The Daily Shot And Data - July 14, 2016

Greetings,

1. We begin with the energy markets, where U.S. gasoline inventories significantly exceeded forecasts.

2. NYMEX crude shed 4% in response to the above report, falling below $45/bbl again.

Source: Investing.com

Some analysts are suggesting that crude and products inventories will continue to weigh on the market in the months to come.

3. We can't conclude much from one data point (below) but according to certain forecasts, we should soon see stabilization in US crude oil production.

Source: EIA

4. According to Citi, US shale producers need $50/bbl+ over time to return to growth. It's important to note however that a number of firms have pre-sold crude oil in the futures market above $50 - which will keep them profitable as long as they can continue hedging (in effect complementing their earnings with carry).

Source: Citi, ‏@joshdigga

5. With oversupply of gasoline (first chart above), US crack spreads (refining margins) are declining, putting refineries under pressure.

Source: Scotiabank

Source: Ycharts.com

6. Iran's oil production rises to a 5-year high while the nation's supply of crude in floating storage remains elevated.

Source: ‏@JavierBlas2, @IEA

Source: Citi, ‏@joshdigga

7. Venezuela crude oil production falls to the lowest level since 2003, choking off the nation's only major source of hard currency.

Source: ‏@JavierBlas2, @IEA

8. As discussed yesterday, increases in the Middle East crude production have largely offset the North American declines.This shift in market share was (supposedly) the goal of this "price war".

Source: ‏@vexmark, @technology

In US power market, residential and wholesale electricity prices continue to diverge. It's time someone disrupted this "market".

Source: @EIAgov, @bfly

Source: @EIAgov

1. Continuing with commodities, here we have US cotton futures. Hedge funds have moved in.

Source: @barchart

2. Iron ore, steel prices in China are at a 3-month high. These markets are well supplied, and it's difficult to find justification for this rally other than the stimulus expectations.

Source: @barchart

Source: @fastFT

1. Turning to China, the nation's future business activity expectations keep drifting lower. Take a look at the summary from Markit.

Source: @MarkitEconomics

2. Are the cuts in China's industrial commodities sufficient to eliminate the oversupply?

Source: Citi, ‏@joshdigga

3. Related to the above, China continues to flood the global markets with cheap steel.

Source: Citi, ‏@joshdigga

4. China's imports and exports declined again on a year-over-year basis.

Source: Goldman Sachs

5. The weaker renminbi has so far has failed to boost exports.

Source: @Callum_Thomas, @JmBadalamenti

6. China Customs Bureau says that the discrepancy between Mainland China's exports to Hong Kong and Hong Kong's imports from China is not due to illegal capital flight. Instead, the disconnect resulted from a new gold refinery in HK. Right.

Source: ‏@TomOrlik

7. Here is what China's middle class is currently doing for investments/savings.

Source: ‏@Callum_Thomas

1. In other emerging markets, Malaysia's central bank unexpectedly cuts rates. "Currency wars" continue as the nation responds to Indonesia and Singapore cutting rates earlier this year.

2. The Dubai economic activity index bounces in 2016 with oil.

Source: @MarkitEconomics

3. Here is another chart showing weakness in the Turkish tourism sector. This trend has already resulted in numerous smaller firms closing down.

Source: HSBC, @joshdigga

4. Hungary's employment rate hit the highest level in a decade.

Source: HSBC, @joshdigga

1. We now go to Japan where the officials are slashing the country's GDP and inflation forecasts.

Source: Reuters

2. Japan's industrial production misses forecasts.

Source: @countryeconomy

3. Japanese investors are loading up on foreign debt.

4. And here goes the Nintendo stock ...

Source: Google

... followed by the Bank of Kyoto which has a 4.2% stake in Nintendo. Some now refer to it as the Pokemon bank.

Source: Google

1. Next, we look at the UK where a rate cut is widely expected.

Source: ‏@markets

2. British commercial property development activity doesn't look very healthy.

Source: @MarkitEconomics

3. Other leading indicators point to an economic contraction and stalling employment growth.

Source: Credit Suisse, @vexmark

4. On a positive note, according to YouGov, the "public is cautiously optimistic about May as Prime Minister".

Source: @YouGov

Elsewhere in Europe, Sweden's housing market looks quite frothy.

Source: HSBC, @joshdigga

1. In the Eurozone, Germany auctions off the 10yr Bund at negative yield for the first time.

2. Germany's investment banking revenue is the lowest since 1995 (YTD). No M&A activity?

Source: @Dealogic

3. Italian banks' nonperforming loan balances decline for the first time since 2008.

Source: Goldman Sachs

4. Eurozone industrial production disappoints.

Source: ‏@acemaxx, @EU_Eurostat

5. Analysts are now projecting no Q2 growth for the Eurozone as a result of this weakness in industrial production as well as other data.

Source: @CapEconEurope

Source: @MikaelSarwe

1. Back in the United States, a robust long-bond auction shows continuing interest any paper with a positive yield.

2. Prices on Chinese imports into the US saw the largest year-over-year declines since 2009. China is once again exporting disinflation into the US.

3. The OCC is becoming uneasy with US banks' growing exposure to commercial real estate.

Source: ‏@jessefelder, @themoneygame

Source: @GregDaco, OCC

4. The December rate hike expectations in the US continue to rise, approaching pre-Brexit levels.

Source: ‏@M_McDonough

5. The Atlanta Fed's US GDP tracker (GDPNow model) forecasts 2.3% for Q2 GDP growth. This forecast is now right on top of the New York Fed's Nowcast model (discussed on Monday).