The Daily Shot: 20-Jul-22
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Food for Thought
The United States
1. Once again, let’s start with the housing market.
• June housing starts were a bit below forecasts.
The weakness was in single-family construction.
Building permits held up well last month, …
… boosted by multifamily demand.
Below is the permits chart for single-family homes.
• There are a lot of homes under construction.
Source: @PPGMacro
• Single-family housing rents have been surging.
Source: CoreLogic
• New housing inventory is piling up in Las Vegas.
Source: @AliWolfEcon
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2. Next, we have some data on economic growth.
• The GDPNow model from the Atlanta Fed continues to show a contraction in Q2.
Source: @AtlantaFed Read full article
• About half of the economists surveyed by The Wall Street Journal expect a recession in the next 12 months.
Source: @WSJ Read full article
For fund managers, it’s a done deal.
Source: BofA Global Research
Traders have been positioning for it. Are recession fears overdone?
Source: Deutsche Bank Research
• The pace of excess savings drawdown within the next year could substantially impact GDP growth.
Source: Oxford Economics
• The pandemic upended a long period of mild volatility in output and inflation.
Source: BlackRock Investment Institute
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3. CFOs have soured on the economy but remain remarkably upbeat about their company’s business.
Source: @jessefelder, @WSJ Read full article
4. Consumers increasingly see a deterioration in credit availability ahead.
Source: NY Fed
5. Excluding vehicles, the retail inventories-to-sales ratio is rebounding.
General merchandise stores are now sitting on bloated inventories.
Restaurants are no longer facing shortages.
Source: Evercore ISI Research
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6. Gains in upstream core producer prices are slowing.
Source: Yardeni Research
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Canada
1. The iShares Canadian long-term bond ETF is attempting to break above its six-month downtrend.
Source: Aazan Habib; Paradigm Capital
2. Real yields have been pressuring equity valuations.
Source: Numera Analytics
3. Housing starts will slow in the months ahead.
Source: Numera Analytics
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The United Kingdom
1. The message from the BoE is a 50 bps rate hike at the next meeting and quantitative tightening ahead.
Source: FXStreet Read full article
Source: Reuters Read full article
Gilt yields are higher.
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2. Demand for labor appears to be slowing (2 charts).
Source: Pantheon Macroeconomics
Source: Pantheon Macroeconomics
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3. Ouch …
Source: @RARohde
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The Eurozone
1. The market is now pricing a 50% chance of a 50 bps ECB rate hike this week.
2. The euro held support at parity …
Source: barchart.com
… as well as its long-term downtrend support.
Source: @NautilusCap
The euro implied vol surged ahead of the ECB decision.
Source: @donnelly_brent
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3. Inflation is yet to peak.
Source: Pantheon Macroeconomics
Here is the CPI dispersion.
Source: Chart and data provided by Macrobond
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4. French wholesale electricity costs continue to surge.
5. The joys of being part of the Eurozone:
Source: ING, @DanielKral1
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Europe
1. Supply stress remains elevated.
Source: ING
2. Here is Europe’s power/energy mix.
Source: @ANZ_Research
3. Wildfires have been extreme this year.
Source: The Economist Read full article
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Asia – Pacific
1. Dollar-yen is holding the uptrend support.
2. Home prices in Sydney and Melbourne are falling.
Source: Coolabah Capita Read full article
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China
1. Beijing continues to struggle in its attempts to contain the property crisis.
Source: The Guardian Read full article
• Homebuyers refusing to make loan payments on unfinished housing:
Source: @RChoongWilkins, @bpolitics Read full article
• At-risk mortgages:
Source: @WSJ Read full article
• Developers’ funding and investment:
Source: TS Lombard
• Construction:
Source: @andrewbatson, @Gavekal
• Metallurgical coal prices (showing weaker demand for steel):
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2. COVID risks are not going away any time soon.
Source: @financialtimes Read full article
3. Unemployment eased in Hong Kong last month.
4. There is no rebound in Macau visitors.
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Emerging Markets
1. The Indian rupee remains under pressure as USD/INR tests resistance at 80.
2. The Pakistani rupee continues to sink.
3. Turkey’s home sales jumped last month, …
… boosted by buyers from Russia.
Source: @uguruzyilmaz, Bloomberg Read full article
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4. Nigeria’s central bank unexpectedly hiked rates by 100 bps.
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Cryptocurrency
1. Cryptos continue to rebound with stocks.
2. The total ETH supply in profit (based on the average cost basis among holders) has risen above 50% given the latest price jump.
Source: @glassnode
3. However, 50% of all value held by short-term bitcoin holders is still at an unrealized loss.
Source: @glassnode
4. There was a spike in total BTC transfer volume at a loss during the LUNA stablecoin collapse.
Source: @glassnode
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Commodities
1. Money managers are trimming their bets on corn futures.
Source: @kannbwx
2. Commodities tend to perform worse in the second half of the year.
Source: @jaykaeppel
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Energy
1. WTI futures are testing resistance.
2. Crude oil is becoming more sensitive to the US dollar.
Source: @WSJ Read full article
3. US jet fuel demand remains below pre-pandemic levels, tracking the recovery in air travel (2 charts).
Source: Piper SandlerÂ
Source: Piper SandlerÂ
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4. Russia’s natural gas production is expected to deteriorate.
Source: IEA; @Insider_FX
5. Concerns are growing over Texas power grid’s ability to handle the surging demand.
Source: NBC News Read full article
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Equities
1. The S&P 500 and the Nasdaq 100 rallied above the 50-day moving average …
Source: @bespokeinvest Read full article
… amid extreme market pessimism (2 charts).
Source: Simon White, Bloomberg Markets Live Blog
Source: Deutsche Bank Research
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2. Fund managers’ profit sentiment hasn’t been this bad in a long time.
Source: BofA Global Research
3. The put/call premium among small options traders has been stretched (very bearish).
Source: SentimenTrader
4. The broad market bounce we just had is not a positive sign for near-term performance.
Source: Chris Murphy, Susquehanna International Group
5. Another bear-market rally?
Source: Michael Kantrowitz, Piper SandlerÂ
6. Here are some potential downside scenarios for the S&P 500, according to MRB Partners.
Source: MRB Partners
7. Next, we have some sector performance trends.
• Banks:
• Tech and semiconductors:
• Communication Services:
• Transportation:
• Energy:
• Metals & Mining:
• Consumer Discretionary:
• Retail:
• Consumer Staples:
• Healthcare:
• Utilities:
Here is fund managers’ positioning going into this rally.
Source: BofA Global Research
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8. Next, let’s take a look at some equity factor trends.
• Value vs. growth:
By the way, fund managers are less sure that value will beat growth.
Source: BofA Global Research
• Small caps:
• High-beta and low-vol:
• High-dividend:
• Quality:
• Momentum (yes, there are more value names in the momentum ETF):
• Inflation-sensitive:
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Rates
1. The 10-year – 3-month portion of the Treasury curve is flattening rapidly.
Source: Tradeweb
Source: @GunjanJS, @bespokeinvest
Here is the yield curve.
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2. Treasury market liquidity has been deteriorating in recent years.
Source: JP Morgan Research, h/t III Capital Management
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Food for Thought
1. Change in new vehicle sales over the past 12 months:
Source: @axios Read full article
2. Who is responsible for flight delays:
Source: Bloomberg Read full article
3. The most abundant mineral resource in each African country:
Source: The Economist
4. Concerns about extreme weather:
Source: Data for Progress Read full article
5. Americans’ trust in major institutions:
Source: FiveThirtyEight Read full article
6. Split congressional districts:
Source: @axios Read full article
7. Peering back in time to detect oxygen in a 13.1 billion-year-old galaxy:
Source: @DrEOChapman Further reading
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