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1. We begin with the United States where economists remain puzzled over the weakness in productivity growth - the year-over-year trend is shown below. The second chart below shows growth over a 5-year period.
2. US construction spending  - which came in weaker than expected - was dragged down by sharp declines in public non-residential construction (such as educational facilities).
h/t @MattGarrett3
3. According to the Institute for Supply Management (ISM), the US manufacturing sector unexpectedly moved back into contraction mode. So let's push the dollar higher and see what happens.
Source: Institute for Supply Management (ISM)
4. Markit Economics put out a gloomy service sector report for the US, pointing to a 1% Q3 GDP growth. This result is completely inconsistent with the consensus projections as well as the Fed's nowcast models (such as GDPNow).
Source: @MarkitEconomics
5. US nominal wage growth slowed again, dipping below 2.5% per year.
6. Average weekly hours of US workers took a bit of a dip in August vs. last year.
7. The US payrolls disappointment (chart below) sent the implied probability of a September rate hike lower (second chart below). Now the chances are roughly 1 in 3.
8. The primary measure of US underemployment, which includes "marginally attached" and "employed part-time for economic reasons" workers (U-6), has stalled.
9. Long-term unemployment in the US remains stubbornly high - over 2 million people.
10. In response to some of the above reports, the Citi US Economic Surprise Index has dropped back down to zero.
11. On a positive note, US exports of goods rose in response to a softer US dollar in the first half of the year. Now that the dollar rally has resumed as a result of the recent comments from the Fed, is the trend sustainable?
1. Next, we go to the UK where economic reports continue to surprise to the upside. Here is the service sector PMI which unexpectedly returned to expansion in August.
2. The UK's manufacturing activity was also stronger than consensus.
3. Even the nation's construction activity was a bit stronger than expected (less of a contraction than forecast). However, we see further evidence (see text below) that raw materials price pressures are building.
Source: @MarkitEconomics, @cipsnews
4. Related to the above, UK's 5yr breakeven inflation expectations (based on inflation-linked gilts) continue to grind higher.
1. In the Eurozone, German services sector growth slowed more than expected. To be sure, German economy is still expanding as manufacturing activity remains robust. 
2. Eurozone's retail sales rose more than expected - by a sizeable margin.
Further Reading
French retail sales, in particular, rose sharply.  It seems that the earlier (possibly Brexit-related) consumer uncertainty has eased. 
3. Citi shows how rapidly the ECB's QE has been absorbing the supply of euro-denominated fixed income securities. The Eurozone is facing a massive shortage of quality paper. More on this tomorrow.
 Source: Citi, h/t  ‏@jessefelder
1. Turning to emerging (and emerged) markets, Poland's government bond yields rise on the looming Moody's downgrade.
2. Moving further east, the Ukrainian currency is hemorrhaging again.Apparently, last week the IMF agreed to release the desperately-needed bailout package tranche - a very welcome news indeed.
3. Russian inflation eases on stable ruble and weak domestic demand.
4. The Russian ruble net speculative positions continue to rise as funds bet on recovery in the country.
5. The Russian domestic stock market reaches historic highs. The MICEX Index is up 15% YTD (up 28% YTD in dollar terms).
6. Brazil's 2yr government bond yield dropped to lows we haven't seen in a couple of years. Dovish comments from central bank drove the decline. Moreover, the market likes the Dilma-related uncertainty coming to a close.
7. The Brazilian stock market is on fire: up 37% YTD (67% in USD terms).
8. Nonetheless, according to Markit Economics, Brazil's deep recession continues.
Source: @MarkitEconomics
9. Chile's economic activity index shows a worse-than-expected economic slowdown. The bounce we saw in 2014 turned out to be transient.
10. We have a further confirmation that Nigeria's economic activity contraction has deepened.
11. Thailand's stock market gives up some 3% - supposedly on fund selling.
Source: Bloomberg LP
1. In Japan, longer-dated JGB yields continue to rise. Note that for the current 30yr JGB, a 10bp rise in yield is equivalent to a 2.7% hit to the price. Painful.
2. Bloomberg points out that the so-called "shadow rate" (the theoretical overnight rate) is falling behind the Eurozone's equivalent. Does Kuroda need to ease further to keep up with Draghi?
Source: @business
1. Next, we look at the US funding markets where we've seen a massive rotation out of prime money market funds into treasury funds ahead of the looming regulation.
Source: @krollbondrating
2. As a result of the above, US dollar financial commercial paper outstanding has declined.
3. Separately, we see a sharp decline in retail money market fund holdings. This trend is likely to be unrelated to the new regulation. Instead, it suggests that retail investors are now coming back into the equity markets (which they exited during the sharp selloff early in the year). Perfect timing as always.
In US credit markets HY spreads are still drifting lower.
1. In the equity markets, US banking shares continue to outperform.
2. On the other hand, pharma shares are struggling. One of the reasons is the political rhetoric from Hillary Clinton on price controls.
Source: @FT
Bitcoin price popped nearly 6% over the weekend. This rally, supposedly, has to do with an increase in activity on Chinese Bitcoin exchanges.
1. in commodity markets, silver bounced 3% on the US payrolls disappointment.
2. Lead seems to be China's speculators' latest toy as prices spike. Lead is also moving higher in the spot market - supposedly related to declining production (and higher auto demand) in China.
Source: (the Shanghai Futures Exchange)
3. A similar situation has developed in zinc.
4. Declines in US cattle futures accelerate in response to market chatter of weak consumer demand.
5. In the energy markets, apparently, the Russians and the Saudis will collaborate to stabilize oil prices. Right. The chart below shows the two nations' production as they try to grab market share.
Source: ‏@Schuldensuehner, Further Reading
Finally, the "natural" interest rates (at which inflation is stable) are declining globally. This trend caps future rate hikes by central banks. Based on the chart below, the Fed is capped at roughly 2% fed funds rate (using core PCE of 1.6%). That's why rate cuts can not be the primary easing tool in the future (it won't take much to hit zero again).
Source:  @NickTimiraos
From our sponsor: 

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

1. Here is the latest RCP (poll averages) electoral map for the presidential elections in the US.
Source:,  ‏@MarathonWealth
2. The largest company in each state.
Source:  ‏@robbmccallum, @sobata416
3. Innovation centers in Europe.
Source: @wef
4. The reach of unions in the US continues to dwindle.
Source: @jensmanuel
5. A shorter commute is costly for New Yorkers.
Source: @FiveThirtyEight, @joshdigga
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