The Daily Shot And Data - March 1, 2016

Let us begin with China where the PBoC cut the reserve requirement (RRR) for banks as it tries to stabilize growth.

Source: TradingEconomics

More easing in the near-term is likely as economic reports from China remain poor.

1. The official manufacturing and non-manufacturing PMI measures (released this morning for February) are trending lower.

Source: TradingEconomics

2. Similarly, the China Caixin PMI (private report) was also terrible (note that PMI < 50 means contraction).

Source: Markit/Caixin

One item of note in this latest report is more job cuts. Beijing is not going to tolerate this and further stimulus spending to cushion the slowdown is likely.

Continuing with Emerging markets, ...

1. Modi’s government sticks to its fiscal deficit targets, sending Indian bond yields lower and the rupee higher.

2. Colombia’s unemployment rate jumps as weak commodity prices take their toll.

3. Nigeria's foreign exchange reserves are the lowest in over a decade. Capital outflows have been costly.

Now on to Japan where we focus on a number of trends.

1. Japan's labor shortages worsen as jobs per applicant continue to rise.

2. There is evidence that the Japanese have shifted some funds abroad to escape negative rates. So far it's not enough to weaken the yen.

3. Japanese firms are hoarding cash.

Source: @onlyanna100, h/t Josh

4. Here is what happened with Japan's interbank lending since the introduction of negative rates.

Source: @martin_whetton, h/t Josh

Australian manufacturing activity surprised to the upside and is now the strongest it has been since 2010. The weakness in the Australian dollar is helping,

Source: ‏TradingEconomics

Switching to the Eurozone, the area's CPI missed economists' forecasts. Draghi has to be readying a "bazooka" stimulus increase.

Here is a comparison with the United States - the contrast that was mentioned yesterday.

Source: @jsblokland

Related to the above, Italy has its first negative CPI print in a year.

Here are a number of other trends in the Eurozone.

1. The area's bond yields continue to decline in preparation for the ECB action. Below are the French and German 5yr bond yields hitting new lows (excuse the different time scale).

In fact, here is some history of the French government's issuance of the 12-month bills. Amazing.

2. Related to the above, the September Euribor contract is at new highs (way above par), pricing in deeper negative rates in the Eurozone.

Source: barchart

3. Spain's current account surplus hits another record.

4. Ireland's retail sales are up 10% from last year. Given all the trade with the UK, will the recent EUR/GBP rally have an adverse effect?

Source: barchart

5. Some European exporters must be excited to see the euro decline sharply against. the yen recently.

Source: Investing.com

6. Eurozone's inflation expectations continue to fall, with the 5Y5Y forward inflation swap hitting record lows.

Source: @MxSba

Elsewhere in Europe we have the following developments.

1. The Swiss 30y government bond yield hits record low; is the whole yield cure going into the red?

2. Swedish economic growth accelerates with the central bank providing unprecedented stimulus. There is no deflation in Sweden and some are suggesting that staying out of the Eurozone has a great deal to do with the nation's economic success.

3. Consumer credit in the UK grows at pre-recession rates as housing-related credit expansion continues. Did someone say "pressure on the banking system"? So far, there is little evidence of that.

Speaking of the banking system and with all the focus on large banks, it's the smaller ones in the US that are rapidly ramping up balance sheets.

Source: @AmbroseEP

And public bank shares are still underperforming sharply - both in the US and in Europe.

Source: Ycharts.com

Elsewhere in the US we are following these trends:

1. The Chicago Fed PMI (Midwest manufacturing indicator) came in below consensus.

Source: ‏Investing.com

Combining all the regional PMI reports does not bode well for the national ISM PMI index - the most important measure of US manufacturing activity.

Source: @Not_Jim_Cramer

2. Pending home sales fell 2.5% - driven mostly by higher prices (remember housing prices growing faster than wages?) and low inventories.

h/t @DianaOlick

3. Texas manufacturing activity contracts again (index < 0 means contraction)

Source: Dallas Fed

Here is the current activity index for Texas manufacturing. Some may remember silly remarks by analysts (a year ago) suggesting that energy is only a part of Texas' "diversified" economy.

To make matters worse, US natural gas fell some 6% since yesterday - dipping below $1.7/mmbtu. Note that we haven't seen prices this low since the 1990s.

In US credit and equity markets we see HY corporate bonds all of a sudden sharply outperform the S&P500 over the past couple of days. Capital is returning to leverage finance markets - for now.

Source: ‏Ycharts.com

Small caps also outperformed over the past week.

Source: ‏Ycharts.com

Oh Valeant ...

Source: NY Times

Source: Google

Finally, it turns out that Google search frequency for “mortgage refinance” correlates well with the MBA mortgage refi index. Is the latest MBA refi activity overstated?