The Daily Shot: 23-Mar-22
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Food for Thought
The United States
1. Let’s begin with the housing market.
• This estimate of housing affordability from Standard Chartered takes us back to the housing bubble era.
Source: Standard Chartered; @lisaabramowicz1
• Investors’ share of the housing market hit a multi-year high.
Source: @johnburnsjbrec
• Are new home prices facing a correction?
Source: Pantheon Macroeconomics
• Homebuilder shares are underperforming, …
… as mortgage rates hit the highest level in three years.
• Despite some of the headwinds, Moody’s expects residential construction activity to keep climbing.
Source: Moody’s Investors Service
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2. Next, we have some updates on inflation.
• Inflation is expected to peak just below 9%, according to Fitch Ratings.
Source: Fitch Ratings
• Consumer inflation expectations could be nearing a peak.
Source: Pantheon Macroeconomics
• Here is the proportion of CPI components rising faster than 1% month-over-month.
Source: Longview Economics
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3. The Richmond Fed’s regional manufacturing index improved this month.
But forward-looking indicators deteriorated.
• Employee hours increased.
• Cost pressures remain extreme, but price indicators appear to have peaked.
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4. Based on the UK data, US COVID cases will be climbing in the days ahead.
Source: Pantheon Macroeconomics
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Canada
1. Consumer confidence is dropping again.
2. The surge in inflation is not just about base effects.
Source: Scotiabank Economics
• What happens to Canada’s CPI when we add used vehicles to the index?
Source: Scotiabank Economics
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3. Market-based inflation expectations keep climbing, with the front end of the inflation curve rising faster.
Source: Scotiabank Economics
4. Canada’s bonds are having the worst year in decades.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
5. This chart shows Canada’s real short-term rates.
Source: @RichardDias_CFA
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The United Kingdom
1. The CPI breached 6% for the first time in decades, exceeding forecasts. The core CPI cleared 5% last month.
• The CPI is expected to keep climbing in the months ahead, peaking at 8%.
Source: Fitch Ratings
• Retail prices are up over 8%.
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2. The 10yr gilt yield is about to take out the 2018 peak.
3. Industrial orders surprised to the upside this month.
Manufacturers are rapidly boosting prices, …
Source: Reuters Read full article
… which will show up in the PPI in the months ahead.
Source: Pantheon Macroeconomics
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4. The government borrowed more than expected last month.
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The Eurozone
1. The Bund market selloff has been massive.
2. The German government wants to bring gasoline prices back toward two euros a liter via subsidies.
Source: @Schuldensuehner, @welt Read full article
3. Eurozone construction output surged in January.
4. Belgium’s March consumer confidence report doesn’t bode well for the Eurozone’s sentiment data.
Source: @OliverRakau
5. Here are the changes in the ECB’s taper plan.
Source: PGM Global
6. The iShares MSCI France ETF (EWQ) is entering a seasonally strong period.
Source: SentimenTrader
Separately, the labor market is rapidly tightening in France.
Source: Fitch Ratings
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7. China is punishing Lithuania for allowing Taiwan to open a de-facto embassy in Vilnius.
Source: Bloomberg Read full article
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Asia – Pacific
1. Dollar-yen continues to climb.
2. Next, we have some updates on Australia.
• Economists continue to boost Australia’s GDP growth forecasts for 2022.
• This month’s Aussie rally has been impressive.
Source: @Scutty
• More Australian workers are shifting to full-time jobs.
Source: ANZ Research
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China
1. Economists keep downgrading China’s GDP growth projections for this year.
2. Home prices continue to fall (3 charts).
Source: Pantheon Macroeconomics
Source: @WSJ Read full article
Source: Chart and data provided by Macrobond
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3. Hong Kong’s inflation remains subdued.
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Emerging Markets
1. Chile’s current account deficit has blown out.
The Q4 GDP growth was a bit below forecasts but still quite strong.
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2. According to the World Economics SMI report, India’s business sector is struggling to grow.
Source: World Economics
3. The risk of default among Russian companies has risen sharply.
Source: S&P Global Market Intelligence
Russia’s inflation is surging.
Source: Fitch Ratings
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4. US equities and the dollar are the key drivers of EM equity returns.
Source: TS Lombard
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Cryptocurrency
1. This chart shows that BTC long liquidations have dominated so far this year. Will we see an increase in short liquidations around the $44K-$45K resistance zone?
Source: @Negentropic_
2. Roughly 25% of the top 50 cryptos are performing better than bitcoin over the past 90 days. That does not confirm “altcoin season” just yet.
Source: Blockchain Center Read full article
3. This chart shows how a rotation from bitcoin to altcoins can reduce drawdowns during risk-off periods (and vice versa).
Source: @Negentropic_
4. The Bitwise Crypto Industry Innovators ETF (BITQ) is now outperforming BTC over the past 30 days.
Source: CoinDesk Read full article
5. Energy companies have been getting into bitcoin mining.
Source: Bloomberg Read full article
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Commodities
1. LME nickel trading finally stabilized, but prices continue to drop.
2. Fertilizer prices and shares of companies in that sector have been surging.
Source: @AndreasSteno
Source: @Marcomadness2
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3. The divergence between the dollar and commodities persists.
Source: PGM Global
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Energy
1. Russia’s crude oil discount to Brent has widened further.
Source: Neste
• China and India will be replacing some of the lost sales elsewhere.
Source: Reuters Graphics
• Oil tanker activity at Russian ports has declined sharply.
Source: @RobinBrooksIIF, @JonathanPingle
• The Dallas Fed sees a global recession without Russian energy supplies.
Source: @WSJ Read full article Further reading
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2. Will Indonesia’s coal exports rebound this year to replace some of the lost supply from Russia?
Source: Fitch Ratings
3. About a third of US domestic petroleum consumption is outside of the transportation sector.
Source: Moody’s Investors Service
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Equities
1. Stocks continue to rebound, with some analysts viewing the equity market as a “haven” against inflation.
The fear of rising rates we saw in recent months has magically evaporated. The Nasdaq 100 is suddenly correlated with Treasury yields …
Source: barchart.com
… and real rates.
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2. The recent surge in the Nasdaq’s momentum looks similar to prior troughs.
Source: SentimenTrader
3. The equity/bond ratio (SPY/TLT) continues to strengthen as rates rise.
Source: Dantes Outlook
4. Stocks tend to struggle during periods of accelerated rate hikes.
Source: @WillieDelwiche Read full article
5. Next, we have some updates on the volatility market.
• Indicators of equity vol (VIX) and rate vol (MOVE) have been moving in opposite directions.
• The VIX futures curve is back in contango.
• VXX (a long VIX futures ETN) has decoupled from its NAV after Barclays suspended sales.
These two ETNs are essentially the same product.
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Rates
1. Nine 25 bps rate hikes this year are increasingly likely, according to the futures market.
2. Rising liquidity premium in Treasuries has widened the spread between on- and off-the-run 5yr notes.
Source: Bloomberg Read full article
3. Does Powell’s suggestion to focus on the short end of the curve produce a better economic signal?
Source: Deutsche Bank Research
4. Treasuries have been selling off despite inflows from Japan.
Source: @EffMktHype
5. Surprisingly, the largest long-term Treasury ETF has been experiencing fund inflows.
Source: Chris Murphy, Susquehanna International Group
6. There has been a rapid decline in global debt with negative yields.
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Food for Thought
1. US labor force recovery:
Source: @WSJ Read full article
2. US Southwest land border apprehensions:
Source: CBP
• Outcomes of apprehensions:
Source: American Immigration Council Read full article
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3. In the late 1990’s, rapid wage gains were not inflationary (due in part to robust productivity gains).
Source: Pantheon Macroeconomics
4. Widening meat-processing margins:
Source: @WSJ Read full article
5. Public spending on education:
Source: Wells Fargo Securities
6. Where biodiversity is most at risk in the US:
Source: The NY Times Read full article
7. US dog ownership by generation:
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