If there was some hope that that today's Fed rate cut would mark the bottom of the global economic slowdown and serve as the basis for even a modest recovery - after all, even Powell admitted that after this, nothing less than a full blown economic shitstorm would force the Fed to cut more - then Beijing promptly crapped all over any such optimism, when it reported that its latest official PMIs for the month of October not only missed by a mile, but were two of the worst prints since the financial crisis.
Early on Thursday, China's National Bureau of Statistics reported that in October, China's manufacturing PMI slumped deeper into contraction, dropping from 49.8 to 49.3, not only below the 49.8 consensus estimate, but also below the lowest sellside estimate (the range was 49.5-50.5). Worse, the Non-manufacturing PMI, which many had ignored for months because it was so deeply into expansionary territory, tumbled sharply, and after its biggest drop in almost a year, dipped to 52.8 from 53.6, and is now just shy of the lowest print since the financial crisis.
It gets even worse: whereas the contraction for large cap companies was modest, at just 49.9, down from 50.8, mid cap companies were worse, at 49.0, while small caps were dismal, at a paltry 47.9, down from 48.8.
Broken down by components, almost every index posted a decline, with the exception of the worst one, employment, which posted a modest increase:
- Production 50.8, down from 52.3
- New Orders 49.6, down from 50.5
- Employment 47.3, up from 47.0
The above means that not only is the trade war with the US continuing to take its toll on China, but as long as Beijing refuses to spark a massive credit injection spree, which rebooted the global economy after the financial crisis, after the European sovereign debt crisis, and again after the Shanghai Accord...
... then the Fed's hopes that its "insurance cuts" will amount to anything, will soon be drowned in the chaos of another global recession, but not before the Fed first cuts rates back to zero first, and then negative.