Brazil

Several months ago activist Nelson Peltz may lost his proxy fight against DuPont, but in retrospect he may be counting his lucky stars as moments ago the company became only the latest chemical giant to admit the gruesome reality of the global economic slump driven by a historic USD surge, when it not only cut its second half operating EPS from $0.75 to $0.40, in the process also slashing full year operating EPS from a prior guidance of $3.10 to just $2.75 mostly blaming Brazil, but in an even bigger shocker also reported that its CEO and Chairman Ellen Kullman is retiring from the company effective October 16.

On the heels of China's, Japan's, Brazil's, and Europe's Services PMI weakness (and US Manufacturing PMI and ISM weakness), Markit's US Services PMI printed 55.1 (missing exectations of 55.6) and dropping to its lowest since June. This catch-down to Manufacturing weakness suggests the mid-year bounce is well and truly dead as even Markit admits, "it remains unclear as to whether growth will weaken further as we move into Q4." Additionally, after its exuberant spike to 10 year highs in July, ISM Services continued to drop back (to 56.9 missing expectations) with the biggest collapse in New Orders since Lehman.

"The impotence of monetary policy in boosting growth and staving off deflationary pressures has become painfully apparent, especially when it is acting in isolation and when a large number of countries are resorting to the same limited playbook."

"Australia has benefited from China’s growth over the past decades, but has become a less diversified and commodity dependent economy in the process. It is now exposed to China’s slowdown, and may be unable to re-engineer itself quickly enough to avoid the end of the commodity super-cycle. The worst is yet to come, in our view."

"It is not a problem of liquidity, but of fundamentals"...

The signs of deflation are now flashing all over the globe and the possibility of an associated financial crisis is now dangerously high over the next few months. Our preferred model for how things are going to unfold follows the Ka-Poom! Theory, which states that this epic debt bubble will ultimately burst first by deflation (the "Ka!") before then exploding (the "Poom!") in hyperinflation due to additional massive money printing efforts by frightened global central bankers acting in unison. First an inwards collapse, then an outwards explosion.

If you think it’s bad now, just wait until November. If AKP doesn’t secure an absolute majority there’s no telling how Erdogan will react and if Ankara moves to nullify yet another democratic election by intentionally stirring up the PKK, you can expect outright chaos.

With the fiscal picture looking increasingly precarious and confidence collapsing, we bring you the latest from the frontlines of the EM meltdown. In short, Brazil is falling apart at the seams. Now, who wants tickets to the 2016 Olympic Games in Rio?

• Asia shares rally, but on track for worst quarterly loss in four years (Reuters)
• Global Rally Shows Relief at End of $11 Trillion Stocks Meltdown (BBG)
• Glencore Extends Rebound as Turmoil Shows Signs of Easing (BBG)
• Putin wins parliamentary backing for air strikes in Syria (Reuters)
• China Cuts Minimum Home Down Payment for First-Time Buyers (BBG)
• German Unemployment Unexpectedly Rises in Sign of Economic Risks (BBG)
• Japan Industrial Output Slide Hints at Recession (WSJ)

Obama’s speech at The UN made clear that Washington accepts no responsibility for the destruction of the lives and prospects of millions of Muslims. The refugees from Washington’s wars who are overflowing Europe are the fault of Assad, Obama declared. Obama’s claim to represent "international norms" was an assertion of US hegemony, and was recognized as such by the General Assembly. The presidents of Russia, China, and Iran did not accept Washington’s definition of "international norms." The lines are drawn. Unless the American people come to their senses and expel the Washington warmongers, war is our future.

“The king is not in a stable condition and in reality the son of the king [Mohammed bin Salman] is ruling the kingdom,” the prince said. “So four or possibly five of my uncles will meet soon to discuss the letters. They are making a plan with a lot of nephews and that will open the door. A lot of the second generation is very anxious.”

In the wake of the global commodities rout which recently saw prices touch their lowest levels of the 21st century, there’s been no shortage of commentary (here or otherwise) on the pain that’s been inflicted on commodity currencies and by extension, on EM. As it stands, the world’s emerging economies face a kind of perfect storm triggered by a combination of the following factors: falling commodity prices, depressed Chinese demand, and the threat of an imminent Fed hike. With the situation deteriorating virtually by the day, we thought it an opportune time to highlight the spike in EM credit risk...

"It was our Black Monday. The big question is when will they come back, because managers have been really quite reliant on Sama for business in recent years."