The Daily Shot And Data — Tuesday, Nov. 8

By Staff of SoberLook.com

Tuesday, November 8, 2016 7:24 AM EDT

The United States

Investors around the world continue to focus on the US elections, with the latest Clinton/FBI news injecting a fresh dose of risk appetite into the global markets. Here is what the betting markets are telling us as of the late evening on Monday.
•Donald Trump victory odds over time (from PredictIt).

•PredictIt betting odds electoral map.

Source: @PredictIt; Further reading

•Electoral map based on Betfair betting odds.

Source: Maxim Lott and John Stossel (Fox News)

With risk appetite returning in response to reduced political uncertainty, the S&P500 had the best day since March.

The yen, which usually weakens against the dollar when risk appetite improves, dropped 1.3%.

The declining chances of a Trump victory sent the probability of a December rate hike to 82% - the highest in almost a year.

Historically, here is how US elections impacted uncertainty, the stock market, and credit risk in the past.

Source: @JoshZumbrun, @NickTimiraos, @Tmp_Research; Read full article

Next, let's take a look at other economic developments in the United States.

1. Consumer debt (excluding mortgages) rose more than expected - shown as a percentage of the GDP below.

A good portion of this increase was from student loans. The chart below shows student debt directly owned by the federal government, which has now exceeded $1 trillion. Note that the total student debt outstanding (including debt that is guaranteed by the government) is about $1.4 trillion.

Another significant contributor is auto debt (shown adjusted for the population growth below). This trend is how the near-record auto sales in the US have been financed.

2. The latest data from Moody's suggests that the US apartment market tightness is easing. Hopefully, this will result in the leveling off in the shelter CPI.

Source: Moody’s Investors Service, @joshdigga

3. As discussed yesterday, wage acceleration is likely to be concentrated in the skilled/managerial component of the labor market. Credit Suisse points out that this is the case in manufacturing.

Source: Credit Suisse, @NickatFP, @joshdigga

4. The Fed's labor market conditions index has stabilized but remains below the post-recession average.

5. As we've seen earlier, construction spending in the US has been soft, with the drag coming from a weaker public investment (especially in transportation). This trend has contributed to a reduction in the overall economic growth.

Source: Goldman Sachs, @joshdigga

6. Finally, Credit Suisse points out that US long-term real yield remains extremely low in comparison to what we've had over the past century.

Source: Credit Suisse, @NickatFP, @joshdigga

Emerging Markets

1. The political developments in the US (above) send stocks, bonds, and currencies in many emerging markets sharply higher. Here are Mexico's 10yr bond yields and the equity market index.

Separately, Mexico's consumer sentiment unexpectedly bounced from multi-year lows.

2. Venezuela's stock market has been up for the past thirteen days in a row, rising 7% on Monday.

3. Chile's export figures remain soft. Here are the total as well as copper exports.

4. The Turkish lira continues to slide while bond yields grind higher.

5. India's economic activity has improved significantly since the summer.

Source: Goldman Sachs, @joshdigga

6. Indonesia is cutting back stimulus as government spending declined by the largest percentage in years.

Source: @Emgist

7. The Egyptian pound experienced another dramatic decline on Monday, with the dollar now buying almost 17 pounds (from less than 9 a few days ago).

Foreigners apparently like this devaluation, pumping a good sum of money into the nation's stock market and sending share prices sharply higher.

8. Speaking of foreigners pumping money into a relatively small equity market, here is Bulgaria's stock index.

The rally is a bit surprising given increased political uncertainty in the nation.

Source: Reuters; Read full article

Greater China

1. China's FX reserves declined more than expected as the renminbi's gradual devaluation encourages capital outflows by residents.

Source: Reuters; Read full article

Below is a breakdown as well as a forecast of outflows for China and other emerging economies.

Source: @IIF, @DeanDijour; Read full article

2. On the other hand, Hong Kong's FX reserves hit a new record (perhaps in part driven by outflows from the Mainland).

3. Separately, Hong Kong's property shares took a hit as the government raised stamp duty in hopes of cooling the housing market. Will it work?

Source: @jsblokland, @DeanDijour

Source: Bangkok Post; Read full article

4. Taiwan's trade activity spikes, with both imports and exports rising much more than forecast.

The Eurozone

1. German manufacturing orders beat consensus, driven by external demand. Domestic orders remain subdued which continues to add to rising trade imbalances.

Source: Federal Statistical Office (Germany)

Related to the above, German exports to China and Russia are no longer falling.

Source: Credit Suisse, @NickatFP, @joshdigga

2. Retail trade activity in the Eurozone is trending lower - in large part driven by Germany. Once again, Germany suffers from weak domestic demand which adds to trade imbalances.

3. Investor confidence in the Eurozone unexpectedly jumped after hitting Brexit-related lows.

4. France is issuing short-term debt at an ever lower rate - moving deeper into negative territory.

5. Greek bonds continue to rally on debt relief expectations, with the 10-year yield now below 7.5%.

Europe

1. Elsewhere in Europe, UK's house price appreciation continues to decline. However, the latest Halifax year-over-year growth figure beat consensus.

2. Denmark's industrial production took an unexpected hit.

3. Norway's industrial production (shown on a year-over-year basis below) also continues to contract.

4. Switzerland struggles to pull out of deflation.

The Swiss National Bank continues to accumulate euros as it tries to keep the franc from appreciating too much. Note that the nation's FX reserves are now roughly equivalent to a year's worth of GDP.

Global Developments

1. Credit Suisse points out that global yields have decoupled from industrial production. Will we see some convergence?

Source: Credit Suisse, @NickatFP, @joshdigga

2. Moody's research shows that the most vulnerable economies (with the lowest-rated debt) are also most exposed to climate change.

Source: Moody’s Investors Service

Credit

1. US HY bond market bounced sharply in response to the latest political developments.

2. HSBC points out that HY bonds have been quite resilient this year in the face of heavy new issuance hitting the market.

Source: HSBC, @NickatFP, @joshdigga

Equity Markets

1. Bank shares rallied globally on Monday. The chart below provides the year-to-date US banks' performance relative to the S&P500 (total return).

2. As we saw earlier, US consumer debt growth shows brisk demand. Is this trend helping online lenders?

Source: @WSJ; Read full article

Commodities

1. A fresh injection of risk appetite from the US gave a further boost to China's industrial metals bubble. The usual suspects include copper, zinc, steel, and manganese.