The Daily Shot: 22-May-23
• Administrative Update
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
Administrative Update
Please note that The Daily Shot will not be published on Monday, May 29th.
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The United States
1. Let’s begin with some updates on inflation.
• Economists continue to boost their forecasts for core inflation this year.
• The COVID-era surge in corporate margins has been an important driver of consumer inflation.
Source: UBS Research
• Cyclical components drove the recent CPI decline, but structural inflation remains sticky.
Source: Simon White, Bloomberg Markets Live Blog
• Significant improvements in global supply chain conditions have been pulling inflation lower.
Source: Deutsche Bank Research
• Wholesale used vehicle prices were lower again this month.
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2. The GDPNow model is tracking Q2 growth at 2.9% (annualized).
Source: @AtlantaFed Read full article
Here are the contributions.
Source: @ANZ_Research
• The consensus estimate is well below that figure but is in positive territory.
• The market expects a soft landing.
Source: Torsten Slok, Apollo
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3. Not a pause but a skip? Fed officials are indicating that there will be no rate increase in June.
Source: AP News Read full article
Source: @catarinasaraiva, @RichMiller28, @economics Read full article
Market expectations got repriced on Friday in response to Fed signals.
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4. According to Goldman, it may not be June 1st, but the X-date will hit shortly after.
Source: @AnsteyAsia, @markets Read full article
• Treasury cash balance continues to dwindle.
• The stock market remains relatively unconcerned.
Source: @emily_graffeo, @markets Read full article
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Canada
1. Retail sales dropped in March, …
… as Canadians slowed vehicle purchases.
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2. Financial conditions remain tight, according to Oxford Economics.
Source: Oxford Economics
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The United Kingdom
1. Consumer confidence continues to rebound.
2. Home prices jumped this month.
3. Strong corporate margins have been boosting food inflation.
Source: UBS Research
4. This chart shows non-tourist visa issuance over time.
Source: @financialtimes Read full article
5. GBP/USD appears overbought.
Source: BCA Research
Speculative accounts are now net long GBP futures.
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The Eurozone
1. The DAX hit a record high last week.
Source: @financialtimes Read full article
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2. Speculative accounts continue to boost their bets on the euro.
Separately, the euro’s share of reserves peaked at 28% in 2010 and has been stable at around 20% since 2015. Top holdings of the euro continue to rise near record highs.
Source: Alpine Macro
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3. Germany’s PPI is crashing.
The euro-area inflation breadth is moderating.
Source: TS Lombard
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4. Greece’s economy is projected to surpass the euro area’s growth rate.
Source: Goldman Sachs
• Greek bond yields are now lower than Italian yields.
Hedge funds have been betting against Greek bonds.
Source: @financialtimes Read full article
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5. Will the divergence between services and manufacturing activity persist?
Source: Deutsche Bank Research
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Japan
1. The Nikkei hit a multi-decade high.
2. The CPI breadth has been rising.
Source: Scotiabank Economics
3. Services activity dipped in March.
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Asia-Pacific
1. Taiwan’s stocks had a strong performance last week.
2. South Korea’s exports are 16% below 2022 levels but are still quite strong.
3. Aussie-yen is at resistance.
Source: @TheTerminal, Bloomberg Finance L.P.
4. Australia’s wage growth “breadth” has been rising.
Source: @ANZ_Research
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China
1. Beijing indicated it was unhappy about the renminbi’s sharp decline.
Source: @markets Read full article
The currency jumped on Friday but is retreating again today.
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2. Equity valuations remain depressed.
Source: Citi Private Bank
3. So far, China’s economic recovery has been weak.
Source: BCA Research
4. How are households allocating their surplus savings?
Source: BofA Global Research
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Emerging Markets
1. Economists have been boosting their estimates for LatAm growth this year.
• Brazil:
• Mexico:
• Chile:
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2. Brazil’s economic activity held up well in March.
3. South Africa’s bonds and the rand remain under pressure.
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4. Foreigners continue to exit Turkey’s stock market.
5. A trough in China’s business cycle could bode well for EM equity earnings, particularly in Asia.
Source: Alpine Macro
6. Next, we have some performance data from last week.
• Currencies:
• Bond yields:
• Equity ETFs:
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Cryptocurrency
1. Transaction fees have become a much larger share of bitcoin mining revenues.
Source: @WSJ Read full article
Source: @sidcoins, @DavidPan_1, @technology Read full article
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2. Litecoin outperformed sharply last week
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Commodities
1. Speculative accounts continue to boost their bets against copper.
2. Here is last week’s performance across key commodity markets.
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Energy
1. US rig count is now down on a year-over-year basis.
Fracking activity has also been slowing.
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2. Global crude oil is less oversupplied than in the second half of 2022, …
Source: Numera Analytics (@NumeraAnalytics)
… aided by falling production in the Middle East.
Source: Numera Analytics (@NumeraAnalytics)
But the rest of OPEC+ is exceeding quota targets.
Source: Numera Analytics (@NumeraAnalytics)
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3. Henry Hub Natural Gas futures could see a seasonal peak in mid-June.
Source: Aazan Habib, Paradigm Capital
4. US energy stocks are starting to lag, narrowing their gap with crude oil.
Merrill Lynch’s private clients have been dumping energy stocks.
Source: BofA Global Research
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Equities
1. Deutsche Bank’s positioning index is back to neutral.
Source: Deutsche Bank Research
2. A majority of sub-industry groups show a positive return over the last year.
Source: SentimenTrader
3. The S&P 500’s three-month average intraday range has deteriorated.
Source: SentimenTrader
4. Equity fund flows have flattened out. Outflows next?
Source: BofA Global Research
5. Margin debt as a share of the S&P 500 market cap has been declining.
Source: Yardeni Research
6. This chart shows S&P 500 put and call skew trends.
Source: Simon White, Bloomberg Markets Live Blog
7. There is a lot of enthusiasm around Nasdaq 100 stocks. Call option volume jumped last week.
The Nasdaq 100 futures positioning has surged relative to the S&P 500 futures.
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8. The Nasdaq 100 (QQQ) has decoupled from Treasury prices (IEF).
9. Here is the percentage of S&P 500 members outperforming the index.
Source: @t1alpha
10. Retail investor purchases of financials have declined but remain elevated relative to pre-SVB levels.
Source: Vanda Research
11. High-dividend stocks have been widening their underperformance.
12. Next, we have some performance data from last week.
• Sectors (defensives have been lagging):
• Equity factors:
• Macro basket pairs’ relative performance:
• Thematic ETFs:
• Largest US tech stocks:
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Credit
1. It’s been a good month for IG corporate bond issuance.
Source: @axios Read full article
2. Small bank deposits increased during the week ending on May 10th.
3. Business loan balances are rolling over.
• There is pain ahead for business credit.
Source: Oxford Economics
• Small businesses rely heavily on small banks for financing.
Source: Goldman Sachs
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4. Demand and supply of credit are declining as lending standards tighten. (2 charts)
Source: Morgan Stanley Research
Source: Morgan Stanley Research
A slowdown in credit growth could have a significant impact on consumption.
Source: Morgan Stanley Research
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5. CLO arbitrage declined this year amid elevated liability costs.
Source: @ArroyoNieto, @LisaLeereporter, @markets Read full article
6. Finally, here is last week’s performance across credit asset classes.
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Rates
1. US real yields have been rising.
2. Treasury funds continue to see inflows.
Source: BofA Global Research
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Global Developments
1. The dollar’s yield advantage is expected to narrow.
Source: Alpine Macro
Although the dollar’s share of global reserves declined over the past few decades, there has been no wholesale dumping of dollars.
Source: Alpine Macro
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2. Speculative accounts continue to boost their bets against the US dollar.
3. Implied volatility across DM currency markets has been trending lower.
4. Some leading indicators point to a mild economic contraction this year. But it is well anticipated, evidenced by market drawdowns and a sharp decline in downward earnings revisions last year. (2 charts)
Source: BofA Global Research
Source: BofA Global Research
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5. Next, we have some DM performance data from last week.
• Trade-weighted currency indices:
• Bond yields:
• Large-cap equity indices:
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Food for Thought
1. Global EV production:
Source: Visual Capitalist Read full article
2. McDonald’s company-operated vs. franchise stores:
Source: @chartrdaily
3. Netflix subscriptions and revenue per membership by region:
Source: Reuters Read full article
4. Passenger aircraft deliveries:
Source: Deutsche Bank Research
5. NYC rents (year-over-year growth):
Source: BofA Global Research
6. Population projections for China and India:
Source: @WSJ Read full article
7. Vaccination of children around the world:
Source: UNICEF Read full article
8. Duration of MLB games:
Source: semafor
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