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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