Month: July 2018

Via Disobedient Media

In a new development that will shock no one, factions within the CIA attempted for the second time in just over a month to undermine President Trump’s peace overtures towards North Korea by leaking information calculated to decrease confidence in Kim Jong Un’s willingness to earnestly negotiate.

On June 29, 2018, NBC News released a report quoting anonymous CIA officials who claimed that North Korea was increasing nuclear production at “secret sites” without providing any actual evidence for such claims. The report’s credibility is further weakened by the fact that it also cited reports from a think tank which has strong connections to the defense industry and other private special interests.

In disseminating their report, the CIA used NBC reporter Ken Dilanian as an outlet for leaks. As Disobedient Media previously reported, Dilanian was outed by the Intercept in 2014 as a CIA asset. In the aftermath of the disclosure, Dilanian’s previous employers at the Tribune Washington and Los Angeles Times disavowed the disgraced journalist. In at least one instance, the CIA’s instructions to Dilanian appears to have led to significant changes in a story that was eventually published in the Los Angeles Times.

Since that time, Dilanian has persisted in pushing articles written by former CIA officials who continue to perpetuate the “Trump-Russia” collusion narrative without any regard to facts, such as Steven Hall’s Washington Post article titled: “I was in the CIA. We wouldn’t trust a country whose leader did what Trump did.”

In the absence of hard evidence from the CIA to back their claims about North Korea, Dilanian cited the opinion of Clinton administration official Joel Wit and reports from 38north.org. 38north is a project run by the Henry L. Stimson Center. The Stimson Center’s Board of Directors includes individuals associated with organizations such as Northrop Grumman, the Boeing Company, Warburg Pincus, the Carnegie Endowment, Mercy Corps, The Council on Foreign Relations, the Department of Defense, the CIA and US Department of the Treasury. Their Partners include the George C. Marshall Foundation, Saudi Arabia’s Gulf Research Center and the Jinnah Institute.

Satellite images circulated by 38north claiming to show improvements to North Korea’s Yongbyon Nuclear Scientific Research Center appear to have been obtained from Airbus Defense and Space SAS, a subsidiary of European multinational conglomerate Airbus Group SE. Airbus was the brainchild of Germany’s DaimlerChrysler Aerospace and British Aerospace. The association of a German connected transnational group in efforts to undermine Korean peace negotiations is interesting given the strong connections they held with the now scandalized South Korean government of Park Geun-hye.

The involvement of a think tank in a website that is centered around undermining US confidence in North Korea is hardly a surprise given their connections to the military-industrial complex and internationalist special interest groups. Both Northrop Grumman and Boeing have seen their stock’s value drop in the aftermath of Trump’s Singapore meeting with Kim Jong Un in what analysts saw as a temporary setback to defense stocks. Seeing such corporations use their ties to institutions such as the Stimson Center to collaborate with the CIA in an effort to scuttle commitments to North Korean denuclearization and a peace accord between the Koreas and United States represents a new low.

Despite the best efforts of the CIA, President Trump has stated that there is no current nuclear threat from North Korea, and that the Singapore Summit represented a positive interaction with the leader of the so-called “hermit kingdom.” Trump has repeatedly highlighted the opportunity for Chairman Kim to engage with the world and begin a new era of “security and prosperity” for North Korea. North Korea destroyed portions of their test site at Punggye-ri before a group of foreign journalist observers in the lead up to the US-North Korea summit on June 12.

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While demand for US Treasurys remains brisk at primary auctions (if more questionable in the secondary market where we recently learned that Russia dumped half of its Treasury holdings, or almost $50BN, in April), the same can hardly be said for the short-end of the market, where moments ago we saw what happens to auction demand in a time of rapidly rising rates.

As shown in the chart below, while the yield on 3 Month Bills auctioned off today came in largely as expected at 1.940%, the demand did not, and after an already depressed Bid to Cover of 2.89 last week, today’s 3M auction suffered from one of the lowest demands on record, tumbling to just 2.62, with $125.88BN in bids tendered for $48BN in paper, down sharply from $138.87BN on June 25. In context, this was the lowest Bid To Cover inthe past ten years, and one would have to go back all the way to the post-Lehman days of 2008 to find a lower BTC.

And with both T-Bill issuance continuing to surge, and rates rising, two things are certain: not only will the Libor-OIS spread resume blowing out amid the continued surge in short-term supply and increasingly tighter financial conditions, but demand will continue slide, although the good news is that we are still well off from the record lows, in which auctions were only 2.0x covered at the start of the century. That said, who knows: perhaps the break in the bond market will begin with a failed Bill auction as the US Treasury finds it increasingly difficult to roll over short-term debt.

What we do know is that today’s sloppy 3-Month auction follows an equally ugly 6-Month Bill sale on June 18, when it took saw the second lowest BTC print this decade. The result: two unexpectedly ugly Bill auctions two weeks apart from each other as demand for cash-equivalents suddenly flees.

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Having surged as much as 7% pre-market – despite missing its deadline for the milestone of producing 5,000 Model 3 cars in a week – it appears the humans have now read the reports (rather than the machines), and Tesla’s stock price is tumbling…

Well that escalated quickly…

“I think we just became a real car company,” Musk wrote earlier.

And judging by Tesla’s bonds, it has a long way to go…

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Authored by Mike Shedlock via MishTalk,

Juan Cole claims Turkey, Iraq, and China will defy Trump sanctions. But saying and doing are two different things.

Juan Cole, Informed Comment, says Turkey, Iraq and China defy Trump on new Iran Sanctions, Act to Hold Tehran Harmless.

Let me first point out the EU said the same thing, but it won’t.

China might, but how does that get goods to Iran?

Iraq by itself is meaningless. It would also imply cooperation between Iraq and Iran.

India is more interesting. The Financial Tribune reported India to Revive Rupee Payment for Iran Oil Imports. That is from the First Iranian English Economic Daily, but the headline rings true. I do not doubt it a bit. Here are some interesting snips:

India is looking to revive a rupee trade mechanism to settle part of its oil payments to Iran, fearing foreign channels to pay Tehran might choke under pressure from US sanctions, two government sources said.

During a previous round of sanctions, India devised a barter-like scheme acceptable to Washington to allow it to make some oil payments to Tehran in rupees through a small state bank.

Iran used the funds to import goods from India, Reuters reported. “We are looking at reviving rupee mechanism … We have to prepare ourselves,” one of the sources told Reuters, adding that the current payment mechanism might not work from November.

Refiners in India currently use State Bank of India and Germany-based Europaeisch-Iranische Handelsbank AG to buy Iranian oil in euros, according to IOC and other companies.

Oil Trades Directly in Euros

Read that last line carefully. Please note that Iranian oil trades directly in euros, not dollars.

India purchased oil both in Rupees and in euros, directly from Iran.

No one needs dollars to buy oil.

Is this hash settled once and for all? Unfortunately, no. Petrodollar conspiracy proponents will never stop making idiotic claims that people get sucked into.

With that, let’s move on.

India Preparing for Cut in Oil Imports from Iran

Reuters reports India Preparing for Cut in Oil Imports from Iran.

India’s oil ministry has asked refiners to prepare for a ‘drastic reduction or zero’ imports of Iranian oil from November, two industry sources said, the first sign that New Delhi is responding to a push by the United States to cut trade ties with Iran.

India has said it does not recognise unilateral restrictions imposed by the United States, and instead follows U.N. sanctions. But the industry sources said India, the biggest buyer of Iranian oil after China, will be forced to take action to protect its exposure to the U.S. financial system.

India’s oil ministry held a meeting with refiners on Thursday, urging them to scout for alternatives to Iranian oil, the sources said.

That is the difference between saying and doing. It is entirely believable that India will establish another Rupee exchange mechanism. However, it appears unlikely India will use it.

Let’s return to Juan Cole.

Turkey, Iraq and China defy Trump on New Iran Sanctions

​The Trump administration is unlikely to have the same success in getting other countries to boycott Iranian petroleum as did the Obama administration in 2012-2015, though its officials are making a full court press in that regard.

Proof came in the form of statements from the Turkish, Iraqi and Chinese governments yesterday. Turkish Economy Minister Nihat Zeybekci was scathing on Trump’s aggressive moves against Iran. Turkey, he said, is not bound by the new US sanctions, which are unilateral. Reuters reports him saying in Ankara, “The decisions that the United States makes are not binding on us. We would be bound by any decisions taken by the United Nations.”

Then Zeybekci, who is certainly speaking for newly reelected Turkish president Tayyip Erdogan, put the sting in the tail: “We will try to pay attention so that Iran, which is a friend and brother country, doesn’t experience injustice or is wronged in these matters.”

Turkey isn’t just not cooperating with Washington on this issue, it is actively defying Trump and Pompeo and promising to run interference for Iran. This stance comes despite the conflict in Syria between Turkey and Iran, where they took opposite sides (though that conflict is winding down and likely few would make policy just on that basis anyway).

Iraq also says that the change in Washington policy toward Iran will not affect its plans for economic cooperation with Tehran. The logistics of oil transport are such that it makes sense for Iraq to send Kirkuk oil to a refinery in Kermanshah for Iranian consumers, and to accept refined Iranian petroleum into south Iraq at the other end of the country.

Russia had plans to invest $50 bn. in the Iranian hydrocarbon sector, and while some of those plans may now be shelved, Washington should not count on much cooperation from Vladimir Putin, who has an active battlefield alliance with Iran in Syria.

Most important of all, China’s massive Sinopec oil company says it needs Iranian oil for its new provincial refineries and has no plans to cut back.

​Saying vs. Doing

Can we accept the headline as fact? The correct answer is no.

India and the EU said they would defy sanctions, then backed down.

Is it possible?

Yes. Turkey holds a lot of cards.

Synopsis

Turkey, in and of itself, is not a major global player. But Turkey has a critical land connection to both Iran and the EU.

If the US sanctioned Turkey it could take over US military bases or deny US air rights. Sanctioning Turkey would also drive the country straight into the arms of Russia.

And unless Trump sanctioned Turkey, the country could get goods easily through Greece or Bulgaria and pass them straight to Iran. This would be a huge boon to a country struggling financially with massive inflation.

If Turkey allows goods into Iran, would Trump bomb either country? That seems highly doubtful.

It only takes one major country to stand up to Trump for this whole thing to collapse or backfire spectacularly.

China is a huge global player, but China has no means of getting goods to Iran. Iran would have Yuan, but what would it do with them?

Domino Effect

If Turkey does go ahead with this threat, might not India, Russia, and Georgia join the party?

Yes, perhaps. Trump would have to then sanction India, China, Turkey, Russia, and Georgia.

You can see where this is headed. But, it has to start somewhere. As I said, saying and doing are different matters.

I cannot stand Turkish president Recep Tayyip Erdoğan, but he could do the whole world a big favor by standing up to Trump.

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The offshore Yuan just crashed to its weakest against the greenback in 11 months.

The pace of the devaluation is suddenly accelerating (today is the biggest drop in the Yuan in 5 months), with Yuan testing 6.70…

For context this means that ALL US exports to China are now 7.4% more expensive than they were in Q1 – that’s quite a blanket tariff.

And as we noted previously, before this is dismissed as just the mirror of USD strength, we suggest the following chart shows very clearly the PBOC allowing the Yuan to weaken notably against just the dollar while – until the last few week – maintaining Yuan’s buying power against the rest of the world.

Additionally, as Capital Economics points out, if the PBOC is using the exchange rate to fight back against the US, it is pulling its punches: the PBOC’s daily reference exchange rate has in the past few days been stronger than market rates might have suggested, not weaker.

It is of course still notable that the PBOC has done relatively little to stand in the way of the currency slide, even if it isn’t directly responsible for it. It always argues that the exchange rate is driven by market forces.

But its tolerance will probably only go so far, given the painful experiences of 2015 and 2016: any benefit to exporters would be swamped if depreciation triggered economic and financial instability.

Still, as a wise market participant noted, while all the bellicose language is coming from Trump, perhaps the biggest factor right now is that Beijing has “weaponized” the Yuan…

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With the US set to roll out new tariffs on China this Friday, hitting $34BN in Chinese imports with a 25% tax, any hopes that Trump’s trade war with China is “reversible” and mostly rhetorical, are quietly fading away. On Sunday, Morgan Stanley underscored just this point, saying that “the US and its key economic partners now view trade differently: One party’s in-kind response is the other’s escalation” and added that “This is what a vicious cycle looks like.”

MS also said that with Congress unlikely to step in due to a rise in popular support for Trump’s strategy, “a near-term ‘circuit breaker’ to trade escalation is more likely to come from the scoreboard – namely, more challenged and volatile markets.“

In other words, a market crash may be need to break the regime of tit-for-tat, and looking at the sharp market drop to start the second half of the year, the market may be starting to get the message.

What about other markets, especially those in China, where the Shanghai Composite is now down 22% for the year while the Renminbi (-3.3%) just suffered its worst month since FX markets were established in China back in 1994?

According to Deutsche Bank’s Alan Ruskin – who echoes JPMorgan on the topic, here too it’s set to get worse before it gets better.

As Ruskin wrote in a note last week, anyone who has read the latest White House Office of trade and manufacturing policy report on China’s ‘economic aggression’ will understand that “the US – China relations are not going back to a ‘business as usual’ model any time soon.“

And, if he is correct, for the markets here are a few important elements to consider:

1. whereas tariffs levered against US’s traditional allies has spotty/weak support at best within Republican and Democrat parties, there is widespread bipartisan support to address China trade issues, not least as it relates to perceived intellectual property transgressions. This means the IP issue is now ‘live’ and will transcend the Trump Administration.
2. technology transfer has the potential to impact all trade and particularly FDI. There will likely be a strong interventionist approach on the US side to trade and FDI that has the potential to transfer advanced technologies that is not desirable from a national security standpoint and where protections are not enforceable/ enforced.
3. the uncertainties generated by this shift, have the potential to cool China’s role in global supply chains at least as they relate to US corporations, and encourage alternatives where IP is perceived as better protected and where the US is seen having a less ‘competitive’ strategic relationship.

Of course, if a “peaceful” resolution of trade issues does not lead to ‘business as usual’ as assumed above, then the negative response observed from China assets, and the CNY, makes sense, according to DB.

This pivots to another topical question: will China, whose currency just had its worst month in history, seek to devalue even more aggressively? As Ruskin explains, until now China has appeared to take a view that the last thing it needs is to interject CNY weakness into the equation and complicate negotiations with the US. However, the recent price action itself suggests this resolve to keep USD/CNY stable is weakening.

And while this may be a response to the US’s tougher trade stance, it is probably better ascribed to the increased market pressures for CNY weakness.

Making matters worse for China is that Beijing now has no choice but to ease conditions as a result of a slump in the economy, not so much retaliation for US-specific trade overtures. However, to Trump it won’t matter what caused it.

Indeed, the relationship whereby USD/CNY has followed reserve requirements (as per the chart above) is likely to hold as a broader directive on CNY trends, especially with chatter of more RRR reductions to come.

And although RRR cuts should in theory not negatively impact the currency as much as rate cuts, RRR changes have historically impacted the currency more in China because:

1. RRR is used as a more active liquidity tool than most parts of the world;
2. it does provide a strong directive on the policy bias; and
3. the broader policy bias logically gets directly reflected in the official currency bias.

Finally, as the Yuan continues to sink, here is a trade idea from Ruskin who recently noted that USDCNY vol looked under priced, adding that “the 6m straddle breakeven straddles are indicated at 6.46 to 6.75.”

The market is taking a view that China will make sure that USD/CNY is not going to intercede in ongoing negotiations with the US that will straddle the Congressional mid-term elections. However, for a currency pair that has moved from 6.38 to 6.65 since mid-June, vol still looks extraordinary low.

In short, the market still does not appear to have taken on board the likely persistence in shifting US – China relations; nor, the more troubling prospect that divergent US and China policy will engender its own volatility, resulting in a positive feedback loop that only accelerates this divergence. And for those who are leery of shorting US stocks, or the SHCOMP on fears of government intervention, the best bet may be to go long Yuan volatility which according to DB, is assured to rise as the trade was and policy divergence accelerates.

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As we hit the mid-point for the year, leaving behind a half most would rather forget and looking forward to a half in which central bank QT is about to really pick up, DB’s Jim Reid writes that markets spent most of the month of June flip-flopping between constantly evolving trade-war related headlines, as well as digesting the diverging path of a more hawkish than expected Fed versus a more dovish than expected ECB following their respective policy meetings.

So when it was all said and done, while the majority of assets ended the month with a negative total return (24 out of 39 in local currency terms and 26 out of 39 in dollar terms), the heaviest falls were reserved for EM assets in particular.

EM equities bore the brunt of this with the Shanghai Comp (-7.3%) officially falling into a bear market and falling by the most in a month since January 2016. The Bovespa (-5.2%) was also sharply lower while EM equities more broadly suffered a -4.1% fall. EM bonds were also hit to the tune of -2.8% despite Treasuries (0.0%) actually finishing unchanged. The other big fallers in June were soft commodities including Corn (-11.1%) and Wheat (-5.5%) as well as metals like Copper (-3.7%), Gold (-3.5%) and Silver (-1.9%).

Meanwhile, at the top of the leaderboard the clear winner in June was WTI Oil (+10.6%) which benefited from the latest  OPEC decision to only gently reintroduce supply back into the market.

Meanwhile core equity markets largely chopped and changed around the trade headlines. The S&P 500 finished the month +0.6% and Stoxx 600 -0.6%, however the more export sensitive DAX was hit to the tune of -2.4%. European Banks (-0.6%) also continued to slide, not helped by the dovish ECB outcome while the relative outperformers last month was actually the periphery with the IBEX (+2.5%), Portugal General (+1.5%) and Greek Athex (+1.1%) all ending higher.

As for bond markets, Bunds (+0.1%) were similarly muted last month after yields did something of a u-turn post the ECB meeting. Spanish Bonds (+1.4%) and BTPs (+1.5%) were firmer while Gilts (-0.6%) suffered a negative total return. The end result for credit however was a broadly softer picture. In Europe only Senior Financials (+0.1%) delivered a positive return, with Non-Fins (-0.1%), HY (-0.5%) and Sub Financials (-0.5%) all weaker. In contrast, US HY (+0.4%) was the relative outperformer across the pond, while IG Corps delivered a -0.5% return.

The above is summarized in the June performance charts below.

Stepping back from June, and focusing on Q2 more broadly, the picture looks slightly weaker according to Deutsche. In local currency terms, 16 assets finished in positive territory versus 23 in negative. However the stronger USD (+5.2% versus the Euro, +4.0% versus the Yen and +5.8% versus Sterling) means that the picture is more stark in dollar adjusted terms with only 9 assets returning a positive total return, versus 30 delivering a negative return. In terms of standouts, the combination of Italy woes in May and a dovish ECB, trade war headlines and EM pain in June means the FTSE MIB (-1.7%), European Banks (-5.2%), EM Equities (-7.9%) and Shanghai Comp (-9.1%) are amongst the biggest equity market fallers in Q2. The S&P 500 (+3.4%) and Stoxx 600 (+4.3%) on the other hand delivered solid single digit returns. BTPs (-5.1%) were unsurprisingly the biggest bond market underperformer while Bunds (+1.3%) and Treasuries (+0.1%) were fairly muted. Meanwhile credit, with the exception of US HY (+1.4%), was weaker across the board with European indices returning -0.1% to -2.0% (higher beta underperforming) and US indices -0.4% to -1.6%. Brent (+16.7%) and WTI Oil (+14.2%) were the big winners in Q2.

Finally, for the first half of the year through June we’re now at 15 assets in positive territory in local currency terms but just 8 in dollar terms. WTI (+22.7%) and Brent (+22.3%) also top this leaderboard while at the other end the Shanghai Comp (-12.9%), Copper (-10.6%), European Banks (-9.8%) and EM Equities (-6.6%) have been the big underperformers.

The S&P 500 is sitting with a +2.6% total return which is ahead of the vast majority of core equity markets, while the Stoxx 600 (+0.1%) is more or less unchanged (although -2.6% in dollar terms). Bunds (+1.6%) have outperformed Treasuries (-1.1%) so far while in credit US HY (+0.3%) is the only positive returner

Source: Deutsche Bank

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More than a week after President Trump threatened to slap a 20% tariff on auto imports from the European Union, Brussels has issued a written warning to the US Department of Commerce with a threat of its own: If the Trump administration moves ahead with the auto tariffs, the bureaucrats in Brussels won’t hesitate to respond with tariffs on $300 billion in US goods, according to the Financial Times. The threat comes as Trump doubled-down on his trade threats in an interview with Fox Business’s Maria Bartiromo that aired Sunday morning, where Trump criticized the EU’s $151 billion trade surplus. Trump initially threatened to impose the 20% tariffs if the EU doesn’t eliminate trade barriers to US automotive imports.

Based on the Tariffs and Trade Barriers long placed on the U.S. & its great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!

— Donald J. Trump (@realDonaldTrump) June 23, 2018

The warning marked the first time that Brussels has filed a written submission with the Commerce Department, which is presently considering Section 232 auto tariffs. In the letter, which was obtained by the FT,   Brussels warned that Trump’s threatened auto tariffs would risk sparking a global trade war that could ultimately harm employment in the US and slice billions of dollars off US GDP. That echos a warning from GM, issued in comments to the Commerce Department’s investigation, where the carmaker said tariffs would lead to a “smaller company.”

In a sign of the EU’s exasperation at Mr Trump’s confrontational trade policy, which has already stoked tensions over steel and aluminium, the document said the move “could result in yet another disregard of international law” by the US. It said imposing the car tariffs would not be accepted by the international community and would “damage further the reputation” of the US.

A trade group representing global automakers recently warned that Trump’s threatened tariffs could raise prices for US consumers by up to $6,000 per car. The $300 billion figure proposed by the EU is roughly equivalent to the value of US imports of cars and parts, which reached $330 billion last year, according to the FT.

The EU also argued that the Trump administration’s national security concerns – which it has used to justify its aggressive trade policy under Section 232 of the Trade Expansion Act – has “no basis in fact.”

The EU has also firmly rejected Mr Trump’s use of national security arguments to justify restrictive trade measures, saying it has no basis in fact and risks undercutting the entire rules-based system of international trade.

This development harms trade, growth and jobs in the US and abroad, weakens the bonds with friends and allies, and shifts the attention away from the shared strategic challenges that genuinely threaten the market-based western economic model,” the document said.

The document, submitted to US authorities on Friday, marks the latest step in the EU’s campaign to get Mr Trump to step back from the brink before it is too late.

Finally, the EU devoted part of its letter to what appeared to be subtle political threats, pointing out that EU-based car companies operate plants in several Republican-dominated states across the Southern US, meaning that Trump voters would likely absorb the brunt of the EU’s retaliation. The implication is clear: it’d be a shame if something were to happen to those jobs. But even if the EU chose not to retaliate, the tariffs threatened by Trump would still harm the US by knocking $14 billion off of US GDP due to “market fragmentation.”

The commission document said that, according to its “internal analysis” and other expert studies, the tariffs would be an “own goal” for the US economy even before other economies retaliated. The interconnectedness of the car industry, and its high degree of regional specialisation, mean that imposing additional 25 per cent tariffs on imports would cause a hit to US gross domestic product “in the order of” $13bn-$14bn, according to the document.

The paper, submitted by the EU’s representation in Washington, also underlines that EU-owned car companies account for more than a quarter of US car production, with plants “across the country, including in South Carolina, Alabama, Mississippi and Tennessee” — all strongly Republican states — and that the majority of this production was for export.

EU Commission President Jean-Claude Juncker will have a chance to follow up on these threats in person when he travels to Washington later this month. And EU officials have said they will take part in a two-day Department of Commerce hearing set to begin July 19. 

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Following disappointing prints in European PMIs and contraction in Brazil, US Manufacturing PMI also slipped to the lowest since February with optimism at the lowest since January; BUT ISM exploded to its highest since Feb.

• Manufacturing PMI dropped from 56.4 to 55.4 (4-month lows) but better than 54.6 expectation.

• ISM Manufacturing spiked from 58.7 to 60.2 (4-month highs) above all economists’ expectations.

Under the hood, it’s stagflation red flags as the PMI showed output growth slowing, new order growth at the weakest since Nov 17, but factory gate prices spiked at the second-fastest pace since June 2011.

For ISM, prices paid dropped very modestly from multi-decade highs and new orders slipped.

ISM’s Fiore notes that Factories “are overwhelmingly concerned” about Trump tariffs.

Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The PMI for June rounds off the best quarter for manufacturing for almost four years, but also fires some warning shots about what lies ahead. As such, the second quarter could represent a peak in the production cycle.

“The survey has a good track record of accurately anticipating changes in the official manufacturing output data, and suggests the goods-producing sector is growing at an annualised rate of around 2.5%.

“On the downside, new orders inflows were the weakest for seven months, with rising domestic demand countered by a drop in export sales for the first time since July of last year.

“Business optimism about the year ahead also fell to the lowest since January, with survey respondents worried in particular about the potential impact of trade wars and tariffs.

“Tariffs were widely blamed on a further marked rise in input costs, and also linked to worsening supply chain delays – which hit the highest on record, exacerbating existing tight supply conditions.”

And as far as the global synchronous recovery narrative, that’s over…

Just this morning, Brazil joined Russia, Turkey, Malaysia, and South Korea in ‘contractionary’ sub-50 territory according to Markit’s PMI, as we additionally point out that South Korean exports fell 0.1% YoY in June…

Historically a big red flashing warning sign for US recession.

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