The Daily Shot: 05-Apr-23
• The United States
• Canada
• The Eurozone
• Europe
• Asia – Pacific
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Food for Thought
The United States
1. Job openings declined more than expected in February.
• Here are the monthly changes with contributions
Source: @TheTerminal, Bloomberg Finance L.P.
And this chart shows the quarterly changes in job openings over the past couple of decades.
• Job vacancies are now more in line with postings on Indeed.
Source: Wells Fargo Securities
• Here is the number of openings per unemployed person, suggesting that the labor market imbalance persists.
The Beveridge Curve also points to job market imbalances.
Source: @TheTerminal, Bloomberg Finance L.P.
• Below are some trends by sector.
– Manufacturing:
– Construction (a surprise increase):
– Retail:
– Hotels and restaurants/bars:
– Healthcare:
• Surprisingly, the number of voluntary resignations (quits) increased in February, signaling confidence in the job market.
Source: @TheTerminal, Bloomberg Finance L.P.
Here are the quits and the layoffs rates.
Source: @TheTerminal, Bloomberg Finance L.P.
• Finally, this scatterplot shows the quits rate and wage growth.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. The faster-than-expected decline in job openings sent Treasury yields sharply lower.
• The market is pricing a faster pace of Fed rate cuts starting this summer.
Too much enthusiasm?
Source: Numera Analytics (@NumeraAnalytics)
• This chart shows the near-term forward spread, the Fed’s preferred yield curve leading indicator. It is the expected three-month Treasury yield 18 months from now (market expectations) minus the current 3-month yield. Some Fed officials view this as a better indicator than the 10yr – 2yr spread (see research). The near-term forward spread is signaling a sharp economic downturn.
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3. Factory orders declined in February.
Real capital goods orders continue to fall, signaling slowing CapEx.
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4. The economy is still coming off a long period of deleveraging following a credit binge in the 1990s/early-2000s.
Source: MRB Partners
5. Multi-family (apartment) building sales are down sharply.
Source: @WSJ Read full article
Prices have been falling recently.
Source: Wells Fargo Securities
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6. When is the X-date? Here are some scenarios based on the US Treasury’s cash flows in previous years.
Source: Deutsche Bank Research
The market remains very concerned about the debt ceiling impasse.
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Canada
1. Consumer inflation expectations are moderating.
Source: Scotiabank Economics
2. Lower inflation could take the pressure off the BoC, possibly leading to a pause/pivot.
Source: Numera Analytics (@NumeraAnalytics)
3. The inverted yield curve has been a drag on financial stocks, similar to previous occurrences.
Source: Numera Analytics (@NumeraAnalytics)
4. Canadian stocks have underperformed developed market peers during the recent correction in oil prices.
Source: Numera Analytics (@NumeraAnalytics)
However, the iShares Canada ETF (EWC) is holding long-term support relative to the S&P 500, aided by the recent bounce in crude prices.
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The Eurozone
1. Germany’s trade surplus was a bit lower than expected.
2. Italy’s budget deficit exceeded the 2020 levels in March.
3. The euro-area PPI continues to moderate.
4. Wage growth and CPI are now higher in the Eurozone versus the US.
Source: Deutsche Bank Research
The wide gap between Europe and US inflation points to a wider interest rate differential and a higher EUR/USD.
Source: Deutsche Bank Research
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Europe
1. Norway’s unemployment rate remains very low for this time of the year.
2. Here is the Czech Republic’s year-to-date budget deficit.
3. Below is a look at aviation strikes in Europe’s largest economies.
Source: @WillWilkesNews, @tomelleryrees, @eckldorna, @bpolitics Read full article
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Asia – Pacific
1. South Korea’s core CPI remains elevated.
2. New Zealand’s central bank hiked rates by 50 bps, surprising the market.
The Kiwi dollar and bond yields jumped.
Source: @tracywwithers, @markets Read full article
• Separately, New Zealand’s home price declines are now worse than during the GFC.
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3. Australia’s central bank left rates unchanged.
Source: @Swatisays, @economics Read full article
Some analysts still expect a rate hike in May. The market is assigning less than a 10% chance of such an outcome.
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Emerging Markets
1. Let’s begin with Chile.
• Economic activity (a slight decline in February):
• Manufacturing production (well below last year’s levels):
• Copper production (very soft):
• Retail sales (in line with 2021 levels):
• Business sentiment (depressed):
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2. Mexican vehicle sales are rebounding.
Remittances remain at record highs.
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3. The gap between the official and the “blue-chip” USD/ARS (Argentine peso) rates continues to widen. This trend is not sustainable (amid reduced FX reserves).
Source: @TheTerminal, Bloomberg Finance L.P.
4. Pakistan’s central bank hiked rates again as inflation surges.
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Commodities
1. Gold blasted past $2,000/oz, as …
Source: barchart.com
… the US dollar weakens and real yields decline.
• Silver has also been surging.
• Palladium’s underperformance widened further as platinum prices jumped.
• Oxford Economics sees gold prices retreating in the months ahead.
Source: Oxford Economics
2. Gold and copper stocks have outperformed their respective physical commodity ETFs. (2 charts)
Source: Aazan Habib, Paradigm Capital
Source: Aazan Habib, Paradigm Capital
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3. US hog futures remain under pressure amid ample supplies and weak cash prices.
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Energy
1. Despite a sharp increase in oil prices this week, oil implied vol has been declining.
2. Crack spreads dropped this week, …
… which is a headwind for refiners.
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3. Oil and gas exploration & production stocks (XOP) have underperformed crude oil (USO).
Source: Aazan Habib, Paradigm Capital
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Equities
1. The recent Russell 2000 underperformance vs. the Nasdaq 100 has been remarkably rapid.
2. Bank shares continue to struggle.
• Regional banks don’t look as cheap when the price-to-book ratio is adjusted for unrealized losses.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
• Bank stocks typically outperform during the recovery phase, while insurance stocks underperform.
Source: Alpine Macro
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3. Deutsche Bank is bullish on mega-cap stocks (MCG & Tech = “mega-cap growth and tech”).
Source: Deutsche Bank Research
4. S&P 500 forward earnings have not fully priced in a recession.
Source: BCA Research
5. Analysts continue to downgrade profit margin projections.
Source: Yardeni Research
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Credit
1. A survey from the Dallas Fed indicates deteriorating loan volumes and demand in March.
Source: Dallas Fed
Source: Dallas Fed
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2. This chart shows the evolution of the hold-to-maturity portfolios in the banking system.
Source: Oxford Economics
3. Leveraged loan and high-yield funds continue to see outflows.
Source: Deutsche Bank Research
BofA’s private clients have also been getting out of munis.
Source: BofA Global Research
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4. Leveraged loan sales slowed sharply in Q1.
Source: Bloomberg Law Read full article
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Food for Thought
1. The AI feature helping Bing’s popularity:
Source: Reuters Read full article
2. Companies discussing AI:
Source: @Subrat_Patnaik, @technology Read full article
3. TikTok’s popularity with adults:
Source: Statista
4. Researching a major news event:
Source: @chartrdaily
5. Religious participation and “deaths of despair”:
Source: The Economist Read full article
Deaths of despair over time:
Source: The Economist Read full article
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6. Projected prevalence of obesity in the US and its impact on the economy:
Source: World Obesity Day
7. Weeks of income needed to purchase a new vehicle in the US:
Source: @KailashConcepts, @TheStreet Read full article
8. Highest-paid actors and actresses of all time:
Source: @genuine_impact
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