It is becoming increasingly clear that April was the peak in economic activities more or less on a global basis.
Manufacturing continues to come off from the very high levels, but I expect it to remain in expansionary territory.
The effect of strong yen has been palpable on the Japanese economy. And the currency has only been stronger since. I expect this to cause further drag on the economy. I have liked long Dax vs short Nikkei or Topix for couple months now and this remains to be my favorite idea.
On the commodities side, I am more bearish oil than copper for two reasons:
Staggeringly high oil and refined products inventory in US
Relatively more robust economic picture in China vs rest of the world (this probably should be investigated more thoroughly to confirm) whose economy has more impact on copper than oil.
Japan’s Q2 disappoints hugely
• Particularly concerning is weakening exports no doubt fueled by strong yen.
• Consumption remains stagnant. As I have been saying we are seeing slowing consumption everywhere in the world.
• The economy could face a critical test in coming months, analysts said, as existing shopping incentives and other stimulus programs expire, removing what has been a crucial crutch. Meanwhile, the strong yen could put further pressure on Japan's key exporters, which are less competitive in other markets when the currency rises.
US empire state manufacturing index comes in lukewarm
• The top-line index rose slightly, to 7.1 in August from 5.1 in July, but that's still down considerably from June's 19.6 reading and a cyclical high of 31.9 recorded in April. Above zero indicates growth (think of the 50 level for PMI).
• Particularly troubling is the new orders component (generally regarded as a good leading indicator) fell below zero (contraction territory) for the first time in more than a year. It plunged 13 points all the way down to -2.7.
Russian industrial production sluggish in July
• Russian industrial production grew at its slowest rate in 8-months amid weeks of record-high temperatures, data from the Federal Statistics Service showed Monday.
• Output rose 5.9% year-on-year last month, its slowest expansion since November and sharply down from a 9.7% increase in June.
• The biggest slowdowns were seen in manufacturing, which fell 0.4% on-month as some factories in central Russia shut down or announced reduced work weeks due to the extreme heat.
Russia to consider the fate of grain export ban
• Russia plans to discuss after Oct. 1 whether to extend a grain export ban into next year, First Deputy Prime Minister Viktor Zubkov told Reuters, after a severe drought ruined vast tracts of the country's grain crop.
• The ban comes into force on Sunday and is due to last until Dec. 31, a move designed to restrain domestic food prices because of the worst drought in more than a century -- which has also caused forest fires and left Moscow blanketed in smoke.
Notable events tomorrow:
• Aug RBA board minutes
• UK CPI and RPI
• US PPI
• US July Industrial production
• US July capacity utilization
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