The Daily Shot: 09-Nov-21
• The United States
• The United Kingdom
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Global Developments
• Food for Thought
The United States
1. Let’s begin with some updates on inflation.
• Nomura expects an uptick in the October CPI report, boosted by shelter and vehicle prices.
Source: Nomura Securities
– Wholesale used car prices lead the CPI component by two months.
Source: Nomura Securities
– Home price gains will drive owners’ equivalent rent (OER) higher.
Source: Nomura Securities
• Oxford Economics expects CPI to moderate in the second half of next year, especially as energy supply comes back online. But the CPI peak is yet to come.
Source: Oxford Economics
• This chart shows PCE inflation over various look-back periods.
Source: Gavekal Research
• The Phillips curve relationship in the US hasn’t worked well for a long time.
Source: Mizuho Securities USA
Is that trend about to change?
Source: Jefferies
• The median PCE inflation excluding shelter is now above 2.5%.
Source: MRB Partners
• This chart shows the betting markets’ odds of the October CPI rising by 0.5% (month-over-month).
Source: Kalshi
• Consumer inflation expectations continue to climb.
Source: NY Fed
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2. Consumers expect faster wage growth ahead.
Source: NY Fed
Economists agree. Here is a forecast from Cornerstone Macro.
Source: Cornerstone Macro
And CFOs agree as well.
Source: Evercore ISI
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3. The Citi Economic Surprise index is back above zero, boosted by survey data (ISM manufacturing and services). A strong employment report also helped.
4. US household deleveraging has been extraordinary, unwinding the entire 1990 – 2009 credit binge.
Source: Mizuho Securities USA
5. Shipping costs from China appear to be moderating.
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The United Kingdom
1. The 30yr gilt yield is back near 1%.
2. The UK equity market looks attractive, with one of the highest developed-market equity risk premiums.
Source: Longview Economics
3. Will the UK economy outperform the US and the Eurozone next year?
Source: LPL Research
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Europe
1. COVID cases are on the rise across Europe.
Source: @chartrdaily
Source: @financialtimes Read full article
2. Nonetheless, the Sentix investor confidence index surprised to the upside.
3. Keeping a lid on sovereign yields will be challenging after ECB QE ends.
Source: IIF
4. Euro area inflation has been more muted and narrower than in the US.
Source: BCA Research
5. Eurozone labor market slack remains comparable to 2011 levels.
Source: BCA Research
6. Czech industrial production is following Germany lower.
Here is the Czech trade balance.
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7. With the looming expiry of the escape clause of the Stability and Growth Pact, the scene is set for a debate on future EU fiscal rules. The chart below shows the ESM proposal, which still looks very restrictive.
Source: TS Lombard
8. Finally, we have some data on sector PMIs (business activity).
Source: IHS Markit
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Asia – Pacific
1. Taiwan’s exports hit a record high.
2. South Korea’s central bank finds itself in a precarious situation with skyrocketing private debt (especially household debt) and house prices.
Source: Pavilion Global Markets
3. New Zealand’s traffic data point to a bounce in economic activity from the 2021 lockdown lows.
4. Australia’s consumer and business confidence indicators are recovering.
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5. Natural gas consumption in Asia-Pacific has been surging in recent decades.
Source: @financialtimes Read full article
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China
1. Here we go again. Thermal coal prices are down another 7.5%.
2. Despite an attempt to ramp up pipeline projects (largely gas from Central Asia and Russia), China continues to depend on LNG as a key source of gas.
Source: Fitch Ratings
3. Here is the breakdown of China’s exports.
Source: @GregDaco; Bloomberg Read full article
China’s trade surplus hit a record despite increased energy imports.
Source: Pantheon Macroeconomics
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4. Profit margins are under pressure as costs climb.
Source: Pavilion Global Markets
5. Some Chinese banks are very exposed to property markets.
Source: SOM Macro Strategies
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Emerging Markets
1. Let’s begin with Chile.
• Inflation topped market expectations.
• This chart shows Chile’s exports.
• Chilean mining exports are about to take a leg down due to demand weakness in China.
Source: Deutsche Bank Research
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2. Mexican vehicle sales remain at multiyear lows for this time of the year.
Separately, speculative accounts (such as hedge funds) have soured on the Mexican peso.
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3. The Philippine GDP jumped in Q3, exceeding forecasts. But there is a long road to recovery.
4. Malaysia’s industrial production rebounded to hit a multi-year high (for September).
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Cryptocurrency
1. Bitcoin and ether made record highs on Monday.
Source: CoinDesk Read full article
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2. Litecoin (LTC) has been outperforming other large cryptocurrencies over the past week.
Source: FinViz
3. Despite lower trading volume in the spot market, ether’s option volumes have risen to their highest level since May.
Source: Kaiko Read full article
4. Ethereum is losing market share to alternate Layer 1 protocols.
Source: Kaiko Read full article
5. Digital asset funds saw the 12th consecutive week of inflows.
Source: CoinShares Read full article
Bitcoin investment products accounted for a majority of inflows last week.
Source: CoinShares Read full article
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6. Finally, we have a couple of bitcoin/gold comparisons.
• Fund flows.
Source: @ISABELNET_SA, @jpmorgan
• Market cap:
Source: ingoldwetrust.report
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Commodities
1. Let’s begin with some updates on gold.
• Gold futures are attempting to break above an intermediate-term downtrend.
Source: Dantes Outlook
• This story gave gold a boost.
Source: @WSJ Read full article
• The percentage of gold mining stocks in bear markets has dropped from 95% to 65% in recent days.
Source: SentimenTrader
• Here is a look at seasonal trends in the SPDR Gold ETF (GLD) over the past 20 years.
Source: Cannon Advisors
• Gold prices could weaken if TIPS yields move higher.
Source: Longview Economics
• Speculators have trimmed their extreme net-long gold positions over the past few years.
Source: Longview Economics
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2. Copper inventories are approaching multi-year lows.
3. US soybean futures have been trending lower amid robust supply expectations and softer demand from China.
Source: Reuters Read full article
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4. It’s been a strong year for commodities.
Source: BofA Global Research
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Energy
1. OPEC+ nations could contribute around half of global oil supply growth next year, and a further 12% from Russia, according to Fitch estimates. Rising supply could weigh on oil prices in 2022.
Source: Fitch Solutions Macro Research
2. Fitch expects refined fuel consumption to slow over the next few years.
Source: Fitch Solutions Macro Research
3. Shares of uranium mining firms are surging.
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Equities
1. The market has been up in 16 out of the last 18 sessions.
h/t @luwangnyc
2. VIX climbed on Monday, even with the market edging higher.
Source: Bloomberg Read full article
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3. Fewer than 25% of Nasdaq 100 stocks are in a correction (down 10% from their high) – the lowest since February.
Source: SentimenTrader
• 16% of the S&P 500 members are at 52-week highs.
Source: Bloomberg Read full article
• More than 40% of major global developed market indexes are at a 52-week high – the most since August.
Source: SentimenTrader
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4. US stocks have outperformed all other developed markets over the long term.
Source: BofA Global Research
Has the outperformance peaked for now?
Source: BofA Global Research
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5. Risk appetite in the options market has surged in recent weeks.
• Nasdaq 100 call option volume:
Source: Morgan Stanley Research
• Call options in S&P 500 and Russell 2000 names as well as by sector:
Source: Deutsche Bank Research
• The put-call ratio:
Source: Deutsche Bank Research
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6. The Reddit crowd is pressing its bets.
• Most shorted names and meme stocks:
• Non-profitable tech:
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7. Next, let’s look at a couple of attribution charts.
• Return contributions over time:
Source: Pavilion Global Markets
• Drivers of S&P 500 price changes over the past two years:
Source: @ukarlewitz
• Margin expansion has taken the reins from valuation expansion as the key driver of returns:
Source: Variant Perception
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8. The scatterplot below shows sectors plotted by risk (standard deviation) and return over the last three years.
Source: Mizuho Securities USA
9. Retail interest in SPACs has collapsed.
Source: Variant Perception
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Rates
1. The 30yr TIPS yield (real rates) hit a record low. Nervous about inflation, investors have been bidding up inflation-linked Treasuries.
The TIPS curve flattened.
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2. The market expectations for the nominal long-run rate (r*) is back below 2%.
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Global Developments
1. Global equity markets continue to underperform the S&P 500.
Source: LPL Research
2. Food prices have been surging.
3. Global venture capital investment in the electric vehicle sector hit a record $17.8 billion in the first nine months of 2021.
Source: PitchBook
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Food for Thought
1. Aquaculture production:
Source: @_HannahRitchie Read full article
2. Increasing droughts and floods in sub-Saharan Africa:
Source: The World Bank Group Read full article
2. Share of the population unwilling to get vaccinated:
Source: Scott Galloway
3. Reported experience with anxiety/depression:
Source: Gallup Read full article
4. US retirements:
Source: Miguel Faria-e-Castro Read full article
5. Projected change in high school graduation rates:
Source: Bloomberg Read full article
6. How long would $1 million last in retirement:
Source: Visual Capitalist Read full article
7. Tobacco products’ price evolution:
Source: Pavilion Global Markets
8. Top 100 companies by market capitalization:
Source: @VisualCap Read full article
9. When do adult musical preferences set in?
Source: The New York Times Read full article
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