The Daily Shot And Data - April 7, 2016

Greetings,

We begin with the energy markets where the Energy Information Administration (EIA) confirmed yesterday's API report showing a larger than expected draw on US crude oil inventory.

NYMEX crude oil rallied 5% during the day in response and is up another 1% in the after-hours trading (boosting global equity markets). The fact that the amount of oil sitting in US storage facilities can impact the stock markets to such an extent is unprecedented.

Source: barchart

Continuing with energy, here are several other developments.

1. The crude oil curve has been flattening (contango shrinking).

Source: ‏@JavierBlas2

2. Crude oil correlation with the HY markets is at record levels.

Source: @tracyalloway, Goldman Sachs

3. US crude oil production falls to 9 Mbbl/d from 9.6 at peak, with declines remaining very gradual. The second chart below compares the recent output decline with the previous year.

Source: EIA

4. US refinery inputs and gasoline demand remain above last year's level.

5. US distillates (heating oil, diesel) inventory levels are much higher than where they should be this time of the year.

Below are the inventory levels of US residual fuel (heavy fuel oil), jet fuel, and diesel - all highly elevated.

Source: Morgan Stanley

In other commodity markets, it seems that the wholesale diamond prices have stabilized for now. Most analysts don't see significant appreciation from here.

Source: Zimnisky

In the currency markets, dollar-yen declines continue as the currency pair approaches 109 (yen per one dollar). This yen move puts the BoJ in a difficult situation as the yen strength could derail the fight against deflation.

The yen rally is surprising given the elevated risk appetite. As discussed yesterday, usually the yen rally corresponds to risk-off sentiment.

Source: Morgan Stanley

In other F/X developments, the trade-weighted sterling index continues to fall as the Brexit referendum looms.

Source: ‏@FTMarkets

The US dollar index (DXY) is drifting lower, providing support to commodities and emerging markets.

Source: barchart

Biotech shares rallied on the back of the Pfizer-Allergan deal breakup.

Source: Reuters

Related to the above, the M&A withdrawals (volume) for US firms hit a record.

Source: @Dealogic, h/t Jake

Highly levered LBO deals are off the table for now. It's hard to see many such deals done in the near-term, especially during the Fed's tightening cycle.

Source: ‏@lcdnews

The chart below shows US equity fund flows by size category. Mid-cap funds seem to be in favor.

Source: Deutsche Bank

Turning to China, ...

1. ... the nation's domestic bond market volume spiked this year (DCM = debt capital markets). There is a great deal of demand coming from WMPs (wealth management products) as corporate debt in China continues to expand rapidly.

Source: @Dealogic

2. Equity issuance volume in China also hit new highs (ECM stands for "equity capital markets").

Source: @Dealogic

3. Take a look at China's domestic M&A volume ...

Source: @Dealogic

4. The offshore RMB bond issuance dried up as devaluation risk hurts demand.

Source: @Dealogic

Speaking of devaluation risks, the PBoC is now depreciating the yuan against the CFETS currency basket. The media is not paying attention because the RMB has been stable against USD.

Source: Credit Suisse

Continuing with China, the nation's imports of scrap metal are falling. That used to be an attractive export business for some firms in the US, but not so much these days ...

Source: Macquarie

In other emerging markets, we see more evidence of economic stabilization in Russia. Here is a summary from BAML (ECI stands for "Economic Conditions Index").

Source: BAML

Colombia's CPI is at the highest level in years amid domestic drought, weak currency. More rate hikes are expected.

Now we take a look at some global economic indicators.

1. The ANZ Global Leading Indicator suggests a sharp improvement in economic activity (we should see a pickup in global industrial production).

Source: @ANZ_Research

2. The Goldman global economic surprise index turns positive for the first time in months.

Source: ‏@boes_

3. Major central banks now hold over USD 7 trillion in QE-purchased assets.

Source: ING, h/t Alex

Back in the United States, the FOMC minutes show the Fed divided on inflation trajectory and concerned about disinflationary risks. The minutes were a bit less dovish than Janet Yellen's press conference because a couple of the FOMC members were eager to hike rates immediately. Nonetheless, the minutes show concerns over global risks and the dollar.

Source: FRB

Next, we have a number of charts covering the US economy.

1. The Gallup US Job Creation Index shows strength in the labor markets.

Source: @GallupNews

2. On the other hand, (according to BAML), the unemployment rate adjusted for labor force participation shows that the US is not yet at "full employment". Note that Goldman disagrees with this assessment, suggesting instead that the pool of available workers from those who are not in the labor force is quite limited and nearly exhausted.

Source: BAML

Here is the labor force participation rate broken out by age group.

Source: BAML

Below is the US labor force participation rate adjusted for demographic changes. BAML argues that there is a large enough pool to draw from which would suggest there is plenty of slack in the labor markets.

Source: BAML

3. Employment in Detroit jumps sharply. Has the city turned the corner?

Source: ‏@boes_

Finally, Puerto Rico's bonds hit new lows after the "Debt [payment] Moratorium" bill was passed. The territory just actively defaulted, setting up for a protracted legal battle with creditors.