The Daily Shot: 12-Apr-22
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Food for Thought
The United States
1. The percentage of Americans who expect to be worse off financially in 12 months hit the highest level in at least nine years, according to the NY Fed.
Source: NY Fed
• Households increasingly expect to boost their spending as a result of rising costs.
Source: NY Fed
• Inflation expectations remain anchored, with the one- and three-year indicators continuing to diverge.
Source: NY Fed
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2. According to ANZ, the Fed may want to cool the labor market enough to bring the job openings-to-unemployed ratio closer to one. That would ease wage pressures, getting the Employment Cost Index (ECI) growth down to 3%.
Source: ANZ Research
Lower ECI growth would bring the CPI back near the Fed’s 2% objective.
Source: ANZ Research
By the way, history indicates that Fed tightening has a limited impact on inflation.
Source: MarketDesk Research
3. The market now fully expects a 50 bps rate hike in May.
The market sees the Fed boosting rates above 3% and holding them elevated over a longer period.
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4. Supply chain stress levels remain elevated, according to Oxford Economics, with pressures now driven more by higher costs.
Source: Oxford Economics
But shippers see capacity improving, …
Source: BofA Global Research; @TheStalwart
… with shipping rates from China beginning to moderate.
However, the COVID-related lockdowns in China are likely to make the situation worse.
Source: Bloomberg Read full article
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5. US real disposable income is expected to remain below the pre-COVID trend, according to Wells Fargo.
Source: Wells Fargo Securities
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Canada
1. Deteriorating US consumer confidence points to downside risks for Canada’s sentiment.
Source: Quill Intelligence
Inflation has become a major concern for Canada’s consumers.
Source: Quill Intelligence
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2. Banks are exposed to a surge in variable-rate mortgages.
Source: PGM Global
The large revenue boost for banks over the past two years came from a surge in capital market activities (higher commissions and fees). Still, despite strong mortgage originations, net interest income from core lending has fallen, according to PGM Global.
Source: PGM Global
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3. Investors are bullish on Canadian stocks.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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The United Kingdom
1. UK GDP growth paused in February.
Services output strengthened, …
… but manufacturing and construction activity edged lower.
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2. The trade deficit remains near record levels.
3. Economists now expect consumer prices to rise by 7% this year.
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The Eurozone
1. The Bund sell-off has been relentless.
Here is the yield curve.
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2. Germany’s industrial output has been strengthening, except in capital goods (which include vehicles).
Source: Pantheon Macroeconomics
3. Economists increasingly see the Eurozone moving toward stagflation.
• GDP forecasts for 2022:
• Inflation forecasts for 2022:
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4. The participation rate in French first-round elections has been trending lower.
Source: Pantheon Macroeconomics
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Europe
1. Sweden’s unemployment rate continues to fall.
2. Norway’s consumer inflation report was surprisingly benign.
But that hasn’t been the case elsewhere in Europe.
• Denmark:
• The Czech Republic:
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Japan
1. Dollar-yen is testing long-term resistance.
2. Machine tool orders jumped in March.
3. Producer prices continue to surprise to the upside.
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Asia – Pacific
1. Taiwan’s portfolio outflows accelerated last month.
Source: ANZ Research
2. Australia’s consumer confidence has stabilized.
• Business confidence has rebounded.
• Australians expect to spend more are prices climb.
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China
1. March loan growth topped expectations.
• Bank loans:
• Total financing:
Money supply growth was also stronger than expected.
Credit impulse outside of local government debt has been soft. Are we now seeing a turnaround?
Source: BCA Research
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2. Auto inventories have been rising.
Source: BCA Research
3. Productivity growth has stabilized in recent years.
Source: Lowy Institute
4. China invests far more in public infrastructure than other major economies.
Source: Lowy Institute
Here is a look at China’s public investment compared with other East Asian countries.
Source: Lowy Institute
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5. Shanghai’s subway system shows the extent of the lockdowns.
Source: @AndreasSteno
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Emerging Markets
1. India’s portfolio flows remain negative.
Source: ANZ Research
2. Russia’s current account surplus hit a record as imports slump.
3. South Africa’s factory output edged lower in February.
4. Mexico’s manufacturing production hit a new high.
5. Hedge funds are betting against EM equities.
h/t @IshikaMookerjee
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Cryptocurrency
1. Cryptos are off to a rough start this month.
Source: FinViz
Bitcoin went through the 50-day moving average, dipping below $40k.
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2. Bitcoin’s 90-day correlation with the Nasdaq 100 reached a new high.
Source: CoinDesk, Koyfin Read full article
3. A spike in long BTC liquidations occurred over the weekend, although not extreme compared with early March.
Source: Coinglass Read full article
4. The ratio of bitcoin’s buy volume versus sell volume has declined this year, indicating bearish sentiment among traders.
Source: CryptoQuant Read full article
5. Bitcoin’s put/call option skews are trending higher, indicating a renewed bias for puts.
Source: @CoinbaseInsto
6. Open interest in CME bitcoin futures has ticked lower over the past week.
Source: @CoinbaseInsto
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Commodities
1. The surge in US real rates poses a risk for gold.
Source: @TheTerminal, Bloomberg Finance L.P.
2. Wheat is rallying again.
3. Fund managers love commodities.
Source: BofA Global Research
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Energy
1. Brent crude dipped below $100/bbl.
Source: @TheTerminal, Bloomberg Finance L.P.
Source: Reuters Read full article
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2. Fund managers see long oil/commodities as the most crowded trade, …
Source: BofA Global Research
… but expect oil to outperform.
Source: BofA Global Research
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3. Oil backwardation continues to ease. Here is the June-July Brent futures spread.
Source: @HFI_Research
4. Crack spreads are still elevated, boosting refinery margins.
Source: @HFI_Research
5. US natural gas is pushing toward $7/mmbtu.
Source: @markets Read full article
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Equities
1. After ignoring rising real rates for weeks, growth stocks have taken a hit in recent days. This scatterplot shows the relationship between QQQ (Nasdaq 100) and TIP (inflation-linked Treasuries).
Source: @TheTerminal, Bloomberg Finance L.P.
• Rising rates will continue to pressure equity multiples.
Source: BCA Research
• Severe Treasury drawdowns tend to have consequences beyond the bond market.
Source: @sentimentrader
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2. Cyclicals continue to lag defensive sectors.
3. Depressed equity risk premium (see chart) will be a drag on returns.
Source: Truist Advisory Services
4. This chart shows share buyback activity by sector.
Source: EPFR Global Navigator
5. Companies that announce stock splits tend to outperform over the following year.
Source: Barron’s Read full article
By the way, stock splits were popular during the dot-com boom.
Source: Barron’s Read full article
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Rates
1. The drawdown in the Treasury market has been extreme.
2. The 10-year Treasury yield is testing long-term downtrend resistance.
Source: @CarterBWorth
3. Increasing MBS durations (as housing refi activity collapses) exacerbated the sell-off in Treasuries. MBS portfolio managers are forced to cut duration to address rising exposure to rates.
Source: PGM Global
4. Finally, this chart shows market expectations for terminal rates in advanced economies.
Source: Morgan Stanley Research; @MichaelAArouet
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Food for Thought
1. COVID drug production:
Source: BCA Research
2. Contagiousness vs. reduction in antibody effectiveness:
Source: The New York Times Read full article
3. US health expenditures:
Source: @WSJ Read full article
4. Urine drug test positivity rates in the US:
Source: Quest Diagnostics
5. Polling margins in the first six months of an election year vs. actual margins:
Source: @FiveThirtyEight Read full article
6. US political polarization over time:
Source: BCA Research
7. Women in the film industry:
Source: Statista
8. Why US employees have left and returned to the workforce:
Source: McKinsey & Company Read full article
9. Most popular sports around the world:
Source: Wikimedia Commons, Earl Andrew
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