The Daily Shot: 13-Dec-21
• The United States
• The United Kingdom
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Traders were concerned about another upside inflation surprise, but the November CPI report was roughly in line with expectations. That’s why stocks and bonds rallied despite a multi-decade high CPI print.
• Let’s take a look at the contributions to the CPI surge.
– Goods vs. services:
Source: Scotiabank Economics
– Year-over-year key components:
Source: @TheTerminal, Bloomberg Finance L.P.
– Month-over-month contributions (2 charts):
Source: Wells Fargo Securities
Source: Nomura Securities
• Here are some of the CPI components (year-over-year).
– New vehicles:
– Food away from home (restaurants are rapidly boosting prices to cope with higher wages):
– Shelter (plenty of room to rise further):
• Alternative core inflation indicators are all surging.
– Median CPI (rising inflation breadth):
– Trimmed-mean CPI:
– Sticky CPI:
• The disinflationary trend that started after oil prices crashed in 2014 has been reversed. Since the Fed is targeting price levels, the central bank should see this as “mission accomplished.”
Source: ANZ Research
As a result, the Fed is expected to accelerate its QE taper. Here is a projection from ANZ.
Source: ANZ Research
Tomorrow, we’ll take a look at some inflation forecasts.
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2. Since the market feared an upside inflation surprise, Treasuries rallied when the CPI report came in line with expectations.
And inflation expectations ticked lower.
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3. One driver of US inflation has been a rapid growth in the money supply. Eliminating QE should slow this trend.
4. The U. Michigan consumer sentiment index ticked higher this month, …
… boosted by a pullback in gasoline prices.
This chart shows the U. Michigan buying conditions for household durables.
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5. Finally, the US budget deficit is following the 2020 (pre-COVID) path.
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The United Kingdom
1. The October monthly GDP estimate was below forecasts as the economy approaches full recovery.
• Industrial production was soft.
• Construction output weakened:
• Services have made a full recovery.
• Exports have been trending lower, …
Source: Pantheon Macroeconomics
… but export orders point to improvements ahead.
Source: @macro_daily
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2. The 7-day average of COVID cases exceeded 50k per day.
3. Finally, we have some political polls.
Source: POLITICO
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Europe
1. Dutch factory output hit a new high in October, with industrial sales holding at multi-year highs for this time of the year.
2. Italian industrial production has been rolling over.
3. European natural gas prices are surging again, …
… amid declining inventories (now well below the 5yr range). Power prices will stay elevated.
Source: @Ole_S_Hansen
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4. The automobile sector remains in contraction mode (PMI < 50).
Source: IHS Markit
5. Tech sector investment surged this year.
Source: @StuartLWallace, @IvanLevingston Read full article
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Asia – Pacific
1. Japan’s Tankan manufacturing survey showed a pullback in business confidence this quarter.
Service sector outlook continues to recover.
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2. New Zealand’s service sector activity remains in contraction mode.
Home sales are rebounding.
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China
1. Indicators point to a rebound in China’s credit impulse.
Source: Deutsche Bank Research
2. A boost in infrastructure spending is coming.
Source: Pantheon Macroeconomics
3. The renminbi has diverged from equity prices.
Source: BCA Research
4. Coal output is growing.
Source: ANZ Research
5. The PPI has peaked, according to Evercore ISI. However, the CPI is expected to stay elevated, which will constrain further PBoC easing.
Source: Evercore ISI Research
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Emerging Markets
1. The Turkish lira resumed its descent, breaching 14 to the dollar.
Separately, increased lending in Turkey isn’t generating higher deposits. Something is off.
Source: @RobinBrooksIIF, @UgrasUlkuIIF
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2. India’s industrial production was below forecasts but remains robust.
3. Vietnam’s car sales surged over the past couple of months.
4. Russian exports continue to climb, boosted by higher energy prices.
5. Will EM currencies retest long-term resistance as the Fed pulls stimulus?
Source: Fitch Solutions Macro Research
6. Finally, we have the creditor composition of public debt (multilateral = syndicated debt).
Source: IMF Read full article
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Cryptocurrency
1. Most major cryptocurrencies are still in the red this month.
Source: FinViz
Ether continues to outperform bitcoin.
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2. Bitcoin is holding support at the lower Bollinger Band.
3. Bitcoin has exhibited high idiosyncratic risk since its inception.
Source: J.P. Morgan Asset Management
4. Bitcoin’s correlation with stocks remains elevated.
5. Bitcoin investment products saw inflows totaling $145 million last week, although the recent crypto sell-off triggered $42 million in outflows during the latter half of the week.
Source: CoinShares
6. The public’s interest in crypto has been moving higher again.
Source: @CivicScience Read full article
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Commodities
1. US lumber prices are surging again as residential construction accelerates.
Source: Markets Insider Read full article
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2. The euro and copper have diverged.
Source: BCA Research
3. Next, we have some data on global lithium supplies.
Source: The Economist Read full article
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Energy
1. US rig count is grinding higher.
Source: Reuters Read full article
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2. Have crude oil prices peaked for now?
Source: @EIAgov
3. Efficiency gains have been a drag on oil demand over many years.
Source: Evercore ISI Research
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Equities
1. It was a good week for US stocks as the S&P 500 hit a record high.
Source: @kgreifeld
2. The valuation gap between US stocks and the rest of the world continues to widen.
Source: Yardeni Research
3. Insiders have sold quite a bit of stock this year. Note that these are dollar amounts, partly reflecting elevated share prices.
Source: @WSJ Read full article
4. Inverse ETF volume is declining from extreme levels, suggesting that investors are less concerned about a stock market sell-off.
Source: SentimenTrader
5. Sticking with the top five stocks (rebalanced monthly) produced impressive returns recently.
Source: @MichaelKantro
6. Crowded stocks continue to struggle.
7. Next, we have some sector trends.
• Month-to-date returns:
• Positive vs. negative guidance for Q4:
Source: @FactSet Read full article
• Last week’s performance:
– Banks:
– Housing:
– Transportation:
– Communication Services:
– Tech:
– Pharma and biotech:
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Credit
1. A great deal of bond trading is still done over the phone.
Source: @LizAnnSonders, @FT Read full article
2. MBS bond spreads remain tight.
Source: Morgan Stanley Research
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Rates
The 10yr Treasury yield has diverged from the market expectation of the terminal rate (long-term fed funds rate).
Source: Morgan Stanley Research
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Global Developments
1. Let’s begin with some month-to-date returns data from Acorn Macro.
• Equities:
Source: Acorn Macro Consulting Ltd.
• Currencies:
Source: Acorn Macro Consulting Ltd.
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2. There is a 2% gap between the historic 60/40 (equities/bonds) returns and JP Morgan’s forecasts.
Source: J.P. Morgan Asset Management
The gap is mainly due to a difficult starting point of low yields and high valuations.
Source: J.P. Morgan Asset Management
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3. Is the US dollar overvalued (2 charts)?
Source: BCA Research
Source: BCA Research
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4. Has growth peaked across OECD economies?
Source: OECD Read full article
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Food for Thought
1. US teen labor force participation rate:
Source: Self Read full article
2. Twitter power users:
Source: Pew Research Center Read full article
Source: Pew Research Center Read full article
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3. Charging stations per EV:
Source: ING
4. Age appropriateness of social media:
Source: @CivicScience Read full article
5. Warmer oceans:
Source: Oceanpanel.org
6. Booster shots vs. total vaccination rates:
Source: Numera Analytics
7. Vaccine effectiveness against the Delta variant:
Source: The Economist Read full article
8. US COVID hospitalizations:
Source: @WSJ Read full article
9. The most misspelled brands:
Source: Statista
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