The Daily Shot: 12-Jul-23
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. The NFIB small business sentiment index showed some improvement in June.
• Even as businesses continue to report a downward trend in sales, their sales projections were slightly less gloomy last month.
• More companies plan to boost prices.
A separate survey shows that raising prices to defend margins remains a popular strategy.
Source: McKinsey & Company Read full article
• The NFIB report signals slower wage growth ahead.
Source: Oxford Economics
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2 The Johnson Redbook index of same-store sales is now down year-over-year for the first time since the 2020 COVID shock.
3. The impending student loan reckoning is anticipated to strain consumer spending.
Source: @cfb_18, @gutavsaraiva
Source: @TheDailyShot Further reading
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4. Office visits increased across the country in June.
Source: Placer.ai
5. The wholesale inventories-to-sales ratio remains elevated.
6. Online goods prices have been in deflation mode for ten months in a row.
Source: @atanzi, @economics Read full article
7. Next, we have some updates on the housing market.
• Mortgage rates are hovering around 7%.
– Most homeowner mortgages are well below current market rates.
Source: Oxford Economics
– Adjustable-rate mortgages are a small share of the market.
Source: Oxford Economics
• The rapid rise in rates has more than doubled monthly mortgage payments from pandemic lows, significantly denting affordability.
– Monthly payments:
Source: @TheTerminal, Bloomberg Finance L.P.
– How much home can you buy with a $2,500 monthly mortgage payment?
Source: @TheTerminal, Bloomberg Finance L.P.
– Here is a look at housing affordability across states.
Source: Oxford Economics
• The Freddie Mac housing index was almost flat in May (year-over-year).
• Current predictions largely indicate a rebound in the year-over-year home price growth.
– AEI Housing Center:
Source: AEI Housing Center
– CoreLogic:
Source: CoreLogic Read full article
• The national inventory of homes for sale continues to deteriorate.
Source: realtor.com
• The median listing price is slightly below 2022 levels.
Source: realtor.com
• Housing starts have decoupled from permits, although there are signs of improvement. (2 charts)
Source: BCA Research
Source: BCA Research
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Correction: Yesterday’s employment-to-population ratio chart did not cover the full range. Here is the correct image.
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The United Kingdom
1. The UK employment report revealed cracks in the job market, even as wage growth remains robust.
– Payrolls:
– Jobless claims:
– The unemployment rate:
– Wage growth:
• Permanent placements have been slowing.
Source: S&P Global PMI
• Job openings are declining (2 charts), …
Source: Pantheon Macroeconomics
… as worker shortages ease, …
Source: ING
… helped by foreign worker inflows.
Source: IMF Read full article
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2. Similar to the US, rising rates and higher monthly payments have impacted affordability.
Source: Owen Minde
3. The GBP/USD rally has accelerated.
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The Eurozone
1. Germany’s ZEW expectations index continues to sink.
Source: Reuters Read full article
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2. Italian industrial production bounced in May.
3. Job growth in Spain and Germany has been dominated by the public sector.
Source: @financialtimes Read full article
4. Eurozone labor costs are heading higher.
Source: Pantheon Macroeconomics
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Europe
1. The Swiss franc is surging.
2. European natural gas consumption remains below average.
Source: @JKempEnergy
3. This chart shows the number of vehicles and road fatalities in the EU.
Source: @ACEA_auto
4. Many parts of Europe face water shortages.
Source: OECD Read full article
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Correction: Here is an up-to-date map of Ukrainian refugees in Europe (yesterday’s map was outdated).
Source: Eurostat Read full article
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Japan
1. The PPI is slowing rapidly.
2. Machinery orders declined sharply in May.
3. Machine tool orders were weak last month.
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China
1. Last month’s credit growth was stronger than expected.
Source: @markets Read full article
– CNY loans:
– Aggregate financing:
But the overall credit growth continues to slow.
Source: Pantheon Macroeconomics
Here are the money supply metrics.
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2. Will local government special-purpose bond issuance boost infrastructure spending? (2 charts)
Source: Gavekal Research
Source: Gavekal Research
Source: SCMP Read full article
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3. Domestic carmakers are increasingly dominating the market.
Source: @WSJ Read full article
4. The Shanghai Shenzhen CSI 300 Index is consolidating.
Source: @TheTerminal, Bloomberg Finance L.P.
5. China’s marriage rate hit a new low.
Source: @TheDailyShot Further reading
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Emerging Markets
1. Brazil’s falling inflation signals a rate cut next month.
• Headline CPI:
• Core CPI:
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2. Russia’s current account surplus declined sharply this year, with the Q2 print coming in well below forecasts.
Source: @markets Read full article
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3. EM inflation has been surprising to the downside.
4. This chart shows sovereign debt renegotiations and write-offs involving China’s lenders.
Source: Rhodium Group Read full article
5. China’s shares have been a drag on EM performance.
Further reading
6. EM equity ETFs’ implied volatility is near record lows.
Source: Alpine Macro
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Cryptocurrency
1. Bitcoin’s trading volatility has been very low as searches for ‘cryptocurrency regulation’ declined.
Source: Deutsche Digital Assets
2. According to Deutsche Digital Assets, a significant decline in real yields alongside monetary policy easing could provide a tailwind for bitcoin.
Source: Deutsche Digital Assets
3. Crypto funds saw three straight weeks of inflows, fully correcting the prior nine weeks of outflows.
Source: CoinShares Read full article
• Bitcoin products saw the most inflows last week while investors continued to exit short-bitcoin funds.
Source: CoinShares Read full article
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Commodities
1. Cotton futures rallied in New York and Zhengzhou on China’s stimulus hopes and adverse weather conditions in Texas.
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2. The Chicago hog futures rebound continues.
Source: Farm Journal Read full article
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3. Cocoa supplies are running low.
Source: @isiscarol14, @dayannesousa, @MumbiGitau, @markets Read full article
4. The cobalt market is expected to shift into deficit over the next few years.
Source: @financialtimes Read full article
Who are the largest suppliers of cobalt?
Source: @financialtimes Read full article
5. Here is a look at key metals production.
Source: Capital Economics
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Energy
1. Brent futures have exited the recent trading range and are testing resistance at $80/bbl.
Source: barchart.com
2. Oil implied volatility has been trending lower (2 charts).
Source: @TheTerminal, Bloomberg Finance L.P.
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3. Here is a look at O&G drilling CapEx.
Source: @WSJ Read full article
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Equities
1. Global investors are very bearish on US stocks.
Source: S&P Global
• Here is the percentage of JP Morgan’s clients planning to increase their equity exposure.
Source: JP Morgan Research; @dailychartbook
• Hedge funds went on a shorting spree last week as yields surged.
Source: Goldman Sachs; @themarketear
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2. While money managers and institutions are cautious, the Reddit crowd is happy to buy. Speculative stocks are outperforming.
• The CBOE put-call ratio hit the lowest level since 2021.
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3. This chart shows the percentage of stocks outperforming the S&P 500 (market breadth).
Source: BofA Global Research
4. The correlation between the Nasdaq 100 and small caps (including small-cap growth stocks) has deteriorated.
Source: @t1alpha
5. Next, we have some sector updates.
• US financial stocks are starting to improve relative to the S&P 500.
Source: Aazan Habib, Paradigm Capital
• This chart shows cumulative fund flows by sector.
Source: Deutsche Bank Research
• How do global investors see sector performance over the next 30 days?
Source: S&P Global
• US REITs and other real estate-related companies typically outperform the broader market coming out of downturns.
Source: Baron Funds Read full article
• Here is short interest by sector vs. historical averages.
Source: Deutsche Bank Research
• Below is a long-term view of sector contributions to the S&P 500 capitalization and income.
Source: Goldman Sachs; @dailychartbook
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6. US growth stocks appear overbought versus value stocks.
Source: MRB Partners
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Credit
1. Bankruptcies have been rising (2 charts).
Source: @t1alpha
Source: S&P Global Market Intelligence
• Here is the breakdown by sector.
Source: S&P Global Market Intelligence
• This chart shows retail sector defaults over time.
Source: Moody’s Investors Service
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2. Small caps are vulnerable to tighter credit conditions.
Source: Oxford Economics
3. CLOs are finally starting to reset their liability spreads.
Source: @LisaLeereporter, @ArroyoNieto, @markets Read full article
AAA spreads have been trending lower after peaking last fall.
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4. CMBS issuance remains depressed relative to recent years.
Source: Deutsche Bank Research
• Office property investment is expected to deteriorate further.
Source: Goldman Sachs; @dailychartbook
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Rates
1. TS Lombard’s model suggests that rates implied vol should be lower.
Source: TS Lombard
2. Here is the percentage of JP Morgan’s clients planning to decrease bond portfolio duration.
Source: JP Morgan Research; @dailychartbook
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Global Developments
1. The US dollar broke below short-term support.
Source: @TheTerminal, Bloomberg Finance L.P.
2. Global labor markets continue to slacken, according to LinkedIn.
Source: LinkedIn
Hiring is slowing.
Source: LinkedIn
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3. Is the global economy nearing a recession?
Source: BCA Research
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Food for Thought
1. EVs with the longest range:
Source: Visual Capitalist Read full article
2. The most innovative companies:
Source: Visual Capitalist Read full article
3. The Index of Economic Freedom:
Source: Visual Capitalist Read full article
4. NATO’s expansion:
Source: @financialtimes Read full article
5. Remote work policies by company size:
Source: @WSJ Read full article
6. Views on declining union membership:
Source: Pew Research Center Read full article
7. Distance to light pollution-free areas in the US:
Source: @axios Read full article
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