Continuing unemployment claims are starting to show an upward trend

The Daily Shot: 17-Feb-23
Administrative Update
The United States
Asia – Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Global Developments
Food for Thought



 

Administrative Update

The Daily Shot will not be published on Monday, February 20th.


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The United States

1. The January report on producer prices topped expectations in both the headline and core PPI. Upstream price pressures persist.
 

 
Here are the contributions.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Trade services inflation has slowed, suggesting softer profit margin growth.
 

 
Weaker profit margins mean less hiring.
 
Source: @katiadmi, @business   Read full article  

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2. Initial jobless claims remain very low for this time of the year, …
 

 
… running below the average of 2018, 2019, and 2022.
 

 
However, continuing claims are starting to show an upward trend.
 

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3. Given the stubbornly high inflation and the ongoing tightness in the labor markets, some Fed officials have indicated a willingness to consider a 50 bps rate hike.
 
Source: @Jonnelle, @economics   Read full article  
 
Source: @SteveMatthews12, @economics   Read full article  
 
The market-based rate hike expectation for March climbed above 25 bps, signaling a nonzero probability of a half-point increase.
 

 
Markets took notice of the PPI beat and hawkish Fed comments, with stocks and bonds selling off.
 

 

 
Short-term inflation expectations continue to rebound.
 

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4. The Philly Fed’s regional manufacturing report was a disaster, showing rapidly deteriorating conditions this month (diverging from the NY Fed’s report).
 

 
It doesn’t bode well for manufacturing activity at the national level.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Inventories have been rising, …
 

 
… outpacing orders and signaling further production weakness ahead.
 
Source: @MikaelSarwe  
 
The region’s manufacturers are cutting workers’ hours.
 

 
Fewer firms have been boosting prices as demand softens.
 

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5. Next, we have some updates on the housing market.
 
Housing starts and building permits are down substantially from last year but remain above pre-COVID levels.
 

 

 
The weakness has been in single-family housing (3 charts).
 

 

 

 
On the other hand, multifamily housing activity remains robust.
 

 
The backlog of multifamily housing projects is becoming massive.
 
Source: Wells Fargo Securities  
 
Builders expect an uptick in demand if they lower prices.
 
Source: @AliWolfEcon  
 
Mortgage rates have been grinding higher.
 

 
Mortgage originations have fallen to more typical levels but have not collapsed.
 
Source: Federal Reserve Bank of New York  
 
Mortgage delinquencies remain low.
 
Source: Federal Reserve Bank of New York  
 
This chart shows real house prices vs. mortgage demand.
 
Source: Oxford Economics  

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6. The latest Penta-CS report shows an improvement in consumer sentiment.
 
Source: @PentaGRP, @CivicScience  


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Asia – Pacific

1. Japan’s trade deficit was narrower than expected in January.
 

 
2. Singapore’s exports are down sharply on a year-over-year basis.
 

 


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China

1. After months of declines, new home prices were flat in January.
 

 
Prices are well below trend.
 
Source: Pantheon Macroeconomics  

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2. Activity is picking up as the economy reopens.
 
Source: Pantheon Macroeconomics  
 
3. China-focused funds are seeing some outflows.
 
Source: BofA Global Research  
 
4. Local government debt levels continue to rise. Spreads have been elevated.
 
Source: Gavekal Research  
 
6. Protests have become more commonplace. Elderly retirees are protesting cuts to healthcare benefits amid soaring medical costs.
 
Source: BBC   Read full article  
 
7. Hong Kong’s unemployment rate continues to fall.
 


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Emerging Markets

1. The Philippine central bank hiked rates again.
 

 
2. Thai GDP unexpectedly contracted last quarter.
 

 
Source: @Ton_Asean, @markets   Read full article  

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3. Adani shares remain under pressure.
 

 
4. Brazil’s economic activity edged higher in December.
 

 
5. EM debt funds saw some outflows in recent days.
 
Source: BofA Global Research  
 
6. EM core inflation continues to climb.
 
Source: Capital Economics  


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Cryptocurrency

1. Cryptos rallied over the past week, with bitcoin outperforming large-cap peers.
 
Source: FinViz  
 
2. Bitcoin’s market cap relative to the total crypto market cap (dominance ratio) continues to hold support. A sustained rise in the dominance ratio typically signals risk-off conditions.
 

 
Similarly, the ETH/BTC price ratio faces strong resistance, suggesting a lower appetite for risk among crypto traders despite bear market rallies.
 

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3. The Crypto Fear & Greed Index returned to “greed” territory.
 
Source: Alternative.me  
 
4. Litecoin (LTC) has been a standout, rallying off long-term support.
 


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Commodities

1. Rising copper demand has been all about China.
 
Source: Macquarie; @Scutty  
 
2. Lithium prices have been rolling over.
 

 
3. The Global X Uranium ETF (URA) is stabilizing relative to the Global X Lithium ETF (LIT).
 
Source: Aazan Habib, Paradigm Capital  


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Energy

1. US jet fuel inventories remain very low.
 
Source: @JKempEnergy  
 
Source: Reuters   Read full article  

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2. US natural gas in storage is holding above the five-year average.
 

 
3. European natural gas prices continue to sink.
 


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Equities

1. Deteriorating global liquidity conditions will remain a headwind for stocks.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
2. Are stock investors finally taking notice of persistent inflationary pressures, a hawkish Fed, and rising yields?
 
Source: @themarketear  
 
3. After declining further, profit margins are expected to rebound later this year and into 2024.
 
Source: @katiadmi, @business   Read full article  
 
4. What are the drivers of nearterm returns? This chart is based on a survey of investment managers by S&P Global.
 
Source: S&P Global Market Intelligence  
 
5. Margin debt and stock prices have diverged.
 
Source: @t1alpha  
 
6. Retail investors have been very active lately, …
 
Source: Vanda Research  
 
… buying the dip.
 
Source: Vanda Research  
 
Retail favorites have seen substantial net purchases lately.
 
Source: Vanda Research  

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7. Demand for tech stocks (including from retail investors) forced substantial short-covering by hedge funds.
 
Source: Goldman Sachs  
 
Source: Reuters   Read full article  
 
But tech mutual funds and ETFs are now seeing outflows.
 
Source: BofA Global Research  

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8. With a large share of options transactions expiring within a day, the recorded options open interest has been relatively low.
 
Source: Chris Murphy, Susquehanna International Group  


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Credit

1. High-yield funds registered some outflows lately.
 
Source: BofA Global Research  
 
2. January was a big month for large-company bankruptcies, as earnings weakened and access to cheap credit was shut off.
 
Source: @ncallanan, @abhinavvr, @markets   Read full article  
 
3. Commercial banks are sitting on substantial unrealized securities losses.
 
Source: Longview Economics  


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Global Developments

1. Commodity super cycles typically correspond to rising capital expenditures.
 
Source: Goldman Sachs  
 
2. Corporate earnings beats have been strong in Europe, while Japan and EM have missed.
 
Source: Deutsche Bank Research  
 
3. Loan demand in advanced economies has deteriorated.
 
Source: Oxford Economics  
 
4. Global stock/bond ratios are on the rise, although Japan and the US are lagging.
 
Source: MRB Partners  
 
5. The US dollar trade-weighted index is breaking above its 50-day moving average.
 
Source: @TheTerminal, Bloomberg Finance L.P.  


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Food for Thought

1. Financial resolutions for 2023:
 
Source: LendingTree  
 
Financial regrets:
 
Source: LendingTree  

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2. What influences your purchase decisions?
 
Source: @CivicScience  
 
3. Revenue per restaurant unit vs. total US stores:
 
Source: @chartrdaily  
 
4. US auto sales:
 
Source: MarketDesk Research  
 
5. Countries with the highest concentration of earthquakes:
 
Source: @OpenAxisHQ  
 
6. 1.5 billion grandparents in the world:
 
Source: The Economist   Read full article  
 
7. Top fleets of combat tanks:
 
Source: Visual Capitalist   Read full article  
 
8. Lake Mead water level:
 
Source: Lakes Online  
 
9. Towns and counties matching last names of US presidents:
 
Source: US Census Bureau   Read full article  
 

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The next Daily Shot will be out on Tuesday, February 21st.
 
Have a great weekend!


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