The Daily Shot: 20-Mar-23
• Credit
• Equities
• Energy
• Commodities
• Cryptocurrency
• Emerging Markets
• China
• Europe
• The United Kingdom
• The United States
• Global Developments
• Food for Thought
Credit
1. Swiss regulators strongarmed UBS to take over Credit Suisse over the weekend to stem the banking crisis.
Source: CNBC Read full article
It appears that the Credit Suisse AT1 securities will get wiped out. That’s a sizable hit to the CoCo market and will make it challenging for other banks to issue these securities.
Source: @financialtimes Read full article
Source: Reuters Read full article
Of course, the CoCo holders are not going to take this lying down.
Source: @ArroyoNieto, @markets Read full article
Separately, this chart shows Credit Suisse wealth management clients running for the exits.
Source: @financialtimes Read full article
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2. In the US, First Republic Bank shares remain under pressure.
Here are the preferreds and sub-debt.
Shares are down again this morning.
Source: @TheTerminal, Bloomberg Finance L.P.
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3. The Fed moved to boost dollar funding capability for other central banks.
Source: @ctorresreporter, @markets Read full article
This brings back memories of 2008.
Source: Reuters Read full article
The use of the Fed’s international swap lines spikes during severe risk-off episodes when there is a shortage of dollar liquidity.
For now, basis swaps are not signaling severe shortages of US dollar funding.
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4. US deposits continued to shrink going into the SVB default week, driven mostly by the Fed’s QT.
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5. Is US loan growth about to peak?
6. Leveraged loans continue to see outflows.
Source: Deutsche Bank Research
BKLN, the largest loan ETF, is testing support.
Source: barchart.com
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7. Flows into money market funds have accelerated.
Source: Deutsche Bank Research
8. Here is last week’s performance by credit asset class.
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Equities
1. Stock futures in the US and Europe are under pressure after the Credit Suisse deal.
2. The S&P 500 outperformed other DM large-cap indices last week, …
… boosted by tech mega-caps.
3. The Nasdaq 100 had the best week vs. the S&P 500 since 2008.
4. SPY, the largest ETF, saw substantial inflows.
Source: @SamJPotter, @markets Read full article
We are yet to see meaningful outflows from equity funds.
Source: BofA Global Research
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6. Next, let’s take a look at financials.
• It’s been a rough month for regional banks relative to the overall banking sector.
• After massive inflows, the regional banking ETF saw outflows on Friday.
• Demand for call options on smaller financials has crumbled.
Source: Deutsche Bank Research
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7. Now, let’s take a look at last week’s performance.
• Sectors:
• Equity factors:
– Small caps:
– Growth vs. value for large- and small-cap stocks:
– The buyback index (companies known for buying back their shares):
• Macro basket pairs relative performance:
– Inflation long vs. inflation short:
– Strong vs. weak balance sheet:
• Thematic ETFs:
• Largest tech firms:
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Energy
1. Brent crude is approaching $70/bbl.
2. Will energy shares close their outperformance vs. crude oil?
3. Are OPEC and IEA overestimating global oil demand for this year?
Source: Longview Economics
Oil demand is highly correlated to GDP growth.
Source: BofA Global Research
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4. US natural gas levels in storage remain elevated.
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Commodities
1. Will gold test resistance at $2,000?
Source: barchart.com
• ETF gold holdings have bottomed.
• CTOs massively boosted exposure to gold.
Source: Deutsche Bank Research
• Gold’s rally is supported by a pullback in real yields.
Source: Aazan Habib, Paradigm Capital
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2. Here is last week’s performance across key commodity markets.
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Cryptocurrency
Bitcoin broke through a key resistance level.
The cryptocurrency was up almost 40% over the past week sharply outperforming other cryptos.
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Emerging Markets
1. Economists have been upgrading Mexico’s GDP growth forecasts for 2023.
2. Vietnam’s vehicle sales bounced from recent lows.
3. Next, we have some performance data.
• Currencies:
• Bond yields:
• Equity ETFs:
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China
1. The PBoC eased monetary policy again via the RRR.
2. Foreign direct investment was at 2022 levels in February.
3. Hong Kong stocks are down sharply.
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Europe
1. Bund yields saw the biggest weekly decline in decades.
2. German home prices have been falling.
Source: Longview Economics
3. Here is the rate shock to the euro-area corporate sector.
Source: Longview Economics
4. Next, we have some updates on Sweden.
• GDP growth forecasts:
• Inflation:
• The krona:
Source: Pound Sterling Live Read full article
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The United Kingdom
1. There are signs of home prices stabilizing.
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2. Inflation expectations are easing.
3. The chance of a BoE rate hike this week is just above 50%, according to the rates markets.
4. Job vacancies are drifting lower.
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The United States
1. The 2-year Treasury yield plunged further this morning after the announcement of UBS taking over Credit Suisse.
The month-to-date decline has been the biggest since the early 1980s.
• The market is unsure if the Fed will hike rates this month.
Tightening financial conditions over the past few days are equivalent to a significant rate hike.
Source: Torsten Slok, Apollo
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2. US manufacturing output unexpectedly increased (slightly) last month.
Capacity utilization eased.
Utilities’ output has been soft, …
… with capacity utilization near multi-year lows.
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3. The U. Michigan consumer sentiment index declined this month.
• Buying conditions:
• Income expectations:
• Financial situation:
Inflation expectations eased.
A separate survey from Penta and Civic Science also declined.
Source: @CS_Penta, @Pentagrp, @CivicScience
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4. The Conference Board’s leading index is down 11 months in a row.
Coincident indicators have not yet fallen despite the sharp drop in leading indicators, possibly delaying the shift to recession.
Source: Yardeni Research
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Global Developments
1. Global consumer confidence has been rising from the lowest levels since the financial crisis.
Source: Numera Analytics (@NumeraAnalytics)
2. Here are some of the causes of global recessions.
Source: BofA Global Research
3. Economies with the most overvalued asset prices and those that rely relatively more on bank financing would likely suffer the greatest GDP decline during a major repricing of risk, according to Oxford Economics.
Source: Oxford Economics
4. Next, we have some market performance data.
• Currencies:
• Bond yields:
• Market movements across different asset classes:
Source: Deutsche Bank Research
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Food for Thought
1. Best places to work:
Source: Visual Capitalist Read full article
2. Tech layoffs:
Source: @WSJ Read full article
3. Changes in homicides by city (2022 vs. 2021):
Source: Council on Criminal Justice
4. Importance of children having similar religious beliefs to their parents:
Source: Pew Research Center Read full article
5. Will GOP lawmakers cut Social Security and Medicare?
Source: Morning Consult Read full article
6. EV and battery investments:
Source: @OpenAxisHQ
7. Carbon-removal patent applications:
Source: The Economist Read full article
8. Percentage of high school students who had ever had sex:
Source: CDC Read full article
9. Which teams played the most Super Bowl games?
Source: Statista
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