Greetings,

Let's begin with emerging markets.

1. The Brazilian real is up around 20% year-to-date.  Impressive.

2. Argentina's shares stage a rally on MSCI's possible upgrade in its emerging-market index.

3. Colombia's central bank raised the benchmark interest rate again. This last hike may be it for a while, especially if the Fed moves slowly.

4. Which EM currencies are most correlated with risk-on/risk-off market sentiment (thus vulnerable to Brexit)?

Source: HSBC

5. Barclays investor survey asks: "Which asset class do you think will provide the best return in the next three months?". It shows investor preferences to rotate out of US equities into emerging markets and commodities.

Source: Barclays

7. In a Brexit scenario, EM Europe looks quite vulnerable.(CEE = Central and Eastern Europe).

Source: Morgan Stanley

8. Here are the cumulative flows into EM bond and equity funds since the beginning of 2015.

Source: HSBC

9. As discussed before, net bond issuance in China has declined sharply. Here is some color on the situation.

Credit Suisse: - We believe such material decline was mainly due to: (1) corporate bond default cases in industries with significant overcapacity surging during April-June and (2) rising expectation of supply-side reform after the interview of an "authoritative figure" (as reported in Bloomberg & other media sources in May)

Source: Credit Suisse, @joshdigga

10. Below is a note to the editor from a Daily Shot reader regarding the RMB fixing policy.

With respect to the CNY basket, I’m not sure these studies are right on this one. Last Dec the PBoC stated that going forward they would focus more on their new basket of currencies than USD correlation and that they expected a gradual depreciation of CNY vs. that basket. Since then that is precisely what we’ve seen. Regardless of the swings in USD over that period, CNY vs. the basket has depreciated in virtually a straight line. USD vs. CNY, on the other hand, has been roller-coasting. The only element up for debate is whether or not the depreciation vs. the basket has been gradual or something a bit more rapid. 

Cheers, Sean.

Source: Bloomberg

Source: Bloomberg

1. In the energy markets, US crude production continues to decline - now near a 2-year low. Will the drilled-but-uncompleted wells coming online in the next few months halt this decline?

Source: EIA

2. US crude oil imports have been significantly higher than last year.

3. US gasoline inventories remain highly elevated relative to the historical range.

4. On the other hand, the amount of US gasoline supplied hit a new record (showing high demand).

Source: EIA

5. Energy producing US states continue to struggle with slowing economic activity. Here is the Coincident Economic Activity index for Oklahoma (YoY).

In other commodities markets, we see a big draw on physical gold on the Shanghai Gold Exchange (which is not the case on COMEX). Nomura is quite bullish gold due to rising physical demand in China.

Source: Nomura

1. Back in the United States, mortgage refinancing activity picks up in response to lower mortgage rates.

 

2. Low mortgage rates also seem to have boosted US home sales to a nine-year high. Part of this trend is also demographics (household formation).

3. Can the volume of US cash wires be used as an indicator of US economic activity? If so, the index doesn't paint a positive picture.

Source: @JmBadalamenti

4. As discussed before, the path for the US dollar depends to a large extent on the Fed Funds rate trajectory (and expectations). Here is Goldman's forecast.

Source: Goldman Sachs, @joshdigga

5. Here are two important charts on labor force participation among US men.

Source: Goldman Sachs

Real rate differential between the US and Japan suggests that the yen should be much weaker relative to the dollar.

Source: Morgan Stanley

The key reason for the yen dislocation is Brexit risk. However, other explanations include repatriation of foreign proceeds as well as foreigners buying Japanese short-term bonds - a surprising trend.

Next, we have a few updates on today's EU Referendum in the UK.

1. VIX had the highest close since February.

Source: @barchart

2. Two last Brexit polls that came out on Wednesday evening suggest the "stay" camp has a slight edge. The British pound hit the highest level of 2016 in response. The betting markets are trading Brexit at about 27%,

Source: @fastFT

3. Here is one of the last 2 polls - YouGov eve-of-vote poll: REMAIN 51, LEAVE 49.

Source: @YouGov

4. The S&P500 futures jumped after hours in response to these last 2 UK polls.

5. Separately, Barclays investor survey shows reduced concern about China/EM and more focus on "geopolitical risks". Brexit has been one of those risks.

Source: Barclays

In other UK-related news, British corporate investment has slowed as the referendum looms.

Source: Morgan Stanley, @joshdigga

UK mortgage affordability and demand for housing has created a large market for "Buy-to-Let" purchases. After the EU Referendum, the BoE may refocus on this.

Source: Bernstein, @joshdigga

Source: Bernstein, @joshdigga

Elsewhere in Europe, has Norway's unemployment peaked?

1. In the Eurozone, the monetary base exceeds €2 trillion for the first time. Time and time again we see that "money printing" does not necessarily generate inflation.

Source: ECB

Here is the bank reserves component of the monetary base (above).

Source: Barclays

2. According to HSBC, weak labor markets in the Eurozone will continue to create disinflationary pressures due stagnant wages.

Source: HSBC, @joshdigga

Source: HSBC, @joshdigga

Given the weakness in US wage growth, the Eurozone, with its elevated labor costs, will surely face wage disinflation.

Source: HSBC, @joshdigga

Next, we have a couple of items on the tri-party repo market.

1. Tri-party repo balances (with treasuries as collateral) rose to multi-year highs as bilateral repo activity tightens due to US bank regulations.

Source: ‏Barclays;   See this article for the definition of "tri-party repo."

2. More dealers are now involved in tri-party repo activity.

Source: ‏Barclays

Finally, "micro VC" funds, which essentially are "angel" funds with significant value-add to the business, are on the rise. For example, the New York City fintech community is receiving quite a bit of support from these small investment groups.

Source:  ‏@innovosource, ValueWalk

Turning to Food for Thought, we have 5 items this morning:

1. Where do MBAs want to work? This chart shows the change from last year according to Training the Street.

Source: @BloombergBrief

2. How many children (per woman) died before their 5th birthday? A historical perspective.

Source: @MaxCRoser 

3. Most Americans think a person's political views say a great deal about her character. Does this attitude add to the polarization in the country?

Source: @pewresearch, ‏@JmBadalamenti

4. Internet users in emerging economies are really into social media.

Source: @pewglobal, ‏@JmBadalamenti

5. According to the WSJ, "America’s upper-middle class is larger and richer than it’s ever been”. As discussed before, it's not the 1%-99% divide that's significant but more the 25%-75%: those with specialized high-demand skills and those without.

Source: @BenLeubsdorf, @JoshZumbrun