The Daily Shot: 12-May-23
• The United States
• The United Kingdom
• Europe
• Asia-Pacific
• China
• Commodities
• Energy
• Equities
• Credit
• Rates
• Food for Thought
The United States
1. Let’s begin with some updates on inflation.
• Gains in producer prices were lower than expected.
Source: CNBC Read full article
– The trade services PPI (business markups) jumped in April, suggesting that profit margins are not collapsing.
– The core PPI is nearing 3% on a year-over-year basis.
– The PPI is signaling a further slowdown in consumer inflation. This chart includes a forecast from Pantheon Macroeconomics.
Source: Pantheon Macroeconomics
• The Fed’s UIG measure continues to moderate.
• Here is the sticky CPI (3-month changes).
• This chart shows CPI diffusion indices.
Source: @TheTerminal, Bloomberg Finance L.P.
• China’s PPI signals slower US consumer inflation ahead.
Source: Simon White, Bloomberg Markets Live Blog
• Easing labor shortages helped reduce inflation at restaurants and hotels.
Source: Nomura Securities
• Still waiting …
Source: Industrial Alliance Investment Management
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2. The US labor market is starting to sputter as initial jobless claims jump (2 charts).
• The number of Americans receiving unemployment benefits is now 25% above last year’s levels.
• States with large tech and financial sectors are seeing higher unemployment claims.
Source: BofA Global Research
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3. Next, we have some updates on consumer credit.
• Banks are lowering limits on auto loans.
• Credit card delinquencies among US millennial homeowners are now above renters.
Source: Quill Intelligence
• Here is the distribution of household liabilities by income tier.
Source: Morgan Stanley Research
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4. The wage growth slowdown has been sharper among higher-income households (1st panel), resulting in softer discretionary spending (2nd panel).
Source: BofA Global Research
5. The average gap between the last Fed rate hike in a cycle and the first cut thereafter is about six months. The median gap is four months. Typically, rate cuts occur when a recession has already started or roughly three months afterward.
Source: Deutsche Bank Research
6. Pictet expects a recession to start in Q3, with real GDP declines similar to 1990 but significantly smaller than the financial crisis.
Source: Pictet Wealth Management
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The United Kingdom
1. The BoE hiked rates by 25 bps (as expected).
• The market sees a couple of additional rate hikes in this cycle.
• Inflation remains sticky, outpacing the US and the Eurozone.
Source: BCA Research
• The BoE boosted its inflation forecast.
Source: BCA Research
• The central bank now sees the UK avoiding a recession.
Source: @financialtimes Read full article
• The BoE sharply lowered its forecast for unemployment.
Source: @financialtimes Read full article
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2. The Q1 GDP growth was in line with expectations. We will have more on the GDP report next week.
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Europe
1. EUR/USD appears overbought, and bullish sentiment is stretched.
Source: BCA Research
2. This chart shows French, Italian, and German trade with China.
Source: @financialtimes Read full article
3. Sweden’s unemployment rate is very low.
4. Czech inflation is finally easing.
Source: ING
Source: ING Read full article
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5. Almost 100k non-EU citizens have returned to another country in 2022.
Source: Eurostat Read full article
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Asia-Pacific
1. Japan’s Economy Watchers Survey continues to rebound.
2. New Zealand continues to see increased immigration.
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China
1. Lending slowed sharply in April (well below forecasts).
Source: @economics Read full article
Total loan balances extended this year are still well above 2022.
• Aggregate financing (including bonds) was also below forecasts.
• The money supply growth eased.
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2. The rebound in Chinese stocks has stalled despite positive earnings momentum.
Source: MRB Partners
China’s shares are underperforming global peers.
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3. Leading indicators suggest the industrial sector softened this month.
Source: Capital Economics
• Industrial capacity utilization is falling.
Source: Capital Economics
• The decline in Chinese steel and iron ore prices suggests a weaker-than-expected industrial recovery.
The decline in Chinese steel and iron ore prices suggests a weaker-than-expected industrial recovery.
Source: BCA Research
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4. The improvement in hiring surveys in Q1 points to accelerating household income growth later this year, which could support greater consumption, according to Gavekal.
Source: Gavekal Research
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Commodities
1. Silver declined sharply this week and is now at the 50-day moving average.
Source: barchart.com
2. Fertilizer prices are falling, reflecting declining input costs and becoming more affordable. (3 charts)
Source: The World Bank
Source: The World Bank
Source: The World Bank
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3. Olive oil prices hit a multi-year high.
4. This chart shows Russian grain and oilseed production.
Source: USDA Read full article
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Energy
1. OPEC’s oil production slowed again last month.
2. Here is a forecast for the Brent crude price trajectory from Numera Analytics.
Source: Numera Analytics (@NumeraAnalytics)
3. US oil well productivity has declined in recent years.
Source: The World Bank
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Equities
1. Shares of regional banks continue to sink, deepening underperformance relative to the overall banking sector.
• US banks keep underperforming European peers.
Source: Pantheon Macroeconomics
• The rotation out of financials into tech continues.
Source: BofA Global Research
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2. The Nasdaq 100 (QQQ) is up about 11% relative to the S&P 500 (SPY) since late January.
The Nasdaq’s strong performance is visible in the volatility market, with VXN (Nasdaq 100 VIX-equivalent) declining faster than VIX.
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3. US growth stocks have nearly reversed half of last year’s downtrend versus value stocks.
Source: Aazan Habib, Paradigm Capital
4. Demand for VIX call options keeps rising. Investors are preparing for a massive vol spike as the X-date nears.
Source: @richhend, @markets Read full article
5. Small caps are nearing the 2020 lows vs. the Nasdaq 100.
6. The median earnings beat is at the higher end of its pre-pandemic range.
Source: Deutsche Bank Research
Cyclical stocks have been leading earnings beats.
Source: Deutsche Bank Research
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7. BofA’s private clients continue to dump REITs.
Source: BofA Global Research
Investors are particularly worried about office REITs.
Source: @TheTerminal, Bloomberg Finance L.P.
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8. Retail investors’ equity purchases tumbled this month, …
Source: Vanda Research
… mostly due to slower single-stock purchases.
Source: Vanda Research
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Credit
1. Bank shares’ relative performance has diverged sharply from Treasury yields. In the past, higher yields typically meant stronger interest margins. But these days, the inverted yield curve is a headwind for earnings, while higher yields mean underwater hold-to-maturity portfolios.
Source: @TheTerminal, Bloomberg Finance L.P.; h/t BofA Global Research
2. The US still has too many banks.
Source: Goldman Sachs
3. Interest coverage ratios on new leveraged loans have declined substantially.
Source: TheLeadLeft Read full article
4. Leveraged loan repayment rates are at multi-year lows.
Source: Deutsche Bank Research
5. Office vacancies have risen sharply in the COVID era.
Source: The New York Times Read full article
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Rates
1. Let’s start with the Treasury bill curve.
2. The copper-to-gold ratio points to lower Treasury yields ahead.
Source: @TheTerminal, Bloomberg Finance L.P.
3. Here is Numera Analytics’ attribution of the year-to-date decline in the 10-year Treasury yield.
Source: Numera Analytics (@NumeraAnalytics)
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Food for Thought
1. Fast-food breakfast:
Source: @CivicScience Read full article
2. Grocery store preferences:
Source: @CivicScience Read full article
3. How Bed Bath & Beyond customers shifted their spending:
Source: Earnest Analytics
4. NYC skyscraper construction speed (in stories per year):
Source: Brian Potter Read full article
5. Labor-market exit age:
Source: @WSJ Read full article
6. States with the highest interest from home searchers:
Source: @PaulinaCachero, @wealth Read full article
7. US families with children under 18:
Source: FlowingData
8. Retail health clinics (most are in metropolitan areas):
Source: The Census Bureau Read full article
9. US craft beer production:
Source: @TheDailyShot
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Have a great weekend!
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