Small businesses haven’t been this concerned about inflation since 1981

The Daily Shot: 12-Jan-22
The United States
Canada
The Eurozone
Asia – Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. The NFIB small business sentiment index ticked higher in December.
 

 
Businesses are increasingly worried about inflation …
 
Source: NFIB   Read full article  
 

 
… and the cost of labor.
 

 
The compensation index hit a new high.
 

 
The compensation plans index is holding near extreme levels.
 

 
Businesses continue to face challenges attracting workers.
 

 
The share of companies boosting prices ticked lower but remains near the peak.
 

 
Here is the price plans index.
 

 
Inventories are still extremely tight, but there was some improvement in December.
 

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2. The Evercore ISI Retailers index showed softer sales activity at the start of the year.
 
Source: Evercore ISI Research  
 
Retailers’ pricing power remains at the highest level in years.
 
Source: Evercore ISI Research  

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3. Household spending plans improved notably over the past few months, especially in the low-income tier, according to Bain’s consumer health survey.
 
Source: Bain & Company  
 
4. Some 1.7 million Americans were not at work due to illness in December.
 
Source: @WSJ   Read full article  
 
5. US COVID-related hospitalizations hit a record high.
 
Source: Our World in Data  
 
Source: Statista  


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Canada

1. Consumer confidence continues to deteriorate.
 

 
2. The rebound in Canada’s employment has been remarkable.
 


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The Eurozone

1. High-frequency data point to downside risks for Germany’s consumer spending.
 
Source: Natixis  
 
2. Dutch inflation surged to a post-euro record.
 

 
3. Italian retail sales ticked lower in November but remained near the highs.
 

 
Separately, Italy is one of the few economies in the world where house prices are still below the 2006 peak and are not rebounding.
 
Source: Fitch Ratings  

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4. How much of a drag did supply bottlenecks have on industrial production?
 
Source: ECB   Read full article  
 
5. Euro-area interbank rates continue to move deeper into negative territory amid ample QE-driven liquidity.
 

 
6. Sovereign green bond issuance is expected to set a new record this year.
 
Source: Danske Bank  


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Asia – Pacific

1. Japan’s bank lending remains well above the pre-COVID trend.
 

 
2. South Korea’s unemployment rate rose more than usual in December.
 

 
3. Australia’s job vacancies have been surging.
 


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China

1. Consumer inflation dropped in December, coming in below estimates.
 

 
The core CPI is holding steady. This inflation report should give Beijing room to ease policy further.
 

 
2. The PPI also surprised to the downside.
 

 
3. As we saw yesterday, construction activity has been softening, …
 
Source: Gavekal Research  
 
… with property sales declining sharply at the start of the year.
 
Source: Gavekal Research  

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4. Fixed asset investment slowed over the past year.
 
Source: PGM Global  
 
5. China needs stability in Kazakhstan.
 
Source: Gavekal Research  
 
6. Hong Kong’s population declined sharply last year.
 
Source: Bloomberg   Read full article  
 
7. US-blacklisted Chinese companies performed well relative to benchmarks.
 
Source: Alpine Macro  
 
8. Equity price momentum has deteriorated, driven by healthcare, consumer, and real estate stocks.
 
Source: MRB Partners  
 
But earnings momentum has been improving.
 
Source: MRB Partners  
 
9. The Hang Seng Index (Hong Kong) is nearing resistance as tech shares rebound.
 


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Emerging Markets

1. Russian bond yields continue to climb.
 

 
2. South Africa’s factory output remains well below pre-COVID levels.
 

 
3. Vietnam’s domestic vehicle sales surged again going into the year-end.
 

 
4. Brazil’s consumer inflation ticked lower but remained above 10% last month.
 

 
5. Mexico’s industrial production was barely above 2020 levels in November.
 

 
6. EM central banks face the dilemma of surging inflation and softer economic performance.
 
Source: PGM Global  


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Cryptocurrency

1. Crypto-related stocks sold off over the past two months, compared to a roughly 30% drop in bitcoin’s price.
 
Source: CoinDesk   Read full article  
 
2. Bitcoin is starting to stabilize along with equity markets, although there is some risk ahead of the US CPI release today. Macro factors are impacting both assets.
 
Source: CoinDesk   Read full article  
 
3. Bitcoin is the most oversold since December, although price reaction has been delayed given the short-term downtrend.
 
Source: CoinDesk   Read full article  
 
4. Short-term BTC holders continue to exit positions at a loss (below their average cost basis), according to blockchain data.
 
Source: @Delphi_Digital  
 
5. The growth in bitcoin’s market cap has been correlated with the global money supply expansion.
 
Source: Morgan Stanley Research; @MayankSeksaria  
 
6. NFT trading volume continues to rise, similar to mid-2021 before the market cooled off.
 
Source: @Delphi_Digital  


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Commodities

1. Iron ore and Shanghai steel futures are moving higher amid expectations for more stimulus from Beijing (especially after China’s inflation has slowed).
 

 

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2. Copper prices remained elevated last year despite lower import demand from China.
 
Source: PGM Global  
 
And the Shanghai copper futures price diverged from China’s government bond yields.
 
Source: PGM Global  

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3. The decline in battery costs is over for now as lithium prices surge.
 
Source: @financialtimes, h/t Walter   Read full article  
 

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4. This chart shows how real assets perform under different US inflation regimes.
 
Source: JP Morgan Research, Bloomberg   Read full article  


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Energy

1. Brent is nearing $84/bbl.
 

 
2. This chart shows non-OPEC crude oil supply growth.
 
Source: CreditSights  
 
3. US exploration and production (E&P) companies are increasing capital spending as oil prices rise.
 
Source: Longview Economics  
 
More E&P companies are focused on growing production instead of reducing costs.
 
Source: Longview Economics  

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4. Here is a forecast for oil demand growth over the next couple of decades.
 
Source: Evercore ISI Research  
 
5. Sentiment flipped bullish over the past month for energy stocks.
 
Source: SentimenTrader  
 
6. Asia has been dominating LNG imports.
 
Source: Oxford Institute for Energy Studies  
 
7. This chart shows Russia’s natural gas production.
 
Source: Platts; @ira_joseph  
 
8. Finally, we have cumulative growth in global offshore wind capacity.
 
Source: @BloombergNEF   Read full article  


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Equities

1. Let’s begin with the year-to-date US market performance by sector …
 

 
… and equity factor.
 

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2. How do higher yields and policy tightening impact different sectors?
 
Source: UBS; @WallStJesus  
 
3. Shares favored by hedge funds have underperformed sharply in recent months.
 

 
4. The Nasdaq 100 does well after bouncing from an intraday selloff of more than 2%.
 
Source: Chris Murphy, Susquehanna International Group  
 
5. Of the 17 historic episodes where the S&P 500 rose more than 25%, the following year on average saw 14% returns.
 
Source: Truist Advisory Services  
 
6. Historically, 85% of the time the S&P 500 rises during an economic expansion.
 
Source: Truist Advisory Services  
 
7. Goldman’s sentiment indicator shows investor unease – a bullish sign.
 
Source: Goldman Sachs  
 
8. The bubble in the most shorted stocks, which was created by the Reddit crowd, has deflated.
 
Source: @LizAnnSonders, @GoldmanSachs  
 
9. Tech firms have increasingly been going public with two classes of stock (to retain more control).
 
Source: @WSJ   Read full article  


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Credit

1. Rising rates made floating-rate paper, such as leveraged loans, more attractive.
 
Source: Bloomberg   Read full article  
 
Here is the relative performance of leveraged loans vs. high-yield bonds.
 

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2. US non-financial corporate leverage has returned to trend.
 
Source: Mizuho Securities USA  
 
The US corporate debt burden is the lowest since the 1970s.
 
Source: Mizuho Securities USA  

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3. Real yields are increasingly important for credit spreads.
 
Source: Deutsche Bank Research  
 
4. Green bonds have mostly been earmarked for energy, buildings, and transport.
 
Source: Barclays Research  


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Rates

1. JP Morgan’s clients are most bearish on Treasuries since 2017.
 

 
2. Should the 10yr Treasury term premium be higher (given a flatter yield curve)?
 
Source: Deutsche Bank Research  
 
3. The US Treasury’s rapid cash decline due to the debt ceiling boosted reserves by raising private-sector deposits (liquidity moved from the Fed to the private sector). The RRP (reverse repo) facility absorbed that liquidity, keeping reserves relatively steady. Here is the liability structure of the Fed’s balance sheet.
 
Source: Liberty Street Economics  


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Global Developments

1. The Bloomberg US Dollar Index is at support.
 
Source: @TheTerminal, Bloomberg Finance L.P., h/t Michael G. Wilson  
 
Softer US economic surprises could be a drag on the US dollar
 
Source: Oxford Economics  

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2. Inflation at the OECD level is at multi-year highs.
 
Source: OECD  
 
3. Capital Economics expects a moderation in energy prices which could reduce inflation in developed markets this year.
 
Source: Capital Economics  
 
Still, Capital Economics maintains an above-consensus view on inflation.
 
Source: Capital Economics  

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4. Auto production has trended lower in recent years.
 
Source: J.P. Morgan Asset Management  
 
Automobile-related semiconductor capital spending is expected to double this year versus prior trends.
 
Source: J.P. Morgan Asset Management  

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5. The share of global consumer spending on goods remains elevated.
 
Source: Flexport   Read full article  


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Food for Thought

1. Labor union density by state:
 
Source: EPI  
 
2. Telework job postings in advanced economies:
 
Source: OECD   Read full article  
 
3. Increased COVID-era retirements among older Americans:
 
Source: Federal Reserve Bank of St. Louis   Read full article  
 
4. Top tier AI researchers:
 
Source: MacroPolo   Read full article  
 
5. Semiconductor sales:
 
Source: BIS   Read full article  
 
6. Actual vs. perceived social mobility of children:
 
Source: The Economist   Read full article  
 
7. US religious affiliation over time:
 
Source: Pew Research Center   Read full article  
 
8. Wind capacity additions globally:
 
Source: Gavekal Research  
 
9. Western US snow deficit:
 
Source: @pkedrosky  
 
10. Vaccine sales share:
 
Source: Statista  
 
11. Most college football wins:
 
Source: Wells Fargo Securities  

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