The Daily Shot: 25-Apr-22
• The United States
• The United Kingdom
• The Eurozone
• Europe
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The April Markit PMI report was mixed.
• The manufacturing index showed robust factory activity across the US this month.
– Export orders picked up momentum.
– Manufacturers are rapidly boosting prices.
• The services PMI measure was much less upbeat, …
… with price pressures hitting extreme levels.
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2. As we saw last week, the Philly Fed’s report showed supplier delays peaking. And manufacturers expect bottlenecks to ease further in the months ahead.
Source: Longview Economics
3. Slower demand should begin to alleviate inflationary pressures.
Source: Citi Private Bank
And tighter financial conditions are expected to lessen demand, …
… as the Fed’s tightening and other factors chip away at US liquidity (2 charts).
Source: Merrill Lynch
Source: @MichaelKantro
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3. For now, recession risks are negligible, according to TS Lombard’s models.
Source: TS Lombard
4. The Fed is ready to “front-load” its rate hikes.
Source: MarketWatch Read full article
Here is the fed funds trajectory expected by the futures market.
While a 75 basis point hike may not be in the cards for May, …
Source: MarketWatch Read full article
… the market now sees one-in-five odds of a 75 bps hike in June (rather than 50 bps).
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5. Household budgets have been squeezed by inflation.
Source: Oxford Economics
6. Business applications increased further in the first quarter.
Source: @economics Read full article
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The United Kingdom
1. Retail sales deteriorated in March as prices surged.
• Food sales:
• Non-store (internet) sales:
The pound slumped in response to the report.
Source: MarketWatch Read full article
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2. Factory activity held up well this month, …
… but the pace of factory price hikes is hitting extreme levels.
• Services PMI declined but growth remained robust.
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3. The housing market continues to perform well.
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The Eurozone
1. Overall, the April PMI report was better than expected.
– Businesses are accelerating price hikes.
– Supply bottlenecks remain severe.
Source: Pantheon Macroeconomics
• There are signs of weakness in Germany’s manufacturing activity …
… as new orders shrink for the first time since the early stage of the pandemic.
However, Germany’s service-sector activity gained momentum.
• French business activity accelerated this month.
– Manufacturing:
– Services:
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2. As the betting markets expected, Macron was reelected.
Source: @EuropeElects
But there was no celebration in the currency markets.
The charts below show the impact of past French presidential elections across markets.
Source: Scotiabank Economics
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3. Germany plans to increase its borrowing this year.
Source: @mcnienaber, @bpolitics Read full article
4. Euro-area tourism activity has been rebounding.
Source: Pantheon Macroeconomics
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Europe
1. Poland’s industrial output soared in March.
Producer price gains hit 20%.
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2. Economic growth in the EU is expected to be slower than in the US this year.
Source: TS Lombard
And inflation forecasts for Europe are catching up with those in the US.
Source: TS Lombard
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3. Europe-focused equity ETF outflows persist.
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China
1. It was a rough week for the renminbi, with further losses on Monday.
And China’s currency faces additional downside risks (2 charts).
Source: Pantheon Macroeconomics
Source: Longview Economics
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2. The nation’s stock market is facing severe headwinds as the economy slows.
Tech shares in Hong Kong continue to tumble.
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3. Business activity in Shanghai remains depressed.
Source: @WSJ Read full article
4. This chart shows visitor arrivals in Macau.
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Emerging Markets
1. LatAm ETF flows are rolling over.
2. The Brazilian real took a hit on Friday.
3. Colombia’s headline and core inflation are far above the central bank’s inflation target.
Source: Scotiabank Economics
Analysts expect Colombia’s central bank to raise rates by 100 basis points this month.
Source: Nasdaq Read full article
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4. Mexican consumer inflation is holding above 7%.
5. Finally, we have last week’s performance across …
• … equity ETFs
• … and EM currencies.
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Cryptocurrency
1. Bitcoin’s Fear & Greed index dipped into the “extreme fear” zone.
Source: Alternative.me
2. Ether is underperforming today.
3. Bitcoin’s implied volatility continues to decline.
Source: Skew Read full article
4. Bitcoin’s put/call ratio ticked lower over the past few days.
Source: Skew Read full article
5. There is a growing amount of bitcoin illiquid supply (blue region), which represents that amount of BTC that has not been moved or sold in a while.
Source: Glassnode Read full article
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Commodities
1. Iron ore tumbled today amid concerns about slowing demand from China.
Source: Bloomberg Read full article
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2. Gold physical demand has held up.
Source: Goldman Sachs
But gold remains vulnerable to downside risks from higher real yields and a stronger US dollar.
Source: @TheTerminal, Bloomberg Finance L.P.
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3. Indonesia stopped palm oil exports, …
Source: Reuters Read full article
… which is a tailwind for soybean oil.
Hedge funds are betting on further strength in soybean oil.
Source: @kannbwx
4. This chart shows the combined net position in grain and oilseed futures.
Source: @kannbwx
5. The Metals & Mining ETF (relative performance) is rolling over, pointing to concerns about weakening demand.
6. This chart shows last week’s performance across various commodity markets.
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Equities
1. Stocks are under pressure from the Fed’s rate hike “front-loading,” as financial conditions tighten.
• Equity fund outflows were severe over the past two weeks.
Source: Deutsche Bank Research
• It’s been a rough month for the Nasdaq 100.
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2. Sentiment has deteriorated.
• Put/call ratio:
Source: Deutsche Bank Research
• AAII:
• Goldman’s sentiment indicator:
Source: Goldman Sachs; @WallStJesus
Retail investors’ attempt to reload on call options resulted in a painful pullback.
Source: Deutsche Bank Research
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3. Following insider buying activity hasn’t been working well lately.
h/t @Callum_Thomas
4. Next, we have last week’s sector performance data.
• Sector returns:
• Banks:
By the way, financials ETF flows remain negative.
• Healthcare:
• Consumer Staples:
• Transportation:
• Telecoms:
• Communication Services:
• Energy:
• Metals & Mining:
• REITs:
By the way, here is how the REIT industry composition has changed over the past decade.
Source: S&P Global Market Intelligence
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5. Shares of large tech firms continue to struggle.
6. Thematic ETFs were in the red across the board last week.
Below is ARK Innovation.
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7. Finally, we have last week’s factor performance.
And this is value vs. growth over the past year.
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Credit
Credit markets were broadly lower last week. Even leveraged loans sold off with equities.
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Rates
1. Technicals suggest that longer-term Treasuries are due for a bounce (especially if we see signs of softer economic activity).
2. Over the past 35 years, long-duration Treasuries have had an average return of 12% during equity market drawdowns of 20% or more.
Source: Citi Private Bank
3. It took a year, but the gap between the copper-to-gold ratio and the 10yr Treasury yield has closed.
Source: @TheTerminal, Bloomberg Finance L.P.
4. Given the recent surge in longer-term inflation expectations, bond term premium should be higher for both the US and the euro area.
Source: Deutsche Bank Research
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Global Developments
1. The US dollar continues to rally.
Below is the year-over-year performance.
Source: MarketDesk Research
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2. A growing percentage of central banks have been hiking rates.
Source: BofA Global Research
3. This chart shows saving rates across advanced economies.
Source: Capital Economics
4. It’s been a while since the traditional 60% equity/40% bond portfolio suffered significant losses over a 5-year period (in real terms).
Source: Bridgewater Associates
5. Finally, we have some performance data for advanced economies over the past week.
• Trade-weighted currency indices:
• Bond yields:
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Food for Thought
1. US mortality rates in 2019 and 2020:
Source: NCHS
2. Changes in pedestrian fatalities:
Source: @axios Read full article
3. Daily or near-daily cannabis consumption among past-month users in Europe:
Source: @PotResearch, @ijdrugpolicy Read full article
4. Fake Twitter accounts:
Source: Statista
5. K-12 absenteeism since the start of the pandemic:
Source: McKinsey & Company Read full article
6. US cities that gained the most workers over the past 12 months:
Source: Wells Fargo Securities
7. Expected global lithium production by source:
Source: McKinsey & Company Read full article
8. Raw materials prices for EVs vs. gasoline/diesel-powered vehicles:
Source: BofA Global Research; @MichaelAArouet
9. The most popular snack in each state:
Source: @statspanda1 Read full article
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