The gasoline shock is about speed of price gains, not price levels

The Daily Shot: 24-Mar-22
The United States
The Eurozone
Europe
Asia – Pacific
China
Emerging Markets
Cryptocurrency
Energy
Equities
Rates
Global Developments
Food for Thought

 



 

The United States

1. Consensus seems to be building for a 50 bps rate hike in May, with the markets giving it a 70%+ probability.
 
Source: Bloomberg   Read full article  
 

 
Danske Bank sees the Fed pushing rates up to 3%.
 
Source: Danske Bank  
 
Market-based inflation expectations keep climbing with oil prices.
 

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2. US gasoline prices are not extreme when adjusted for …
 
Inflation:
 
Source: @WSJ   Read full article  
 
Wages:
 
Source: Wells Fargo Securities  
 
Fuel efficiency:
 
Source: @WSJ   Read full article  
 
Energy consumption as a share of total consumer spending is not yet very high.
 
Source: MRB Partners  
 
It’s the speed of the price gains, not the price level that has been a shocker for the consumer.
 
Source: @WSJ   Read full article  

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3. Next, we have some updates on the housing market.
 
Mortgage applications seem to be slowing.
 

 
Refi activity is falling rapidly.
 

 
New home sales were softer than expected last month.
 

 
This time of the year, we should see much faster nventory declines.
 

 
Big public home builders increasingly dominate the housing market.
 
Source: @RickPalaciosJr  

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4. The number of container ships waiting at Port of LA and Long Beach has been declining.
 
Source: Goldman Sachs; @countdraghula  
 
Eastern Seaboard container volumes have been slowing. This trend coincides with deteriorating forward-looking data in the Richmond Fed’s manufacturing survey.
 
Source: The Daily Feather  


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The Eurozone

1. Consumer confidence deteriorated sharply this month.
 

 

 
Here is the index for the Netherlands.
 

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2. Next, we have some updates on Germany.
 
Declining profit expectations in key sectors:
 
Source: Fitch Ratings  
 
Germany’s import dependency by energy source:
 
Source: Clean Energy Wire; {h/t} SOM Macro Strategies  
 
The impact of severing ties with Russia:
 
Source: Bloomberg   Read full article  
 
Funding the defense budget increase:
 
Source: Bloomberg   Read full article  
 
Plunging real wages:
 
Source: Danske Bank  

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3. Here is the situation with real wages in other economies.
 
Source: Danske Bank  
 
4. Italian bond liquidity has worsened.
 
Source: @RobinBrooksIIF  


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Europe

1. Poland’s consumer confidence has collapsed.
 

 
2. Outflows from European equity funds have been extreme.
 
Source: Barclays Research  
 
3. Here is a look at the EU’s energy dependency.
 
Source: Visual Capitalist; h/t Walter   Read full article  


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Asia – Pacific

1. Dollar-yen is testing long-term resistance.
 

 
Here is Japan’s real effective exchange rate.
 
Source: Capital Economics  
 
2. Japan’s business activity showed some improvement this month but growth remains elusive.
 
Source: IHS Markit  
 
3. Singapore’s CPI unexpectedly declined last month.
 

 
3. Growth in Australia’s business activity remains robust.
 
Source: IHS Markit  
 
The nation’s labor force participation has been remarkably strong, with gains driven by women entering the workforce.
 
Source: ANZ Research  
 
The female unemployment rate is at a 48-year low.
 
Source: ANZ Research  


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China

1. Will Shanghai’s COVID cases follow Hong Kong higher?
 
Source: @HAOHONG_CFA  
 
2. BCA Research expects a fresh round of fiscal stimulus that could reverse the current drag.
 
Source: BCA Research  
 
An acceleration in credit growth could also support the economy.
 
Source: BCA Research  
 
Pledged supplementary lending (PSL), a tool the government utilized to monetize excess inventories in the market in 2015/16, has ticked up.
 
Source: BCA Research  


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Emerging Markets

1. The Brazilian real is surging as EM investors rotate to LatAm.
 

 
2. Argentina’s exports are at record highs for this time of the year as commodity prices spike.
 

 
3. Are Indian stocks too expensive?
 
Source: BCA Research  
 
4. Thai exports have been very strong.
 

 
5. South Africa’s inflation slowed last month.
 

 
6. EM shares are undervalued relative to DM.
 
Source: TS Lombard  
 
7. Next, We have some updates on Russia.
 
Default protection premiums are rising again despite reports that Russia paid its bond coupon.
 

 
Russia’s sovereign wealth fund took a hit in February.
 

 
Source: Reuters   Read full article  
 
Inflation has been soaring.
 

 
Industrial production eased in February.
 

 
Here is the anatomy of the GDP shock.
 
Source: @IIF   Read full article  
 
Cutting out dollar holdings from FX reserves wasn’t particularly helpful as the EU operated in concert with the US on sanctions.
 
Source: Alpine Macro  
 
Putin’s domestic approval ratings have improved.
 
Source: Danske Bank  


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Cryptocurrency

1. Cryptos are rallying, with ether outperforming.
 

 
2. Bitcoin is increasingly correlated with meme stocks.
 
h/t Dantes Outlook  
 
3. Bitcoin futures are at resistance.
 
Source: barchart.com; h/t @MarkCCranfield  
 
4. Open interest in the bitcoin futures market has stabilized over the past few months, but some analysts expect an uptick in trading activity if BTC pushes higher.
 
Source: Arcane Research   Read full article  
 
5. The six-month ETH put-call skew is declining, indicating less demand for downside protection among option traders.
 
Source: Skew   Read full article  
 
6. The spread between ETH and BTC one-month implied volatility turned negative for the first time since March 2021. We could see a sharp move in the ETH/BTC price ratio.
 
Source: Skew   Read full article  


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Energy

1. Brent passed $120/bbl after the Caspian Sea pipeline news.
 

 
Source: @financialtimes   Read full article  

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2. European natural gas futures jumped after talk of settling contracts in rubles.
 

 
Source: Reuters   Read full article  
 
The biggest natural gas storage facility in Northern Europe is empty.
 
Source: @AndreasSteno  

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3. European gasoil futures are in massive backwardation.
 
Source: @JavierBlas  
 
4. A survey from the Dallas Fed shows that US investors still expect strict capital discipline from energy firms.
 
Source: Federal Reserve Bank of Dallas  
 
That’s surprising, given the investment opportunity at current prices. Free cash flow has been surging.
 
Source: @TaviCosta  

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5. US liquids inventories continue to shrink.
 
Source: @HFI_Research  
 
Crude oil (2 charts):
 

 
Source: @HFI_Research  
 
Products (2 charts):
 
Source: @HFI_Research  
 

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6. Clean energy stocks are attempting a turnaround, although most stocks peaked in the runup to the Nov. 2020 US elections.
 
Source: Alpine Macro  
 
7. Energy shares have been negatively correlated with the rest of the stock market.
 
  Further reading  


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Equities

1. Small caps should be outperforming large tech stocks as bond yields climb. That hasn’t been the case.
 
h/t @mikamsika  
 
2. Below is a look at the S&P 500 and periods when the 2yr-10yr Treasury slope flattens/inverts.
 
Source: @McClellanOsc  
 
3. Here are the longest bull markets.
 
Source: Ryan Detrick, LPL Research  
 
4. EPS growth estimates have improved, …
 
Source: @CameronDawson  
 
… driven by energy and tech.
 
Source: @CameronDawson  
 
Earnings growth projections for retailing shares have deteriorated.
 
Source: @CameronDawson  

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5. More upside for financials?
 
Source: MRB Partners  


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Rates

1. Cash is king. Risk-free overnight deposits paying 0.3% at the Fed’s reverse repo facility have been attracting money market funds looking to place massive amounts of cash.
 

 
Treasury bills are in huge demand.
 

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2. The Treasury curve has flattened further amid strong demand for the 20-year paper.
 

 

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3. The rise in the 2-year Treasury note yield has outpaced most other G10 countries.
 
Source: BCA Research  


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Global Developments

1. DM currency moves vs. USD have been correlated to changes in yield differentials.
 
Source: Capital Economics  
 
2. Supply-chain bottlenecks have been acute. Have they now peaked (3 charts)?
 

 
Source: Goldman Sachs; @countdraghula  
 

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3. Global manufacturing activity is expected to slow.
 
Source: Danske Bank  
 
4. The drawdown in global bonds has been massive.
 


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Food for Thought

1. NYC subway daily ridership:
 
Source: @chartrdaily  
 
2. Women-powered industries:
 
Source: Wells Fargo Securities  
 
3. Fixed wireless access (FWA) internet services:
 
Source: Deloitte   Read full article  
 
4. Daycare employment:
 
Source: @WSJ   Read full article  
 
Daycare wages:
 
Source: Wells Fargo Securities  

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5. Self-employment growth:
 
Source: @ceprdc   Read full article  
 
6. Wage growth by age group:
 
Source: @WSJ   Read full article  
 
7. The most common last names around the world:
 
Source: NetCredit   Read full article  

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