The Daily Shot: 14-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. The U. Michigan consumer sentiment indicator deteriorated further this month as gasoline prices surged.
• Households expect further worsening in their financial situation …
… despite easing concerns about job losses.
• Buying conditions for vehicles appear to have bottomed.
• Here is the sentiment indicator among independent voters.
Source: Mizuho Securities USA
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2. Next, we have some updates on inflation.
• The U. Michigan inflation expectations:
Source: Mizuho Securities USA
• Market-based inflation expectations:
• CPI forecasts (most point to headline inflation peaking above 8%):
– Deutsche Bank:
Source: Deutsche Bank Research
– Wells Fargo:
Source: Wells Fargo Securities
• Companies citing inflation on earnings calls, by industry:
Source: @FactSet Read full article
• Alternative core CPI measures:
– Median and trimmed-mean CPI:
– Sticky CPI:
• The Core CPI index vs. the 2% price growth:
• Select trends from the February CPI report:
– CPI components:
Source: @WSJ Read full article
– Food at home:
– Shelter:
– Vehicles (the second chart shows used vehicles month-over-month):
Source: Deutsche Bank Research
– Floor coverings:
– Physicians’ services:
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3. The US Budget deficit is running below 2019 levels amid robust tax receipts.
4. The 2-year Treasury yield continues to climb as more rate hikes get priced in.
The market has now almost fully priced in seven rate hikes this year.
• The 10-year yield is back above 2%.
• The Treasury curve keeps flattening.
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5. Growth in consumer credit has slowed.
Source: MarketDesk Research
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Canada
1. The February jobs report topped expectations.
• Employment is approaching the pre-COVID trend.
• The unemployment rate tumbled.
• And the labor force participation rate rebounded from January.
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2. Capacity utilization jumped in Q4.
3. Transportation, oil, and gas extraction are leading the way in terms of capital expenditures so far this year.
Source: Oxford Economics
Transportation and warehousing continue to represent the largest share of capital expenditures.
Source: Oxford Economics
Private sector investment intentions have been weaker than expected this year.
Source: Oxford Economics
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4. The high level of household debt could pose a risk to financial stability.
Source: BCA Research
5. Apartment completions have surpassed single-family homes.
Source: BCA Research
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The United Kingdom
1. Shares of smaller firms have been lagging large caps.
2. The January GDP report was stronger than expected, topping pre-COVID levels.
Private-sector output has been lagging.
Source: Pantheon Macroeconomics
• Manufacturing production:
• Services:
• Construction:
3. The trade deficit hit a new record as energy prices surged.
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The Eurozone
1. Here are some economic trends vs. the US.
• Household income:
Source: ECB Read full article
• Real consumption:
Source: ECB Read full article
• Real investment:
Source: ECB Read full article
• Savings:
Source: ECB Read full article
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2. Housing costs are on the rise for tenants, especially for those with shorter-term tenure.
Source: ECB
This chart shows homeownership rates in the euro area by country.
Source: ECB
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3. How much will energy prices hit the euro-area economy?
Source: Bloomberg Read full article
This article talks about Italian truckers stopping work due to surging fuel costs.
Source: ANSA.it Read full article
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4. Here is the Q1 GDP forecast from Pantheon Macroeconomics.
Source: Pantheon Macroeconomics
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Europe
1. Vulnerable currencies rebounded last week.
2. The European Union has become heavily dependent on Russia for hydrocarbons.
Source: IIF
Source: @fwred
How long can Europe last without Russian natural gas without hitting demand destruction?
Source: Oxford Institute for Energy Studies
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3. Here are some trends in self-employment.
Source: Eurostat Read full article
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Asia – Pacific
1. Asian currencies are under pressure.
• The South Korean won:
• The Taiwan dollar:
2. Equity fund flows into Taiwan have been strong this year.
Source: EPFR
3. Here is a projection for South Korea’s government debt (as % of GDP).
Source: Fitch Ratings
4. New Zealand’s home sales remain soft.
5. The Aussie dollar is undervalued.
Source: Alpine Macro
An upswing in China’s credit impulse would be positive for the Aussie dollar, which could close the valuation gap.
Source: Alpine Macro
Separately, wage growth has been relatively modest and is within the RBA’s target range.
Source: BCA Research
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China
1. Equity markets continue to tumble.
– Mainland:
– Hong Kong:
• Earnings yields of China’s shares keep climbing relative to the US.
Source: @SofiaHCBBG
• Hong Kong-based and international investors have been pulling capital out of mainland China’s stock market.
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2. The renminbi rally has stalled.
3. COVID cases have been rising, …
Source: Our World in Data
… which is pressuring iron ore prices.
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4. Dollar-denominated HY bonds continue to hit multi-year lows.
5. Worker protests in service industries have been outpacing manufacturing,
Source: China Labour Bulletin Read full article
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Emerging Markets
1. Let’s begin with last week’s performance.
• Currencies:
• EM ETFs (Russia is no longer part of this list):
2. Invesco’s EM Sovereign Debt ETF (PCY) holdings are having a rough start to the year. Outside of Russia/Ukraine, most losses are attributed to the rise in US interest rates, not a widening of credit spreads, according to III Capital Management.
Source: III Capital Management
EM debt outflows accelerated recently.
Source: BofA Global Research; @MikeZaccardi
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3. Next, we have some updates on Russia.
• The monetary base surged at the start of the war as the central bank boosted support for the banking system.
• Domestic financial institutions control most of Russia’s bank system assets.
Source: IIF
• Financial conditions have deteriorated dramatically.
Source: IIF
• The current account swelled in February amid surging energy prices.
Source: @RobinBrooksIIF
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4. India’s industrial production was a bit lower than expected but edged above the January peak.
5. Brazil’s CPI is holding above 10%.
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Cryptocurrency
1. A proposed rule that could amount to a ban on bitcoin will be voted on by the European Union parliament on Monday. That could be a source of volatility.
Source: CoinDesk Read full article
2. The ETH/BTC price ratio is below its 40-week moving average, similar to what occurred during the 2018 crypto bear market.
Source: CoinDesk Read full article
3. NFT transaction volume has deteriorated.
Source: @jessefelder, @FT Read full article
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Commodities
1. Precious metals continue to see strong inflows.
The performance across gold ETFs has been quite divergent from the underlying commodity.
Source: FactorResearch Read full article
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2. Next, we have last week’s performance across different commodity markets.
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Energy
1. The US rig count continues to rebound.
US shale oil production and fracking fleet counts are recovering, albeit still below pre-pandemic levels.
Source: PGM Global
PGM Global expects bullish sentiment in the oil futures market to moderate as producers sell forward contracts to lock in gains. A wave of exploration and production activity could occur later this year.
Source: PGM Global
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2. Here is a look at Russia’s oil trade.
Source: @NumeraAnalytics
3. Below is Wells Fargo’s forecast for Brent crude price.
Source: Wells Fargo Securities
4. Oil futures’ open interest has been falling.
Source: @markets Read full article
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Equities
1. Large caps saw inflows last week.
Here are the flows by sector (2 charts).
Source: Deutsche Bank Research
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2. Equities no longer look overbought, according to BCA Research.
Source: BCA Research
3. The Nasdaq 100 is below support relative to the S&P 500.
Nasdaq 100 valuations have room to fall further.
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4. S&P 500 valuations are below recent pre-COVID highs.
Source: @FactSet Read full article
5. The S&P 500 3-month skew has been falling (out-of-the-money puts are becoming relatively cheaper).
h/t @ossingerj
6. Next we have some updates on last week’s performance.
• Sectors:
• Largest tech stocks:
• Equity factors:
• Thematic ETFs:
By the way, this chart shows the recent popularity of different thematic ETFs, by strategy.
Source: @jessefelder, @FT Read full article
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7. Recent price swings in the S&P 500 resemble past bear markets.
Source: SentimenTrader
8. Historically, equities have recouped losses quickly following global conflicts.
Source: Oxford Economics
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Credit
1. High-yield funds saw substantial outflows this year.
Source: Deutsche Bank Research
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2. This chart shows last week’s performance by asset class.
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Rates
1. Investors are extremely net short duration.
Source: BCA Research
2. The risk profile of Treasuries has improved over the past year, according to Alpine Research.
Source: Alpine Macro
3. A breakout for the 30yr Treasury yield?
Source: LPL Research
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Food for Thought
1. Ukrainian refugees:
Source: EEA Read full article
2. Seizures of heroin and fentanyl:
Source: Rand Corporation
3. COVID fatality ratio:
Source: @financialtimes Read full article
4. Offshore wind farms:
Source: @financialtimes Read full article
5. Supplying NYC with hydropower:
Source: @BBGVisualDataMore Read full article
6. Paying attention to local news:
Source: @axios Read full article
7. Hotel occupancy rates relative to 2019:
Source: Wells Fargo Securities
8. Americans with a driver’s license:
Source: Sivak Applied Research
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