The Daily Shot: 30-Jun-22
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Mortgage applications to purchase a home dropped sharply last week and are now down 24% vs. last year.
• Banks have been reporting softer demand for mortgages.
Source: Alpine Macro
• A higher percentage of borrowers have been tapping adjustable-rate mortgages to reduce initial monthly payments.
Source: @LizAnnSonders, @DataArbor, @MBAMortgage
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2. More low-income households surveyed by the Census Bureau are behind on rent as of early June.
Source: @atanzi, @markets Read full article
3. Tight financial conditions will substantially boost recession risks by mid-2023, according to Deutsche Bank.
Source: Deutsche Bank Research
• A majority of institutional investors expect a recession to occur next year.
Source: Deutsche Bank Research
• Cyclical cargo railcar loadings are indicating a slowdown.
Source: TS Lombard
• The spread between the Conference Board’s consumer expectations and current conditions is signaling a recession.
Source: @TheTerminal, Bloomberg Finance L.P.
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4. Households are beginning to show concerns about the labor market.
Source: Quill Intelligence
Food service job openings growth has slowed.
Source: BofA Global Research; @MikeZaccardi
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5. Real compensation costs are now well below pre-COVID levels.
Source: S&P Global Ratings
6. The market is pricing bigger Fed rate cuts starting in the first half of next year.
7. Market pricing for the real neutral rate reflects deteriorating longer-term potential GDP growth (see comment from Piper Sandler).
Source: Piper Sandler
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The United Kingdom
1. The Lloyds business sentiment index is rolling over.
2. ANZ Research cut its GDP forecast to 3.6% this year, flattened by base effects. ANZ also sees below potential growth of 1% next year.
Source: @ANZ_Research
3. Labor demand is moderating.
Source: Pantheon Macroeconomics
4. This trend is unlikely to continue, given higher rates and awful consumer sentiment.
Source: @financialtimes Read full article
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The Eurozone
1. Bund yields are sharply lower as global recession risks climb.
DAX is down as well amid risk-off sentiment.
Market pricing for the ECB rate hikes this year has been moderating in recent days.
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2. German inflation came in below forecasts.
But this is no cause for celebration – the decline was due to temporary government relief measures.
Source: Bloomberg Read full article
Pantheon Macroeconomics: – For some reason, the consensus failed to adequately factor-in two one-off inflation-depressing fiscal measures; the fuel duty cut and the introduction of discounted rail fare-the nine-euro ticket-weighing on both the headline and core.
Spain’s inflation continues to surge, hitting 10% this month.
And here is the Belgian CPI.
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3. Generally, business confidence has been holding up well.
But construction sentiment is rolling over.
And retailers are reporting weaker conditions.
Below is the overall economic confidence, which includes consumer sentiment.
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Europe
1. Let’s begin with Sweden.
• Confidence indicators:
• Household inflation expectations:
Source: Nordea Markets
• Retail sales (2 charts):
Source: Nordea Markets
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2. How important is tourism for EU economies?
Source: Piper Sandler
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Japan
1. Consumer confidence continues to weaken.
2. Industrial production tanked in May due to China’s lockdowns.
3. Housing starts surprised to the downside.
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Asia – Pacific
1. South Korea’s business surveys are softer this month.
2. New Zealand’s business confidence continues to deteriorate.
3. Australia’s credit growth surprised to the upside.
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China
1. The official PMI report showed business returning to growth.
• Manufacturing:
• Non-manufacturing:
Factory input price gains are slowing, …
… and order backlogs are easing.
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2. Diverging monetary policy paths resulted in China’s bonds sharply outperforming Treasuries.
Source: Gavekal Research
3. Urban unemployment remains elevated.
Source: @ANZ_Research
4. China’s foreign trade growth in high-tech products has been slowing.
Source: ING
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Emerging Markets
1. The Chilean peso continues to sink.
Chile’s unemployment rate was lower than expected in May.
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2. Thai manufacturing production declined on supply shortages due to China’s lockdown.
3. No equity market capitation yet?
Source: BCA Research
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Cryptocurrency
1. Bitcoin is back below $20k.
2. Bitcoin miners who have been under income stress lately are in full distribution mode, selling an estimated 3,000-4,000 BTC per month.
Source: @glassnode
3. Large bitcoin investors (holding more than 1,000 BTC) have added to their balances during the recent sell-off. These holders account for roughly 45% of total BTC supply and have not yet capitulated.
Source: @glassnode
The same is true for smaller bitcoin holders.
Source: @glassnode
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4. Grayscale is planning to sue the SEC after its bid for a spot-based bitcoin ETF was rejected.
Source: CoinDesk Read full article
The Grayscale Bitcoin Trust’s (GBTC) discount has narrowed over the past week.
Source: Skew
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Energy
1. US refinery inputs are firmer.
And gasoline inventories are starting to recover (2 charts).
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2. US oil inventories are nearing the 5-year range.
3. Open interest in Brent and WTI futures hit a 7-year low.
Source: @JavierBlas
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Equities
1. Stock futures are heavy this morning as recession risks mount.
2. It has been a difficult first half of the year for stocks.
Source: S&P Dow Jones Indices
Here are the US equity market value drawdowns as a share of GDP.
Source: @strategasasset
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3. We’ve had a very volatile 5-week period.
Source: @sentimentrader, @JasonGoepfert
4. Will the S&P 500 break below the 3-year moving average?
Source: BCA Research
5. How extensive can bear market rallies get?
Source: Evercore ISI Research
6. Retail investors continue to buy the dip, but it’s not enough to offset institutional sales.
Source: Vanda Research
7. Global equity valuations have been linked to US real rates.
Source: Capital Economics
8. Sales growth and inflation tend to be correlated.
Source: Truist Advisory Services
9. Small and mid-cap shares continue to trade at a substantial discount to large caps.
Source: Yardeni Research
The selloff in credit points to downside risks for small caps.
Source: BCA Research
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10. Almost a third of financial industry employees started working after the financial crisis.
Source: Trahan Macro Research
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Credit
1. European high-yield debt markets are struggling.
2. Airline bonds have been selling off.
Source: Bloomberg Law Read full article
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3. This scatterplot shows the amount of B- debt maturing through the end of 2023 vs. the number of issuers.
Source: S&P Global Ratings
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Rates
1. The copper-to-gold ratio is pricing in slower growth. Will Treasury yields follow?
Source: @TheTerminal, Bloomberg Finance L.P.
2. This has been the worst start of the year for Treasuries since 1788.
Source: Deutsche Bank Research
3. The Treasury curve is rapidly flattening between the 1-year and the 10-year maturities.
Source: Tradeweb
Here is another leading indicator: the Fed’s near-term forward spread.
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4. The iShares TIPS Bond ETF (TIP) is testing resistance relative to the iShares 7-10 Year Treasury Bond ETF (IEF).
Source: Azan Habib; Paradigm Capital
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Global Developments
1. Commodities and the dollar are up this year. Everything else is down.
Source: JP Morgan Research; @Scutty
2. Traders have been boosting bets on the US dollar index futures.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
Historically, the dollar has weakened when the equity market has troughed, typically around the midpoint of a US recession.
Source: Deutsche Bank Research
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3. The June SMI report from World Economics shows global business activity entering contraction territory.
Source: World Economics
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Food for Thought
1. Using a bike as a primary mode of transportation for short trips:
Source: @financialtimes Read full article
2. City liveability rankings by region:
Source: The Economist Read full article
3. Spending on pharmaceuticals:
Source: @chartrdaily
4. Medication abortions as a share of total US abortions:
Source: @chartrdaily
Google search activity for “medication abortion”:
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5. Share of childcare done by men and fertility rates:
Source: @financialtimes Read full article
6. Global emissions by category:
Source: Wells Fargo Securities
7. Betting markets’ probabilities for the 2024 Republican presidential nomination:
Source: @PredictIt
8. Best UK music act of the last 50 years:
Source: @markets Read full article
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