The Daily Shot And Data - September 15, 2016

Greetings,

With the global bond markets seemingly stable on Wednesday (for now), we begin with the latest developments in energy.

1. US gasoline production remains materially above last year's output.

2. Gasoline inventory increase was, therefore, higher than forecast.

3. Crude oil markets weren't happy with this report, sending WTI futures down another 3%. Oil continued pressuring equities in the afternoon.

4. It was a big week for US crude oil imports as deliveries recovered from the Hurricane Hermine decline.

5. US crude oil production remains stable (for now).

6. Paris-based IEA says that the oil industry may see another year of declining investment.

Source: @markets, @rakteem

7. Energy E&P firms have been raising quite a bit of equity capital but all via follow-on or convert financing. Extraction Oil & Gas (a Denver-based firm) will be testing the IPO waters shortly.

Source: @FT,  ‏@Ed_Crooks , @EricGPlatt

1. In the credit markets, O&G firms continue to dominate what S&P calls "weakest links." 

Source: @SPGlobal

Source: @SPGlobal

2. That's why US HY default rates are higher than those in Europe and Emerging Markets (US has proportionally more O&G firms financed via the HY market).

Source: @SPGlobal

1. In commodities, the Shanghai steel futures are ending up being another speculative unwind.

2. US bacon deflation continues. Amazing.

Source: ‏barchart.com

In the funding markets, corporate withdrawals from prime money market funds have been spectacular. This is the reason LIBOR keeps rising. Many corporate treasurers are not permitted to put money into anything with a fluctuating NAV which is where prime funds are headed under the new regulation. Welcome to the "unintended consequences" of (over) regulation.

By the way, this trend may be one of the technical reasons the Fed may choose to wait until later in the year to hike rates.

Source: @business, @mccormickliz

Speaking of the funding markets, it's now even more expensive to borrow renminbi in Hong Kong as the squeeze on the currency worsens.

Source: analystz.hk

There are several explanations for this tightness floating around.

Source: ‏South China Morning Post

It's interesting that the Hong Kong dollar rates also rose slightly. 

1. Continuing with China, the new domestic loan volume was higher than forecast (apparently dominated by mortgages). The second chart below shows the total credit expansion.

Source: @fastFT

2. China's broad money supply growth seems to have stabilized (for now).

Source: PBoC

3. Here is a nice chart showing both monetary and fiscal stimulus in China.

Source: @topdowncharts

1. In other emerging markets, South Africa's retail sales growth takes an unexpected dive.

2. India's wholesale inflation increased as expected. Many still expect the RBI to cut rates in the near-term. 

3. Mexican markets remain under pressure: equities, sovereign CDS spread, and the peso.

Source: myfxbook.com

4. The Lebanese 10yr USD-denominated government bond yield rose sharply. It's amazing that the nation has been able to maintain such a low yield to begin with.

5. Leading economic indicators show desynchronization between EM and DM economies.

Source:  ‏@topdowncharts 

1. Turning to Japan, the BoJ balance sheet as a percentage of Japan's GDP continues to climb. Despite the massive QE effort, Japan's longer-dated inflation expectations are now declining.

2. Japan's industrial production missed forecasts by a significant margin.

3. Are the Japanese investors dumping foreign shares again?

Source: Investing.com

1. Now on to Europe, where the Czech 2yr government bond yield is pricing in severe deflationary pressures ahead. This looks like Switzerland.

Source: Investing.com

2. On the other hand, Switzerland's 5yr government bond yield is climbing higher.

Source: Investing.com

3. UK's unemployment rate remains at 4.9%. Wage growth, however, has slowed. Natixis is forecasting a further deceleration ahead. 

 

Source: Natixis,  ‏@joshdigga

4. The UK has auctioned off a 30-year inflation-linked bond at record low (negative) yield. The nation's real rates remain firmly in the red.

5. In other developments, profit margins for European firms continue to languish.

Source: Barclays, ‏@joshdigga

1. In the Eurozone, the bloc's industrial production fell in July.

2. French core CPI declined below 0.5%. Service sector inflation has been falling for years now.

Source EUROSTAT

Source: Natixis, ‏@joshdigga

3. Italy has not yet pulled out of deflation.

Source EUROSTAT

4. Banca Monte dei Paschi changed management. Investors don't seem impressed by the firm's recent actions thus far.

Source: @WSJ

5. According to Bloomberg, Italy has reduced bad loans, but problem debt balances remain the highest in Europe.

Source: @markets

6. Irish economy grew by 0.6% - a more realistic calculation than the 20%+ a few months back. That spike, by the way, was called "leprechaun economics." It's hard to determine the GDP when a number of foreign firms run a chunk of their P&L through Ireland for tax purposes. So many SPVs, so little time.

1. Finally, we go to the US where the September rate hike probability dropped to 20%.

2. With US mortgage rates still near record lows (even after yields have backed up), the mini-refi wave keeps going.

Source: Bankrate.com

Source: MBA

Also, somewhat surprisingly, we had a jump in house purchase activity. Folks anticipating higher rates ahead?

Source: MBA

3. The US Transportation Services Index (trucking, rail, pipelines, etc.) reached an all-time high in July.

4. The US continues to import disinflation from China.

5. US CEOs are not very optimistic, especially on hiring and sales.

Source: The Business Roundtable CEO Economic Outlook Survey,  @NickatFP

Source: The Business Roundtable CEO Economic Outlook Survey,  @NickatFP

6. The last chart shows growth in market value of US privately held federal government debt and the GDP over the past 40 years (1976 =100).

1. Turning to Food for Thought, Bloomberg Briefs asks "how much living space can one million euros buy?"

Source:  ‏@BloombergBrief

2. According to the Wall Street Journal, it's "good news for liberal-arts majors: pay gap tends to narrow as careers progress."

Source: @WSJThinkTank, @Tmp_Research

3. What do people in Japan and China think about territorial disputes in the region?

Source: @pewglobal, @Tmp_Research 

4. What do Americans think about all the medical technology that may help them live longer and improve their abilities?

Source: @pewresearch, @Tmp_Research

Source: @pewresearch, @Tmp_Research

5. We all need more charts!

Source: @priceonomics