The Daily Shot And Data - October 11, 2016
Greetings,
We begin with the US where the September private payrolls came in roughly in line with expectations (167k vs. 170k expected). Here are several other developments in the nation's labor markets.
United States
1. Labor force participation continues to stabilize.
Moreover, the number of unemployed Americans dropping out of the workforce has declined to pre-recession levels.
2. The declines in underemployment, however, have stalled.
3. The manufacturing sector continues to shed jobs.
4. Wage growth, especially for non-supervisory employees, is improving.
Some of this improvement is coming from the construction sector, where homebuilders increasingly complain about troubles recruiting skilled workers.
On the other hand, several other areas, such as retail, have seen wage growth slowing.
5. Finally, one significant trend in US labor markets has to do with the length of time Americans receive unemployment benefits. The chart below shows the difference between the mean and the median duration of unemployment. It's a rough measure of the distribution "skew," which suggests that while the majority of the unemployed get rehired reasonably quickly, there is a group that remains unemployed until the benefits expire. This trend, which became pronounced after the Great Recession, persists through today.
In other US developments, the Fed's nowcast forecasts of the third quarter GDP growth have now converged at just above 2%. Here are the models from the Atlanta Fed and the NY Fed.
Source: Atlanta Fed
Source: NY Fed
The United Kingdom
1. In the UK, industrial production missed economists' forecasts.
2. The nation's house price appreciation continues to slow - we already saw signs of this trend in lower mortgage approval rates.
3. The British pound continues to trend lower.
Speculative accounts last week have reloaded their net short-GBP exposure to a new record. This trade has worked out well on Thursday night with the "pound flash crash."
Further reading
4. Gilt yields continue to rise with weaker sterling and higher inflation expectations.
5. The following three charts show how dominant the UK's financial services sector has been in Europe. Will we see significant damage to the industry from Brexit?
a. The UK securities market
Source: Goldman Sachs, @joshdigga
b. Cross-border lending
Source: Goldman Sachs, @joshdigga
c. Alternative finance
Source: Goldman Sachs, @joshdigga
The Eurozone
In the euro area, industrial production in Germany, France, and Spain surprised to the upside. The ECB's taper starting early next year looks increasingly likely.
1. While German industrial production was higher than expected, the nation's construction activity remains soft.
2. Economists had been projecting the French industrial production to decline. Thus, even a small increase was a surprise.
3. Spain's industrial activity has suddenly accelerated.
In other Eurozone developments, the Portuguese 10yr yields fell sharply after the rating agency DBRS (supposedly) told the nation's Finance Minister that it is "comfortable" with Portugal's fiscal situation.
Europe
Elsewhere in Europe, the Czech 2yr yield hit another record low (deep in negative territory) as the markets position for the removal of the koruna cap vs. the euro. Will a deep Swiss-style deflation follow?
Emerging Markets
1. Brazil's CPI continues to move lower, giving the central bank ammunition to launch an easing cycle.
Related to the above, Brazil's government bond yields keep falling (with the 10yr now below 11.5%).
The nation's latest industrial production and capacity utilization figures show why lower rates in Brazil at this juncture are so critical.
Source: Goldman Sachs, @joshdigga
Source: Goldman Sachs, @joshdigga
2. The Mexican peso staged a rally as Mr. Trump's market-based probability of a US presidential victory in November fell below 20%.
3. Thailand's stock market and the currency fell sharply as King Bhumibol's health deteriorated.
Further reading
4. Speculative accounts are net long record amounts of the Russian ruble as oil prices continue to rise. Is the ruble now vulnerable to a correction?
5. The PBoC has pushed the renminbi to multi-year lows as the currency officially entered the IMF's "hard currency" basket. Some suggest that Beijing is concerned about falling FX reserves and would rather see the yuan fall than spend more dollars to defend it. Perhaps. Of course, these currency declines could precipitate further capital outflows. The charts below show the onshore (CNY) and the offshore (CNH) renminbi vs. the dollar.
Asia
In other regional developments, speculative accounts continue to load up on net long yen positions. This trend is a bit surprising given the high likelihood of a rate hike in the US this year (which should support the dollar).
Australian bond yields are on the rise again, now above the levels reached during the global bond selloff last month.
Commodities
1. In the energy markets, the US oil rig count continues to rise gradually. At current prices, we may start seeing some small increases in US oil production.
2. Nonetheless, oil prices rose further on Monday. Is the rally overdone?
3. In other commodities (as discussed before), copper is waking up. The chart below shows the copper futures in Shanghai. Some analysts suggest that higher oil prices have lifted copper in recent days. Perhaps. Whatever the case, this is a welcome development for some mining-dependent nations such as Chile (further reading).
4. Cocoa prices continue to fall on better crop expectations in Africa.
Funding Markets
Finally, dollar LIBOR continues to rise, increasing funding costs for many indebted US companies (most corporate loans pay a coupon that is linked to LIBOR).
Food for Thought
1. Turning to Food for Thought, here is a chart on changing Florida demographics.
Source: @WSJThinkTank, @acampoflores, @poverberg, @Tmp_Research; Read full article
2. 40% of Afghan GDP comes from foreign aid.
Source: @ECONdailycharts, @Tmp_Research; Read full article
3. Bear-related fatalities in the US.
Source: @voxdotcom, @Tmp_Research; Read full article
4. How many hours per week do people spend reading?
Source: @StatistaCharts, @Tmp_Research; Read full article
5. Recycling in the US.
Source: @FactTank, @Tmp_Research; Read full article
6. Nuclear stockpile over time in the US and Russia.
Source: @TheEconomist, @Tmp_Research; Read full article
The United States Greetings, We begin with the US where the September private payrolls came in roughly in line with expectations (167k vs. 170k expected). Here are several other developments in the nation's labor markets. 1. Labor force participation continues to stabilize.
Moreover, the number of unemployed Americans dropping out of the workforce has declined to pre-recession levels.
2. The declines in underemployment, however, have stalled.
3. The manufacturing sector continues to shed jobs.
4. Wage growth, especially for non-supervisory employees, is improving.
Some of this improvement is coming from the construction sector, where homebuilders increasingly complain about troubles recruiting skilled workers.
On the other hand, several other areas, such as retail, have seen wage growth slowing.
5. Finally, one significant trend in US labor markets has to do with the length of time Americans receive unemployment benefits. The chart below shows the difference between the mean and the median duration of unemployment. It's a rough measure of the distribution "skew," which suggests that while the majority of the unemployed get rehired reasonably quickly, there is a group that remains unemployed until the benefits expire. This trend, which became pronounced after the Great Recession, persists through today.
In other US developments, the Fed's nowcast forecasts of the third quarter GDP growth have now converged at just above 2%. Here are the models from the Atlanta Fed and the NY Fed.
The United Kingdom 1. In the UK, industrial production missed economists' forecasts.
2. The nation's house price appreciation continues to slow - we already saw signs of this trend in lower mortgage approval rates.
3. The British pound continues to trend lower.
4. Gilt yields continue to rise with weaker sterling and higher inflation expectations.
5. The following three charts show how dominant the UK's financial services sector has been in Europe. Will we see significant damage to the industry from Brexit? a. The UK securities market
b. Cross-border lending
c. Alternative finance
The Eurozone In the euro area, industrial production in Germany, France, and Spain surprised to the upside. The ECB's taper starting early next year looks increasingly likely. 1. While German industrial production was higher than expected, the nation's construction activity remains soft.
2. Economists had been projecting the French industrial production to decline. Thus, even a small increase was a surprise.
3. Spain's industrial activity has suddenly accelerated.
In other Eurozone developments, the Portuguese 10yr yields fell sharply after the rating agency DBRS (supposedly) told the nation's Finance Minister that it is "comfortable" with Portugal's fiscal situation.
Europe Elsewhere in Europe, the Czech 2yr yield hit another record low (deep in negative territory) as the markets position for the removal of the koruna cap vs. the euro. Will a deep Swiss-style deflation follow?
Emerging Markets 1. Brazil's CPI continues to move lower, giving the central bank ammunition to launch an easing cycle.
Related to the above, Brazil's government bond yields keep falling (with the 10yr now below 11.5%).
The nation's latest industrial production and capacity utilization figures show why lower rates in Brazil at this juncture are so critical.
2. The Mexican peso staged a rally as Mr. Trump's market-based probability of a US presidential victory in November fell below 20%.
3. Thailand's stock market and the currency fell sharply as King Bhumibol's health deteriorated.
4. Speculative accounts are net long record amounts of the Russian ruble as oil prices continue to rise. Is the ruble now vulnerable to a correction?
5. The PBoC has pushed the renminbi to multi-year lows as the currency officially entered the IMF's "hard currency" basket. Some suggest that Beijing is concerned about falling FX reserves and would rather see the yuan fall than spend more dollars to defend it. Perhaps. Of course, these currency declines could precipitate further capital outflows. The charts below show the onshore (CNY) and the offshore (CNH) renminbi vs. the dollar.
Asia In other regional developments, speculative accounts continue to load up on net long yen positions. This trend is a bit surprising given the high likelihood of a rate hike in the US this year (which should support the dollar).
Australian bond yields are on the rise again, now above the levels reached during the global bond selloff last month.
Commodities 1. In the energy markets, the US oil rig count continues to rise gradually. At current prices, we may start seeing some small increases in US oil production.
2. Nonetheless, oil prices rose further on Monday. Is the rally overdone?
3. In other commodities (as discussed before), copper is waking up. The chart below shows the copper futures in Shanghai. Some analysts suggest that higher oil prices have lifted copper in recent days. Perhaps. Whatever the case, this is a welcome development for some mining-dependent nations such as Chile (further reading).
4. Cocoa prices continue to fall on better crop expectations in Africa.
Funding Markets Finally, dollar LIBOR continues to rise, increasing funding costs for many indebted US companies (most corporate loans pay a coupon that is linked to LIBOR).
Food for Thought 1. Turning to Food for Thought, here is a chart on changing Florida demographics.
2. 40% of Afghan GDP comes from foreign aid.
3. Bear-related fatalities in the US.
4. How many hours per week do people spend reading?
5. Recycling in the US.
6. Nuclear stockpile over time in the US and Russia.
Source: @TheEconomist, @Tmp_Research; read full article |
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