July 11, 2023July 11, 2023 by The Daily Shot Editor: Lev Borodovsky

US credit card rate climbs above 22%

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

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.

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

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

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

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

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

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

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

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

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

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

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

Rates

1. Higher yields are consistent with positive economic surprises.

Source: Barclays Research

2. Bets against Treasury futures remain extreme (and profitable).

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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