The Daily Shot: 19-May-22
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• Australia
• China
• Emerging Markets
• Cryptocurrency
• Energy
• Equities
• Credit
• Rates
• Food for Thought
The United States
1. Earnings reports from Walmart and Target spooked investors on Wednesday, fueling fresh concerns about collapsing discretionary spending and impending recession. The stock market plunged.
Source: CNBC Read full article
For now, high-frequency indicators point to a slowdown, not a recession.
Source: Evercore ISI Research
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2. Next, we have some updates on the housing market.
• Mortgage applications to purchase a home and rate locks declined sharply last week.
Source: AEI Center on Housing Markets and Finance
The fastest increase in mortgage rates in decades …
… and rapid gains in housing prices have been pressuring affordability.
Source: MRB Partners
And it’s finally starting to take a toll on housing demand. The stock market rout is also raising concerns about housing.
Source: Redfin
• Refi activity continues to shrink.
• Active home listings are no longer falling.
Source: MRB Partners
• Housing starts were strong last month, boosted by apartment construction (3rd panel).
But permits softened.
• Construction backlogs persist.
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3. Here are the industries with the highest labor shortages among small businesses.
Source: Alignable.com
4. Wage growth decelerated recently. A trend?
Source: Deutsche Bank Research
5. Internet-based retail activity as a share of total sales has been relatively stable after coming off the first COVID wave.
Source: Mizuho Securities USA
6. Private capital flows into the US have been surging, providing support for the dollar.
Source: Yardeni Research
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Canada
1. The April inflation report was just awful.
• The shocker was in the core inflation measures.
• It’s not just about base effects.
Source: Scotiabank Economics
• Inflation breadth has been widening.
Source: Scotiabank Economics
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2. Home price appreciation shows no signs of easing.
3. Foreign investors moved into Canadian securities in March.
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The United Kingdom
1. The CPI report was roughly in line with expectations, …
… as the core CPI smashed through 6%.
Retail price gains exceeded 11%.
2. The PPI surprised to the upside.
3. Employment growth is slowing.
Source: Pantheon Macroeconomics
4. Here is a Food for Thought item. UK newspaper preferences by ideology:
Source: @alexandreafonso
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The Eurozone
1. This chart shows why a rate hike is coming in July.
And it won’t be a 10 bps increase.
Source: Reuters Read full article
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2. Car registrations remain soft.
3. Barclays expects negotiated wage growth in Germany to increase toward 2.5% year-over-year.
Source: Barclays Research
• Negotiated wage growth in Italy has been subdued across sectors.
Source: Barclays Research
• Negotiated wage growth in Spain is rising.
Source: Barclays Research
• Manufacturers in France expect to raise wages over the next three months.
Source: Barclays Research
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Japan
1. The trade deficit widened further as lofty energy prices and a weak yen boosted import costs. At the same time, China’s lockdowns hurt exports.
Source: ABC News Read full article
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2. Service sector activity improved in March, but there is no upward trend here.
3. Core machinery orders were strong in March.
4. The weak yen and high commodity prices are contributing to rising inflation.
Source: Vanda Research
5. Speculative short positions in Japanese government bonds increased in recent months, albeit still below last year’s peak.
Source: Vanda Research
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Australia
The employment report was disappointing.
But full-time jobs continue to surge.
The unemployment rate is holding below 4%.
The participation rate ticked lower.
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China
1. Trade as a share of GDP has been trending lower.
Source: Goldman Sachs
2. Credit expansion outpaced the US since the GFC.
Source: TS Lombard
3. This chart shows China’s power demand and fuel types used.
Source: Fitch Ratings
4. China’s fiscal response to the pandemic has been relatively muted.
Source: BCA Research
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Emerging Markets
1. Chile’s GDP decline was larger than expected last quarter. But the GDP remains above the pre-COVID trend.
2. South Africa’s inflation is grinding higher.
Retail sales dipped below the pre-COVID trend.
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3. Here are the government debt-to-GDP ratios for select economies.
Source: Capital Economics
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Cryptocurrency
1. Bitcoin’s realized and implied volatility remains elevated (2 charts).
Source: Skew Read full article
Source: Skew Read full article
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2. Bitcoin’s buy/sell volume (yellow line) declined over the past two months, indicating persistent selling pressure.
Source: @cryptoquant_com
3. Bitcoin’s correlation to stocks keeps rising.
4. Finally, we have crypto companies with the most sports sponsorship deals.
Source: Coin Journal Read full article
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Energy
1. US gasoline demand has strengthened.
And gasoline inventories are now falling quicker than they usually do this time of the year.
• Crude oil and distillates inventories are also very low.
• This chart shows total US inventories, including the strategic petroleum reserve.
Source: @HFI_Research
• The Brent-WTI spread moved into negative territory amid robust domestic demand in the US.
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2. Next, we have the US coal vs. natural gas power generation capacity. Here is a quick description of “combined cycle power plant.”
Source: EIA Read full article
3. Fund managers expect crude oil to outperform other asset classes.
Source: BofA Global Research
4. Who are Gazprom’s top clients?
Source: Stefan Ulrich, Arun Toora, BloombergNEF Read full article
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Equities
1. Wednesday was an ugly day for the stock market amid recession concerns.
And futures point to more pain on the way.
Volatility continues to rise.
Source: @TheTerminal, Bloomberg Finance L.P.
We are nearing the official end of the COVID-era bull market.
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2. There is room to move much lower on valuations from here, especially since the market is losing faith in analysts’ earnings estimates.
BofA’s Financial Market Stability Risks Indicator points to further losses.
Source: BofA Global Research
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3. How did stocks perform during past recessions?
Source: Goldman Sachs
4. The put/call ratio among small traders remains elevated.
Source: SentimenTrader
5. This table shows the risk-adjusted returns of long/short factor portfolios based on changes in the 5-year Treasury yield. Value stocks tend to outperform when rates rise.
Source: BNP Paribas Asset Management Read full article
6. Retail buying has shifted from single stocks to ETFs.
Source: Vanda Research
ETF volume as a share of total trading activity has been rising.
Source: Deutsche Bank Research
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7. Finally, we have the percentage of Americans who took money out of the stock market because of recent events.
Source: MagnifyMoney Read full article
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Credit
1. Recession concerns are taking a toll on credit. High-yield bonds are starting to underperform investment-grade debt.
High-yield spreads continue to widen.
The high-yield universe has a large concentration of very leveraged debt.
Source: Moody’s Investors Service
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2. CLO activity has been robust, …
Source: Deutsche Bank Research
… even as AAA spreads widen.
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3. Munis have been tumbling.
• High-yield munis (vs. HY corporates):
• AAA muni yield ratio to Treasuries:
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Rates
1. Treasury bill demand is showing up in ETF flows.
2. A large portion of Treasury selling has occurred during Asia hours over the past month.
Source: Vanda Research
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Food for Thought
1. Potential expansion of NATOs land border with Russia:
Source: @TheBigDataStats Read full article
Source: Statista
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2. Ukrainian refugees boosting the population of host countries (which should improve their GDP growth):
Source: McKinsey & Company
3. Incomes vs. fertility rates:
Source: BCA Research
4. Emergency room visits for self-harm by children and adolescents:
Source: The New York Times Read full article
5. Priorities in preventing mass shootings:
Source: Morning Consult Read full article
6. Highest-grossing mobile games:
Source: @statspanda1 Read full article
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