Posted on by The Daily Shot Editor: Lev Borodovsky

Trucking rates continue to fall

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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