March 9, 2022March 9, 2022 by The Daily Shot Editor: Lev Borodovsky

The stock market is signaling slowing economic activity ahead

The Daily Shot: 09-Mar-22
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought

The United States

1. Small business sentiment declined further last month, missing expectations.

Two underlying indices may be pointing to slowing economic growth.

– Hiring plans:

– Sales expectations:

• CapEx plans are holding up for now.

• The share of firms planning to boost selling prices hit a record high.

Here are some additional inflation-related trends from the NFIB report.

– “Inflation is the single most important problem”:

– Selling price plans:

– Compensation index:

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2. The stock market is signaling slowing economic activity ahead.

• The S&P 500 vs. the NFIB small business index (above):

Source: Pantheon Macroeconomics

• The S&P 500 momentum:

Source: Deutsche Bank Research

• The Russell 2000 (small-cap) relative performance:

Source: Deutsche Bank Research

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3. The trade deficit hit a record high, with the non-petroleum gap widening beyond $100 billion (boosted by strong domestic demand and rising prices).

Source: MarketWatch Read full article

Source: Reuters Read full article

Imports from China are still elevated.

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4. Inventories remained tight in January, with the inventory-to-sales ratios declining again.

Wholesalers’ sales accelerated.

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5. Here are some updates on inflation.

• Retail gasoline prices hit a record high.

• What is the impact of rising oil prices on the CPI?

Source: @SalehaMohsin

• Wage growth has surged toward the highest level in 20 years.

Source: BCA Research

• Below is a new index of consumer inflation expectations from ICE.

Source: ICE Read full article Further reading

• The 10-year breakeven rate (market-based inflation expectations) hit a new high.

Canada

1. The loonie has decoupled from oil prices.

Further reading

2. The trade surplus reached the highest level since 2008, …

… as US imports surged.

The United Kingdom

Market-based inflation expectations continue to soar.

The Eurozone

1. Bund yields jumped on Tuesday.

2. The ECB will need to revise its inflation projections.

Source: @fwred

Power prices are surging (2 charts).

Source: Bloomberg Read full article

Source: @AndreasSteno

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3. Over 50% of the euro-area gasoline price is tax.

Source: Pantheon Macroeconomics

4. Unlike the US and Canada, disposable income in the euro area is lower than its pre-pandemic trend.

Source: BCA Research

5. Italian retail sales seem to be peaking but remain strong.

6. French industrial production jumped in January.

Europe

1. Poland’s central bank hiked rates more than expected.

Bond yields continue to climb.

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2. The markets cheered the news of a potential EU joint bond issuance.

Source: Bloomberg Read full article

3. This chart shows the trends in business registrations and bankruptcies in the EU.

Source: Eurostat Read full article

Asia – Pacific

1. Japan’s bankruptcies continue to drift lower.

2. Taiwan’s exports remained strong last month.

3. Next, we have some updates on Australia.

• The 5yr bond yield:

• Consumer confidence:

• Sydney’s rainfall:

Source: @Ben_Domensino

China

1. The CPI held steady last month, …

… held down by pork deflation.

The core CPI ticked lower …

… due to some noisy data.

2. The PPI has been moderating, but we could see this trend reversing this month.

3. Rising debt levels and falling land sale revenues are making interest payments a larger fiscal burden, according to Gavekal.

Source: Gavekal Research

4. Bank lending growth to the property sector is the lowest in a decade.

Source: Moody’s Investors Service

• Moody’s expects home inventory levels to remain near historical averages. The decline in home sales could be offset by a drop in new supply from slowing land sales.

Source: Moody’s Investors Service

• Mortgage loan growth stabilized toward the end of last year. Fitch also noted reductions in down payments across lower-tier cities so far this year.

Source: Fitch Ratings

• Property stocks have been under pressure again.

Emerging Markets

1. Colombia’s core inflation is above 5%.

2. Brazil’s vehicle production remains soft.

3. US imports from Mexico hit a record high for January.

4. Thailand’s inflation is accelerating.

Consumer confidence remains depressed.

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5. Fitch sees “imminent” default of Russian sovereign debt.

Source: Fitch Ratings Read full article

Cryptocurrency

1. Cryptos are rebounding.

2. Here is a look at key support and resistance levels, according to blockchain data showing the average BTC holder’s cost-basis (realized prices).

Source: Glassnode Read full article

And this chart shows short-term support and resistance levels using BTC spot trading volume and transaction volumes on the Bitcoin blockchain.

Source: Glassnode Read full article

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3. The bitcoin Fear & Greed Index has remained in “fear” territory over the past three months.

Source: Alternative.me Read full article

4. Here is a look at concentration in the crypto space.

Source: @0xTomoyo

5. Deribit accounts for 87% of the total open interest across bitcoin options.

Source: TheBlock

6. These charts show the recent flow of crypto transactions to and from Ukraine government addresses (2 charts).

Source: @coinmetrics

Source: @coinmetrics

Commodities

1. Gold is nearing the 2020 peak.

2. We could see a shortage of barley, …

Source: Fitch Solutions Macro Research

… especially in China, …

Source: Fitch Solutions Macro Research

… impacting beer brewers.

Source: Fitch Solutions Macro Research

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3. The 3x short nickel ETF is no more …

Source: WisdomTree Read full article

… and no trading in nickel for a few days.

Source: Bloomberg; h/t Walter Read full article

Energy

1. Brent is trading above $131/bbl. Interestingly, the stock market is no longer reacting negatively.

Source: Reuters Read full article

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2. The world is facing a shortage of diesel. Prices have gone vertical.

Source: @markets Read full article

• Diesel backwardation:

Source: Reuters Read full article

• Diesel crack spread:

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3. US natural gas prices are holding below $5/mmbtu, …

… amid robust production.

Source: @LizAnnSonders, @DataArbor, @EIAgov

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4. Making plastics is becoming unprofitable in Asia. Demand destruction?

Source: Bloomberg Read full article

5. Will Russia turn off the spigot?

Source: Bloomberg Read full article

Equities

1. Risk appetite has deteriorated, but is sentiment about to stabilize?

2. Small caps are widening their outperformance.

3. Risk parity strategies are gaining on the S&P 500.

4. Hedge funds have been reducing their outright exposure to the market.

Source: @WallStJesus

5. Implied market correlation has been climbing.

6. Is the capitulation not complete yet?

Source: @JessicaMenton, @jkrinskypga

7. Here is the S&P 500 tech-to-energy ratio.

Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital

8. Should we expect profit disappointments ahead?

Source: Alpine Macro

Credit

1. Investment-grade debt has been underperforming high-yield.

• Spread trends (purple= IG, black=HY):

• HY/IG spread ratio:

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2. Credit spreads are still very low compared to previous times when VIX was elevated.

Source: Kevin Coldiron Read full article

Rates

1. US real yields have reversed their 2022 gains. In a “normal” environment, this would be a positive for growth stocks.

2. Treasury term premium deteriorates with slower growth in the working-age population.

Source: @AndreasSteno

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Food for Thought

1. US trading partners.

Source: Morning Consult Read full article

2. Americans’ unfavorable views of Russia:

Source: Gallup Read full article

3. EU payments to Russia for natural gas:

Source: Bruegel; @adam_tooze Read full article Further reading

4. Nighttime lights over Ukraine one month ago and now:

Source: @JavierMejiaC

5. Languages of websites and their users:

Source: Statista

6. EV battery cell cost breakdown:

Source: Visual Capitalist Read full article

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