The Daily Shot: 03-Aug-22
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Job openings declined at a faster pace in June, but the labor market remains tight. The Fed would like to see this indicator come off some more.
Source: Reuters Read full article
The market was reminded that the Fed has more wood to chop.
• Job vacancies in retail registered a record decline.
• Construction openings are down sharply as well.
Leading indicators point to further weakness in construction employment.
Source: Quill Intelligence
• Here are some additional trends.
– Hotels and restaurants:
– Nondurable goods manufacturing:
– Government (which includes public school teachers):
– Financial services (bucking the trend):
• State and local governments are seeing a lot of resignations.
• Slower overall quit rates (voluntary resignations) point to a moderation in labor costs.
Source: Capital Economics
• Quit rates could move much lower as consumer income expectations slump.
Source: Quill Intelligence
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2. The labor force participation rate has not kept up with the rise in payrolls.
Source: PGM Global
• Labor force participation (relative to pre-pandemic levels) is lowest among the youngest and oldest cohorts.
Source: PGM Global
• Here are the sources of the decline in labor force participation since the start of the pandemic (demographic exits = expected retirements, given the US aging population).
Source: Goldman Sachs; @MikeZaccardi
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3. Freight rates continue to moderate.
4. Could we see a faster-than-expected drop in inflation? (2 charts)
Source: Alpine Macro
Source: Alpine Macro
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5. Vehicle sales edged higher in July.
6. The real money supply (M2) is down sharply on a year-over-year basis.
This trend does not bode well for GDP growth.
Source: Deutsche Bank Research
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Canada
1. The GDP held up better than expected in May.
2. Manufacturing growth is slowing.
Source: S&P Global PMI
Factory orders are declining now.
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The United Kingdom
1. Home price appreciation slowed in July.
Source: Reuters Read full article
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2. Job ads continue to moderate.
Source: Pantheon Macroeconomics
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The Eurozone
1. The ECB rate trajectory expectations are resetting lower.
2. The ECB has been running its own version of “Operation Twist” in its fight against defragmentation risks.
3. The euro area is nearing peak inflation.
Source: BCA Research
4. Electricity prices continue to hit record highs.
• Germany:
• France:
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5. Germany may already be in a recession.
Source: Pantheon Macroeconomics
6. The Rhine River situation is a disaster.
Source: @Jwittels, @business Read full article
The water level is at multi-year lows.
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7. Here is a look at fiscal measures related to the war in Ukraine.
Source: ECB Read full article
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Europe
1. The Swiss franc continues to strengthen vs. the euro.
2. Russia’s Gazprom output in July declined with lower exports to Europe and Turkey and higher exports to China. Around wintertime, Germany could be forced to use some Nord Stream 2 capacity (which runs on Russian-assembled turbines) in the case of severe gas shortages, according to REA.
Source: Nadia Kazakova, REA
REA expects Gazprom output to remain lower than previous years because of lower exports to Europe and weak domestic demand (although weather effects could increase domestic flows).
Source: Nadia Kazakova, REA
3. Which sectors are most/least sensitive to natural gas prices?
Source: ING
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Asia – Pacific
1. Dollar-yen held support near 131.
Source: barchart.com
2. Japan’s shares look attractive relative to the US.
Source: Alpine Macro
3. Taiwan Semiconductor has underperformed due to geopolitical tensions.
USD/TWD is at long-term resistance (the Taiwan dollar is weakening vs. USD).
Source: barchart.com
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4. Singapore’s business activity remains strong.
5. Australia’s central bank hiked rates again (as expected).
6. New Zealand’s Q2 employment report surprised to the downside.
• Employment growth has stalled.
• The unemployment rate unexpectedly edged higher.
• Participation is trending lower.
• However, wage growth surged.
• The Kiwi dollar dropped in response to the employment report.
Separately, New Zealand’s home prices continue to fall.
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China
1. The banking sector is facing substantial risks related to mortgage boycotts.
Source: @markets Read full article
Source: @markets Read full article
2. New home sales have been trending lower.
Source: @WSJ Read full article
3. Hong Kong’s retail sales were very soft in June.
But business activity remains in growth mode.
Source: S&P Global PMI
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Emerging Markets
1. Let’s begin with South Africa.
• Producer prices are surging.
• Manufacturing is in contraction territory now.
• Credit growth has rebounded to pre-pandemic levels.
• Vehicle sales show some improvement.
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2. Next, we have some updates on Vietnam.
• The CPI (lower than expected):
• Exports (strong but losing momentum):
• Trade balance:
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3. India’s industrial production remains robust.
4. The Turkish lira is holding near 18 to the dollar.
Source: barchart.com
5. Brazil’s industrial production has been flat.
6. Argentines are pulling their USD bank deposits.
Source: @squires_esq, @markets Read full article
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Cryptocurrency
1. Bitcoin’s breakout is fading.
The cryptocurrency is not rebounding with growth stocks.
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2. Minecraft’s decision to ban NFT integration triggered a plunge in related NFTs.
Source: @Delphi_Digital
Source: Engadget Read full article
• NFT sales have been trending lower.
Source: OpenAxis
• This chart shows NFT collection rankings.
Source: OpenAxis
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Commodities
1. Copper positioning remains bearish.
Source: @acemaxx, @GoldmanSachs
2. Here is a look at lithium reserves.
Source: @ANZ_Research
3. Wheat is at support.
4. US lumber futures are trending lower amid weakness in the housing market.
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Energy
1. US natural gas is back below $8/mmbtu.
2. OPEC’s oil production continues to lag planned output.
Source: Bloomberg Read full article
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Equities
1. Companies are preparing the market for an earnings recession.
Source: Alpine Macro
2. Downward adjustments to earnings expectations continue (EPS = earnings per share).
Source: Evercore ISI Research
Here is the breakdown by quarter.
Source: Yardeni Research
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3. Recent (relatively) strong earnings growth in the S&P 500 has been driven by energy.
Source: Deutsche Bank Research
4. Stocks remain sensitive to real rates (2 charts).
Source: Deutsche Bank Research
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5. Equity ETF inflows were well below historical averages last month, while bond funds attracted fresh capital.
Source: SPDR Americas Research, @mattbartolini
6. Breadth indicators have been improving across US and Canadian equities.
Source: Aazan Habib, Paradigm Capital
7. Bear market rallies can improve short-term momentum but typically don’t last long.
Source: @StocktonKatie
8. Below is the July large-cap performance across key global markets.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
9. Here is a look at SPAC status by vintage quarter (see definition of de-SPAC).
Source: @SPGMarketIntel Read full article
10. Long vol has been a painful trade in recent months.
Source: BNN Read full article
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Credit
1. Here is the risk-return profile for select asset classes (y-axis = spread, x-axis = risk).
Source: BCA Research
2. Implied correlations show riskier companies more vulnerable to higher rates.
Source: JP Morgan Research; @DiMartinoBooth, @tracyalloway
3. Banks have been tightening lending standards on commercial real estate loans.
Source: Board of Governors of The Federal Reserve System
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Rates
1. Off-the-run Treasury yields are increasingly deviating from the yield curve fit, pointing to worsening liquidity in the market.
2. The 10-year note futures contract is holding support.
Source: Aazan Habib, Paradigm Capital
3. More rate hikes are necessary to bring inflation under control, yet the market is pricing in cuts.
Source: SOM Macro Strategies
4. Treasury bill supply has bottomed.
Source: Deutsche Bank Research
5. The 2-year/10-year Treasury yield curve is inverted, while the German Bund one is steep.
Source: Barclays Research
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Global Developments
1. This chart shows the July performance by asset class.
Source: BCA Research
2. Industrial price pressures in developed markets are coming down sharply.
Source: @WilliamsonChris
3. This chart shows fund flows by asset class.
Source: Deutsche Bank Research
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Food for Thought
1. US e-commerce penetration:
Source: @TheTranscript_, @carlquintanilla, @knowledge_vital
2. Households’ excess savings by income:
Source: @WSJ Read full article
3. Ukraine’s counteroffensive:
Source: @opinion Read full article
4. How should the US respond if China invades Taiwan?
Source: Morning Consult Read full article
5. Americans feeling like strangers in their own country:
Source: The Washington Post Read full article
6. Aging church attendees:
Source: @ryanburge
7. Domestication of animals:
Source: Visual Capitalist Read full article
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