The Daily Shot And Data - October 26, 2016
Commodities
Let's start with the commodities markets where China's traders are taking metal futures to new highs. Aluminum prices in Shanghai go vertical.
The Zhengzhou-based silicon manganese futures keep rallying.
And the Shanghai zinc futures are grinding higher as well.
It's worth noting that cash prices for some of these commodities, while stable, don't show nearly as much of an increase. Here are aluminum and zinc spot prices.
1. In other commodity developments, wholesale coffee prices keep rising.
Source: Bloomberg.com; Read full article
Source: ICE
2. Looks like "bacon deflation" is over for now as hog prices turn higher.
3. Jewelry demand in India and China has declined, suggesting downward pressure on gold.
On the other hand, Goldman suggests that the renminbi weakness may push China's investors into gold to preserve the value of their assets in dollar terms.
Source: Bloomberg.com; Read full article
4. Overall flows into commodities have been quite high this year. A bet against inflation?
Source: Barclays, @NickatFP, @joshdigga
5. In the energy markets, Russian crude production jumped as new projects became operational (discussed earlier). Analysts remain skeptical about the November Russia/OPEC production "cuts."
Credit
1. Speaking of oil, energy HY bonds have seen a spectacular decline in spreads since the peak back in February.
Source: @MktOutperform
2. According to Barclays, the worst may be over for emerging market bond downgrades.
Source: Barclays, @NickatFP, @joshdigga
Emerging Markets
1. Brazil's short-term rates rose as the central bank remains a bit more hawkish than was priced into the market. The bank said in its minutes that it is concerned about the recent pause in the slowdown of services prices. That means the rate cuts are not going to be as aggressive as some had expected.
2. S&P downgraded Venezuela's state oil company's bonds to "selective default," suggesting that the government forced many investors to take the "extend and pretend" deal. This action will not impact credit default swaps which would trigger upon a payment default.
3. Emerging markets credit is increasingly dominated by passive products (the phenomenon is not limited to US equities). It means that volatility is likely to rise as hot money moves in and out of these funds.
Source: Barclays, @NickatFP, @joshdigga
As an example of the above, here are the shares outstanding for the iShares JP Morgan USD Emerging Markets Bond Fund (EMB).
Source: Bloomberg
China
1. Once again investors keep pointing to the dollar strength against the PBoC currency basket to explain away the renminbi weakness. But on a trade-weighted basis, the recent declines have primarily been just against the dollar.
Source: @Callum_Thomas
2. Retail mortgage balances in China continue to grow, becoming a substantial part of new domestic lending.
Source: Deutsche Bank, @joshdigga
3. As property sales accelerate, property investment is starting to return.
Source: Deutsche Bank, @joshdigga
Japan
Japanese shares continue to recover.
The Eurozone
1. Now on to the euro area where German business sentiment data continues to surprise to the upside. Below are a couple of charts from Ifo (aggregate and sector breakdown).
2. German companies continue to save faster than their peers. A weak corporate investment will cap domestic growth and exacerbate German trade imbalances within Europe and globally.
Source: @WSJ, @pdacosta, @TonysAngle; Read full article
3. French business sentiment disappointed.
On the other hand, French labor market seems to be improving as the number of jobseekers declines.
4. Italian industrial orders unexpectedly jump. Perhaps the nation will be able to avoid yet another recession (assuming the referendum situation works out well).
Europe
Elsewhere in Europe, Polish unemployment rate fell to the lowest level since the early 1990s.
The United Kingdom
1. The Bank of England's Governor Mark Carney sent the British pound for a wild ride. First came a sharp selloff. Then Carney mentioned that the BoE would not ignore the currency weakness and the resulting pickup in inflation. These comments sent the pound higher, although still down on the day.
Source: Reuters; Read full article
2. Separately there seems to be a significant income divide in the UK's population's trust in British institutions. Perhaps these attitudes are not too dissimilar from the US.
Source: Barclays, @NickatFP, @joshdigga
Australia
Australian CPI surprised to the upside, suggesting the RBA's options for further easing may be limited.
The Aussie dollar jumped on the news.
Canada
The loonie keeps drifting lower on what seems to be mixed messages from the BoC.
The United States
1. US inflation expectations continue to grind higher, increasing the certainty of a rate hike this year. Shortly, several Fed officials will begin preparing the markets for this policy decision.
2. Related to the above, shares outstanding of the iShares TIPS Bond ETF continue to increase, as wealth managers and others attempt to hedge inflation risk in their portfolios.
3. US consumer sentiment disappoints, driven in part by the presidential elections.
4. On the other hand, the IBD/TIPP Economic Optimism Index (see definition below) surprises to the upside.
5. The volume of home sales in southern US looks unsustainable.
Source: SocGen Cross Asset Research, @joshdigga
6. This Gallup index shows easing underemployment in the United States.
Source: @GallupAnalytics; Read full article
Global Developments
Is this the bottom for global import volume growth?
Source: @topdowncharts
Funding Markets
The LIBOR - OIS spread (see overview) shows some easing in the funding markets since the end of the third quarter.
Equity Markets
1. This story will dominate Wednesday's financial media discussion: Apple's (AAPL) numbers (especially the forecast) disappointed. Shares dropped some 3% after hours.
2. The last graphic shows busted deals (globally) by industry over the last couple of years. Will the AT&T (T) - Time Warner (TWX) deal go on this chart next year?
Source: @WSJ; Read full article
Food for Thought
1. Let's start the Food for Thought™ section with this chart from Gallup that showed up on every national TV news station in the US. Americans' respect for police rose sharply this year.
Source: @GallupAnalytics; Read full article
2. Household income in most countries is higher in urban areas than elsewhere. The difference is much smaller in the US and Belgium.
Source: @OECD, @Tmp_Research; Read full article
3. Opioids distribution rate and overdose death rates have been on the rise. Enforcement, on the other hand, has been on a decline.
Source: @PostGraphics, @Tmp_Research; Read full article
Source: @PostGraphics, @Tmp_Research; Read full article
4. Polls become more accurate in the US as the presidential election approaches.
Source: @ECONdailycharts, @Tmp_Research; Read full article
5. Users follow very different groups on Twitter (TWTR) and Facebook (FB). Usage for political news/views as well as posting political comments, on the other hand, seems similar.
Source: @FactTank, @Tmp_Research; Read full article
6. The percentage of uninsured in the US.
Source: @GallupAnalytics; Read full article
7. Is the government doing too many things?
Source: @GallupAnalytics; Read full article
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