The Daily Shot: 10-Feb-23
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Equities
• Rates
• Food for Thought
The United States
1. Let’s begin with the labor market.
• Initial unemployment applications increased last week, …
… but remain below the average of 2018, 2019, and 2022 levels. The labor market is still tight.
Continuing unemployment claims have been edging higher.
• The Atlanta Fed’s wage growth tracker shows some moderation in pay increases.
Source: @GregDaco, @AtlantaFed
The spread between wage growth of job switchers and job stayers has started to tighten, suggesting that labor demand has peaked (2 charts).
Source: @AtlantaFed
• Job openings should ease going forward.
Source: UBS Research; III Capital Management
• Payrolls growth will resume its slowing trend, according to Morgan Stanley.
Source: Morgan Stanley Research
• The ISM Manufacturing PMI signals job losses ahead.
Source: BofA Global Research Read full article
• Wells Fargo sees the unemployment rate peaking just below 5% this year (averaged over each quarter).
Source: Wells Fargo Securities
• This chart shows unemployment around recessions.
Source: Deutsche Bank Research
• Some sectors have been “labor hoarding,” with no typical seasonal layoffs. That behavior has contributed to tight labor markets.
Source: Morgan Stanley Research
• Next, we have tech layoffs as a percentage of each company’s workforce.
Source: @LizAnnSonders, @DataArbor, @Layoffsfyi
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2. The wholesale durable goods inventories-to-sales ratio is now well above pre-COVID levels, which should help ease inflation. The inventory overhang will also put downward pressure on margins.
The vehicle inventories-to-sales ratio is at pre-COVID levels.
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3. The WCI Container Freight Rate dipped below $2k for the first time since mid-2020, down over 80% from the peak.
Trucking rates continue to fall as demand slows.
Source: FreightWaves SONAR
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The United Kingdom
1. Employment losses ahead?
Source: Pantheon Macroeconomics
2. More Britons are switching to private health insurance.
Source: Statista
3. This chart shows the latest voting intentions polls.
Source: @RedfieldWilton Read full article
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The Eurozone
1. German inflation continued to ease in January.
Source: @jrandow, @economics Read full article
Separately, Sweden’s Industrial weakness signals more headwinds for German factories.
Source: Gavekal Research
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2. Euro-area stagflation conditions are expected to dissipate over the coming months.
Source: BCA Research
3. More Euro-area banks have tightened lending standards.
Source: PGM Global
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Europe
1. Let’s begin with Sweden.
• Riksbank delivered a hawkish rate hike, signaling a willingness to boost the krona.
Source: @nicrolander, @economics Read full article
• The krona surged 2% vs. the euro.
Bond yields jumped.
• Here is the yield curve.
• Sweden’s construction activity remains robust.
Source: Nordea Markets
• Models point to a recession.
Source: @AndreasSteno, @MikaelSarwe
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2. European stock funds see outflows again.
Source: BofA Global Research Read full article
3. This chart shows government guarantees by country.
Source: Eurostat Read full article
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Asia – Pacific
1. Japan’s PPI is back below 10%.
2. Taiwan’s core CPI is near 3% again, surpassing expectations.
3. The rebound in visitors from China will boost Australia’s GDP growth.
Source: @ANZ_Research
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China
1. Consumer inflation climbed last month.
• Headline CPI:
• Core CPI:
2. The PPI surprised to the downside.
This is good news for US inflation.
Source: @ANZ_Research
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3. Chinese stocks have rallied alongside improving earnings momentum and inflows.
Source: MRB Partners
4. Most provinces cut their growth targets for 2023.
Source: Gavekal Research
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Emerging Markets
1. Banxico surprised the markets with a 50 bps rate hike amid persistently elevated core inflation (2nd and 3rd charts below). Based on the Fed’s decision, the market expected a 25 bps increase.
Further reading
Source: @MddeH, @economics Read full article
– Core CPI (month over month):
– Biweekly core CPI (year over year):
• The peso and bond yields jumped.
Here is the yield curve.
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2. Brazil’s inflation continues to moderate.
December retail sales surprised to the downside.
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3. Is India’s central bank done raising rates?
Source: Capital Economics
4. Egypt’s inflation climbed above 30% after the recent devaluation. More CPI gains ahead?
5. South Africa’s manufacturing output declined more than expected on a year-over-year basis.
But mining production showed some improvement.
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6. EM equity fund inflows are rolling over.
Source: BofA Global Research Read full article
7. This chart shows the number of domestic nominal and inflation-linked bonds by country and average maturity at issuance.
Source: Codera Analytics Further reading
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Cryptocurrency
1. The crypto rally stalled over the past week, with ether (ETH) underperforming large-cap peers.
Source: FinViz
Bitcoin was down almost 5% on Thursday.
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2. The BTC/ETH price ratio is holding support above its 200-day moving average. A sustained rise in this ratio typically signals risk-off conditions.
3. The Crypto Fear & Greed Index declined from “greed” territory and returned to “neutral” over the past week.
Source: Alternative.me
4. Finally, we have “grassroots” crypto ownership by country.
Source: Morning Consult Read full article
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Commodities
Fitch expects higher copper and nickel prices as demand outstrips supply, especially with China’s reopening. (2 charts)
Source: Fitch Solutions Macro Research
Source: Fitch Solutions Macro Research
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Equities
1. Analysts’ 2023 S&P 500 earnings forecasts are down 11% from the peak. More downgrades ahead?
• Here is the evolution of earnings estimates for the current quarter, with industrials and materials taking the biggest hit.
Source: Deutsche Bank Research
• Tighter credit conditions point to further weakness in profits.
Source: Deutsche Bank Research
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2. Tighter credit conditions also suggest that equities will underperform bonds.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
3. The Insider Transaction Ratio signals bearish sentiment.
Source: Thomson Reuters, Barron’s
But retail investors have turned bullish (2 charts).
Source: @BTLipschultz, @markets Read full article
Source: Vanda Research
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4. The S&P 500 typically bottoms about seven months after inflation peaks.
Source: Stifel
Declining inflation has benefitted cyclical growth relative to cyclical value.
Source: Stifel
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5. Historically, stocks have rallied around the peak of the Fed hiking cycle, but immediate gains have been short-lived if the economy enters a recession. This time, however, drawdowns have been more severe during the start of the hiking phase. (2 charts)
Source: Piper Sandler
Source: Piper Sandler
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6. Is the market pricing in a no-recession scenario?
Source: TS Lombard
7. Tech stocks finally saw some inflows.
Source: BofA Global Research
8. The Nasdaq 100 has been highly correlated with inflation-linked Treasuries (TIPS) over the past 90 days (inversely correlated to real yields).
So what should we make of this recent divergence?
Source: @TheTerminal, Bloomberg Finance L.P.
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9. VVIX (vol of vol) has diverged from VIX, pointing to surging demand for VIX call options (downside protection for stocks).
Source: @TheTerminal, Bloomberg Finance L.P.; h/t @themarketear
10. All eyes are on next week’s CPI report.
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Rates
1. The 10-year Treasury auction showed robust demand, with dealers taking down the smallest share of notes on record. That indicates demand from a broad array of investors.
Source: @lisaabramowicz1
2. Treasury funds saw some outflows.
Source: BofA Global Research Read full article
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Food for Thought
1. Consumption of financial advice:
Source: Morning Consult Read full article
2. US office visits (still down 40% from pre-COVID levels):
Source: Placer.ai
3. Major corporate collapses since 1987:
Source: Deutsche Bank Research
4. Media companies’ global reach vs. content ownership:
Source: S&P Global Ratings
5. Life expectancy and GDP per capita:
Source: McKinsey & Company, h/t Walter Read full article
6. India’s imports from Russia:
Source: @RichardDias_CFA
7. Honesty and ethics ratings by profession:
Source: Gallup Read full article
8. Home game attendance in North American men’s pro sports leagues:
Source: @FiveThirtyEight Read full article
• Super Bowl’s most improved QBs:
Source: @neil_paine, @friscojosh, FiveThirtyEight Read full article
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Have a great weekend!
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