It hasn't been this bad for US manufacturing since the financial crisis (USD, DXY)

[Screen Shot 2016 05 23 at 9.54.26 AM] The manufacturing recession may not have ended yet. A preliminary reading of activity in May showed that output fell for the first time since the peak of the Great Recession. Markit's flash manufacturing Purchasing Manager's Index (PMI) out Monday was 50.5. Economists had estimated that it improved to 51 from 50.8, according to Bloomberg.  This index is basically on the edge of contraction, with 50 being the border between expansion and shrinkage. The manufacturing sector entered a slowdown last year after it was pressured by the energy downturn, the strong dollar and weak global demand.  Although the services sector will continue to be an outsized driver of the US economy, manufacturing could be a drag on second-quarter growth, according to Markit chief economist Chris Williamson.  "The weak manufacturing PMI data cast doubt on the ability of the US economy to rebound from its disappointing start to the year in the second quarter," Williamson said in the release. In May, some firms said uncertainty about the economy made them reluctant to spend, prompting them to reduce their production schedules, according to Markit. Manufacturers' outstanding work fell for a fourth straight month, indicating that operating capacity was slack. They continued to hire workers, but only at a slightly faster pace than the 34-month low recorded in April. The final April print of 50.8 marked the weakest improvement in business conditions since the series began in September 2009. Williamson said this dimmed hopes that weakness in the first quarter was temporary.  Regional manufacturing readings from New York and Philadelphia released last week, which were weaker than forecast, also suggested that the sector's recovery is unraveling at a slower-than-expected pace. Deutsche Bank's Joe LaVorgna said last week that both surveys raise the risk that the Institute of Supply Management's manufacturing index for May due June 1 could slip below 50 into contraction. SEE ALSO: THE HOUSING CRISIS IS GREAT NEWS FOR AMERICA Join the conversation about this story » NOW WATCH: FORMER GREEK FINANCE MINISTER: The single largest threat to the global economy

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Forget earnings - dividends have been the hottest stock market measuring stick (DIA, SPX, SPY, QQQ, IWM, TLT)

Forget earnings — stock market returns have been all about dividends lately.  In a note to clients on Monday, Sean Darby and the equity strategy team at Jefferies argued that it's dividends per share, not earnings, that have driven returns in the last year as earnings and stock prices have been flat.  "US indices whose constituents show increasing dividend payments over time have sharply outperformed since the beginning of the year," Jefferies writes. "A scarcity of 'dividend growth' globally, combined with flattening G7 yield curves, has put a bid on 'US dividend growth stocks,' in our view. US real bond yields have also fallen since November 2015 underwriting income generating stocks." And looking at Jefferies "dividend aristocrats" index, which tracks stocks that offer higher consecutive dividend payments, this search for yield has proven a winner in the last year or so.  [Screen Shot 2016 05 23 at 10.12.49 AM] This trend, however, might be set to cool off in 2016.   Dividend payment increases were hot in 2015, with announced dividend payouts rising 10.6% year over year. And the companies that jumped on this train were rewarded.  Dividend payments increases, however, are expected to drop to just a 4.2% year over year growth rate in 2016.  As Jefferies writes, "The good news is that forward expectations for dividends have stabilized based on the futures markets... THE BOTTOM LINE IS THAT US [DIVIDEND PER SHARE] GROWTH IS JUST AS AN IMPORTANT DRIVER FOR EQUITIES AS [EARNINGS PER SHARE] GIVEN THE GLOBAL REACH FOR YIELD. However, the expected [dividend per share] figure for 2016 is underwhelming single digit, although the pace of decline appears to have bottomed out." [Screen Shot 2016 05 23 at 10.16.44 AM] Something you often hear in markets is that big dividend paying stocks are a replacement of sorts for bonds.  If we assume that the point of owning bonds is receiving the regular coupon payment from the company you've lent money to, then receiving a regular dividend payment would seem to be an apt replacement. And with with record-low or near-record-low interest rates prevailing in much of the developed world, these bond coupon payments have shriveled up to a negligible level, leaving investors searching for alternative ways to earn returns on their capital.  Like, for example, getting a regular dividend payment for owning a company's stock. Of course, the dividend isn't the only thing at risk here, as your capital investment — which in the case of a bond is returned when the bond matures (or is called, which is a possibility depending on the type of bond issued) — can go up or down depending on the stock price.  This can have all sorts of knock-on effects within a portfolio, but it suffices to say buying the stock of a big dividend payer and then sitting back to collect that cash is not as simple as I just made it sound.  But recall that interest rates are at record lows and people are trying to find whatever return they can on their invested capital. And so here we are.  SEE ALSO: YOUR COMPLETE PREVIEW OF THE WEEK'S BIG ECONOMIC EVENTS Join the conversation about this story » NOW WATCH: FORMER GREEK FINANCE MINISTER: The single largest threat to the global economy

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One chart from Goldman Sachs shows why the oil industry is trapped

After collapsing to start 2016, oil prices have climbed back in recent weeks to nearly $50 a barrel. This has some observers hoping that continued strengthening in prices can help shore up the economic futures of oil-producing areas. Goldman Sachs, however, has a chart that shows why that optimism may not be warranted. Essentially, the global industry is trapped in a vicious circle of production at lower and lower costs that will continue to feed the oversupply of oil and keep prices in the current range. The biggest change in recent years is the emergence of US shale, which according to the Goldman research team has created a new paradigm for oil production. "We see the industry being reshaped into a 'new oil order' as it searches for a new dynamic equilibrium," the note said. "The increasing productivity and huge scale of the US shale plays has flattened the industry cost curve and provides substantial new volumes, with a relatively short lead time, at US$50-60/bl oil prices." In response to this shift, other major producers have had to change their behavior. OPEC countries, which generally have lower production costs than their competitors, have fought to maintain market share by continuing to ramp up supply in hopes of crowding out other producers. As Goldman shows, this has changed the picture for oil producers. As efficiency has increased, the breakeven price (y-axis), or price at which an oil-drilling product is profitable, has gone down for many producers. This has allowed more producers to increase their pumping to maintain share, leading to an increase in barrels per day extracted (x-axis). As the fight to stay competitive intensifies, the efficiency increases will flatten the curve further, forcing producers to push production higher to keep their foothold. This increased supply then keeps prices low. [oil vicious circle GS COTD] The race for production is not limited to the US and OPEC, as other producers such as Russia and Canada have scrambled to adjust policies to attract investment and continue to pump. "In the rest of the world, projects and countries have to compete for capital, trying to drive costs down to become competitive through deflation, FX and potentially lower tax rates," the note said. "Capital remains a key constraint also for the shale players and for OPEC in funding higher activity levels." There are a few ways this cycle could end, according to Goldman. For example, because of the slicing of tax rates and competitive foreign-exchange policy abroad, US shale needs free-flowing equity and debt markets to stay competitive. An economic slowdown in the US could disrupt this. For now, however, as countries compete for share through low-cost production, it seems as if the supply glut will stick around for a while and oil is unlikely to move past $60 a barrel. SEE ALSO: THERE'S A BIG SIGN THAT THE US ECONOMY IS ABOUT TO SLOW DOWN Join the conversation about this story » NOW WATCH: FORMER GREEK FINANCE MINISTER: The single largest threat to the global economy

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Brazilians are using a demonic chant to protest their new president

[Brazil protests May 22nd Homeless workers party] Things are already getting ugly for Brazil's new president, Michel Temer, and over the weekend protesters expressed their anger with a demonic chant for his ouster, according to Dom Philips at The Washington Post. From WaPo: Musicians railed against Temer at shows across Brazil this weekend, and their audiences sang for his ouster. Some chanted “Temer out” to a famous and melodramatic opera melody — its sense of impending apocalypse playing with unfounded Internet rumors that Brazil’s unpopular new leader is a Satanist. This is not an auspicious beginning for Brazil's former vice president, and it also marks the end of everything pundits and scholars have predicted for the country. For the most part, even the most shocking things that have happened in Brazil since a massive graft scandal was uncovered have been priced in by the market. Yes, even the removal of President Dilma Rousseff (which is now basically a foregone conclusion) was priced in. In fact, the market liked it. She stood accused of trying to hide the wretched state of Brazil's economy when she took office for a second term in the fall of 2014. Now that the drama surrounding impeachment is over, we've entered a part of the story where the pundits and market watchers have yet to go. This is where we could see some real chaos as the Brazilian people find not just Rousseff's PT party unfit, but seek a complete cleansing of their political system. You see, the problem is that Brazil isn't just throwing Rousseff out, letting her successor rule with a fresh finance minister, and moving forward to get out of its current economic recession. No, that would be way too simple. Part of the reason why Brazilians are so angry with their government has to do with a 2014 sting called "Operation Car Wash." It revealed that the government was using the quasi-state oil company, Petrobras, as its personal slush fund. Politicians and businessmen from all parties and walks of life were complicit in this corruption, and the Brazilian people — and, more important, the country's judicial branch — want to hold them accountable for that. So instead of stopping with Rousseff, the arrests are continuing. That is why João Cláudio Genu, a former treasurer of Rouseff's successor Michel Temer's Progressive Party, was just arrested for graft. It's a signal that heads will continue to roll, and it doesn't matter which party they come from. AND THEN THERE'S THE ECONOMY, STUPID What's more, since the economy is bad, there are a bunch of pressure points that the government is hitting in order to tighten its belt. That is why Temer himself is in trouble right now, and that's where this chant came from. Musicians and artists, including the legendary Caetano Veloso (think: Bob Dylan status), threw a bunch of big rallies and concerts protesting the government over the weekend. They're mad because Temer said he would do away with Brazil's Ministry of Culture to cut costs. Temer later walked back from his decision to cut the ministry, but the chant is still a thing, according to WaPo. It should also be noted that there are Brazilians who still support Rousseff. They call Temer "golpista" — a scammer/con artist who pulled off an illegal coup against the president. Obviously, these aren't auspicious beginnings for the Temer administration. And after Temer, the known road for Brazilian politics ends. Economists, political analysts, and journalists alike are uncertain what it could mean for the country, and the market hates uncertainty. So hold on to your hats. SEE ALSO: I WENT TO THE BIGGEST WALL STREET PARTY OF THE YEAR AND EVERYONE WAS MISERABLE Join the conversation about this story » NOW WATCH: FORMER GREEK FINANCE MINISTER: How I dealt with stress when Greece nearly defaulted

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IMF pushes debt interest cap for Greece

Move risks requiring other eurogroup members to plug yet more Greek gaps

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Greek National Tourism Organization and Greece’s UN Mission Join Forces

The new offices of the Press and Communication Office, Permanent Mission of Greece to the UN in New York and the Greek National Tourism Organization (EOT) at 800 3rd Avenue were inaugurated on May 14 by State Minister Nikos Pappas. Pappas stated that the ...

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Italy helps rescue 2,600 migrants from sea in 24 hours

[Migrants arrive by the Italian coastguard vessel Peluso in the Sicilian harbour of Augusta]Some 2,000 migrants were rescued off the Libyan coast from 14 rubber dinghies and one larger boat in salvage operations by the Italian navy and coastguard, the medical charity Medecins Sans Frontieres and an Irish navy vessel, the coastguard said. More than 31,000 migrants have reached Italy by boat so far this year, slightly fewer than in the same period of 2015. Humanitarian organisations say the sea route between Libya and Italy is now the main route for asylum seekers heading for Europe, after an EU deal on migrants with Turkey dramatically slowed the flow of people reaching Greece.

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