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Author byline hedcut. Newsletter by Lev Borodovsky
Twitter: @SoberLook

Table of Contents

Sep 9, 2019
•     The United States
•     Canada
•     The United Kingdom
•     The Eurozone
•     Asia – Pacific
•     China
•     Emerging Markets
•     Cryptocurrency
•     Commodities
•     Energy
•     Equities
•     Credit
•     Rates
•     Food for Thought

The United States

1. Let’s start with Friday’s jobs report. While the headline figure was below the consensus forecast, the underlying labor market trends remain strong.

• The total number of new jobs created was relatively soft, especially in the private sector (second chart).

Source: FTN Financial

There was a pickup in government jobs, which is due to the start of the 2020 census hiring (see story).

Source: @WSJ; Read full article

Source: @WSJ; Read full article

Fewer industries saw job gains.

Source: @markets; Read full article

• Factory hiring continues to slow.

Source: BofA Merrill Lynch Global Research

• Wage growth exceeded market expectations.

Here are the 3-month changes in wages (annualized).

Source: @WSJ; Read full article

However, the median wage growth across industries was a bit softer.

Source: Morgan Stanley Research

• The hours worked ticked higher last month.

• Prime-age labor force participation and the employment-to-population ratio rose sharply as higher wages encourage more workers to step off the sidelines.

Labor force participation among prime-age US women hit the highest level since 2002.

The trends in prime-age vs. total labor force participation continue to diverge.

Source: BofA Merrill Lynch Global Research

Older Americans increasingly remain in the workforce, which has kept the overall labor force participation from declining.

Source: Deutsche Bank Research

• More Americans now have a full-time and a part-time job or multiple jobs.

Source: Deutsche Bank Research

• The unemployment rate among African-Americans hit a record low (going back to the early 1970s when the Labor Department started tracking this series).

• Temp payrolls, which tend to be a leading indicator for the overall job market, jumped in August.


2. Soft headline employment figures sealed the widely expected rate cut by the Federal Reserve this month. However, the market no longer expects a 50 basis point rate reduction.

Source: Piper Jaffray

3. Higher wages are starting to pressure corporate margins.

Source: CIBC Capital Markets

4. Economic policy uncertainty remains elevated …

… and is now impacting economic sentiment.

Source: @TheEconomist; Read full article

Fed researchers are estimating that uncertainty has created a substantial drag on economic growth.

Source: @WSJ; Read full article

Here are the year-over-year changes in the Atlanta Fed’s GDPNow growth forecast.

Source: @crescatkevin——————–

5. Economists are concerned about the weakness in new factory orders.

Source: Morgan Stanley Research

Will manufacturing drag the rest of the economy down?

Source: Longview Economics——————–

6. While fiscal stimulus has been providing support for the economy, its impact is ebbing.

Source: Moody’s Analytics

Back to Index



1. The August employment report was stronger than the consensus forecast.

While the unemployment rate was unchanged, the participation rate ticked higher.

Wage growth softened in August but remains robust.


2. The Ivey PMI, which measures Canada’s business activity, picked up momentum in August.

Price pressures are easing.


3. Business confidence has diverged from consumer sentiment.

Source: Market Ethos, Richardson GMP

4. Debt levels and debt service ratios have been elevated.

Source: Market Ethos, Richardson GMP

While bank loan loss provisions have been rising, they remain steady relative to the overall loan balances.

Source: Market Ethos, Richardson GMP——————–

5. This chart compares Canadian and US recessions.

Source: CIBC Capital Markets

6. The US-Canada bond spreads have been tightening this year.

h/t Tradeweb 

Back to Index

The United Kingdom

1. The percentage of income that households spend on mortgages is the lowest in years.

Source: Longview Economics

2. Inflation expectations are grinding higher.

3. The July GDP growth exceeded forecasts. More on this tomorrow.

Back to Index


The Eurozone

1. Germany’s industrial production shows no signs of a rebound.

Source: Statistisches Bundesamt (Destatis) 

At the same time, the growth rate in German labor costs has picked up.


2. The market expects more than one rate cut from the ECB.

• Market-based rate probabilities:

Source: Scotiabank Economics

• 2-year bond yields:

Source: @financialtimes; Read full article

Economists also expect the ECB to lower its inflation forecasts. Here is an estimate from Pictet Wealth Management.

Source: Pictet Wealth Management

While we continue to hear hawkish comments from some ECB officials, market-based inflation expectations keep drifting lower.

Source: Nordea Markets——————–

3. Employment growth has been moderating.

4. The divergence between services and manufacturing PMIs (measures of business activity) has been dramatic. As Longview Economics points out, this gap is also present in the US and Japan.

Source: Longview Economics

Back to Index

Asia – Pacific

1. Here is that same PMI divergence for Japan.

Source: Longview Economics

2. Next, we have some updates on South Korea.

• The government is planning to boost fiscal stimulus.

Source: Alpine Macro

• Bond yields bounced from the recent lows.

• The won appears to be relatively cheap.

Source: Alpine Macro

And traders have been bidding up the currency over the past couple of days.

Back to Index



1. China eased its monetary policy by cutting the reserve requirement ratio (RRR) and freeing up additional bank liquidity.

Source: Scotiabank Economics

2. Exports were softer than the market was expecting.

• Here is the trade balance.

• Exports to the US are down 16% from a year ago.

• There appears to be a shift in the composition of China’s exports.

Source: IIF

Source: IIF

• Here are the trade balances with China for select economies.

Source: @bpolitics; Read full article——————–

3. Foreign reserves remain stable.

4. The NASDAQ-style ChiNext exchange index is back in bull-market territory.

5. Next, we have some updates on Hong Kong.

• Applications for visas to the UK:

Source: @WSJ; Read full article

• Visitor arrivals (down 40% from a year ago):

Back to Index

Emerging Markets

1. EM currencies are gradually recovering.

2. As expected, Russia’s central bank cut its benchmark rate again, and more easing is on the way.

Separately, Russia’s stocks appear to be cheap on a price-to-book basis.

Source: Goldman Sachs Investment Research

Also, Russian equities have not rallied in response to falling interest rates.

Source: Goldman Sachs Investment Research——————–

3. Mexico’s business investment remains soft.

4. The charts below show weakening sovereign credit for Lebanon, Oman, Bahrain, and Algeria.

Source: Credit Benchmark; Read full article

Back to Index



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