The CPI peak projections keep getting pushed out

The Daily Shot: 10-Mar-22
The United States
The United Kingdom
The Eurozone
Europe
Japan
Asia – Pacific
China
Emerging Markets
Commodities
Energy
Equities
Rates
Food for Thought



 

The United States

1. The labor market remains tight, with the job openings report topping expectations.
 

 
Here are the job openings and quit rates by sector.
 
Source: Wells Fargo Securities  
 
And this chart shows the Beveridge curve.
 
Source: BLS  

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2. Mortgage applications have been surprisingly strong, …
 

 
… despite the recent runup in mortgage rates.
 

 
Refinance candidates have decreased as mortgage rates rise.
 
Source: Black Knight Technologies  
 
This chart shows the amount of equity withdrawn from homes via cashout refinance.
 
Source: Black Knight Technologies  

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4. Next, we have some updates on inflation.
 
Economists continue to downgrade their GDP growth forecasts for this year while boosting inflation projections.
 

 
The CPI peak projections keep getting pushed out.
 
Source: @economics  
 
The NFIB report points to further increases in the median CPI (year-over-year).
 
Source: @MikaelSarwe  
 
Nomura expects another strong CPI report today (for February), boosted by shelter costs.
 
Source: Nomura Securities  
 
Here are the monthly changes in various core CPI measures.
 
Source: Nomura Securities  
 
Have used car prices peaked?
 

 
How much did inflation eat into wages this year? This chart shows real wage gains by wage “category.”
 
Source: Oxford Economics  
 
What is the impact of rising fuel prices on consumer spending?
 
Source: Truist Advisory Services  
 
Supply chain stress levels are increasingly driven by rising prices and labor costs.
 
Source: Oxford Economics  
 
By the way, trucking company sales have been moderating.
 
Source: Evercore ISI Research  

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5. Economists expect around six Fed rate hikes this year.
 

 
The current monetary policy is extraordinarily accommodative.
 
Source: ANZ Research  
 
The Fed’s starting point for this tightening cycle is unusual.
 
Source: ANZ Research  


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The United Kingdom

1. Home prices continue to climb at a strong clip.
 

 
2. Will the CPI exceed 8%? Here are two forecasts.
 
Pantheon Macroeconomics:
 
Source: Pantheon Macroeconomics  
 
Barclays:
 
Source: Barclays Research  

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3. The UK needs to boost its nuclear power capacity.
 
Source: Carbon Brief   Read full article  


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The Eurozone

1. Rates implied volatility remains elevated ahead of the ECB.
 

 
2. Despite rapid upgrades in inflation forecasts, …
 
Source: Barclays Research  
 
… rate hike expectations have eased.
 
Source: Pantheon Macroeconomics  

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3. Italian industrial production slumped in January.
 

 
4. Factory output remains robust in the Netherlands.
 

 
5. Eurozone loan growth has normalized.
 
Source: ECB  
 
6. Slower growth in the money supply points to downside risks for economic activity.
 
Source: BCA Research  
 
7. Replacing Russian natural gas will be challenging.
 
Source: Algebris   Read full article  


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Europe

1. European shares surged on Wednesday amid short-covering.
 

 
This chart shows the correlation of different sectors’ earnings expectations to crude oil.
 
Source: Barclays Research  

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2. Next, we have some updates on Sweden.
 
Private sector output:
 

 
Industrial orders:
 

 
Household consumption:
 

 
The unemployment rate:
 

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3. How much municipal waste is generated per person in the EU?
 
Source: Eurostat   Read full article  


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Japan

1. The PPI surprised to the upside.
 

 
2. Consumer inflation expectations have been climbing.
 
Source: Evercore ISI Research  
 
3. The 10-year government bond yield has been testing the top of the central bank’s tolerance band.
 
Source: Goldman Sachs  


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Asia – Pacific

1. Conservative Yoon Suk-yeol won South Korea’s presidential election.
 
Source: Reuters   Read full article  
 
Separately, the nation’s household credit growth has been slowing.
 

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2. Australian inflation expectations are approaching 5% for the first time in years.
 


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China

1. Export growth could be at risk if European economies slow down sharply.
 
Source: Alpine Macro  
 
2. Government spending should rebound.
 
Source: Gavekal Research  
 
3. More provinces are getting closer to the official threshold for fiscal consolidation.
 
Source: Gavekal Research  
 
4. Here is a look at the Henan province’s GDP components.
 
Source: Fitch Ratings  
 
5. Energy trade with Russia has been growing.
 
Source: IIF  
 
But the total trade with Russia is relatively small.
 
Source: Gavekal Research  

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6. Hong Kong’s elderly vaccination rates are relatively low.
 
Source: @financialtimes   Read full article  


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Emerging Markets

1. Brazil’s industrial production dropped in January.
 

 
2. Mexican core CPI continues to surge.
 

 
3. LatAm equities and currencies have been outperforming in recent weeks, …
 
Source: Gavekal Research  
 
Source: PGM Global  
 
… as EM decouples.
 
Source: PGM Global  

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4. Which countries are most dependent on Ukrainian and Russian wheat?
 
Source: @financialtimes   Read full article  
 
5. Next, we have some updates on Russia.
 
The central bank is having a tough time strengthening the ruble.
 

 
Inflation is expected to surge this month.
 

 
How bad will the recession get?
 
Source: @markets   Read full article  
 
Russia has become largely independent of external financing.
 
Source: Goldman Sachs  

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6. Ukraine boosted its FX reserves over the past few years.
 
Source: Goldman Sachs  
 
Ukrainian port activity has collapsed.
 
Source: Longview Economics  


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Commodities

1. Wheat is down 12% from the highs.
 

 
2. Soybean meal and soy oil futures are surging amid export restrictions around the world.
 

 

 
Source: Reuters   Read full article  

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3. The highest price increases have been in Russia/Ukraine-exposed commodities.
 
Source: Numera Analytics  
 
4. Commodities have diverged from the dollar.
 
Source: PGM Global  


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Energy

1. Oil tumbled on Wednesday.
 

 
Source: @WSJ   Read full article  

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2. US crude oil inventories remain tight.
 
Source: Princeton Energy Advisors  
 

 
Will gasoline demand begin to ease in response to the price spike?
 

 
Gasoline inventories are not low.
 

 
Distillates demand has been strong, …
 
Source: Princeton Energy Advisors  
 
.. while inventories are tumbling.
 

 
Here are the total liquids inventories.
 
Source: BofA Global Research  

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3. European natural gas futures tumbled but remain well above the previous peak.
 

 
Inventories are not unusually low.
 
Source: Barclays Research  

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4. This chart shows the put option volume on SPDR Energy Select Sector ETF.
 
Source: @danny_kirsch  


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Equities

1. Stocks rose sharply on Wednesday.
 

 

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2. Small caps have been resilient in the recent selloff, with microcaps outperforming over the past week.
 

 
3. CTAs have been short equities as downtrends unfold.
 
Source: Deutsche Bank Research  
 
4. Equities have become more attractive relative to bonds.
 
Source: @markets   Read full article  
 
5. High-dividend and dividend-growth stocks tend to outperform during periods of high inflation.
 
Source: @LizAnnSonders, @GoldmanSachs  
 
6. Discretionary investor equity positioning is neutral, while systematic strategies have reduced their exposure to stocks.
 
Source: Deutsche Bank Research  
 
7. Stock splits tend to boost performance.
 
Source: BofA Global Research; @SamRo  
 
Here is Amazon.
 
Source: @FerroTV  


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Rates

1. The iShares 20+ Year Treasury Bond ETF (TLT) is approaching support
 
Source: Alpine Macro  
 
2. Aside from China, major foreign holders have increased their purchases of Treasuries as yields rose.
 
Source: PGM Global  
 
Institutions earn a healthy yield pick-up in Treasuries versus local government bonds. For example, here is Japan’s case.
 
Source: PGM Global  


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Food for Thought

1. Shopping mall visits relative to 2019:
 
Source: Placer.ai  
 
2. Affordability migration:
 
Source: Wells Fargo Securities  
 
3. Living paycheck to paycheck:
 
Source: MagnifyMoney¬†   Read full article  
 
4. By 2030, US federal tax revenues will fall short of mandatory spending on entitlements and interest. There will be no room for discretionary spending.
 
Source: J.P. Morgan Asset Management  
 
5. The average cost of money remittances:
 
Source: J.P. Morgan Asset Management  
 
6. Increases in death-benefit claims:
 
Source: @WSJ   Read full article  
 
7. Oil production in Africa:
 
Source: Statista  
 
8. Russian banks switching to the Chinese card system (Unionpay):
 
Source: @disclosetv  
 
9. Smart and sad or dumb and happy?
 
Source: @YouGovAmerica  

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