Greetings,

1. We begin with the United Kingdom where the latest Markit PMI report shows the nation's economy hitting a wall.

Source: @MarkitEconomics

2. Moreover, factory input prices seem to be rising at the fastest pace in four years (as a result of the pound devaluation). Is the UK facing stagflation?

Source: @MarkitEconomics

3. Here is the British pound's reaction to the Markit report on the UK's economy.

Source: barchart.com

4. Speculative accounts have been positioned for this move in the British pound. The question now is whether the short pound bet is becoming a crowded trade.

 

5. The August BoE rate cut expectations rose after the disastrous PMI report. Given the speculative accounts' positioning, the GBP reversal will get ugly if the BoE disappoints next month.

Source: ‏@fastFT

1. The Eurozone economy was "surprisingly resilient" to Brexit thus far, according to Markit.

Source: @MarkitEconomics

2. In particular, German private sector growth hit a year-high in July, beating forecasts.

3. Nonetheless, the ECB growth expectations for the Eurozone have been downgraded. 

Source: ‏@fastFT

Elsewhere in Europe, Iceland's disinflationary pressures seem to be back - a trend that persists in a number of European economies.

Norway's government has been tapping the nation's massive sovereign wealth fund as energy prices remain low.

Source: @acemaxx, @MorganStanley

1. Japan's June exports declined less than expected, raising some hopes for a recovery in GDP growth.

 

2. Nintendo declined 16% this morning after its comment on Pokemon Go.

Source: Bloomberg.com

Source: Google

New Zealand's 10-yr government bond yield hit another record low as global investors chase yield. New Zealand offers some of the highest nominal yields across the developed markets.

Source: Investing.com

1. Turning to emerging markets, USD/CNY is back above 6.7 (US dollar buys 6.7 yuan) as the PBoC weakens the renminbi.

Source: barchart.com

2. China's investment growth continues to be driven by the public sector and remains focused on infrastructure.

Source: Macquarie

Source: Macquarie

3. Speculative net position in the Russian ruble rose sharply last week to the levels we haven't seen since 2011. This has been a painful trade as oil prices weaken (second chart below shows the relative ruble move vs. USD in July).

 

4. Turkish shares had the worst week since the financial crisis.

Source: ‏@fastFT

5. The next set of charts shows deteriorating economic metrics in Venezuela: oil production, real GDP, inflation.

Source: Goldman Sachs

Goldman Sachs sees Venezuela running out of hard currency to cover its liabilities some time next year.

 

Source: Goldman Sachs

1. Turning to the United States, the US dollar index (DXY) continues to grind higher.

Source: ‏barchart.com

2. Despite a stronger dollar, US financial conditions have eased. The dollar rally is offset by lower rates, tighter credit spreads, and the equity market strength.

3. The ECRI US index of leading indicators hit a new multi-year high. This trend is a clear sign of a rebound in the US economy since the early part of the year.

Source: @businesscycle

4. Related to the above, the latest Markit Economics report finally strikes a positive tone on the US manufacturing sector.

Source: @MarkitEconomics

Source: ‏@MarkitEconomics

5. The last US chart shows failed recovery expectations since the Great Recession. Each yellow curve represents the markets' view of the Fed Funds rate trajectory at the time.

Source:  ‏@tracyalloway, BofAML

1. In the Funding markets, the charts below show the 1-month and the 3-month US LIBOR - both elevated. Some analysts suggest that these higher interbank rates are the result of the new money market funds regulation (raising rates on lower-rated commercial paper).

 

Source: @agurevich23

2. Similarly, shorter-term US rate swap spreads have widened, expecting higher LIBOR due to the money funds reform.

Source: ‏@MatsGlettenberg

3. At the same time, EUR/USD cross-currency basis continues to widen.

Source: @simondiamondzzz

Switching to the credit markets, here are the high yield default cycles compared to the current trend.

Source: @jsblokland, @valuewalk

2. The next chart shows the diverging cost of equity vs. debt financing which contributed to a significant divergence between bond and IPO issuance.

 

Source: Citi, h/t @stephengrocer

Now let's look at US equity markets, starting with several negative trends.

1. It seems that we are going to get another quarter of declining earnings growth - 6th in a row.

 

 

 

Source: ‏@bySamRo, @FactSet 

2. According to CNBC, "sales growth has to pick up in order to justify this level" of S&P500 valuations.

Source: @vexmark, CNBC

3. The S&P500 net speculative position is the highest we've seen in a couple of years.

Source: @DonDraperClone

4. US shares are ignoring Beijing's gradual renminbi devaluation.

Source: ‏@vexmark, Bloomberg

1. On the other hand, according to some analysts, the current equity valuations can be justified given the extremely low long-term rates. 

Source: @NickatFP, @GoldmanSachs

 

2. Similarly, extremely low inflation could justify higher share valuations.

Source:  ‏@bySamRo, Rich Bernstein 

 

3. So far, the second-quarter earnings have been better than consensus, with 77% beating expectations. 90% have raised guidance.

 Source: ‏ ‏@Callum_Thomas

Next, we look at commodities, where US soybeans futures got hammered on Friday.

Source: Investing.com

2. Similarly, the broad physical agricultural commodity prices have been under pressure.

Source: barchart.com

3. Could this create a problem for farm credit? The Creighton University index/report suggests persistent weakness in agricultural credit. The sector is quite vulnerable to further rate hikes by the Fed. 

Source: creighton.edu, @slapdash__ 

4. Related to the above, John Deere, who provides significant amounts of financing to farms (via John Deere Financial), is struggling.

Source: WQAD

Source: Google

The chart below shows net speculative positions in silver. This increasingly looks like a crowded trade.

 

In the energy markets, US oil rig count continues to rise.

NYMEX crude oil did not respond well to Friday's rig report, falling below $44/bbl.

Source: Investing.com

Turning to Food for Thought, we have 5 items today:

1. US hospital admission rate for congestive heart failure for select nations.

Source: @KaiserFamFound

2. Marriage and divorce rate trends in the US.

Source:‏ @MaxCRoser, @JustinWolfers

3. Which tech company gives out the most stock option awards to its employees as a percentage of total revenue?

Source:  ‏@PlanMaestro, WSJ

4. The healthcare sector in the US is about to become the largest employer.

Source: ‏@lcdnews

5. Has Pokemon Go "peaked"? Here are the daily US users this month (mm). The numbers are still staggering for a single game.

Source:  ‏@paul1kirby