The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

By Anonymous

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Twitter: @SoberLook




The Daily Shot: 18-Sep-18
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Asia -Pacific
• China
• Emerging Markets
• Commodities
• Equities
• Rates
• Global Developments
• Food for Thought

The United States

1. Let's begin with the NY Fed's regional manufacturing report (Empire Manufacturing), which was weaker than expected. To be sure, factory activity remains robust, but growth has moderated.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Input costs are still rising, but fewer businesses are passing these costs to their customers. If the trend continues, we may see further pressure on margins.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Manufacturers are less sure about the future.

- Business activity (now and six months ahead):

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Piper Jaffray

- New orders:

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

- Employment:

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

The components of the Empire State index suggest that manufacturing activity is moderating at the national level (ISM).

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Pantheon Macroeconomics

On the other hand, the World Economics' SMI index for September says that business activity at the national level is expanding at a faster clip.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: World Economics

2. Hurricane Florence is expected to have some impact on the US economic data for September. The effect should be relatively small and is unlikely to linger. Here are some historical examples.

Initial jobless claims:

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Oxford Economics

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Pantheon Macroeconomics

Industrial production:

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Oxford Economics

Vehicle sales should climb, although the increase is not expected to be nearly as large as what we saw after Hurricane Harvey.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

3. Next, we have some updates on inflation.

On a harmonized basis, the US and the Eurozone CPI measures are not that different. Both are heavily impacted by oil prices. The ECB's monetary policy, however, lags the Fed's by several years.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

The US CPI and the unemployment rate are inversely correlated again, which suggests that the Phillips Curve is "functioning" now. Perhaps.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: @TaviCosta; Read full article

As discussed previously, the closing US output gap should, in theory, boost inflation.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: NY Fed; Read full article

4. Younger Americans are much more nervous about buying a home than the older generations. This divergence is a recent phenomenon.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Deutsche Bank Research

5. How has leverage in the US changed since the start of the financial crisis? Banks and households cut back on leverage, but corporations and the government went in the other direction.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: BlackRock; Read full article

6. This chart shows how big the gap is between the states' "rainy day funds" and what they need to cover shortfalls in the next recession.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: @markets; Read full article


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Canada

1. Canada's household credit growth has been moderating.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: CIBC Capital Markets

But as interest rates climbed, the nation's household debt service ratio worsened.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: @markets; Read full article

2. This chart shows Canada's trade deficit in automobiles and parts.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Scotiabank Economics

3. Next, we have some data on Canada's dairy business trends.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: WSJ.com, h/t Paul Menestrier; Read full article


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The United Kingdom

1. As discussed yesterday, traders assign outsize risk to the British pound. The spread between the currency's implied and realized volatility stands out.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: TD Securities

2. After years of declines, mortgage rates are expected to start climbing next year.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Pantheon Macroeconomics


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The Eurozone

1. The "super-core" inflation rate (core CPI excluding package vacations) is moderating. Price increases remain sluggish in France.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Nordea Markets

2. As discussed previously (#3 here), wage growth is accelerating.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Nordea Markets

3. Youth unemployment remains elevated.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Oxford Economics


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Europe

1. Sweden's Riksbank struck a hawkish tone this month.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: EconoTimes; Read full article

Bond yields and the krona advanced.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot
The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

2. Czech bond yields continue to climb.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot


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Asia -Pacific

1. Japanese shares have been outperforming other Asian markets.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

2. Australia's housing price index is down year-over-year for the first time since 2012.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

3. The Aussie-yen currency cross appears to be correlated with emerging markets' equities (both are indicators of risk appetite).

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Rothko Research


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China

1. The yuan is drifting lower again as the White House escalates the US-China trade war (see story).

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

2. The World Economics' SMI points to further deterioration in China's manufacturing growth.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: World Economics

3. Economists are skeptical about the latest official economic indicators from Beijing.

Retail sales:

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Pantheon Macroeconomics

Industrial production:

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Pantheon Macroeconomics

4. Growth in private fixed asset investment remains stable. However, the investment-focused fiscal stimulus has slowed markedly.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: @C_Barraud

Here is the breakdown by sector.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Gavekal,h/t Skënderbeg Alternative Investments AG

5. The slowdown in credit expansion points to further moderation in economic growth.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Capital Economics

However, the PBoC's recent policy easing should stabilize China's lending activity.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Oxford Economics


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Emerging Markets

1. Exacerbated by the US-China trade war escalation, the selloff in the Philippine peso has been relentless.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Bond yields have been rising as well.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

2. The Indian rupee remains under pressure amid portfolio outflows.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot
The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: CIBC Capital Markets

3. Here is the Uruguayan peso

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

4. Brazil's economic activity surprised to the upside.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

5. Is Lebanon going to default on its debt? Here is the sovereign credit default swap spread.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: @TheTerminal

6. North Korea is circumventing the UN sanctions again as Russia and China resupply the isolated nation. Here is the gasoline price in Pyongyang.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: WSJ.com, h/t Paul Menestrier; Read full article


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Commodities

1. Bloomberg's agriculture index hit a record low. Will this impact the US rural vote in November?

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

2. This chart shows the latest speculative positioning in commodities.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Danske Bank

3. Coffee futures in New York hit the lowest level since 2005.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

The decline in the Brazilian real has exacerbated the weakness in this market.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: @financialtimes; Read full article

This is a disaster for global coffee producers.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Reuters; Read full article

4. The bounce in sugar futures appears to be over.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot


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Equities

1. The escalating trade war with China is keeping stock investors on edge. Nonetheless, many investors are still hoping that a full-blown trade war can be avoided.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: @WSJ; Read full article

Here are the S&P 500 futures.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

2. Tech shares tumbled on Monday ("QQQ" = Nasdaq 100).

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

3. Investors jumped into defensive shares such as consumer staples.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Here is the relative performance of consumer discretionary and consumer staples sectors.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

4. Banks have had a rough four days.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

5. Industrials outperformed on Monday, helped by airspace/defense shares.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot
The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

6. Homebuilders continue to underperform.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

7. Cannabis stocks climbed again on Monday, this time in response to comments from Coca-Cola. Is the sector in bubble territory?

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Market Ethos, Richardson GMP


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Rates

1. The 10yr Treasury yield is back above 3%.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

2. Even though the Treasury curve has not yet inverted, many economists suggest that the flattening trend is already forecasting an economic slowdown.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Danske Bank

3. The 10yr risk-neutral yield (the expected return from rolling short-term Treasury bills for ten years) continues to climb.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Why isn't the 10yr Treasury yield following the risk-neutral rate higher? The negative term premium is "holding it back."

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Some economists think that precautionary savings have been driving the term premium lower (outsize amount of savers' capital going into Treasuries).

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Deutsche Bank Research


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Global Developments

1. This table shows the Goldman Sachs Current Activity Indicator (CAI) for the largest economies. The last column shows the difference between the current and the potential CAI (indicating which economies are running "hotter").

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Goldman Sachs

This is what the global CAI looks like over time.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Goldman Sachs

2. The valuation divergence between the US and EM stocks continues to widen.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: IIF

3. This chart shows how speculative accounts are positioned in the currency markets (hedge funds are still long the dollar).

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Danske Bank

4. Is the global reflation over?

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: The Daily Feather

5. Which factors drive wage growth?

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Oxford Economics

6. Finally, here is the unemployment rate for select economies vs. the 1990-2007 low.

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: Capital Economics


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Food for Thought

1. Income mobility:

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: @simongerman600; Read full article

2. Views on the American dream:

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: @pewresearch; Read full article

3. The purchasing power of $100:

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: @taxfoundation, @ahardtospell, @ericadyork; Read full article

4. The revenues of 3-D imaging/sensing technology:

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: WSJ.com, h/t Paul Menestrier; Read full article

5. Factors impacting premature death:

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: @KaiserFamFound; Read full article

6. Sexually transmitted diseases in the US:

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: @axios; Read full article

7. Preferred alcoholic beverages in Europe (a shift from vodka and wine to beer?):

The Daily Shot: How Has Leverage Changed Since the Start of the Financial Crisis? - Daily Shot

Source: WHO, @NaytaData

The Daily Shot provides objective and disinterested analysis and commentary regarding macroeconomic and market trends. Other than indirectly through country or sector specific exchange-traded or mutual funds, the author of the Daily Shot does not have any interest in or own any of the individual securities which may be mentioned. The Daily Shot does not provide investment advice or any recommendations regarding particular securities. Nothing in the Daily Shot should be relied upon in making an investment decision, nor considered to be a solicitation to offer or buy any securities.

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