The Daily Shot: 22-Jun-23
• The United Kingdom
• The United States
• The Eurozone
• Europe
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
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As a reminder, the next Daily Shot will be published on Monday, June 26th.
The United Kingdom
1. As we mentioned yesterday, the UK inflation report was well above expectations again, …
… with services driving the core CPI to multi-decade highs.
• Here is how inflation compares to the BoE’s forecast.
Source: ING
• UK inflation stands out relative to peers (2 charts).
Source: @financialtimes Read full article
Source: @financialtimes Read full article
Elevated wage growth and extreme energy price shock explain why UK CPI has been outpacing other economies.
Source: Capital Economics
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2. Short-term rates continue to surge, …
… with markets pricing multiple BoE rate hikes ahead. Moreover, market pricing now puts decent odds on one or more 50 bps increases. Are these expectations overdone?
• The terminal rate continues to climb, moving further out.
• Here is the market pricing for the overnight rate after the February MPC meeting.
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3. Long-term market-based inflation expectations are rising again.
4. Producer prices offer a hopeful signal for the CPI.
5. Industrial orders show signs of improvement.
Manufacturers are reducing the pace of price increases.
Source: Reuters Read full article
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6. Home prices have been holding up better than expected.
7. Government borrowing in May topped forecasts, …
… pushing the debt-to-GDP ratio above 100% for the first time in decades.
Source: @PhilAldrick, @markets Read full article
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The United States
1. Chair Powell struck a hawkish tone on Wednesday.
Source: Reuters Read full article
The market is now pricing in a small chance of a rate hike in November.
The terminal rate moved higher.
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2. Mortgage applications appear to have stabilized below 2014 levels.
This chart shows the rate lock count.
Source: AEI Housing Center
• The supply of homes for sale continues to sink.
Source: Redfin
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3. The World Economics SMI report shows business activity improving in June.
Source: World Economics
4. State and local governments are sitting on substantial excess savings (as evidenced by their holdings of Treasury securities).
Source: Deutsche Bank Research
5. Business applications remain elevated.
Source: Arcano Economics
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The Eurozone
1. New vehicle registrations are back above 2021 levels in the EU and the Eurozone.
2. China remains a key trading partner for the Eurozone.
Source: @WSJ Read full article
3. Ireland is distorting the euro-area manufacturing output figures.
III Capital Management: – Irish data continues to distort overall Euro area data due to Ireland’s role as a profit center for multi-nationals and a hub for multi-nationals’ intellectual property rights. The latest example was April industrial production data, which was reported at 1% month-over-month, but actually declined by 0.8% ex-Ireland. Overall, industrial output in Europe ex-Ireland remains below its pre-Covid level.
Source: JP Morgan Research; III Capital Management
4. It will take a long time for Greece’s economy to return to the 2008 peak.
Source: Alpine Macro
The deleveraging process in Greece is ongoing.
Source: Alpine Macro
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5. Putin is having a field day with this development.
Source: Reuters Read full article
Source: @pollofpolls_EU
Source: @Wahlen_DE
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Europe
1. Sweden’s short-term bond yields continue to climb.
2. Poland’s industrial production bounced in May but remained below last year’s levels.
3. This chart shows the Swiss broad money supply (year-over-year).
4. Finally, we have some data on road accident fatalities across Europe.
Source: @EU_Eurostat Read full article
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Asia-Pacific
1. Foreign purchases of Japanese stocks remain elevated.
2. New Zealand’s exports hit a record high.
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China
1. Consumer confidence is improving, but loan growth has been slow.
Source: Alpine Macro
2. Only a third of investors surveyed by BofA think Chinese equities will retest the October 2022 price low.
Source: BofA Global Research
3. Here is an illustration of China’s interest rate system.
Source: ING
4. Residential real estate transactions remain below last year’s levels.
Source: Arcano Economics
5. Has corporate loan growth peaked?
Source: Pantheon Macroeconomics
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Emerging Markets
1. Mexico stands to gain from the US-China decoupling.
Source: Alpine Macro
2. Argentina’s trade deficit has widened sharply.
3. Brazil’s CDS spread is below the EM average.
Source: Pantheon Macroeconomics
4. Turkey’s manufacturing confidence is improving.
5. South Africa’s inflation is moderating.
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Cryptocurrency
1. It has been a strong week for cryptos so far, with Bitcoin Cash outperforming peers.
Source: FinViz
2. Bitcoin has been surging on hopes that cash bitcoin ETFs will finally be approved in the US.
Source: CNBC Read full article
• Bitcoin extended gains, but is not yet overbought. Next resistance is at the 40-week moving average near $32K.
Source: Symbolik
• BTC’s rally past $30K triggered another spike in short liquidations.
Source: CoinGlass
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3. Only 4% of altcoins have outperformed BTC over the past month. Traders continue to prefer bitcoin during this rally, which is unusual for risk-on phases.
Source: Blockchain Center
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Commodities
1. US grains continue to surge as crop conditions deteriorate.
Source: Farm and Dairy Read full article
• Corn:
• Soybeans:
• Bloomberg’s grains index:
• Wheat also got a boost from some international news.
Source: Reuters Read full article
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2. Feeder cattle broke below the 50-day moving average as grain prices soared.
Source: barchart.com Read full article
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3. Here is a look at the changes in global steel production.
Source: Capital Economics
4. Nuclear reactors are expected to double by 2050, which could support uranium prices.
Source: PGM Global
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Equities
1. Goldman’s positioning indicator has moved into “stretched” territory.
Source: Goldman Sachs
2. US retail sentiment is the most bullish since late-2021, shortly before the recent bear market began.
Source: Longview Economics
3. The Nasdaq 100 trailing PE ratio jumped by almost 50% over the past six months – a highly unusual move.
h/t @themarketear
4. The S&P 500 equity risk premium is nearing the pre-GFC lows.
Further reading
5. The S&P 500 is typically higher one year after rising from a 52-week low to a 52-week high. Pullbacks are likely during the next one-to-three months.
Source: @scottcharts
6. Hedge funds’ gross leverage has been surging this year.
Source: Goldman Sachs
7. The CBOE skew index is tumbling.
8. ARK Innovation continues to follow the dot-com analog.
Source: @TheTerminal, Bloomberg Finance L.P.
Source: Reuters Read full article
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Credit
1. The Fed’s RRP balances keep moving lower, …
… offsetting the liquidity drain from the US Treasury rebuilding its holdings at the Fed.
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2. With many existing CLOs ending their reinvestment periods, new CLOs will have no shortage of product to buy.
Source: @financialtimes Read full article
3. This chart shows corporate bond spread compression since May 23rd.
Source: Capital Economics
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Rates
1. US short-term real yields keep rising.
Source: @axios
2. The T-bill share of the Treasury market is expected to climb further as the US Treasury boosts its post-debt-ceiling issuance.
Source: Oxford Economics
3. The Fed owns the highest concentration of 10+ year Treasuries, with roughly 36% outstanding.
Source: Deutsche Bank Research
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Global Developments
1. The dollar remains dominant in global markets.
Source: Alpine Macro
2. Global M1 money supply has declined sharply.
Source: Deutsche Bank Research
3. Next, we have nominal and real year-over-year house price changes.
Source: Oxford Economics
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Food for Thought
1. US tariffs on manufactured goods:
Source: @WSJ Read full article
2. Endowment funds:
Source: Visual Capitalist Read full article
3. Samsung Electronics’ number of employees in China:
Source: @WSJ Read full article
4. Changes in Medicaid enrollment:
Source: USAFacts
5. Views on MMR vaccine requirements to attend public schools:
Source: Pew Research Center Read full article
6. Afghan refugees’ perilous journey:
Source: The New York Times Read full article
7. Plants and animals at risk of extinction:
Source: Statista
8. New Zealand’s sheep-to-people ratio:
Source: @chartrdaily
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As a reminder, the next Daily Shot will be published on Monday, June 26th
Have a great weekend!
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