Posted on by The Daily Shot Editor: Lev Borodovsky

Retail gasoline prices hit a record high, pressuring consumer sentiment

The Daily Shot: 11-May-22
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought

 

The United States

1. The NFIB small business sentiment index held steady last month (at the lowest level since early 2020).
 

 
• Outlook is at record lows …
 

 
• … due to inflation concerns.
 

 
• Near-record percentage of firms have been raising prices.
 

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2. Next, we have some updates on inflation.
 
• The consensus CPI estimate for April is 0.4% month-over-month. This is the most consequential US economic report of the month and will be watched closely around the world.
 

 
ANZ’s estimate is 0.5%.
 
Source: @ANZ_Research  
 
• Base effects tell us that on a year-over-year basis the CPI should decline.
 
Source: Pantheon Macroeconomics  
 
• The Fed’s survey shows a downtick in the one-year consumer inflation expectations and an uptick in the three-year index.
 
Source: @WSJ   Read full article  

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3. Where are we in the business cycle?
 
Source: BCA Research  
 
The Citi Economic Surprise Index broke below its 50-day moving average, signaling slower growth.
 
Source: Evercore ISI Research  

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4. High inflation and rising mortgage rates are pressuring discretionary spending.
 
Source: BCA Research  
 
Did the trend start in March when spending on booze declined meaningfully?
 
Source: Morning Consult   Read full article  

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5. Retail gasoline prices hit a record high, which will be a drag on consumer sentiment this month.
 
Source: @axios   Read full article  
 

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6. Banks see stronger demand for consumer loans.
 
Source: Federal Reserve Board  

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The United Kingdom

1. The BRC report showed slowing retail sales last month.
 

 
Source: @financialtimes   Read full article  

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2. The BoE’s latest forecast shows unemployment rising above the COVID peak in 2024.
 
Source: ING  
 
The central bank may end up being more dovish than markets expect.
 
Source: BCA Research  

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3. Here are the latest general election voting intentions.
 
Source: Pantheon Macroeconomics  
 
4. Northern Ireland’s trade status remains a thorny issue in the Brexit saga.
 
Source: Reuters   Read full article  
 
While this is still a low-probability event, …
 
Source: Statista  
 
… it would “resolve” a good portion of the outstanding trade frictions with the EU.
 

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The Eurozone

1. Germany’s ZEW economic confidence unexpectedly improved in May.
 

 
Source: RTT News   Read full article  

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2. Italian industrial production held steady in March.
 

 
But the latest PMI report points to downside risks.
 
Source: Pantheon Macroeconomics  

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3. The Dutch CPI is off the highs but remains above 11%.
 

 
Manufacturing output was softer but still robust in March.
 

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Europe

1. Norway’s inflation surprised to the upside.
 

 
A rate hike is coming in June.
 
Source: Scotiabank Economics  

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2. Inflation is surging elsewhere in Europe.
 
• Denmark’s CPI (2 charts):
 

 
Source: Nordea Markets  
 
• Czech CPI and the import price index:
 

 

 
• The EU is facing a cost-of-living crisis.
 
Source: Fitch Solutions Macro Research  

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3. European shares bounced from oversold territory.
 
Source: @TheTerminal, Bloomberg Finance L.P., h/t Sagarika Jaisinghani   

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Asia – Pacific

1. South Korea’s unemployment rate is holding at record lows.
 

 
Lending to households is slowing.
 

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2. New Zealand’s credit card spending rebounded in April.
 

 
3. Next, we have some updates on Australia.
 
• The Westpac report confirmed consumer sentiment deterioration this month.
 

 
• Costs continue to rise.
 

 
• Political risk and monetary tightening pose the greatest risk to the country’s credit market, according to a survey of fixed income investors.
 
Source: Fitch Ratings  
 
– Investors also expect bank lending standards to tighten over the next 12 months.
 
Source: Fitch Ratings  
 
– Investors expect credit spreads to widen, especially as macro and property risks re-emerge.
 
Source: Fitch Ratings  
 
• Australian materials stock valuations are near historical lows.
 
Source: PGM Global  

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China

1. Inflation surprise to the upside, …
 

 
… driven by food prices (2 charts).
 

 

 
But core inflation is moderating.
 

 
The PPI declined less than expected.
 

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2. Partial lockdowns remain widespread.
 
Source: Morgan Stanley Research  
 
Port traffic in Shanghai has taken a hit.
 
Source: Alpine Macro  

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3. The situation in Hong Kong gives an indication of the slowdown we could see in mainland’s economy.
 
Source: @financialtimes   Read full article  
 
Here is a forecast from Morgan Stanley.
 
Source: Morgan Stanley Research  

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4. The sovereign CDS spread has been elevated.
 

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Emerging Markets

1. Will India’s central bank continue to intervene in the F/X markets to support the rupee?
 
Source: Capital Economics  
 
2. The Thai baht hit a 5-year low.
 

 
3. The Turkish lira remains under pressure.
 

 
Source: Nasdaq   Read full article  

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4. EM equity markets (in US dollar terms) are highly correlated to the British pound.
 
h/t Yvan Berthoux, MNI  
 
5. Here is a look at EM trade data for Q1 relative to pre-COVID levels.
 
Source: IIF  

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Cryptocurrency

1. There was a spike in the transfer volume of BTC onto exchanges during Monday’s sell-off. That suggests traders are looking to sell their crypto assets instead of moving them to digital wallets.
 
Source: Glassnode   Read full article  
 
2. Bitcoin is roughly 53% below its all-time high near $69K reached in November of last year.
 
Source: Koyfin   Read full article  
 
3. As we saw earlier, bitcoin’s correlation with the S&P 500 is at an all-time high amid a broad risk-off environment.
 
Source: @coinmetrics  
 
4. Bitcoin (BTC) and ether (ETH) have been increasingly correlated this year.
 
Source: @coinmetrics  
 
5. Bitcoin’s sales volume on Cash app (owned by Block, formerly Square) has declined over the past year.
 
Source: @TheBlock_  
 
6. Terra’s UST (un)stablecoin is getting propped up by its backers.
 
Source: @technology   Read full article  
 
…and its founder is promising a “recovery plan.”
 
Source: @stablekwon  

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Commodities

1. Capital spending among iron ore miners has been slow to rise, especially after the resource production boom a decade ago.
 
Source: Longview Economics  
 
2. Lithium prices continue to hit new highs.
 
Source: @benchmarkmin   Read full article   Further reading  
 
3. Here is a look at China’s dominance in processing key minerals.
 
Source: @sdmoores, @thetimes, @hjesanderson   Read full article  
 
4. Brazil’s soybean exports have taken a hit this year.
 
Source: @kannbwx  

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Energy

1. The New York Harbor jet fuel remains decoupled from other markets.
 
Source: @EIAgov  
 
2. Russia’s pipeline flows to China have increased over the past few years, and there is capacity for more flows (2 charts).
 
Source: IIF  
 
Source: IIF  

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3. US uranium production is down to a trickle.
 
Source: EIA   Read full article  

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Equities

1. More firms are mentioning “weak demand.”
 
Source: @jessefelder; BofA Global Research   Read full article  
 
2. The P/E adjustment has been severe in the latest selloff.
 
Source: @LizAnnSonders  
 
3. The Nasdaq 100 valuation premium to the S&P 500 is nearing its longer-term average.
 
Source: @bespokeinvest   Read full article  
 
4. The decline in heavy truck sales doesn’t bode well for equity performance.
 
Source: SentimenTrader  
 
5. Bond yields point to further downside risks for high-beta stocks.
 
Source: @MichaelKantro  
 
6. The meme bubble continues to deflate.
 
Source: Bloomberg   Read full article  
 

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7. Here is a look at macro correlations across S&P 500 industries.
 
Source: Stifel  
 
8. The Russell 2000 hit its pre-COVID peak.
 
Source: @bespokeinvest  
 
9. Since 2011, over one-third of S&P 500 returns have been driven by buybacks.
 
Source: PGM Global  

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Credit

1. US high-yield spreads could rise further given the 10-year Treasury yield spike and the persistently elevated equity volatility (two charts).
 
Source: Citi Private Bank  
 
Source: Citi Private Bank  

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2. The surge in inflation and interest rates is putting stress on weaker credits.
 
Source: Bloomberg Law   Read full article  
 

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3. Munis underperformed Treasuries last month as ratios increased.
 
Source: Breckinridge Capital Advisors   Read full article  
 
Yields on HY munis keep climbing.
 

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Rates

1. Real yields continue to surge, with the 5yr TIPS approaching zero.
 

 
Here is the TIPS curve.
 

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2. The 10yr US breakeven rate (inflation expectations) is off the highs.
 

 
3. Where is the neutral rate currently?
 
• The FOMC:
 

 
• The market:
 

 
Forward rates show that the US monetary policy is becoming restrictive.
 
Source: BCA Research  

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Food for Thought

1. Private-sector union membership in the US:
 
Source: BCA Research  
 
2. Political donations of tech companies and their employees:
 
Source: Vox    Read full article  
 
3. Vaccines eradicating diseases:
 
Source: Statista  
 
4. COVID treatments delivered:
 
Source: BCA Research  
 
5. School funding adequacy:
 
Source: County Health Rankings   Read full article  
 
6. Online cross-border shopping:
 
Source: eCommerceDB   Read full article  
 
7. Baby formula shortages:
 
Source: @srussolillo, @josephpisani   Read full article  
 
8. The longest-running TV shows:
 
Source: @statspanda1   Read full article  

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