The Daily Shot: 11-Jan-22
• The United States
• The Eurozone
• 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 additional data on the December payrolls report.
• Jobs recovery by wage tier (high-paying jobs have fully recovered):
Source: Morgan Stanley Research
• Services vs. goods sector employment recovery:
Source: Oxford Economics
• The impact of Leisure & Hospitality:
Source: Wells Fargo Securities
• Wage growth by industry (2 charts):
Source: Wells Fargo Securities
Source: @johnauthers, @bopinion Read full article
• The rapid decline in the unemployment rate:
Source: Morgan Stanley Research
• The unemployment rate attribution by duration:
Source: Barclays Research
• December winners and losers:
Source: Bloomberg Read full article
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2. Many Americans expect to quit their jobs this year.
Source: ResumeBuilder.com Read full article
• Who is quitting?
Source: ResumeBuilder.com Read full article
• When?
Source: ResumeBuilder.com Read full article
• Why?
Source: ResumeBuilder.com Read full article
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3. Next, we have some updates on inflation.
• Nomura estimates another month of strong price gains in December.
Source: Nomura Securities
• This chart shows the relative share of CPI weighting by category.
Source: Bain & Company
• Is the Fed too optimistic about inflation moderating over the next couple of years?
Source: ANZ Research
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3. Goldman expects the Fed to hike rates four times this year, which is consistent with the market (the futures-based probability is now above 90%). But beyond this year, Goldman sees a more aggressive rate hike trajectory than the market.
Source: Goldman Sachs Further reading
4. Next, we have some updates on housing.
• Mortgage rates continue to climb.
While rates are still historically low, the sharp increase may cool the pandemic-era enthusiasm for housing in the short term. Given the lofty price levels, affordability will deteriorate further.
Source: Goldman Sachs
• The recent supply chain bottlenecks have been delaying residential construction projects.
Source: @WSJ Read full article
• Apartment occupancy rates have been surging.
Source: Bloomberg Read full article
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5. GDP growth is expected to remain well above pre-pandemic levels through at least 2023.
Source: Truist Advisory Services
6. CapEx has been increasingly directed at “new economy” investments.
Source: Cornerstone Macro
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The Eurozone
1. The Sentix confidence index ticked higher this month.
2. The unemployment rate is back at pre-COVID levels.
Source: Eurostat Read full article
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3. Here are the changes in inflation by country.
Source: Barclays Research
The ECB was surprised by the persistent surge in prices.
Source: @fwred
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4. Will the euro test the long-term support?
Source: BCA Research
5. Dutch manufacturing output keeps hitting record highs.
Below is the growth in industrial sales.
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Europe
1. Sweden’s private-sector output and consumer spending continue to climb, pointing to robust economic expansion.
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2. Norway’s CPI surprised to the upside, although the underlying index remains below 2%.
The PPI is nearing 70% year-over-year (driven by energy prices).
Norway’s bond yields keep climbing.
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3. The Swiss 10-year bond yield is above zero for the first time since 2018.
4. The EU’s trade gap with China keeps widening.
Source: @WSJ Read full article
5. European economic surprises have been outperforming the US.
Source: Morgan Stanley Research
6. European natural gas storage is entering the winter season at its lowest level in 10 years.
Source: Bain & Company
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Asia – Pacific
1. Telecommunications prices have been keeping the Tokyo core CPI in negative territory. But that’s likely to end soon.
Source: Pantheon Macroeconomics
2. Bank of Korea is expected to hike rates.
Source: Scotiabank Economics
3. Next, we have some updates on Australia.
• The trade surplus is off the highs.
• The latest leg up in Australian housing appears to be due to both continued owner-occupier credit growth as well as a return of investors.
Source: Reserve Bank of Australia
• This chart shows Australian house prices and household debt relative to disposable income.
Source: Reserve Bank of Australia
• Valuations and sentiment point to some upside for the Aussie dollar.
Source: BCA Research
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China
1. Here we go again. Investors remain concerned about developers’ mountain of maturing debt.
Source: Fitch Ratings Read full article
China’s HY index hit a multi-year low.
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2. China’s construction sector continues to weaken.
• Cement production:
Source: Longview Economics
• Steel output:
• Excavator sales:
Source: Longview Economics
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3. Imports of key commodities declined significantly during the second half of 2021.
Source: BCA Research
4. The mainland stock market is holding in the lower end of the trading range.
Source: @TheTerminal, Bloomberg Finance L.P.
5. The PBoC will be supporting credit growth.
Source: PGM Global
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Emerging Markets
1. Chile’s inflation continues to climb.
Separately, the nation’s exports hit a record high.
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2. Mexico’s business investment remained depressed in October.
3. Turkey’s budget deteriorated sharply going into the year-end.
4. Malaysia’s industrial production continues to climb.
5. COVID cases hit a record high in the Philippines.
6. Rate hikes will invert yield curves in some economies.
Source: PGM Global
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Cryptocurrency
1. Bitcoin held support at $40k.
2. Ether continues to underperform.
3. Bitcoin’s correlation with stocks has risen over the past few months, while its relationship to gold remains very low.
Source: @KaikoData
4. Bitcoin’s option volumes have been muted after hitting a yearly high in October.
Source: @KaikoData
5. Digital asset investment products saw record outflows last week as crypto prices slid.
Source: CoinShares Read full article
6. Bitcoin-focused investment products accounted for most of the outflows last week.
Source: CoinShares Read full article
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Commodities
1. A Canadian housing correction could cause steep declines in the price of copper.
Source: Numera Analytics
2. Declines in Sweden’s manufacturing conditions, along with a lower Swedish krona/Swiss franc cross rate, points to downside risk in raw material prices.
Source: BCA Research
3. Steel use per capita peaks once a certain level of GDP per capita is reached. Developed countries saw this happen in the 1970s and 80s, linked directly to the peak of manufacturing as a share of their economies.
Source: Barclays Research
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Energy
1. US oil output is expected to return to peak levels by the end of the year.
Source: Evercore ISI Research
2. Oil has been rallying despite a stronger US dollar.
Source: Alpine Macro
3. Indonesia’s coal hoarding is creating a headache for some economies.
Source: VesselsValue
But the nation appears to be easing its export ban.
Source: Reuters Read full article
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Equities
1. The rotation out of cyclicals, which started in November, has resumed.
2. Buybacks accounted for 40% of the S&P 500’s total return since 2011.
Source: True Insights
3. What size drawdowns should we expect this year?
Source: Goldman Sachs
4. Prices often see a wobble when earnings growth peaks.
Source: @TimmerFidelity
And earnings expectations have been moving lower.
Source: Deutsche Bank Research
But given the robust economic activity, will we see substantial upward earnings surprises?
Source: Deutsche Bank Research
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5. Over the long-run, stock prices follow earnings.
Source: @TimmerFidelity
6. The Invesco S&P 500 Equal Weight ETF has been outperforming.
Source: Cannon Advisors
7. More upside for small caps relative to the Nasdaq composite?
Source: @macro_daily
8. Stock prices remain stretched relative to bonds.
Source: Alpine Macro
9. Rising inflation typically results in a higher stock/bond price correlation.
Source: BCA Research
10. Industrial stocks could benefit from an inventory rebuild and rising capital spending.
Source: MRB Partners
11. Relative earnings of healthcare stocks are starting to improve.
Source: MRB Partners
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Rates
1. The Treasury curve is flattening again at the long end.
2. More upside for longer-dated Treasury yields?
Source: @TheTerminal, Bloomberg Finance L.P.
3. This chart shows real 10yr yields in select economies (based on inflation expectations).
Source: @RobinBrooksIIF
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Global Developments
1. Let’s start with sovereign debt month-to-date performance.
Source: S&P Global Market Intelligence
2. Speculative net-long dollar positioning is near prior extremes.
Source: Longview Economics
However, consensus sentiment on the dollar is not extremely bullish.
Source: Longview Economics
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3. Supply chain bottlenecks may have peaked.
Source: @LibertyStEcon Read full article
4. The global economy is projected to grow faster than the recovery years following the financial crisis.
Source: Truist Advisory Services
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Food for Thought
1. Retiring early:
Source: Deutsche Bank Research
2. Highest increases in inflation-adjusted pay:
Source: Bloomberg Read full article
3. Spoken-word audio vs. music:
Source: NPR/Edison Research Read full article
4. Not working due to COVID:
Source: @GregDaco, @JuliaRaifman, @aaronsojourner
5. Herd immunity?
Source: Alpine Macro
6. Flight incursions by Chinese aircraft into Taiwan:
Source: Goldman Sachs
7. The race to the moon:
Source: Statista
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