Posted on by The Daily Shot Editor: Lev Borodovsky

Initial jobless claims are now firmly above pre-COVID levels

The Daily Shot: 05-Aug-22
• The United States
• The United Kingdom
• The Eurozone
• Japan
• Emerging Markets
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought

 

The United States

1. Initial jobless claims are now firmly above the 2018/19 levels.
 

 
Here is the spread.
 

 
As a result, JP Morgan now sees a gain of only 200k payrolls for July (vs. consensus of 250k).
 
Source: JP Morgan Research; @carlquintanilla  
 
• Continuing claims are still at multi-year lows.
 

 
• Layoffs are also quite low (shown in log scale).
 

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2. Next, we have some updates on inflation.
 
• The core CPI is a more dominant component of inflation in the US than in the rest of G7.
 
Source: @GregDaco, @OECD   Read full article  
 
• Here is the decomposition of the PCE inflation into supply- and demand-driven components.
 
Source: Alpine Macro  
 
• Home price appreciation has been supporting rent inflation.
 
Source: Numera Analytics  
 
Shelter inflation has been surprising to the upside.
 
Source: Goldman Sachs; @MikeZaccardi  
 
• Inflation dispersion has widened substantially.
 
Source: The Economist   Read full article  
 
• Regional Fed surveys point to slower growth in business markups (PPI trade services).
 
Source: Pantheon Macroeconomics  
 
• Food inflation should begin to moderate.
 
Source: Stifel  

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3. As we saw earlier, the trade deficit narrowed further in June.
 

 
• US exports growth has been robust this year, …
 
Source: Wells Fargo Securities  
 
… but it’s expected to slow (driven by weaker global demand and a strong US dollar).
 
Source: Capital Economics  

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4. CapEx strengthened in Q2.
 
Source: @WSJ   Read full article  
 
5. Mall visits are down vs. 2021.
 
Source: Placer.ai  
 
6. Has the US entered a new period of macro instability?
 
Source: TS Lombard  

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The United Kingdom

1. The BoE hiked rates by 50 bps.
 

 
Source: CNBC   Read full article  
 
• Here is the history of BoE rates going back to 1840.
 
Source: @JamesSmithRF  
 
• How much more tightening should we expect? Below is a forecast from Wells Fargo.
 
Source: Wells Fargo Securities  
 
2. The BoE boosted its inflation forecast – again.
 
Source: Commerzbank Research  
 
The central bank’s model points to a sharp CPI decline in three years.
 
Source: Pantheon Macroeconomics  
 
3. The BoE is now forecasting a prolonged recession in the UK (2 charts).
 
Source: Wells Fargo Securities  
 
Source: Pantheon Macroeconomics  
 
4. The pound dropped in response to the BoE action/forecasts (the chart shows the euro gaining vs. GBP).
 

 
Gilt yields declined but rebounded shortly after.
 

 
The yield curve has flattened considerably.
 

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5. New car registrations remain at multi-year lows for this time of the year.
 

 
6. Service sector growth has slowed but remains positive.
 
Source: S&P Global PMI  
 
Price pressures persist.
 
Source: S&P Global PMI  

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The Eurozone

1. Germany’s factory orders edged lower in June.
 

 
Sentiment indicators point to further declines.
 
Source: Commerzbank Research  
 
• Industrial production edged higher in June, topping forecasts.
 

 
• Germany’s construction activity is tumbling.
 

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2. French nuclear power output hit a multi-year low. This could not have come at a worse time.
 

 
Source: Bloomberg   Read full article  

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3. Ireland’s unemployment rate is nearing 4%.
 

 
4. Euro-area bank loan rates have been rising this year.
 
Source: ECB   Read full article  
 
5. Households are hit by the erosion of purchasing power.
 
Source: BCA Research  
 
6 The S&P Global PMI data point to weaker productivity in the Eurozone.
 
Source: S&P Global PMI  
 
7. This chart shows base rates in Europe going back to 1800.
 
Source: Deutsche Bank Research  

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Japan

1 Japan’s real wages showed some improvement in June.
 

 
2. Household spending is inside the pre-COVID range.
 

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Emerging Markets

1. India’s central bank delivered a bigger-than-expected rate hike.
 

 
2. Thailand’s core inflation surprised to the upside, but the central bank is not raising rates.
 

 
3. The Philippine CPI also surprised to the upside.
 

 
4. Russia’s car sales remain depressed.
 

 
5. Mexican consumer confidence deteriorated last month.
 

 
6. Chile has been hit with portfolio outflows.
 
Source: Scotiabank Economics  
 
7. Emerging markets continue to see outflows.
 
Source: IIF  

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Energy

1. OPEC+ essentially left output unchanged.
 
Source: Reuters   Read full article  
 
But demand concerns continue to weigh on oil prices.
 
Source: Reuters   Read full article  
 

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2. This chart shows natural gas sales to the EU by source.
 
Source: ECB   Read full article  
 
3. Permian natural gas pipeline capacity has been expanding.
 
Source: @EIAgov   Read full article  
 
4. Finally, we have US power generating capacity additions.
 
Source: @EIAgov   Read full article  

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Equities

1. The Nasdaq 100 is at resistance.
 

 
2. Responses to earnings misses have been unusually benign.
 
Source: Truist Advisory Services  
 
3. This chart shows the breadth of earnings revisions.
 
Source: @MrBlonde_macro  
 
4. Here is the evolution of consensus earnings estimates by sector.
 
Source: Yardeni Research  
 
5. A classic “triple waterfall”?
 
Source: Stifel  
 
6. Goldman sees the S&P 500 at 4300 by the end of the year.
 
Source: @ISABELNET_SA, @GoldmanSachs  
 
7. Low-beta shares tend to outperform when economic activity slows.
 
Source: @MrBlonde_macro  
 
8. The average total return for the S&P 500 the year following a yield curve inversion is almost 10%.
 
Source: Denise Chisholm, Fidelity Investments  
 
9. Given tighter financial conditions, the S&P 500 dividend yield should be higher.
 

 
10. Macro hedge funds are short stocks.
 
h/t @pav_chartbook  
 
11. The VIX – S&P 500 divergence is closing.
 
Source: Stifel  

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Credit

1. BDCs are still outperforming high-yield bonds.
 

 
Here is the composition of BDC portfolios.
 
Source: S&P Global Ratings  
 
BDC portfolio loans tend to have a LIBOR floor.
 
Source: S&P Global Ratings  

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2. Bankruptcy filings among middle-market and larger firms have been relatively low this year.
 
Source: S&P Global Market Intelligence  
 
3. US banks are seeing stronger demand for business loans.
 
Source: Board of Governors of The Federal Reserve System  
 
But they are tightening lending standards.
 
Source: Board of Governors of The Federal Reserve System  

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Rates

1. Treasury cash flows have improved markedly compared to the last two years.
 
Source: Deutsche Bank Research  
 
2. The rise in real rates over the past quarter has caused considerable turbulence in the market.
 
Source: Deutsche Bank Research  

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Global Developments

1. Investors see both the dollar and oil lower in 12 months.
 
Source: BCA Research  
 
2. Supply chain stress continues to ease.
 

 
3. Shipping rates are expected to move lower.
 
Source: BofA Global Research  
 
4. This chart shows the contributions to global current account imbalances.
 
Source: IMF   Read full article  

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Food for Thought

1. Fertility rates by women’s education:
 
Source: IMF   Read full article  
 
2. Happiness and friends:
 
Source: Our World in Data   Read full article  
 
3. Out-of-pocket medical spending:
 
Source: @axios   Read full article  
 
4. US federal wildfire suppression costs:
 
Source: OpenAxis  
 
5. The most important issues in the US over time:
 
Source: The Economist   Read full article  
 
6. Living in emergency shelters:
 
Source: The New York Times   Read full article  
 
7. Comparing the current vs. previous job:
 
Source: Pew Research Center   Read full article  
 
8. Formula 1 car weight over time:
 
Source: r/formula1  

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Have a great weekend!

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