The Daily Shot: 14-Nov-22
• The United States
• The United Kingdom
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The U. Michigan Consumer Sentiment Index softened this month (coming in below forecasts), with both the current conditions and expectations indices registering declines.
• Consumers increasingly expect a weaker job market.
• Expected changes in business conditions are similar to the GFC lows.
• Households see a deterioration in their balance sheets.
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2. Next, we have some updates on inflation.
• Inflation expectations climbed again this month, raising concerns about price expectations becoming unanchored.
Compounding these concerns, households expect higher incomes ahead.
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• Here are some alternative CPI measures.
– Median CPI:
– Trimmed-mean:
– The NY Fed’s UIG:
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• The core CPI ex-shelter declined last month.
Source: Longview Economics
• Has the core CPI peaked?
– Forecast from Deutsche Bank:
Source: Deutsche Bank Research
– Core CPI vs. small-business price plans:
Source: Capital Economics
This chart shows the headline CPI relative to historical cycles.
Source: Longview Economics
• Retailers’ pricing power continues to weaken as inventories climb.
Source: Evercore ISI Research
• How many CPI sub-categories have increased more in the past three months than in the past 12 months?
Source: TS Lombard
• The charts below show how fast the CPI will decline on a year-over-year basis given different monthly CPI assumptions.
Source: BofA Global Research
Source: @bespokeinvest
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3. Mortgage rates declined sharply last week.
4. Layoff announcements are still relatively low but are trending up.
Source: Evercore ISI Research
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5. The markets have taken the possibility of a 75 bps rate hike in December off the table.
Expectations for February are somewhere between 25 and 50 bps.
Source: @ANZ_Research
Did the markets get ahead of themselves last week based on a single CPI report?
Source: @markets, @Swatisays Read full article
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6. The portions of the Treasury curve tracked closely by the Fed remain inverted.
Source: @ANZ_Research
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The United Kingdom
1. The GDP declined less than expected last quarter, …
… supported by government spending …
… and improved net exports.
But consumer spending and business investment were down.
Business investment remains well below pre-COVID levels.
• Moreover, growth deteriorated in the last month of the quarter.
Manufacturing production held steady in September, …
But services output declined.
• The trade deficit narrowed, but the improvement was minimal when precious metals are excluded.
• The COVID-era GDP recovery still lags other advanced economies.
Source: Pantheon Macroeconomics
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2. Home price appreciation continues to ease.
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Europe
1. Germany’s yield curve remains inverted.
2. Manufacturing surveys show confidence in the ability to pass on high producer prices.
Source: Variant Perception
3. How did European currencies perform relative to the euro last week?
4. European shares are in overbought territory.
5. This chart shows EU tax collections as a share of GDP.
Source: Eurostat Read full article
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Asia – Pacific
1. Japan’s PPI surprised to the upside last week.
2. Australian wheat yields have been climbing.
Source: USDA Read full article
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China
1. Beijing wants the banking system to support property developers.
Source: Reuters Read full article
Property stocks are surging.
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2. The renminbi had the best five days vs. USD in years.
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3. COVID remains a drag on economic activity.
Source: Goldman Sachs
4. Consumers are not keen on spending.
Source: Pantheon Macroeconomics
5. Government spending has declined under Xi Jinping’s leadership.
Source: Alpine Macro
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Emerging Markets
1. It was a challenging week for Brazilian assets (2 charts).
• Here is the evolution of Brazil’s yield curve.
Source: Oxford Economics
• Service sector activity has been strong.
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2. Mexico’s factory output remains robust.
3. Colombia’s retail sales have leveled off.
Manufacturing output is still quite strong.
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4. India’s industrial production is back above last year’s levels.
5 Turkey’s industrial production has been rolling over (driven by weakness in the Eurozone).
But the nation’s retail sales continue to climb.
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6. Next, we have some performance data from last week.
• Bond yields:
• Currencies:
• Equity ETFs:
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Cryptocurrency
1. Concerns about the Crypto.com platform spread over the weekend (after the FTX collapse).
Source: @WSJ Read full article
But bitcoin once again held support just below $16k.
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2. Bitcoin investors have been withdrawing tokens off exchanges, either cashing out or moving to self-custody.
Source: @glassnode
Source: @jessefelder, @FT Read full article
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3. This chart shows the relative share of bitcoin supply in profit and loss, based on the average cost basis among holders.
Source: @glassnode
4. BTC and ETH market liquidity has deteriorated. (2 charts)
Source: @KaikoData
Source: @KaikoData
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5. Solana’s (SOL) open interest on FTX and other exchanges declined during the recent sell-off. Meanwhile, funding rates (the cost to fund long/short positions in the perpetual futures market) have improved.
Source: @KaikoData
The token price is collapsing.
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Commodities
1. Variant Perception expects further weakness for industrial metal prices because of cyclical demand headwinds. (2 charts)
Source: Variant Perception
Source: Variant Perception
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2. Here is last week’s performance across key markets.
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Equities
1. Speculative tech shares surged last week (3 charts).
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2. Dow index futures broke above their short-term downtrend.
Source: Aazan Habib, Paradigm Capital
3. Stock/bond correlations remain elevated.
Stocks moved higher as the rally in bond yields and the dollar paused.
Source: MRB Partners
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4. The divergence between earnings and sales expectations signals shrinking margins ahead.
The looming recession will put further pressure on earnings.
Source: @steve_donze
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5. Retail investors were very risk-averse going into November.
Source: TD Ameritrade
6. Stocks are not pricing in a US recession, which could be a few quarters away, according to an investor survey by BCA Research.
Source: BCA Research
7. This chart shows the S&P 500 returns on CPI release days.
Source: S&P Dow Jones Indices
8. Net call option volume surged after the CPI report.
Source: Deutsche Bank Research
• Here is the change in the S&P 500 implied vol term structure after last week’s CPI report.
Source: @TheTerminal, Bloomberg Finance L.P.
• Realized and implied volatility diverged last week.
Source: @TheTerminal, Bloomberg Finance L.P., h/t Deutsche Bank Research
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9. Next, we have some performance data from last week.
• Sectors:
• Equity factors:
It was a rough week for momentum stocks (on a relative basis).
Source: Morgan Stanley Research; @fkronawitter1
• Thematic ETFs:
• Largest tech firms:
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Credit
1. High-yield funds saw some inflows last week.
Here are the high-yield and investment-grade net flows.
Source: BofA Global Research
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2. This chart shows last week’s performance by asset class.
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Rates
1. The Treasury yield curve inverted earlier and more sharply during this hiking cycle.
Source: Deutsche Bank Research
2. BofA’s private clients flocked into bonds recently.
Source: BofA Global Research
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Global Developments
1. It was a difficult week for the US dollar.
Source: @DavidInglesTV
Is the next stop the 200-day moving average (for DXY)?
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2. Shipping container sales have slowed in recent months.
Source: VesselsValue Read full article
3. Next, we have some performance data from last week.
• Trade-weighted DM currency indices:
• DM yield changes:
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Food for Thought
1. Global semiconductor demand:
Source: Natixis
2. Support for labor unions in the US:
Source: @CivicScience
3. Changing demographics in US exit polls:
Source: BCA Research
4. The likelihood of using Twitter since the takeover:
Source: @CivicScience
5. The flu season is back:
Source: @chartrdaily
6. Being connected to others:
Source: Gallup Read full article
7. Annoying workplace terminology:
Source: LLC.ORG Read full article
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