Posted on by The Daily Shot Editor: Lev Borodovsky

The number of news articles mentioning “hiring freeze” jumped in May

The Daily Shot: 03-Jun-22
• The United States
• Canada
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought

 

The United States

1. Let’s begin with the labor market.
 
• Unemployment applications remain exceptionally low.
 

 
• However, the ADP report showed slower job gains in May, well below forecasts.
 
Source: ADP Research Institute  
 
• According to ADP, small businesses have been shedding jobs in recent months.
 

 
• The number of news articles mentioning “hiring freeze” jumped in May.
 

 
• Morgan Stanley is estimating that the payrolls report will show a gain of 350k jobs in May, …
 
Source: Morgan Stanley Research  
 
… with the unemployment rate dropping to 3.5%.
 
Source: Morgan Stanley Research  

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2. On average, economic data continues to surprise to the downside.
 

 
• In particular, housing market data has been very soft.
 
Source: BCA Research  
 
• The Atlanta Fed’s GDPNow estimate has declined to 1.3% growth (annualized) for Q2.
 
Source: @AtlantaFed  

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3. The recent decline in CEO confidence does not bode well for capital spending.
 
Source: Gavekal Research  
 
4. The bottom quantile of US households now has less excess savings than in 2019. Note that the top two quantiles represent over 61% of US consumption.
 
Source: Morgan Stanley Research; @carlquintanilla  
 
5. This chart shows the federal government’s interest expense under different aggregate interest rate scenarios.
 
Source: Yardeni Research  

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Canada

1. The markets now expect the BoC to take rates well above 3% by the end of the year.
 

 
• Morgan Stanley sees two 75 bps rate hikes.
 
Source: Morgan Stanley Research  
 
• The 2yr yield keeps climbing.
 

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2. Household purchasing power continues to deteriorate, with recovery not expected to start until next year.
 
Source: Scotiabank Economics  
 
3. Housing inventories are very tight, keeping price appreciation near record levels. How quickly will the BoC’s tightening cool the housing market?
 
Source: Numera Analytics  
 
4. Sensible immigration policies helped boost Canada’s prime-age population, which will be a tailwind for GDP growth.
 
Source: @RichardDias_CFA  

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The Eurozone

1. Shorter-term Bund yields have been surging as the market prices in a more hawkish ECB.
 

 
2. Inflation expectations are on the rise.
 
Source: Danske Bank  
 
3. Germany’s economy is expected to underperform this year.
 
Source: @jrandow, @bpolitics   Read full article  
 
4. The ECB has been financing much of Italy’s bond issuance.
 
Source: IIF  
 
5. What is the relationship between supply strains (delivery times) and input prices?
 
Source: ECB   Read full article  

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Europe

1. Swiss inflation surprised to the upside. A strong Swiss franc has been keeping the CPI well below the levels we see in the Eurozone.
 

 
The 2yr Swiss yield hit the highest level since 2011.
 

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2. Denmark’s short-term yields are surging as well.
 

 
3. The Czech government budget deficit exceeded 2020 levels.
 

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Asia – Pacific

1. South Korea’s inflation topped expectations.
 

 
Source: Reuters   Read full article  
 
Separately, South Korea’s business investment has been contracting in recent months.
 
Source: ING  

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2. Singapore’s business activity surged in May.
 
Source: S&P Global PMI  
 
3. Australia’s housing finance is starting to cool.
 

 
But business lending is accelerating.
 

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China

1. The renminbi resumed its rebound as investors return to China.
 

 
2. Corporate earnings outlook has been weak.
 
Source: Alpine Macro  
 
But depressed sentiment on Chinese equities could be a tailwind for the market.
 
Source: BCA Research  
 
Valuations look attractive.
 
Source: BCA Research  

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3. Lockdowns are easing.
 
Source: Gavekal Research  
 
Here are the waiting times for vessels at the Port of Shanghai.
 
Source: VesselsValue  

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4. China’s total financing is now below the broad money supply growth.
 
Source: Chart and data provided by Macrobond  
 
5. The unemployment rate among young people has risen substantially.
 
Source: @WSJ   Read full article  

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Emerging Markets

1. Brazil’s economy continued to expand in Q1, although growth was slower than expected. Economists see a tough road ahead for the rest of 2022.
 

 
2. Mexican consumer confidence has been resilient.
 

 
3. Next, we have some vehicle sales data through May.
 
• Brazil:
 

 
• Mexico:
 

 
• Chile:
 

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4. Ukraine’s central bank has returned to the business of monetary policy, hiking rates to 25%.
 

 
5. EM central banks will begin cutting rates next year, according to Capital Economics.
 
Source: Capital Economics  

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Cryptocurrency

1. Most major cryptos stabilized over the past week.
 
Source: FinViz  
 
2. There has been a dip in the number of active addresses and entities on the Bitcoin blockchain, similar to what occurred during the 2018 bear market.
 
Source: Glassnode   Read full article  
 
3. Bitcoin miners have distributed less of their BTC holdings over the past few weeks.
 
Source: Glassnode   Read full article  
 
4. Could we see a rise in M&A among crypto miners?
 
Source: CoinDesk   Read full article  
 
Here is a comparison of fundamental metrics across publicly listed mining companies.
 
Source: @ArcaneResearch  

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5. It would be challenging for Russia to use crypto for circumventing sanctions.
 
Source: @IIF   Read full article  
 
6. The number of cryptocurrencies has exploded.
 
Source: Statista  
 
7. Crypto industry political donations surged over the past few quarters.
 
Source: @allyversprille, @bill_allison, @bpolitics   Read full article  

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Commodities

1. Copper soared on Thursday amid improving demand expectations for China.
 

 

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2. Soybean crush has been tumbling as gains in soybeans outpace soybean oil and soybean meal.
 
h/t Tom  

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Energy

1. The OPEC+ output “boost” is not very meaningful, because production has been persistently running below quotas.
 
Source: Reuters   Read full article  
 
2. US oil inventories surprised to the downside (2 charts).
 

 

 
Refined product inventories are also very tight.
 
• Distillates:
 

 
• Gasoline:
 

 
US refinery runs declined last week.
 

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3. Euro area countries have been filling up their gas storage for the upcoming winter, but export cuts from Russia could cause significant setbacks.
 
Source: BCA Research  
 
4. European petroleum tanker rates surged this year.
 
Source: EIA   Read full article  
 
5. Who owns crude tankers moving Russian oil?
 
Source: @RobinBrooksIIF, @JonathanPingle  
 
6. Fitch expects Asia spot LNG prices to fade over the next few years.
 
Source: Fitch Solutions Macro Research  
 
7. Insiders in the energy sector have been selling shares.
 
Source: JP Morgan Research; @MichaelAArouet  

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Equities

1. Stocks jumped on Thursday, and the S&P 500 now faces resistance at 4,200.
 

 
2. Fund flows ended up in the black for May.
 
Source: JP Morgan Research; @WallStJesus  
 
3. The cyclicals-to-defensives rotation has been massive in recent months.
 
Source: SPDR Americas Research, @mattbartolini  
 
4. This chart shows how stocks performed (on average) each day of the week since 1928.
 
Source: BofA Global Research  
 
5. Are retail investors migrating to more traditional brokerage platforms?
 
Source: Vanda Research  
 
6. Finally, we have returns by sector during the 1970s (when inflation was rampant).
 
Source: Deutsche Bank Research  

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Credit

1. Delays and cancellations in financing plans surged this year amid market uncertainty.
 
Source: Bloomberg Law   Read full article  
 
2. The iShares High Yield ETF (HYG) had its largest one-day rate of change in over two years last week, which typically precedes further gains.
 
Source: @NautilusCap  
 
3. A majority of US investment-grade bonds are trading below par.
 
Source: Quill Intelligence  
 
4. Tighter bank lending standards point to wider credit spreads ahead.
 
Source: Jack Ablin, Cresset Wealth Advisors  

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Rates

1. Treasury yields have room to rise as the Fed’s tightening cycle progresses.
 
Source: Trahan Macro Research  
 
2. Bond ETFs saw substantial inflows in May, …
 
Source: SPDR Americas Research, @mattbartolini  
 
… outpacing equity flows.
 
Source: SPDR Americas Research, @mattbartolini  

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Global Developments

1. This chart shows the percentage of ETFs with inflows in May, compared to historical levels.
 
Source: SPDR Americas Research, @mattbartolini  
 
2. Here is a look at May’s performance across asset classes, expressed in standard deviations.
 
Source: BCA Research  
 
3. The spread between the PMI indices of new orders and inventories has deteriorated, which tends to signal softer manufacturing output going forward.
 
Source: Quill Intelligence  

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Food for Thought

1. US economic recession and expansion lengths:
 
Source: Scotiabank Economics  
 
2. Americans living near their extended family:
 
Source: Pew Research Center   Read full article  
 
3. Exports to Russia:
 
Source: @financialtimes   Read full article  
 
4. Political convictions in Hong Kong:
 
Source: The Economist   Read full article  
 
5. Apple’s revenue growth by segment:
 
Source: Fitch Solutions Macro Research  
 
6. Browser market share over time:
 
Source: Statcounter  
 
• The most popular browser by country:
 
Source: Chart of the Week  

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7. Ransomware attacks by sector in the US:
 
Source: Moody’s Investors Service  
 
8. Examples of English spelling weirdness:
 
Source: Reuters   Read full article  

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Have a great weekend!

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