As PMI manufacturing surveys are released around the world, we get an early read on the state of glkobal manufacturing. As the below table shows, out of the 25 countries that have reported so far, 8 reported improvements in their manufacturing sectors in September, while 15 recorded a weakening, and 2 remained unchanged.
Today in the Land of the Free, everyone is required to pay into the Social Security system, and over 90% of students go to public schools. With the passage of the Affordable Care Act, the state is exerting its control over your medical care. And now with a new bill comes the crown jewel of state employment. Presenting Senate Bill 2726: the Strengthening Forgiveness for Public Servants Act. If passed, the bill aims to get young people into government employment by promising to forgive their student loan debt. Somewhere Otto von Bismarck is smiling.
We have the very makings of a Crash. If stocks breakdown from this line and cannot reclaim it, we could easily wipe out all of the gains going back to 2013.
- European Bond Yields Go Negative (WSJ)
- Traveler from Liberia is first Ebola patient diagnosed in U.S. (Reuters)
- Hong Kong Protesters Step up Pressure on Leung to Quit (BBG)
- JPMorgan to face U.S. class action in $10 billion MBS case (Reuters)
- Turkey mulls military action against Islamic State (Reuters)
- Singapore Home Prices Fall for Fourth Straight Quarter on Curbs (BBG)
- Italy's Economic Woes Highlight Dilemma for European Central Bank (WSJ)
- Advanced iOS virus targeting Hong Kong protestors (Reuters)
- Fed Scrutiny of Leveraged Loans Grows Along With Bubble Concern (BBG)
- Mosquito Virus That Walloped Caribbean Spreads in U.S. (BBG)
In a striking admission that Mario Draghi's "strategy" about the ECB's Private QE future, aka ABS monetization plan, is nothing short of converting Europe's central bank into a "bad bank" repository for trillions in bad and non-performing debt, the FT yesterday reported that "Mario Draghi is to push the European Central Bank to buy bundles of Greek and Cypriot bank loans with “junk” ratings, in a move that is set to exacerbate tensions between Germany and the bank." It is expected that the former Goldmanite will unveil details of a plan to buy hundreds of billions of euros’ worth of private-sector assets at tomorrow's ECB meeting.
A quick anecdote that should quickly confirm just how broken everything is: earlier today MarkIt reported European manufacturing data that was atrocious, with both German and European PMIs tumbling to levels not seen since mid-2013, and with Europe's growth dynamo now in a contraction phase clearly signalling what has been long overdue: a European triple dip recession. So what happens? Moments later Germany sells €4.1 billion in 10 Year paper at a record low yield below 1%.... even as the Bundesbank had to retain a whopping 17.84% of the auction, the highest since June, with only €4.663 Bn in bids for the €5 Bn target, the first miss since May 21. So hurray for the central banks, boo for the economy, and as for that mythical creature, once known as bond vigilantes, our condolences: good luck figuring out what the hell just happened, and good luck recalling what a free market is.
If the European triple-dip alert was barely glowing a muted red until this morning, then following the latest German PMI data, which tumbled to 49.9 from 50.3, below the 50.3 consensus, and is the first contractionary print in 15 months, then they are now screaming a bright burgundy. And while the European recession has now clearly made its way to the core, it wasn't just Germany: French PMI continued to be solidly in a contracting phase, at 48.8, unchanged from the previous month, the overall European Manufacturing PMI also missed and declined, dropping from a flash reading 50.5 to only 50.3, which was a 14 month low, with the average PMI reading for Q3 the lowest since a year ago, and as MarkIt summarized, "Eurozone manufacturing edges closer to stagnation." Have no fear, though, Mario Draghi and his monetization of Greek Junk Bonds will fix everything!
- Hong Kong protesters stockpile supplies, fear fresh police advance (Reuters)
- Protesters stay out on Hong Kong streets, defying Beijing (Reuters)
- Traders Turn Up Grilling Sausages at Hong Kong Protests (BBG)
- Ukraine Army Sees Worst Day Since Truce as Battles Flare (BBG)
- Islamic State uses grain to tighten grip in Iraq (Reuters)
- For Putin Ally, U.S. Sanctions Only Add to Anti-Russia Conspiracy Theory (WSJ)
- Coinbase Leads Move to Bring Bitcoin to Masses (BBG) - good luck
- Austria Cracks Down on Spies -- and Jihadis (BBG)
- EU Believes Apple, Fiat Tax Deals Broke Rules (WSJ); Apple’s Irish Tax Deal ‘Engineered’ to Boost Employment, EU Says (BBG)
It has been a night of relentless and pervasive disappointing economic data from just about every point on the globe: first the Chinese HSBC manufacturing data was well short of expectations (50.2 vs. Exp. 50.5), which was promptly spun as bullish and a reason for more stimulus by the PBOC even though the central bank has been constantly repeating it will not engage in western-style shotgun easing. Then Japanese wages, household spending and industrial production came in far below expectations - in fact at levels which suggest Japan is once again in a recession - which once again was spun as bullish, because the BOJ has no choice but to do more of the same failed policies that have made Abenomics the laughing stock of the world. Finally, moments ago Europe reported the lowest inflation data in 5 years, as well as core CPI sliding to just 0.7%, and which was, wait for it, immediately spun as bullish for risk as once again the local central bank would have "no choice but to ease." In other words, thank god for horrible news: because how else will the rich get even richer?
The essence of the Oil Head-Fake Dynamic is the inevitable drop in oil price resulting from a sharp decline in demand (i.e. global recession) will trigger disruption of the global oil supply chain that will eventually push prices higher than most currently think possible.
10Y yields are back below 2.50% and the entire Treasury complex is flattening (erasing post-GDP losses) as fears over Catalan independence and Hong Kong protests spark safe-haven buying around the world. Gold is up, back over $1220 (pre-GDP levels) and Bunds are well bid yet the USD is fading modestly this morning driven by EUR and JPY strength. European periperhals bond risk is on the rise and stocks are mostly lower with Germany's DAX back below its crucial 50DMA. US equity futures are all red - retracing the entire Friday mini-melt-up in the afternoon (and catching back down to credit reality).
While the bond market is still reeling from Friday's shocking Bill Gross departure, and PIMCO has already started to bleed tens of billions in redemptions (see "Billions Fly Out the Door at Pimco About $10 Billion Is Withdrawn After Departure of Gross"), stocks which may have been hoping for a peaceful weekend after Friday's ridiculous no volume ramp in the last two hours of trading, got hit by a double whammy of first Catalan independence fears rising up again after Catalan President Mas signed a decree committing Catalonia to a referendum bid on November 9th, leading to a move wider in Spanish bond yields, and second the sharpest surge in Hong Kong violence in decades, which led to a 2% drop in the Hang Seng, are now solidly lower across the board, with the DAX dropping below its 50 DMA, while US equity futures are printing about 9 points lower from Friday's close despite another epic ramp in the USDJPY which flited with 110 briefly before retracing to 109.50, and also threaten to push below the key technical support level unless the NY Fed's "Markets group" emerges out of its new Chicago digs and buys up enough E-minis to restore confidence in a rigged market.
When one of the most watched German channels - south German state TV channel ZDF - releases an 8+ minute satirical spoof of all the fabricated "news" surrounding the Ukraine "ïnvasion" by Russia and all the associated newsflow from the region (in which "any similarity to the current news is unintended and accidental, but absolutely inevitable"), you know that the time has come to double down on the propaganda effort because if ground zero of media indoctrination, Germany, is starting to see through the fog of endless media BS, then how long until the rest of the world follows?
Straight forward discussion of the key events next week. Weak on bluster. Strong on analysis. You've been warned.
Can market forces prevail in the Eurozone? With another round of central bank intervention coming four plus years after the start of the Eurozone debt crisis, this is a question worth considering, at a time when the Southern Eurozone members - Italy, Spain, Greece and Portugal, which collectively account for over 30% of the GDP of the early adopters of the Euro as a whole – continue to struggle. This is a complex topic for sure, but a simple economic indicator can be used to help frame the situation.