LME Copper Cash
End-of-day quote - 08/15
6382
+0.49%

WSJ?s Daily Shot: Is Dr. Copper Telling Us Something About Stocks?

Envoyer par e-mail
12/20/2016 | 02:05 pm

To receive the Daily Shot newsletter in your inbox, please sign up at our Email Center.

Have questions, feedback or comments? Contact author Lev.Borodovsky@DowJones.com.

The Daily Shot: 20-Dec-16 ? China ? Emerging Markets ? Asia ? Australia ? The United Kingdom ? The Eurozone ? Europe ? The United States ? Equity Markets ? Commodities ? Global Developments ? Food for Thought

1. As discussed before, monetary conditions in China have tightened in recent weeks. Concerned about the selloff in the domestic bond markets, the PBoC injected some liquidity into the markets last week. Nonetheless, the interbank rate continues to move higher: here is the one-week SHIBOR.

2. China's bonds remain under pressure, with the selloff now hitting the short-end of the curve. Below are the 5yr and the 1yr government bond yields.

3. Corporate bond yields also rose as rumors circulate about redemptions from wealth management products (WMPs) who hold a great deal of China's corporate debt (often leveraged).

4. China's stock market is moving lower partially in response to the news that the housing rally has stalled (discussed yesterday).

5. In Hong Kong, the renminbi funding markets remain tight, with the 3-month CNH (offshore renminbi) HIBOR hitting the highest level since January. The second chart below shows the CNH HIBOR curve - now and a month ago.

6. The Hong Kong dollar (HKD) HIBOR is also on the rise as it converges with the US dollar LIBOR.

Source: Bloomberg; Further reading

7. The USD/HKD risk reversal continues to rise as traders once again put on bets that the Hong Kong Monetary Authority will give up the peg to the dollar.

1. The assassination of the Russian ambassador in Turkey put investors further on edge, sending the lira lower again.

Source: BBC; Read full article

Some analysts suggest that this event could exacerbate market volatility.

Powder Keg looking for a spark or expected tremors from rapidly shifting geopolitical tectonics? The assassination of Russian Ambassador to Turkey Andrey Karlov appears to be an unfortunate result of a major geopolitical shift that is afoot. The assassin's comments at the time of the shooting reveal a motivation tied to Russian-backed Assad's battle to take Aleppo. Syria is just one country whose control was in the balance of two opposing foreign powers and their influence within the country. Given the magnitude of the signaled foreign policy shift of the US, it is very likely that other geographies will become unstable whether via acts of opportunism or desperation. Volatility begets volatility.

Matthew Garrett

It's worth noting that the Google search frequency for "Franz Ferdinand", whose assassination was the harbinger of WW-I, spiked on the Andrey Karlov news.

Source: Google Trends, @MattGarrett3

2. Speaking of Google searches, India's residents have been actively searching for "physical asset" words after the currency reform.

Source: Goldman Sachs, @joshdigga

High-frequency indicators are pointing to a rather severe downturn in India's economic activity.

? Corporate employment outlook:

Source: Goldman Sachs, @joshdigga

? Gems and jewelry expoerts:

Source: Goldman Sachs, @joshdigga

? Motor vehicle registrations:

Source: Goldman Sachs, @joshdigga

3. Russia's retail sales are still 4% below last year's level, continuing the decline that started in 2014. It's amazing that the nation's leadership remains hugely popular.

As discussed before, other economic indicators show signs of stabilization.

Source: Natixis, @joshdigga

4. The Philippine stock market is getting slammed again. The "pivot to China" isn't working out so well.

Monday's selloff was driven by the food company Jollibee which has been divesting some of its foreign assets.

5. Argentina's massive stock market rally seems to be over for now.

6. The Egyptian pound is down nearly 60% year-to-date. It will be interesting to see how the government deals with hyperinflation risks.

7. While emerging market currencies on average are down vs. the US dollar, they are sharply higher against other developed market currencies.

Source: Goldman Sachs, @joshdigga

1. Some readers may recognize the shape of this trend. Below is the latest South Korean PPI (YoY), which is following the same metric in China.

2. Even in Japan, companies have upgraded their near-term inflation forecasts.

Source: Goldman Sachs, @joshdigga

Australia's government barely escaped a downgrade from S&P, which is holding the nation on a negative rating outlook. The rating agency remains skeptical about the government's will to improve the fiscal situation.

Source: ABC (Australia); Read full article

The Aussie dollar slumped.

Separately, while both Australia and New Zealand are expected to see rate hikes in a year, New Zealand's tightening is projected to come first.

Source: Goldman Sachs, @joshdigga

1. Nicola Sturgeon once again threatened an independence referendum if Scotland is denied access to the EU market.

Source: Independent.co.uk; Read full article

The pound fell on the news.

2. Homeowner surveys show that UK's housing market remains on a growth path, albeit at a slower rate.

Source: Knight Frank/IHS Markit

1. The tragic terrorist attack in Germany sent the euro to the lowest level in years.

Source: NPR; Read full article

2. German 2-year yield hits another record low (deep in negative territory).

3. German business climate indicators (ifo) surprised to the upside.

Will industrial production follow?

Source: @jsblokland

4. Banca Monte dei Paschi shares dropped 11% as markets became skeptical of the bank's ability to recapitalize without a government bailout.

Source: @fastFT; Read full article

5. Meanwhile, Italy's new government is putting together a plan to borrow more money if it has to bailout Banca Monte dei Paschi and/or UniCredit.

Source: Bloomberg.com; Read full article

Such a move would add to the nation's mounting debt which is currently ?2.2 trillion.

But who is worried? The ECB's buying sent Italian two-year government bond yield deeper into negative territory.

6. Portugal's PPI pulls out of the red for the first time in almost four years. Once again, it's following China's PPI higher.

7. The EUR/USD cross-currency basis is widening again, making it expensive for European banks to convert euro funding into a dollar based loan.

Elsewhere in Europe, Poland's retail sales surprised to the upside.

Separately, Poland's PPI was higher than economists had been forecasting. Many analysts are focused on specific countries and miss the fact that the PPI is a global index driven by China.

1. Morgan Stanley has outlined the impact of the proposed corporate tax structure that would not tax income from exports while disallowing deductions from imports. Importers with relatively small margins, for example, would be wiped out if they can't deduct their cost of goods.

However, Morgan Stanley suggests that the dollar would have to move significantly higher if such a tax scheme is implemented. The importer in the above example would see her margins rise sufficiently (imported goods would be that much cheaper in dollar terms) to compensate for the new tax regime (in theory).

Source: Morgan Stanley, @MattGarrett3

As a reminder, here are the latest US trade statistics.

Source: Morgan Stanley, @MattGarrett5

2. Economists continue to question Trump's promise of bringing back US manufacturing jobs. We have a letter to the editor on the topic at the end.

Source: @WSJ, @BaldwinRE; Read full article

3. According to a survey from Barclays, here is what investors think about Trump's policies' impact on growth.

Source: Barclays, @NickatFP

4. The shape of the mortgage curve (applications and originations vs. credit score) remains materially different from the way it looked before the recession. Applicants with weaker credit are not participating in the housing market.

Source: MarketWatch; Read full article

5. Could the 10yr Treasury yield hitting 3% trigger a wave of outflows as it did in 2013?

Source: Deutsche Bank, @tracyalloway

6. The US - Germany 10yr bond spread hits another multi-year high.

7. Is the long-dollar trade becoming crowded?

Source: Barclays, @NickatFP

1. Is Dr. Copper telling us something about stocks? Here is what happened with the two markets since the US elections.

Source: Bloomberg

2. Are US equities as a whole becoming a crowded trade?

Source: Barclays, @NickatFP

3. Share buybacks seem to be slowing.

Source: @FactSet; Read full article

4. US biotechs continue to get hammered. Here is the NASDAQ Biotech Index relative performance vs. the NASDAQ Composite.

5. Discount warehouse stores represent 29% of total US retailers' earnings.

Source: Moody's Investors Services

6. 2016 has been a huge year for terminated deals.

Source: @business, @Tmp_Research; Read full article

1. Tighter monetary conditions in China are putting downward pressure on commodities. Here are the Zhengzhou cotton and the Shanghai zinc futures.

2. US hog futures continue their rapid recovery.

Are we in the midst of "de-globalization"?

Source: Barclays, @NickatFP

1. Merry Chr..., I mean Happy Holidays!

Source: @paul1kirby, @Tmp_Research; Read full article

2. Views on Russia's meddling in US elections.

Source: @MichaelCBender, @TimJHanrahan, @Tmp_Research; Read full article

3. Election materials in languages other than English.

Source: @allthingscensus, @FactTank, @Tmp_Research; Read full article

4. The percentage of people living outside their country of birth.

Source: @wef, @Tmp_Research; Read full article

5. Korea and Japan are the largest users of industrial robots.

Source: @economics, @Tmp_Research; Read full article

6. Updated deportation data for the United States.

Source: @jensmanuel, @Tmp_Research; Read full article

(MORE TO FOLLOW) Dow Jones Newswires

12-20-16 0805ET

Envoyer par e-mail