The Daily Shot: 14-Dec-22
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The November CPI report came in below expectation as inflation moderates.
Here are the contributions to the monthly CPI changes.
Source: @TheTerminal, Bloomberg Finance L.P.
• Gains in the core CPI were the lowest since August 2021, …
… and were negative when shelter is excluded.
Source: Calculated Risk
• The core goods CPI was negative again.
The core services CPI remains elevated, …
… driven by housing (2 charts).
• Below is the CPI on a year-over-year basis.
Source: Oxford Economics
• Next, we have some additional trends from the CPI report.
– Vehicles:
– Hospital services:
– Airline fares vs. jet fuel inflation:
Source: Pantheon Macroeconomics
• While the CPI slowdown is good news, absolute price levels have risen massively over the past couple of years, putting pressure on US households.
Source: Mizuho Securities USA
• We will have more data on inflation tomorrow.
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2. Next, let’s take a look at market reactions to the CPI report.
• Bond yields:
– The Treasury curve:
– By the way, was the CPI report leaked?
Source: @TheTerminal, Bloomberg Finance L.P.
Source: @readep, @gardnerakayla, @markets Read full article
• Equities:
• The dollar:
• Gold:
• Copper:
• Cryptocurrencies:
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3. The implied terminal rate declined, with the market expecting the Fed to ease up on rate hikes (2 charts). Are the markets too optimistic about the Fed’s intentions?
February is now looking more like 25 bps rather than 50 bps.
Source: @ANZ_Research
By the way, here is a survey result from Deutsche Bank on the terminal rate.
Source: Deutsche Bank Research
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4. The inflation curve has been flattening.
Source: Quill Intelligence
5. The FOMC is expected to boost its projections for unemployment. The forecast track record isn’t great.
Source: TS Lombard
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6. The NFIB small business sentiment edged higher last month.
• Indicators of current earnings and sales expectations improved.
• Businesses are now trying to cut inventories.
• Compensation and compensation plans indicators remain elevated.
• Job openings are still hard to fill but getting easier, …
… which points to lower job openings ahead.
Source: Yardeni Research
• Small businesses are cutting back on hiring plans.
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The United Kingdom
1. The November payrolls growth topped expectations.
• The unemployment rate edged higher over the August – October period.
• Wage growth is above 6%.
• Vacancies are staring to moderate.
Source: Arcano Economics
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2. Danske Bank expects no rate cuts next year as inflation remains elevated.
Source: Danske Bank
3. Inflation expectations remain near multi-year highs.
Source: Pictet Wealth Management
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The Eurozone
1. Germany’s ZEW expectations index climbed further this month as fears of an energy crisis this winter subside.
The EUR/USD one-month implied vol has been falling rapidly.
However, euro-area economic uncertainty remains elevated.
Source: Deutsche Bank Research
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2. Italy’s industrial production declined again.
3. How will markets react to the ECB’s decision? Below are some scenarios from ING.
Source: ING
Here is the market pricing for the ECB terminal rate.
Source: ING
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4. Inventories have been rising quickly.
Source: Longview Economics
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Europe
1. Norway’s GDP declined in October, but the economy remains robust.
2. How have real housing prices changed over the past few years?
Source: Gavekal Research
This scatterplot shows housing valuation changes over the past decade.
Source: Gavekal Research
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3. Next, we have renewables capacity additions in the EU.
Source: Fitch Ratings
4. How important is manufacturing to each country’s economy?
Source: @financialtimes Read full article
5. Finally, we have traffic fatalities by country.
Source: Datawrapper
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Japan
1. The Tankan report showed manufacturing conditions and outlook moving lower.
Services activity remains strong, but the outlook is sputtering.
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2. Banks are flush with cash, which could support lending.
Source: BCA Research
Credit demand has been rising.
Source: BCA Research
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Emerging Markets
1. Brazil’s services output declined in October but remains well above pre-COVID levels.
Brazil’s stocks came under pressure in recent days.
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2. LatAm fund managers are turning more gloomy, according to a survey from BofA.
Source: BofA Global Research
3. Turkey’s industrial production improved in October.
4. South Africa’s mining output continues to deteriorate.
But business sentiment is holding up.
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5. This chart shows distressed EM sovereigns’ debt composition.
Source: Oxford Economics
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Cryptocurrency
1. The ETH/BTC price ratio has stalled over the past month, capped below long-term resistance.
2. Crypto funds saw minor inflows last week led by long bitcoin products.
Source: CoinShares Read full article
Canadian crypto funds attracted the most capital last week.
Source: CoinShares Read full article
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3. Total liquidity processed by Solana plummeted nearly 96% during the FTX fiasco.
Source: @DelphiDigital
The SOL/BTC price ratio collapsed to its lowest level since July 2021.
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4. This chart shows the total number of crypto tokens with a value of over $1 billion (“unicorns”).
Source: Blockchain Center
5. Binance, the largest crypto exchange, faces significant outflows.
Source: Reuters Read full article
The Binance token has underperformed.
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Commodities
1. Fund managers are underweight commodities relative to bonds.
Source: BofA Global Research
2. Brazil’s soybeans crop forecast signals an oversupplied market next year.
Source: S&P Global Commodity Insights
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Energy
1. Slower economic activity could put further downward pressure on oil prices.
Source: Capital Economics
2. Falling oil prices could make it more challenging for Russia to keep financing its war.
Source: Princeton Energy Advisors
3. US natural gas demand is about to surge.
Source: S&P Global Commodity Insights
Source: NOAA
Prices have been rising.
Back to Index
Equities
1. The S&P 500 downtrend resistance held after the CPI report.
2. Market swings around CPI reports have been getting larger.
Source: @WSJ Read full article
4. A survey of US equity investors by S&P Global shows deteriorating risk appetite (diverging from the BofA fund manager survey).
Source: S&P Global Market Intelligence
5. The correlation between stocks has moderated over the past month.
Source: Evercore ISI Research
6. Next, we have some sector updates.
• Buyback announcements:
Source: Deutsche Bank Research
• Fund flows:
Source: Deutsche Bank Research
• Fund managers’ overweight/underweight levels by sector:
Source: BofA Global Research
• Sector performance during periods of high and falling inflation:
Source: Goldman Sachs
• Sector outlook:
Source: S&P Global Market Intelligence
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7. The percentage of days with the S&P 500 down and VIX also down hit a multi-decade high this year.
Source: Tier1 Alpha
8. The best-performing regions of the last decade often disappoint in the following decade.
Source: Taunus Trust
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Credit
Short-term US corporate bond yields are on par with the S&P 500’s earnings yield for the first time since the financial crisis.
Source: State Street Global Advisors Read full article
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Rates
1. The 10-year Treasury yield is testing support.
Source: @TheTerminal, Bloomberg Finance L.P.
2. The rates/equities implied vol gap remains wide.
Source: @themarketear
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Global Developments
1. The dollar index (DXY) is testing long-term support.
The upside appears limited, given overbought readings.
Source: Evercore ISI Research
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2. Bloomberg article mentions of “recession” peaked earlier this year. That could signal a trough in global manufacturing PMIs …
Source: BCA Research
… and maybe a peak in the dollar.
Source: BCA Research
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3. US CPI, FOMC, and ECB days have seen outsized market moves this year.
Source: Deutsche Bank Research
4. Labor markets remain very tight in advanced economies.
Source: JP Morgan Research; @SamRo
5. The Oxford Economics’ 2023 GDP forecasts are well below consensus.
Source: Oxford Economics
This chart shows Barclays’ inflation forecasts for 2023.
Source: Barclays Research
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Food for Thought
1. Falling real wages:
Source: Statista
2. Tech layoffs:
Source: Visual Capitalist Read full article
3. Real heating costs in the US:
Source: USAFacts
4. Smaller households, larger homes:
Source: The New York Times Read full article
5. US population aged 50 and older by marital status:
Source: The New York Times Read full article
6. Ukraine’s missile interception rates:
Source: @financialtimes Read full article
7. Carbon reduction plans vs. goals (2 charts):
Source: Barclays Research
Source: Datawrapper
• Investment required for climate action by 2030:
Source: Oxford Economics
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8. Thunderstorm frequency across Europe:
Source: @loverofgeography
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