The Daily Shot: 09-Nov-22
• The United States
• The Eurozone
• Europe
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. As of 3:30 AM EST, the betting markets indicate that Republicans have flipped the House (as expected).
Source: Election Betting Odds
But Democrats seem to have held the Senate.
Source: Election Betting Odds
Source: @PredictIt
• The debt ceiling battle looms (see comment below from Oxford Economics). And this time, the bond market may not be as forgiving as in the past. The UK gave us a taste of that recently.
Source: Oxford Economics
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2. The NFIB small business sentiment index declined last month.
• The indicator of hiring plans is back inside the pre-COVID range.
• Companies are still struggling to fill job openings.
• The compensation index remains elevated, …
… while the compensation plans index surged, raising concerns about persistent inflationary pressures.
• The share of companies that plan to raise prices increased in October.
• The CapEx plans index remains below pre-COVID levels.
• Inventories are no longer tight.
Source: Wells Fargo Securities
• So far, businesses are not complaining about poor sales.
• Companies expect tighter credit conditions ahead.
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2. Supply pressures continue to ease.
• Container import volume (2 charts):
Source: FreightWaves
Source: @FreightAlley, @dailychartbook
• Port delays:
Source: FreightWaves
• Truckload freight rates:
Source: FreightWaves SONAR
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3. Next, we have a couple of updates on the labor market.
• The LinkedIn hiring index:
Source: LinkedIn’s Economic Graph
• Labor force participation among older Americans:
Source: BlackRock Investment Institute
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4. Rising costs put a strain on discretionary demand.
Source: BofA Global Research; @MichaelAArouet
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The Eurozone
1. The Bund curve has inverted.
2. Euro-area retail sales improved in September.
But consumer financial expectations point to deterioration ahead.
Source: Numera Analytics
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3. The French trade deficit hit a new record.
4. Germany’s electricity prices have declined massively from the peak but remain elevated.
5. How dependent are German companies on China?
Source: @adam_tooze Read full article
6. Durable goods purchase intentions are falling in Finland.
Source: Danske Bank
Finland’s home prices are now flat year-over-year.
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7. The ECB is hiking rates into stagflation.
Source: Capital Economics
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Europe
1. The Swiss central bank continues to tighten liquidity.
2. Norway’s economic growth outlook has weakened.
Source: Danske Bank
3. Sweden’s housing market is in trouble.
Source: @SusanneSpectr
Tight financial conditions point to downside risks for Sweden’s economy.
Source: Nordea Markets
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4. Here is the distribution of energy consumption for space heating.
Source: BCA Research
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Japan
1. Loan growth is accelerating.
2. Here is Japan’s trade balance.
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China
1. The CPI declined more than expected last month.
• But the core CPI held steady.
• Pork inflation is accelerating again.
But it was more than offset by other items.
• Fresh vegetables (a very volatile index):
• Housing:
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2. The PPI is in negative territory.
3. COVID cases continue to climb.
Source: Our World in Data
Source: Reuters Read full article
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Emerging Markets
1. Chile’s inflation is moderating.
2. Brazil’s inflation also continues to ease.
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3. India’s equity markets keep outperforming China’s stocks.
Source: S&P Dow Jones Indices
4. EM Asia stocks are trading at attractive valuations versus developed markets.
Source: Numera Analytics
EM Asia stocks outperform Middle Eastern stocks when oil prices decline – a potential diversification benefit for EM portfolios.
Source: Numera Analytics
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5. Investors continue to exit EM bond funds.
Source: Deutsche Bank Research
This chart shows BoA private clients’ ETF flows.
Source: BofA Global Research
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Cryptocurrency
1. Binance agreed to buy rival exchange FTX. Concerns about liquidity issues at FTX sent crypto markets into a panic.
Source: CoinDesk Read full article
Source: @cz_binance
• CZ “pulled a Musk” on FTX.
• The FTX token crashed.
Source: CoinDesk
• FTX experienced large withdrawals on Tuesday, mainly from Jump Trading and Alameda Research (owned by the CEO of FTX).
Source: CoinDesk Read full article
• FTX led all exchanges in stablecoin outflows on Tuesday as traders quickly liquidated their parked “crypto cash.”
Source: CoinDesk Read full article
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2. There were significant spikes in long BTC liquidations on Tuesday as the crypto’s price fell below $19K.
Source: Coinglass
Bitcoin remains vulnerable despite short-term relief rallies.
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3. Bitcoin’s correlation with equities has broken down.
Source: @danny_kirsch
Bitcoin has also diverged from gold.
Source: @themarketear
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4. Bitcoin’s implied volatility jumped.
Source: @TheTerminal, Bloomberg Finance L.P.
5. Ether is rapidly giving up its outperformance.
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Commodities
Gold sentiment is at extreme lows.
Source: Longview Economics
A breakout for gold?
Source: barchart.com
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Energy
1. European natural gas is in deep contango amid ample supplies.
Source: The Economist Read full article
2. Europe is dominating global LNG demand.
Source: @business, @SStapczynski, @a_shiryaevskaya, @FaseehMangi Read full article
3. US natural gas exports are expected to hit a record high next year.
Source: @EIAgov
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Equities
1. Companies haven’t been particularly concerned about the US midterm elections.
Source: @FactSet Read full article
A midterm election bump ahead?
Source: @isabelletanlee, @StrategasRP, @johnauthers Read full article
The S&P 500 typically trades higher 12 months after midterm elections.
Source: Deutsche Bank Research
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2. Companies with international sales have been outperforming, …
… as the US dollar rally sputters.
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3. S&P 500 Q3 earnings surprises have been below the long-term average of 5%. Cyclical sectors have seen the weakest results so far.
Source: Danske Bank
But sales surprises have been robust. This divergence points to margin pressures.
Source: BofA Global Research
Elevated inventories also signal weaker margins ahead (“PPI trade services”).
Source: Pantheon Macroeconomics
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4. The 2023 revisions have been relatively steep, and there is more to go.
Source: Goldman Sachs; @markets Read full article
5. S&P 500 call option volume remains elevated.
Source: @WSJ Read full article
6. Retail stocks are testing support relative to staples.
Source: Aazan Habib, Paradigm Capital
And industrial stocks are improving relative to staples, indicating short-term risk-on conditions.
Source: Aazan Habib, Paradigm Capital
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7. Forward earnings for semiconductor stocks have not yet troughed.
Source: MRB Partners
8. Here is the dot-com analog. A lost decade ahead?
Source: @AndreasSteno
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Credit
1. AAA CLO debt is cheap relative to corporate bonds.
Source: BofA Global Research
2. Subprime auto ABS spreads have blown out as delinquencies climb.
Source: @markets, @ScottJourno, @ArroyoNieto Read full article
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Rates
1. While the Treasury curve is becoming more inverted in the short end, it has been steepening at the long end.
2. Japan has been a seller of Treasuries.
Source: @jessefelder, @WSJ Read full article
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Global Developments
1. Will the dollar decouple from short-term rates?
Source: Evercore ISI Research
2. The US dollar strength and surging energy prices created a divergence in global terms of trade.
Source: TS Lombard
3. High interest rates play a role in decreasing the amount of cash in circulation.
Source: Deutsche Bank Research
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Food for Thought
1. Early votes:
Source: Statista
2. US political spending by outside groups:
Source: @financialtimes Read full article
3. Americans’ foreign policy concerns:
Source: Visual Capitalist Read full article
4. Going above and beyond at work:
Source: @_constantjo, @business Read full article
5. Labor force participation rates in the US:
Source: Morgan Stanley Research
6. Which states are interested in Metaverse investing?
Source: Softtik Technologies Read full article
7. Using electric toothbrushes:
Source: @CivicScience
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