Greetings,
With Markit releasing the February flash PMI reports, let's look at the global manufacturing trends. It's not a pretty picture.
1. Japan's flash PMI is at an 8-month low as manufacturing stalls.
Source: @MarkitEconomics
Source: @MarkitEconomics, h/t Jake
2. In the Eurozone the PMI report shows German manufacturing sector no longer growing.
Source: Investing.com
In aggregate the Eurozone PMI also declined more than expected.
Source: FT
3. According to Markit, US manufacturing is still expanding (slightly) but Markit is quickly catching up to the ISM measures (discussed previously).
Here are the US manufacturing PMI sub-indices for output and employment.
Source: Markit
Turning to China, the latest economic signals remain poor.
1. The MNI China Business Sentiment weakens again.
2. Moreover according to Bloomberg, a private survey index called Minxin shows there may still be significant near-term downside risks to China's growth.
Source: Bloomberg.com
Source: @vexmark, @business
In other China-related developments, the RMB forwards rose on bets that the PBoC may push the yuan higher prior to the G-20 Shanghai meeting. It's "window dressing" time.
Source: @Schuldensuehner, h/t Jake
Here is one reason why we've seen the Baltic Dry index collapse recently. The bulk shipping capacity doubled since 2007 with the expectations of China's continuing demand for iron ore.
Source: @vexmark
The Chinese banking system growth in recent years has been spectacular. What happens to the economy when banks' balance sheets can no longer support such growth as bad loan volume rises further?
Source: @valuewalk, Barclays
Related to the above, Singapore's current deflation has been the longest in recent history, with the latest decline worse than expected.
Source: Investing.com
India's corporate sector earnings sentiment (EPS upgrades - downgrades for MSCI India) is the worst since 2008-09. Analysts are anticipating a significant slowdown.
Source: @vikramreuters
Here are the latest export trends for select Asian economies.
Source: @ericbeebo, h/t Jake
When it rains it pours for HSBC, as the bank struggles with its EM-heavy balance sheet and other issues.
Source: NY Times
Source: Bloomberg.com
Speaking of emerging markets, Brazil's shares have outperformed sharply on Monday as investors look for value there.
Source: Ycharts.com
The strong yen continues to be a problem for Japan's shares. The BoJ seems uneasy with further massive monetary expansion experiments (which have been ineffective). Negative rates seems to be the next phase of BoJ's program.
Source: barchart (chart shows the number of yen one dollar buys => the lower the number, the stronger the yen)
Here is the 1-month yen LIBOR - going into negative territory.
As an aside, here is the latest Google Trends search frequency for the term "negative rates".
Source: Google
Now let's look at a couple of developments in Europe.
1. Following up on the negative rates craze (above), here is what the situation looks like in the Eruzone.
Source: @business
An here are the trends in the forward overnight rates as we approach another potential rate cut by the ECB.
Source: @CapEconEurope
2. The British pound hit the lowest level since 2009 on Brexit (UK exit from EU) fears.
Source: barchart
This has been the largest drop for the pound since the UK elections in 2010.
Source: @ReutersJamie
The British pound implied volatility shot up in response.
Source: @paul_dobson, @business
And of course we look at our handy Google Trends search frequency for the word "Brexit".
Source: Google
3. The next chart shows the Swiss National Bank's currency holdings, which are mostly euro. Some in Switzerland remain uneasy with such massive euro holdings by their central bank.
Now we revisit the energy markets where crude oil shot up some 6% on the day (chart below shows Monday NY open).
Source: Investing.com
What caused that jump? Supposedly it was the latest IEA projection for the non-OPEC (particularly US) crude production. Before the Non-OPEC producers ramp up, they will undergo a material contraction, driven mostly by the US. That near-term dip got the markets excited.
Source: @SoberLook
Here is what the projection looks like for the OPEC producers.
Source: @SoberLook
According to the IEA, crude oil market will be under-supplied by 2018.
Source: IEA
Staying with commodities, iron ore just went "vertical". This has been a total surprise for many analysts. Is China overproducing steel again? How much of this is driven by short-covering in the face of China's fiscal stimulus?
Source: barchart
Metals & mining shares now outperform the S&P500 over the past 3 months.
Source: Ycharts.com
For those who like technical analysis, below is a nice triangle forming in gold. By the way, a fundamental explanation of these is a compression in volatility often "uncoiling" into a large move.
Source: barchart
Below is one explanation for some of the ugly corrections we saw this year in leading US internet shares. They were part of the "hedge fund hotel", with hedge funds running highly concentrated portfolios. This didn't end well when some were forced to capitulate.
Source: @NickatFP, GS
Source: @NickatFP, GS
Finally, here are some of the reasons hedge funds were shutting down in 2015. More to come this year?
Source: @Preqin
Turning to Food for Thought, we have 5 items this morning:
1. Fewer labor strikes in the US. Notice the dip in 2009.
Source: @BLS_gov
2. Education is not nearly as helpful for the poor (FPL = Federal Poverty Level).
Source: brookings.edu, h/t Jake
3. Fiber optic penetration in the US is relatively small.
Source: Business Insider, @MattGarrett3
4. With Jeb Bush dropping out, which GOP candidate should expect an increase in support?
Source: @nytimes, h/t Jake
5. As fuel prices fell, so did the funding for electric vehicle development.
Source: @echasan, @BloombergBrief, h/t Jake
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