The Daily Shot And Data - July 7, 2016 -

By Walter Kurtz

Thursday, July 7, 2016 10:48 AM EDT

Greetings,

Let's begin with more "unintended consequences" of Brexit as the UK property funds continue to hound the financial sector.

1. Some $23 billion worth of property assets is now frozen after seven funds put up gates.

Source: Reuters

2. Moreover, certain funds are sharply marking down their portfolios. Welcome to "dilution adjustment" as Aberdeen cuts its property fund NAV by 17% and suspends redemptions.

Source: Aberdeen

3. Traded UK property assets such as this ETF (below) have tumbled. Could this shift out of British real estate spill over into other frothy property markets? Hong Kong, Syndey, Toronto, San Francisco?

Source: Google

4. Firms who suspend redemptions see their shares take a hit. Please, please don't dump my stock ...

Source: The Telegraph

Source: Bloomberg.com

5. European banks remain under pressure.

Source: Investing.com

6. Deutsche Bank shares continue with their daily decline while CDS spreads widen.

Source: Google

Source: @MktOutperform

7. Italian banks are down another 2% on Wednesday and 56% year-to-date. Brutal.

8. Of course, the rout in the financial sector is not limited to Europe. Here are Japanese financials.

Source: Google

1. Staying with the UK, here is the Brexit decision tree from Nomura. Easy ...

Source: ‏@EMgist, Nomura

Note that in the near-term the paths do not matter much because the economic damage due to elevated uncertainty has already been done.

2. The UK financial stress is now visible in the elevated GBP Libor - OIS spread.

Source: ‏@Schuldensuehner

3. The British pound devaluation impact on the equity markets discussed yesterday remains in place as the FTSE 100 and the FTSE 250 diverge.

Source: ‏‏@fastFT

4. Auto purchases slowed prior to the EU Referendum on higher uncertainty. It will be interesting to see what this looks like for July.

Source: @telebusiness

5. According to the FT, some 700k fewer jobs are now advertised online than before the referendum. This report may be an indication of significant damage to the whole UK labor market.

Source: @PickardJE, ‏@JolyonMaugham

1. Turning to the Eurozone, Italian retail activity drops to a 31-month low.

Source: @MarkitEconomics

2. Spain's industrial production was disappointing.

Source: ‏@tEconomics

6. Bund yield hit new lows.

Source: @FastFT

Here is German 2-year government note auction (yield) over time.

7. The ECB balance sheet goes vertical, blasting past €3.2 trillion.

Source: ECB

8. Draghi threatens Slovenia.

Source: Reuters

1. Looking at some global trends, here is the latest negative yield tracker.

Source: @fastFT, @Citi

2. Global CPI seems to be at the lowest level since 2009.

Source: @jsblokland

3. On a positive note, the Goldman's global economic surprise index hits the highest level since 2013.

Source: @boes_

1. Back in the United States, the online help-wanted index (HWOL), both the total and the new ads, paint a dim picture of US labor markets. Economists expect 175k new payrolls created in June. Is this data telling us we may be disappointed?

Source: @Conferenceboard

On the other hand, the Gallup US Job Creation Index is going strong. US economic data remains mixed and conflicting across the board.

Source: @Gallup

2. Markit PMI is tracking 1% US GDP growth. Take a look at the commentary by their economists. This result is completely inconsistent with the Atlanta Fed's GDPNow model which is showing 2.4% growth (second chart below).

Source: @MarkitEconomics

Source: @AtlantaFed

3. The ISM US non-manufacturing PMI report was considerably stronger than expected. Note a decent pickup in non-manufacturing employment (green in the table below), which bodes well for Friday's payrolls report. Business activity and new orders showed a significant improvement.

Source: ISM

4. Below is US trade with China: diverging import and export trends. Maybe Donald Trump can fix this ...

5. The 10yr - 2yr treasury spread falls below 80bp as the US curve continues to flatten.

6. Here is another conflicting set of US economic indicators: The ECRI index of leading indicators vs. the 10yr treasury yield.

Source: @Callum_Thomas

7. As expected, US refi activity rises in response to the lowest mortgage rates since 2013.

8. Minutes show the FOMC was nervous about softer US labor markets and Brexit risk. All eyes are on this Friday's payrolls report.

Source: FRB

Staying with the Americas, Canada is consistently running a trade deficit since 2014. The latest figure was worse than expected.

Colombia's inflation accelerates, explaining why the central bank continues to raise rates.

1. In the equity markets, transport shares underperformance worsens. This can be viewed as a bearish sign for those who follow the Dow Theory.

Source: Ycharts.com

2. According to Business Insider/BofaML, "there's only one buyer of stocks this year" - corporate buybacks.

Source: ‏@chartoftheday

3. US shares look expensive relative to the rest of the world.

Source: @LeahyWealth

4. On the other hand, the US 30-year treasury yield is now below the S&P 500 dividend yield.

Source: ‏@TheStalwart

5. Here is a nice chart showing equity capitalization by sector as a percentage of the total S&P500 capitalization.

Source: ‏@NickatFP, Goldman Sachs

1. In credit-land, investment-grade bond issuance in the US hits a record in Q2.

Source: ‏@TRLPC

2. Private credit fundraising seems to be recovering after a dismal first quarter.

Source: ‏@theleadleft, @Preqin

Asset managers are more optimistic about Brexit induced portfolio losses than the investors. We will soon know who is right.

Source: ‏@Preqin

1. Finally, we look at commodities where corn futures are down another 3% in a spectacular selloff.

Source: ‏@barchart

2. Soybeans and soy meal futures are getting pounded. That massive rally had to end.

Source: ‏@barchart

3. The next chart shows lean hogs futures - another China-induced rally that is being rapidly reversed.

Source: ‏@barchart

4. Orange juice futures hit a 4-year high. Here is why:

Bloomberg: - Prices for orange juice are soaring as a crop disease called citrus greening hampers fruit yields in Brazil and Florida, the world’s top producers of the beverage. Adverse South American weather and the threat of a more-active-than-normal Atlantic Hurricane season pose the risk of further production losses. Global inventories have shrunk to the smallest since 2009, while orange-juice futures in New York are trading at the highest in more than four years.