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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