The Daily Shot: 30-Sep-21
• Administrative Update
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
Administrative Update
As a reminder, the next Daily Shot will be published on Monday, October 4th.
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The United States
1. Pending home sales surprised to the upside, suggesting that the housing market remains strong. Consumers complain about houses becoming more expensive but keep buying.
Mortgage applications remain firmly above 2019 levels.
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2. Equities as a share of household financial assets have surpassed the Dotcom peak, …
Source: BCA Research
… and are now well above real estate holdings.
Source: TS Lombard
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3. According to the Conference Board’s survey, households are less interested in purchasing cars. However, auto dealers say that demand is not the problem.
Source: @jeffsparshott
4. US exports of goods hit another record high in August.
5. Analysts’ sentiment on inventories points to worsening supply chain backlogs.
Source: BofA Global Research
6. Next, we have some updates on inflation.
• Companies mentioning inflation on earnings calls (updated):
Source: @acemaxx, @MorganStanley
• BlackRock’s longer-term forecast for the core CPI (well above the Fed’s target):
Source: BlackRock
• Core PCE inflation forecast from MRB:
Source: MRB Partners
• Capital equipment inflation:
Source: @WSJ Read full article
• Rent inflation:
Source: Variant Perception
Home price appreciation vs. rent and owners’ equivalent rent CPI:
Source: ING
• Fed officials discussing inflation more frequently:
Source: @benbreitholtz
• Pandemic-related inflation:
Source: BCA Research
• The NY Fed’s UIG inflation measure:
Source: NY Fed
• US vs. China CPI:
Source: Piper Sandler
• Signs of market-based inflation expectations being well anchored:
Source: Piper Sandler
• An indication that consumer inflation expectations are well anchored (2 charts):
Source: Mizuho Securities USA
Source: NY Fed
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The United Kingdom
1. Natural gas prices jumped another 10% on Wednesday. This trend will leave a mark on the economy.
The UK relies heavily on natural gas.
Source: ING
Consumers are becoming concerned.
Source: ING
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2. Consumer credit growth was stronger than expected in August.
• Mortgage approvals:
• Credit supplied:
Consumers continue to save more than they did before the pandemic.
Source: Pantheon Macroeconomics
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3. Business sentiment continues to surge.
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The Eurozone
1. The unprecedented natural gas surge will boost inflation and dampen corporate margins.
• Here is Germany’s import price index.
• Spain’s September CPI surprised to the upside.
• Longer-term inflation expectations continue to climb.
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2. The euro hit the lowest level since the summer of 2020.
3. Business sentiment remains robust.
• Services:
• Manufacturing:
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4. Growth in China’s imports from the Eurozone has slowed.
Source: Commerzbank Research
5. Finally, we have hours worked and the employment-to-population ratio (compared to the US).
Source: ECB Read full article
Here are the same trends by country.
Source: ECB Read full article
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Europe
1. Sweden’s economic sentiment remains near the highs (business + consumer).
2. Next, we have some updates on Norway (from Morgan Stanley).
• The Norwegian krone could benefit from a steeper US yield curve.
Source: Morgan Stanley Research
• Norway’s economy is highly reliant on consumption and exports.
Source: Morgan Stanley Research
Oil and gas exports account for half of those exports.
Source: Morgan Stanley Research
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3. Why are the EU emissions allowance prices surging?
The ECB: – Important medium-term price drivers have included the introduction of the MSR and a faster reduction in the number of EU emissions allowances available to businesses covered by the EU ETS. Also, … the 2018 revision of the EU ETS Directive – which set the framework for the fourth trading period from 2021 to 2030 – appears to have increased the credibility of the scheme. More recently, a perceived shift towards more stringent climate policies globally and the likelihood of an earlier end to the free allocation of emissions allowances, as outlined in the “Fit for 55” package.
Source: ECB Read full article
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Japan
1. Dollar-yen is testing resistance at 112.
2. Economic activity softened in August.
• Industrial production:
• Retail sales:
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3. Japanese inflation continues to be the weakest among advanced economies.
Source: Morgan Stanley Research
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Asia – Pacific
1. South Korea’s business surveys point to strong sentiment persisting in September.
Industrial production ticked lower in August, but the pre-COVID trend is holding.
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2. Singapore’s population tumbled as foreign workers were kept out.
Source: @markets Read full article
3. New Zealand’s surge in construction activity has been impressive.
4. Next, we have some updates on Australia.
• Private sector credit (continuing rebound):
• Building approvals (an increase in August):
• Job vacancies (off the highs):
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China
1. The September manufacturing PMI reports were mixed but both showed shrinking export orders.
• Official PMI:
• Markit PMI:
The official non-manufacturing PMI showed a rebound in business activity in September.
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2. The Evergrande situation remains precarious.
Source: Reuters Read full article
The central bank continues to inject liquidity into the financial system.
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3. Chinese domestic investors have been taking a more relaxed view of the Evegrande fallout.
Source: Alpine Macro
4. As we saw yesterday, coal prices have been surging as inventories tumble (2nd panel below).
Source: Alpine Macro
5. China isn’t experiencing the spike in inflation seen in developed markets, with food prices falling outright (mostly due to pork prices). This creates a positive backdrop for consumers.
Source: MRB Partners
6. Finally, we have Macau’s hotel occupancy rate.
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Emerging Markets
1. Brazil’s formal job creation remains strong.
The debt-to-GDP ratio appears to have peaked for now.
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2. Turkey’s economic confidence continues to improve.
3. Thailand’s industrial production dipped below 2020 levels in August, hurt by the pandemic.
4. Here is a look at cyclical and growth sector concentrations across EM countries.
Source: BofA Global Research
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Cryptocurrency
1. Unlike the S&P 500, bitcoin’s correlation with commodities continued to decline over the past few months.
Source: CoinDesk Read full article
2. Crypto spot trading activity peaks at 2 pm UTC, coinciding with the opening of US markets.
Source: @CoinbaseInsto
3. Funding rates, or the cost to fund long positions in the market for BTC perpetual swaps, have been neutral over the past few weeks. This suggests some caution in the futures market.
Source: Arcane Research
4. Bitcoin’s open interest tends to recover over the course of the month following option expiration.
Source: Delphi Digital Read full article
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Commodities
1. Let’s begin with precious metals.
• Silver is at support.
Source: @Ole_S_Hansen
• The silver/gold ratio has been rolling over.
• Silver-mining ETFs saw some outflows recently.
Source: @TaviCosta
• Gold miners are at support.
Source: @NautilusCap
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2. Cotton futures continue to surge.
Source: @markets Read full article
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Energy
1. Record carbon emissions prices are keeping coal production down, leading to less price elasticity in the natural gas market, according to III Capital Management.
Source: III Capital Management
2. US crude oil production still hasn’t fully recovered from Ida.
And neither has the nation’s refinery activity.
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3. US gasoline demand remains robust.
4. US drilled but uncompleted (DUC) well inventories are below recent averages and trending lower.
Source: Princeton Energy Advisors
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Equities
1. Large growth stocks continue to underperform, pressured by higher bond yields.
2. The correlation between stocks and bonds remains elevated (nowhere to hide).
3. Here is a look at the relationship between the 30-year Treasury yield and equity trends.
Source: Alpine Macro
4. Bank of America’s private clients are holding more equities than they have over the past 15 years.
Source: BofA Global Research
5. The S&P 500 is only 4% below its peak.
Source: @LizAnnSonders
6. Bank of America is forecasting negative returns for the S&P 500 in the next 10 years.
Source: BofA Global Research
7. Earnings surprises should be returning to more “sustainable” levels.
Source: @ISABELNET_SA, @MorganStanley
8. S&P 500 futures liquidity has been declining.
Source: Goldman Sachs; @themarketear
9. The rally in housing-related stocks has paused this year.
Source: Alpine Macro
10. Head-and-shoulders in global stocks?
h/t @mikamsika
11. Stock returns tend to be positive during Fed tightening cycles.
Source: TS Lombard
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Credit
1. Munis have sold off in recent days.
2. This chart shows the global corporate issuance of sustainable bonds.
Source: ING
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Rates
1. Here is another look at the Treasury bill curve responding to US default risk.
2. Treasury term premium jumped this week.
3. Liquidity in the Treasury market has been deteriorating.
Source: Morgan Stanley Research
4. What are the betting markets telling us about the next Fed chair?
Source: @PredictIt
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Global Developments
1. The US dollar continues to rally.
2. Economic surprise indices have fallen across emerging and developed economies this year.
Source: Morgan Stanley Research
3. Global exports have risen to the highest levels in a decade.
Source: Morgan Stanley Research
4. The sharp decline in the credit impulse points to weaker manufacturing conditions ahead.
Source: Nordea Markets
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Food for Thought
1. US middle-market company policies on working from home:
Source: Marcum LLP/Hofstra University CEO Survey
2. Visits to workplaces:
Source: @jeffsparshott
3. Hybrid work is here to stay:
Source: Statista
4. Projected changes in chip manufacturing locations:
Source: Statista
5. Smartphone shipments:
Source: Statista
6. Phasing out leaded gasoline:
Source: The Economist Read full article
7. Diet trends:
Source: @chartrdaily
8. Do you limit your kids’ screen time?
Source: CivicScience Read full article
9. Illicit cannabis market:
Source: @financialtimes Read full article
10. The best-selling car model in the US since 1978:
Source: @VisualCap Read full article
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The next Daily Shot will be published on Monday, October 4th.
Have a great weekend!
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