The Daily Shot: 11-Aug-22
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. The July CPI report surprised to the downside. The decline in gasoline prices offset most of the gains elsewhere.
Below is a different breakdown of the CPI components.
Source: @GregDaco
The core inflation print was also below forecasts (2 charts).
Source: Nomura Securities
This chart shows the components of the core goods CPI.
Source: Nomura Securities
• Next, we have the year-over-year CPI attribution.
Source: Oxford Economics
• Despite the positive news on inflation, shelter CPI remains very high.
Rents are expected to keep climbing at a much faster pace than what we saw in the pre-COVID era.
Source: Nomura Securities
• We will have more on the CPI report tomorrow (including some forecasts).
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2. The probability of a 75 bps Fed rate hike in September dipped back below 50% in response to the softer-than-expected CPI report.
• Treasury yields didn’t change much.
• Inflation expectations declined.
• Risk assets cheered the possibility of smaller rate hikes.
– Equities:
– Corporate bonds:
• The dollar dropped.
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3. Mortgage applications are running at levels we saw in 2015.
Here is the trend for rate locks.
Source: AEI Center on Housing Markets and Finance
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4. The Atlanta Fed’s GDPNow (nowcast) model has the Q3 GDP growth at 2.5% (annualized).
Source: @AtlantaFed Read full article
5. Durables inventories-to-sales ratio continues to climb (2 charts).
Source: Bloomberg Read full article
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6. The federal budget deficit was worse than expected in July.
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The United Kingdom
1. The housing market held up well last month.
2. Retail electricity and natural gas prices are expected to surge.
Source: @JavierBlas, @CornwallInsight
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The Eurozone
1. German food inflation is nearing 15%.
Core inflation is expected to remain elevated.
Source: Pantheon Macroeconomics
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2. Dutch factory output remains robust.
3. The Rhine river situation is very precarious.
Source: Bloomberg Read full article
Source: Reuters Read full article
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4. The bond/equity volatility gap continues to widen.
Source: @PatrickKrizan
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Europe
1. Sweden’s economic activity remains strong.
Will record low consumer sentiment drag down consumption?
Source: Nordea Markets
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2. Norway’s CPI surprised to the upside.
3. Denmark’s CPI continues to surge, increasingly driven by core inflation (2 charts).
Source: Nordea Markets
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4. Drought conditions are affecting about 60% of the EU and the UK, according to Axios.
Source: @axios Read full article
5. Can Europe substantially reduce its dependence on Russian gas?
Source: Fitch Solutions Macro Research
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Asia – Pacific
1. Dollar-yen held resistance at the 50-day moving average.
2. Thie chart shows the drivers of South Korea’s job gains in 2022.
Source: ING
3. Here is Taiwan’s trade balance with China and the rest of the world.
Source: Alpine Macro
4. New Zealand’s home sales are at multi-year lows.
5. Australia’s consumer inflation expectations are off the highs.
The Aussie dollar jumped by 1.5% in response to the US CPI miss.
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China
1. The renminbi strengthened on the US CPI report but gave up half the gains today.
2. Offshore renminbi bond issuance has accelerated.
Source: Gavekal Research
3. Roughly 56% of China’s aluminum smelters are operating at below cash costs, mainly because of rising energy prices, according to ANZ.
Source: @ANZ_Research
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Emerging Markets
1. EM currencies climbed in response to the US CPI report.
2. EM equities have been underperforming advanced economies.
Here is the regional performance.
Source: PGM Global
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3. Brazil’s retail sales have been holding up well.
The nation’s job market has been stronger than expected this year.
Source: TS Lombard
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4. Mexican nominal wage growth hit a two-decade high.
5. Russia’s inflation has peaked. Once again, data from the Federal Service of State Statistics should be taken with a grain of salt.
The budget (reported by the Russian Ministry of Finance) appears to be deteriorating.
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6. Thailand’s central bank finally raised rates.
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Cryptocurrency
1. Bitcoin remains highly correlated to growth stocks
Source: @M_McDonough
2. Small-cap tokens have been outperforming bitcoin over the past two weeks.
Source: Bietchley Indexes Read full article
3. 98% of the top 50 coins have outperformed bitcoin over the past three months. It’s officially “altcoin season.”
Source: Blockchain Center
4. Ether’s put/call ratio is trending lower.
Source: Skew
Bitcoin’s put/call ratio is starting to tick higher again.
Source: Skew
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Commodities
1. Copper is rebounding with other risk assets.
• LME copper and aluminum inventories remain low for this time of the year.
Source: Commerzbank Research
• But a surplus in the global copper market could weigh on prices.
Source: BCA Research
Copper miners plan to increase capital spending this year.
Source: BCA Research
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2. Gold is still trading above its long-term average relative to US CPI. However, tighter monetary policy and disinflation are headwinds for the precious metal.
Source: Deutsche Bank Research
3. Memory chip prices have been falling.
Source: Commerzbank Research
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Energy
1. Crude oil backwardation continues to ease amid demand uncertainty.
2. US crude oil inventories are moving deeper inside the five-year range. However, refined product stocks remain low.
3. Will softer US gasoline demand keep a lid on prices (by pressuring refinery margins)?
Source: Numera Analytics
4. European natural gas futures are rallying, …
… despite improved storage levels.
Source: JP Morgan Research; @chigrl
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5. Clean energy shares have been surging.
Source: @WSJ Read full article
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Equities
1. Investor sentiment is rebounding.
• AAII:
• Advisory services sentiment:
Source: @williedelwiche, h/t @pav_chartbook
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2. Small caps are outperforming (3 charts), …
Source: SentimenTrader
… with small-cap growth stocks leading the way.
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3. Inflation-sensitive stocks outperformed after the CPI report (boosted by the overall risk-on sentiment).
4. Retail investors have been buying tech for some time and recently started getting into EV stocks.
Source: Vanda Research
Retail investors’ options activity has picked up.
Source: Vanda Research
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5. The current stock rally has been met with a great deal of skepticism.
Source: SentimenTrader
6. VIX is back below 20.
7. Finally, we have some sector updates (showing responses to the CPI report).
• Housing:
• Banks:
• Industrials:
• Transportation:
• Metals & Mining:
• Communication services:
The sector could get a boost from relatively strong Disney results after the close.
• Consumer Staples:
• Healthcare:
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Credit
1. Energy pipeline MLPs remain highly volatile but are once again outperforming high-yield.
2. This chart shows US states’ rainy day funds growth.
Source: Bloomberg Read full article
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Global Developments
1. The US dollar broke below its uptrend channel.
Source: Evercore ISI Research
2. Sovereign bonds typically outperform stocks on a risk-adjusted basis during economic contractions.
Source: Alliance Bernstein Read full article
3. Business and consumer confidence indicators have diverged sharply.
Source: @Callum_Thomas, @topdowncharts
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Food for Thought
1. US personal bankruptcies by age:
Source: Federal Reserve Bank of New York
2. Your friends’ income bracket:
Source: The New York Times Read full article
3. The largest producers of natural gas:
Source: Visual Capitalist Read full article
4. US family structure over time:
Source: @alyssamvance
5. China’s retail sales and manufacturing in perspective:
Source: Alpine Macro
6. Spending on pharmaceuticals:
Source: Statista
7. Passing legislation via Reconciliation:
Source: Evercore ISI Research
8. Global beer consumption:
Source: Visual Capitalist Read full article
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