How does anyone afford to drink at a bar?

The Daily Shot: 11-Nov-22
The United States
Europe
Asia – Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. The CPI report surprised to the downside, suggesting that inflationary pressures are easing.
 

 
The core CPI was closer to Nomura’s estimate than the consensus.
 

 
Core goods prices are falling.
 
Source: JP Morgan Research; @WallStJesus  
 
Housing remains the backbone of the core CPI, …
 
Source: @GregDaco, @EY_US  
 
… as shelter CPI hits a multi-decade high. But shelter inflation was offset by other CPI components in October (shown below).
 

 
These charts provide some additional breakdown information.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Here is the CPI on a year-over-year basis.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Outside of shelter CPI, a number of items signaled slower inflation in October (shown on a month-over-month basis).
 
Core CPI excluding shelter:
 
Source: JP Morgan Research; @WallStJesus  
 
Groceries:
 

 
Apparel:
 

 
Furniture:
 

 
New vehicles:
 

 
Used vehicles:
 

 
Here are the year-over-year trends.
 
Source: @WSJ   Read full article  
 
Hospital services:
 

 
Health insurance:
 

 
The worst news from the inflation report was how expensive it is becoming to get a drink at a bar (2 charts).
 

 
Source: @WSJ   Read full article  
 
We will have more on the CPI report next week.

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2. The rate of shelter inflation is now outpacing wage growth (not sustainable).
 

 
And leading indicators are telling us that rent inflation is slowing rapidly. Here is an estimate of loss to lease.
 
Source: @jayparsons  

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3. Markets reacted sharply to the downside CPI surprise.
 
Stocks:
 

 
The US dollar:
 

 
Treasury yields:
 

 

 
The 10-year/3month portion of the Treasury curve moved deeper into inversion.
 

 
The terminal rate dipped below 5%. Here is the market expectation for the fed funds rate trajectory.
 

 
This chart shows one-year-ahead market expectations versus the actual fed funds rate.
 
Source: JP Morgan Research; @carlquintanilla  

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4. Jobless claims show no signs of loosening in the labor market.
 

 

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5. Retail sales appear to be down on a year-over-year basis in October.
 
Source: Earnest Research  
 
6. Households’ financial obligations ratio remains low.
 
Source: BCA Research  
 
7. The year-over-year change in bank deposits is negative for the first time since the mid-1990s.
 

 
8. The October budget deficit was roughly in line with expectations.
 


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Europe

1. Inflation-linked debt volatility in the UK has been unprecedented.
 
Source: @business, @greg_ritchie   Read full article  
 
2. German industrial gas demand is below its four-year average.
 
Source: Deutsche Bank Research  
 
3. Next, we have some updates on Italy.
 
Industrial production was down in September but is holding at pre-COVID levels.
 

 
Italy’s domestic industrial demand has been robust, driving gross fixed capital formation (GFCF). This could be a source of dependable corporate tax revenue into next year, according to PGM Global.
 
Source: PGM Global  
 
Italy continues to buy a meaningful share of Russian oil exports.
 
Source: @RobinBrooksIIF, @JonathanPingle  
 
Excluding interest payments, Italy was running a budget surplus prior to COVID.
 
Source: @adam_tooze   Read full article  

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4. Sweden’s household consumption could be rolling over.
 

 
5. Norway’s inflation topped expectations.
 

 
Denmark’s CPI continues to surge.
 

 
But the Czech CPI has finally peaked.
 

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6. European funds continue to see outflows.
 
Source: BofA Global Research  
 
7. What are the fiscal costs of Ukrainian refugees?
 
Source: IMF   Read full article  


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Asia – Pacific

1. The yen surged in response to the US CPI report.
 
Source: @DavidInglesTV  
 
2. New Zealand’s factory activity entered contraction territory last month.
 

 
3. Australian supply pressures continue to ease.
 
Source: BIS   Read full article  


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China

1. Stocks surged as Beijing “recalibrates” its Covid Zero policy.
 
Source: @BloombergAsia  
 

 
The renminbi jumped.
 

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2. Bank lending was weaker than expected last month.
 

 
Source: Reuters   Read full article  
 
This chart shows China’s aggregate financing.
 

 
Growth in the broad money supply slowed.
 

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3. More countries have traded with China than the US over the past decade.
 
Source: Alpine Macro  


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Emerging Markets

1. Banxico delivered another jumbo rate hike.
 

 
Wage growth appears to be slowing.
 

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2. Additional weakness in China could weigh on Brazil’s exports. (2 charts)
 
Source: Quill Intelligence  
 
Source: Quill Intelligence  

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3. South Africa’s manufacturing production rebounded in September
 

 
Mining output remains well below pre-COVID levels.
 

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4. Egypt’s inflation will keep rising, following the recent devaluation.
 


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Cryptocurrency

1. It’s been a tough week for crypto, although litecoin (LTC) outperformed.
 
Source: FinViz  
 

 
The LTC/BTC price ratio rallied from support.
 

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2. Solana’s SOL token, backed by Alameda Research (owned by FTX CEO Sam Bankman-Fried), declined by roughly 40% this week.
 

 
3. The total crypto market cap continues to decline after reaching $3 trillion in November 2021.
 

 
4. Here is a full list of companies conducting business with FTX, according to Forbes.
 
Source: Forbes Digital Assets   Read full article  
 
FTX could face US securities-law violations.
 
Source: @WSJ   Read full article  

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4. Bitcoin miners’ margins have collapsed.
 
Source: JP Morgan Research; @themarketear  
 
5. How does the crypto market compare to other bubbles in the past five decades?
 
Source: BofA Global Research  


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Commodities

Gold is breaking out after two months of consolidation.
Source: Aazan Habib, Paradigm Capital  
 


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Energy

1. US natural gas in storage is near the 5-year average, …
 

 
… sending prices lower.
 

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2. US natural gas pipeline capacity is expected to expand significantly over the next few years.
 
Source: Tai Liu, @BloombergNEF   Read full article  
 
3. Energy funds are seeing inflows.
 
Source: BofA Global Research  


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Equities

1. Is the 200-day moving average the next stop for the S&P 500?
 

 
2. Short-covering and massive short-term options bets fueled the rally on Thursday.
 

 
Source: @markets, @luwangnyc   Read full article  
 
Post-IPO stocks (many of which are hated by investors) surged 10%.
 

 
The most beaten-down large-cap (Russell 1000) stocks saw the largest gains.
 
Source: @MichaelKantro  

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3. What percentage of the S&P 500 members are above their 200-day moving average?
 
Source: @bespokeinvest  
 
Here is the share of each sector that is above the 50-day moving average.
 
Source: @bespokeinvest  

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4. Trend-following strategies took a hit on Thursday.
 

 
5. Last month’s spike in S&P 500 stock correlations was in the 95th percentile, which typically precedes higher returns. (2 charts)
 
Source: Denise Chisholm; Fidelity Investments  
 
Source: Denise Chisholm; Fidelity Investments  

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6. Equity risk premium has diverged from high-yield spreads.
 
Source: @dlacalle_IA  
 
7. Stocks tend to struggle after unemployment troughs if inflation is elevated.
 
Source: Goldman Sachs; @WallStJesus  


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Credit

1. Credit markets surged on Thursday in response to the US CPI report.
 

 
Credit default swap spreads tightened sharply.
 

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2. Business loan balances on banks’ balance sheets continue to surge.
 

 
Total loans are hitting record highs.
 


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Rates

1. Treasury market implied volatility tumbled this month.
 

 
2. The 2-year Treasury yield broke below its uptrend from August with declining momentum.
 
Source: Aazan Habib, Paradigm Capital  
 
3. Some short-term T-Bill yields jumped due to crypto-related collateral liquidation, …
 
h/t @Marcomadness2  
 
… as stablecoins came under pressure.
 
Source: CoinMarketCap  


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Global Developments

1. Only a few currencies withstood dollar strength this year.
 
Source: TS Lombard  
 
2. The OECD leading indicator declined again in October.
 

 
3. This chart shows major secular market adjustments in recent decades.
 
Source: BofA Global Research  
 
4. Geopolitical and economic uncertainty remains elevated.
 
Source: Alpine Macro  


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Food for Thought

1. Tech companies’ workforce:
 
Source: Statista  
 
2. Disabled workers in the US:
 
Source: Liberty Street Economics   Read full article  
 
3. US employees’ financial anxiety (based on a survey by MetLife):
 
Source: MetLife   Read full article  
 
4. The risk of dying from influenza in the US:
 
Source: Our World in Data   Read full article  
 
5. Poll performance in Senate races:
 
Source: @WSJ   Read full article  
 
6. Drought strangling the Mississippi:
 
Source: @PostGraphics   Read full article  
 
7. It’s Veterans Day in the United States.
 

 
US longest foreign wars:
 
Source: Statista  
 
Surviving WW-II veterans:
 
Source: The National WWII Museum   Read full article  
 
The military phonetic alphabet:
 
Source: Military.com   Read full article  

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Have a great weekend!


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