The Daily Shot And Data - July 28, 2016
Greetings,
1. We begin with the energy markets where US crude oil inventories unexpectedly rose. Analysts have been expecting a decline.
2. NYMEX crude oil fell below $42/bbl in response to the above as well as higher gasoline inventories.
Source: Investing.com
3. The next chart shows US crude oil imports vs. last year. As discussed before, it is sometimes cheaper to import than to move crude by rail from within the US.
4. Here is the US crude oil production - with and without the contribution from Alaska. Production in the lower-48 is still declining.
Source: EIA
5. Despite falling US production, crude oil supply fundamentals remain bearish. High-cost producers such as the US and Colombia are expected to start increasing production next year. Low-cost producers are accelerating production.
Source: Goldman Sachs
6. Moreover, US gasoline inventories should not be rising this time of the year - but they are. This is not what analysts had expected.
7. Regionally, the gasoline inventory build has been concentrated on the East Coast.
8. Globally, gasoline inventories in the Central Atlantic region are at record high.
Source: Goldman Sachs
9. Wholesale and retail gasoline price continues to fall in response to this oversupply trend.
Source: barchart.com
Separately, energy producing states continue to struggle.
1. Here is the Fed's economic activity index in Oklahoma.
2. And this chart shows the North Dakota new housing permits.
Here is a new dynamic in the credit markets: HY - crude oil divergence. Is this sustainable if oil prices keep declining?
1. In other commodity markets, it has been a good day for precious metals. Silver jumped 2% - now back above $20/oz.
Source: Investing.com
2. Here is platinum.
Source: Investing.com
3. And this next chart shows palladium over the past year.
Source: barchart.com
4. Iron ore prices jumped on a regulatory action in China. Here is a nice summary.
Source: Hellenicshippingnews.com
Source: barchart.com (DCE = 英文/DaLian Commodity Exchange)
Source: barchart.com
5. Speaking of China, US lean hogs prices plunged 4% on the day. This was another China-driven speculative bubble that burst.
Source: barchart.com
1. We now turn to emerging markets, where Nigeria's naira weakened to record low - despite the rate hike (discussed yesterday).
Source: @reutersMikeD
2. Goldman says that "Brazil's credit crunch continues to deepen." The 4 charts below tell the full story.
Source: Goldman Sachs
3. Mexican unemployment rate is below 4% again.
1. Switching to the Eurozone, there are no direct signs that the pressure on European bank shares negatively impacted Eurozone bank lending (so far). Loans to households and corporations continue to increase, albeit slowly. The broad money supply growth has been stable at 5% per year.
Source: ECB
Source: ECB
2. Italy's manufacturing business confidence rose to the highest level since January while consumer sentiment beat consensus. Once again, there is no visible Brexit impact so far.
3. Spanish retail sales bounced in June, suggesting that Spain's economic recovery continues.
4. Deutsche Bank's profit plunged as the firm tries to restructure. Shares are back near record lows.
Source: Google
5. Italy's Monte dei Paschi is trying to arrange a private bailout.
Source: Reuters
Source: Google
6. Are stocks the "new bonds"?
Source: @jpmorganfunds
7. The 30-year Bund auction resulted in the lowest yield on record.
8. The final chart on the Eurozone shows JPMorgan's estimates of Eurozone GDP growth improvements that can be achieved via reform.
Source: @jpmorganfunds
Elsewhere in Europe, Sweden's consumer confidence was below consensus.
Furthermore, here is Sweden's NIER Economic Tendency Indicator. Are these signs of moderating economic growth?
Source: Goldman Sachs
1. The EU remains annoyed with Poland's populist government and its spat with the courts. Polexit?
Source: Bloomberg.com
1. In the UK, retail sales fell at the fastest rate in four years. This result was far worse than expected.
2. Where on this trade spectrum will the UK end up?
Source: @jpmorganfunds
3. The UK's Q2 (pre-Brexit) GDP beat consensus. It's worth noting that the UK probably grew faster than the US in the first half of the year. Things are likely to change in the second half.
1. Back in the United States, the FOMC seems encouraged by the US economy's performance thus far (based on some changes in the FOMC language). A rate hike this year is increasingly likely.
Source: FRB
2. Even a September hike now looks possible.
Source: @fastFT
3. Surprisingly, the US dollar fell in response to the Fed's announcement. It would be a positive development if the Fed can raise rates without pushing the dollar materially higher.
Source: barchart.com
4. US pending home sales rose less than expected in June on tight inventories and high prices.
Source: CNBC
5. The Atlanta Fed's GDPNow model calls for a 2.3% Q2 GDP growth. We should know shortly.
Source: @AtlantaFed
6. US wage growth (broken out by earnings bracket) shows a significant improvement for low-wage workers.
Source: Goldman Sachs
7. US durable goods orders fell more than expected, primarily on weak overseas orders. The second chart below shows orders less defense and aircraft - which tend to be more volatile. Not a great trend.
Finally, let's look at some trends in US equity markets.
1. Here is the Nasdaq Composite vs. the S&P500 over the past month - driven primarily by Apple. Strong results from Facebook on Wednesday (up 5% after hours) may widen this further.
Source: Ycharts.com
2. This is what a margin squeeze looks like.
Source: @jpmorganfunds
3. The value-to-growth ratio seems to be correlated with long-term rates.
Source: @jpmorganfunds
Turning to Food for Thought, we have 5 items today:
1. Level of difficulty in doing business in Europe.
Source: @jpmorganfunds
2. According to the WSJ, "the U.S. startup scene is still languishing".
Source: @WSJecon
3. The Chinese-American population percentage by state: 1870 and 2010.
Source: @paul1kirby
4. STEM = Science, Technology, Engineering, and Math. Is the China and India situation out of balance?
Source: @wef
5. Have the global CO2 emissions leveled off?
Source: @wef
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