The Daily Shot: 28-Sep-21
• Energy
• Equities
• Credit
• Rates
• Commodities
• Cryptocurrency
• Emerging Markets
• China
• Asia – Pacific
• The Eurozone
• The United States
• Global Developments
• Food for Thought
Energy
1. Brent crude broke through its long-term downtrend resistance and is trading above $80/bbl.
Source: @TheTerminal, Bloomberg Finance L.P.
2. US natural gas futures are trading above $6/mmbtu and about to take out the 2014 peak.
3. Natural gas prices keep surging in Europe, …
… driving up coal prices.
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4. Energy shares continued to rally on Monday.
5. US frac spread count picked up momentum as prices surge.
6. The path to net-zero emissions may have severe adverse implications for energy security – more concentrated oil supply, dependence on critical minerals for renewable energy, and of course, a more variable energy supply.
Source: IEA
IEA estimates that in a net-zero emissions scenario (NZE), we will see a decline in demand for oil, gas, and coal. Oil demand never returns to the 2019 peak.
Source: IEA
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Equities
1. Bond yields are rising globally, which tends to put pressure on growth stocks.
US real yields are also up sharply over the past couple of weeks.
• With yields on the rise, the Nasdaq 100 futures slumped this morning, underperforming the S&P 500.
• Growth and value stocks diverged on Monday.
• Small caps outperformed.
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2. Financials are benefitting from higher yields.
More outperformance ahead?
Source: Longview Economics
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3. Rate-sensitive stocks such as utilities and REITs sold off.
Here are a few other sector trends.
• Healthcare:
• Transportation:
• Consumer discretionary:
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4. Here is the month-to-date and quarter-to-date performance of different sectors and equity factors.
Source: S&P Global Market Intelligence
5. How do S&P 500 sales and profits compare to 2019?
Source: @ISABELNET_SA, @GoldmanSachs
6. Historically, the S&P 500 returned 38x more in November-April versus May-October.
Source: Stifel
7. The S&P 500 appears stretched relative to commodities.
Source: Stifel
8. Most public listings these days use a four-letter ticker symbol.
Source: @axios Read full article
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Credit
1. It’s been a strong September for loan issuance.
Source: @LPCLoans Read full article
Loan sales for leveraged buyouts surged this year. The $6 billion Medline loan is one of the largest in history (CLO managers are happy).
Source: @WSJ Read full article
Source: @markets Read full article
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2. Longer-term bonds now account for a greater portion of US non-financial corporate liabilities.
Source: Mizuho Securities USA
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Rates
2. The 30yr Treasury price broke to the downside.
Source: Longview Economics
2. Historic recoveries suggest that yields (10-Year and TIPS) will just trade sideways from here.
Source: Arbor Research & Trading
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Commodities
1. Let’s start with month-to-date performance.
Source: @RichardDias_CFA
2. Commodity ETFs are seeing outflows after months of massive inflows.
Source: Arbor Research & Trading
3. The grain inventories report from the USDA is expected to show multi-year low stocks for some commodities.
Source: @kannbwx
4. US farmland prices have jumped since the start of the pandemic.
Source: @WSJ Read full article
5. US hog prices are rebounding.
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Cryptocurrency
1. Some traders have piled into DeFi tokens in the wake of China’s crypto ban.
Source: CoinDesk Read full article
• DeFi assets continue to surge.
Source: Bloomberg Read full article
• Uniswap’s UNI token, which powers the automated DeFi exchange, had strong trading volumes on Coinbase yesterday.
Source: @CoinbaseInsto
By the way, Uniswap is being investigated by the SEC. DeFi is not spared from regulatory crackdowns.
Source: @WSJ Read full article
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2. Investors pumped $95 million into digital asset products last week, more than double the prior week’s pace.
Source: CoinShares Read full article
3. The chart below shows BTC’s market-value-to-realized-value (MVRV) ratio, which suggests the cryptocurrency is trading roughly at its fair value after the May sell-off.
Source: Glassnode Read full article
4. A majority of countries are researching central bank digital currencies.
Source: Alpine Macro
Source: Coinbase Read full article
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Emerging Markets
1. Below are some updates on Mexico.
• The core CPI is approaching 5%, with inflation topping forecasts.
• Mexico’s economic activity remains below pre-COVID levels.
• Retail sales declined again in July.
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2. Vietnam’s growth of US import share has slowed.
Source: TS Lombard
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China
1. Credit risks in the property market are not limited to Evergrande.
Source: @WSJ Read full article
• The nation’s property market is massive.
Source: Goldman Sachs; James W.
• Chinese households’ exposure to property is higher than in other economies.
Source: Goldman Sachs; James W.
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2. China is facing a power crunch, with Beijing pressuring businesses to cut back on electricity usage.
Source: Reuters Read full article
Source: @business Read full article
Source: @markets Read full article
Power-sensitive sectors have underperformed.
h/t @JeannyYu
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3. The renminbi continues to climb against a basket of currencies. This trend will become a drag on exports.
Yuan’s performance against the USD has been lagging since the recent dollar rally.
Source: Capital Economics
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4. The correlation between the iShares MSCI China ETF (MCHI) and Treasury yields turned positive. Is the sell-off overdone given the recent breakout in yields?
Source: Dantes Outlook; Koyfin
5. Industrial profits softened in August.
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Asia – Pacific
1. Taiwan’s industrial production hit a record high.
2. South Korea’s consumer confidence is holding up well.
3. Australian retail sales slumped last month, although the decline was less severe than expected.
Source: MarketWatch Read full article
We are back to the pre-COVID trend.
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The Eurozone
1. Business loan growth continues to moderate.
But the broad money supply expansion surprised to the upside.
Households are sitting on substantial excess savings.
Source: Pantheon Macroeconomics
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2. Inflation has been stronger in the US than in the Eurozone.
Source: ECB Read full article
But the ECB’s dovish stance in the face of stronger data has led to a rise in market-implied inflation expectations.
Source: Morgan Stanley Research
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3. Accounting for QE, the level of supply of bonds in Europe will be manageable and well below 2019 levels.
Source: Morgan Stanley Research
4. The TLTRO financing allowed European banks to reduce their funding costs substantially.
Source: ECB Read full article
Here is the evolution of the ECB’s bank lending operations.
Source: ECB Read full article
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5. Finally we have a couple of charts on German politics.
• Confidence in the national government has been strong.
Source: Gallup Read full article
• The biggest SPD gains were among older Germans.
Source: @adam_tooze, @RikeFranke
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The United States
1. The 2yr Treasury yield is up sharply.
Rate hike expectations in 2022 have risen.
The first hike is now fully priced in for 2022.
As a comparison, here is the same chart after the FOMC meeting last week.
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2. The durable goods orders report showed further strength in August.
• Below is a comparison to the post-2008 recovery.
Source: Mizuho Securities USA
• And here is the breakdown by sector.
Source: @GregDaco
• Capital goods orders saw only one decline over the past 12 months, pointing to robust CapEx.
Shipments have been especially strong.
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3. The Dallas Fed’s regional manufacturing report showed a further loss of momentum.
Price pressures are becoming more acute.
The word “stagflation” comes to mind when looking at this chart.
Source: @TaviCosta
By the way, this divergence between business activity and price indices is a global phenomenon.
Source: The Daily Feather
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4. Morgan Stanley’s business conditions indicator also shows a loss of momentum.
Source: Morgan Stanley Research
5. Households’ financial obligations as a share of disposable income are at multi-decade lows.
Source: BofA Global Research; @MikeZaccardi
6. Next, we have a couple of updates on the labor market.
• Main reason for not working:
Source: @aaronsojourner
• Online searches for “sign-on bonus”:
Source: Fitch Solutions Macro Research
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7. Traffic to COVID “beneficiaries” (think grocery stores) is near the highs, while covid-recovery traffic (think gyms) has stalled below pre-covid levels.
Source: Cornerstone Macro
8. However, the COVID situation continues to improve.
• New cases and hospitalizations:
Source: Yardeni Research
• The positivity rate:
Source: @carlquintanilla, @fundstrat
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Global Developments
1. What is the most crowded trade?
Source: BofA Global Research
2. Interest rate differentials have moved sharply against the dollar.
Source: BCA Research
3. This chart shows the deviation of output from pre-pandemic projections.
Source: @adam_tooze Read full article
4. Global growth momentum has largely blown off the froth of early 2021.
Source: Fitch Solutions Macro Research
5. Finally, we have the OECD’s inflation forecasts.
Source: @financialtimes Read full article
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Food for Thought
1. The number of global disasters, disaster-related deaths, and resulting economic loss:
Source: World Meteorological Organization Read full article
2. Sea levels over time:
Source: Deutsche Bank Research
3. Support for vaccine mandates:
Source: @YouGovAmerica Read full article
4. Soccer defenders facing higher dementia risk:
Source: Statista
5. Milk fat usage:
Source: @USDA_ERS Read full article
6. White population in the US:
Source: @WSJ Read full article
7. US regional population share:
Source: Inspection Support Network, h/t Hightower Las Vegas, RCG Economics Read full article
8. R&D financing:
Source: @WSJ Read full article
9. Less than 13 years before Social Security becomes insolvent:
Source: CRFB
10. Most popular sports team in each state:
Source: Ozark Radio News Read full article
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