India

Chicago PMI Slumps Back Into Contraction; Election Blamed

Having wavered around the magical '50' level for much of the last year, bouncing off December plunge lows, Chicago PMI printed below expectations of 50.5 at a contractionary 49.3 - the 6th month of contraction in the last 12 months. With weakness in new orders (lowest since Dec 2015) and production (both back into contraction), MNI notes that on the heels of April's decline, the latest results show activity stumbling in the second quarter, following only moderate growth in Q1.

Unintended Consequences: Easy Money = Overcapacity = Trade Wars

So what happens to all that Chinese steel that was on its way to the US and EU before slamming into those prohibitively high tariffs? One of three things: Either it’s sold elsewhere, probably at even steeper discounts, thus pricing US and EU steel exports out of those markets. Or it’s stockpiled in China for future use, thus lowering future demand for new steel production and, other things being equal, depressing tomorrow’s prices. Or many of China’s newly-built steel mills will close, and China will eat the losses related to this malinvestment. Each scenario results in lower prices and financial losses somewhere. Put another way, as far as steel is concerned, the world’s fiat currencies are rising in value, which is the common definition of deflation.

Losing Ground In Flyover America, Part 2

There has never been a more destructive central banking policy than the Fed’s current maniacal quest to stimulate more inflation and more debt. That’s what is killing real wages and economic vitality in flyover America - even as it showers prodigious windfalls of unearned wealth on Wall Street and the bicoastal elites who draft on the nation’s vastly inflated finances. Indeed, Fed policy has had a double whammy effect on the flyover zone economy. It drove inflation up when down was needed; and its strip-mined capital from American business when increased capital investment was of the essence.

The Consequences Of $50 Oil

If U.S. shale stays competitive, it could trigger another round of production increases from Saudi Arabia, which is determined to do its utmost to hold on to market share even as it boasts of long-term plans to build an “oil-less” economy by 2030. The Saudi bottom line has been ravaged by years of low prices, generating huge budget deficits and debts to contractors (which the Saudi government will attempt to cover through IOUs). Nevertheless, Saudi Arabia remains uniquely positioned to weather such storms; should the price fall again, it is better-placed to retain market share than the high-cost producers in the U.S. and elsewhere.

"We’re Moving To Tackle Systemic Risk" - India Cracks Down On HFT Scourge

While the corrupt and criminal US regulators are unable to do anything to stifle the market domination of algos which have totally destroyed the US equity market, and sucked up enough liquidity where neither buy nor sellsiders can generate a profit, India is already well on its way to crushing the parasitic - and perfectly legal - frontrunners of virtually ever trade. It will do so by increasing penalties on high-speed trading firms that flood exchanges with orders that don’t result into actual transactions, as part of steps aimed at strengthening its oversight of computerized trading.

Furious China Slams "Irrational" US Trade War, Warns "Will Take Steps"

Overnight the Commerce Department escalated its trade war with China when it implemented the latest clampdown on a glut of steel imports, when it announced that corrosion-resistant steel from China will face final U.S. anti-dumping and anti-subsidy duties of up to 450%. China's Commerce Ministry said it was extremely dissatisfied at what it called the "irrational" move by the United States, which it said would harm cooperation between the two countries. "China will take all necessary steps to strive for fair treatment and to protect the companies' rights," it said, without elaborating.

Add It Up... And It Doesn't Add Up

Continuing deceleration of population growth offset by rate cuts incentivizing ever greater debt loads (with continually underperforming GDP) was the central banks only play. And now as population growth and decelerating demand really begin to wane...the playbook is basically exhausted save for one play...simply print money with which to buy and "permanently retire" those assets. Think Treasury's, think MBS, think equity's...think anything that can be digitally created and digitally destroyed all to perpetually shrink the outstanding float (think perpetual short squeeze). How long this can maintain asset values northward march in the face of the populations southward divergence is anybody's guess.

Frontrunning: May 24

  • Asian stocks near 11-week lows, dollar bounces on Fed rate view (Reuters)
  • Poll Finds Lack of Enthusiasm for Clinton and Trump (WSJ)
  • Oil falls for fifth day as focus returns to growing exports (Reuters)
  • The Hedge Fund That Couldn't Stay Open Long Enough for a Big Payday (BBG)
  • French police break up refinery blockade in anti-reform showdown (Reuters)

Stronger Dollar Sends Futures Higher, Oil Lower, Asian Stocks To Two Month Lows

Yesterday's weak dollar headfake has ended and overnight the USD rallied, while Asian stocks dropped to the lowest level in 7 weeks and crude oil fell as speculation returned that the Federal Reserve will raise interest rates as early as next month. The pound jumped and European stocks gained thanks to a weaker EUR.

The World's Cheapest (& Most Expensive) Places To Sin

While Draghi and his co-conspirators hammer the deflation ogre in Sendai, there is some good news for those who partake of 'sin'. Broadly speaking the cost of beer-and-cigarettes (what Deutsche Bank defines as 'sin') has dropped notably over the past two years with prices in Moscow and Stockholm plunging the most (while Madrid and Mumbai have risen the most). However, those looking for the cheapest way to maintain their bad habits should head to Manila in the Philippines (and avoid Melbourne, Australia).

Can Russia Survive Washington's Attack?

Neither Russia nor China seek conflict. It is a gratuitous and reckless act for Washington to send the message to Russia and China that they must choose vassalage or war.

The Mother Of All Head & Shoulder Patterns Just Completed The Right Shoulder

China was, in essence, the right shoulder to the greatest head and shoulder pattern in the history of mankind.  Central banks and federal governments will do everything in their power to maintain the present system.  They will attempt anything and likely everything to maintain what ultimately cannot be maintained.  Unfortunately, no one knows how much is too much and the economic, financial, and societal ramifications.  Invest accordingly?!?

Satellite Image Reveals 1.2 Mile Oil Slick At Location Of Possible EgyptAir Crash

Tthe European Space Agency says one of its satellites has spotted a possible oil slick in the same area of the Mediterranean Sea where EgyptAir Flight 804 disappeared. The agency said its Sentinel-1A radar satellite detected the 2 kilometer- (1.2 mile-) long slick about 40 kilometers (25 miles) southeast of the plane's last known location. It gave the coordinates as 33 32' N / 29 13' E.