The Daily Shot And Data - August 3, 2016
Greetings,
1. Once again let's begin with the European banking system where the largest Italian bank UniCredit was down another 8% on Tuesday. However, credit default swap spreads, while elevated relative to last year's levels remain stable.
Source: Investing.com
2. So much for yesterday's rally in Banca Monte dei Paschi di Siena - shares were down 16% on Tuesday despite the "bad loan" portfolio sale.
Source: Bloomberg LP
3. Italian banks as a whole closed 6% lower.
4. Greek banks were down almost 9% on the day.
5. German banks have also been under pressure, with Deutsche bank shares hitting new lows. This selloff has been brutal.
Source: Bloomberg LP
6. Commerzbank share price also hit new lows in high-volume trading.
Source: Bloomberg LP
7. Overall, European banks were down some 5% on the day.
Source: Investing.com
1. Switching to the UK, the nation's construction PMI registered the fastest overall drop in output since June 2009. Below is a summary from Chartered Institute of Procurement & Supply (CIPS).
Source: @cipsnews, @MarkitEconomics
Source: @cipsnews, @MarkitEconomics
2. The UK government is enjoying record low funding costs as seen in the 5yr gilt auction (below).
Source: Bloomberg LP
3. Recent UK retail fund outflows were higher than during 2008. A contrarian indicator?
Source: @fastFT
4. The British pound rallied, creating some pain for the massively net short speculative investor crowd (discussed Monday).
Source: Investing.com
Ireland's manufacturing PMI showed the nation's factory activity stalling. Below is the explanation from Markit.
Source: Bloomberg LP, Markit
Source: @MarkitEconomics
The Eurosystem (ECB) balance sheet continues to expand to new highs. Many anticipate the ECB to announce a change in the bond purchases proportions - increasing Italian and Spanish debt buying. Can this introduce a moral hazard, reducing pressure on these governments to control spending?
Swiss retail sales saw deeper than expected declines. Part of the problem is the Swiss franc strength undermining demand.
Dollar-yen fell below 101 again (yen strengthened), creating further headwinds for Japan's fight against deflation.
Source: barchart.com
1. Switching to emerging markets, S&P pronounced the Republic of Congo in default as the government missed a payment. Weakness in crude oil has pushed the nation to the limit as the currency fell sharply (first chart below) and bonds sold off (second chart).
Source: barchart.com
Source: Bloomberg LP
2. As more manufacturers open shop in Mexico, the nation is having trouble recruiting.
Source: Credit Suisse, @joshdigga
3. Brazil's industrial production decline seems to have eased. Green shoots?
4. Hong Kong retail sales fell further last month. Fewer shoppers from the Mainland is one of the reasons.
5. China's oil consumption is maintaining its upward trend. Once again (we will see more below), the weakness in crude oil prices is driven by the supply side - so far.
Source: Credit Suisse, @joshdigga
6. Chinese companies' cash holdings hit a new record.
Source: @markets
1. Back in the United States, futures markets are telling us there is less than a 40% chance of a rate hike this year. The second chart below shows the probabilities of different outcomes over time (courtesy of our friends at Bloomberg LP).
Source: @CMEGroup
Source: Bloomberg LP
2. Fed's Kaplan said the FOMC wants to see materially more than 125k new jobs created per month. This Friday's employment report will be critical (180k new payrolls expected).
Source: Reuters
3. The US consumer is still keeping the economy afloat as consumer sales beat forecast.
4. US inflation (as measured by the PCE index) remains benign.
Here is the Dallas Fed trimmed mean PCE measure - which also shows no signs of accelerating inflation.
5. US auto sales continue to soften - the recent trend certainly doesn't look great.
6. The Johnson Redbook Index (definition below the chart) fell to the lowest level since 2009.
Source: Tradingeconomics.com; definition from Investing.com
7. Here is a depressing set of facts about the recent GDP growth in the US.
Source: @michaellebowitz
8. On a positive note, Goldman Sachs says that the cutbacks in inventories may be behind us, and some restocking may provide tailwinds for the GDP growth.
Source: Goldman Sachs
1. Switching to the energy markets, NYMEX crude futures are trading comfortably below $40/bbl.
Source: Bloomberg LP
2. Crude oil imports have risen by less than production has fallen. Should we start seeing inventories easing soon?
Source: Credit Suisse, @joshdigga
3. The recent peak in crude prices coincides with the bottom for the US oil rig count (discussed Monday).
Source: @MarathonWealth, @business
4. US average retail gasoline price continues to decline which should be helping US households.
5. The next two charts from Credit Suisse show that the gasoline glut is a supply issue.
Source: Credit Suisse, @joshdigga
Source: Credit Suisse, @joshdigga
6. Ethanol futures are following corn and gasoline prices lower.
Source: barchart.com
1. Speaking of corn, the selloff in the commodity has been relentless.
Source: Investing.com
2. Soybeans ended up being another China-driven speculative bubble that burst.
Source: barchart.com
Source: barchart.com
3. The broad CRB commodity index continues to move lower.
Source: Bloomberg LP
4. But not all commodities are facing downward pressure. Here is silver, where some technicians suggest that we are about to break higher on this "ascending triangle." Others call it a "double top" and see silver moving lower from here. It's important to keep in mind that speculative accounts hold record net long positions in silver.
Source: barchart.com
5. Funds are back pushing US milk futures to new highs for the year.
Source: barchart.com
6. Iron ore futures on the DaLian Commodity Exchange are grinding higher on talk of an anti dumping investigation. It's OK when China dumps steel into international markets below cost, but Australians selling to China are "committing a crime".
Source: barchart.com
1. In the equity markets, US autos and consumer discretionary shares were hammered on the weak auto sales report (above).
Source: Google
Source: Google
Source: Ycharts.com
2. US transport index is down over 4% in the last five days - not a good sign for those who follow the Dow Theory.
Source: Ycharts.com
3. US retail shares were slammed on Tuesday. This is certainly consistent with the multi-year lows for the Johnson Redbook Index (above).
Source: Ycharts.com
In asset management, here is an excellent visualization from the WSJ on what it takes to get a 7.5% (targeted) return. This trend is a serious challenge for insurance firms who have much higher capital charges for holding some of the riskier assets. Clearly, it is also a significant problem for pension funds with minimum asset return requirements needed to meet their obligations.
Source: @MebFaber, @WSJ
College endowments are posting the worst returns since 2009 as a result of the recent weakness in international markets (and in some cases poor performance in alternatives).
Source: @business
Finally, bitcoin traders hit their panic button on Tuesday as the cryptocurrency fell below $500 (a 20%+ decline). A major bitcoin exchange was breached and the rumor is that some 100k bitcoin (about $54mm) was stolen (h/t @raoul_wade). A buying opportunity?
Source: bitcoincharts.com
Source: Huffington Post
Turning to Food for Thought, we have 5 items today:
1. According to McKinsey, France narrowed its wage gap while in the US and the Netherlands "inequality" has grown. Of course, French unemployment rate is 10.5% while it is 7% in the Netherlands.
Source: @joshdigga
2. Union membership declined globally except in Italy and it remains exceptionally high in Sweden.
Source: @joshdigga
3. The percentage of households with flat or falling income.
Source: @joshdigga
4. Nations with the best and worst literacy and numeracy rates.
Source: @wef
5. According to the WSJ, "Puerto Rico’s population slide is the worst since the Census Bureau began its first tally in 1920".
Source: @WSJecon
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