.
• Banks:
• Consumer stocks (2 charts):
• Industrials:
• Energy:
• Materials and Metals & Mining:
• Utilities:
6. Here are some additional sector trends.
• Price-to-book ratio (z-scores):
Source: BofA Global Research
• Trailing P/E ratios:
Source: Deutsche Bank Research
• Companies citing “inflation” on earnings calls, by sector:
Source: @FactSet Read full article
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7. Forward P/E ratios have been drifting lower.
The S&P 600 (small-cap) forward P/E ratio is down sharply.
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8. Small caps tend to be more vulnerable to wage inflation.
Source: Goldman Sachs
9. Liquidity conditions have been exceptionally supportive, according to fund managers.
Source: @ISABELNET_SA, @BofAML
10. S&P 500 earnings have grown at 6.5% per year since 1935.
Source: Deutsche Bank Research
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Credit
1. Resolving bottlenecks could require more capital, which could lead to an increase in corporate bond yields, according to Gavekal.
Source: Gavekal Research
2. M&A transaction volumes have surged over the past year, boosting debt levels. Corporate debt as a percent of GDP remains far above highs seen in previous cycles (2 charts).
Source: Variant Perception
Source: Variant Perception
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Energy
1. Clean energy shares rallied last week.
Source: The New York Times Read full article
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2. The US rig count bounced from the Ida-driven dip but still lags oil prices.
Source: Chart and data provided by Macrobond
3. Oil price momentum declined from max positive levels over the past month.
Source: Deutsche Bank Research Read full article
4. Will the surge in natural gas prices boost other energy sectors in Europe?
Source: @chigrl
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Commodities
1. Iron ore is down 10% today in Singapore.
Are North American steel prices about to peak?
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2. Previously, sharp moves in commodity prices occurred during times of war/crisis.
Source: Stifel
3. Battery recycling is expected to supply almost a third of cobalt needs by 2035.
Source: @kd_ampofo, @BloombergNEF, @SMI_UQ Read full article
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Rates
1. The long end of the Treasury curve continues to flatten.
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2. Primary dealers expect a pop in Treasury yields by the end of the year.
Source: @markets Read full article
3. Despite the massive demand for TIPS this year, inflation expectations have been relatively flat.
Source: Deutsche Bank Research
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Cryptocurrency
1. Cryptos are under pressure as risk appetite dims. XRP is down 9% today.
2. Underbanked households show the most interest in central bank digital currencies.
Source: Morning Consult Read full article
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Emerging Markets
1. EM currencies started the week on a softer note. Here is the Turkish lira.
2. Hedge funds have soured on EM equities, with net futures positioning turning negative.
3. Next, we have some updates on India.
• Indian stocks trade at almost double the multiples of the rest of the emerging markets. In part, this is due to stronger earnings growth, lower volatility, and (according to some analysts) better prospects.
Source: BCA Research
• Indian consumer confidence remains depressed, although expectations did not decline as much as current conditions.
Source: Gavekal Research
• Foreign direct investment has been climbing, but business spending hasn’t followed.
Source: Statista
• India’s fiscal situation is improving.
Source: ANZ Research
• Vaccinations have been gathering pace.
Source: @Gavekal
• Indian rural wage growth is close to zero, restraining inflation.
Source: BCA Research
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China
1. The Hang Seng Properties Index is down 6.8% on Monday, …
… with Evergande leading the way.
• Lower-rated bond yields continue to push higher. As much as $55 billion of property developers’ debt will mature next year, followed by another $44 billion in 2023.
Source: ANZ Research
• Who are the largest holders of Evergrande bonds?
Source: @markets Read full article
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2. Regulation since the start of the year has started to cool the Chinese real estate market.
Source: BCA Research
• Housing starts and new home sales have been soft.
Source: BCA Research
• Property inventory levels are lower than in the previous cycle.
Source: ANZ Research
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3. The PBoC injected liquidity into the banking system in response to signs of credit stress.
3. The renminbi is softer amid outflows.
4. The decline in China’s credit impulse has led to a reduction in fixed-asset investment this year.
Source: MRB Partners
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Asia – Pacific
1. Speculative accounts continue to boost their bets against the Aussie dollar.
2. Growth in Australia’s household wealth accelerated this year.
Source: BIS Read full article
3. New Zealand’s service activity tumbled last month (second-lowest level for this index) due to the national lockdown.
4. The global order backlog of microchips from Renesas, a large Japanese semiconductor supplier whose microchip plant set on fire in March, is now four times greater than it was before the pandemic.
Source: Renseas; Longview Economics
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The Eurozone
1. The pickup in euro area inflation has not been broad-based.
Source: BCA Research
Non-energy goods prices rose sharply last month, pushing the core CPI higher.
Source: Pantheon Macroeconomics
Nonetheless, the core CPI index remains range-bound.
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2. Construction output is at pre-COVID levels but well below the trend.
3. Eurozone consumer confidence remains firm relative to the US.
Source: Oxford Economics
4. There could be further upside for EUR/USD due to lagged effects from China’s credit impulse, according to Oxford Economics.
Source: Oxford Economics
5. But China’s credit impulse could be a drag on German factory orders.
Source: Nordea Markets
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Europe
1. EUR/CHF broke above short-term resistance.
h/t @vkaramanis_fx
Separately, the Swiss capital productivity growth has been soft.
Source: @acemaxx, @StatSchweiz Read full article
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2. This chart shows job vacancies in the EU.
Source: Eurostat Read full article
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The United Kingdom
1. Retail sales unexpectedly declined last month,
Here is the breakdown by sector.
Source: Pantheon Macroeconomics
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2. Growth in asking prices for residential property held below 6% this month.
3. Consumers in the UK intend to save their excess savings, partly because most have accrued to higher-income households.
Source: Bain & Company
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Canada
1. The Canadian dollar has performed well year-to-date.
Source: BCA Research
Improving terms of trade bode well for the loonie.
Source: BCA Research
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2. Here is an updated election poll tracker.
Source: Scotiabank Economics
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The United States
1. The U. Michigan consumer sentiment index was almost unchanged this month.
• Longer-term financial situation expectations continue to fall.
• Buying conditions for durable goods keep deteriorating, driven by higher prices. It should be noted that despite the complaints about prices, US consumers keep spending.
Separately, COVID concerns remain elevated.
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2. This chart shows the Oxford Economics Recovery Tracker by region.
Source: Oxford Economics
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3. The NY Fed’s regional services index showed slower growth this month.
Price pressures continue to mount.
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4. The West Coast port congestion is at extreme levels as businesses try to rebuild inventories ahead of the holiday shopping season.
Source: @MichaelKantro, @NancyRLazar1
5. The corporate share of national income is rising again.
Source: Mizuho Securities USA
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Global Developments
1. Dry bulk shipping costs keep grinding higher, even as iron ore prices tumble.
2. Oxford Economics expects the dollar to weaken into 2022.
Source: Oxford Economics
3. Fund managers still see inflation as the biggest tail risk.
Source: BofA Global Research; @Callum_Thomas
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Food for Thought
1. Declines in kindergarten enrollment in 2020:
Source: The New York Times Read full article
2. Graduation rates around the world:
Source: OECD
3. US college tuition and fees:
Source: @WSJ Read full article
4. The CFA exam pass rate:
Source: Bloomberg Read full article
Source: Bloomberg Read full article
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5. The cost of COVID hospitalizations (unvaccinated adults):
Source: @cynthiaccox, @KFF Read full article
6. Views on vaccination requirements:
Source: The Economist Read full article
7. The decline in US life expectancy:
Source: CDC
Source: CDC
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8. US domestic workers:
Source: @bbgequality Read full article
9. Religious composition of the world over time:
Source: Statista
10. The New Orleans storm system:
Source: @WSJ Read full article
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