The Daily Shot: 20-Dec-22
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. Let’s begin with the housing market.
• Homebuilder sentiment came close to the COVID-shock lows this month.
But sales expectations edged higher.
• US homeowners have relatively low exposure to interest rates.
Source: KKR Global Institute
• Housing inventories are still tight.
Source: realtor.com
• It takes a bit longer to sell a house than last year, but the number of days on the market depends on local inventories.
Source: realtor.com
• Underwater mortgages will be less likely in the current housing downturn.
Source: @WSJ Read full article
• Housing market pain was visible in last month’s retail sales.
Source: Wells Fargo Securities
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2. Next, we have some updates on inflation.
• Rent inflation continues to moderate.
Source: @axios Read full article
• Wage growth is slowing.
Source: Hiring Lab Read full article
• This chart shows the NY Fed’s UIG inflation measures.
Source: Federal Reserve Bank of New York
• Slower growth in the broad money supply could signal softer inflation ahead.
Source: Chart and data provided by Macrobond
• Supply-driven components of inflation will be in negative territory in 2023 (on a year-over-year basis), according to a model from Alpine Macro.
Source: Alpine Macro
• Retail gasoline prices are 5% below the levels we saw 12 months ago.
• Here is the Citi Inflation Surprise Index.
• The US inflation swap curve (market-based inflation expectations) continues to flatten.
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3. What signals will we get from the yield curve as the economy enters a recession?
Source: Simon White, Bloomberg Markets Live Blog
4. This chart shows the drivers of slower growth in 2023, according to KKR.
Source: KKR Global Institute
5. Funded ratios for private defined benefit pension funds have improved markedly in the pandemic era.
Source: JP Morgan Research; III Capital Management
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Canada
1. Consumer confidence edged higher again last week.
2. Home prices have been down for five months in a row.
3. Retail sales kept improving last month, according to Scotiabank.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
4. Producer price inflation is off the highs but remains elevated.
5. Canada has more fiscal room than other advanced economies.
Source: Oxford Economics
6. Finally, we have some data on Canada’s firearm-related violent crime.
Source: Statistics Canada Read full article
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The United Kingdom
1. The CBI industrial orders report was a bit better than expected.
Price gains remain elevated.
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2. Gilt yields have been rising.
Source: Tradeweb
3. Economists continue to downgrade UK’s labor force participation forecasts.
Source: ONS Read full article
4. Flu-related hospitalizations have exceeded COVID.
Source: Statista
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The Eurozone
1. Let’s begin with Germany.
• The Ifo expectations index improved again this month.
Source: ifo Institute
• Uncertainty remains elevated.
Source: Deutsche Bank Research
• The PMI data continues to signal a recession.
Source: Pantheon Macroeconomics
Here is a forecast from Deutsche Bank.
Source: Deutsche Bank Research
• Germany has a tough time assimilating migrants into the labor force.
Source: @WSJ Read full article
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2. Bund supply is expected to increase next year.
Source: Goldman Sachs
• Last week saw the fourth-largest absolute spread change between 10-year Treasuries and Bunds. Deutsche Bank expects the spread to compress as the Fed is closer to a pivot than the ECB.
Source: Deutsche Bank Research
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3. The euro-area trade deficit narrowed as energy prices fell.
4. How exposed are euro-area homeowners to higher rates?
Source: Wells Fargo Securities
5. Construction output remained elevated in October.
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Japan
The BoJ shocked the markets by widening the 10-year JGB yield band to 50 bps from 25 bps. This is a form of monetary tightening.
Source: Reuters Read full article
• The 10yr JGB yield jumped by most in nearly two decades.
• Here is the yield curve.
• The yen rallied (chart shows USD falling vs. JPY).
• Stocks fell in Japan and globally.
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Asia – Pacific
1. Australian yields jumped with JGBs.
2. Australia faces housing shortages (2 charts).
Source: Reuters Read full article
Source: Reuters Read full article
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3. New Zealand’s consumer and business confidence has collapsed.
Source: @tracywwithers, @markets Read full article
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China
1. China’s exports have been revised lower.
Source: Arcano Economics
2. The World Economics SMI report showed an accelerating contraction in China’s business activity this month as confidence slumps.
Source: World Economics
3. China lags behind other Asian countries in COVID booster shots.
Source: Pictet Wealth Management
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Emerging Markets
1. ANZ Research expects Asia ex-China growth differentials to rise, led by India and ASEAN countries. (2 charts)
Source: @ANZ_Research
Source: @ANZ_Research
Interest rate differentials in most Asian countries are at their narrowest level in more than a decade.
Source: @ANZ_Research
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2. Below are Wells Fargo’s forecasts for EM policy rates.
Source: Wells Fargo Securities
3. The ruble hit the lowest level since May.
4. Argentina’s exports remain at multi-year highs.
5. EM local debt spreads are narrowing.
Source: BlackRock Investment Institute
6. EM equities have underperformed year-to-date.
Source: Oxford Economics
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Cryptocurrency
1. Bitcoin could not sustain the move above $17k.
But much will depend on the stock market.
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2. Crypto funds saw outflows last year, driven by bitcoin products (2 charts).
Source: CoinShares Read full article
Source: CoinShares Read full article
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3. The BTC/ETH price ratio is holding long-term support. A breakout could signal risk-off conditions.
Source: @StocktonKatie
4. Binance’s net outflows hit around $6 billion last week.
Source: Reuters Read full article
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Commodities
1. The slowdown in global demand points to weaker commodity prices.
Source: MRB Partners
2. What drove commodity outflows this year?
Source: Goldman Sachs
According to Goldman, capital is expected to return to commodity funds next year.
Source: Goldman Sachs
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Energy
1. European natural gas prices declined sharply in recent days amid ample supplies.
2. This infographic shows petroleum products made from a barrel of crude.
Source: @EIAgov Read full article
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Equities
1. Earnings expectations are not fully pricing in the recession risk.
Source: BlackRock Investment Institute
Here is Alpine Macro’s model estimate for S&P 500 earnings per share.
Source: Alpine Macro
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2. There is downside risk to the global stock/bond ratio as economic growth weakens.
Source: MRB Partners
3. Value funds saw substantial inflows last week.
Source: BofA Global Research
4. Margin debt has declined markedly this year.
Source: Simon White, Bloomberg Markets Live Blog
5. Cyclicals continue to lag defensives as the market braces for a recession.
6. The SPDR Industrial sector ETF (XLI) is outperforming the S&P 500.
Source: Aazan Habib, Paradigm Capital
7. Dividend growers are holding on to their outperformance.
8. Companies with high operating leverage underperformed in recent days.
9. The S&P 500 has diverged from VIX.
Source: @TheTerminal, Bloomberg Finance L.P.
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Credit
1. Are HY bonds attractive?
Source: KKR Global Institute
The market for HY bonds is undersupplied.
Source: Goldman Sachs; III Capital Management
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2. Here is a look at distressed hedge fund performance after difficult periods for high-yield bonds.
Source: Citi Private Bank
3. Credit spreads have been highly correlated to rate vol.
Source: Deutsche Bank Research
4. Someone has been using the Fed’s discount window. Interbank liquidity could be getting tight going into the year end.
Source: @tracyalloway Read full article
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Global Developments
1. This chart shows year-to-date returns across select asset classes.
Source: Alpine Macro
2. Corporate debt and equity capital raising slowed sharply this year.
Source: KKR Global Institute
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Food for Thought
1. Largest copper producers:
Source: Visual Capitalist Read full article
2. Number of months to build a home in the US:
Source: @TIME
3. The year of follow-ups at the box office:
Source: @chartrdaily
4. Median age of Americans buying a primary residence:
Source: @PostGraphics Read full article
5. Projections for prime-age population:
Source: @indeed, @Glassdoor
6. 2024 GOP presidential nomination probabilities in the betting markets:
Source: @PredictIt
7. Christmas songs on Spotify:
Source: @chartrdaily
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