The Daily Shot: 08-Oct-21
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. The US Senate approved a short-term increase in the debt ceiling, raising the level by $480 billion. The timing was critical because the US Treasury’s cash balances hit the lowest level since 2017.
But the 480-billion boost will not last long, and the markets will face the same predicament in early December. Here is the T-bill maturing on December 9th.
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2. Treasury yields keep grinding higher ahead of the employment report.
3. Initial jobless claims continue to show improvement in the labor market, with further declines expected (2nd chart).
Source: Pantheon Macroeconomics
Economists are estimating a 500k increase in employment last month (consensus).
Below is a forecast from Oxford Economics.
Source: @GregDaco
Separately, the bulk of the recent job openings have been in small and medium-sized businesses.
Source: Desjardins
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4. The reversal of the pandemic fiscal impulse will be a drag on the GDP next year.
Source: Oxford Economics
5. The Philly Fed’s regional manufacturing survey (leading vs. lagging components) leads the broader ISM index. And right now, it is flashing a significant drop in early 2022.
Source: Nordea Markets
6. Next, we have some updates on consumer credit.
• Credit card debt remains well below pre-COVID levels.
• Credit card rates are back above 17% – near the highs.
• Here is the status of the US government’s student debt portfolio.
Source: @WSJ Read full article
• This chart shows households’ excess savings by income category.
Source: Morgan Stanley Research
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7. Finally, we have some data on inflation.
• Long-term market-based inflation expectations (highest since 2013):
• Businesses experiencing inflation (CFO survey):
Source: Gartner; @JeffWeniger
• Inflation in 12 months (a survey of credit investors) :
Source: S&P Global Market Intelligence
• The Dallas Fed’s trimmed mean PCE inflation (closely watched by the Fed):
• Small business plans to boost prices vs. the median CPI:
Source: Nordea Markets
• Incomes feeding into the CPI:
Source: Cornerstone Macro
• Low automobile inventories boosting prices:
Source: Pantheon Macroeconomics
• Wholesale used car prices (updated):
• The 2% price target (as opposed to a rate target) depends on the starting point.
Source: Mizuho Securities USA
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Canada
1. Short-term bond yields are surging as more rate hikes get priced in.
Source: @WSJ Read full article
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2. Real rates have been exceptionally low.
Source: @RichardDias_CFA
3. The Ivey PMI index showed robust business activity in September, with prices surging.
4. Here are the GDP changes by sector since the start of the pandemic.
Source: Scotiabank Economics
5. The energy sector’s strength offset the softness in autos, boosting Canada’s trade surplus with the US.
Source: Economics and Strategy Group, National Bank of Canada
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The United Kingdom
1. Market-based inflation expectations continue to surge.
2. This chart shows the UK’s stock-bond correlation since 1875.
Source: TS Lombard
3. UK savings are returning to pre-COVID levels.
Source: Barclays Research
4. As we mentioned earlier, the UK weather has not cooperated this year. Weaker renewables production exacerbated the energy crisis.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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The Eurozone
1. Longer-term rates are climbing.
2. Italian retail sales improved in August, continuing on the pre-COVID trend.
3. France’s trade volume keeps climbing.
4. The Dutch CPI is back at 3%.
5. Manufacturing price expectations point to higher Eurozone inflation ahead.
Source: @RichardDias_CFA
6. Here is the composition of the ECB’s (Eurosystem) balance sheet.
Source: ECB Read full article
7. Pantheon Macroeconomics expects the unemployment rate to continue on a downward path.
Source: Pantheon Macroeconomics
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Asia – Pacific
1. Japan’s Economy Watchers Expectations Index surged last month, pointing to a rebound in economic activity.
2. Australia’s bond yields continue to climb.
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China
1. The credit crisis in the property sector shows no signs of letting up.
• Sunac’s bond price continues to sink.
• Bloomberg’s leveraged dollar-denominated corporate bond index yield is nearing 17%.
• Venke Real Estate is not highly leveraged, but investors are using its credit default swaps to hedge risks in the sector.
• Many developers already defaulted this year.
Source: Gavekal Research
• By the way, the developers’ credit crunch is not about lack of demand.
Source: MacroPolo
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2. The renminbi continues to climb against a basket of currencies, which will further tighten China’s financial conditions and put pressure on exporters.
3. Service-sector activity grew last month, with the Markit PMI surprising to the upside.
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Emerging Markets
1. The Indian rupee tumbled further after the RBI left rates unchanged.
Separately, here is a summary of India’s energy crisis.
Source: Statista
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2. Israel’s manufacturing output continues to surge.
3. Mexican core CPI is approaching 5%.
4. Inflation risks have diverged across EM economies.
Source: TS Lombard
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Cryptocurrency
1. Bond investors haven’t been happy in the crypto space.
Source: @WSJ Read full article
2. Crypto and blockchain VC funding hit a record high last quarter.
Source: @WSJ Read full article
3. How different are crypto investors from the broader population?
Source: VOX EU Read full article
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Commodities
1. Cotton futures continue to surge.
2. China’s property developer credit crisis poses a risk for industrial metals.
Source: Macro Trends Group, Bain Read full article
3. Next, we have lithium and cobalt expected demand growth from EV battery production.
Source: @financialtimes Read full article
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Energy
1. European energy prices are off the highs.
• Gas:
• Coal:
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2. Brent crude is nearing the 2018 high. US oil is approaching $80/bbl.
3. US energy consumption, as a share of the GDP, is far lower now than it was in the 1970s. As a result, the spike in prices is not expected to have a substantial impact on growth.
Source: Alpine Macro
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Equities
1. Companies with substantial sales in China are widening their underperformance.
2. Buybacks are making a strong comeback, becoming a tailwind for stocks.
Source: BCA Research
3. Many M&A deals have been funded with stock.
Source: @axios Read full article
4. US equities have been outperforming EAFE for the longest time since the 1990s.
Source: J.P. Morgan Asset Management
5. This chart shows the S&P 500 sector composition over time.
Source: @ISABELNET_SA, @GoldmanSachs
6. What percentage of active funds outperformed their benchmark over the past three years?
Source: @ToddCFRA
7. ARK Innovation saw some outflows last month.
Source: @jessefelder, @FT Read full article
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Credit
1. Let’s start with some data on CLOs.
• CLO activity:
Source: Deutsche Bank Research
Source: S&P Global Market Intelligence
• Investment period of new deals:
Source: S&P Global Market Intelligence
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2. Loan defaults continue to decline.
Source: S&P Global Market Intelligence
3. There has been a great deal of borrowing to fund dividend payouts.
Source: S&P Global Market Intelligence
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Global Developments
1. Container rates declined from the highs (especially China-US).
• The logistics managers’ index has recorded its longest stretch above 70, i.e. significant growth. Has the index peaked?
Source: Logistics Managers’ Index Further reading
• Transportation capacity is struggling, but the declines have been moderating (a reading above 50 would indicate capacity is expanding again).
Source: Capital Economics
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2. The global food price index continues to surge.
3. The rise in the stock/bond correlation points to greater sensitivity of the dollar to nominal yields.
Source: JPMorgan
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Food for Thought
1. Job losses and gains at the most productive firms:
Source: OECD Read full article
2. Tesla deliveries:
Source: @chartrdaily
3. Americans’ views of business sectors:
Source: Gallup Read full article
4. Manhattan apartment sales:
Source: Bloomberg Read full article
• New York City office visits (vs. 2019):
Source: Placer.ai
• New York City retail and tourism visits:
Source: Placer.ai
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5. The global semiconductor sector:
Source: The Economist Read full article
6. Facebook’s outage:
Source: @chartrdaily
7. Apple’s growth:
Source: Statista
8. Productivity vs. compensation:
Source: EPI
9. Binge drinking:
Source: @CivicScience
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Have a great weekend!
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