The Daily Shot: 08-Jun-22
• The United States
• Canada
• The Eurozone
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. US consumer credit growth topped forecasts again.
• Revolving credit balances (credit cards) are now above the pre-COVID peak.
Credit card usage is up sharply, but relative to debit cards, borrowing is not materially different from pre-pandemic levels.
Source: BofA Global Research; @SamRo
• Non-revolving credit is outpacing the pre-COVID trend (mostly due to automobile debt).
• Growth in student debt continues to slow.
By the way, government-owned student debt in forbearance has now exceeded $1 trillion.
Source: @WSJ Read full article
• Household balance sheets remain relatively healthy.
Source: Wells Fargo Securities
And household cash levels are holding above pre-pandemic levels.
Source: @SamRo, BofA Read full article
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2. The trade deficit shrunk in April (2 charts), which should boost the current quarter’s GDP growth.
Source: @TheTerminal, Bloomberg Finance L.P.
Source: Reuters Read full article
The US has increased exports of energy and agricultural commodities.
Source: @kannbwx
Source: @bespokeinvest Read full article
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3. Goldman’s Q2 GDP growth tracker moved up to 3%.
Source: Goldman Sachs; @MikeZaccardi
But the Atlanta Fed’s GDP tracker is holding below 1%.
Source: @AtlantaFed Read full article
By the way, here are Morgan Stanley’s recession probabilities.
Source: Morgan Stanley Research
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4. Retail gasoline prices continue to surge, …
… depressing consumer confidence.
Source: Piper Sandler
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5. Next, we have some updates on inflation.
• The consensus estimate for the May core CPI increase is 0.5%. The markets could react violently if we get an upward surprise, especially if calls for more aggressive Fed rate hikes get louder.
– ANZ expects 0.6% in May.
Source: @ANZ_Research
– And Nomura sees an acceleration in the core CPI to 0.7% …
Source: Nomura Securities
… as housing-related inflation surges.
Source: Nomura Securities
Housing is expected to be a key driver of US core inflation in the months ahead.
Source: Nordea Markets
• The Citi inflation surprise index has been moderating.
• Semiconductor prices, shipping costs, and even fertilizer prices appear to be peaking.
Source: @GregDaco, @markets Read full article
Contributions to the core PCE inflation from supply-constrained items (year-over-year) should become a drag on inflation by the end of 2022.
Source: Goldman Sachs; @MikeZaccardi
• Why is the US CPI substantially higher than the OECD average?
Source: Federal Reserve Bank of San Francisco Read full article
Massive US fiscal support helps explain the above divergence.
Source: Federal Reserve Bank of San Francisco Read full article
• This chart shows the distribution of inflation components by price gains.
Source: @ANZ_Research
• Market-based inflation expectations have diverged from crude oil.
Source: JP Morgan Research; @WallStJesus
• Longer-term consumer inflation expectations are holding steady for now.
Source: NY Fed; h/t @ANZ_Research
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6. Retailers are struggling with bloated inventories.
Source: @WSJ Read full article
Source: @WSJ Read full article
But retailers still feel they have substantial pricing power, according to a survey from Evercore ISI.
Source: Evercore ISI Research
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Canada
1. The trade surplus was lower than expected in April.
2. Business activity remains robust, according to the Ivey PMI report.
3. Investment as a share of GDP has been slowing.
Source: @RichardDias_CFA
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The Eurozone
1. Investor confidence edged higher this month.
Source: RTT News Read full article
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2. The PMI orders-to-inventories ratio points to headwinds for factory activity.
Source: S&P Global PMI
Markets are also signaling an economic slump in the Eurozone.
Source: Danske Bank
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3. Germany’s factory orders continued to decline in April.
Capital goods orders have been particularly soft.
Industrial production edged higher.
Automobile manufacturing shows signs of improvement, …
Source: @OliverRakau
… as semiconductor shortages ease.
Source: @OliverRakau
• Construction activity continues to weaken.
• Germany is boosting the minimum wage to €12.
Source: @bbgequality Read full article
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4. Spain’s industrial production is back above pre-COVID levels.
5. Investment rather than consumption drove Italy’s GDP gains in Q4 and Q1.
Source: Pantheon Macroeconomics
6. The Eurozone terms of trade have decoupled from the US due to European dependence on energy imports.
Source: Capital Economics
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Japan
1. The trade gap was narrower than expected.
2. The Economy Watchers Survey shows increasing optimism.
3. The yen continues to weaken, with USD/JPY nearing the peak reached two decades ago. Analysts don’t expect an MoF intervention in the currency markets at this point.
Source: @TheTerminal, Bloomberg Finance L.P.
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Asia – Pacific
1. Taiwan’s consumer inflation continues to grind higher, …
… as wholesale inflation approaches 17%. Another rate hike is coming.
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2. South Korea’s economic growth remains robust.
3. The markets expect the RBA’s policy rate to reach 3.79% in 12 months, …
Source: Wells Fargo Securities
… as inflation gains momentum.
Source: ING
Australian consumer confidence continues to deteriorate due to cost-of-living concerns.
Source: @ANZ_Research, @arindam_chky, @DavidPlank12
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China
1. Hong Kong-based and foreign investors are returning to mainland equity markets.
2. Offshore debt defaults have been massive this year.
Source: @business Read full article
Here is one more.
Source: Fitch Ratings Read full article
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3. Cement produces are not happy.
Source: BofA Global Research
4. Local government’s key source of revenue has been disrupted.
Source: BCA Research
Local government bond issuance has picked up this year to fund infrastructure investments.
Source: CreditSights
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5. Steel production and consumption are recovering because of new infrastructure projects, albeit below pre-pandemic levels (2 charts).
Source: CreditSights
Source: CreditSights
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6. The Port of Shanghai is nearly back to normal.
Source: VesselsValue
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Emerging Markets
1. India’s central bank hiked rates to address inflationary pressures.
Source: The Economic Times Read full article
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2. The Turkish lira continues to sink, with USD/TRY nearing 17.0.
Sovereign CDS spreads are hitting multi-year highs.
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3. South Africa’s Q1 growth surprised to the upside, with the GDP now above pre-COVID levels.
4. Brazil’s vehicle production is accelerating.
Vehicle sales are back to last year’s levels.
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5. Chile’s central bank delivered another aggressive rate hike.
• Wages continue to surge.
• Chile’s exports keep climbing.
But the trade surplus was lower than expected last month.
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Cryptocurrency
1. Bitcoin’s realized price, or the average cost basis of all BTC in supply, is at $23,600. That could be a key support level.
Source: Glassnode Read full article
2. Almost all bitcoin investors during this market cycle are holding unrealized losses, according to blockchain data compiled by Glassnode.
Source: @glassnode
3. May was the first month when total bitcoin spot trading volume was higher on FTX than Coinbase.
Source: @coinmetrics
4. Binance has maintained its strong lead on the market as the largest exchange by volume.
Source: @coinmetrics
Binance has served as a conduit for laundering billions in illicit funds, according to a Reuters investigation.
Source: Reuters Read full article
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5. Citadel is planning to make markets for various cryptos.
Source: Reuters Read full article
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Energy
1. Global oil inventories continue to surprise to the downside.
Source: Goldman Sachs; @OpenSquareCap
2. The recovery in US drilling activity has been slow.
Source: Fitch Solutions Macro Research
3. Europe could boost investment in nuclear energy to cut its dependence on Russian natural gas.
Source: @financialtimes Read full article
4. Here is a map showing European LNG terminals.
Source: The Economist Read full article
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Equities
1. $3.2 trillion of equity options expire next week, which could boost volatility.
Source: Goldman Sachs; @MichaelGoodwell
2. Small caps have been outperforming in recent days.
3. Share buybacks remain robust.
Source: Evercore ISI Research
4. Bear markets since 1950 have typically troughed around this point, although there is wide variability.
Source: SentimenTrader
5. According to the FT, “around 16% of US stocks are held by index trackers and ETFs vs. 14% by actively managed funds.”
Source: @financialtimes Read full article
6. Fund fees continue to shrink.
Source: @LizAnnSonders, @biancoresearch
7. Insider selling of tech stocks has steadily declined over the past year.
Source: SentimenTrader
8. Pension underfunding could reach fresh heights if stock valuations “normalize.”
Source: Quill Intelligence
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Credit
1. In the next few years, high-yield defaults could hit the highest level since the financial crisis, according to Deutsche Bank.
Source: Deutsche Bank Research
2. The recovery in leveraged loan credit quality has a long way to go.
Source: S&P Global Ratings
3. This chart shows factor betas of select fixed-income ETFs to global stocks and US bonds.
Source: FactorResearch Read full article
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Global Developments
1. The dollar appears richly valued by historical standards.
Source: Gavekal Research
Still, the dollar could see additional “flight to safety” buying if the US falls into a recession.
Source: Gavekal Research
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2. Since early this year, there has been a rotation from corporate to sovereign bond funds, as well as from growth to value equity funds.
Source: ECB
3. It’s been a challenging 12 months for sovereign bonds.
Source: S&P Dow Jones Indices
4. Global supply bottlenecks have been easing.
Source: S&P Global PMI
5. Large M&A deal activity has been strong this quarter.
Source: S&P Global Market Intelligence
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Food for Thought
1. Coping with high food prices:
Source: CNBC Read full article
2. Spending on gasoline as a share of total card spending:
Source: @SamRo, BofA Read full article
3. The biggest US employers:
Source: @chartrdaily Read full article
4. US federal government’s interest payments as a percent of GDP:
Source: Wells Fargo Securities
5. Academic majors of unicorn founders:
Source: OpenAxis
6. Central bankers mentioning “inequality” in their speeches (AE = advanced economies, EME = emerging market economies):
Source: BIS Read full article
7. US-China tariff rates:
Source: SOM Macro Strategies
8. Gun ownership and homicide rates:
Source: The New York Times
9. The impact of materials costs on EV prices relative to ICE (internal combustion) vehicles:
Source: Wells Fargo Securities; @reillybrennan
10. Rail track gauge (the distance between the two rails) across Europe:
Source: @WSJ Read full article
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