Deep breath please

So the ECB, BOJ, SNB, Riksbank and Danish central bank have negative interest rates but we determine that China is the currency manipulator whose onshore currency is down a whopping 2.7% this year vs the dollar. Anger and pure politics are now driving the approach towards China, certainly not economic logic. If anything, China is doing its best to keep its currency from falling further and thus manipulating it higher. Everyone needs to take a deep breath here as dealing with China is not a NY real estate negotiation where if you bang someone in the head enough they will capitulate.

Anyway, China fixed the midpoint of CNY last night below 7 at 6.9683 and that is why the yuan is rallying which in turn is helping our markets to rebound, along with Europe.

Shifting gears to some economic data, Japan said regular base pay rose .1% y/o/y, a punk figure but after 5 months in a row of declines. Worries about growth, particularly with China, has certainly limited the wage story in Japan. It’s another reason why they need as low inflation as possible in order to raise real wages. Bonus pay was higher by .9% y/o/y and maybe that is what helped household spending rise by 2.7% y/o/y in June, above the estimate of up 1.1%. Either that or consumers are buying ahead of the expected VAT hike in October.

With some market calm this morning, the yen is selling off but I want to point out the continued weakness in Japanese bank stocks in response to the further collapse in bond yields over the past few weeks. The Topix bank stock index closed today at a 3 year low as banks are being bled dry by negative rate policy.

European bank stocks yesterday also closed at a 3 yr low but are up a touch today. They are dying as well.

Factory orders in June in Germany did bounce 2.5% m/o/m after a 2% drop in May and that was better than the estimate of up .5%. The improvement was solely led by a nearly 9% rise in non eurozone orders and capital goods as opposed to consumer goods which fell. Bottom line, the weakness in June ebbed but any signs of a notable, sustainable uptick is not close, especially with what happened in July and so far in August with the trade fight. The euro is little changed but bond yields are going more negative with the German 10 yr yield down another 2.5 bps to -.54%.