Greetings,

We begin with several updates on the United States.

1. The ADP private payrolls report beat consensus, suggesting that the 175k nonfarm payrolls number expected on Friday is realistic.

However, June ADP report also showed the first decline in private construction jobs since 2010.

Moreover, the "goods-producing" sector payrolls have declined sharply. 

Related to the chart above, the ADP report showed manufacturing jobs getting whacked.

Source: ADP

Separately, here is an update on the help wanted online (HWOL) index discussed yesterday. A Daily Shot reader pointed out a Fed paper which discusses the key reason for the decline in online job postings - and it has little to do with the jobs market. It turns out that a significant portion of this decrease is due to Craigslist jacking up its prices to advertise job openings.

Source: FRB, @slapdash__ 

2. Some wonder why US productivity growth has been so weak. Here is part of the answer: soft and declining Capex.

Source: @jpmorganfunds, @MarathonWealth

And here is what happens when you have fewer workers plus poor productivity growth.

Source: @jpmorganfunds, @MarathonWealth​

3. US 10-yr real rate just went negative while the 5-yr rate moved to the lowest level since 2013. This trend tells us that the "effective" monetary policy in the US is quite accommodative.

4. The 30y treasury yield hit another record low.

By the way, below are US bond yields going back to 1800. Nominal rates have never been as low as they are now.

Source: ‏@MatthewPhillips

5. Related to the above, according to Freddie Mac, US mortgage rates are approaching all-time lows (about 10bp away).

Source: freddiemac.com

6. The FOMC minutes mention the word "uncertain" more than ever. And this is before the EU Referendum vote.

Source: ‏@NickatFP, Rosenberg

7. Here is a good history of US economic expansions.

Source: @jpmorganfunds, @MarathonWealth​

1. Turning to the UK, the nation's consumer confidence crashes after the referendum vote.

 

Source: WSJ

2. UK house price appreciation slowed some in June but is still incredibly strong. What happens in July?

3. The 10yr gilts were auctioned off at a record low yield as demand for this paper spiked.

4. This last item probably belongs in the Food for Thought section, but at the risk of being bombarded with angry emails, let's include it here. This is the Leave/Remain vote vs. the "English" identity.

Source: @MatthewPhillips, @simonjhix

1. Now on to the Eurozone, where German industrial output showed a surprise 1.3% decline. This is not what economists had been expecting.

2. French 10yr government bond was auctioned off at 16 basis points.

Next, we focus on a few developments in the European financial sector.

1. While some European bank shares have stabilized (for now), weakness in the sector persists. Here is a European financials' ETF.

Source: Google

2. Financials is one of the reasons for this spectacular divergence between the STOXX600 vs. the S&P500 indices.

Source: Stockcharts.com

3. The divergence also exists in credit (CDS spreads show below), with US banks remaining resilient.

Source: @Schuldensuehner

4. Since we are on the topic of European banks, it's time for our daily Deutsche Bank share decline update. This is extraordinary - maybe it's time for a bounce?

Source: Google

Moreover, Deutsche Bank's CoCos are under pressure again.

Source: @lisaabramowicz1 

5. A German bank is about to fail.

Source: ‏@fastFT

6. And in Italy, Banca Monte dei Paschi di Siena shares hit a new low.

Source: Google

8. Some in the Eurozone are calling for a more active bailout effort.

Source: WSJ

9. As discussed before, the risk is that all this pressure on the banking sector could cause a credit contraction in the Eurozone.

Source: @Schuldensuehner, Deutsche Bank

10. While this is not necessarily an indication of risk, here is the percentage of revenues generated by banks in the UK (many of these businesses can be moved to other locations).

Source: @pdacosta

Elsewhere in Europe, the Swiss 10yr bond yield drops below -0.6%. 

Over the years, the Swiss National Bank bought billions worth of US public companies, supposedly based on some mysterious "equity index".

Source: @FTMarkets 

1. We now switch to China, where the Wealth Management Products (WMP) asset/liability mismatch remains a major issue. People often forget that the mechanics behind the failure of major US broker/dealers in 08 was their inability to roll short-term debt.

Source: ‏@TomOrlik

Source: ‏@TomOrlik

Banks are able to offer WMP rates that are substantially above cash rates by taking credit risk and more importantly rollover risk.

Source: Macquarie

2. In part related to the above, here are private credit balances: China vs. other emerging economies.

Source: ‏@jpmorganfunds, @MarathonWealth

3. After a great start of the year, home sales in China seem to be slowing.

Source: Macquarie

4. China's FX reserves unexpectedly rose. Part of the reason is that domestic firms stopped paying down their dollar debt. Several other potential reasons exist as well.

 

Source: ‏@SvendsenAnders

2. As discussed before, commodity volumes at China's futures exchanges spike again.

Source: @vexmark, @business

1. In other Emerging markets, Temasek assets decline for the first time since 2009.

Source:  CNBC

Source: Temasek​

Continuing with Singapore, the nation's currency has been strengthening on a trade-weighted basis. This trend is hurting exports and putting pressure on the central bank to ease.

2. Serbian central bank unexpectedly cut rates to record lows on Brexit concerns.

3. Chilean copper exports (dollar-equivalent) continue to decline.

4. The Brazilian real is down some 4% this month vs. USD - the longest decline since February.

New Zealand's rapid house price appreciation may prevent the RBNZ from cutting rates further in the near-term. The kiwi dollar rallies.

Source: qv.co.nz

Source: @barchart

Globally, here is a good illustration of central banks' policy stance.

Source: @JohnKicklighter 

---

Sovereign downgrades by rating agencies continue.

Source: @FTMarkets

1. Next, we look at commodities, where soy futures are down 11% over the past 5 days.

Source: @barchart

2. Copper was punished this week. 

Source: @barchart

3. As US grains take a beating, John Deere shares come under pressure. John Deere Financial's agricultural loan exposure is at 83.3%.

Source: @barchart

Source: Ycharts.com, h/t @slapdash__

1. In the energy markets, US gasoline inventory draw was much weaker than expected.

Crude oil inventory decline missed as well.

Crude oil tumbled in response to the above report.

And gasoline futures were down over 6% on the day.

2. With gasoline markets oversupplied, refiners turn to diesel where margins are now better.

Source: @A_Riley17, @BloombergBrief

3. US transport of crude oil by rail declines as imports become cheaper (CBR = "crude by rail").

Source: @EIAgov

Source: @EIAgov

4. A great deal of fracking equipment in the US is now idle. 

Source: @pdacosta, WSJ

5. Improved technology is helping fracking firms extend the life of crude oil wells.

Source: Reuters, @merrillmatter, @JKempEnergy

Source: Reuters, @merrillmatter, @JKempEnergy

Finally, let's look at a few other markets.

1. This is the S&P Puerto Rico Muni Bond Index. What default?

Source: S&P, @DividendMaster

2. Is it time for US REITs to take a breather?

Source: Ycharts.com

3. Bitcoin is under pressure - down 8%+ on Thursday.

Source: bitcoincharts.com

4. This is how US IPOs traded relative to target prices (by quarter).

Source:  ‏@FactSet

5. Private equity deal flow remains soft.

Source: @theleadleft, @PitchBook, @garrettjblack

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

1. UK jobs by industry since 1841.

Source:  @EconBizFin, @JmBadalamenti

2. Bloomberg asks "Who needs retirement? Almost 20% of Americans 65 and older are now working".

Source: ‏@business

3. According to the WSJ, "paid interns get more job offers and higher salaries than their unpaid peers". Selection bias?

Source: ‏‏@WSJCentralBanks

4. According to Pew, US "political independents outnumber Democrats or Republicans".

Source: @RuthIgielnik,  ‏@JmBadalamenti

5. It’s incredibly difficult to lose weight through exercise alone.

Source: ‏@voxdotcom, @JmBadalamenti