U.S. In For Weak GDP Growth Rate if PMI Remains at Current Levels, And China Faces Mounting Debt

While we’re pouring over today’s jobs report, cap off your Friday with a look at this week’s economic trends. The trade war and a decline in exports has led to U.S. businesses suffering “one of the toughest months since the global financial crisis” in August, says Chris Williamson, Chief Economist at IHS Markit. US PMI recorded weak expansion in August, and if it remains at its current levels, we’ll be on track for an anemic 1% annualized GDP growth rate. While yields on the two-year Treasury surged yesterday, the 30-year Treasury has our attention as its August return was the third strongest since 1988. With so much demand flowing into the long-duration market this summer, are you surprised yields weren’t weaker? And while the trade war is driving U.S. importers to look outside of China, Chinese businesses face another burden as a wave of repayment obligations approach in 2020. Could this give the U.S. a leg up in trade war negotiations when talks resume later this month?

1. Does this remind anyone of the late 1990’s?

Source: WSJ Daily Shot, as of 9/5/19

2. Will this trend hurt companies with long-term capital needs?

Source: Deutsche Bank Research, as of 9/6/19

3. Are long-duration bonds due for a pullback?

Source: Refinitiv, as of 9/6/19

4. Despite our yields plummeting across the yield curve, we still have the highest rates amongst the developed world…

Source: WSJ Daily Shot, as of 9/4/19

5. Occasionally, it is worth reading a bit. This PMI is both for services and manufacturing…

Source: IHS Markit, as of 9/6/19

6. We have been getting a few questions about the recent volatility in the markets. Here are a few examples of one of the major causes:

 Source: Bloomberg, as of 9/6/19

7. This may be why the Chinese are coming back to the negotiating table:

Source: Pictet Wealth Management, as of 9/5/19

8. Chinese companies have a lot of debt to refinance in the next three quarters. The good news is that rates are much lower…

Source: Bloomberg, as of 9/5/19

9. …the bad news is that if the loans are bad, the interest rates won’t matter much!

Source: Bloomberg, as of 9/5/19

10. Tariffs and retaliatory tariffs on steel, aluminum, cars and other components is having a significant impact on Germany…

 Source: WSJ Daily Shot, as of 9/6/19

11. Unlike much of the developed world, Germany’s conservative nature leaves them plenty of room to stimulate…

Source: Alpine Macro, as of 9/5/19

12. If the U.K. voted today on BREXIT, they would likely vote to stay!

Source: NatCen Social Research & Macrobond, as of 9/6/19