The Daily Shot: 26-Aug-22
• Administrative Update
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
Administrative Update
The Daily Shot will not be published on Friday, September 2nd and Monday, September 5th.
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The United States
1. The Q2 GDP growth was revised higher, …
… with a boost from better than initially reported consumer spending.
Housing was a drag on growth (and will be again in Q3).
• Despite a small decline, the GDP report does not signal a recession (yet). Private demand has slowed sharply, but the “final sales to private domestic purchasers” indicator (the “core” GDP) was up slightly.
• Moreover, the GDI continued to grow, …
… sharply outpacing the GDP measure (2 charts).
Source: @RiccardoTrezzi
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2. Below are some additional updates on economic growth.
• There is no recession signal yet in corporate profits.
Source: Evercore ISI Research
• The Atlanta Fed’s GDPNow model estimate continues to show stable consumer spending growth this quarter.
Source: @TheTerminal, Bloomberg Finance L.P., h/t BCA Research
• The FIBER leading index points to further deterioration in economic growth.
Source: Quill Intelligence
• Here is a look at US recessions since 1857.
Source: USAFacts Read full article
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3. Next, we have some updates on the labor market.
• Initial jobless claims are still above pre-COVID levels, but not by much. The labor market is still tight.
This chart shows the continuing claims.
• Here is the percentage of workers not getting raises.
Source: TS Lombard
• Job postings on Indeed are drifting lower. The Fed will want to see this indicator move closer to pre-COVID levels.
• Layoffs at startups remain elevated.
Source: @roger_lee
• Pandemic-era payrolls data have been very noisy.
Source: IIF
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4. The Kansas City Fed regional manufacturing index fell sharply this month, with production moving into contraction territory.
• Demand is falling.
This chart shows new orders across the regional Fed reports we got this month.
Source: @MichaelKantro
• The Kansas City Fed report showed factories rapidly reducing employee hours.
• Price pressures are moderating.
• CapEx expectations improved.
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5. Now, let’s take a look at housing.
• Mortgage rates climbed this week with Treasury yields.
• The Commonwealth Demand/Supply Ratio points to a sharp deceleration in home price appreciation.
Source: Peter Essele, Commonwealth
• Sellers are going on strike.
Source: Redfin
• Housing demand is down but not out.
Source: Redfin
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6. Consumer confidence appears to have stabilized.
Source: BofA Global Research
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Canada
1. The CFIB small/medium-size business indicator edged higher this month.
• Housing-related components have softened (2 charts).
• Manufacturing is also weaker.
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2. Net share buybacks have been surging.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
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The United Kingdom
1. The CBI retail sales index unexpectedly jumped this month, driven by grocery purchases.
Source: Reuters Read full article
2. Rising inventories point to some moderation in goods CPI.
Source: Pantheon Macroeconomics
3. Inflation-linked bonds will be costly for the government.
Source: Simon White, Bloomberg Markets Live Blog
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The Eurozone
1. Germany’s Ifo expectations index was a touch better than expected, but business sentiment remains depressed, …
… pointing to a GDP contraction.
Source: Capital Economics
The combination of Ifo and PMI indicators signals a recession in Germany.
Source: Pantheon Macroeconomics
Here is the Ifo sector breakdown.
Source: ifo Institute
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2. Inflation expectations signal more ECB rate hikes ahead.
Source: Nordea Markets
Here is the market-implied rate hike trajectory.
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3. Tighter liquidity conditions point to further deterioration in the Eurozone’s business activity.
Source: @steve_donze
Leading indicators do as well.
Source: Deutsche Bank Research
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4. Hedge funds are betting against Italian debt ahead of the elections.
Source: @financialtimes Read full article
5. Euro-area growth was dampened by deleveraging over the past decade.
Source: MRB Partners
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Europe
1. Economists sharply downgraded their 2023 growth forecasts for Sweden.
2. European nations are rapidly building their natural gas inventories, …
Source: @AndreasSteno
… by cutting demand (and praying for a warm winter).
Source: Bridgewater Associates Read full article
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3. Here is the expected duration of working life in the EU.
Source: Eurostat Read full article
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Japan
1. The August Tokyo CPI, which comes out well ahead of the national figures, surprised to the upside.
2. COVID cases in Japan are surging.
Source: Our World in Data
3. Japan’s total energy consumption has been declining over the past decade.
Source: @WSJ Read full article
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Asia – Pacific
1. South Korea’s demographics continue to deteriorate.
Source: @samkimasia, @business Read full article
2. New Zealand’s home prices are taking a hit.
Source: @ANZ_Research
Separately, the nation’s retail sales unexpectedly declined last quarter.
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3. Australia’s households are heavily indebted.
Source: @acemaxx, @economics Read full article
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China
1. Developers’ onshore debt extensions have been rapidly accumulating, according to Gavekal Research. Next year’s maturity wall looks ugly.
Source: Gavekal Research Read full article
• Domestic bond issuance has been shut off for private-sector developers.
Source: @WSJ Read full article
• Offshore debt markets are mostly shut off for the nation’s developers.
Source: @financialtimes Read full article
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2. Here is China’s total debt as a share of GDP.
Source: BofA Global Research
3. Hong Kong’s exports have been slowing.
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Emerging Markets
1. Let’s begin with Mexico.
• Economic activity has been underperforming due to weak investment.
Source: Numera Analytics
• The yield curve is heavily inverted now.
• The peso has outperformed other EM currencies.
Source: PGM Global
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2. Brazil’s consumer sentiment is rebounding.
3. Chile’s CPI will moderate as liquidity tightens.
Source: Variant Perception
4. Turkey’s manufacturing confidence is deteriorating.
5. EM corporate earnings could decline as liquidity tightens.
Source: BCA Research
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Energy
1. US frackers are expected to make $200 billion this year.
Source: @jessefelder, Bloomberg Read full article
2. Has US crude oil production peaked for now?
Source: Capital Economics
By the way, shale wells have a much shorter lifespan than conventional wells.
Source: Longview Economics
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3. Next, we have some updates on Russia’s crude oil output.
• Exports:
Source: Longview Economics
• Tanker traffic:
Source: IIF
• Production forecast:
Source: BCA Research
• The Urals/Brent spread:
Source: Neste
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4. Solar power costs have been declining as installed capacity grew.
Source: @WSJ Read full article
This chart shows US utility-scale solar capacity additions.
Source: S&P Global Market Intelligence
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Equities
1. Corporate margins hit a multi-decade high last quarter.
Source: Bloomberg Read full article
2. PMI indicators continue to signal deterioration in corporate profits.
Source: @pav_chartbook, @prometheusmacro
3. Retail investors’ average portfolio is still ahead of the S&P 500 since the start of the pandemic, but the outperformance is dwindling.
Source: Vanda Research
4. Companies that benefit from higher inflation have been outperforming this week.
5. Sector return dispersion is at the highest level since the dot-com era.
Source: SPDR Americas Research, @mattbartolini
6. This chart shows the sector composition of equity markets in advanced economies.
Source: MRB Partners
7. Hedge funds’ favorite long picks have significantly underperformed their short picks over the past 12 months.
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Credit
1. Institutional fund managers have greatly reduced their credit exposure this year.
Source: Evercore ISI Research
2. Leveraged loan price dispersion has widened dramatically in recent months.
Source: Bloomberg Law Read full article
3. Student debt ABS share has been shrinking.
Source: Morgan Stanley Research
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Global Developments
1. The US dollar appears to be overbought.
Source: BCA Research
2. Rate differentials will have a lower impact on currencies as economic growth slumps.
Source: Oxford Economics
3. Next, we have part-time employment in advanced economies.
Source: Capital Economics
4. Secondhand luxury watch prices continue to trend down.
Source: WatchCharts
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Food for Thought
1. Stay-at-home stocks:
Source: @axios Read full article
2. Changes in US goods exports by destination in the first half of 2022:
Source: Wells Fargo Securities
3. Saudi Aramco’s net profit:
Source: @chartrdaily
4. Teen social media platform preferences:
Source: Pew Research Center Read full article
5. US congressional trips to Taiwan:
Source: Bloomberg Read full article
6. Student debt demographics:
Source: @PplPolicyProj Read full article
7. Student loan forgiveness benefits share:
Source: BofA Global Research
8. What are you most likely to do when going on a first date?
Source: @CivicScience
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Have a great weekend!
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