The Daily Shot And Data - April 1, 2016

By Walter Kurtz

Friday, April 1, 2016 10:38 AM EDT

Greetings,

We begin with China where the latest reports suggest that the nation's economic growth may have bottomed for now.

1. China's official manufacturing PMI beat consensus, showing slight growth (PMI > 50).

2. The China Caixin Manufacturing PMI also beat expectations. Here is a quote from Caixin on the latest results.

Source: Markit/Caixin

3. China's property markets are heating up. This is the Soufun 100-city property price index.

Source: Goldman Sachs

Moreover, China's housing inventory continues to trend lower.

Source: Goldman Sachs

4. Of course, a number of headwinds/risks remain. UBS for example sees Shanghai retail vacancy rates rising going forward.

Source: UBS

5. China's "old economy" (heavy industry, etc.) is still struggling as seen by the nation's power generation growth.

Source: @RBS_Economics

6. There has been an increase in China's firms asking foreign debt investors to loosen covenants/terms on their debt. China's corporate credit remains vulnerable.

Source: @vexmark, @Bfly

In other developments, the offshore RMB rate at which banks lend to each other in Hong Kong (HIBOR) went negative for one day. The reason has to do with Beijing imposing reserve requirements for offshore deposits, forcing some banks to cut their deposit balances and flooding the interbank market with liquidity.

Source: @fastFT

Also in Hong Kong, we see retail sales plunge 13.6% - the biggest slump since 1999.

Now let's discuss some developments in other emerging economies.

1. Emerging markets (EM) ETF inflows have been the strongest in almost 2 years.

Source: Credit Suisse

2. The dovish Fed and the resulting weakness in the US dollar have added to investors' confidence in EM investing - for now.

Source: barchart

3. Here are the net inflows into Latin America.

Source: Credit Suisse

4. One of the reasons for this sudden push is the fact that global fund managers have been under-invested in EM. In some instances, they are trying to get back in quickly.

Source: Credit Suisse

5. According to the Economist, "Venezuela today looks like Zimbabwe 15 years ago".

Source: The Economist

6. Indonesia's manufacturing returns to growth. It seems that we are witnessing a manufacturing stabilization across a number of EM economies.

7. Mexico's credit growth has been robust. By the way, Pemex (Mexican state-owned petroleum company) rating was cut by Moody's which resulted in Mexico's outlook being lowered.

Source: Goldman Sachs

8. India's infrastructure output grew 5.7% in February, surprising some analysts.

9. Fiscal deterioration in Brazil continues (deficit and debt shown below).

Source: Goldman Sachs

Australia's manufacturing rebounded sharply - with the PMI measure hitting a multi-year high. A period of AUD weakness has been helpful.

Also, is Australia's housing market losing some momentum?

Source: Goldman Sachs

Switching to Japan, the latest Tankan large manufacturers index sinks more than expected. The second chart below shows the other Tankan series.

Source: Goldman Sachs

The Nikkei 225 took a hit (1-month low) as a result of the Tankan report as well as in response to a stronger yen.

Switching to the Eurozone, the ECB continues to be challenged by disinflationary pressures.

1. Here is Spain's consumer inflation - back at -1%.

2. Italy's consumer inflation went into the red as well. The second chart below shows Italy's PPI which has been declining over the past 3 years.

With Germany's headline inflation also in the red, the Eurozone as a whole is still in deflation. However, the core CPI (excluding food and energy) bounced back somewhat.

UK's bank lending against commercial real estate is at the highest level since 2011. UK banks are back in the property game.

Source: @CapEconProperty

Back in the United States here are a number of observations we are tracking.

1. Below is Goldman's forecast for today's US payrolls report.

Source: Goldman Sachs

2. Speaking of payrolls, US job cuts (both in March and YTD) have been the heaviest in energy and retail.

Source: CGC

3. US commercial paper outstanding rose to the highest level since December 2013.

4. Related to the above, there seems to be no evidence of tighter credit conditions in the US. In fact (as discussed before), loan growth remains quite robust.

Source: BAML

5. Next we have a couple of charts on US labor force participation rate declines in recent years. While some of the "dropping out of the workforce" is due to cyclical factors, a great deal of this is structural. It means that participation will remain weak even if the economy continues to improve.

Source: Macquarie, h/t Josh

6. Weak government spending has been a drag on US growth. Is this about to change?

Source: Deutsche Bank, h/t Josh

7. Regional Fed surveys all point to a sharp improvement in the ISM PMI (the main manufacturing indicator in the US). In fact the spike in the combined regional index has been the highest ever.

Source: @Not_Jim_Cramer

8. Here comes the quarter-end window dressing spike in the Fed's reverse repo balances (as everyone wants to park cash at the Fed for a day or two).

In the equity markets we see retail investors (possibly) getting back into the market (based on the recent spike in retail money market funds). The spike is likely the result of liquidations in people's brokerage accounts. Perfect timing ...