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With Flash PMI in contraction and ISM sliding fast, expectations were for a very modest rise in both measures of manufacturing in August as ‘hard’ US macro data picked up relative to expectations.

The headline Markit Manufacturing PMI inched back into expansion with a final 50.3 print for August (after a 49.9 flash print), however, that is still the lowest since September 2009, with new export orders plunging at the fastest pace in 10 years.

The headline ISM Manufacturing plunged into contraction, printing 49.1 (well below the 51.3 expectations) to the lowest since Jan 2016 as employment and new orders (seven year low) collapsed.

Source: Bloomberg

The word “Contracting” dominates the sub-components of the ISM report… but look at the comments – this is very odd!

ISM respondents expressed slightly more concern about U.S.-China trade turbulence, but trade remains the most significant issue, indicated by the strong contraction in new export orders. Respondents continued to note supply chain adjustments as a result of moving manufacturing from China. Overall, sentiment this month declined and reached its lowest level in 2019.

“Business is starting to show signs of a broad slowdown.” (Machinery)

“While business is strong, there is an undercurrent of fear and alarm regarding the trade wars and a potential recession.” (Chemical Products)

As Bloomberg notes, the latest downturn underscores how slowing global growth and an escalating U.S. trade war with China are taking an even bigger toll on domestic producers. Although manufacturing only makes up about 11% of the economy, there are concerns that entrenched weakness – and any layoffs that may result – could filter through to the rest of the economy and endanger the record-long expansion.

Chris Williamson, Chief Business Economist at IHS Markit said:

“The August PMI indicates that US manufacturers are enduring a torrid summer, with the main survey gauge down to its lowest since the depths of the financial crisis in 2009. Output and order book indices are both among the lowest seen for a decade, indicating that manufacturing is likely to have again acted as a significant drag on the economy in the third quarter, dampening GDP growth.

“At current levels, the survey indicates that manufacturing production is falling at an annualised rate of approximately 3%.

“Deteriorating exports are the key to the downturn, with new orders from foreign markets dropping at the fastest rate since 2009. Many companies blame slower global economic growth for weakened order books, but also point the finger at rising trade war tensions and tariffs.

“Hiring has stalled as companies worry about the outlook: optimism about the year ahead is at its lowest since comparable data were first available in 2012. Similarly, price pressures are close to a three-year low, as crumbling demand has removed firms’ pricing power.”

As Rabobank comments, what is clear from both surveys is that the US manufacturing sector has come to a standstill, most likely because of the global economic slowdown and the uncertainty about international trade policy.

This was also reflected in the Q2 decline in business investment. Sufficient reason for the Fed to start cutting rates in July. And this will not be the last. As we explained previously, by taking a risk management approach to trade policy uncertainty, the Fed is amplifying the effect of trade policy on monetary policy.

All President Trump needs to do is raise tariffs or take another protectionist measure to get the Fed to cut rates further. In fact, the Fed is enabling the US administration to be tough on trade as the central bank has promised to offset any expected negative impact on the US economy by cutting rates in advance. This means that the Fed is bolstering Trump’s bargaining position in the ‘game of chicken’ between the US and China. This also makes it more likely that President Trump will continue to escalate the trade war.

And that makes it more likely that the Fed will have to make additional insurance cuts before the end of the year. Consequently, there is now a strong feedback loop between trade policy and monetary policy that will force the FOMC to make more insurance cuts in the near future, most likely in September and October.

The vicious circle this sets up does not bode well for any rational investor.

via ZeroHedge News https://ift.tt/2ZJaRVX Tyler Durden

Jean Luc Brunel, the modeling agency boss who was accused of scouting young girls for Jeffrey Epstein, has mysteriously vanished like a “ghost” as investigators search the world looking for him, according to the NY Post. 

French authorities are trying to find the 72 year old Brunel and question him over his ties to Epstein as part of an ongoing probe into Epstein, who had a house in Paris. 

A legal source in Paris said: “He is a ghost who has disappeared without a trace.”

French authorities have made inquiries in places like the U.S. and Europe, as well as Brazil, where Brunel was seen “looking for girls” just three months before Epstein was arrested. 

The legal source continued: “There is no address for him, all his internet accounts, including social media, have been wiped out. He is uncontactable.”

Brunel’s connection to the Epstein scandal had come to light in numerous court filings. Epstein had invested $1 million to help launch Brunel’s modeling firm, MC2, in return for a “supply of girls on tap” according to one lawsuit.

Brunel even allegedly sent Epstein three 12 year old girls as a birthday present one year.

One of the most well known Epstein accusers, Virginia Roberts Giuffre, alleged that Brunel “farmed out” his modeling hopefuls to Epstein that she was not only forced to have sex with Epstein, but with Brunel, too. 

In 2015, Brunel told the media: “I strongly deny having committed any illicit act or any wrongdoing in the course of my work as a scouter or model agencies manager.”

Brunel is known for discovering some very well known names in the modeling world, including Christy Turlington and Angie Everhardt, and has denied being “directly or indirectly” involved with Epstein.

via ZeroHedge News https://ift.tt/34oPCsf Tyler Durden

Authored by Richard Breslow via Bloomberg,

The Market Isn’t Ready for Back-to-School Season

Typically, with the advent of September, traders plan to come out of the blocks ready and raring to go. It’s the last obvious time to turn a new leaf and settle on the strategies that will, hopefully, see you through to year-end. There’s supposed to be an excitement in the air that is usually associated with the beginning of January. It just doesn’t feel that way this time around.

Now it may just be that investors are planning to wait for U.S. markets to open officially before there is the expected beehive of activity as new positions are put on and risk ramped up. But there isn’t that feeling of pent-up energy and traders chomping at the bit. There are a couple of reasons this year might be different.

A lot of the trades that have worked for much of the year have left people tired and distrustful, and with a sense they are overdone. Although you might be hard-pressed to find too many quantitative models that think so.

Buying global bonds at these yield levels simultaneously feels like something that must be done but just doesn’t seem right. That’s a real conundrum for those trying to contemplate how their year will end up.

The dollar trades like a champ. Now the decision has to be made whether to buy and hold it at prices that were forecast by very few analysts. Traders are getting very little solace from being told that if they liked the euro versus the dollar at 1.14, they must love it at 1.09. And, frankly, some of the obvious safe-haven trades have been running out of steam. Even as they have done nothing wrong to negate the story of why they are useful items in the best of portfolios. Patience is a virtue often in very short supply.

And equities are being very hard on those who want a clean narrative. They have serially looked really good and bad. Often in quick succession. Which should have meant they had something for everyone, but it seems like the opposite was more typically the case.

The buyers and the sellers are really just talking at cross purposes and not being successful convincing anyone to change their outlook. The jury is most definitely out on the global economy. But not on where you can get some yield.

Making none of this any easier is the long list of central bank meetings on the schedule. Unfortunately, even at this late hour, we are left debating exactly how much they will do. Let alone the fact that now, more than ever, we must consider whether the cure has become worse than the disease. It isn’t only the predictable list of hawks who are warning that enough might be enough. It’s especially concerning because the first thing any rate cuts are greeted with is calls to do more.

And we’re unlikely to get a great deal of clarification from the myriad official speakers later this week. Still, all eyes will have no choice but to be on Fed Chairman Jerome Powell when he gives the last pre-FOMC talk, shortly after the August non-farm payrolls report. Where the whisper number is looking for something on the soft side.

And, of course, the digital nature of so much of the known-unknown risks has left headline danger extreme. Trade talks, Brexit and Hong Kong are hardly localized issues that can be compartmentalized or ring-fenced.

There is a real possibility that September will look a lot more like an August than a January. That’s not necessarily a problem. It just has to be navigated accordingly. But taking a pass shouldn’t be one of the options.

via ZeroHedge News https://ift.tt/2NQp1OH Tyler Durden

US equity markets ripped higher as President Trump tweeted that “we are doing very well in our negotiations with China.”

However, they quickly puked it all back after reading his follow-up:

“While I am sure they would love to be dealing with a new administration so they could continue their practice of “ripoff USA”($600 B/year),16 months PLUS is a long time to be hemorrhaging jobs and companies on a long-shot…

…And then, think what happens to China when I win. Deal would get MUCH TOUGHER! In the meantime, China’s Supply Chain will crumble and businesses, jobs and money will be gone!”

The algos reacted instantly but gave it all back as humans realized there’s nothing new here…

But hey, Powell speaks Friday so that’s enough hope to keep on buying stocks right?

via ZeroHedge News https://ift.tt/2PTWlXZ Tyler Durden

As first unveiled on the sidelines of the recent G7 summit in France, President Macron is making a last ditch effort to create conditions to bring Tehran and Washington back to the nuclear negotiating table by offering Iran a $15 billion credit line as an incentive to come back into compliance with the nuclear deal. 

Iran’s top diplomat, FM Zarif, was said to be open to it when it was first raised in Biarritz, France over a week ago — but the plan’s progress is now conditioned on whether the White House rejects it.

Though this past week Iranian leaders again threatened to further breach uranium enrichment caps set by the 2015 JCPOA, Iran responded positively to the new trade mechanism involving the $15 billion credit line issued to the end of the year to help it conduct business.

The proposal comes after Trump at the G7 publicly expressed rare openness to sitting down with Iran, saying of Macron’s efforts to cool tensions toward dialogue, “If the circumstances were correct or right, I would certainly agree with that.” Trump cited “good feelings” about Iran and its desire to escape currently escalating tensions. 

Reuters reports an Iranian delegation is in Paris negotiating with French officials over the details which would provide immediate sanctions relief. A source privy to the negotiations told Reuters, “The question is to know whether we can reach this $15 billion) level, secondly who will finance it, and thirdly we need to get at the very least the tacit approval of the United States. We still don’t know what the U.S. position is.”

The Iranians appear to have fully endorsed the deal, with an Iranian official saying, “France has offered the credit line of $15 billion but we are still discussing it. It should be guaranteed that we will have access to this amount freely and also Iran should be able to sell its oil and have access to its money.”

“President Macron is trying hard to resolve the issue and help to save the deal … and we have overcome some issues and gaps narrowed but still there are remaining issues,” the Iranian official said further.

Trump has reportedly softened toward the idea of a special credit line or alternative mechanisms which bring Iran back in conformity with enrichment limits; however, he’s said to be firm on not walking back sanctions. 

It’s likely Washington’s decision will be known by the end of this week, given French Finance Minister Bruno Le Maire is expected in Washington Tuesday to discuss the new mechanisms. 

via ZeroHedge News https://ift.tt/2zIfWzk Tyler Durden