The Daily Shot: 14-Jun-23
• The United States
• The United Kingdom
• Europe
• Asia-Pacific
• China
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The CPI report was roughly in line with expectations, …
Source: @TheTerminal, Bloomberg Finance L.P.
… with core inflation remaining stubbornly high.
Below is the year-over-year trend.
• Once again, used car prices gave the CPI a boost.
Source: @TheTerminal, Bloomberg Finance L.P.
• The supercore CPI (core services ex housing) increased in May, …
… with gains driven by car insurance costs, which saw the biggest increase since 2020.
– The good news is that car insurance inflation tends to follow new vehicle prices with a lag.
Source: Pantheon Macroeconomics
And new car prices declined again.
• Housing inflation is still running well above pre-COVID levels.
• Here are some additional CPI trends.
– Core goods and services:
– Airline fares:
– Hospital services:
– Nursing homes:
We will have more data on the CPI report tomorrow.
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2. With no major surprises from the CPI report, the Fed is expected to keep rates unchanged today.
But Treasury yields climbed, …
… as the market moderated its expectations for rate cuts next year.
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3. Real hourly wage growth moved back into positive territory.
4. The NFIB Small Business Optimism Index edged higher in May, but sentiment remains depressed.
This survey often displays a lack of internal consistency because the NFIB is dominated by very small businesses. As a result, certain sections of the report closely resemble consumer sentiment measures rather than traditional business indicators.
– Sales expectations keep falling.
– Businesses are increasingly concerned about future credit conditions.
– And yet hiring and CapEx plans jumped.
This chart summarises the divergence.
Source: NFIB Read full article
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The United Kingdom
1. Labor force inactivity is declining amid rising cost of living.
Source: ING
• Job vacancies continue to trend lower.
• Surveys point to slower wage growth ahead.
Source: Pantheon Macroeconomics
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2. The UK-US 2-year yield differential is back in positive territory.
3. UK real rates are expected to keep rising.
Source: Simon White, Bloomberg Markets Live Blog
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Europe
1. Germany’s ZEW expectations index unexpectedly edged higher this month.
But the current situation index declined sharply.
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2. This chart shows the percentage of businesses conducting remote meetings across the EU.
Source: Eurostat Read full article
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Asia-Pacific
1. Japan’s share prices continue to surge.
Separately, the yen appears deeply undervalued.
Source: MRB Partners
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2. South Korea’s unemployment rate hit a record low.
Source: Nikkei Asia Read full article
• South Korea’s export prices are down sharply on a year-over-year basis.
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China
1. Credit expansion surprised to the downside.
• CNY loans:
• Aggregate financing:
Money supply growth has been slowing.
Source: Reuters Read full article
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2. Beijing is introducing new stimulus, …
Source: @economics Read full article
…starting with a rate cut.
Source: @WSJ Read full article
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3. Local governments experienced large declines in tax revenue and land-use right sales last year.
Source: Gavekal Research
A large volume of local government financing vehicle bonds (LGFV) are coming due this year, raising the need for refinancing.
Source: Gavekal Research
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Emerging Markets
1. South Africa’s mining output is rebounding.
2. Egypt’s core inflation is back above 40%.
3. Vietnam’s domestic vehicle sales have been declining.
4. This chart shows Morgan Stanley’s projection for central bank policy trajectories.
Source: Morgan Stanley Research
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Commodities
1. Gold is outperforming the US equity risk premium and its typical inverse correlation with the dollar.
Source: Alpine Macro
2. Here is a look at top lithium producers.
Source: Visual Capitalist Read full article
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Energy
1. Oil market implied volatility has been falling.
2. Analysts expect a deficit in oil markets.
Source: Numera Analytics (@NumeraAnalytics)
3. Fund managers have soured on energy stocks.
Source: BofA Global Research
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Equities
1. The Fed’s RRP (reverse repo) balances are rolling over, which should boost bank deposits and reserves.
The extra liquidity in the private sector tends to be a tailwind for stocks (2 charts).
Source: MUFG Securities
Source: Deutsche Bank Research
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2. The Nasdaq 100 valuation continues to diverge from real rates.
Source: @TheTerminal, Bloomberg Finance L.P.
3. S&P 500 earnings estimates for 2023 have been stable.
Source: Yardeni Research
4. According to Morgan Stanley, “the gap between reported earnings and cash flow remains the widest in ~25 yrs, driven by excess inventory, inflation and capitalized costs that have yet to flow thru the P&L.”
Source: Morgan Stanley Research
5. Demand for call options on mega-cap shares keeps rising.
Source: TS Lombard
6. US early cyclicals have outperformed defensive stocks, taking leadership from energy.
Source: Alpine Macro
7. So far, the S&P 500 growth/value ratio remains in an uptrend despite its sharp correction.
Source: Alpine Macro
8. Insiders have been buying.
Source: @thomsonreuters
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Credit
1. Let’s start with some updates on commercial real estate (CRE).
• Aggregate commercial property year-over-year price changes (stabilizing?):
• CRE credit supply and demand:
Source: Wells Fargo Securities
• CRE lending (a surprise bounce):
Source: Capital Economics
• Office visits (still about 40% below 2019 levels):
Source: Placer.ai
Source: Placer.ai
• Origin of capital going into CRE:
Source: Wells Fargo Securities
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2. Next, we have some updates on private corporate credit.
• Direct lending market vs. the leverage finance market in Q1:
Source: Deutsche Bank Research
• Private credit growth:
Source: Goldman Sachs
• Private credit loan interest:
Source: Goldman Sachs
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Rates
1. US real yields are surging again, which tends to be a headwind for growth stocks.
2. Treasury futures positioning remains extraordinarily bearish.
Source: Deutsche Bank Research
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Global Developments
1. According to Bridgewater, the US, Europe, and UK economies have veered away from equilibrium, with risk premiums on assets falling relative to cash.
Source: Bridgewater Associates Read full article
2. The Fed is priced to cut far more than other G10 central banks.
Source: Morgan Stanley Research
3. Positive corporate earnings revisions signal a rebound in global manufacturing.
Source: TS Lombard
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Food for Thought
1. Airline satisfaction survey:
Source: J.D.Power
2. Amounts wagered on sports events since June 2018 by state:
Source: @axios Read full article
3. Category leaders:
Source: @genuine_impact
4. Cloud infrastructure market share:
Source: Statista
5. Components of gasoline and diesel prices at the pump:
Source: @EIAgov
6. The CBO’s latest projections of federal government deficit and debt:
Source: CBO
7. Share of working-age Americans in the total population over time:
Source: @axios Read full article
8. Focus on domestic vs. international issues:
Source: Pew Research Center Read full article
9. Peak superheroes?
Source: @chartrdaily
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