The Daily Shot: 12-Oct-21
• Administrative Update
• China
• Asia – Pacific
• Japan
• The Eurozone
• Europe
• The United kingdom
• The United States
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
Administrative Update
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China
1. Thermal coal prices hit a new high today amid falling inventories and strong demand for electricity.
Source: TS Lombard
• Coal usage for power production surged this year.
Source: BCA Research
• Steel output has slumped partly due to energy scarcity.
Source: Barclays Research
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2. Next, let’s revisit the property sector.
• Investors continue to dump property bonds.
• Modern Land’s bond maturing this month gave up half of its value after the firm sought to delay repayment.
Source: @WSJ Read full article
• Residential investment growth has been too fast (3 charts).
Source: TS Lombard
Source: Longview Economics
Source: @WSJ Read full article
But construction and infrastructure activity slowed recently.
Source: BCA Research
• The percentage of vacant properties is relatively high.
Source: TS Lombard
• Here are the sources of funding for real estate developers.
Source: @WSJ Read full article
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3. China’s sovereign CDS spread remains elevated.
4. Here are some updates on the equity market.
• Tech shares in Hong Kong (testing resistance):
• A-share free float by investor type:
Source: UBS Asset Management
• A-share turnover by quarter:
Source: UBS Asset Management
• Equity return dispersion (tech and property shares down sharply, other sectors more stable):
Source: S&P Global Market Intelligence
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5. Here is the total debt-to-GDP trend by sector.
Source: Goldman Sachs
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Asia – Pacific
1. Taiwan’s exports hit another record high.
The Taiwan dollar is rolling over.
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2. Retail card spending in New Zealand remains depressed.
New Zealand’s bond yields continue to climb.
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3. Next, we have some updates on Australia.
• Consumer and business confidence indicators are rebounding.
• Aussie mining stocks significantly underperformed their global counterparts this year …
Source: Pavilion Global Markets
… pushing valuations to the lowest levels in about a decade.
Source: Pavilion Global Markets
Australia dominates the global iron ore supply. Slowing demand from China does not help.
Source: Pavilion Global Markets
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Japan
1. Producer prices increased more than expected last month. With consumer inflation remaining depressed, the PPI spike could put pressure on margins in some sectors.
2. Machine tool orders rose sharply last month.
3. Technicals suggest that the dollar is overbought vs. the yen.
h/t Cormac Mullen
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The Eurozone
1. Italian industrial production is holding near pre-COVID levels.
2. Spanish tourism recovery has been painfully slow.
Source: Fitch Ratings
3. This chart shows goods consumption relative to the pre-COVID trend.
Source: @OliverRakau
4. Home price appreciation spiked in Germany.
Source: @fwred
5. Here are the drivers of the Eurozone’s CPI.
Source: ECB Read full article
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Europe
1. Norway’s CPI remains tepid.
2. Czech inflation surprised to the upside.
Bond yields are surging.
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3. Energy stocks continue to underperform oil.
4. This chart shows the evolution of bankruptcies in the construction sector since the start of the pandemic.
Source: ING
5. European office vacancy and take-up rates have hardly recovered.
Source: UBS Asset Management
6. Furlough schemes around Europe are winding down.
Source: Fitch Ratings
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The United kingdom
1. Gilt yields continue to surge, …
… outpacing the US.
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2. Long-term inflation expectations hit the highest level in over a decade.
3. The UK has been facing soft consumer confidence and a rising desire to save.
Source: Pantheon Macroeconomics
4. Higher energy prices in the UK are about to hit spending on domestic leisure activities
Source: Pantheon Macroeconomics
5. Public opinion on the government’s handling of the economy, inflation, and taxes has shifted.
Source: @YouGov Read full article
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The United States
1. Let’s begin with the labor market.
• Employment turnover is rising.
Source: @McKinsey Read full article
• The tight labor market will further boost wage inflation, …
Source: Trahan Macro Research
… which is likely to feed through to consumer inflation.
Source: The Daily Feather
• As the US economy recovered, mainly due to a surge in the higher-productivity goods sectors, a gap has opened up between the number of people employed and GDP. The key question now is whether this gap is structural or will close.
Source: Bain & Company
• This chart shows the broad unemployment/underemployment trend since the start of the pandemic.
Source: @GregDaco
• Here are the labor force participation demographic trends.
Source: @WSJ Read full article
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2. Cornerstone Macro’s consumer confidence tracker shows further deterioration, …
Source: Cornerstone Macro
… as retail gasoline prices hit the highest level since 2014.
Source: GasBuddy
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3. Real incomes, excluding government support, have been flat since the start of the pandemic.
Source: Yardeni Research
4. This chart shows projections for the US Treasury’s net borrowing needs and the Fed’s purchases of Treasuries.
Source: Reuters Read full article
5. The recent decline in durable goods inventory growth points to slowing manufacturing activity ahead.
Source: Variant Perception
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Emerging Markets
1. The Turkish lira hit a record low.
2. Vietnam’s domestic car sales improved last month but remain soft.
3. South Africa’s business confidence is now well below pre-COVID levels.
4. Next, we have the month-to-date equity returns.
Source: S&P Global Market Intelligence
5. Financial conditions have tightened over the past year, especially relative to developed markets, …
Source: Variant Perception
… which is partly due to EM central bank rate hikes in response to rising inflation.
Source: Variant Perception
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Cryptocurrency
1. Bitcoin is at resistance.
2. The options market is placing a 20% probability of bitcoin ending the month at a new all-time high above $65K.
Source: Skew Read full article
3. Crypto-focused investment products saw eight straight weeks of inflows.
Source: CoinShares Read full article
Bitcoin products accounted for the majority of inflows last week.
Source: CoinShares Read full article
4. Next, we have some data on crypto awareness.
Source: Cardify Read full article
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Commodities
1. Aluminum prices are surging, boosted by the spike in energy costs.
Source: Bloomberg Read full article
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2. Chinese housing starts historically correlated well with commodity prices, and the recent reading points to commodity declines are ahead.
Source: Fitch Ratings
3. Here is copper vs. China’s electricity output.
Source: @Not_Jim_Cramer
4. The recent US dollar gains could weigh on commodity prices.
h/t @ISABELNET_SA
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Energy
1. The US oil curve continues to move deeper into backwardation, pointing to tight supplies (2 charts).
• Nov-Dec spread:
Source: @business Read full article
• December-to-December (1yr) rolling spread:
h/t @jessicaisummers
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2. Further gains in the US dollar could slow the rally in oil.
Source: @Marcomadness2
3. US energy shares continue to underperform oil.
Source: S&P Global Market Intelligence
4. Next, we have some updates on renewables.
• Solar installations:
Source: @NatBullard
• Rising costs in solar panel production:
Source: @WSJ Read full article
• Solar and wind penetration of electricity generation around the world:
Source: Cornerstone Macro
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Equities
1. Stocks are softer this morning, …
… as bond yields grind higher.
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2. The amount of liquidity held by US corporates and households, both on an absolute and relative basis, has never been higher, which should be a tailwind for stocks.
Source: Merill Lynch , BofA Global Research
3. Earnings growth will moderate as comps become more challenging.
Source: LPL Research
4. Profit warnings picked up last quarter.
Source: BofA Global Research; @MikeZaccardi
5. The last three months have seen extreme outflows from economically sensitive sectors, suggesting expectations have reset.
Source: Truist Advisory Services
6. Despite a dip in September, institutional investor confidence is still near three-year highs.
Source: SPDR Americas Research, @mattbartolini
6. Investor risk appetite has been moderating.
Source: MRB Partners
7. How do stocks perform in stagflationary environments?
Source: @ISABELNET_SA, @GoldmanSachs
8. Most-shorted stocks broke the downward trend as the Reddit crowd pounced. Shorting equities, an essential part of a healthy market, has become nearly untenable.
Source: Deutsche Bank Research
9. Financials still appear undervalued relative to the broader market (2 charts).
Source: BCA Research
Source: BCA Research
Have banks’ net-interest margins reached a bottom?
Source: BCA Research
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10. The iShares large-cap value ETF (IVE) is holding support relative to the iShares large-cap growth ETF (IVW).
Source: Dantes Outlook
11. Option skew continues to trend lower as demand for out-of-the-money puts moderates.
h/t @danny_kirsch
Here are the changes in the S&P 500 volatility curve by strike percentage (skew).
Source: @TheTerminal, Bloomberg Finance L.P.
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Credit
1. S&P Global’s bankruptcy tracker shows slowing US defaults.
Source: S&P Global Market Intelligence
2. Next, we have leveraged loan issuance by rating, …
Source: S&P Global Market Intelligence
… and use of proceeds.
Source: S&P Global Market Intelligence
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Rates
1. Higher real yields ahead?
Source: MarketDesk Research
2. The US shadow rate shows an extraordinary level of policy accommodation.
Source: @AtlantaFed Read full article
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Global Developments
1. Global supply chain bottlenecks persist.
Source: @tomfishburne Read full article
• Supplier deliveries:
Source: @acemaxx, @JPMorganAM
• Semiconductor delays:
Source: Bloomberg Read full article
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2. What are the risks of stagflation over the coming year?
Source: Deutsche Bank Research
3. Labor markets are increasingly tight, especially in the US and the Eurozone.
Source: Morgan Stanley Research
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Food for Thought
1. Early holiday shopping:
Source: @CivicScience
2. “Buy now pay later” (BNPL) users:
Source: @alantsen Read full article
3. Interacting with banks:
Source: @BBGVisualData Read full article
4. Growth in charter school enrollment:
Source: @axios Read full article
5. Nearly half of US adults are unmarried:
Source: @HTLasVegas, @rcgeconomics Read full article
6. Nuclear submarine fleets:
Source: Gavekal Research
7. Adult obesity prevalence by state:
Source: CDC
8. Cheapest Netflix standard plans:
Source: Statista
9. A mid-1970s German forecast for energy sources of the future:
Source: @Stephen83802580
10. Reasons why Britons (individuals) would not want to go to the Moon:
Source: @RupertMyers Read full article
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