The Daily Shot: 05-Oct-21
• The United States
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Let’s begin with some updates on manufacturing.
• Factory orders continued to climb in August.
Capital goods orders and shipments were adjusted higher, pointing to robust business investment.
• The ISM manufacturing PMI continues to show a gap between the new orders and production indices. Supply bottlenecks are increasingly holding back factory output.
Source: Piper Sandler
• Manufacturers are building larger-than-normal inventories to deal with shortages. The just-in-time (JIT) inventory management method has gone out the window.
Source: Mizuho Securities USA
• China’s factory activity tends to lead the US, pointing to moderation in American manufacturing growth ahead.
Source: Pantheon Macroeconomics
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2. Retailers are struggling to maintain sufficient inventories.
Source: @lisaabramowicz1 Read full article
American consumers are not used to this.
Source: Morning Consult Read full article
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3. Residential and non-residential construction spending trends continue to diverge.
Source: Chart and data provided by Macrobond
By the way, US construction productivity hasn’t grown since WW-II.
Source: The Economist Read full article
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4. Next, we have some updates on the labor market.
• Job openings on Indeed:
Source: @AE_Konkel, @indeed
• Online job search activity:
Source: Arbor Research & Trading
• Quit rate (pointing to further upside in wage growth):
Source: Deutsche Bank Research
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5. Kayak searches for flights are rebounding as the pandemic eases.
Source: @RenMacLLC
6. Mortgage applications have been resilient despite higher housing prices. But housing activity will see a pullback if Treasury yields rise further.
Source: BCA Research
7. Households that received unemployment benefits reduced spending more than those that did not.
Source: The Daily Feather
8. The Atlanta Fed’s GDPNow model forecast for the third-quarter GDP growth continues to sink.
Source: @AtlantaFed Read full article
9. How will a 5% gain in the US dollar (trade-weighted) impact the GDP?
Source: @TheTerminal, Bloomberg Finance L.P.
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The Eurozone
1. Investor sentiment declined again.
2. German electricity prices are moving lower.
But power prices remain elevated across Europe.
Source: @MikeZaccardi, @enelyst_
Increased energy costs will squeeze disposable incomes.
Source: TS Lombard
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3. Will euro-area PMI catch up to the US ISM, …
Source: MRB Partners
… or will China derail Eurozone’s manufacturing expansion?
Source: @AndreasSteno
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4. Here are the drivers of euro-area inflation (2 charts).
Source: Pantheon Macroeconomics
Source: Nordea Markets
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Europe
1. Poland’s bond yields are surging on expectations of rate hikes.
2. Swiss inflation is in positive territory. Will it stay there?
3. EU building permits have recovered.
Source: ING
4. Nordic water shortages are putting downward pressure on hydroelectric power output.
Source: @C_Barraud Read full article
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Asia – Pacific
1. Tokyo’s core CPI has stalled below zero, which suggests that inflation remained subdued at the national level in September.
2. South Korea’s stock market is rolling over.
Source: barchart.com
And the won has been trending down amid capital outflows.
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3. New Zealand has been experiencing robust job growth despite lockdowns. Rate hikes are coming.
Source: ANZ Research
4. Next, we have some updates on Australia.
• The trade surplus surged to new highs.
• Consumer confidence is rebounding.
• Job ads are off the highs.
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China
1. Leveraged developers’ debt spreads have blown out.
Source: UBS; @AlessioUrban
• China’s housing market was already slowing before the Evergrande fallout hit the newswires.
Source: Nordea Markets
• House price-to-income ratios dominate the list of the world’s most expensive cities (2 charts).
Source: Longview Economics
Source: @ExanteData
• Residential investment has been surging.
Source: @WSJ Read full article
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2. Coal inventories tumbled this year.
Source: @HFI_Research
The spat with Australia didn’t help.
Source: Chen Zhao, Alpine Macro
Here is China’s energy mix.
Source: IEA; @andrewtwone
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3. China’s refined fuel exports have tumbled.
Source: EIA
See this story (from August) explaining the situation.
Source: Reuters Read full article
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4. Semiconductor stocks have seen strong relative earnings growth.
Source: Pavilion Global Markets
• Integrated circuits output has been rising.
Source: Pavilion Global Markets
• China is now ahead of Taiwan as the largest buyer of chip equipment.
Source: Pavilion Global Markets
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Emerging Markets
1. Let’s begin with some updates on Chile, where economic growth remains robust.
• Unemployment:
• Retail sales:
• Manufacturing production:
• Copper output:
• Economic activity:
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2. Brazil’s 2yr bond yield is approaching 10%.
• The unemployment rate is finally below 2020 levels.
• Vehicle sales remain soft (a global trend).
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3. Colombia’s central bank hiked rates for the first time since 2016.
The labor market is recovering.
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4. Next, we have some updates on Mexico.
• Consumer confidence:
• Vehicle sales;
• More rate hikes ahead:
Source: Pantheon Macroeconomics
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5. South Africa’s trade surplus surprised to the upside again.
Factory growth remains robust.
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6. Turkey’s inflation continues to climb.
7. Israel’s trade deficit hit another record.
8. India’s coal inventories have collapsed.
Source: @JKempEnergy
• Indian trade deficit surged due to a spike in oil imports.
Source: @SergiLanauIIF
• India’s PMI reports continue to show moderate growth (2 charts).
Source: IHS Markit
Source: IHS Markit
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9. COVID-19 cases have peaked in developed and emerging economies, …
Source: TS Lombard
… especially in Southeast Asia, which recently experienced a surge in Delta variant cases.
Source: TS Lombard
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Cryptocurrency
1. The correlation between bitcoin and ether increased during the recent crypto sell-off.
Source: @CoinbaseInsto
2. Bitcoin trading volume has been subdued relative to the levels we saw earlier this year.
Source: @WSJ Read full article
3. Ethereum transactions settled surged this year.
Source: @RyanWatkins_
4. Crypto funds saw $90 million of inflows last week, marking the seventh consecutive week of inflows.
Source: CoinShares Read full article
5. Circle Financial, a key supporter of the USDC stablecoin, is under investigation by the SEC.
Source: CoinDesk Read full article
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Commodities
1. Bloomberg’s broad commodity index hit a record high as oil prices surged.
2. Tin prices have been soaring.
Source: @JeffWeniger
3. China’s deteriorating credit impulse poses a risk for commodities.
Source: @AndreasSteno
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Energy
1. Brent climbed above $81/bbl after bullish news from OPEC+.
Source: @WSJ Read full article
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2. Refinery margins are surging.
• Europe:
• Asia:
• US (3-2-1 crack spread):
Source: @HFI_Research
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3. US crude and refined products inventories are well below the 5-year average.
Source: Cornerstone Macro
4. US fracking activity continues to recover.
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Equities
1. Growth stocks remain under pressure amid jitters about bond yields.
• The tech sector’s drawdown is still relatively modest.
• Growth shares’ relative performance is highly correlated to Treasury prices.
• The valuation gap between growth and value stocks remains near extremes.
Source: Trahan Macro; @RBAdvisors
• The tech mega-caps are testing support at the 200-day moving average.
By the way, these companies remain a substantial component of the S&P 500.
Source: Bloomberg Read full article
• Here are the largest contributors to the S&P 500 decline from the peak (and stocks offsetting the drop).
Source: @bespokeinvest Read full article
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2. Speculative tech stocks are finally underperforming as the Reddit crowd retreats.
• Where is the Reddit crowd going? Into crypto, of course.
Source: @TheTerminal, Bloomberg Finance L.P.
• By the way, here is the ARK Innovation ETF overlaid on top of the dot-com bubble.
Source: @JulianMI2
• It’s been a good year for OTC share trading.
Source: @WSJ Read full article
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3. The fourth quarter historically has the best performance.
Source: LPL Research
4. Sentiment has deteriorated.
Source: Truist Advisory Services
Source: BCA Research
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5. Small-caps’ relative performance has been correlated with Treasury yields.
Source: Acorn Macro Consulting Ltd.
6. Liquidity is a leading driver of equity returns, and the latest prints suggest worse returns ahead.
Source: Alpine Macro
7. This chart shows how stocks performed around the world last month.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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Credit
1. BDCs remain resilient despite softer stock and high-yield bond prices.
2. US corporate bond issuance hit an all-time high last year, primarily driven by investment-grade credit.
Source: NY Fed
• US corporate debt growth is starting to slow as a percentage of GDP, while total debt continues to grow.
Source: S&P Global Market Intelligence
• A large amount of US corporate debt is due to mature over the next few years. S&P warned that a rise in borrowing rates related to inflation could make it harder for companies to make repayments.
Source: S&P Global Market Intelligence
• Here are some trends in corporate debt globally.
Source: @adam_tooze; The Economist Read full article
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Rates
1. Speculative accounts boosted their bets on the 10yr Treasury.
But asset managers are short.
Source: @EricGPlatt, @FT Read full article
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2. The 10-year Treasury futures trading volume spiked over the past month.
Source: FHN Financial
3. Slowing global economic growth could weigh on yields.
Source: Alpine Macro
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Global Developments
1. Let’s start with last month’s performance across asset classes (z-scores).
Source: BCA Research
2. The number of central banks hiking rates jumped in September.
Source: @macro_daily
3. Speculators remain long euro and CAD and short the Aussie and Japanese yen.
Source: Morgan Stanley Research
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Food for Thought
1. The number of close friendships that Americans have (2021 vs. 1990):
Source: @axios Read full article
2. US fastest-growing cities:
Source: Visual Capitalist Read full article
3. Household income growth by race and ethnicity:
Source: Bloomberg Read full article
4. US number of births per death:
Source: @WSJ Read full article
5. Sporting goods store visits vs. 2019:
Source: Placer.ai
6. US mortgage originations by age:
Source: Federal Reserve Bank of New York
7. Enrollment in US veterinary schools by gender:
Source: AAVMC- American Association of Veterinary Medical Colleges
8. Most common plastic surgeries:
Source: Statista
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