Homebuilders’ sales expectations slumped this month

The Daily Shot: 18-May-22
The United States
The United Kingdom
The Eurozone
Asia – Pacific
China
Emerging Markets
Energy
Equities
Rates
Global Developments
Food for Thought



 

The United States

1. US retail sales held up well last month despite inflationary pressures. At least for now, the US consumer has not retreated.
 

 
This chart shows the dollar level of retail sales.
 

 
Real retail sales are holding above the pre-COVID trend.
 
Source: @jasonfurman  
 
Here are last month’s changes in retail sales by sector.
 
Source: @GregDaco  
 
Fuel costs will continue to be a drag on discretionary spending.
 
Source: Pantheon Macroeconomics  
 
But it’s worth noting that real gasoline prices adjusted for fuel efficiency are not at extreme levels (see comment below).
 
Source: MarketWatch   Read full article  

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2. Industrial production topped expectations, …
 

 
… as the nation’s manufacturing output keeps climbing.
 

 
Vehicle production improved further.
 

 
Manufacturing capacity utilization is at multi-year highs.
 

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3. The Atlanta Fed’s GDP growth model estimate for Q2 moved higher in response to the economic reports above.
 
Source: @AtlantaFed   Read full article  
 
4. Business inventories continued to climb rapidly in March.
 

 
5. Next, we have some updates on the housing market.
 
Homebuilder optimism slumped this month, with housing sales expectations tumbling (2nd panel below).
 

 
This chart shows mortgage originations by credit score.
 
Source: New York Fed  
 
Single-family housing rental costs are up substantially over the past 12 months.
 
Source: CoreLogic  
 
Home equity is at a high relative to GDP.
 
Source: Mizuho Securities USA  

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6. Air travel is improving, albeit still below 2019 levels.
 
Source: @ANZ_Research  
 
Here is the Evercore ISI Airlines survey.
 
Source: Evercore ISI Research  

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7. Powell had more hawkish comments on Tuesday.
 
Source: @WSJ   Read full article  
 
Rate hike expectations climbed. The second panel below shows market expectations for the fed funds rate at the end of this year.
 

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8. The recent strength in the US dollar (below) has slowed import price gains.
 


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The United Kingdom

The jobs report surprised to the upside.
 
Payrolls estimate:
 

 
The unemployment rate (multi-decade low):
 

 
Job vacancies:
 

 
Wages accelerated more than expected.
 

 
The pound and gilt yields surged in response to the employment report.
 

 


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The Eurozone

1. The GDP is now above pre-COVID levels.
 

 
Employment continued to strengthen last quarter.
 

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2. The Dutch GDP was flat in Q1, but economists don’t expect a recession.
 

 
3. The expected year-end ECB policy rate surged this week.
 

 
Here is the market-implied rate trajectory.
 

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4. German power prices continue to surge.
 

 
Separately, German shares have been underperforming euro-area peers.
 
Source: PGM Global  


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Asia – Pacific

1. Japan’s GDP growth was negative in Q1, but the decline was lower than expected. Consumption held up well.
 

 
2. Australian wage cost gains held steady last quarter.
 


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China

1. Foreign ownership of China’s government bonds declined again. The government will now stop reporting bond trades by foreigners.
 

 
Source: Bloomberg   Read full article  

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2. Coal output dropped sharply in April but remains elevated.
 

 
3. New home prices declined again last month and are now down on a year-over-year basis.
 

 
4. The drop in land sales creates a massive gap in Chinese public finance.
 
Source: @PhilipJagd  
 
5. Ships’ waiting times in Shanghai are declining.
 
Source: VesselsValue  


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Emerging Markets

1. The Turkish lira remains under pressure.
 

 
2. The ruble is grinding higher.
 

 
Manufactured goods exports to Russia tumbled in March.
 
Source: @ChorzempaMartin   Read full article  

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3. India’s wholesale price inflation is above 15%.
 

 
4. Indonesia’s trade surplus hit a record high due to commodity exports.
 

 
Source: Reuters   Read full article  
 
But the palm oil export ban is hurting trade and pressuring the rupiah.
 

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5. Dollar-denominated EM debt drawdown has been severe.
 

 
6. EM stagflationary risks are rising.
 
Source: TS Lombard  


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Energy

1. US crude oil exports to Europe have been surging.
 
Source: Bloomberg   Read full article  
 
2. European distillate stocks were already declining before the Russia/Ukraine war.
 
Source: Oxford Institute for Energy Studies  
 
3. Many European refineries are heavily dependent on Russian oil.
 
Source: Bloomberg   Read full article  
 
4. The EU is diversifying away from Russian natural gas.
 
Source: BCA Research  
 
5. OPEC+ crude exports remain soft.
 
Source: @HFI_Research  
 
6. China’s oil demand has been weakening.
 
Source: @ANZ_Research  


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Equities

1. Let’s start with market corrections during midterm-elections years.
 
Source: Merrill Lynch  
 
2. Stock return dispersion climbed this year.
 
Source: S&P Global Market Intelligence  
 
3. Margin debt is not high relative to market capitalization.
 
Source: Yardeni Research  
 
4. Traders have been increasing their bets against Russell 2000 (small-cap) futures.
 
Source: Deutsche Bank Research  
 
5. Which sectors are most exposed to rate hikes?
 
Source: Numera Analytics  
 
6. We received a number of questions about the sharp declines in equity skew indicators (see chart). Here is a good answer.
 
Source: Evercore ISI Research  
 
7. Earnings growth has been robust.
 
Source: LPL Research  
 
But corporate earnings are facing significant headwinds.
 
Source: BofA Global Research  
 
Fund managers haven’t been this gloomy about corporate profits since 2008.
 
Source: BofA Global Research  

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8. Next, we have some sector updates.
 
Consumer Discretionary:
 

 
By the way, bear market underperformers tend to outperform on the rebound.
 
Source: Evercore ISI Research  
 
Communication Services:
 

 
Semiconductors:
 

 
Transportation:
 

 
Metals & Mining:
 

 
Insurance:
 

 
Consumer Staples:
 

 
Source: CNBC   Read full article  


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Rates

1. Demand for Treasury bills remains very strong.
 

 
2. Japanese investors sold a lot of Treasuries in March.
 
h/t Masaki Kondo  
 
3. Bond fund outflows have been massive this year.
 
Source: Yardeni Research  


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Global Developments

1. Let’s begin with fund flows by asset class.
 
Source: EPFR  
 
2. Fund managers increasingly expect stagflation over the next 12 months.
 
Source: BofA Global Research  
 
3. How sensitive are global inflation measures to oil prices?
 
Source: Morgan Stanley Research  
 
4. This chart shows inflation “entrenchment” scores by country.
 
Source: The Economist   Read full article  
 
5. Inflation has been a headwind for real consumer spending.
 
Source: Capital Economics  
 
6. Which are the world’s cheapest and most expensive currencies?
 
Source: Deutsche Bank Research  
 
7. Finally, we have government interest expense trends for advanced and emerging economies.
 
Source: Wells Fargo Securities  


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Food for Thought

1. Semiconductor market share:
 
Source: SIA  
 
2. Number of US nuclear warheads:
 
Source: USA Facts   Read full article  
 
3. Congressional polarization:
 
Source: Pew Research Center   Read full article  
 
4. Views on social media companies’ right to ban users:
 
Source: Morning Consult   Read full article  
 
5. Losses from internet crime:
 
Source: @chartrdaily  
 
6. Changes in work status for mothers with school-age children:
 
Source: The New York Times   Read full article  
 
7. Sunshine hours per year:
 
Source: BRITISHBUSINESSENERGY.CO.UK   Read full article  

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