The Daily Shot: 12-Sep-22
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Let’s begin with some updates on inflation.
• Morgan Stanley is estimating a negative month-over-month CPI print for August due to lower fuel prices.
Source: Morgan Stanley Research
• High-frequency indicators also point to a decline in the CPI.
Source: @WSJ Read full article
• But the core inflation remained elevated, according to Nomura (driven by housing).
Source: Nomura Securities
• Shelter inflation is not expected to peak until next year.
Source: Morgan Stanley Research
Shelter CPI tends to be autocorrelated, which means that trend reversals are slow.
Source: Morgan Stanley Research
• Easing supply stress should soften core goods inflation.
Source: Nomura Securities
• Market-based inflation expectations have been falling.
Source: @michaellachlan, @markets Read full article
• Food inflation should begin to moderate.
Source: Variant Perception
• US dollar gains should ease tradable goods inflation.
Source: @IanRHarnett
• Used vehicle prices have been declining (2 charts).
Source: @LizAnnSonders, @Manheim_US
• Economists continue to boost their forecasts for PCE inflation in 2023.
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2. Household net worth tumbled last quarter as stocks slumped.
Source: @federalreserve Read full article
Source: Reuters Read full article
Here are the cumulative gains since the start of the pandemic.
Source: ING
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3. The inventories-to-sales ratio is rebounding, especially in durable goods.
4. The Oxford Economics supply chain stress index continues to moderate.
Source: Oxford Economics
Semiconductor delivery times appear to have peaked but remain elevated.
Source: @ianmking, @technology Read full article
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5. Next, we have some updates on economic growth.
• Economists now expect next year’s growth to dip below 1%.
• Companies are increasingly mentioning “recession” on earnings calls.
Source: FactSet
• Stock investors are positioning for a recession.
Source: Deutsche Bank Research
• Job openings tend to peak before recessions.
Source: Desjardins
• State tax receipts are slowing.
Source: Evercore ISI Research
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6. The markets are convinced that the Fed will lift rates by 75 bps this month.
• Market pricing for the terminal rate is now above 4%.
Here is a forecast from Wells Fargo. Will the Fed be forced to cut rates in the second half of next year?
Source: Wells Fargo Securities
• The 2-year Treasury yield has risen above 3.5%.
• Financial conditions could worsen as quantitative tightening accelerates.
Source: PGM Global
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Canada
1. The employment report surprised to the downside. That’s three months of job losses in a row.
Construction and education drove last month’s employment losses.
Source: Oxford Economics
• The unemployment rate jumped.
• Wage growth remains well above pre-COVID levels, which will be the BoC’s key focus.
Source: Scotiabank Economics
• The participation rate edged higher.
• Job postings are trending down.
Source: Scotiabank Economics
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2. Retirements have accelerated
Source: Reuters Read full article
3. Capacity utilization surged in Q2 (but probably declined this quarter).
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The United Kingdom
1. BoE rate hikes are expected to outpace the Fed’s tightening.
Source: Chart and data provided by Macrobond
2. Inflation expectations have been rising.
Source: Reuters Read full article
3. Car purchases have been holding up despite collapsing consumer sentiment.
Source: Pantheon Macroeconomics
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The Eurozone
1. Market expectations for the ECB rate at the end of the year continue to climb.
Here is the 2-year Bund.
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2. A deep recession is coming, according to Barclays.
Source: Barclays Research
3. Even with a 20% demand reduction, Germany’s gas storage would be largely depleted at the end of the winter season, according to Deutsche Bank.
Source: Deutsche Bank Research
4. Are euro-area shares oversold?
Source: MRB Partners
5. Italy’s right-wing parties could get an absolute majority.
Source: Reuters Read full article
Source: Danske Bank
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Europe
1. Will the SNB rate hikes lag the ECB?
• Pantheon Macroeconomics:
Source: Pantheon Macroeconomics
• Barclays:
Source: Barclays Research
The Swiss franc outperformed other European currencies last week.
The 2-year yield hit the highest level in over a decade.
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2. Norway’s underlying inflation continued to climb last month.
3. Sweden’s rising inventories and record-low consumer confidence is not a good mix.
Source: @MikaelSarwe
4. European countries reduced their reliance on Russian natural gas in the first half of the year.
Source: @financialtimes Read full article
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China
1. Bank loan growth was softer than expected last month.
But total credit surprised to the upside.
The money supply expansion continues to improve.
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2. Manufacturing jobs were rising despite the pandemic but have recently started to lose steam.
Source: Gavekal Research
Hiring in the service sector has been weak, albeit with marginal improvement in recent months.
Source: Gavekal Research
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3. Home purchase intention could improve as mortgage rates decline.
Source: Alpine Macro
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Emerging Markets
1. Brazil’s inflation has been moderating.
2. But Chile’s CPI climbed above 14%.
• Chile’s trade balance has been deteriorating as imports surge.
• FX reserves are rapidly returning to pre-COVID levels.
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3. Mexico’s core CPI is above 8%.
Here is the biweekly index.
Separately, Mexico’s factory output remains robust.
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4. South Africa’s business confidence is rolling over.
Manufacturing output remains soft.
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5. Next, we have some performance data from last week.
• Currencies:
• Domestic bond yields:
• Equity ETFs:
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Commodities
1. Commodity trading has been profitable for banks this year.
Source: Reuters Read full article
2. Here is last week’s performance across key commodity markets.
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Energy
1. For now, Russian natural gas flows via Ukraine are holding, even as Nord Stream flows have been halted.
How long will this last?
Source: @TheTerminal, Bloomberg Finance L.P.
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2. Open interest in US crude oil futures has been trending lower.
Source: @WSJ Read full article
3. This chart shows the OPEC+ fiscal breakeven crude oil prices.
Source: Longview Economics
4. Finally, we have US electricity generation by source.
Source: @EIAgov
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Equities
1. Short-covering gave stocks a boost last week.
2. The stalling US dollar rally was also a tailwind for stocks.
Source: Evercore ISI Research
3. The S&P 500 is in a wedge pattern.
4. The S&P 500 dividend yield increasingly lags international peers.
Source: J.P. Morgan Asset Management
5. S&P 500 dividend growth has massively outpaced inflation since the financial crisis.
Source: Jack Ablin, Cresset Wealth Advisors
6. A majority of companies have been providing negative Q3 EPS guidance.
Source: @FactSet Read full article
This chart shows EPS growth by sector since 1995.
Source: Citi Private Bank
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7. Tech outflows accelerated in recent weeks.
Source: @WSJ Read full article
Source: BofA Global Research
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8. Next, we have some performance data from last week.
• Sectors:
• Equity factors:
• Thematic ETFs:
• Largest tech firms:
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Credit
1. High-yield outflows have been extreme.
Source: Deutsche Bank Research
But we finally got some inflows last week.
Source: Variant Perception
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2. Business loan growth turned negative last week.
Source: @ANZ_Research
We could see further declines in the months ahead.
Source: Variant Perception
Source: Citi Private Bank
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3. Here is the distribution of corporate sector liabilities in the largest economies.
Source: RIETI Read full article
4. Finally, we have last week’s performance data by asset class.
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Rates
1. MBS funds saw significant outflows last week, continuing the trend we’ve seen much of the year.
Source: EPFR Global Navigator
2. Mortgage refi activity has declined sharply. As a result, MBS debt on Fed’s balance sheet will take much longer to amortize, slowing QT.
Source: Deutsche Bank Research
3. Global government bonds have underperformed other types of debt.
Source: @GarfieldR1966, @markets Read full article
4. Yield curve inversions tend to precede the end of Fed tightening.
Source: JP Morgan Private Bank
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Global Developments
1. The global 60% equity/40% bond ratio remains challenged, especially given recent market swings.
Source: MRB Partners
2. Barclays downgraded its global GDP growth estimate while boosting inflation forecasts.
Source: Barclays Research
3. China’s tumbling PPI will help ease global price pressures.
Source: Pantheon Macroeconomics
4. Next, we have some DM performance data from last week.
• Trade-weighted currency indices:
• Bond yields:
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Food for Thought
1. Restaurant reservations in select states:
Source: @ANZ_Research
2. The most popular fast food brands:
Source: Visual Capitalist Read full article
3. Shrinkflation:
Source: Morning Consult Read full article
4. US life expectancy trends (3 charts):
Source: @WSJ Read full article
Source: Centers for Disease Control and Prevention
Source: Centers for Disease Control and Prevention
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5. No areas of record cold in 2022:
Source: @ZLabe, @BerkeleyEarth Read full article
6. Local vs. national problems:
Source: YouGov Read full article
7. Kings and queens of England:
Source: The Economist Read full article
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