Construction supply bottlenecks are starting to ease

The Daily Shot: 19-Apr-22
The United States
Europe
Asia – Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Rates
Global Developments
Food for Thought



 

The United States

1. Let’s begin with the housing market.
 
Mortgage rates hit a multi-year high on Monday, exceeding the 2018 peak.
 

 
Nonconforming loans are becoming a greater portion of mortgage originations.
 
Source: Black Knight  
 
Homebuilder sentiment eased further this month as demand moderates.
 

 
The number of new homes for sale that are currently under construction continues to grow.
 
Source: Wells Fargo Securities  
 
Source: Wells Fargo Securities  
 
Construction supply bottlenecks are starting to ease.
 
Source: @EricFinnigan  
 
Here is the distribution of home price-to-income ratios.
 
Source: Wells Fargo Securities  
 
Single-family housing rents are surging across all price tiers.
 
Source: CoreLogic  
 
As a result, builders are expanding the construction of single-family rentals.
 
Source: Wells Fargo Securities  
 
Eviction rates are heading toward their historical average.
 
Source: @ps_hepburn, @evictionlab  

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2. The spread between the Conference Board’s consumer expectations and current situation indices points to an economic slowdown ahead (blue bars denote recessions).
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. The US growth potential has been trending down for decades.
 
Source: Alpine Macro  
 
4. The pandemic-era government spending is ending.
 
Source: Goldman Sachs; @MikeZaccardi  
 
The resulting shift in US fiscal policy has become a drag on growth.
 
Source: @WSJ   Read full article  


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Europe

1. UK consumer confidence has been deteriorating.
 
Source: YouGov  
 
2. Euro-area long-term inflation expectations are now on par with those in the US.
 

 
3. The euro continues to drift lower.
 

 
4. Economists have been downgrading the 2022 euro-area growth forecasts. Spain is expected to outperform.
 
Source: PGM Global  
 
5. The EU’s labor market slack is now below pre-COVID levels.
 
Source: Eurostat   Read full article  


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Asia – Pacific

1. Dollar-yen is headed toward 130.
 

 
The yen has suffered the longest losing streak in decades.
 
Source: Bloomberg   Read full article  
 
And speculative accounts are betting on further weakness.
 

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2. Australia’s yield curve has been steepening.
 


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China

1. China’s interbank rates have moved lower in recent days (stealth easing?)
 

 
2. China’s tech shares are under pressure again.
 

 
Trading volumes have declined across China’s stock exchanges.
 
h/t @johnchenghc  

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3. Past economic growth targets have been ambitious, but attainable.
 
Source: TS Lombard  
 
The recent decline in the credit impulse points to further economic weakness over the short term.
 
Source: TS Lombard  

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4. Logistics throughput has been weakening amid lockdowns.
 
Source: Gavekal Research  
 
Shanghai’s road traffic plummeted.
 
Source: Numera Analytics  

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5. This chart shows the top 10 cities by GDP contribution.
 
Source: ANZ Research  


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Emerging Markets

1. India’s wholesale price index surprised to the upside.
 

 
2. Indonesia’s exports hit a record high.
 

 
3. Significant dependence on Asian LNG makes some EM countries vulnerable to price shocks.
 
Source: Fitch Solutions Macro Research  
 
4. Russia cut its US dollar reserves ahead of the attack. Moscow didn’t count on the ECB also freezing Russian assets (in addition to the Fed).
 
Source: Bloomberg   Read full article  
 
5. EM gains in producer prices have been outpacing advanced economies.
 
Source: Numera Analytics  


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Cryptocurrency

1. Large bitcoin investors (holding 100-1,000 BTC) have started to take profits, while smaller bitcoin holders have accumulated so far this year.
 
Source: Glassnode   Read full article  
 
2. Bitcoin’s market cap relative to the total crypto market cap has been stuck in a range over the past year, indicating uncertainty among traders.
 
Source: CoinDesk   Read full article  
 
3. There has been more evidence of North Korea’s crypto engagements lately.
 
Source: CoinDesk   Read full article  
 
Source: CoinDesk   Read full article  
 
Ether (ETH) accounts for a greater majority of funds stolen by North Korean hackers.
 
Source: Chainalysis   Read full article  
 
There is a large unlaundered balance held by North Korean actors dating back to 2016. When will they cash out? (Capital can still flow within the crypto ecosystem via staking).
 
Source: Chainalysis   Read full article  

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4. Bitcoin’s correlation to gold is increasingly negative.
 
Source: @ossingerj, @markets   Read full article  


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Commodities

1. Tightness in the global nickel market could persist over the next few years.
 
Source: Fitch Solutions Macro Research  
 
The electric vehicle market will be a key source of nickel demand.
 
Source: Fitch Solutions Macro Research  

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2. Rising bond yields could put downward pressure on gold.
 
Source: @TaviCosta  
 
3. Grain futures continue to climb.
 
Rice:
 

 
Soybeans:
 

 
Corn:
 

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4. The number of commodity markets in backwardation (indicating tight supplies) remains near multi-decade highs.
 
Source: TS Lombard  
 
5. The US dollar’s strength …
 

 
… and slower economic growth in China pose downside risks for commodities (2 charts).
 
Source: Alpine Macro  
 
Source: TS Lombard  


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Energy

1. US natural gas looks overbought.
 

 
2. Asia LNG spot prices could remain elevated because of supply concerns and increasing demand from Europe, according to Fitch.
 
Source: Fitch Solutions Macro Research  
 
3. Brent oil price volatility could ease toward the second half of next year, albeit with elevated prices around $70-$100/barrel, according to OIES.
 
Source: Oxford Institute for Energy Studies  
 
4. New Permian Basin drilling permits have risen in recent weeks.
 
Source: @axios   Read full article  
 
5. OIES expects an oil surplus this year, which could eventually subside as demand growth picks up in late-2023.
 
Source: Oxford Institute for Energy Studies  
 
6. Investors have been less upbeat on crude oil (which is confirmed by ETF flows).
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  
 
7. This chart shows longer-term hydrocarbon output projections.
 
Source: Fitch Solutions Macro Research  


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Equities

1. Margins are expected to stay healthy as business markups surge.
 
Source: BofA Global Research; @MikeZaccardi  
 
2. US firms that “rely on domestic supply chains or have a high domestic manufacturing footprint” continue to outperform (based on indices from Goldman). Investors are punishing companies for offshoring.
 

 
3. The median Nasdaq Composite stock is down almost 40% from the high, but the Nasdaq Composite index drawdown is only 17%.
 
Source: @WillieDelwiche  
 
4. The single-stock options volume continues to outpace index/ETF options trading.
 
Source: Chris Murphy, Susquehanna International Group  
 
5. Meme stocks have been getting slammed.
 

 
6. Next, we have some sector updates.
 
Energy:
 

 
Banks:
 

 
Healthcare:
 

 
Communication Services:
 

 
Consumer Discretionary:
 

 
By the way, demand for downside protection on the largest Consumer Discretionary ETF (above) has been surging.
 
Source: Chris Murphy, Susquehanna International Group  


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Rates

The drawdown on long-term Treasuries reached 30%.
 


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Global Developments

1. This scatterplot shows Numera Analytics’ risk/reward profile across global equity markets.
 
Source: Numera Analytics  
 
2. Are Swedish factory orders signaling weaker global manufacturing activity ahead?
 
Source: BCA Research  
 
3. The slowdown in new export orders points to weakness in world trade volumes.
 
Source: Quill Intelligence  


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Food for Thought

1. Female executives and return on equity:
 
Source: BofA Global Research; @SamRo  
 
2. Stock market participation by race and income:
 
Source: @stlouisfed   Read full article  
 
3. Laws concerning LGBTQ education in the US:
 
Source: Statista  
 
4. Across a broad range of metrics, machine-intelligence leaders achieve triple the improvement of other companies.
 
Source: McKinsey & Company   Read full article  
 
5. Atmospheric CO2 levels:
 
Source: @axios   Read full article  
 
6. Vaccine exports:
 
Source: OECD   Read full article  
 
7. Changes in life expectancy vs. the proportion of life spent in poor health:
 
Source: McKinsey & Company  
 
8. Russia’s arms exports to China:
 
Source: @financialtimes   Read full article  
 
9. Refugees by country of origin:
 
Source: The Economist   Read full article  
 
10. Most common items collected by Americans:
 
Source: MagnifyMoney   Read full article  

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