The Daily Shot: 01-Mar-22
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Food for Thought
The United States
1. The Chicago PMI showed a downshift in the region’s business activity in February
Moreover, the spread between the indices of new orders and inventory dipped below zero, pointing to slower growth ahead. Supply-chain strains remain elevated.
Source: The Daily Feather
Will we see further declines in the ISM manufacturing PMI at the national level?
Source: Pantheon Macroeconomics
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2. The Dallas Fed’s regional manufacturing index jumped last month. However, the sub-index of production eased further (2nd panel).
• Unfilled orders continue to moderate.
• Price pressures persist.
• And most manufacturers now expect to boost wages in the months ahead.
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3. The US trade deficit in goods hit another record, …
… as imports surged.
This chart illustrates the divergence between import and export trends in recent months.
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4. Retailers continue to build inventories at a rapid pace. Will we get an inventory overhang if demand slows?
5. Online retail sales are starting to revert to the pre-pandemic trend.
Source: BCA Research
6. Next, we have some updates on inflation.
• Long-run inflation expectations remain relatively moderate despite the recent spike in CPI (2 charts).
Source: BCA Research
Source: Wells Fargo Securities
The markets show a sharp divergence between short- and long-term inflation expectations.
Source: Piper Sandler
• Rent inflation could have further room to rise (2 charts).
Source: SOM Macro Strategies
Source: SOM Macro Strategies
• Here is Wells Fargo’s inflation forecast.
Source: Wells Fargo Securities
• Slower growth in shipping activity points to moderation in price gains.
Source: Piper Sandler
• PGM Global expects a moderate stagflationary event this year.
Source: PGM Global
• Consumer confidence follows the Misery index (the sum of the unemployment rate and inflation rate) closely.
Source: Capital Economics
Gasoline prices, in particular, will keep putting downward pressure on sentiment.
Source: Pantheon Macroeconomics
Gasoline futures are surging amid concerns about crude oil supplies (primarily due to sanctions on Russia), which will show up at the pump in the days ahead.
• The 2-year changes in the PPI (removing the base effects) show massive gains in producer prices.
Source: @WSJ Read full article
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The United Kingdom
1. Long-term market-based inflation expectations are hitting new highs.
2. UK GDP has been boosted by some sectors where the current pace of growth is unsustainable.
Source: Pantheon Macroeconomics
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The Eurozone
1. Bund yields were down sharply on Monday as traders price in the risk of slower growth ahead (due to the Russia situation and surging energy costs).
2. European bank shares took a hit due to Russia exposure.
Source: Wells Fargo Securities
• European markets are underperforming the US.
Source: Truist Advisory Services
• Valuations look attractive relative to other advanced economies.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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3. Germany announced that it will spend more on defense.
Source: Reuters Read full article
Source: @nghrbi
Source: @Schuldensuehner
Shares of Germany’s defense contractor Rheinmetall soared.
Source: @Schuldensuehner
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4. Labour force participation is above pre-pandemic levels, in stark contrast to the US.
Source: Gavekal Research
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Europe
1. Credit default swap spreads in Poland and other Central/Eastern European countries have widened sharply.
2. European rigid wage system is yet to budge despite labor shortages.
Source: Gavekal Research
3. Sweden’s Q4 GDP growth was below consensus.
Retail sales rebounded sharply in January.
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Asia – Pacific
1. South Korea’s manufacturing PMI jumped back into growth mode last month.
Source: IHS Markit
2. Taiwan’s PMI ticked lower.
Source: IHS Markit
3. Australia’s consumer confidence remains soft.
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China
1. Three separate indicators point to an improvement in China’s business activity in February. Price indices increased.
• The official manufacturing PMI:
• Markit PMI:
• The World Economics SMI:
Source: World Economics
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2. The overall economic momentum seems to be turning higher.
Source: MRB Partners
3. Foreign ownership of Chinese bonds keeps rising.
Source: MRB Partners
4. Property sales and M&A deals are inversely correlated.
Source: Fitch Ratings
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Emerging Markets
1. The ASEAN manufacturing PMI showed steady growth in February.
Source: IHS Markit
Here are some of the PMI indices.
• Indonesia (slower growth):
Source: IHS Markit
• The Philippines (steady):
Source: IHS Markit
• Thailand (acceleration):
Source: IHS Markit
• Vietnam (stronger growth):
Source: IHS Markit
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2. Here are some additional updates on Vietnam.
• The CPI (lower than expected):
• Exports:
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3. India’s industrial activity started the year on a strong note.
4. Next, we have some updates on Russia.
• Equity futures:
• US-based equity ETF:
• The 5yr spread to Treasuries:
• Sberbank (Russia’s largest bank) CDS spread:
Source: @Lvieweconomics
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Cryptocurrency
1. Cryptos are sharply higher amid a surge in demand from Russia (as the ruble tumbles).
• Ruble-denominated bitcoin volume swelled to a nine-month high on Sunday.
Source: Kaiko Read full article
• Ukrainian and other global officials are concerned that crypto could be used to circumvent sanctions.
Source: @FedorovMykhailo
Source: CoinDesk Read full article
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2. Bitcoin is back above the 50-day moving average.
3. The chart below shows that bitcoin’s deviation from “fair value” is not as extreme relative to previous price bottoms.
Source: Glassnode Read full article
4. There has been a large difference between bitcoin’s performance in the first half of the month versus the second half.
Source: @ArcaneResearch
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Commodities
1. The surge in commodity prices this year has been impressive.
Source: BofA; @AndrewThrasher
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2. February was a good month for US lumber futures (2 charts).
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3. Commodities are outperforming developed market stocks after a dismal 2020.
Source: Numera Analytics
4. Wheat prices continue to soar.
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Energy
1. This chart shows the expected 12-month change in the Brent spot price if sanctions were to block Russian exports, according to Numera Analytics.
Source: Numera Analytics
Still, there is a lower probability of oil remaining at high levels over the next few months.
Source: Numera Analytics
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2. US motor gasoline demand is at the high end of its historical range. Fitch expects market tightness to persist over the next quarter, although demand could decline later this year due to seasonal winter effects.
Source: Fitch Solutions Macro Research
3. This chart shows global natural gas exports.
Source: @WSJ Read full article
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Equities
1. Let’s start with the updated year-to-date S&P 500 return attribution.
2. Deutsche Bank’s equity positioning indicator has been moving further into negative territory.
Source: Deutsche Bank Research
3. High-beta and small-cap stocks outperformed in February, …
… finishing the month in positive territory. Here is the monthly performance across equity factors.
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4. Outside of energy, all S&P 500 sectors were down in February.
5. Many Nasdaq Composite stocks hit 52-week lows this year.
Source: @acemaxx, @MorganStanley
6. On average, it takes about 47 days for the S&P 500 to recover from geopolitical-driven sell-offs. Other studies show that equities continued to advance in three to six months following major global incidents.
Source: @Negentropic_
7. Over the long term, the correlation between relative industry growth and relative equity returns evaporates.
Source: BCA Research
8. Leveraged and inverse ETFs have been very popular.
Source: Bloomberg Read full article
TQQQ (3x Nasdaq 100) got $1.1 billion of inflows last week.
Source: @kgreifeld
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9. Defense stocks had an excellent few days.
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Rates
1. Treasury yields declined sharply on Monday.
Source: @kgreifeld
2. Inflation expectations drove Treasury yield increases in February.
3. Euro basis swaps are showing tighter conditions in the dollar money markets (due to the Russia crisis).
4. SOFR continues to gain in acceptance, with futures volume hitting 50% of the LIBOR-based product.
Source: @BrianGierke
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Food for Thought
1. Who is happier working on-site rather than remotely:
Source: @CivicScience Read full article
2. Trends in shared micro-mobility:
Source: NACTO Read full article
3. Space sector R&D:
Source: McKinsey & Company Read full article
4. R&D spending trends:
Source: @WSJ Read full article
5. More polarization in redrawn US congressional districts:
Source: Politico Read full article
6. Adopting California’s emissions standards:
Source: NYS Read full article
7. COVID skepticism:
Source: Statista
8. Share of natural gas imports coming from Russia:
Source: @BBGVisualData Read full article
9. Favorite snacks:
Source: Statista
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