The Daily Shot: 17-Nov-21
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Food for Thought
The United States
1. Retail sales were well above expectations in October, with consumers starting their holiday shopping early (apparently unfazed by higher prices).
• The chart below illustrates why retailers and their suppliers can’t keep up.
Retailers’ inventories-to-sales ratio remains depressed.
And for the first time in years, retailers have pricing power, …
Source: Evercore ISI
… as sales surge.
Source: Evercore ISI
• Despite the U. Michigan’s collapsing buying conditions index, spending on automobiles rebounded and remained well above the pre-COVID trend.
• Online spending is holding above the levels we saw in 2020.
• Next, we have the changes in retail sales by sector.
– Changes in October:
Source: @GregDaco
– The weighted contributions to the total retail sales index:
Source: Scotiabank Economics
– Select sector trends:
Source: ING
• Retail sales as a share of total consumer spending have risen since the start of the pandemic (a bigger contribution to the GDP).
Source: ING
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2. Industrial production also topped economists’ forecasts.
• Manufacturing output hit the highest level since early 2019.
• Capacity utilization is back at pre-COVID levels as Hurricane Ida’s impact is reversed.
• Vehicle production rebounded sharply.
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3. Strength in retail sales and industrial production further raised the Citi Economic Surprise Index (which got a boost from the ISM indicators at the beginning of the month).
The Atlanta Fed’s GDPNow model has the Q4 growth at 8.7% (annualized).
Source: Atlanta Fed
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4. The NY Fed’s regional service-sector report continues to show rising price pressures …
… and accelerating wage growth.
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5. Next, we have some updates on the labor market.
• Job postings on Indeed are over 50% higher than they were just before the start of the pandemic.
• The U. Michigan sentiment indicator has deteriorated despite the labor market strength. The index tends to be more sensitive to inflation than other consumer gauges.
Source: @bespokeinvest Read full article
• This chart shows employment by wage growth.
Source: Oxford Economics
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6. The US dollar continues to strengthen, which should help ease import price inflation.
Source: barchart.com
7. Finally, let’s take a look at some trends in the housing market.
• Homebuilder sentiment is rebounding after the recent pullback as demand improves.
• The U. Michigan index of buying conditions for houses hit another low this month.
Despite the complaints about high prices, the US demand for homes is exceptional.
Source: Redfin
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• Homes are selling quickly.
Source: @WSJ Read full article
• Why are homeowners taking money out of their home equity?
Source: @jessefelder; Bloomberg Read full article
• House rents are up sharply this year across all price categories.
Source: CoreLogic
• Commercial properties are rapidly being converted into residential space.
Source: RentCafe; h/t @axios Read full article
Source: RentCafe; h/t @axios Read full article
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Canada
1. Housing starts are returning to more sustainable levels.
2. Bond yields continue to climb.
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The United Kingdom
1. Payrolls have been rebounding, …
Source: The Guardian Read full article
… as the unemployment rate drops.
Wages eased, pointing to more part-time jobs.
Source: Pantheon Macroeconomics
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2. Productivity dipped below the pre-COVID trend.
3. Inflation surprised to the upside – more on this tomorrow.
The euro hit the weakest level against the pound since the start of the pandemic.
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The Eurozone
1. Equity indices are hitting record highs.
2. The euro continues to weaken as US economic data surprises to the upside (2nd panel).
h/t @vkaramanis_fx
3. GDP and employment indices are approaching pre-COVID levels.
Dutch GDP is surging.
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4. This chart shows the pandemic-era changes in Italy’s labor force participation.
Source: Pantheon Macroeconomics
5. French fertilizer prices are soaring, which will drive up food inflation.
Source: Gavekal Research
6. Natural gas prices surged as German authorities put a hold on Nord Stream 2.
Source: Reuters Read full article
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7. Euro-area broad financing conditions remain favorable at current levels, according to Barclays.
Source: Barclays Research
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Japan
1. Dollar-yen is testing resistance.
Source: barchart.com
2. Market-based inflation expectations continue to climb.
3. Speculative accounts have unwound their bets on Nikkei futures.
Source: Deutsche Bank Research
4 The COVID situation is under control.
Source: Evercore ISI
5. Nonetheless, service sector activity remains depressed.
6. Exports strengthed last month.
7. Economic growth should rebound this quarter.
Source: Pantheon Macroeconomics
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Asia – Pacific
1. Inflation pressures are broadening in South Korea, supporting a more hawkish central bank stance.
Source: Barclays Research
2. Singapore’s exports have strenghened.
Source: ING
3. Australia’s job postings are outpacing other advanced economies.
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China
1. The US dollar rally is boosting the renminbi against other currencies. This trend will be a drag on China’s exports.
For example, China’s products are becoming more expensive in Europe.
Source: @Avonmehren
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2. State-owned enterprise (SOE) debt has grown to about 130% of GDP.
Source: Pavilion Global Markets
There was a sharp rise in SOE bond defaults last year.
Source: Pavilion Global Markets
Net issuance by local authorities with a stronger fiscal backdrop bounced back strongly during the first half of this year.
Source: Pavilion Global Markets
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3. Hong Kong’s unemployment rate continues to drop.
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Emerging Markets
1. Brazil’s economic activity eased further in September, although the decline wasn’t as severe as some analysts feared.
Here are the contributions to Brazil’s CPI.
Source: @M_McDonough
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2. Colombia’s GDP is surging.
The nation’s trade deficit is near record highs.
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3. EM central banks continue to hike rates.
Source: Cornerstone Macro
4. Fund managers are under-allocated EM equities.
Source: BofA Global Research
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Cryptocurrency
1. Major cryptocurrencies have been in the red in recent days.
Source: FinViz
Bitcoin is back below $60k.
Source: barchart.com
And ether is about to test support at $4k.
Source: barchart.com
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2. The Bitcoin Fear & Greed Index is starting to fall from the highest level since September.
Source: Arcane Research Read full article
3. MRB’s crypto momentum index has been rising from oversold levels last month and is now only mildly overbought.
Source: Santiago Espinosa; MRB Partners
4. VanEck’s futures-based bitcoin ETF (XBTF) is off to a slow start.
Source: CoinDesk Read full article
5. This chart shows where fund managers see bitcoin over the next 12 months.
Source: BofA Global Research
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Commodities
1. Copper backwardation is normalizing.
2. The last time the Bloomberg Commodity Spot Index went more than 400 days without setting a one-year low was Sep. 2017, which led to an additional eight months of higher commodity prices, according to SentimenTrader.
Source: SentimenTrader
3. Industrial metals could come under further pressure due to weak construction activity in China.
Source: @PkZweifel
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Energy
1. Correlation between natural gas and coal has been surging, while oil-coal correlation dipped into negative territory.
Source: Oxford Economics
2. Flows into energy stocks surged.
Source: BofA Global Research
3. OECD crude oil inventories remain well below the five-year range.
Source: @IEA, @staunovo
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Equities
1. Tech stocks are breaking out relative to S&P 500.
Source: Truist Advisory Services
2. Here is a look at assets under management for US inflation-themed ETFs …
Source: FactorResearch Read full article
… and a breakdown by asset class.
Source: FactorResearch Read full article
By the way, companies continue to ring alarm bells about inflation.
Source: @FactSet Read full article
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3. Growth and value stock valuations continue to diverge.
Source: Yardeni Research
4. Tech mega-caps are now 30% of the S&P 500 market cap.
Source: Yardeni Research
This chart shows the S&P 500 P/E ratio with and without the tech mega-caps.
Source: Yardeni Research
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5. Fund managers are putting the pedal to the metal, with significant allocations to stocks (OW = overweight).
Source: BofA Global Research
Source: BofA Global Research
6. Flows into funds labeled “climate” have been above conventional funds since 2017, but exploded in 2020 surging by a staggering 48% of assets under management over the four quarters of 2020.
Source: IMF
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Rates
1. Flows into inflation-protected Treasuries have been surging.
Source: Goldman Sachs; @MrBlonde_macro
2. Fund manages increasingly expect a flatter yield curve.
Source: BofA Global Research
3. The iShares 20+ year Treasury bond ETF (TLT) is entering a seasonally strong period.
Source: SentimenTrader
4. The correlation between the short end and long end of the yield curve has collapsed to previously never seen lows.
Source: Trahan Macro Research
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Food for Thought
1. SALT deductions by income group:
Source: USA Facts Read full article
2. The largest US firms have become much less labor-intensive.
Source: BofA Global Research
3. The number of music streams needed to make one dollar:
Source: Statista
4. Views on separation of church and state:
Source: Pew Research Center Read full article
5. The number of Republican and Democratic state governors:
Source: Statista
6. Deforestation in the Amazon:
Source: @chartrdaily
7. Used farm equipment prices:
Source: Bloomberg Read full article
8. Risks to economic growth:
Source: McKinsey Read full article
9. Lucid’s valuation overtaking GM and Ford:
Source: Bloomberg Read full article
10. Most interesting neighborhoods:
Source: Statista
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