The Daily Shot: 09-Jun-22
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Energy
• Equities
• Food for Thought
The United States
1. Let’s begin with the housing market.
• Mortgage applications dipped to 2013 levels over the Memorial Day week.
Here is MBA’s seasonally-adjusted data. Their adjustment tends to be noisy, especially around US holidays.
• This has been the fastest decline in housing affordability in decades.
Source: @axios Read full article
• CoreLogic expects home price appreciation to cool but hold in positive territory.
Source: CoreLogic
• The total tappable home equity hit $11 trillion or $207k per mortgage holder. There is a lot of housing wealth in the US.
Source: Black Knight
• Housing investment is expected to deteriorate.
Source: Gavekal Research
• What percentage of apartment renters are moving out to buy a home?
Source: Evercore ISI Research
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2. US commercial property sales are now down relative to last year.
Source: @WSJ Read full article
And property prices are cooling as well.
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3. Growth in the broad money supply has been slowing.
Source: Gavekal Research
4. Market expectations for the fed funds rate by the end of the year are nearing 3%. Some analysts expect the US central bank to keep delivering 50 bps hikes at every meeting until there is visible progress on inflation.
5. Wider federal budget deficits are expected next year and beyond.
Source: Deutsche Bank Research
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Canada
1. Economists keep boosting their forecasts for Canada’s inflation in 2022.
2. Canadian labor markets continue to outperform the US.
• Employment:
Source: Industrial Alliance Investment Management
• Labor force participation:
Source: Industrial Alliance Investment Management
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The United Kingdom
1. The RICS house price balance was lower than expected in May. But the housing market remains robust for now.
2. Construction activity continues to expand.
3. The BoE has been consistently surprised by surging inflation.
Source: @tomjs, @jackhleslie Read full article
UK inflation is expected to outpace other advanced economies (and China) in 2022 and 2023.
Source: Scotiabank Economics
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The Eurozone
1. The euro-area economy has been holding up relatively well despite the headwinds.
Source: Pantheon Macroeconomics
2. Italian retail sales have been strong.
3. The French trade gap narrowed a bit in April but remained near record levels.
4. How did different ECB presidents perform in meeting inflation targets?
Source: Truist Advisory Services
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Asia – Pacific
1. Who holds JGBs?
Source: @WSJ Read full article
Separately, the yen-denominated oil price hit a record high, which is pressuring Japan’s trade balance.
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2. Taiwan’s exports were softer than expected in May. The trade surplus declined.
3. South Korea’s GDP per capita has been outpacing peers across Asia-Pacific.
Source: World Economics
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China
1. Exports rebounded in May, …
Source: Bloomberg Read full article
… boosting China’s trade surplus.
Here are the cumulative trends.
But sales to the US will likely slow amid ample inventories and slowing demand.
Source: BCA Research
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2. China will be exporting disinflation.
Source: Pantheon Macroeconomics
3. All PMI indicators continue to show deterioration in China’s labor market.
Source: Pantheon Macroeconomics
4. Beijing faces fiscal headwinds.
Source: Alpine Macro
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Emerging Markets
1. Chile’s CPI continues to surge.
2. India’s GDP growth is expected to outpace other large economies.
Source: Scotiabank Economics
3. The Turkish lira sell-off has been brutal, with USD/TRY breaching 17.0
Turkey’s dollar-denominated debt yields are hitting multi-year highs.
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4. Hungary’s CPI is approaching 11%.
5. Real rates are negative in most EM economies.
Source: Danske Bank
6. EM currencies have been more resilient again the dollar than DM currencies.
Source: Alpine Macro
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Cryptocurrency
1. In-the-money bitcoin addresses (see definition below) hit the lowest level since March 2020.
Source: Bloomberg Read full article
2. Crypto VC activity is expected to slow this year.
Source: Morgan Stanley Research
3. Which countries have the most NFT users?
Source: Statista
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Energy
1. US oil inventories edged higher, but gasoline stocks continue to shrink.
US gasoline demand has been firming despite record prices.
Refinery runs are rebounding.
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2. Russia is not hurting for energy clients.
Source: Reuters Read full article
3. Replacing Russian natural gas will be challenging for Europe.
Source: TS Lombard
4. Europe is now dependent on US LNG deliveries.
Source: @EIAgov
Here is what happens when there is a disruption.
• US LNG plant to shut for 3 weeks:
Source: Reuters Read full article
• UK natural gas price:
• US natural gas price:
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Equities
1. The S&P 500 is stuck in a range as investors await the CPI report.
2. The S&P 500 price-to-sales ratio is still above the dot-com peak. But investors often ignore this valuation metric. Part of the reason is that margins have been very strong, resulting in a much lower price-to-earnings ratio (more “reasonable” valuations).
Source: Mizuho Securities USA
Indeed, analysts expect margins to hit record highs this year. What happens if these projections are wrong, given the current economic headwinds?
Source: BofA Global Research
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3. Forward earnings estimates are off their peak (except energy) but still up year-to-date in most sectors.
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4. Defensive sectors have been under pressure (nowhere to hide).
• Utilities:
• REITs:
• Consumer Staples:
Source: CNBC Read full article
Here are some other sector updates.
• Retail (some M&A action):
• Communication Services:
• Transportation:
• Semiconductors:
Source: Barron’s Read full article
• Biotechs held support at the 2020 lows. Should we expect a rebound?
Source: @NautilusCap
By the way, US biotechs’ correlation with China’s tech shares has been remarkable. Both markets appear to be driven by the same group of investors.
Source: Yan Wang, Alpine Macro
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5. This chart shows US PMIs (business activity) by sector.
Source: S&P Global PMI
6. Companies with strong balance sheets have been outperforming in recent days.
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Food for Thought
1. Change in US retail inventories since January 2020:
Source: @WSJ Read full article
2. Big 4 accounting firms’ global revenues:
Source: @chartrdaily
3. Industrial robot orders:
Source: @WSJ Read full article
4. Imports from Russia by country:
Source: @RobinBrooksIIF
5. NATO troop levels in 1990 and 2021:
Source: Statista
6. Data on school shootings:
Source: USAFacts Read full article
7. Wildlife making a comeback in Europe:
Source: @OurWorldInData Read full article
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