The Daily Shot: 18-Nov-21
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Food for Thought
The United States
1. Let’s begin with the housing market.
• Residential construction activity is moderating, especially in single-family housing.
– Starts:
– Permits:
On a seasonally-adjusted basis, single-family starts are now below pre-covid levels.
Source: Mizuho Securities USA
Shortages are creating a substantial construction backlog.
Source: Reuters Read full article
Here is the number of residential construction projects that have been authorized but not started.
• The number of units currently under construction has exceeded the housing bubble peak.
• Loan applications to purchase a house remain elevated for this time of the year.
• Investors accounted for a larger share of home buyers over the past year.
Source: Quill Intelligence
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2. Cap rates on commercial properties are at multi-decade lows. At these levels, prices are more vulnerable to rising bond yields.
Source: @Callum_Thomas
3. Commercial warehouse construction spending has risen to all-time highs.
Source: Citi Private Bank
4. Inventory rebuilding will support economic growth next year, according to Morgan Stanley.
Source: Morgan Stanley Research
5. Next, we have some updates on inflation.
• As we saw earlier, the latest inflation increase was not just about “ships and chips.”
Source: @jasonfurman
• Many fund managers still view inflation as “transitory.”
Source: BofA Global Research
• Durable goods prices surged this year, but they will become a significant drag on the CPI in 2023.
Source: Goldman Sachs; @carlquintanilla
• This chat shows the Philly Fed’s Survey of Professional Forecasters long-term (10-year average) PCE inflation projection. It’s one of the indicators supporting some economists’ views that inflation expectations are “well-anchored.”
Source: Evercore ISI
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6. The debt ceiling jitters will return next month.
Source: @WSJ Read full article
• The US Treasury’s cash balances dipped below $200 billion again.
• The Treasury faces default risk at the end of the year.
Source: @GregDaco, @OxfordEconomics, @nanc455
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Canada
1. Inflation continues to surge. However, core inflation indicators seem to have leveled off.
2. Housing price appreciation has peaked.
3. The Oxford Economics Recovery Tracker is now firmly above pre-COVID levels.
Source: Oxford Economics
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The United Kingdom
1. Inflation surprised to the upside, adding to the BoE’s concerns about being behind the curve.
And it wasn’t just about the natural gas price spike, which, by the way, is yet to fully propagate through the economy.
Below are a couple of examples.
– Used cars:
– Furniture:
Here are the contributions to the CPI.
Source: @M_McDonoug
• Consumer inflation is yet to peak.
Source: Pantheon Macroeconomics
• The Retail Price Index hit 6% year-over-year.
• Producer prices also topped forecasts.
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2. Rent costs are rising.
Source: @Quicktake Read full article
3. Home price appreciation is nearing 12% again.
4. The quit rate in the UK is surging (similar to the US).
Source: @mmamertino
5. UK equity underperformance continues to widen.
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The Eurozone
1. The Eurozone-US inflation divergence has been a drag on the euro.
2. COVID cases in Germany continue to surge.
Source: CNBC Read full article
Here is the situation in other euro-area economies.
Source: Bloomberg Read full article
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3. Construction output is running below 2018/19 levels.
But improved sentiment points to a rebound.
Source: Pantheon Macroeconomics
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4. TLTRO III was much larger than previous iterations as the ECB sought to reduce rates and restrictions to encourage take-up during the pandemic crisis.
Source: Barclays Research
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Europe
1. Poland’s core inflation hit 4.5% for the first time in years.
2. Iceland hiked rates by 50 bps amid inflation concerns.
3. Natural gas inventories continue to sink relative to their seasonal average. A cold snap this winter could be trouble.
Source: Longview Economics
4. European stocks are not overpriced.
Source: @ISABELNET_SA, @GoldmanSachs
5. Next, we have the evolution of building permits in the EU.
Source: EC Read full article
6. Finally, this map shows the 2021 GDP growth across the EU.
Source: EC Read full article
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China
1. The total debt-to-GDP ratio appears to have stabilized.
Source: Morgan Stanley Research
2. Developers are getting regulatory relief to access credit.
Source: Bloomberg Read full article
Issuance, especially offshore, has dwindled last month, …
Source: Fitch Ratings
… and ratings downgrades spiked.
Source: Fitch Ratings
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3. Hog prices have stabilized and are no longer a drag on the CPI.
Source: @JCIChina Read full article
Higher inflation reduces the probability of monetary easing.
Source: BCA Research
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4. China’s coal production hit a new high.
Source: Longview Economics
5. Fewer than 20% of stocks in the Overseas China Internet Index are trading above their 50-day moving averages, which typically precedes a price recovery.
Source: SentimenTrader
6. Here is the stock market performance by sector year-to-date.
Source: S&P Global Market Intelligence
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Emerging Markets
1. The Turkish lira continues to slide as Erdogan presses for rate cuts.
Source: Bloomberg Read full article
Will the central bank oblige?
Source: Numera Analytics
Options traders are betting on it.
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2. South Africa’s CPI remains “well behaved.”
Retail sales rebounded in September.
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3. India’s tech IPO market has been hot.
Source: @acemaxx, @FT Read full article
Source: @acemaxx, @FT Read full article
Perhaps too hot?
Source: @technology Read full article
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4. The Chilean peso is under pressure ahead of the vote on November 21st.
5. A majority of EM local-currency bonds have positive real yields, unlike their developed market peers.
Source: Alpine Macro
6. EM equities are below their long-term trend relative to developed market equities.
Source: Alpine Macro
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Cryptocurrency
1. Bitcoin held support at the 50-day moving average.
2. Elevated funding rates (the cost of holding long positions in the perpetual futures market) in bitcoin and ether have reset near neutral territory.
Source: Delphi Digital Read full article
3. Some leveraged traders faced liquidations during the recent sell-off.
Source: Delphi Digital Read full article
4. In the bitcoin options market, open interest is near all-time highs seen in March and April, which preceded a significant price drop.
Source: @glassnode
5. There is a large dominance of BTC call options expiring Dec. 31.
Source: @glassnode
6. Is crypto facing the “stadium curse?”
Source: CoinDesk Read full article
7. Fidelity is launching bitcoin custody services in Canada.
Source: CoinDesk Read full article
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Commodities
1. Iron ore futures in China continue to tumble.
2. There have only been nine other times when both gold and the dollar hit a 90-day high at the same time. And while gold’s returns over the next 6-12 months were positive, it struggled to hold gains during the next 1-3 months.
Source: SentimenTrader
3. All the LME base metals are in backwardation (inverted curve), pointing to tight inventories.
Source: @markets Read full article
4. Lithium batteries are going to take a bigger share of global electric vehicle markets.
Source: S&P Global Research Read full article
5. Wheat prices in the US continue to climb.
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Energy
1. The rally in crude oil is fading.
2. US refinery inputs are very weak for this time of the year.
3. US crude oil inventories are at multi-year lows.
This chart shows the total liquids inventory.
Source: @HFI_Research
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4. US crude oil production has stalled again.
Bakken’s output remains weak (“most of the best wells have been drilled”).
Source: @jessefelder, @FT Read full article
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5. LNG prices continue to surge.
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Equities
1. US small caps have underperformed sharply in recent days.
2. When will the S&P 500 operating income growth peak?
Source: Variant Perception
3. Manufacturing order growth points to a turning point in S&P 500 earnings.
Source: Variant Perception
4. Here is the Evercore ISI sector allocation survey of institutional investors and hedge funds (shown against historical averages).
Source: Evercore ISI
5. This chart shows the year-to-date stock market performance in select economies.
Source: S&P Global Market Intelligence
6. Fund managers are increasingly concerned about early rate hikes derailing the rally.
Source: BofA Global Research
7. “Reopening” stocks have been outperforming.
Source: DealBook Read full article
8. Equity risk premium has remained above the historical median over the past decade.
Source: Federal Reserve
9. Equity implied volatility (VIX) continues to decline relative to rate vol (MOVE).
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Credit
1. Investment-grade yields have been rising.
Source: @lisaabramowicz1
2. Next, we have some data on securitized debt spreads (from Deutsche Bank).
– Term structure:
Source: Deutsche Bank Research
– Current spreads vs. the past five years:
Source: Deutsche Bank Research
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3. Covid crisis was the first real test of fintechs. Fintech lenders grew assets throughout the crisis at a rapid clip but saw an increase in non-performing assets (not seen among traditional lenders).
Source: IMF
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Food for Thought
1. Shopping on Black Friday:
Source: @CivicScience
2. Ferrari sales:
Source: @chartrdaily
3. Global growth in non-cash transactions:
Source: Capgemini Read full article
4. US package shipment market:
Source: QZ Read full article
5. Baby boomer retirements:
Source: @axios Read full article
6. Warm oceans:
Source: @NOAANCEI Read full article
7. Carbon emissions per capita:
Source: @WSJ Read full article
8. US 2021 political typology:
Source: Pew Research Center Read full article
9. Evolution of the Microsoft Windows logo:
Source: CSH
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