The Daily Shot And Data - October 20, 2016

By Staff

Thursday, October 20, 2016 4:50 AM EDT

Energy

1. Let's begin with the energy markets where crude oil prices hit the highest level in a year.

2. Part of the reason for the rally was another unexpected dip in US oil stockpiles.

3. Moreover, crude oil imports declined more than expected.

4. On the other hand, US total oil production (that includes Alaska) has been stable since June. As prices rise, it's only a matter of time before US production ramps up again - capping further appreciation.

The Permian Basin oil firms, for example, have been effective in maintaining and even growing production by drilling sideways (significant distances) and raising oil well efficiency.

Source: Bloomberg.com; Read full article

5. A sudden rise in gasoline imports contributed to higher-than-expected inventories.

6. The divergence in inventory trends for oil and gasoline resulted in a price performance gap.

Canada

Related to the oil rally (above), Canada's stock market is pushing higher.

Emerging Markets

1. Since we are on the topic of energy, the prolonged period of crude oil price weakness is forcing the Saudis into the debt capital markets. The nation issued the largest emerging markets bond in history. Here is a bit of background.

Source: @WSJ; Read full article

2. Argentina's retail sales were softer than expected. Nonetheless, the nation's stock market rise has been spectacular.

3. Chile's stocks also had a great week.

4. Brazil's central bank cut interest rates as expected and as the bond market shows, there is more to come.

5. Mexico has become increasingly reliant on exports to the US since the implementation of NAFTA. That's why a Trump victory would be seen as a negative for the peso.

Source: Credit Suisse, @NickatFP

By the way, the peso rose further after the last presidential debate on Wednesday night.

6. The Philippine stock market had another great day on the "pivot to China" policy.

7. South Africa's retail sales unexpectedly stall.

8. Emerging markets bond investors are back as the iShares EM bond ETF (EMB) shares outstanding rise again.

China

1. China's government bond yields continue to move lower.

2. China's public sector continues to dominate fixed-asset investment and, according to some, crowding out private investors.

Source: @fastFT; Read full article

3. As discussed yesterday (see chart), China's private loan market is increasingly dominated by mortgages. The housing market is heating up.

Source: @WSJ; Read full article

The Eurozone

1. Shares of Italy's Banca Monte dei Paschi jumped 8% after the bank said it is moving ahead with capital raising and loan sales. This development, combined with the better-than-expected bank earnings in the US, sent European bank shares higher.

2. Portugal's bond yields are drifting lower on expectations that the rating agency DBRS will hold the debt rating unchanged. The report will be out later this week.

3. Mario Draghi should be happy to see euro area market-based inflation expectations moving higher. A great deal of this is due to higher energy prices, but the ECB will call it a victory nevertheless.

4. Once a month New Zealand's central bank releases the so-called "shadow rates" (see definition). It seems that the ECB has been more successful in its policy easing than the BoJ.

Source: Bloomberg

The United Kingdom

1. A survey of UK's households shows signs of unease with finances, possibly related to higher inflation (as a result of the weak pound).

Source: @MarkitEconomics

2. On the other hand, UK's wage growth beat consensus.

3. Moreover, the nation's unemployment rate is at the lowest level in over a decade. Many economists, however, suggest that there are clouds on the horizon in Britain's labor markets as "Hard Brexit" looms.

The United States

1. New residential construction report in the US was mixed. Housing starts took a hit, but building permits were better than expected.

2. The explanation is in the surprisingly sharp decline in multi-unit building starts.

Part of the issue is that the number of muli-unit structures currently under construction is at the highest level since the early 1970s. Anecdotal evidence suggests that homebuilders have capacity issues because they can't seem to hire enough qualified workers for larger apartment projects. Perhaps.

Whatever the case, while multi-family starts have dropped, the number of permits is recovering.

3. In other US developments, the Sales Managers Index shows a slowdown, supposedly driven by the elections-related uncertainty.

Source: @Callum_Thomas; Read full article

4. Another indicator that doesn't bode well for US economic growth is the "garbage index": the number of waste carloads. Lower waste transports may indicate weaker economic activity.

Source: @themoneygame; Read full article

Funding Markets

1. The Fed's RRP program usage remains elevated for this time of the year (near $200bn).

2. The 3-month OIS rate, which is the projection of the average Fed Funds rate over the next three months, continues to rise on rate hike expectations.

Equities

1. In US equity markets, bank shares move higher on better earnings. Here is the Morgan Stanley (MS) stock price followed by the banking sector outperformance over the past three months.

2. The next chart shows European biotechs massively outperforming their US peers this year. A Hillary Clinton effect?

h/t Goldman Sachs

3. Who owns US ETFs?

Source: @WSJ; Read full article

Commodities

Over the past couple of days, we saw data on the tremendous rally in coal. Here is a chart showing the surge in coal-mining shares.

Driven in part by the recovery of raw material prices, especially coal, the Australian dollar is on the rise again.

Food for Thought

1. We begin the Food for Thought^™ section with a chart that shows Tesla outspending competitors on R&D.

Source: @businessinsider; Read full article

2. Speaking of outspending, "hipsters" tend to spend more than other shoppers.

Source: @Forbes, @Tmp_Research; Read full article

3. Historical and projected immigration trend in the United States.

Source: @pewresearch, @nytgraphics, @Tmp_Research; Read full article

4. US Social Security recipients lost out when oil prices fell. The decline brought down the headline CPI, but since seniors don't drive as much, they didn't get the full benefit of lower fuel prices. On the other hand, housing and health care costs keep rising faster than the Social Security adjustments (discussed yesterday).