The Daily Shot: 14-Jul-22
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. The June CPI report delivered another shocker, with price gains exceeding most forecasts.
Here is the attribution chart.
Source: @TheTerminal, Bloomberg Finance L.P.
• On a month-over-month basis, inflation accelerated broadly.
Source: @TheTerminal, Bloomberg Finance L.P.
• Here are Bloomberg’s diffusion indices for monthly CPI changes.
Source: @TheTerminal, Bloomberg Finance L.P.
• Alternative core inflation measures hit multi-decade highs.
– Median CPI (points to broad inflation gains):
– Trimmed-mean CPI:
• Core goods inflation rebounded.
Source: Nomura Securities
• Core services CPI continued to surge.
• Shelter inflation keeps surprising to the upside.
– Rent:
– Owners’ equivalent rent (2 charts):
Source: Nomura Securities
We will have more data from the CPI report tomorrow.
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2. The market immediately priced in a significant probability of a 100 bps Fed rate hike this month (boosted by the Bank of Canada’s shocker and forecasts from several economists).
And September now looks like a 75 bps increase.
• The market also expects bigger rate cuts in the first half of next year as recession sets in.
• The terminal rate climbed back above 3.5%.
• Short-term Treasury yields jumped.
The Treasury curve hasn’t been this inverted since 2000.
• Market-based inflation expectations have been moderating.
Source: @LizAnnSonders
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3. The Fed’s Beige Book is sending a warning signal.
The Beige Book: – … several Districts reported growing signs of a slowdown in demand, and contacts in five Districts noted concerns over an increased risk of a recession. Most Districts reported that consumer spending moderated as higher food and gas prices diminished households’ discretionary income.
Source: @WSJ Read full article
Sentiment has deteriorated.
Source: @lenkiefer
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4. US gasoline prices continue to ease.
Filling up the tank is absorbing around 3.5% of household income.
Source: Longview Economics
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5. Real wages are sinking.
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Canada
1. The BoC surprised the markets with a 100 bps hike. The Fed is likely to follow.
Source: Reuters Read full article
• The BoC is now expected to take rates above 3.7% by the end of the year.
• The yield curve is highly inverted now.
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2. There is a record shortage of labor and input products.
Source: Economics and Strategy Group, National Bank of Canada
3. Purchasing power has not kept pace with surging house prices.
Source: Economics and Strategy Group, National Bank of Canada
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The United Kingdom
1. As we mentioned yesterday, the monthly GDP estimate topped expectations.
All major business sectors exceeded forecasts.
• Manufacturing:
• Services:
• Construction:
The Citi Economic Surprise Index jumped.
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2. UK’s trade gap was wider than expected in May.
3. The housing market cooled somewhat last month.
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The Eurozone
1. For now, the euro is holding support at parity.
Source: barchart.com
The ECB needs to boost the euro to ease energy pain.
Source: TS Lombard
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2. Euro-area industrial production improved in May.
3. Here are the components of Germany’s CPI.
Source: @TheTerminal, Bloomberg Finance L.P.
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Asia – Pacific
1. The yen hit the lowest level since 1998, with USD/JPY approaching 140.
2. Here is Bloomberg’s Asia currency index.
Asian currencies have declined alongside the selloff in cyclical versus defensive stocks.
Source: BCA Research
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3. Singapore’s economy was flat last quarter. We are probably looking at a decline in Q3.
4. Australia’s labor market remains remarkably strong.
• Job gains (almost three times the number expected):
• The unemployment rate (lowest since 1974):
Source: Reuters Read full article
• Labor force participation (amazing!):
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China
1. Exports accelerated last month.
Source: Reuters Read full article
Import gains were more modest, …
… resulting in a surge in China’s trade surplus.
Here are the cumulative year-to-date charts.
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2. The economy probably contracted last quarter due to lockdowns.
Source: Pantheon Macroeconomics
3. Property stocks have broken below their long-term uptrend.
Source: BCA Research
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Emerging Markets
1. Chile’s central bank hiked rates again and promised more to come.
Source: Bloomberg Read full article
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2. The Philippine central bank surprised the markets with a 75 bps hike.
Source: Reuters Read full article
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3. The Indian rupee continues to hit record lows, approaching 80 to the dollar.
4. Next, we have EM exposure to an economic downturn in the EU.
Source: Fitch Ratings
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Cryptocurrency
1. This chart shows the crypto market capitalization by segment.
Source: ECB Read full article
2. Celsius filed for bankruptcy.
Source: Reuters Read full article
Source: @financialtimes Read full article
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Commodities
1. Gold is entering a seasonally favorable period.
Source: SentimenTrader
Gold is testing the uptrend support.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. Most commodities are significantly below their peak from the last couple of years.
Source: Deutsche Bank Research
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Energy
1. US gasoline demand tumbled last week.
Americans are cutting back.
Source: Morning Consult
Gasoline inventories jumped.
2. US crude oil inventories are back inside the 5-year range.
3. Will Brent test support at the 200-day moving average?
4. Texas electricity prices are soaring.
Read full article
Back to Index
Equities
1. Capitulation is not yet extreme in the S&P 500.
Source: BCA Research
2. Typically, market turnarounds occur after 90% of stocks cross above their 50-day moving average. We are not there yet.
Source: SentimenTrader
3. The S&P 500 Q2 consensus earnings expectations have been deteriorating outside of the energy and materials sectors.
Source: Deutsche Bank Research
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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4. Valuations of growth stocks versus value stocks remain elevated.
Source: MRB Partners
5. Will the correction in commodities trigger another leg lower in stocks?
Source: BCA Research
6. The Russell 2000 is holding support for now.
7. Bank shares have underperformed sharply this month.
Valuations look attractive.
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8. Which sectors have the highest operating leverage?
Source: J.P. Morgan Asset Management
9. Meme stocks have been rallying.
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Credit
1. CLO funding costs continue to climb.
Source: Deutsche Bank Research
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2. European HY spreads have diverged from equity implied vol.
h/t @mikamsika
3. This chart shows cumulative fund flows across credit asset classes over the past 12 months.
Source: Deutsche Bank Research
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Global Developments
1. Financial stress levels and the US dollar tend to be correlated.
Source: Numera Analytics
2. The construction sector is grappling with labor shortages as Covid-induced restrictions limit the movement of workers across international borders.
Source: Oxford Economics
3. Private credit impulse in advanced economies has turned negative this year.
Source: Oxford Economics
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Food for Thought
1. Semiconductor spending:
Source: @jessefelder, The Economist Read full article
2. Investing in robotics:
Source: Wells Fargo Securities
3. Tech lobbying:
Source: @chartrdaily
4. Presidential approval vs. consumer sentiment:
Source: @rp_griffin, @monkeycageblog, @johnmsides Read full article
5. Climate footprint of selected foods:
Source: @financialtimes Read full article
6. Russian fossil fuel revenues:
Source: Statista
7. Word count and age of national constitutions:
Source: The Economist Read full article
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