Greetings,

Let's begin with a few items on China's economy.

1. Capital Economics argues that capital outflows from China have been driven by "Chinese firms paying back external debt." Based on that assumption capital flows out of the country should be ending now.

Source: ‏@CapEconChina 

2. After a quick fiscal stimulus boost, China's excavator sales decline again. This is one of the indicators of industrial activity.

Source: Macquarie

3. China's home sales seem to be slowing.

Source: Macquarie

4. A recent study found no evidence that the RMB fixings are linked to the currency basket (CFETS) announced by Beijing in 2015. In fact, the RMB volatility against the "magic basket" has been higher than against the US dollar.

Source: Hong Kong Institute for Monetary Research

5. China's M1 vs. M2 growth divergence (broad and narrow money supply) suggests liquidity is trapped in the financial sector instead of flowing into the broader economy. One of the drivers of this trend is banks financing more of their assets via the bond market rather than with deposits.

Source: Macquarie

An indicator of the divergence above is China's banks lending to non-bank financial entities (such as WMP managers).

Source: Deutsche Bank. @IveBeenHad

1. In other emerging market news, Macau inflation rate is now the lowest since 2010. Is Macau cutting prices to bring back some of the lost business?

2. Turkey's Central Bank cuts the overnight lending rate. Again. As directed by the Erdoğan administration. 

3. Brazil inflation rate hits the lowest level in a year in mid-June as the currency weakness effects subside while domestic demand remains poor.

4. Nigeria's central bank was forced to buy naira in the market for the second day since the free-float, as bids for the currency disappeared. Liquidity remains poor.

Source: @fastFT

1. Now on to the Eurozone where banks remain exposed to their governments' debt. Part of the reason is the regulation which has no capital charges for owning your country's government bonds. Of course, this poses systemic risks, with nations' governments and the financial system's credit highly intertwined.

Source: The Telegraph

2. The ECB is ready to roll out another round of TLTRO financing for banks with very generous terms. In some instances, the ECB will pay banks to take its money for 4 years. Economists expect demand for about €50bn.  

Source: Bloomberg.com

Source: ECB

3. German economic expectations surge in June according to ZEW (beating expectations). Apparently Brexit risk is not viewed as a big deal in Germany.

4. Finland's unemployment remains stubbornly high.

Source: @tEconomics

The UK's manufacturing orders hit a 10-month high as the industrial sector picks up momentum despite the Brexit uncertainty.

Speaking of Brexit, Bitcoin enthusiasts continue to insist that these two charts (below) are unrelated - Bitcoin's sharp decline is all just due to Bitfinex exchange outage, etc. Right.

Source: @PredictIt_

Source: bitcoincharts.com

While the British pound implied volatility fell with lower Brexit probabilities, the one-week GBP/USD risk reversals remain near historical lows.

Source:  ‏@JohnKicklighter

The SNB's foreign currency holdings (mostly euro) hits another record. This has to bother some Swiss who see their central bank's largest (and growing) asset being the euro. 

Sweden's Riksbank is about to run out of bonds to purchase for further QE.

Source: ‏@anwallstrom

1. Back in the United States, many point to the weakness in the various freight indicators as a sign of an impending recession.

Source: Cass Information Systems

However, much of that weakness is due to coal.

Source: Yardeni Research

Once coal is excluded, US total carloads count is reasonable for this time of the year.

2. Janet Yellen mentioned "slow productivity" in her congressional testimony on Tuesday. Weak Capex is in part to blame for this trend.

Source: ‏@auaurelija

3. DB equates the Fed's large remittances to the Treasury (from interest income on all the bonds it holds) as "helicopter money." After all, these payments now correspond to $1k per household per year. However, there is a huge difference in the impact on economic growth between giving money to the government vs. to households. 

Source: ‏@BTabrum, Deutsche Bank

1. Switching to equity and credit markets, the Fed's latest Monetary Policy Report issued a clear warning about stocks being highly vulnerable to increases in interest rates. The central bank is uneasy with its current policy distorting asset valuations and wants to send a message to the markets.

Source: ‏federalreserve.gov

2. The US pharmaceutical industry can't catch a break amid the recent Supreme Court ruling not going its way.

AJMC: - The Supreme Court ruled to uphold a new process for challenging patents that the pharmaceutical industry was hoping would be struck down. Generic drug companies and health insurance plans supported the new rule, which could help lower prices.

Source: Ycharts.com, h/t @MattGarrett3

3. The S&P 500 dividend growth slowed materially this year.

Source: ‏@MktOutperform

4. Tesla makes a bid for SolarCity with part of the goal (supposedly) to create charging stations that use solar power. Tesla shares fell sharply in response.

Source: Google

5. US HY bonds continue to outperform the equity markets on a year-to-date basis.

Source: Ycharts.com

6. US energy sector HY default rate hits 21%.

Source:  ‏@jsblokland 

7. There is plenty of dry powder for private debt in North America. With banks out of the way in many cases, private equity firms are stepping in. The question is whether we have enough demand from quality borrowers.

 ‏Source: @theleadleft, @Preqin

In the last couple of quarters, more hedge funds have been closed down than new ones started.

Source:  ‏@NickatFP, @BloombergBrief 

1. In commodity markets, oil rallies again after bullish API data. The Nigeria rebels denying ceasefire helped as well, with the WTI front contract trading above $50/bbl.

Source: @barchart

Source: CNBC

2. On the other hand, the large numbers of "drilled but uncompleted" (DUCs) oil wells in the US creates a natural near-term cap on oil prices. If prices remain around $50/bbl many of these wells will be completed, raising US production again.

Source: @FTMarkets

3. US natural gas prices are still grinding higher.

Source: @barchart​

4. Finally, corn futures tumbled 6% on the day on improved weather conditions and better US crop outlook.

Source: @barchart​

Turning to Food for Thought, we have 5 items this morning:

1. Apparently job hopping pays. The chart below compares wage growth for those who switched jobs vs. those who didn't.

Source: @AtlantaFed, h/t @GregDaco

2. Here are the White House odds in the betting markets. This is unhealthy for the US - ideally, we should see closer odds at this juncture.

Source: @PredictWise

3. Apparently Greenland was hit with a 75°F weather - a record. The situation looks quite scary globally as well.

Source: http://thkpr.gs/3788651, h/t @MattGarrett3

4. GM and Ford make most of their profits on trucks.

Source:  ‏@PlanMaestro, Citi

5. Staying at home with the kids for a few years can be a terrible hit to the parent's earning potential.

Source: ‏@business