The Daily Shot And Data - April 14, 2016

By Walter Kurtz

Thursday, April 14, 2016 10:40 AM EDT

Greetings,

Let's begin with the banking sector where JPMorgan beat estimates in spite of a tough quarter, with income falling 6.7%. This generated excitement in financials worldwide as the various banking indices rose sharply.

Source: barchart

Italian bank shares were up 8.6% on the day, experiencing volatility we haven't seen since the Eurozone crisis.

Investors bought Italian bank shares in spite of the latest warning from Fitch. The rating agency expressed concern that Italian government may be forcing the stronger banks to bail out the weaker ones.

Source: Fitch Ratings

Investors also ignored the IMF warning about "structural challenges" in the global banking system.

Source: @IMFNews, h/t Josh

Moreover, the IMF warned that the recent declines in interest margin at the euro area banks will require much larger loan balances to make up for lost revenue.

Source: IMF, h/t Josh

Nonetheless, in Germany, the DAX jumped above 10K as financials rose sharply, helped by the JPM results. Deutsche Bank was up 9%.

Source: Google

In other European economic news, ...

1... the Eurozone February industrial production fell more than expected. More on this later.

Source: Investing.com

2. Italian households have been dumping domestic bank bonds. It's not a surprise, but the size of the decline is unprecedented.

Source: Natixis, h/t Josh

3. The EU continues to struggle with unemployment disparity across the member states. Goldman attributes this to regional labor markets that don't respond to broader changes in unemployment within some countries.

Source: ‏Goldman Sachs

Next, we have a couple of updates on japan.

1. Major economic surprise indices turn higher - except for Japan.

Source: BAML

2. Here is one unintended consequence of negative rates in Japan. The nation's floating rate loans have a rate floor of zero. Interest rate swaps used to hedge against rising rates don't have such a floor, producing a mismatch. This may result in weaker loan growth - not what the BoJ had intended.

Source: @business

Australian unemployment rate is at the lowest level since 2013 - an impressive improvement in the nation's economy.

Source: Investing.com

Next, we take a look at China.

1. The mainland's imports from Hong Kong rose by 116%. Really? Clearly these are capital outflows disguised as imports.

Source: ‏@TomOrlik

2. Below is China's domestic bond issuance. Corporate bond demand by wealth management products (WMPs) has helped this trend.

Source: IMF, h/t Josh

3. Related to the above, 56% of China's corporate debt is now financed via the stock exchanges as issuance hits records.

Source: Deutsche Bank

4. According to the IMF: "For Chinese firms, bank loans potentially at risk are substantial but manageable".

Source: IMF, h/t Josh

Singapore's central bank unexpectedly eased monetary policy (as discussed yesterday, this is not what analysts had been forecasting). The Singapore dollar fell sharply.

Source: barchart

One of the reasons for easing is the persistent weakness in Singapore's private lending market.

Source: @markets

Here are a few other developments in emerging markets.

1. India's economic activity recovers.

2. Defaults in Brazil accelerate.

h/t Josh

3. Mexican government bailed out the state-owned energy giant Pemex.

Source: Reuters

4. Troubled loans across emerging economies continue to rise.

Source: h/t Josh

5. The chart below shows foreign ownership of sovereign debt by country.

Source: IMF, h/t Josh

6. Rising EM investment has been financed with credit.

Source: UBS

Back in the United States we have a number of developments to cover.

1. There seems to be no correlation between the Atlanta Fed and the (newly introduced) NY Fed GDP trackers. This competition among the Federal Reserve banks for the "best model" may end up confusing people.

Source: Atlanta Fed

Source: NY Fed

2. According to BofA's internal data, low-income vs. high-income consumer retail sales growth has converged.

Source: ‏BAML

3. Last month's US retail sales disappointed, in large part due to the recent weakness in autos (discussed a few days back).

4. Related to the above, US retailers' inventory-to-sales ratio continues to rise.

5. US small business sentiment worsened again. The statement from the NFIB's economist is downright depressing.

Source: NFIB

One recent concern for small businesses is the pressure on margins. This is caused by (relatively) higher wages and difficulty raising or even maintaining prices (rising costs and flat to falling revenues).

Source: NFIB

6. US PPI unexpectedly turns negative again. Core PPI was also below forecast. This may make the Fed even more cautious.

Source: Investing.com

7. US mortgage activity for house purchases continues to increase gradually.

Source: Investing.com

In US fixed income, Finra says to "keep an eye on US bond trading" because the retail investor is becoming a larger part of the bond market.

Source: @fastFT

Next, we have some updates on the energy markets.

1. Peabody Energy, the massive US coal producer, filed for bankruptcy. This was largely expected.

Source: NPR

2. Ethanol futures jump, in part driven by stronger corn prices. More on this later.

Source: barchart

3. US Gulf Coast crude oil inventories hit a record, raising the overall US crude inventories above expectations. Crude oil futures weakened in response.

Finally, the tightness in soybean meal supplies is pushing soy prices sharply higher. It's important to keep an eye on this market for a number of reasons, including the fact that soy prices can impact broader food prices in emerging economies (affecting those nations' CPI).