Consumer credit delinquencies continue to rise

The Daily Shot: 20-Jul-23
The United States
The United Kingdom
The Eurozone
Asia-Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Rates
Food for Thought



 

The United States

1. Let’s begin with the housing market.
 
Residential construction activity eased last month.
 

 

 
The weaker permits print was due to multifamily housing (2 charts) …
 

 
Source: Wells Fargo Securities  
 
… as the pipeline of units under construction hits a new record, …
 

 
… and rents moderate.
 
Source: Pantheon Macroeconomics  
 
Permits for single-family housing were strong last month, …
 

 
… nearing 2022 levels.
 

 
The number of single-family housing units under construction continues to fall.
 

 
Mortgage applications showed some improvement last week, …
 

 
… as mortgage rates eased.
 

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2. Credit card and auto loan delinquencies continue to rise.
 
Source: Torsten Slok, Apollo  
 
Source: Torsten Slok, Apollo  
 
And so are the rejection rates.
 
Source: FHN Financial  

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3. Is greater household wealth reducing the need to save?
 
Source: SOM Macro Strategies  
 
4. Heavy truck sales have been rising.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
5. Here is a look at the Beveridge curve. Declining job openings and low/steady unemployment would imply a soft landing.
 
Source: Deutsche Bank Research  
 
However, a lower trend in the quit rate points to a higher unemployment rate of around 4-5%. (2 charts)
 
Source: Deutsche Bank Research  
 
Source: Deutsche Bank Research  

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6. The heavily inverted yield curve continues to signal a recession ahead. But is this inversion different?
 

 
Source: @markets   Read full article  


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The United Kingdom

1. The CPI report finally surprised to the downside.
 

 
Is core inflation finally peaking?
 

 
Here are the monthly changes.
 
Source: Pantheon Macroeconomics  
 
Economists see core inflation slowing rapidly from here. Below is a forecast from TS Lombard (monthly changes).
 
Source: TS Lombard  
 
Services inflation has been particularly strong, exceeding the BoE’s forecasts.
 
Source: Capital Economics  
 
Here is the housing services CPI.
 

 
But ING says that services inflation has peaked.
 
Source: ING  
 
UK inflation remains above that of the US and the Eurozone.
 
Source: @financialtimes   Read full article  
 
The PPI is crashing.
 

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2. Rate hike expectations eased after the CPI report.
 

 
Here is the 2-year yield.
 

 
This chart shows the BoE rate projection from Capital Economics (compared to market expectations).
 
Source: Capital Economics  
 
The pound dropped.
 
Source: @5thrule, Bloomberg Markets Live  

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3. Home price appreciation continues to ease, according to the official report.
 

 
4. Bregrets?
 
Source: @bpolitics   Read full article  


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The Eurozone

1. The June core inflation was revised higher.
 

 
Services inflation continues to surge.
 

 
Below are the CPI attributions.
 
By sector:
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
By country:
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The US-Eurozone gap in longer-term inflation expectations has been closing.
 
Source: Oxford Economics  

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2. Construction output is running in line with last year’s levels (no growth).
 

 
3. Car registrations are following the 2021 trajectory.
 

 
4. Credit conditions have tightened sharply.
 
Source: Capital Economics  


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Asia-Pacific

1. Japan’s exports climbed last month.
 

 
The trade deficit continues to narrow.
 

——————–

 
2. Singapore rents have been outpacing other large cities.
 
Source: @bpolitics   Read full article  
 
3. New Zealand’s inflation is moderating but remains high.
 

 
Source: Capital Economics  

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4. Australia’s jobs report topped expectations.
 

 

 
Employment is above trend and is rising faster than before the pandemic.
 

 
The unemployment rate is back at 3.5%.
 

 
The participation rate edged lower but remains near the highs.
 


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China

1. Beijing is getting aggressive in pushing China’s currency higher.
 

 
The renminbi jumped against the dollar.
 

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2. The Citi Economic Surprise Index continues to fall.
 

 
3. Outside of food, China’s CPI is in deflation territory.
 
Source: Danske Bank  
 
4. This chart illustrates China’s imbalance between consumption and investment.
 
Source: Reuters   Read full article  


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Emerging Markets

1. South Africa’s core inflation has finally peaked.
 

 
Retail sales are rolling over.
 

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2. The Thai baht keeps rising.
 

 
Here is the iShares Thailand equity ETF.
 

 
The market wants to see the status quo.
 
Source: @bpolitics   Read full article   Further reading  

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3. EM economies are increasingly dependent on US demand.
 
Source: TS Lombard  


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Cryptocurrency

1. Here is a look at performance over the past month. Litecoin (LTC) also outperformed BTC.
 
Source: FinViz  
 
2. Bitcoin’s price has moved in line with global liquidity.
 
Source: Quill Intelligence  
 
3. 82% of the top 50 altcoins outperformed bitcoin over the past month, led by BCH, XLM, and XRP.
 
Source: Blockchain Center  
 
4. Bitcoin’s market cap relative to the total crypto market cap (dominance ratio) is testing resistance. It appears that favorable legal developments in the US toward altcoins boosted investor optimism outside of BTC.
 

 
5. The ETH/BTC price ratio remains capped below resistance despite positive moves in altcoins.
 


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Commodities

1. The wheat market is finally responding to the Ukraine situation.
 

 
Source: Politico   Read full article  
 
Source: Barron’s   Read full article  

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2. Gold has outperformed industrial metals during the recent global economic slowdown.
 
Source: LPL Research  
 
3. Copper production in Chile and Peru fell sharply during the 2014-2015 El Niño.
 
Source: @ANZ_Research  


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Energy

1. US gasoline inventories remain tight.
 

 
2. The amount of crude oil stored at Cushing, OK (WTI settlement hub) declined sharply last week.
 

 
3. US refinery runs are holding above last year’s levels.
 

 
Refinery utilization is nearing multi-year highs.
 

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4. El Niño could trigger a rise in global electricity consumption.
 
Source: @ANZ_Research  


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Equities

1. Bank shares are rebounding.
 

 
Here is a long-term chart of financials vs. tech.
 
Source: Citi Private Bank  

——————–

 
2. There has been a lot of short-covering this month.
 

 
3. S&P 500 growth stocks are trading at a wide premium to value stocks.
 
Source: MarketDesk Research  
 
4. The Nasdaq is lagging the average bear-market recovery.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
5. This chart shows the market risk profile after retracing half of the previous bear-market drawdown.
 
Source: Goldman Sachs  
 
6. How did stocks perform after inflation peaks?
 
Source: Goldman Sachs  
 
7. Next, we have the dividend payout ratios in the US, Europe, and EM.
 
Source: @acemaxx, @JPMorganAM  
 
8. RIsk assets have been responding positively to good news.
 
Source: TD Securities; @WallStJesus  


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Credit

1. Core bonds tend to do well after the last Fed rate hike.
 
Source: LPL Research  
 
2. Yields across fixed-income sectors are above long-term averages.
 
Source: LPL Research  
 
3. Mortgage-backed securities are trading at a notable discount to corporates.
 
Source: Piper Sandler   
 
4. Small banks’ funding costs remain elevated.
 
Source: Torsten Slok, Apollo  
 
5. Investment-grade portfolio managers have reduced their cash positions.
 
Source: BofA Global Research  
 
6. CMBS new issuance remains depressed.
 
Source: Deutsche Bank Research  


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Rates

1. Bond yields are falling across advanced economies.
 
Source: Capital Economics  
 
2. The Fed’s balance sheet is now below pre-bank-turmoil levels.
 
Source: MarketDesk Research  
 
3. T-Bill inflows appear to be slowing.
 
Source: BofA Global Research  


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Food for Thought

1. Alphabet’s 2022 financials visualized:
 
Source: @chartrdaily  
 
2. Taking a break from social media:
 
Source: @CivicScience   Read full article  
 
3. Declining birth rates:
 
Source: Visual Capitalist   Read full article  
 
4. US support for access to the abortion pill:
 
Source: Gallup   Read full article  
 
5. Views on the morality of various behaviors and practices:
 
Source: Gallup   Read full article  
 
6. New shipping routes opening as Arctic ice melts:
 
Source: Statista  
 
7. The Black Sea Grain Initiative (which Russia blocked):
 
Source: Statista  
 
8. Warmer oceans:
 
Source: The Economist   Read full article  
 
9. Paid family leave laws:
 
Source: @axios   Read full article  
 
10. Men’s singles Grand Slam champions:
 
Source: Statista  
 
Grand Slam titles won:
 
Source: Statista  

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