Longer-term inflation expectations climbed this month

The Daily Shot: 15-May-23
The United States
The United Kingdom
The Eurozone
Japan
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. The U. Michigan consumer sentiment index declined sharply this month …
 

 
… as household expectations deteriorated.
 

 
However, a separate report from CivicScience points to an improvement in consumer sentiment.
 
Source: ESI  
 
2. The 1-year inflation expectations edged lower, …
 

 
… but longer-term inflation expectations surged. This is not the kind of news the Federal Reserve wants to see.
 

 
Falling grocery prices may help ease inflation expectations in the months ahead.
 
Source: Pantheon Macroeconomics  

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3. Next, we have some updates on the housing market.
 
Buying conditions for homes are near multi-year lows.
 

 
Homeowners are refusing to accept the fact that their home values have probably flattened and may have declined.
 

 
New listings of homes for sale are down sharply (2 charts).
 
Source: realtor.com  
 
Source: Black Knight  
 
Though the process of selling a home now takes longer, it’s still quicker than it was prior to the pandemic
 
Source: realtor.com  
 
There is no glut in the housing market.
 
Source: BCA Research  
 
Newly constructed homes are increasingly accounting for a larger share of total home sales.
 
Source: @WSJ   Read full article  
 
Almost one-third of all home purchases are paid for in cash, the highest rate in eight years.
 
Source: PGM Global  
 
This chart shows the drivers of housing affordability.
 
Source: Federal Reserve Bank of Atlanta  
 
Mortgage delinquencies remain relatively low.
 
Source: Calculated Risk  
 
What happened to mortgages that left the COVID-era forbearance plans?
 
Source: Black Knight  
 
Here is a look at active and new listings of luxury homes by city.
 
Source: Quill Intelligence  

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4. Consumer savings balances remain elevated.
 
Source: BofA Global Research  
 
5. Import prices have been falling.
 

 
6. The Citi US Economic Surprise Index continues to move lower.
 

 
7. The US dollar jumped last week amid debt ceiling concerns.
 

 
Source: FXS   Read full article  
 
Here is the US Treasury’s cash account at the Fed.
 


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The United Kingdom

1. As we saw last week, the Q1 GDP growth was in line with expectations (at 0.1%).
 
Source: Reuters   Read full article  
 
Growth in private consumption stalled.
 

 
Business investment unexpectedly increased.
 

 
Government spending declined sharply.
 

 
The COVID-era GDP recovery still lags other G7 economies.
 
Source: Pantheon Macroeconomics  
 
2. Manufacturing production jumped in March.
 

 
But services output declined.
 

 
Construction output keeps climbing.
 

 
3. The March trade gap was narrower than expected.
 

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4. UK real rates are still deep in negative territory.
 
Source: Simon White, Bloomberg Markets Live Blog  


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The Eurozone

1. Germany’s current account surplus surged in March.
 

 
2. Greek economic activity is rebounding.
 
Source: @financialtimes   Read full article  
 
Will the debt be upgraded to investment grade?
 
Source: @financialtimes   Read full article  

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3. Inflation expectations jumped in March.
 
Source: ECB  
 
Source: Reuters   Read full article  

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4. Speculative accounts continue to bet on the euro.
 


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Japan

1. The PPI is moderating.
 

 
2. The JGB market is increasingly dysfunctional.
 
Source: Goldman Sachs  


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China

1. Consumer borrowing is picking up.
 
Source: BCA Research  
 
Improving retail sales could support consumer discretionary stocks.
 
Source: BCA Research  

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2. Breadth among Chinese tech stocks soared in January and has since pulled back.
 
Source: SentimenTrader  
 
3. Here is a look at GDP forecasts relative to the US.
 
Source: The Economist   Read full article  


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Emerging Markets

1. Erdogan is now favored to win the presidential race, according to betting market trends.
 
Source: Election Betting Odds  
 
The lira continues to hit new lows despite the government’s pre-election interventions.
 

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2. Next, we have some updates on South Africa.
 
A potential spat with the US …
 
Source: @financialtimes   Read full article  
 
… sent bonds and the currency lower.
 
The rand (record low):
 

 
Bond yield:
 

 
Manufacturing output jumped in March.
 

 
Mining production also improved (2 charts).
 

 

 
Economists continue to downgrade South Africa’s GDP growth estimates for this year, …
 

 
… while pushing inflation forecasts higher.
 

——————–

 
3. India’s industrial production print was lower than expected.
 

 
Inflation continues to moderate.
 

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4. Russia’s GDP has held up relative to Ukraine (according to the Russian government).
 
Source: IIF  
 
Russia’s financial conditions quickly eased back to pre-war levels as the accumulation of foreign assets shifted from sanctioned to non-sanctioned banks, according to IIF.
 
Source: IIF  

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5. Mexico’s manufacturing production is rolling over.
 

 
Rate cuts are coming.
 
Source: Scotiabank Economics  

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6. Colombia’s retail sales dipped well below last year’s levels.
 

 
7. Brazil’s inflation continues to moderate.
 

 
Rate cuts are coming in the second half of the year.
 
Source: Numera Analytics (@NumeraAnalytics)  

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8. Argentina’s inflation continues to surge.
 

 
Source: Reuters   Read full article  

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9. Next, we have some performance data from last week.
 
Currencies:
 

 
Bond yields:
 

 
Equity ETFs:
 


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Cryptocurrency

1. The crypto market remains susceptible to speculative fervor.
 
Source: @olgakharif, @crypto   Read full article  
 

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2. Below is a look at dead crypto tokens over time.
 
Source: Visual Capitalist   Read full article  
 
3. Here is last week’s performance across some of the most liquid tokens.
 


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Commodities

1. Gold is entering a seasonally weak period.
 
Source: SentimenTrader  
 
2. US winter wheat outlook has deteriorated.
 
Source: @mhirtz, @TarsoVeloso, @markets   Read full article  
 
3. Milk futures continue to slide amid softer product prices (cheddar, butter).
 

 
4. Here is last week’s performance across key commodity markets.
 


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Energy

1. Crude oil futures remain under pressure.
 

 
2. US crude oil rig count continues to trend lower.
 

 
3. The natural gas rig count tumbled last week.
 

 
Source: Reuters   Read full article  


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Equities

1. Consensus earnings estimates for Q2 continue to decline, albeit at a slower pace compared to prior quarters.
 
Source: Deutsche Bank Research  
 
The current US profit recession is expected to be the longest since 2016.
 
Source: @farahesque, @business   Read full article  

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2. The projected earnings and sales forecasts for tech mega-cap companies have been outpacing those for the S&P 500.
 
Source: Goldman Sachs  
 
Mega-cap valuations are not extreme relative to the rest of the S&P 500.
 
Source: Goldman Sachs  
 
3. Companies that will benefit from the AI boom have been driving the S&P 500 gains this year.
 
Source: SG Cross Asset Solutions  
 
Source: @Subrat_Patnaik, @markets   Read full article  

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4. Speculative accounts are now net long the Nasdaq 100 futures and increasingly net short the S&P 500 futures.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
5. Institutional investors have been persistently trimming their equity exposure.
 
Source: @WSJ   Read full article  
 
BofA’s private clients are doing the same.
 
Source: BofA Global Research  
 
According to data from TD Ameritrade, retail investor positioning has bottomed.
 
Source: TD¬†Ameritrade  

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6. Next, we have some equity factor performance data.
 
Value vs. growth:
 

 
The equal weight index:
 

 
Dividend aristocrats:
 

 
Companies known for share buybacks:
 

 
Last week’s performance:
 

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7. Here are some additional performance charts from last week.
 
Sectors:
 

 
Industrials continue to lag.
 

 
Macro trends basket pairs (relative performance):
 

 
Thematic ETFs:
 

 
Largest US tech firms:
 


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Credit

1. Dollar deposits at US domestic banks increased during the week ending on May 3rd.
 

 
Emergency lending was higher.
 
Source: MarketWatch   Read full article  
 

 
The cost of funds for small banks has risen sharply since the start of the banking turmoil.
 
Source: Torsten Slok,¬†Apollo  
 
Business loan balances are rolling over.
 

——————–

 
2. Money market funds’ AUM keeps climbing.
 

 
3. Will the Credit Suisse CoCo bond wipeout trigger a default for the subordinated debt CDS?
 

 
Source: @claireeboston, @markets   Read full article  

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4. Finally, here is last week’s performance by asset class.
 


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Rates

1. Where is the US neutral rate?
 
Source: Scotiabank Economics  
 
The Fed’s policy looks restrictive relative to market pricing for the long-run fed funds rate.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

——————–

 
2. Treasury futures positioning gap between asset managers and hedge funds is at a multi-year high.
 
Source: @GarfieldR1966, @markets   Read full article  


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Global Developments

1. Commodity currencies have not confirmed a rebound in global manufacturing conditions.
 
Source: BCA Research  
 
2. Cross-asset correlations have been falling.
 
Source: @denitsa_tsekova, @luwangnyc, @markets   Read full article  
 
3. Here is the regional attribution of global growth in auto sales, with a forecast from Scotiabank.
 
Source: Scotiabank Economics  
 
4. Global industrial production has contracted over the past few months.
 
Source: The World Bank  
 
5. The US dollar continues to dominate SWIFT payments.
 
Source: Macrobond  
 
6. Next, we have some performance data for last week.
 
Trade-weighted currency indices:
 

 
Bond yields:
 

 
Large-cap equity indices:
 


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Food for Thought

1. Mother’s Day spending:
 
Source: NRF  
 
2. AI talk on earnings calls:
 
Source: Statista  
 
3. Amex cards in circulation:
 
Source: @chartrdaily  
 
4. Purchasing an EV:
 
Source: @CivicScience   Read full article  
 
5. Fuel efficiency by truck type:
 
Source: The Washington Post   Read full article  
 
6. Sneaker inventories:
 
Source: @chartrdaily  
 
7. SVB’s deposits over time:
 
Source: @chartrdaily  
 
8. US banknotes held in foreign countries:
 
Source: USAFacts   Read full article  
 
9. NASA’s share of the federal budget:
 
Source: @chartrdaily  
 
10. Mobile phone subscriptions:
 
Source: Statista  
 
11. Mother’s Day gifts:
 
Source: @CivicScience   Read full article  
 
Source: NRF  
 

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