Posted on by The Daily Shot Editor: Lev Borodovsky

US consumer credit surged in February as households tap credit cards

The Daily Shot: 08-Apr-22
• Administrative Update
• The United States
• The United Kingdom
• The Eurozone
• Asia – Pacific
• China
• Emerging Markets
• Energy
• Equities
• Rates
• Global Developments
• Food for Thought

 

Administrative Update

 
Please note that The Daily Shot will not be published next Friday, April 15th.

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The United States

1. US consumer credit surged by nearly $42 billion in February, an 11% gain.
 

 
Source: MarketWatch   Read full article  
 
Faced with rapid price increases, households are tapping their credit cards again.
 

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2. Jobless claims remain near multi-year lows.
 

 
Here are the continuing jobless claims.
 

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3. Inventory bottlenecks are shifting from supplier delays to companies’ internal backlogs. Below is a comment from Mizuho Securities.
 
Source: Mizuho Securities USA  
 
4. Housing market sentiment has deteriorated to multi-year lows, according to Fannie Mae.
 
Source: Fannie Mae  
 
5. Treasury yields keep climbing as the Fed readies its rapid-fire quantitative tightening.
 

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The United Kingdom

Markets see the BoE pushing the official bank rate above 2.5% before initiating rate cuts late next year.
 

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The Eurozone

1. The Dutch CPI report was a shocker.
 

 
Source: News WWC Media   Read full article  
 
• The ECB continues to get surprised by the euro-area inflation spike.
 
Source: @fwred  
 
• Here are the market projections for rate hikes.
 
Source: Danske Bank  

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2. Retail sales kept following the pre-COVID trend in February.
 

 
3. Rising rates will put downward pressure on economic activity.
 
Source: Trahan Macro Research  
 
4. Productivity slowed in March.
 
Source: IHS Markit  
 
5. Technical indicators suggest that euro-area bonds are oversold.
 
Source: MRB Partners  
 
6. Euro futures positioning has decoupled from EUR/USD.
 
Source: Capital Economics  

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Asia – Pacific

1. Here is Japan’s international investment position.
 
Source: @financialtimes   Read full article  
 
2. Next, we have some updates on Australia.
 
• The trade balance (below expectations in February):
 

 
• Business investment:
 
Source: @AvidCommentator  
 
• Eastern Australia’s rainfall vs. long-term averages:
 
Source: The Guardian   Read full article  

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China

1. Beijing hinted at monetary easing …
 
Source: Bloomberg   Read full article  
 
… amid lockdowns.
 
Source: Ernan Cui, Gavekal Research  
 
The one-year swap rate is moving lower.
 

 
2. The 10-year bond yield differential with the US has collapsed. At some point, this trend has to put downward pressure on the renminbi.
 

 
3. China’s F/X reserves have been moving lower in recent months.
 

 
4. Tech stocks are struggling again in Hong Kong, but property developers are outperforming, …
 

 
… despite weak sales.
 
Source: @WSJ   Read full article  

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5. The spike in COVID cases seems to be limited to Shanghai and Jilin.
 
Source: Ernan Cui, Gavekal Research  
 
6. This chart shows China’s US and Western Europe export share.
 
Source: Alpine Macro  

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Emerging Markets

1. Chile’s exports hit a record high.
 

 
Wage growth accelerated further.
 

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2. Mexico’s March inflation report was ugly.
 

 
3. Next, we have some updates on Russia.
 
• Sovereign credit default upfront premium (on a 5yr CDS) climbed further after the US Treasury limited Russia’s ability to make payments on its debt.
 
Source: @WSJ   Read full article  
 
• Russia’s current account surplus surged, driven by rising energy prices that boosted its terms of trade (2 charts).
 
Source: IIF  
 
Source: IIF  
 
• Sanctions have partly offset gains from higher oil prices, although the capacity of oil tankers in Russian ports has fallen slightly.
 
Source: IIF  
 
• The ruble has recovered to pre-war levels.
 

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4. EM hard-currency bond fund inflows have accelerated.
 
Source: BofA Global Research; @MikeZaccardi  
 
5. If you are scanning for geopolitical risks outside of the Russia-Ukraine war, it’s worth taking a look at Pakistan. Rising political uncertainty and shrinking foreign currency reserves sent the Pakistani rupee to record lows.
 
Source: Reuters   Read full article  
 

 
The central bank hiked rates by 250 bps to stem the decline.
 

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Energy

1. Brent crude is testing support.
 

 
2. Unlike prior spikes, the current oil price shock was driven by a large supply/demand imbalance. By the way, solving for supply-driven inflation comes at the expense of slower economic growth, according to BlackRock (2 charts).
 
Source: BlackRock Investment Institute  
 
Source: BlackRock Investment Institute  

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3. OPECs under-production has been worsening.
 
Source: @nhillman_energy  
 
4. US crude oil inventories remain at multi-year lows.
 
Source: Princeton Energy Advisors  
 
5. US natural gas futures hit the highest level since 2009, …
 

 
… as inventories surprised to the downside, …
 

 
… and the western US is hit with colder-then-normal weather.
 
Source: NOAA  

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Equities

1. The March bounce in cyclical sectors was short-lived.
 

 
2. The top ten stocks in the S&P 500 remain above 30% of the market value, but the earnings contribution is declining.
 
Source: J.P. Morgan Asset Management  
 
3. Fast Fed tightening cycles are not good for stocks.
 
Source: @MrBlonde_macro   Read full article  
 
4. The S&P 500 (SPY) ratio to long-term Treasuries (TLT) hit a new high.
 

 
5. Hedge funds have been cutting their exposure to stocks, …
 
Source: Morgan Stanley Research; @WallStJesus  
 
… particularly, tech.
 
Source: Morgan Stanley Research; @WallStJesus  

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6. Next, we have some sector trends.
 
• Over the long run, the relative performance of the US utilities sector has tracked the bond/stock ratio.
 
Source: MRB Partners  
 
• Homebuilders are now down more than 20% vs. the S&P 500 over the past six months.
 

 
• Banks are underperforming the S&P 500 by over 15%.
 

 
• Here is the risk/return profile across US sectors.
 
Source: Mizuho Securities USA  

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Rates

Implied volatility keeps climbing.
 

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Global Developments

1. Technical indicators suggest that G7 government bonds are oversold.
 
Source: MRB Partners  
 
2. The global PMI orders-to-inventories indicator points to a slowdown in economic activity ahead.
 
Source: @RollinFrederic, @PkZweifel  

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Food for Thought

1. Americans with an investment account:
 
Source: MagnifyMoney   Read full article  
 
• Primary investing goal:
 
Source: MagnifyMoney   Read full article  
 
• Americans’ top investing regrets:
 
Source: MagnifyMoney   Read full article  

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2. Square meters of prime property that can be purchased for $1 million:
 
Source: Statista  
 
3. US box office proceeds:
 
Source: @chartrdaily   Read full article  
 
4. US population growth outside of large metro areas:
 
Source: The New York Times   Read full article  
 
5. Lactose intolerance globally:
 
Source: ProCon   Read full article  
 
6. Food delivery apps:
 
Source: EcommerceDB   Read full article  
 
7. Support from the opposing party for Supreme Court nominees:
 
Source: @madialder   Read full article  
 
8. China Eastern Airlines flight MU5735 compared to other crash profiles:
 
Source: Reuters   Read full article  
 
9. Left- and right-hand traffic:
 
Source: Wikipedia   Read full article  

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Have a great weekend!

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