It looks like China's economy lost a bit of momentum in July

• David Scutt, Business Insider Australia

• 7h
• 351

A man speaks on a phone in front of a stall on November 20, 2008 in Shanghai, China. China Photos/Getty Images

China’s economy continued to perform strongly in July, continuing the theme seen in the first half of the year.

According to China’s National Bureau of Statistics (NBS), the nation’s manufacturing Purchasing Manager’s Index (PMI) came in at 51.4 in July, moderating slightly on the 51.7 level previously reported in June.

It also missed market expectations for a smaller decline to 51.6.

The PMI measures changes in activity levels across China’s manufacturing sector from one month to the next. Anything above 50 signals that activity levels are improving while a reading below suggests they’re deteriorating. The distance away from 50 indicates how quickly activity levels are expanding or contracting.

So at 51.4, that means that activity levels across the sector improved at a slower pace than June.Business Insider Australia

The NBS said that production subindex eased to 53.5, down from 54.4 in June, while new orders and new export orders — indicators on domestic and external demand and lead indicators for activity levels in the months ahead — also grew at a slower pace than June.

The new orders subindex fell to 52.8 from 53.1 while the new export orders subindex dropped to 50.9 from 52.0.

That indicates that both domestic and international demand softened slightly in July, an outcome that will no doubt be watched closely in the months ahead.

Despite that softening, expectations for operating conditions in the period ahead soared to 59.1, leaving it sitting at the highest level since February this year.

By size of manufacturer, the NBS said that larger firms reported stronger activity levels, masking renewed weakness for small and mid-sized firms.

The subindex for larger firms rose by 0.2 points to 52.9, while those for small and mid-tier manufacturers fell by 0.9 points and 1.2 points to 49.6 and 48.9 respectively.

Akin to the headline PMI figure, a reading below 50 indicates that activity levels deteriorated from a month earlier.

As was seen in the manufacturing PMI report, the separate non-manufacturing PMI released by the NBS also improved at a slower pace than June.

It fell to 54.5, down from 54.9 in July.

This PMI measures the performance of other sectors in the Chinese economy such as services and construction.

As seen in the chart below, these sectors of the economy have consistently outperformed China’s manufacturing sector over the past five years.China non manufacturing PMI July 2017.Business Insider Australia

The NBS said that individual subindices for air transport, postal services, telecommunications, information technology and construction all came in above 60 for July, indicating that activity levels improved at a rapid pace.

That helped to offset sub-50 readings from the nation’s road transport industry, real estate and residential services sectors.

The weakness in the latter two subindices suggests that attempts from Chinese policymakers to cool China’s red-hot east coast housing market are having some success, mirroring the slowdown in house prices seen in recent months.

The NBS said that new orders and new exports orders both grew in July from the levels of a month earlier, hinting that conditions across the nation’s non-manufacturing sectors are likely to remain strong in the period ahead.

There has been little market reaction to both PMI reports, with the underlying themes from both largely unchanged from those seen in the first half of the year.

Read the original article on Business Insider Australia. Copyright 2017. Follow Business Insider Australia on Twitter.

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Wall Street is sending huge warning signs for stocks

• Joe Ciolli
 

• Jul. 30, 2017, 6:02 AM
• 53,381
 

Wall Street strategists and hedges funds alike are sounding the alarm on unstable conditions brewing under the surface of the US stock market. Wikimedia Commons

To a growing chorus of strategists and investors across Wall Street, the stock market looks like it's headed for a rude awakening.

Their mounting pessimism comes at a time when US equities are looking healthy, at least on the surface. Major indexes are hovering near record highs they reached this past week, while corporate earnings are growing at a blistering pace.

Yet some market experts think this apparent strength is just masking deeper problems brewing under the surface.

Count Marko Kolanovic, JPMorgan's global head of quantitative and derivatives strategy, as one of those stressing caution. In a client note on Thursday, he said that record-low volatilityshould "give pause to equity managers." Kolanovic even went as far as to compare the strategies that are suppressing price swings to the conditions leading up to the 1987 stock market crash.

"The fact that we had many volatility cycles since 1983, and are now at all-time lows in volatility, indicates that we may be very close to the turning point," he said.

A sudden move down in US stocks on Thursday — including a notably outsized loss in tech — was widely attributed to Kolanovic's note, highlighting just how seriously many investors have started taking such warnings.

The VIX — or stock market fear gauge — hit a record intraday low last week. Markets Insider

His consternation extends into the hedge fund world, where investment managers are also crying foul about low volatility to anyone that will listen.

Baupost Group, a $30 billion fund, recently highlighted the lack of price swings as a harbinger of pain to come, calling it a possible "accelerant for the next financial crisis." Meanwhile, Highfields Capital Management, which oversees $13 billion, said this past week that low volatility is giving people the false impression that the market is risk-free.

Going beyond the much-maligned low-volatility environment, Bank of America Merrill Lynch has its own reasons for expecting an upcoming rough patch in stocks — one it sees coming sometime this autumn.

Michael Hartnett, the chief investment strategist of BAML Global Research, points to how the S&P 500 has continued climbing to new highs, even as the size of the Federal Reserve's balance sheet has stayed relatively unchanged. He says this divergence is a "classic euphoria signal." Such overexuberance has historically been a sign that investment sentiment is overextended.

BAML says the S&P 500 outpacing the Fed's balance sheet is a "classic euphoria signal." Bank of America Merrill Lynch

Legendary investor Byron Wien, who currently serves as vice chairman of Blackstone's private wealth solutions group, agrees with BAML. He sees the stock market outpacing the Fed's balance sheet as problematic and called the development "disturbing" in a July 26 client note.

BAML also points to record low private client cash levels as a sign that the stock market may be close to maxing out. With investors looking fully invested, there's limited dry powder for them to put to work in the market, should they feel inclined to add to positions.

And, perhaps most importantly to BAML's call for a market top this autumn, a proprietary indicator maintained by the firm sits on the brink of reaching a sell signal. It's put together a list of things that need to happen for the market to peak in August:

• The dollar index falls to 90, coinciding with "unambiguous" US labor/consumer weakness (non-farm payrolls lower than 100,000) and a flatter yield curve
• The end of high-yield leadership, which "should be an early warning system"
• Fatigue in equity growth leadership, in areas like the Nasdaq Internet Index, emerging markets Internet, and semiconductors

But, amid the growing pessimism, there are still strategists on Wall Street who see the S&P 500 hanging in there, at least through the end of 2017. A survey of 20 chief equity strategists conducted by Bloomberg shows an average year-end forecast of 2,439, basically unchanged from Friday's close.

So while it's anyone's guess what will transpire in the coming months, it's good to at least be aware of the cracks forming in the market's foundation. And don't say you weren't warned.

Get the latest Bank of America stock price here.

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America – A Nation of Debt Slaves - BILL BONNER

America – A Nation of Debt Slaves

JULY 28, 2017BILL BONNERBILL BONNER'S DIARY

POITOU, FRANCE – Today, we wrap up another week.

The Senate failed again to pass even a “skinny” repeal of Obamacare (which left most of the program in place… and most people subject to its quack finance) after three senators defected.

The new White House communications director, Anthony “The Mooch” Scaramucci, called President Trump’s chief of staff, Reince Priebus, a “paranoid schizophrenic.”

He also said he would “fire everybody” in the communications office, adding that some of the reporting on the infighting going on at 1600 Pennsylvania Ave. offended him “as a Roman Catholic.”

President Trump banned transgenders from the military, saying their medical costs were too high.

The Republican-controlled House passed a bill – with only three brave votes to the contrary – calling for Russia to bend over so it could be properly canned.

This punishment was called for, it said, in response to two offenses. First, because Russia tampered with U.S. elections (unproven and probably untrue). Second, because Russia meddled in Ukraine, thus interfering with U.S. meddling in the Ukraine.

Finally, Fed Chief Janet Yellen said she was still thinking about getting monetary policy back to normal, implying there may be another rate hike coming in December… or maybe not.

—

Business as Usual

In other words, business as usual.

The White House is apparently at war with itself…

There is no hope of reining in domestic spending because the Republicans are also at war with themselves and with the White House…

And the only thing that Democrats and Republicans are not at war about is that Putin is a devil, and we should be at war with him, too!

But amid the bombast and concussion grenades, there was one thing the president did that seems worthy of praise. He said the U.S. would cease supporting rebel groups in Syria.

This immediately drew fire from the mainstream media (particularly Amazon CEO Jeff Bezos’ Washington Post) for playing into Putin’s hands.

The stock market seems to take the headlines as we do: with the calm of a dead man (for more, see today’s Market Insight). Stocks rose again yesterday.

No matter how preposterous or clownish Washington becomes, it doesn’t seem to cause much worry on Wall Street. The fix is in. It is business as usual… and the big money knows it.

Central bankers in Europe, Japan, China, and Britain are putting cash in front of them. And the Fed has their backs. What could go wrong?

But since this is Friday, and the end of the world is coming, we are in a light-hearted mood.

—

Internal War

Here at the Diary, the only thing we know about federally controlled medical spending is that if we were in charge, there wouldn’t be any.

And the only thing we know about foreign policy is that there shouldn’t be any.

Our worldview is simple: If it is a win-win deal, people get what they’ve got coming; who are we to question it?

If it is a win-lose deal, we want nothing to do with it unless, of course, we are on the winning side. Trouble is, with the feds and their cronies, we are always among the losers.

Governments have always made win-lose wars with one another.

It is a way for the elites to increase their power, status, and wealth… at the expense of the foot soldiers and ordinary civilians who pay for it, one way or another.

In the salad days of the Roman Empire, for example, the military crushed its foreign adversaries, bringing loot and slaves back to Rome.

The generals and elite got rich… putting the slaves to work on their plantations.

But the ordinary citizen couldn’t compete with slave labor. Soon, he had to sell his family and himself into slavery, too, just to survive.

A country that makes war on others soon makes war on itself. You can quote us on that.

After Caesar, elite Romans were soon battling with other elite Romans for control of the system… imposing even more suffering on average citizens.

Today, the ordinary U.S. citizen enjoys the circus in Washington… but he sells himself into debt slavery just to maintain his standard of living. He gets student loans to get through college, believing this will increase his income later on.

Then, with no ready cash available, he must get credit cards, auto loans, and housing loans to finance his adult life.

Now, his debt is higher than ever. He is doomed to a life of debt service payments, cradle to grave.

—

Shackled to Debt

And while he is borrowing to support himself, his government is borrowing, too – in his name…

In 1971, when the present fake-money system was put in place, total U.S. government debt was less than $400 billion.

It didn’t hit $1 trillion until the first year of the Reagan administration, 10 years later. By the end of the George W. Bush years, in 2008, it reached $10 trillion.

Now, at $20 trillion, it is pretty obvious where this leads. The line curves upward… empires of debt or of conquest creak and grow old… then the system breaks down.

The cause of this debt explosion is the aforementioned unwillingness of any administration since the 1960s to get control of either foreign policy spending (military spending mostly) or domestic spending (various forms of entitlement bamboozles now dominated by Obamacare).

Both are win-lose deals. Specific people, industries, and lobbyists benefit. The public pays (usually not even realizing how).

Debt grows. And the typical citizen shackles himself to it. He cannot revolt. He can scarcely complain, lest his access to easy-money debt finance be taken away.

He no longer wants the feds to “balance the budget.” He wants the government to go deeper into debt so it can provide him with more free pills and crosswalk guards.

He no longer wants to balance his own budget, either; he wants more credit at a lower cost.

As for the Fed returning to “normal,” if he knew what was involved, it would be the last thing he’d want.

One for the history books.

Regards,

Bill