The Daily Shot: 11-May-23
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Asia-Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. The CPI report was roughly in line with expectations. US inflation continues to run hot.
– Headline CPI:
– Core CPI:
• Core goods inflation jumped, pushed higher by used vehicle prices.
• Core services inflation slowed, which gave markets some comfort.
In particular, the markets saw the “supercore” inflation slowdown as a positive sign.
Source: @TheTerminal, Bloomberg Finance L.P.
Source: @boes_, @gutavsaraiva, @readep, @economics Read full article
• Let’s take a look at some price trends in the automotive sector.
– Used car prices surged on tight supplies (as we saw in Nomura’s report yesterday).
Wholesale prices suggest that these gains will slow or begin reversing.
– New car prices declined for the first time in nearly two years, …
… as dealers offered incentives.
Source: Nomura Securities
– Parts prices jumped again in April.
– Auto repair costs continue to surge …
… driving up auto insurance costs.
• Here are some additional CPI trends.
– Key contributions:
Source: @TheTerminal, Bloomberg Finance L.P.
– Groceries:
– Baby formula (biggest increase on record):
– Rent and owners’ equivalent rent (price gains were up again in April):
– Furniture (dented by the housing market):
We will have more updates on inflation shortly.
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2. The market saw the CPI report as dovish, pushing yields lower.
The dollar declined after the CPI report but is up this morning amid a haven bid.
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3. The Earnest Analytics Spend Index doesn’t bode well for retail sales in April, …
Source: Earnest
… as rate/credit conditions tighten sharply for consumers.
Source: Torsten Slok, Apollo
However, excess savings remain elevated for now.
Source: Hamza Abdelrahman and Luiz Oliveira, Federal Reserve Bank of San Francisco
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4. The April federal budget surplus was weaker than expected due to slower tax receipts.
Source: @v_dendrinou
• The Fed is no longer contributing cash to the US Treasury.
Source: Oxford Economics
• The government’s interest expense keeps rising.
Source: Oxford Economics
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5. The market continues to expect substantial rate cuts starting in the second half of this year.
6. The 1-month T-bill yield surged well above the rest of the curve as the X-date looms.
The spread between the 10-year and the 1-month Treasury yields hit a new low.
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Canada
1. Building permits unexpectedly jumped in March.
2. Oxford Economics expects house prices to fall another 10% by the end of this year, resulting in a 20%+ drawdown from the February 2022 high.
Source: Oxford Economics
• House prices will need to fall much further to realign with affordability.
Source: Oxford Economics
• Here is a look at house price affordability by region.
Source: Oxford Economics
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The United Kingdom
1. The housing market continues to struggle.
Source: Reuters Read full article
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2. Services exports are experiencing significant growth.
Source: The Economist Read full article
3. Net migration has rebounded.
Source: @financialtimes Read full article
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The Eurozone
1. The market is pricing in two additional rate hikes ahead. Could we see more?
Source: @Alemrome, @jrandow, @economics Read full article
• Services inflation is yet to peak.
Source: Arcano Economics
• The market is pricing a rapid moderation in the CPI.
Source: ECB
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2. The economic surprise differential with the US points to downside risks for the euro.
Source: Boris Kovacevic
3. Italy’s industrial output is slowing.
Source: Reuters Read full article
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4. Dutch factory output softened further in March.
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Europe
1. Sweden’s key indicators weakened in March.
• Services output:
• Industrial production:
• Household consumption (sharp deterioration):
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2. Norway’s inflation continues to run hot.
Source: @ottummelas, @economics Read full article
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3. Czech factory output hit a record high.
4. The Polish zloty is surging (chart shows EUR declining against PLN).
5. Despite the sanctions, the EU is trading with Russia via Kazakhstan.
Source: @financialtimes Read full article
6. Here is NATO Europe’s defense spending.
Source: The Economist Read full article
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Asia-Pacific
1. Japan’s current account surplus was smaller than expected in March.
The trade deficit continues to narrow.
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2. Next, we have some updates on South Korea.
• Economists continue to downgrade their GDP forecasts for this year.
• The current account balance is back in surplus.
• The unemployment rate is near multi-decade lows.
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3. New Zealand’s home sales remain depressed.
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China
1. The CPI surprised to the downside, …
… with softer readings driven by food prices.
• However, services inflation climbed amid increased consumer demand.
• The core CPI held steady.
• Rising wages could boost inflation.
Source: Gavekal Research
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2. The PPI moved deeper into negative territory.
Here are some examples.
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3. Domestic equity trading volumes and margin financing have picked up.
Source: Gavekal Research
• State-owned companies have been outperforming.
Source: Gavekal Research
• The SSE Composite remains in a long-term uptrend, albeit volatile. A sustained break above resistance near 3,500 could attract additional buyers.
• Similarly, Hong Kong’s Hang Seng Index remains in a volatile uptrend.
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4. The return on assets on local government financing vehicles (LGFVs) is very low.
Source: BCA Research
5. China is now a leading auto exporter.
Source: Pantheon Macroeconomics
6. Next, we have the breakdowns of China’s power capacity and consumption.
Source: Fitch Ratings
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Emerging Markets
1. Brazil’s industrial production improved in March.
Source: The Brazilian Report Read full article
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2. Turkey’s industrial production topped expectations.
Separately, according to many observers, Turkey is no longer considered a democracy.
Source: @TheEconomist Read full article
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3. Ukraine’s CPI finally dipped below 20%.
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Commodities
1. Industrial metals remain under pressure as concerns about China’s demand persist.
• Iron ore:
• Copper:
2. Softs have been performing well.
• Cocoa futures are surging in New York amid sluggish exports from Côte d’Ivoire.
• Sugar keeps climbing amid supply concerns.
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Energy
1. US oil inventories unexpectedly increased last week.
• Weekly changes:
• Level:
Source: MarketWatch Read full article
However, refined products inventories declined more than expected.
• Gasoline:
• Distillates:
Gasoline demand bounced.
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2. The largest US energy firms continue to limit CapEx despite strong cash flow. Investors want to get paid now.
Source: @WSJ Read full article
3. Here is a look at total oil production by OPEC and OPEC+.
Source: @EIAgov
4. A majority of Americans surveyed approve of using nuclear energy.
Source: BofA Global Research
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Equities
1. Long-duration equities have outperformed sharply in recent days.
2. Tighter credit conditions will continue to weigh on earnings.
Source: Oxford Economics
3. US ETF trading volume has slowed.
Source: @kgreifeld, @markets Read full article
4. Next, we have some sector updates.
• Fund flows:
Source: Deutsche Bank Research
• Geographic exposure:
Source: @FactSet Read full article
– Sector beats vs. foreign exposure:
Source: Oxford Economics
• Investment managers’ sector outlook:
Source: S&P Global PMI
• Airline shares have sold off in recent days.
Source: Reuters Read full article
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Credit
1. The share of banks increasing spreads on business loans hit the highest levels since the GFC.
2. Here are the reasons banks have been tightening credit standards.
Source: Oxford Economics
3. Bankruptcies are expected to surge.
Source: Piper Sandler
Repeat bankruptcy filings haven’t been this high since 2009.
Source: @JeremyHtweets, @sparkyrandles, @markets Read full article
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4. Dealers have cut back their CMBS holdings.
Source: Deutsche Bank Research
CMBS issuance has been depressed this year.
Source: Deutsche Bank Research
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5. Middle-market CLOs use private credit estimates because public ratings are not available for smaller firms. Here is the distribution of estimates over time.
Source: S&P Global Ratings
• More estimates have been lowered than raised over the past two quarters.
Source: S&P Global Ratings
• Companies with private estimates pay much higher spreads than those with public ratings.
Source: S&P Global Ratings
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Global Developments
1. The UK, Australia, and Canada can maintain larger relative current account deficits than the US without their currencies dominating international reserves.
Source: @paulkrugman, The New York Times Read full article
2. OECD leading economic indicators troughed around the S&P 500’s October low.
Source: Longview Economics
3. Global services activity continues to diverge from manufacturing.
Source: Arcano Economics
4. Here is a look at real interest rates around the world.
Source: Visual Capitalist Read full article
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Food for Thought
1. Bloomberg’s terminal vs. non-terminal revenues:
Source: @financialtimes Read full article
2. Anti-ESG shareholder proposals:
Source: @axios Read full article
3. Vice valuation over time:
Source: @chartrdaily Further reading
4. Cutting back on parking spaces:
Source: @WSJ Read full article
5. When did each state become “majority truck”?
Source: The Washington Post Read full article
• Truck share by state:
Source: The Washington Post Read full article
• Vehicle production by type:
Source: The Washington Post Read full article
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6. Hawaii tourism:
Source: @chartrdaily
7. Hate crime incidents on the rise (2 charts):
Source: @TheDailyShot
Source: Statista
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8. How long do college seniors expect to stay at their first job?
Source: Quality Logo Products
9. The most expensive dog breeds:
Source: Genuine Impact
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