Posted on by The Daily Shot Editor: Lev Borodovsky

Student debt delinquencies could rise sharply when the moratorium is lifted

The Daily Shot: 25-Mar-22
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Global Developments
• Food for Thought

 

The United States

1. Durable goods orders declined in February, with the weakness surprising some economists. Signs of slower growth?
 

 

 
Source: MarketWatch   Read full article  

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2. However, survey indicators suggest that business activity strengthened this month. The Markit PMI report topped expectations.
 
• Manufacturing PMI:
 

 
• Services PMI:
 

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3. The Kansas City Fed’s regional factory activity index hit a record high.
 

 
Source: MarketWatch   Read full article  
 
The expectations index was also remarkably strong.
 

 
Price pressures and supply bottlenecks worsened this month.
 

 

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4. Next, we have some updates on the labor market.
 
• Initial jobless claims are at multi-decade lows.
 

 
Here is the seasonally-adjusted indicator (lowest since 1969, when the US population was much smaller).
 

 
Continuing claims have decoupled from the seasonal trends we saw in recent years.
 

 
• Labor force participation among workers aged 35-44 has risen over the past few months.
 
Source: PGM Global  
 
• Placement companies’ revenues are surging.
 
Source: Evercore ISI Research  

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5. Historically, rising oil prices combined with tighter monetary policy have preceded recessions.
 
Source: TS Lombard  
 
6. This chart shows the cumulative impact on consumption from the spike in oil prices, the geopolitical risk, and rate hikes.
 
Source: Numera Analytics  
 
7. Student debt delinquencies could rise sharply when the moratorium is lifted.
 
Source: Liberty Street Economics   Read full article   Further reading  

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The United Kingdom

1. The March PMI report was mixed.
 
• Manufacturing:
 

 
• Services (resilient despite the inflationary/geopolitical pressures):
 

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2. Consumer confidence tumbled.
 

 
3. Retail sales slowed this month.
 

 
Source: Reuters   Read full article  
 
4. Last month’s inflation jump was quite broad. Video game prices drove the increase in recreation CPI.
 
Source: Bloomberg   Read full article  

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The Eurozone

1. Business activity was surprisingly resilient this month, given the geopolitical/inflation backdrop.
 
• Services:
 

 

 
• Manufacturing:
 

 

 
• Eurozone composite PMI (above consensus):
 

 
• Forward-looking measures suggest that factory activity will face some headwinds.
 
Source: @fwred  

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2. French business confidence deteriorated.
 

 
3. Here is German consumer outlook:
 
Source: @OliverRakau, @FAZ_NET  
 
4. Bund yields are surging.
 

 
5. Fixed asset investments in the Eurozone are rising.
 
Source: Longview Economics  

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Europe

1. Norges Bank hiked rates amid uncertainty around the central bank’s leadership.
 

 
Source: MarketWatch   Read full article  
 
• Norges Bank sharply raised its projected rate hike path.
 
Source: Nordea Markets  
 
• Norway’s unemployment rate continues to fall.
 

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2. Czech bond yields are soaring.
 

 
The yield curve is heavily inverted.
 

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3. The dividend futures market points to a 20%-30% decline in European banks’ earnings.
 
Source: TS Lombard  

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Asia – Pacific

1. Based on the data from Tokyo this month, Japan’s core CPI has bottomed.
 

 
Separately, Japan’s department store sales remain in the doldrums.
 

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2. Taiwan’s unemployment rate is at multi-year lows.
 

 
3. Singapore’s industrial production hit a new record.
 

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China

1. The stock market rebound has stalled.
 

 
2. China’s leveraged property developers continue to face liquidity risks.
 
• Sunac:
 
Source: Fitch Ratings   Read full article  
 

 
• Ronshine:
 
Source: Fitch Ratings   Read full article  
 

 
• Credit downgrades:
 
Source: Fitch Ratings  
 
• Tepid offshore bond issuance:
 
Source: Fitch Ratings  

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3. In contrast to other EM economies, China’s money flows have turned negative.
 
Source: IIF  

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Emerging Markets

1. Banxico hiked rates by 50 bps despite tighter financial conditions.
 

 
• Is inflation peaking or is this just a pause?
 

 
• Retail sales were strong in January.
 

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2. South Africa’s central bank also hiked rates.
 

 
3. Stagflation risks have risen.
 
Source: TS Lombard  
 
4. More upside for LatAm equities?
 
Source: PGM Global  

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Cryptocurrency

1. Bitcoin continues to strengthen and could face resistance at $46K and $51K.
 
Source: CoinDesk   Read full article  
 
2. News that Russia could allow countries to pay in “hard currency” or different currencies, including bitcoin, contributed to the rise in cryptos on Thursday.
 
Source: CoinDesk   Read full article  
 
3. Decentralized finance (DeFi) tokens have lagged behind large-cap cryptos, but that could change given recent altcoin rallies.
 
Source: CoinDesk   Read full article  
 
4. ANZ Bank has created a stablecoin pegged to the Aussie dollar.
 
Source: CoinDesk   Read full article  
 
5. There is no correlation between an artist’s popularity on Spotify and their NFT sales.
 
Source: @Delphi_Digital  

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Commodities

1. Iron ore prices are surging in China.
 

 
2. Nickel prices spiked 15%, hitting the limit again. Concerns about short-sellers persist.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
• Was there a “bailout” involved?
 
Source: @WSJ   Read full article  
 
• The nickel surge is impacting shipyard activities.
 
Source: TradeWinds   Read full article  

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3. Plastics costs are going up with crude oil.
 
Source: @WSJ   Read full article  
 
4. Is Russia selling some of its gold?
 
Source: Reuters   Read full article  
 
5. Commodities perform well during Fed rate hikes.
 
Source: MUFG; @giginator_  

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Energy

1. The spread between China’s domestic Qinhuangdao coal price and the Asian benchmark coal price (Newcastle) has widened to record highs. That’s partly because Chinese power plants have been reluctant to increase production due to rising raw material costs, according to ANZ.
 
Source: ANZ Research  
 
2. Russia supplies a lot of coal to Asia/Pacific and Europe.
 
Source: ANZ Research  
 
3. Is the gasoline price spike in the US denting demand?
 
Source: Princeton Energy Advisors  
 
For now, mobility continues to improve.
 
Source: Pantheon Macroeconomics  

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4. This chart shows the estimated payback period of a commercial electric vehicle at various oil prices.
 
Source: Nucleus Wealth   Read full article  

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Equities

1. Small caps are lagging in this rebound.
 

 
2. Here is the return on equity vs. price-to-book ratio by sector.
 
Source: @ISABELNET_SA, @GoldmanSachs  
 
3. These charts show similarities between the latest correction and previous years.
 
Source: SentimenTrader  
 
4. The US equity market’s new lows have exceeded new highs for 55 days.
 
Source: @WillieDelwiche  
 
5. The S&P 500 is experiencing an “oversold bounce.”
 
Source: SentimenTrader  
 
6. Stagflation periods tend to pressure both stocks and bonds.
 
Source: Numera Analytics  
 
7. Equity risk premium shifted from relatively attractive to expensive levels in a matter of days.
 

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Rates

1. Nine Fed rate hikes this year (8 plus the one we just had) is increasingly likely, according to the futures market.
 

 
2. The Treasury curve is flattening rapidly at the longer end.
 

 
3. The US 2-year yield increase this quarter has been remarkable.
 

 
4. Projections for r-star have risen sharply.
 
Source: Deutsche Bank Research  
 
5. Here is the 10yr Treasury yield vs. the ISM Manufacturing PMI.
 
Source: MRB Partners  

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Global Developments

1. Omicron in China is worsening logistics bottlenecks again.
 
Source: @markets   Read full article  
 
2. Inflation has risen well above the midpoint target of most central banks.
 
Source: Fitch Solutions Macro Research  
 
3. Here is a look at the world’s largest currency reserves.
 
Source: Alpine Macro  

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Food for Thought

1. In-person religious services:
 
Source: Pew Research Center   Read full article  
 
2. US labor force participation rates:
 
Source: Wells Fargo Securities  
 
3. Private vehicle charging vs. fuel costs in the UK:
 
Source: @resfoundation  
 
4. Antarctic sea ice:
 
Source: @ZLabe, @NSIDC  
 
5. HIV deaths over time:
 
Source: Our World in Data   Read full article  
 
6. Sanctions and de-globalization:
 
Source: Goldman Sachs  
 
7. Global airlines avoiding Russian airspace:
 
Source: @BBGVisualData   Read full article  
 
8. China becoming Russia’s largest trade partner:
 
Source: Statista  
 
9. The world’s monarchies:
 
Source: Statista  
 
10. The Godfather – Academy Awards and strong box office performance:
 
Source: Reuters Graphics   Read full article  

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Have a great weekend!

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