Wholesale used car prices hit new highs

The Daily Shot: 20-Oct-21
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Food for Thought

The United States

1. Residential construction eased in September, with single-family housing starts and construction permits dipping below last year’s levels.

Source: Reuters Read full article

• On a seasonally adjusted basis, housing starts are roughly back to pre-COVID trends.

Source: Mizuho Securities USA

• Mortgage rates are grinding higher. The housing market is now more sensitive to rising rates than before the pandemic (due to rapid price gains).

——————–

2. Next, let’s take a look at some supply-chain/logistics trends.

• The year-over-year increase in domestic freight rates exceeded 30% for the first time in over a decade (at least).

Source: Cass Information Systems

• Domestic shipments slowed amid supply constraints.

Source: Cass Information Systems

• Inventory-to-sales ratios remain depressed.

Source: Oxford Economics

Surveys continue to point to tight inventories and substantial order backlogs.

Source: TS Lombard

• When will supply-chain disruptions ease?

Source: @WSJ Read full article

• Consumer demand has been outpacing production.

Source: Gavekal Research

And consumers are expected to spend more this holiday season.

Source: @WSJ Read full article

• According to a survey from Evercore ISI, all auto dealers now report tight inventories – which increasingly dampens sales.

Source: Evercore ISI

Consumers are incredibly frustrated with rising prices and the limited availability of vehicles.

But demand remains robust, sending wholesale used car prices to new highs.

——————–

3. Could we see a substantial acceleration in wage growth (2 charts)?

Source: Trahan Macro Research

Source: Trahan Macro Research

——————–

4. The GDPNow model estimate for the Q3 GDP growth has collapsed.

Source: Atlanta Fed

5. Extraordinarily easy financial conditions boosted M&A activity to new highs this year.

Source: The Daily Feather

6. The rise in net private savings has tracked the increase in the government deficit.

Source: SOM Macro Strategies

Back to Index

The United Kingdom

1. The pound continues to strengthen vs. the euro as the market expects the BoE to hike rates aggressively.

2. The UK needs to boost immigration to maintain economic growth.

Source: Pantheon Macroeconomics

Back to Index

The Eurozone

1. The 5yr Bund yield continues to climb.

Does this picture look familiar? We saw the same trend in the US and the UK.

• Central banks have been surprised by the strength and persistence of inflation.

• They are now more likely to tighten policy faster than initially expected.

• Hawkish central banks will result in slower economic growth. That’s why we are looking at flatter yield curves in many economies.

——————–

2. Eurozone construction output slowed in August.

But construction confidence appears to have stabilized.

Source: Pantheon Macroeconomics

——————–

3. Net lending to businesses as a share of GDP surged since the start of the pandemic.

Source: Longview Economics

Back to Index

Europe

1. The Norwegian krone continues to rally (vs. EUR) as energy prices surge.

2. European banks reported a significantly lower cost of risk in the first half of this year, supported by loan loss releases.

Source: DBRS Morningstar

3. Which countries are most dependent on Russian natural gas?

Source: The Economist Read full article

4. This chart shows the expected share of electricity produced by renewables.

Source: @financialtimes Read full article

5. Finally, we have some data on life expectancy in Europe (with the US and Chile included for comparison).

Source: The Economist Read full article

Back to Index

Japan

1. The yen remains under pressure.

2. Exports slowed last month, and the trade balance moved deeper into deficit.

3. Japan’s stocks tend to outperform Europe six months after elections.

Source: MarketDesk Research

4. Back to revolving door government?

Source: Statista

Back to Index

China

1. China’s new-home price index saw its first monthly decline since 2015.

• This chart shows housing inventories as a share of total assets at the largest property developers.

Source: Natixis

• Which firms breached Beijing’s recently introduced rules on property sector leverage?

Source: @financialtimes Read full article

——————–

2. Foreign direct investment has been strong this year.

3. Infrastructure-related activity has been slowing.

Source: Pantheon Macroeconomics

• Weaker credit growth will remain a drag on the economy.

Source: BCA Research

——————–

4. Beijing is trying once again to curb coal prices.

Source: Bloomberg Read full article

• Part of the problem is the disconnect between coal and electricity prices. The end users have no incentive to cut electricity consumption.

Source: Gavekal Research

• This year’s spike in electricity demand is an outlier.

Source: Nordea Markets

——————–

5. Finally, here is the evolution of US-China trade war tariffs.

Source: Peterson Institute for International Economics Read full article

Back to Index

Emerging Markets

1. Brazil’s markets are under pressure.

Source: To share this content, please use the link https://brazilian.report/liveblog/2021/10/19/auxilio-brasil-stock-market-rout/ or the tools offered on the page. Read full article

• Stocks:

• Bonds:

——————–

2. Colombia’s trade deficit accelerated this year as imports strengthened.

Economic activity eased in August.

——————–

3. Surging copper prices are a tailwind for the Chilean peso.

4. The ruble continues to climb with energy prices.

5. Hungary’s central bank announced another indecisive rate hike.

6. Inflation expectations are now well above EM central banks’ targets.

Source: Morgan Stanley Research

7. Local currency bonds are struggling due to faster inflation and more hawkish central banks.

h/t Colleen Goko

Back to Index

Cryptocurrency

1. The ProShares Bitcoin Strategy ETF (BITO) made its trading debut on Tuesday.

Source: CoinDesk

Source: TradingView

——————–

2. Bitcoin is near record highs.

3. There is a large amount of open interest in call options with strike prices above $100K BTC expiring at the end of the year.

Source: @glassnode

4. Mention of digital assets on company earnings calls is back past the previous peak.

Source: BofA Global Research

5. Social media conversation is diversifying away from bitcoin to other digital assets.

Source: BofA Global Research

Back to Index

Commodities

1. The London copper market experienced an unprecedented squeeze as inventories shrunk.

Source: Bloomberg Read full article

• LME inventories:

• Spot prices (record high):

• Spot – forward spread (massive backwardation):

——————–

2. The rally in industrial metals is approaching overbought levels.

Source: SentimenTrader

3. Demand for physical gold has declined from a recent peak.

Source: Incrementum

4. The broader commodity complex has passed its seasonal peak.

Source: SentimenTrader

5. US soy crush margins surged over the past month.

Source: @davechatterton

6. Sugar futures are rolling over amid more favorable weather conditions (rains) in parts of Brazil. Demand has also slowed.

Back to Index

Energy

1. This chart shows how energy-intense are different economies.

Source: Nordea Markets

2. US propane prices have been surging as inventories dwindle.

Source: @aeberman12

This chart shows how much more US consumers will pay to heat their homes this winter.

Source: EIA

Back to Index

Equities

1. High-dividend shares have been stuck in a range in recent months, lagging further behind the broader market.

2. Cyclicals have resumed their outperformance over defensive sectors.

3. This chart shows the decomposition of S&P 500 returns over the past decade.

Source: Pavilion Global Markets

4. Company earnings have been a key driver of index returns this year.

Source: BlackRock Read full article

5. Upside revenue surprises surged this year.

Source: BlackRock Read full article

6. Fund manages boosted exposure to energy and banks, exiting defensive sectors and industrials.

Source: BofA Global Research; @Callum_Thomas

7. Both risk parity funds and balanced mutual funds underperform when stocks and bonds are correlated (2 charts).

Source: JP Morgan

Source: JP Morgan

——————–

8. S&P 500 realized volatility is lagging implied volatility.

Source: Chris Murphy, Susquehanna International Group

9. Small caps have underperformed in recent days.

10. Some meme stocks came to life on Tuesday.

Back to Index

Rates

1. The gap between Treasury yields and the copper-to-gold ratio has widened further.

Source: @TheTerminal, Bloomberg Finance L.P.

2. The 2yr Treasury – OIS spread shows an increasingly tight supply of shorter-term Treasury notes.

3. Treasury implied volatility (MOVE) has diverged from equity vol (VIX).

4. Fund managers ere exceptionally pessimistic on bonds.

Source: BofA Global Research; @Callum_Thomas

——————–

Back to Index

Food for Thought

1. CBD product preferences:

Source: @CivicScience Read full article

2. COVID vaccine effectiveness in saving lives:

Source: Bloomberg Law Read full article

3. Changing views on abortion:

Source: Statista

4. Age distribution of US citizens vs. unauthorized immigrants:

Source: The White House Read full article

5. Solar cell manufacturers:

Source: The Washington Post Read full article

6. US concerns about global warming:

Source: Yale Program on Climate Change Communication

7. Confidence in US institutions:

Source: BCA Research

8. Workplace suicides:

Source: @boes_

9. Celebrating Halloween in 2021:

Source: Morning Consult Read full article

——————–

Back to Index