The Daily Shot: 24-Sep-21
• Administrative Update
• The United Kingdom
• The United States
• Canada
• The Eurozone
• Europe
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Energy
• Equities
• Rates
• Global Developments
• Food for Thought
Administrative Update
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The United Kingdom
1. Despite some growth headwinds, the BoE tilted more hawkish this week. The central bank is signaling a rate hike in the “medium term.” The BoE’s statement follows the Fed’s hawkish dot-plot and taper announcement a day earlier.
Source: MPC Read full article
The MPC expects inflation to be above 4% next quarter.
Source: MPC Read full article
• The 2yr gilt yield jumped.
• The market-based probability of a rate hike by (and including) the March meeting is nearing 90%.
Two rate hikes are now priced in by Q3 of 2022.
Source: Pantheon Macroeconomics
• The yield curve steepened in the short end.
• The pound gained.
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2. The September flash PMI report points to moderating growth in business activity.
• Manufacturing:
• Services:
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3. Consumer confidence deteriorated this month.
Rising prices and concerns about shortages are contributing to weaker sentiment.
Source: Reuters Read full article
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4. This chart shows the average age of hospital admissions.
Source: Longview Economics
The United States
1. The 5-year Treasury yield hit the highest level since the start of the pandemic as the market prices in faster rate hikes and taper.
2. Initial jobless claims were higher than expected last week.
Goldman expects the expiration of emergency unemployment benefits to significantly boost payrolls this year.
Source: @LizAnnSonders, @GoldmanSachs
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3. Next, we have some updates on US households’ financial situation.
• Household net worth continues to surge, …
… as asset values climb.
Source: ING
• The fiscal stimulus helped.
Source: ING
• Excess savings are nearing $2.7 trillion.
Source: S&P Global Market Intelligence
• Here are the contributors to wealth gains.
Source: ING
• Spending plans remain robust.
Source: MRB Partners
Below is a look at the rebound in consumer spending by sector.
Source: BlackRock
• However, US households’ view of their income and personal finances has been deteriorating.
Source: Deutsche Bank Research
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4. According to Markit’s flash PMI report, growth in business activity moderated further in September.
• Manufacturing:
• Services:
Manufacturing supply-chain issues persist.
• Supplier delivery times:
• Backlog of work:
Manufacturers are increasingly boosting prices.
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5. The Kansas City Fed’s regional manufacturing report supports the trend we see from Markit PMI (above).
Supplier problems (many related to import bottlenecks) have been getting worse.
But manufacturers are upbeat about the future.
Canada
1. Retail sales held up better than expected in July.
Here is the breakdown by sector.
Source: Scotiabank Economics
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2. Oxford Economics expects GDP to return to pre-pandemic levels by the end of this year.
Source: Oxford Economics
The Eurozone
1. Growth in business activity slowed sharply, surprising to the downside.
Source: IHS Markit
• Manufacturing:
– The Eurozone:
– Germany:
– France:
Here is the French manufacturing confidence indicator (from a separate report).
• Services:
– The Eurozone:
– France (still relatively strong):
– Germany:
The PMI miss sent the Citi Economic Surprise Index sharply lower.
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2. This chart shows the Eurozone retail sales vs. the post-2008 recovery.
Source: @RichardDias_CFA
3. In recent years, increased hiring intentions have not translated into stronger wage growth.
Source: TS Lombard
4. A large share of stocks in the German DAX Index are foreign-owned.
Source: Wette.de Read full article
The number of German shareholders in ETFs and stocks increased last year.
Source: Wette.de Read full article
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5. Eurozone and US forward earnings estimates have diverged sharply.
Source: BlackRock
Europe
1. The Norges Bank finally hiked rates (as expected) and signaled more tightening to come.
• Here are the latest rate projections.
Source: ING
• The employment situation has been improving.
• The Norwegian krone advanced against the euro.
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2. This chart shows greenhouse gas emissions by sector in the EU.
Source: Eurostat Read full article
3. Hybrid vehicles make up a growing share of total new cars across the EU.
Source: DBRS Morningstar
Japan
1. Inflation was lower than expected in August.
2. Growth in factory activity slowed this month.
But the pressure on service businesses eased.
Asia – Pacific
1. Singapore’s inflation continues to climb.
2. Australian bond yields rose sharply today, partially in response to hawkish signals from the BoE and the Fed.
China
1. The PBoC continues to inject liquidity into the banking system.
As a result, the implied rates (from F/X forwards) in the onshore and offshore yuan have diverged.
Source: @Marcomadness2
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2. The number of declining stocks versus advancing stocks in Hong Kong’s Hang Seng Index reached an extreme earlier this week, which typically precedes a rebound in the months ahead.
Source: SentimenTrader
3. Tighter funding conditions for real estate developers (precipitated by the Evergrande rout) will result in deteriorating property investment.
Source: TS Lombard
4. Favored sectors in China pay lower taxes and receive more tax rebates. This leads them to have higher returns, easier access to and lower costs of funding when compared to less favored industries.
Source: Gavekal Research
5. Global VC funds have been less interested in China.
Source: KrASIA Read full article
Emerging Markets
1. Turkey’s central bank unexpectedly cut rates to please Erdogan.
The lira tumbled, hitting a record low against the dollar. Inflation (which has been rampant) will accelerate further.
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2. Thailand’s exports remain robust.
But domestic car sales are at multi-year lows.
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3. Southeast Asia’s COVID cases are receding.
Source: TS Lombard
Here is the situation across EM.
Source: TS Lombard
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4. This chart shows the most active investors in Africa this year.
Source: Max Cuvellie Read full article
Cryptocurrency
1. Similar to equities, it’s been a tough week for cryptocurrencies, although bitcoin has outperformed.
Source: FinViz
Will bitcoin breach resistance at the 200-day moving average?
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2. Bitcoin’s Fear & Greed Index shows extreme bearish sentiment after the crypto sell-off earlier this week.
Source: Arcane Research
3. The chart below shows that short-term holders, or those who own fewer than 10 BTC, have accelerated their accumulation of bitcoin after large sell-offs.
Source: Glassnode
Energy
1. Brent is testing long-term downtrend resistance.
Technicals suggest Brent is overbought.
Source: Longview Economics
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2. OPEC spare production capacity remains elevated.
Source: Longview Economics
3. How has the distribution of crude oil production changed since the 1970s?
Source: IEA
4. UK natural gas prices have rallied far beyond the 5-year range.
Source: Fitch Solutions Macro Research
Equities
1. Let’s start with Goldman’s year-end scenario analysis for the S&P 500.
Source: Goldman Sachs
2. The iShares Russell 2,000 small-cap ETF sharply reversed outflows over the past few days.
Source: SentimenTrader
3. Cyclical sectors have seen the fastest outflows of the past decade.
Source: Truist Advisory Services
4. The average holding period of stocks has decreased over the years (globally).
Source: Wette.de Read full article
5. The boost to stock returns after inclusion in the S&P 500 has significantly diminished over time.
Source: S&P Global Market Intelligence
6. IPO activity remains robust.
Source: @WSJ Read full article
7. Finally, we have the 50-year annualized returns for stock markets around the world.
Source: Deutsche Bank Research
Rates
1. Which factors contributed to the remarkable decline in Treasury yields over the past three decades?
Source: @benbreitholtz
2. The Treasury term premium has diverged from longer-term upside inflation risks.
Source: Variant Perception
3. Demand surged for the August and September 10-year Treasury auctions.
Source: Deutsche Bank Research
Global Developments
1. Let’s start with the G-7 GDP changes since the start of the pandemic.
Source: Bloomberg Read full article
2. Supplier bottlenecks have been more severe in advanced economies.
Source: IHS Markit
3. Businesses are becoming more pessimistic about global growth prospects, according to a survey by Oxford Economics.
Source: Oxford Economics
And fewer respondents expect a rapid economic recovery this month.
Source: Oxford Economics
The survey also shows that most respondents expect supply chain disruptions to persist beyond the middle of next year.
Source: Oxford Economics
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4. This scatterplot shows the changes in foreign ownership of government bonds.
Source: @RobinBrooksIIF
5. The global credit impulse is deep in negative territory.
Source: @macro_daily
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Food for Thought
1. US Southwest drought (worst on record):
Source: @axios Read full article
2. Vaccine rollout since June:
Source: TS Lombard
3. The most surveilled cities in the world:
Source: Statista
4. Rising populism:
Source: BCA Research
5. The Merkel era:
Source: Statista
6. Global military spending:
Source: SIPRI
7. US new college graduates’ diverging incomes:
Source: @wealth Read full article
• Incomes by educational attainment:
Source: J.P. Morgan Asset Management
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8. States that require kindergarten attendance:
Source: @statspanda1
9. Quality of JD programs during the pandemic:
Source: Gallup Read full article
10. Visitors arriving in the US:
Source: @WSJ Read full article
11. Beer output by the largest brewers:
Source: Statista
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Have a great weekend!