The Daily Shot: 11-Jan-23
• The United States
• Canada
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. The NFIB small business index surprised to the downside in December.
• CapEx plans are trending lower.
• Hiring plans sank further.
• Fewer firms had trouble filling job openings.
• The percentage of small businesses planning to boost compensation remains elevated.
• The share of companies planning to increase prices is tumbling.
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2. The NFIB report points to further weakness in US manufacturing activity, …
Source: Simon White, Bloomberg Markets Live Blog
… as fewer industries experience growth, …
Source: Economics and Strategy Group, National Bank of Canada
… and factory orders slow.
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3. Next, we have some updates on inflation.
• Nomura expects a softer core CPI print for December, …
Source: Nomura Securities
… dragged lower by core goods.
Source: Nomura Securities
– Morgan Stanley, on the rather hand, sees an increase (similar to consensus).
Source: Morgan Stanley Research
• The NFIB price expectations index (above) points to rapid moderation in the CPI this year. Below are some additional indications.
Source: Chart and data provided by Macrobond
– Nordea’s CPI model:
Source: @MikaelSarwe
– Variant Perception’s model:
Source: Variant Perception
– Forecast from Piper Sandler:
Source: Piper Sandler
• Here is how the current CPI trend compares to previous spikes.
Source: Longview Economics
• Inflation reports have been surprising to the downside.
• The decline in sticky inflation could come at a lag.
Source: Numera Analytics (@NumeraAnalytics)
• Rent inflation continues to ease (2 charts).
Source: Apartment List
Source: Capital Economics
• Wholesale used vehicle prices are down almost 15% from a year ago.
• Weaker fertilizer prices signal lower food inflation ahead.
• Consumer inflation expectations have been easing, …
Source: Arcano Economics
… with remarkably similar trends across income categories.
Source: Federal Reserve Bank of New York
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4. The inventories-to-sales ratio continues to rise.
Source: Reuters Read full article
Below are some inventories-to-sales trends by sector.
• Housing-related:
– Lumber/construction materials:
– Hardware and plumbing/heating equipment:
• Vehicles:
• Machinery/equipment:
• Paper (no more toilet paper shortages?):
• Farm product:
• Apparel:
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5. The market expects some 50 bps of Fed rate cuts in the second half of this year.
• Easing financial conditions is not what the Fed wants to see now.
• The Fed has never completed its hiking cycle while the real fed funds rate was negative.
Source: Variant Perception
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Canada
1. Oxford Economics expects the depth of this year’s recession to be similar to the average downturn.
Source: Oxford Economics
Consumption, housing, and slowing inventories could drive this recession.
Source: Oxford Economics
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2. Resetting mortgages will sharply boost homeowners’ payments over the next few years.
Source: Wells Fargo Securities
3. Soft temp employment signals weakness in permanent employment in the months ahead.
Source: Capital Economics
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The Eurozone
1. French manufacturing output has been holding up despite weakness in the PMI data.
Dutch manufacturing production is rapidly coming off the highs.
But industrial sales remain strong.
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2. Gains in producer prices have been slowing.
Source: Arcano Economics
3. Short-term yields appear to have peaked.
Source: PGM Global
4. Rate differentials indicate a fair value for EUR/USD above 1.10, according to Deutsche Bank.
Source: Deutsche Bank Research
• This chart shows EUR/USD’s long-term downtrend channel. There is strong resistance around 1.15.
• The euro has benefitted from strong portfolio flows.
Source: Deutsche Bank Research
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Europe
1. Sweden’s household consumption improved last month.
• Business activity eased in December, but the overall levels remained strong.
– Services:
– Industrial production:
However, industrial orders have weakened (2 charts).
Source: Nordea Markets
• Housing sentiment may have bottomed.
Source: @pohjanka, @economics Read full article
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2. Norway’s inflation remains elevated.
3. The Swiss unemployment rate dipped below 2%.
The central bank continues to pull liquidity from the market.
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4. Are outflows from European equity funds over?
Source: BofA Global Research
5. It was a warm year in Europe.
Source: Reuters Read full article
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Asia – Pacific
1. South Korea’s unemployment rate has been rebounding but remains below pre-COVID levels.
2. Next, we have some updates on Australia.
• Inflation remains stubbornly high.
• Retail sales jumped in November.
• Just like in the US, Australian job vacancies are off the peak but remain well above pre-COVID levels.
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China
1. Loan growth was stronger than expected last month, …
… but aggregate financing was a disappointment.
The money supply expansion slowed.
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2. The downtrend in China’s credit cycle is driven by a slower pace of household borrowing. While credit conditions remain fragile, recent liquidity support to the property sector could lift sentiment, according to S&P.
Source: S&P Global Ratings
3. Household deposits have been surging.
Source: @ANZ_Research
4. Government spending growth is slowing.
Source: BCA Research
5. Here is an estimate of COVID cases in China.
Source: Statista
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Emerging Markets
1. Brazil’s December CPI was higher than expected.
Source: Reuters Read full article
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2. Mexico’s business investment is nearing 2019 levels.
3. Turkey’s industrial production eased in November but remains robust.
The stock market benchmark is testing support at the 50-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
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4. Romania’s central bank hiked rates to 7%. Is the cycle over?
5. USD/INR is at the uptrend support as the rupee strengthens.
6. Egypt’s core CPI is nearing 25%.
7. South Africa’s manufacturing production edged higher in November.
8. Disinflation is coming to EM economies.
Source: Alpine Macro
9. Have EM bond flows stabilized?
Source: Deutsche Bank Research
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Cryptocurrency
Investors are betting that the GBTC discount to NAV will narrow.
Source: @kgreifeld, @crypto Read full article
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Commodities
1. Palladium has not participated in the precious metals rally.
2. Gold is trading at a hefty premium for fair value, according to Variant Perception.
Source: Variant Perception
3. US wheat futures are struggling amid competition from abroad.
Source: Reuters Read full article
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4. Coffee futures are at support.
5. Commodity cycles tend to be choppy and sensitive to supply/demand swings.
Source: Goldman Sachs
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Energy
1. Will US natural gas hold support at $3.5/MMBtu?
2. After rapid COVID-era gains, the cost of solar panel manufacturing is tumbling.
Source: @business Read full article
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Equities
1. The S&P 500 will face resistance near 4,000.
2. US growth stocks appear oversold relative to value stocks. However, in downtrends, oversold conditions can persist for some time.
Source: MRB Partners
Growth stocks still trade at a high premium relative to value stocks.
Source: MRB Partners
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3. Is retail investor sentiment bottoming? Here is the positioning indicator from TD Ameritrade.
Source: TD Ameritrade
4. S&P 500 earnings face their first year-over-year decline since Q3 of 2020.
Source: Deutsche Bank Research
5. BofA private clients moved into defensive sectors last year.
Source: BofA Global Research
6. This chart shows sector fund flows over the past year.
Source: Deutsche Bank Research
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Credit
1. The global credit cycle is trending downward and could see a contraction this year (more nonperforming loans and defaults), according to S&P Global Ratings.
Source: S&P Global Ratings
2. Given the decline in stock valuations, HY spreads should be wider.
Source: @PhilipJagd
3. Loan demand is expected to slow.
Source: Variant Perception
4. Subprime auto ABS delinquency rates continue to climb.
Source: Deutsche Bank Research
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Global Developments
1. The market is sitting on significant USD cash exposure, which is vulnerable to further liquidation as the dollar’s safe-haven appeal declines, according to Deutsche Bank.
Source: Deutsche Bank Research
2. Food inflation is now negative on a year-over-year basis.
Source: Arcano Economics
3. The cost of renting container ships is quickly reverting to more typical levels.
Source: Arcano Economics
4. The global credit impulse is rebounding. Will sentiment follow?
Source: Chart and data provided by Macrobond
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Food for Thought
1. Airline sales recovery:
Source: PGM Global
2. Campbell Soup revenues:
Source: @chartrdaily
3. The global Lorenz Curve:
Source: Goldman Sachs
4. Adjusted global population projections:
Source: Goldman Sachs
5. Mastodon new user registrations:
Source: The Guardian Read full article
6. Teen internet usage:
Source: Pew Research Center Read full article
7. The global innovation index:
Source: Visual Capitalist Read full article
8. Do you play with your phone while watching TV?
Source: @CivicScience
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