The Daily Shot: 12-Nov-21
• The United States
• The United Kingdom
• The Eurozone
• Europe
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Alternatives
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Let’s begin with some data on inflation.
• In previous months, the biggest price gains were driven by the recovery in services hit by the lockdowns (e.g. car rentals and hotels) as well as semiconductor shortages and supply-chain constraints. Inflation, however, is no longer just about “chips and ships.”
Source: Pantheon Macroeconomics
The sector to watch is shelter, …
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
Source: Commerzbank Research
… which will drive up the core services CPI.
Source: Oxford Economics Read full article
• Economists have been boosting longer-dated inflation projections.
Source: Deutsche Bank Research
• New vehicle prices have surged at the fastest pace on record. However, this is the US. As inventories get rebuilt, which may take a while, dealers will start offering incentives to sell more cars. Car prices will begin to moderate, and the reversal of the trend below will become deflationary.
• Over a longer time frame, productivity improvements should curtail inflation.
Source: Gavekal Research
• Below are some additional inflation trends.
– Flexible vs. sticky CPI:
– The NY Fed’s UIG inflation measure:
– Periods of stagflation in the US:
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
– Where do consumers expect the biggest price gains this holiday season?
Source: Morning Consult Read full article
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2. Import volumes remain elevated (2 charts).
Source: @paulkrugman
Source: S&P Global Market Intelligence
• Inland delivery issues could become the next bottleneck once the port situation begins to ease. For now, however, the West Coast ports remain clogged.
Source: Gavekal Research
• The durable goods inventories-to-sales ratio appears to be rebounding.
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3. Next, we have some updates on the labor market.
• Jobless claims are approaching pre-COVID levels.
Source: @WSJ Read full article
• Most of the “labor slack” is gone (2 charts).
Source: Bain & Company Read full article
Source: Gavekal Research
• Here is part of the reason for US labor shortages.
Source: @DianeSwonk
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4. E-commerce retail sales continue to grow, …
Source: Citi Private Bank
… contributing to rising demand for warehouse workers and couriers.
Source: Citi Private Bank
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5. Financial stress is at the lowest levels in nearly 30 years.
Source: Mizuho Securities USA
6. The Oxford Economics Recovery Tracker is at pre-COVID levels.
Source: @GregDaco, @OxfordEconomics
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The United Kingdom
1. The Q3 GDP report underwhelmed, …
… underperforming other economies.
Source: Pantheon Macroeconomics
• Business investment remains soft.
• And exports are not recovering.
Source: ING
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2. Manufacturing production remains below pre-covid levels.
But services output has recovered.
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3. The table below shows the EU’s options for retaliation if the UK triggers Article 16.
Source: ING
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The Eurozone
1. Germany’s federal tax revenue is expected to improve.
Source: Commerzbank Research
2. Dutch factory output has been impressive.
3. Ireland’s CPI blew past 5% for the first time in years.
4. Savings rates are starting to moderate.
Source: Pantheon Macroeconomics
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Europe
1. Norway’s core inflation is back below 1%.
2. Czech inflation, on the other hand, is nearing 6% (well above consensus). More rate hikes are coming.
3. Switzerland has managed to dodge the global supply-side shock, showing no growth at all in unit labor costs.
Source: Deutsche Bank Research
4. Natural gas withdrawals are starting. A cold snap could be trouble.
Source: @BurggrabenH
5. Global companies’ European sales have been slowing, according to a survey from Evercore ISI.
Source: Evercore ISI
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China
1. Coal futures prices continue to fall as Beijing forces out “speculators.”
However, China hasn’t fixed its coal supply shortages. The futures curve is in deep backwardation – an indication of tight markets.
Moreover, coal prices at China’s ports remain near the highs.
Source: BCA Research
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2. The broad economy has decelerated from peak growth, which has weighed on industrial metal prices recently.
Source: MRB Partners
3. Next, we have some updates on the property credit crisis.
• Beijing is signaling some easing in credit/leverage rules.
Source: @WSJ Read full article
Mortgage lending seems to be improving.
Source: Gavekal Research
Developers’ shares jumped.
• Evergrande’s sales tumbled this year.
Source: @WSJ Read full article
• Chinese household assets are dominated by real estate.
Source: Pavilion Global Markets
Many households own several properties.
Source: @liqian_ren
• How much will the property crisis impact the GDP growth? Here are some scenarios from Oxford Economics.
Source: @OxfordEconomics Read full article
• Chinese local governments have increasingly relied on the property sector.
Source: Pantheon Macroeconomics
• There are a lot of unfinished housing construction projects.
Source: @shuli_ren, @bopinion Read full article
• Property developers are facing a substantial maturity wall.
Source: Yahoo Finance/Bloomberg Read full article
Source: Bloomberg Read full article
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4. The renminbi continues to climb against a basket of currencies (boosted by US dollar gains). This trend results in tighter financial conditions in China, dampening economic growth.
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Emerging Markets
1. Banxico hiked rates.
However, the market expected a more aggressive action from Mexico’s central bank amid surging inflation. Bond yields declined.
Banxico remains cautious due to the nation’s weak economy.
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2. Peru’s central bank also hiked rates.
3. Colombia’s manufacturing output hit a record high.
4. Brazil’s retail sales declined again in September.
Separately, the real has plenty of room to rally.
Source: Gavekal Research
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5. South Africa’s industrial production is rebounding, but mining output has been soft.
6. Russia’s exports and trade surplus are following energy prices higher.
Source: @TheTerminal, Bloomberg Finance L.P.
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7. Israel’s trade deficit hits another record.
8. USD/TRY is testing 10.0 as the Turkish lira continues to weaken.
Source: brchart.com
9. The Pakistani rupee hit a record low despite a pledge of support from Saudi Arabia.
10. Malaysia’s GDP deteriorated last quarter due to lockdowns.
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Cryptocurrency
1. Approximately $64 million BTC long positions were liquidated within two hours of bitcoin’s all-time price high near $69K on Wednesday. The sell-off appeared to be fueled by a reduction in leveraged positions.
Source: @glassnode
2. The largest amount of open interest in ether options is at the $5K strike price, where calls outweigh puts.
Source: @CoinbaseInsto
The ETH vol curve has been moving deeper into contango.
Source: UBS Research
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3. Bitcoin’s transaction capacity per second is still very low compared to major payment networks.
Source: Deutsche Bank Research
4. This chart shows the number of bitcoin addresses with a nonzero balance.
Source: @APompliano
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Commodities
1. Key metal prices could keep surging. Here are some price scenarios under net-zero emission targets.
Source: IMF Read full article
Lithium prices continue to climb.
Source: Benchmark Mineral Intelligence
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2. Gold broke through short-term resistance, …
Source: barchart.com
… but it is showing signs of excessive optimism, which typically precede pullbacks.
Source: SentimenTrader
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3. Fertilizer is a key input of agricultural production, particularly rice. Fitch is warning that increased protectionist policies from China could create difficulties for fertilizer exporters.
Source: Fitch Solutions Macro Research
4. Lumber is in contango as mills step up output.
Source: @bespokeinvest Read full article
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Energy
1. We are in a seasonally soft period for oil.
Source: @JKempEnergy Read full article
2. This chart shows US installed capacity for wind, solar, and battery usage.
Source: S&P Global Market Intelligence
3. Job gains in clean energy will not fully offset job losses associated with traditional energy.
Source: IEA
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Equities
1. The transportation sector’s outperformance could be a bullish sign for stocks.
2. “Reopening” stocks are outperforming “stay at home” this month.
3. Next, we have some updates on the options market.
• The surge in options volume has been concentrated in four sectors.
Source: Goldman Sachs; @WallStJesus
• The demand for mega-cap call options sent the Nasdaq 100 skew sharply lower.
Source: Goldman Sachs; @themarketear
• However, put options in the SPDR Tech ETF (XLK) are starting to rise relative to calls.
Source: SentimenTrader
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4. The S&P 500 real earnings yield hit a record low.
Source: @LizAnnSonders
5. The share of companies beating earnings and sales estimates has moderated in the Q3 reporting season.
Source: @bespokeinvest Read full article
6. Higher concentrations of cyclical shares tend to reduce P/E ratios of markets/sectors.
Source: Cornerstone Macro
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Alternatives
1. Currency hedge funds struggled last month.
Source: @ReutersJamie Read full article
2. Barbarians at the gate? A record 21.2% of all venture deals in Europe had a US-based investor on board.
Source: PitchBook
3. The German government is dedicating billions to boost VC investments in the country.
Source: PitchBook Read full article
Berlin and Munich accounted for the bulk of VC investment last year.
Source: PitchBook Read full article
And as the German VC ecosystem has matured, later rounds have dominated.
Source: SentimenTrader
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4. 14 out of the 35 global ed-tech companies valued at $1 billion or more were minted this year, according to PitchBook data.
Source: PitchBook
5. Private capital funds, and VC strategies, in particular, have seen higher returns in recent quarters. But much of those returns remain unrealized and are based on estimated valuations, according to PitchBook.
Source: PitchBook
6. Hedge funds are moving into private markets in a big way.
Source: Goldman Sachs Global Markets Division; Zoetrope Finance
7. VC exits surged this year.
Source: @axios
8. This chart shows VC capital raised by female-founded companies.
Source: @Alisha__g, @dealbook, @PitchBook Read full article
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Credit
1. Implied real investment-grade yields have moved deeper into negative territory.
2. Inflows into MBS funds have accelerated recently.
Source: BofA Global Research
• MBS spreads have been relatively tight.
Source: Morgan Stanley Research
• Banks have been forced to buy MBS as the loan-to-deposit ratio hit a record low.
Source: Morgan Stanley Research
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3. The loan-to-deposit ratio of small vs. large lenders continues to diverge – partly due to regulation.
Source: Mizuho Securities USA
4. Sustainable finance is surging in advanced economies, but less so in emerging economies (possibly due to high debt and limited fiscal space).
Source: IEA
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Rates
1. The 2-5-10 Treasury butterfly spread has blown out, as the belly of the curve takes a hit. Investors expect the Fed to be more aggressive in fighting surging inflation.
2. What happened in the Treasury market in early 2020 when the pandemic first struck?
• Fund outflows forced managers to sell Treasuries.
Source: Federal Reserve Board Read full article
• Futures/cash (basis) arbitrage trades got unwound.
Source: Board Of Governors of the Federal Reserve System Read full article
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Global Developments
1. How have inflation-sensitive assets performed over the past 12 months?
Source: S&P Global Market Intelligence
2. In October, equity implied volatility fell below the historical median, while rates implied vol jumped to the highest level since March.
Source: SPDR Americas Research, @mattbartolini
Cross-asset dispersion has also been trending higher.
Source: SPDR Americas Research, @mattbartolini
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3. What were the drivers of reduced working hours since the start of the pandemic?
Source: BIS
4. Excess liquidity growth remains weak outside of the US.
Source: Variant Perception
5. Demand for goods boosted inflation in many economies.
Source: TS Lombard
6. Government deficits are expected to fall in most G7 countries.
Source: Desjardins
7. Finally, we have rate hikes vs. rate cuts, by year.
Source: S&P Global Market Intelligence
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Food for Thought
1. Black Friday shopping plans:
Source: @CivicScience
2. Buying used cars:
Source: Morning Consult
3. China-US shipping freight delays:
Source: Statista
4. The US mortgage origination fraud index:
Source: CoreLogic
5. Federal regulations:
Source: Capital Economics
6. Have your parents ever supported you financially as an adult?
Source: MagnifyMoney Read full article
How old were you when your parents cut you off financially?
Source: MagnifyMoney Read full article
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7. Covid cases by vaccination status:
Source: Statista
8. Americans avoiding the MMR vaccine:
Source: The Economist Read full article
9. Government shutdowns:
Source: Barclays Research
10. US gun sales:
Source: Everytown
11. The world’s largest passenger ships:
Source: Visual Capitalist Read full article
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Have a great weekend!
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