The Daily Shot And Data - May 13, 2016

Greetings,

Let us begin with emerging markets.

1. South Africa's mining production dropped by 18% from a year ago - a record decline. This report sent some analysts back to the drawing board, with growth projections downgraded again.

h/t Jonathan

2. Romania and Poland remain in deflation. Will both see stabilization as energy prices move higher?

Source: Investing.com

3. Dilma Rousseff's impeachment is moving forward as Brazil's interim President Michel Temer takes over. While many can point to Rousseff's poor leadership and populist tactics, proving that her actions were criminal in nature may be challenging. Rousseff' will continue to fight to regain power which will add to economic uncertainty.

Source: NYTimes

4. Mexican government debt growth slows significantly and so do the bond holdings by foreigners. If the peso remains stable for some time, will foreigners return?

Source: ‏@joshdigga

5. The Philippine stock market surges as the transition to the newly elected government seems to be going well.

6. This last chart shows Asian residential property price changes since 2006 and since 2009.

Source: UBS, @joshdigga

Switching to China, here are some observations.

1. The onshore-offshore renminbi spread is starting to widen again. More capital outflows?

2. Stuff from China coming into the US is getting progressively cheaper. A portion of this is steel dumping.

3. Speaking of steel dumping, some are predicting more cheap imports coming into the US. This sent US Steel shares sharply lower.

Source: Bloomberg.com

Source: Google

4. Below is a comment from Credit Suisse on the collapse of speculative activity in China's steel markets. This has been a spectacular shift in sentiment.

Source: Credit Suisse

Source: @barchart

Japan's April service sector sentiment fell to the weakest level since 2014. This is the Economy Watchers Survey which targets individuals working at consumer-oriented firms (barbers, taxi drivers, waiters, etc.)

Source: Japan Macro Advisors Inc

1. Switching to the Eurozone, the area's monetary base hit €1.9 trillion, a new record.

Source: ECB

2. The next chart shows European corporate debt: bonds vs. loans. The financial crisis and the Eurozone debt crisis forced bank deleveraging (halting lending) while the bond markets continued to grow. Thus, we have the divergence between the two markets.

Source: UBS

3. Take a look at the divergence between (euro-denominated) high-yield and investment-grade issuance in 2016.

Source: UBS

Canada's new housing prices continue to rise in a linear fashion.

1. Back in the United States, the broad money supply growth is approaching 7% per year, highest since 2013. What's driving this? New loan creation. It's hard to look at this and suggest that US credit conditions have tightened.

2. US mortgage rates hit the lowest level in 3 years, providing additional support for housing.

3. We had a bit of a jump in the US initial jobless claims number. Is this just noise? A poor seasonal adjustment perhaps? More on this later.

4. Here is the latest economists' survey on the next Fed hike. With a softer payrolls report last week, many economists have shifted projections from June to July and September. Perhaps another Daily Shot survey is in order.

‏Source: @WSJecon, h/t Jake

5. The Wall Street Journal reports an increased activity at West Coast ports - the highest since 2007.

Source: @WSJGraphics, h/t Jake

Next, we look at some trends in the credit markets.

1. The Volcker Rule kills liquidity in US HY market, with many bonds trading "by appointment" like real estate. Banks went from being market makers to introduction brokers. Many HY desks these days have little understanding of the credits. The focus is simply to find the other side.

Source: @business

2. The chart below shows bonds that are downgraded from investment grade to high yield ("fallen angels") as well as those that are "promoted" from high yield to investment grade ("rising stars"). The net is also shown.

Source: BofAML, ‏@joshdigga

3. Lots of folks are now getting involved in US multi-family housing finance.

Source: BofAML, ‏@joshdigga

1. Switching to the equity markets, LendingClub's troubles continue as major buyers of loans step away.

Source: ‏WSJ

Source: Google

2. JPMorgan's trading value at risk (VAR) rose last quarter while everyone else cut risk.

Source: ‏@business

3. Amazon's outperformance (vs. Nasdaq-100) has been spectacular.

Source: Ycharts.com

4. A record amount of money flowed into VIX products recently. The outcome is predictably painful as the decay often overtakes any benefit from increased volatility. One such product, VXX, is shown in the second chart below.

Source: @Callum_Thomas

Source: Google

1. In commodities, copper's second rally hit a wall. Technical analysts will have a ball with the chart below. There are of course serious fundamental concerns.

Source: ValueWalk

Source: @barchart

2. Gold demand rose sharply this year. Once again, this is a bet on a much slower rate hike trajectory in the US.

3. Sugar futures take off ...

Source: @barchart

Turning to Food for Thought, we have 5 items this morning:

1. According to the FT, "air pollution in some cities around the world has reached catastrophic levels".