The Daily Shot And Data - June 9, 2016

By Walter Kurtz

Thursday, June 9, 2016 10:51 AM EDT

Greetings,

We begin with emerging markets where currencies, bonds, and equities are moving higher.

1. The Brazilian real continues to strengthen.

Source: Investing.com (chart shows US dollar weakening against the real).

Brazil's inflation remains stubbornly high (above consensus) despite weak domestic demand.

Source: Investing.com

2. The South African rand is up some 8% over the past few days.

Source: Investing.com (chart shows US dollar weakening against the rand).

South Africa had its first year-over-year GDP contraction since 2009. Growth is expected to remain tepid.

3. South Korea unexpectedly cut the benchmark rate to record low. Korea's central bank is concerned about the deleveraging taking place in the corporate sector hurting economic growth.

Source: The Washington Post

4. Poland’s zloty rallies with other EM currencies in response to a "softer" mortgage conversion plan. Years back, many Polish households took out mortgages in Swiss francs and got burned when the franc rallied sharply against the zloty. The government was threatening to force the banks to allow these borrowers to repay at the original exchange rate - which would bring the banking sector to its knees. The latest conversion plan, however, seems far less draconian.

5. Mexican stock market is outperforming.

Source: Ycharts.com

1. Turning to China, we see a massive spike in Chinese imports from Hong Kong as back-door capital outflows continue via "over-invoicing".

Source: @RBS_Economic

2. The USD/CNH (offshore yuan) risk reversals show reduced bets on the renminbi devaluation against the dollar. This is in response to a softer US dollar.

Source: ‏@ericbeebo @FinanceCam

3. Next, we have a couple of China demographics charts that will have significant implications over the next few decades.

Around the year 2022, India's population will overtake China's.

Source: ‏@wef

China's working age population has already started declining.

Source: ‏@wef, Business Insider

New Zealand's central bank unexpectedly decided to hold off on rate cuts as the nation's home prices soar.

The kiwi dollar jumps over 2% in response to the central bank holding rates.

Source: @barchart

The Bank of Japan's Nakaso says he is ready to ease policy further if needed. The market doesn't care about Nakaso's comments, as the yen continues to strengthen.

Source: ‏@barchart

1. In the UK we see more evidence of the housing market cooling.

2. UK's industrial production surprised with a sharp improvement. Nobody expected to see this.

Source: ‏HSBC, @joshdigga

3. Nonetheless, we see new lows for the 10-yr gilt yield.

4. Brexit risk has resulted in massive swings in the timing expectations of the first BoE rate hike.

Source: ‏@fwred

5. The British pound implied volatility spike is only rivaled by the financial crisis when the UK banking system looked like it was about to collapse.

Source: ‏@ericbeebo

1. In the Eurozone, the 10-year Bund yield fell to 3 basis points. Time to go negative?

Source: @Garth_Friesen

2. Related to the above, the world government bond yield index (Citi's WGBI index of 23 countries) hit record low.

Source: @ReutersJamie

3. As the ECB starts buying corporate bonds, investment grade yields keep falling. According to the FT, 15% of euro-denominated corporate debt now has a negative yield. Amazing.

Source: ‏ ‏@fastFT

4. Given the above, companies are happy to issue debt. Why bother with equity when debt capital is nearly free?

Source: ‏@jsblokland

5. Apparently negative deposit rates have not had much of an impact on lending in the Eurozone.

Source: ‏@joshdigga

Back in North America, energy-related losses at Canadian banks accelerate.

Source: Norm Mogil

Source: ‏@Macro_Digest

1. In the United States, jobs openings exceeded forecasts.

It's interesting to see manufacturing job openings at 15-year highs.

Source: ‏@mbusigin

On the other hand, Professional & Business Services job openings gap down.

Source: ‏@mbusigin

2. Here is the job openings vs. hires - an indication of the persistent skills gap in the US.

3. Another way to see the skills gap is in the US Beveridge Curve. The second chart below shows the Beveridge Curve using Hornstein-Kudlyak-Lange Non-Employment Index, an alternative unemployment measure.

Source: @SoberLook

4. Here is a chart showing part-time employment for "economic reasons" vs. the headline unemployment rate. This is a worrisome trend, and some are suggesting that it is related to Obamacare. Proving that link, however, has been challenging to date.

Source: ‏Goldman Sachs

5. US mortgage volume for house purchase is gradually moving up over the past couple of years.

6. The market-implied probability of a June rate hike has moved to zero.

Source: ‏@fastFT

1. We see Friday's payrolls report continuing to take its toll on the dollar as DXY (the dollar) index drifts below 94.

Source: @barchart

2. The 10yr treasury yield is near a key support level.

1. In the equity markets, the S&P500 Total Return Index hits a record high.

Source: Ycharts.com

2. Mining shares are on fire.

Source: Ycharts.com

3. As discussed yesterday, developed markets as a whole look rich. Here is a comparison with emerging markets.

Source: ‏@IIF

1. In the energy markets, crude oil roughly doubled from the lows in Feb.

Source: @barchart

2. Energy investment decline in the US has been spectacular.

Source: Barclays, ‏@joshdigga

3. For the first time in months, US crude production rose (as did the rig count).

Source: @Ole_S_Hansen, @merrillmatter

4. US gasoline inventories are highly elevated for this time of the year.

5. Yesterday we had a chart showing the divergence between breakeven inflation expectations and crude oil. We see a similar disconnect in euroland where inflation expectations are near record lows.

Source: @ReutersJamie

1. Continuing with commodity markets, gold price rises further on the weak dollar. Presumably, George Soros started personally trading again, and he is bearish on risk assets.