The Daily Shot: 12-Oct-22
• The United States
• The United Kingdom
• The Eurozone
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Energy
• Equities
• Alternatives
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The NFIB small business optimism index edged higher in September.
However, the stock market weakness this month will be a drag on the NFIB indicator, which tends to lag equity performance.
Source: Pantheon Macroeconomics
• Sales expectations improved.
• Inventories are no longer tight.
• Companies still struggle to fill job openings.
• Fewer companies plan to boost compensation, …
… and prices.
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2. Inventory-to-sales ratios continue to climb as shortages ease (2 charts).
Source: III Capital Management
Source: @WSJ Read full article
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3. Next, we have some updates on inflation.
• Nomura sees the September month-over-month CPI increase at 0.4%. Housing continues to dominate the US CPI.
Source: Nomura Securities
• Easing supply bottlenecks point to slowing core goods inflation.
Source: Nomura Securities
Source: Alpine Macro
But supply-driven improvements won’t be enough for the Fed to “pivot.” The central bank will want to see “convincing” evidence of falling underlying inflation.
• Stong wage growth will keep the core services CPI elevated.
Source: Nomura Securities
• China is exporting disinflation (2 charts), …
Source: @PatrickKrizan
Source: Pantheon Macroeconomics
… as the nation’s producer prices decline sharply.
Source: PGM Global
• US consumer behavior does not signal inflationary mentality.
Source: @lmuehlen, @Claudia_Sahm, @IMKFlash
• Longer-term inflation expectations ticked higher with gasoline prices.
Source: Federal Reserve Bank of New York
• Rent inflation has been the highest in the “outer-ring” suburbs.
Source: Apartment List
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4. The Mortgage News Daily mortgage rate index is back above 7%.
Source: Mortgage News Daily
• Mortgage payments based on the median home price continue to surge.
Source: @TheTerminal, Bloomberg Finance L.P.
• Mortgage credit availability is at the lowest level in nearly a decade, according to Mortgage Bankers Association.
Source: MBA
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5. Barclays’ financial conditions index shows the tightest reading in two decades.
Source: Barclays Research
Here is Goldman’s financial conditions index.
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The United Kingdom
1. The BoE’s bond market intervention will end this Friday, which shocked global markets.
Source: @financialtimes Read full article
Source: @RobinWigg
• The volatility in inflation-linked gilts has been extreme.
Source: @financialtimes Read full article
Distorted by the BoE, forward inflation expectations tumbled.
• Debt issuance is expected to hit extreme levels.
Source: Simon White, Bloomberg Markets Live Blog
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2. Next, we have some updates on the labor market.
• Payrolls climbed in September.
• The unemployment rate is at multi-decade lows.
• Increased corporate borrowing costs point to layoffs ahead.
Source: Pantheon Macroeconomics
• Job vacancies declined again.
• Labor shortages persist.
Source: ING
• Labor inactivity climbed in recent months (2 charts).
Source: ING
Source: Pantheon Macroeconomics
• Wage growth remains elevated.
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3. Rate hike expectations have surged.
Source: Simon White, Bloomberg Markets Live Blog
Here is a forecast from Fitch Ratings.
Source: Fitch Ratings
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The Eurozone
1. Bund yields continue to climb.
2. Italian industrial production surprised to the upside in August.
Source: Reuters Read full article
But the PMI data point to weakness ahead.
Source: Pantheon Macroeconomics
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3. The Italy-Germany bond spread tightened sharply on Germany’s support for joint EU debt (to ease the energy crisis).
Source: Bloomberg Read full article
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Japan
1. The yen continues to weaken despite Japan’s intervention, with the dollar-yen breaking above the 145 resistance level.
2. The Economy Watchers index edged lower last month.
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Asia – Pacific
1. South Korea’s central bank hiked rates by 50 bps as inflation worsens.
2. Taiwan Semiconductor hasn’t been this cheap since 2015 as demand slumps.
3. New Zealand’s home sales remain depressed.
4. Next, we have the proportion of the population aged 65 and above in select countries.
Source: Arcano Economics
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China
1. Loan growth surged last month, …
… as the central bank injected liquidity into the banking system.
Source: Bloomberg Read full article
• Aggregate financing was strong as well, boosted by government debt issuance.
• Growth in the broad money supply edged lower.
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2. Developers have relied on pre-sales and advance payments from homebuyers for a significant portion of their financing.
Source: BCA Research
3. This chart shows China’s trade with Russia.
Source: @RobinBrooksIIF
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Emerging Markets
1. Russia’s current account balance is off the highs but remains elevated.
2. Hungary’s CPI hit 20%.
Bond yields are surging.
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3. South Africa’s manufacturing output improved in August.
4. Vietnam’s vehicle sales remain robust.
5. Chile’s trade deficit is still elevated.
Copper exports have been soft.
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6. EM equities still appear cheap relative to the US and other developed markets.
Source: Alpine Macro
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Energy
1. Here is a look at LNG import growth drivers.
Source: @BloombergNEF Read full article
Asia is the world’s key LNG buyer, while the US, Australia, and Qatar are major exporters of LNG.
Source: Deutsche Bank Research
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2. Energy companies’ cash flow surged this year, diverging from CapEx.
Source: @EIAgov
3. US oil refinery capacity remains stretched.
Source: BCA Research
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Equities
1. US equities have been increasingly driven by macro events. The BoE announced that the gilt market intervention ends this Friday, sending the pound and the S&P 500 lower.
2. US inflation surprises have been unprecedented.
And the stock market has become very sensitive to inflation surprises.
Source: Barclays Research
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3. The Nasdaq drawdown is now the highest since the financial crisis, …
… with the latest weakness driven by semiconductors.
• Semiconductor earnings expectations continue to move lower.
• The Nasdaq Composite is testing support.
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4. The Russell 2000 index is also at support.
5. The S&P 500 forward PE ratio is nearing 15x …
… and 12x, excluding the tech mega-caps.
Source: Alpine Macro
With stock valuations excluding the largest companies becoming attractive, the equal-weight index has been outperforming recently.
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6. The S&P 500 is at the lower end of the bear-market historical range.
Source: Simon White, Bloomberg Markets Live Blog
7. Historically, the S&P 500 has risen one year after midterm elections.
Source: Deutsche Bank Research
8. Equity market implied correlations have been moving higher.
9. The VIX curve is now heavily inverted.
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Alternatives
1. Despite various market headwinds this year, the average hedge fund performance across strategies is relatively flat.
Source: Goldman Sachs
• Managed futures, macro, and multi-strategy funds are in the lead in terms of performance this year, while long/short funds continue to struggle.
Source: Goldman Sachs
• Equity hedge funds’ favorite short positions have been outperforming longs this week.
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2. Here is a look at public and private market correlations.
Source: J.P. Morgan Asset Management
3. There is still plenty of dry powder (committed but unallocated capital) within US venture capital. Still, some funds are overallocated, and investors are proceeding with caution as valuations drop, according to PitchBook.
Source: PitchBook Read full article
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Credit
1. Debt financing costs for US companies keep climbing, hitting the highest level since 2009.
2. CLO trading activity surged in recent weeks.
Source: @WSJ Read full article
AAA CLO debt spreads have been widening.
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3. Merrill’s private clients have started moving back into bonds.
Source: BofA Global Research
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Rates
1. The drawdown in longer-dated Treasuries has been extreme.
2. On a mark-to-market basis, the Fed’s debt portfolio is in the red.
Source: @hussmanjp
This chart shows the Fed’s earnings remittances due to the US Treasury.
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3. Treasury term premium should be higher.
Source: Deutsche Bank Research
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Global Developments
1. The OECD leading indicator continues to sink.
Metals prices point to further deterioration in global factory activity.
Source: Danske Bank
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2. The IMF continues to downgrade its GDP growth forecasts.
Source: Statista
Source: IMF Read full article
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3. This chart shows the number of central banks that target inflation.
Source: UN Read full article
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Food for Thought
1. Social media platform use and news consumption:
Source: Pew Research Center Read full article
2. Commonly used P2P payment apps:
Source: LendingTree Read full article
• Money transfer mistakes and scams by generation:
Source: LendingTree Read full article
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3. Payloads launched into space:
Source: Statista
4. Access to paid sick days:
Source: EPI Read full article
5. The world’s missing women:
Source: Our World in Data, Arcano Economics
6. Concerns about issues in US public schools:
Source: @YouGovAmerica Read full article
7. What are people doing when ads play?
Source: @CivicScience
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