The Daily Shot: 11-Jul-23
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Energy
• Equities
• Alternatives
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Consumer credit growth slowed sharply in May.
Source: MarketWatch Read full article
• Average credit card rate climbed above 22%, a new high.
Nonetheless, credit card balances continue to climb, …
… as households increasingly rely on plastic to maintain their spending.
Source: Oxford Economics
– Real credit card balances remain below pre-COVID levels.
– This chart shows credit card balances as a share of disposable income.
• Non-revolving consumer credit (mostly auto loans and student debt) declined for the first time since the pandemic shock.
– Student debt growth continues to slow (the chart shows year-over-year changes).
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2. Next, we have some data on the labor market.
• The Household Survey vs. the Establishment Survey:
• Job gains in goods and service sectors:
Source: Moody’s Investors Service
• Private payrolls growth vs. small business hiring intentions (NFIB):
Source: Pantheon Macroeconomics
• Unemployment among Americans without a high-school degree:
• The employment-to-population ratio (still below pre-COVID levels):
• Percentage of small businesses (NFIB) reporting difficulties filling job openings:
Source: Arcano Economics
• Healthcare employment (well below pre-COVID trend):
Source: @WSJ Read full article
• Deutsche Bank’s model probability of net job losses over the next few months:
Source: Deutsche Bank Research
• Service industries’ wage growth:
Source: Morgan Stanley Research
– Wage growth among low-wage workers:
Source: Goldman Sachs
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3. The GDPNow model estimate for second-quarter growth has been hovering around 2% (annualized).
Source: Federal Reserve Bank of Atlanta
Here are the contributions.
Source: @TheTerminal, Bloomberg Finance L.P.
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4. Finally, we have some updates on inflation.
• 1-year consumer inflation expectations eased further in June.
Source: @axios Read full article
• High-frequency indicators continue to signal sharp declines in inflation ahead.
Source: MarketDesk Research
Source: Goldman Sachs
• This chart illustrates the year-over-year CPI scenarios derived from the assumptions of monthly changes in CPI.
Source: BofA Global Research
• Wholesale used car prices dropped sharply in June.
Source: @axios Read full article
Here is the F. Black Book wholesale index vs. the used vehicles CPI.
Source: Morgan Stanley Research
• Morgan Stanley sees the June core CPI print significantly lower than the increase observed in May.
Source: Morgan Stanley Research
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Canada
1. Building approvals increased in May.
2. According to Desjardins, a higher terminal rate and somewhat slower pace of rate cuts next year will burden households when renewing mortgages, especially for those with variable rates. (2 charts)
Source: Desjardins
Source: Desjardins
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3. Canadians have been splurging on travel and entertainment this year.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
4. Speculators are turning bullish on the loonie.
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The United Kingdom
1. Pension plans are running surpluses as gilt yields surge.
Source: @financialtimes Read full article
2. Resetting mortgage rates will put pressure on household consumption.
Source: Barclays Research
3. Recruitment challenges are easing.
Source: ING
4. Satisfaction with the NHS is collapsing.
Source: Statista
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The Eurozone
1. The Sentix investor confidence index declined further this month.
Source: RTT News Read full article
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2. The Treasury-Bund spread has diverged from the US-Eurozone economic surprise differential.
Source: Capital Economics
3. Deteriorating excess liquidity points do downside risks for euro-area stocks.
Source: Pantheon Macroeconomics
4. Short-term rates continue to climb, with the 1-year swap rising above 4%.
5. French employment growth has been outpacing the rest of the Eurozone.
Source: @financialtimes Read full article
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Europe
1. Norway’s core CPI hit a record high.
Bond yields jumped.
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2. Sweden is heavily dependent on trade.
Source: PGM Global
3. Here is a look at Ukrainian refugees throughout the EU.
Source: Eurostat Read full article
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Japan
1. The Economy Watchers Expectations index declined in June.
2. The trade deficit widened more than expected.
3. The rally in USD/JPY appears stretched.
Source: Alpine Macro
• Speculative bets against the yen hit a multi-year high.
• Core inflation is already at a 40-year high, while the real value of the yen is at a 50-year low. Will the BoJ abandon yield curve control?
Source: Alpine Macro
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China
1. The CPI unexpectedly hit zero last month (year-over-year).
Source: @financialtimes Read full article
Core inflation is crashing too.
Here are a couple of CPI components.
Source: Reuters Read full article
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2. The PPI moved deeper into negative territory.
Source: Arcano Economics
Below are some PPI components.
– Food:
– Paper:
– Automobiles:
• China will be exporting disinflation.
Source: Pantheon Macroeconomics
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3. Beijing appears to have stabilized the renminbi.
4. Property developers’ USD-denominated bond prices continue to sink.
But Beijing is signaling more support for developers.
Source: @markets Read full article
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5. Broad credit growth has been lagging the money supply expansion.
Source: Chart and data provided by Macrobond
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Emerging Markets
1. Chile’s inflation is slowing.
The trade surplus was higher than expected in June.
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2. Colombia’s core inflation hit a new high.
3. Argentina’s economic activity tanked in April.
But vehicle production remains at multi-year highs.
And vehicle sales are improving.
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4. LatAm currencies have been outperforming.
Source: BCA Research
5. Egypt’s core CPI climbed above 40% last month.
6. Ukrainian inflation is slowing.
7. India’s business investment has been surging.
Source: Gavekal Research
8. Are Vietnam’s exports about to rebound?
Source: @ANZ_Research
9. It has been a good six months for EM Asia portfolio flows.
Source: @ANZ_Research
10. Inter-country equity correlations dipped to multi-year lows.
Source: TS Lombard
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Cryptocurrency
1. Bitcoin’s maximum drawdowns have been fairly consistent throughout cycles, while its correlation with stocks can vary.
Source: Koyfin
2. BTC/USD is testing resistance at its 100-week moving average after retracing about 30% of its prior downtrend.
3. ETH/BTC remains capped below long-term resistance.
4. The Grayscale Bitcoin Trust’s discount has narrowed significantly on hopes for a spot-bitcoin ETF conversion.
Source: CoinDesk Read full article
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Energy
1. The Brent crude backwardation has been strengthening.
2. Green hydrogen costs are expected to decline sharply over the next decade.
Source: @BloombergNEF Read full article
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Equities
1. Deutsche Bank’s positioning indicator has been moving deeper into overweight territory.
Source: Deutsche Bank Research
This chart shows positioning by sector.
Source: Deutsche Bank Research
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2. Hawkish signals from the Fed and robust US employment data sent the stock-bond correlation back into positive territory.
Stocks that benefit from higher rates have been outperforming.
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3. Fundamental and technical indicators point to bonds being attractive relative to stocks.
Source: Alpine Macro
4. Companies with extensive international sales have outperformed over the past couple of months.
5. Companies with high CapEx and R&D have outperformed those focusing on share buybacks and dividends.
6. More than half of US large-cap active managers underperform the S&P 500 Index over the past 20 years.
Source: S&P Dow Jones Indices
7. US and European equity indices returned above their SVB collapse levels, although banks are still lagging.
Source: Deutsche Bank Research
8. This chart compares small- vs. large-cap valuations by sector.
Source: Oxford Economics
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Alternatives
1. Morgan Stanley expects retail investors to contribute $3 trillion of assets to private market assets over the next five years.
Source: Morgan Stanley Research
2. Here is a look at the composition of dry powder across private market funds.
Source: Morgan Stanley Research
3. This chart shows private markets’ AUM over time.
Source: Morgan Stanley Research
4. Global private equity activity has been running well below 2022 levels.
Source: S&P Global Market Intelligence
5. Emerging US venture capital managers are on track to close less than $20 billion in annual commitments for the first time since 2016.
Source: PitchBook
• US venture capital fundraising activity is on pace to finish the year well below $100 billion.
Source: PitchBook
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6. Venture lending activity has slowed.
Source: @theleadleft
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Credit
1. Let’s begin with some updates on small banks.
• Small banks paid down a substantial portion of FHLB debt going into the quarter-end.
Source: Deutsche Bank Research
But borrowings remain elevated.
• Small banks increasingly rely on jumbo CDs for funding.
• Construction loan balances continue to grow.
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2. The St. Louis Fed’s financial stress index has been easing.
3. There has been an uptick in leveraged loan defaults with an increased share from sponsored firms. (2 charts)
Source: Goldman Sachs
Source: Goldman Sachs
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4. There is a growing downgrade risk premium in European senior unsecured real estate debt.
Source: Goldman Sachs
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Rates
1. Higher yields are consistent with positive economic surprises.
Source: Barclays Research
2. Bets against Treasury futures remain extreme (and profitable).
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Global Developments
1. Inflation continues to surprise to the downside.
• Food prices have been trending lower.
Source: Arcano Economics
• Tightening liquidity points to slower inflation ahead.
Source: BofA Global Research
• This scatterplot shows 2023 inflation and GDP growth forecasts.
Source: TS Lombard
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2. The US dollar has been consolidating.
Source: @TheTerminal, Bloomberg Finance L.P.
3. Here are Deutsche Bank’s expectations for currency volatility by economic scenarios. A spike in equity or currency vol could trigger an unwind of carry trades, especially given wide interest rate differentials.
Source: Deutsche Bank Research
4. The global stock/bond ratio appears overbought.
Source: MRB Partners
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Food for Thought
1. Searching for remote work:
Source: @chartrdaily
2. Attending religious services:
Source: Pew Research Center Read full article
3. Threads’ user count:
Source: @chartrdaily
4. Companies with the largest ETF and mutual fund assets:
Source: Visual Capitalist Read full article
5. Cutting back on tips:
Source: Bankrate Read full article
6. EVs are expected to make up 91% of the global light-duty vehicle fleet by 2050.
Source: Alpine Macro
7. Homes with air conditioning that use individual units:
Source: @WSJ Read full article
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