The Daily Shot: 21-Sep-22
• Global Developments
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Equities
• Rates
• Food for Thought
Global Developments
1. The recent Ukrainian territorial gains prompted Putin to escalate the conflict.
Source: Reuters Read full article
The euro dropped. Gold and oil prices are higher. Surprisingly, US stock futures are up.
The US dollar (trade-weighted index) hit a two-decade high.
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2. It’s a busy week of central bank meetings. Plenty of rate hikes coming up …
Source: Deutsche Bank Research
3. Recession fears will dampen capital investment.
Source: Numera Analytics
4. Global debt declined for the first time since 3Q 2018.
Source: IIF
5. This chart shows the distribution of households’ financial assets in the largest economies.
Source: RIETI Read full article
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The United States
1. Housing starts were stronger than expected, boosted by a surge in multifamily construction.
Source: LBM Journal Read full article
Ongoing declines in rental vacancy rates are supporting multifamily housing.
Source: @WSJ Read full article
• Construction permits were more subdued.
Multifamily permits have been outpacing single-family housing.
Source: Wells Fargo Securities
• There is trouble ahead for residential constriction.
Source: Piper Sandler
• Single-family rents have peaked.
Source: CoreLogic
• Single-family cap rates are too low relative to Treasury yields. Property prices will have to come down to boost cap rates.
Source: @nickgerli1
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2. The GDPNow model now shows 0.3% GDP growth in the current quarter.
Source: @AtlantaFed Read full article
The weakness is driven by softer consumer spending and falling residential investment.
Source: Bloomberg
However, many economists are more optimistic about growth in the current quarter.
• Pantheon Macroeconomics sees firmer consumption and tumbling imports boosting growth.
Source: Pantheon Macroeconomics
Imports are dropping as inventories recover.
Source: Pantheon Macroeconomics
• Here is a forecast from Capital Economics.
Source: Capital Economics
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4. Consumers expect to cut spending on non-essential items.
Source: Federal Reserve Bank of New York
5. US port congestion has shifted (in part) to the East Cast.
Source: ING
6. Bank deposits declined sharply last quarter.
Source: @WSJ Read full article
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Canada
1. The CPI report was a bit softer than expected.
• Core inflation measures have peaked.
• The housing market is cooling, which is helping to ease inflationary pressures.
Source: Numera Analytics
Source: Scotiabank Economics
• Energy costs are also lower.
Source: Oxford Economics
• But food inflation keeps surging.
Source: Scotiabank Economics
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2. The Canadian dollar resumed its decline vs. USD after the CPI report.
Bond yields edged lower.
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3. Home prices are falling quickly.
Source: @quinngreg
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4. This chart shows the percentage of youth in Canada’s manufacturing sector.
Source: Visual Capitalist Read full article
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The United Kingdom
1. Gilt yields continue to surge.
2. Mortgage pain is coming as loans reset at higher rates.
Source: Pantheon Macroeconomics
3. Migration has been driving the UK population growth.
Source: @financialtimes Read full article
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The Eurozone
1. Germany’s producer price report was a shocker.
The surprise came from electricity prices, …
… driven by unprecedented gains in the cost of natural gas.
Source: Barclays Research
• The PPI excluding energy has been moderating.
Source: Destatis Read full article
But many non-energy PPI components keep rising on a year-over-year basis.
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2. The energy shock will lead to stagflation.
Source: Barclays Research
Germany and Italy are more exposed (2 charts).
Source: Barclays Research
Source: PGM Global
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3. The Eurozone current account is deep in deficit territory, driven by the energy trade deficit.
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Europe
1. Sweden’s Riksbank shocked the markets with a 100 bps rate hike.
The central bank boosted its rate trajectory projection and the CPI forecast.
Source: ING
• Bond yields jumped.
But the krona continued to weaken (chart shows the euro gaining against the krona).
• The market has repriced rate expectations.
Source: Scotiabank Economics
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2. Poland’s industrial output is holding up.
Source: ING
3. It’s been a tough year for Europe’s IPO market. Porsche’s IPO will be one of the largest European public listings in years.
Source: @WSJ Read full article
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Japan
1. Is the dollar-yen at 145 Japan’s line in the sand?
Source: barchart.com
Source: Bloomberg Read full article
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2. The PPI – CPI divergence points to margin pressures for Japanese firms.
Source: ING
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Asia – Pacific
1. South Korea’s exports have been slowing.
2. Taiwan’s export orders are holding at last year’s levels.
The Taiwan dollar continues to tumble vs. USD.
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China
1. The renminbi remains under pressure despite the PBoC’s support.
2. Chinese companies raised most of their IPO funds in mainland markets this year.
Source: Morgan Stanley Research; @SofiaHCBBG
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Emerging Markets
1. Russian stocks are down sharply as Putin escalates the conflict.
2. The current drawdown in the MSCI EM Equity Index is in line with its historical average.
Source: PGM Global
Negative earnings revisions are spread across value and growth sectors. Industrials is the only sector with positive earnings upgrades this year, driven by shipping and marine transport stocks, according to PGM Global.
Source: PGM Global
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3. Financial conditions are tighter in emerging versus developed markets. That’s partly because many EM central banks raised rates earlier than advanced economies.
Source: Capital Economics
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Cryptocurrency
1. It’s been a tough month for cryptos so far, although XRP is outperforming (possibly related to a pump scam).
Source: FinViz
Source: CoinTelegraph Read full article
It is still unclear if XRP is a security, but we could find out soon.
Source: CoinDesk Read full article
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2. The total crypto market cap is back below $1 trillion.
3. 69% of altcoins have outperformed bitcoin over the past three months. It is no longer “altcoin season.”
Source: Blockchain Center
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Equities
1. Where will the S&P 500 be a year from now? Here is a survey from Evercore ISI.
Source: Evercore ISI Research
2. What are the key drivers of depressed investor sentiment?
Source: S&P Global PMI
Source: S&P Global PMI
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3. Will we get a post-expiration rebound?
Source: Chris Murphy, Susquehanna International Group
4. The current bear market is consistent with other recession-related drawdowns.
Source: Jack Ablin, Cresset Wealth Advisors
Are we in a cyclical selloff?
Source: Jack Ablin, Cresset Wealth Advisors
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5. Long/short hedge funds continue to cut net exposure to stocks.
Source: Deutsche Bank Research
6. How are fund managers positioned across sectors?
Source: BofA Global Research
7. The SOX semiconductor index is at support.
h/t Evercore ISI Research
8. Demand for out-of-the-money protection has been soft.
Source: S&P Dow Jones Indices
9. Stock buybacks have reduced the share count of the S&P 500 by about 9% over the last decade. Buybacks helped avoid share dilution that results from stock-based compensation.
Source: Yardeni Research
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Rates
1. Real yields keep climbing.
2. It’s been decades since we’ve seen such a sharp increase in the 2-year Treasury yield.
Source: S&P Dow Jones Indices
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Food for Thought
1. Food inflation-at home and away from home:
Source: PGM Global
2. Rail miles by state:
Source: Bloomberg Read full article
3. Student-teacher ratios:
Source: Statista
4. Climate tipping points:
Source: The Guardian Read full article
5. Chinese travelers avoiding the US:
Source: @axios Read full article
6. Publishers’ reach on social media:
Source: @axios Read full article
7. UK prime ministers during Queen Elizabeth’s reign:
Source: @financialtimes Read full article
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