Markit

Frontrunning: March 21

  • Oil Drops With Emerging-Market Currencies on Rig Recovery Signs (BBG)
  • A plea for help - How China asked the Fed for its stock crash play book (Reuters)
  • Obama to meet Raul Castro on historic Cuba trip (Reuters)
  • Wall Street's Pile of Unwanted Treasuries Exposes Market Cracks (BBG)
  • Dimon's Timing Looks Savvier by the Day as Equities Rebound (BBG)

Brazil In "Dire Straits" As PMI Crashes To Record Lows

“The Brazilian economic downturn took a real turn for the worse in February," according to Markit's Composite PMI, which collapsed to record lows at 39.0. Despite a slightly less bad than expected GDP print this morning (stil down a record 5.89% YoY), hope was quickly extinguished as PMIs showed economic activity continuing to contract at a record pace, job losses accelerating, and manufacturing's collapse accelerating. As Market sums up, "With the global economy also showing signs of slowing, which will impact on external demand, it looks as if the downturn is set to continue to run its course in the coming months."

"Worse May Be To Come" As US Services Slump Into Contraction, Business Confidence At Record Lows

From the narrative-destroying 49.8 preliminary print for US Services PMI (the lowest since the government shutdown in 2013), today's final February Services PMI printed an even worse 49.7 (below 50.0 expectations) even as stocks have soared in the last 2 weeks. Business confidence tumbles to its lowest since Aug 2010 (record lows). This drops the composite PMI to a dismal 50.0, implying negative GDP growth in Q1. Then ISM Services printed 53.4 (down from January but a small beat) to 2 year lows, confirming the decoupling from manufacturing's demise was a fallacy (merely a lagged response) as the last leg of the economic recovery's stool gets kicked away.

Asian Surge Continues As Rally Stalls In Europe; S&P Futures Unchanged

While Asian stocks continued their longest rally since August overnight, led higher for the third consecutive day on the back of Japan (+1.3%), Australia (+1.2%) and China (+0.4%) strength, European stocks have as of this moment halted their longest rally since October (Stoxx -0.1%) and U.S. index futures are little changed. Oil slipped from an eight-week high despite yesterday's massive rise in US oil inventories on hopes Saudi Arabia may be forced to cut production as its budget strains grow actue and the kingdom is forced to seek a $10 billion loan, its first material borrowing in a decade.

Furious Rally Fizzles Overnight As Futures Follow Oil Lower

Following yesterday's torrid 2.4% March opening rally, which resulted in the biggest S&P gain since January and the best first day of March in history on what was initially seen as very bad news, and then reinterpreted as great news, overnight futures have taken a breather, and erased a modest overnight continuation rally to track the price of oil lower.

China's Mass Unemployment Wave Begins: Six Million Workers To Get Pink Slips

Today, Reuters finally peels away the first layer of just how bad China's mass layoff wave will be when it reports that China aims to lay off 5-6 million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution. As Reuters adds, "China's leadership, obsessed with maintaining stability and making sure redundancies do not lead to unrest, will spend nearly 150 billion yuan ($23 billion) to cover layoffs in just the coal and steel sectors in the next 2-3 years."

Global Manufacturing Rolling Over: Over 70% Of Global PMIs Decline In February

28 regions have reported their global manufacturing PMI surveys so far. Seven saw improvements in their manufacturing sectors in February, twenty recorded a weakening, and India was unchanged. This means that over 70% of the world saw manufacturing sentiment deteriorate in February compared to January.

Growing "Signs Of Distress" In US Manufacturing Data Demolish Decoupling Dream

Following the weakness in global PMIs, and yesterday's Chicago PMI collapse, US Markit Manufacturing PMI dropped to cycle lows at 51.3 from 52.5 (very slightly better than expectations of 51.2) with job growth at 5-month lows, production at slowest in 28 months, and work backlogs tumbling to the lowest since Sept 2009. Then ISM Manufacturing hit, hovering at its weakest in 7 years rose modestly to 49.5 but remains in contraction for the 5th month in a row (longest streak since 2009). As Markit concludes, "the February data add to signs of distress in the US manufacturing economy."

Stocks Squeeze Higher On "Super Tuesday" As Poor Macro Is Offset By Jack Lew's Soothing Words

With markets happy to put February in the history books because it marked the fourth consecutive monthly decline in global stocks, we move on to March 1st, which doubles down as 'Super Tuesday' in the US when Trump's presidential candidacy will almost certainly be sealed and a day in which stocks decided to join the super fun by super surging overnight on nothing but bad global macro and economic which however was promptly ignored and instead the focus was on ongoing central bank intervention and even more jawboning.

China PMIs Plunge, Economists Demand Stimulus To "Prevent Economy Falling Off A Cliff"

"The index readings for all key categories including output, new orders and employment signalled that conditions worsened, in line with signs that the economy’s road to stability remains bumpy...The government needs to press ahead with reforms, while adopting moderate stimulus policies and strengthening support of the economy in other ways to prevent it from falling off a cliff.

And Now We Have A Services Recession: Markit Services PMI Crashes Into Contraction

Following this week's ongoing demise of the US manufacturing sector, tumbling to its weakest since October 2012, Markit US Services PMI collapsed into contraction at 49.8, massively below expectations of 53.5. This is the weakest level for the last pillar standing in the US recovery since the government shutdown in 2013, and as Markit even admits, "slumping business confidence and an increased downturn in order book backlogs suggest there’s worse to come."

The Selling Is Back: S&P Futures Tumble Below 1,900; Sterling Crashes, Gold Soars

On Monday, everyone was giddy that the rally is back on. Less than two days later, the dour fatalism of some HFT algo stop hunting price action and a few comments by the Saudi oil minister, and the markets have remember than nothing has changed and that nothing has been fixed. But at least the biggest shorts squeeze in 5 years is finally over.