The Daily Shot: 29-Jun-22
• The United States
• The Eurozone
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The Conference Board’s consumer confidence report came in below forecasts, with the expectations index tumbling to levels not seen in nearly a decade. This was one of the triggers for Tuesday’s 2% drop in the S&P 500, as recession concerns mount.
• The Conference Board’s inflation expectations index hit a record high.
• Consumers are increasingly gloomy about the stock market.
• The labor differential (“jobs plentiful” vs. “jobs hard to get”) remains elevated.
However, consumers are becoming concerned about job prospects going forward. The “future employment” component is now a drag on the overall confidence index.
Source: Mizuho Securities USA
• The Conference Board’s sentiment indicator remains well above the U. Michigan’s survey.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. The Richmond Fed’s regional manufacturing index plunged this month, …
… as demand deteriorates. Sounds familiar? This trend is playing out across the country.
• Outlook slumped.
Source: @TheTerminal, Bloomberg Finance L.P.
• Supply chain delays are easing, …
… and order backlogs are depleted, as demand slows.
• Factories expect fewer hours for workers in the months ahead.
• Despite weaker demand, manufacturers are still boosting prices.
The regional Fed indicators point to manufacturing contraction at the national level this month.
Source: Yardeni Research
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2. Supply bottlenecks are now on land.
Source: Bloomberg Read full article
But as we saw across the regional manufacturing reports, delivery times are getting shorter as demand stalls.
Source: Yardeni Research
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3. The market still doesn’t expect the Fed to raise rates much above 3.5%.
What if these expectations are too dovish? Could the market be off by nearly 100 bps as the Wells Fargo projections show? What would that mean for equity markets?
Source: Wells Fargo Securities
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4. Financial conditions tightened faster in this hiking cycle than in previous ones.
Source: @ReutersJamie; FRBSF Read full article
5. Home price appreciation hit a new record in April according to the Case-Shiller housing price index.
• The breadth of the rally in home prices has been unprecedented.
Source: Economics and Strategy Group, National Bank of Canada
• S&P Global Ratings expects home prices to keep climbing, albeit at a slower rate.
Source: S&P Global Ratings
• The divergence between home prices and wages continues to widen.
• What does record-high home price appreciation tell us about housing-related inflation?
Source: ING
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6. The goods trade gap eased further in May, which is a tailwind for Q2 GDP growth.
7. Robot orders have increased alongside rising wages.
Source: Alpine Macro
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The Eurozone
1. There was a hint of slower inflation in Germany.
Bund futures jumped and the euro sold off.
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2. French consumer confidence continued to plummet in June (similar to what we see in Germany).
3. Tumbling consumer sentiment will be a drag on retail sales.
Source: Pantheon Macroeconomics
4. German electricity prices have surged to an all-time high. Forward contracts, which lock in energy costs, are getting more expensive by the day.
Source: @JavierBlas Read full article
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Asia – Pacific
1. Japan’s May retail sales were softer than expected.
2. South Korea’s consumer confidence is rolling over.
3. Taiwan’s currency and stocks are under pressure amid capital outflows.
Source: ING
4. Australian retail sales have been very strong.
Separately, the market expects the RBA to outpace the Fed’s tightening next year.
Source: Masaki Kondo, @TheTerminal, Bloomberg Finance L.P.
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China
1. It’s been a good month for China’s stocks.
Source: S&P Dow Jones Indices
2. This chart shows Beijing’s regulatory vs. stimulus actions.
Source: Piper Sandler
3. China’s rental housing share is relatively low.
Source: Gavekal Research
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Emerging Markets
1. The rupee continues to hit record lows, as capital outflows from India accelerate.
2. The Hungarian central bank shocked the markets with a 185 bps rate hike, …
Source: Reuters Read full article
… as the currency weakens.
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3. Mexican unemployment remains relatively low.
4. LatAm equities have been lagging commodities.
Source: Alpine Macro
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Cryptocurrency
1. It has been a tough month for cryptos.
Source: FinViz
2. Gold has outperformed crypto during the current risk-off environment.
Source: MRB Partners
3. Tighter liquidity is a headwind for cryptos.
Source: MRB Partners
4. Ether has been in oversold territory for 54 days.
Source: @bespokeinvest Read full article
5. The total crypto market cap is at support.
Source: All Star Charts
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Commodities
1. Copper is weaker again this morning, …
… and China’s traders are boosting their bets against the metal.
Source: Numera Analytics
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2. Thermal coal prices keep climbing.
Source: S&P Global Commodity Insights
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Equities
1. A sustained risk-on rally would require a reversal in real yields.
Source: Alpine Macro
2. The cyclicals/defensives ratio has reversed the COVID-era gains.
3. Profit margin growth consensus estimates are much too optimistic.
Source: Goldman Sachs; @carlquintanilla
4. Analysts’ earnings forecasts tend to be overly optimistic around recessions.
Source: Simon White, Bloomberg Markets Live Blog
5. Should we expect a 70s-style multi-year sideways market?
Source: Evercore ISI Research
6. This is why investors are so concerned about the current economic downturn becoming a recession.
Source: Simon White, Bloomberg Markets Live Blog
7. Tighter financial conditions require higher compensation for investors to take on risk. The S&P 500 dividend yield is about 40 bps too low. Since companies are not about to boost dividends in this environment, stock prices need to be substantially lower.
Source: @TheTerminal, Bloomberg Finance L.P.
8. Next, we have some sector performance updates.
• Consumer Discretionary:
• Tech/semiconductors:
• Transportation:
• Energy:
• Consumer Staples:
• Healthcare:
• Utilities:
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9. Office properties have underperformed sharply in recent weeks.
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Credit
1. High-yield spreads continue to grind higher.
2. Leveraged finance issuance has been slowing.
Source: Deutsche Bank Research
3. Convertibles issuance also slowed sharply as prices slump.
Source: @WSJ Read full article
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4. Increased fund ownership has exacerbated muni volatility.
Source: @WSJ Read full article
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Rates
Treasury term premium should rise further with quantitative tightening reaching maximum speed later this year, according to Deutsche Bank.
Source: Deutsche Bank Research
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Global Developments
1. Let’s start with COVID-era nominal GDP recovery across G7 economies.
Source: Economics and Strategy Group, National Bank of Canada
2. How much do different countries rely on international trade?
Source: @financialtimes Read full article
3. This chart compares the 2022 GDP growth with changes in real household disposable incomes?
Source: OECD Read full article
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Food for Thought
1. Devastating weather disasters in the US have increased in both frequency and size over the past 40 years.
Source: Wells Fargo Securities
2. Food sales impacted by export restrictions (2 charts):
Source: @SMerler, @IFPRI
Source: Reuters Read full article
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3. Leaving Brooklyn (but mostly staying local):
Source: Placer.ai
4. Adult gamers:
Source: Statista
5. How deep are the Great Lakes?
Source: Visual Capitalist Read full article
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