*More cash is set to wash over the global economic system after the European Central Bank approved rate reductions and asset purchases last week, and the response from domestic markets was predictable–high equity prices and higher bond yields.  The long bond yield jumped 15 bps WoW, while the S&P 500 closed at new all-time highs at 2007.71, a move made easier by a Russo-Ukrainian ceasefire agreement, one that may have already been broken over the weekend.  The soft Friday jobs report (+142k net new payrolls, a 70k miss, and 6.1% unemployment) failed to scare off the bulls too, since August payrolls are often revised with the back to school season and the news won’t pressure the Fed.  As a former resident of Scotland, it is interesting to see their independence referendum taking center stage in global markets, but some polling indicates that those in favor of seceding have passed 50% ahead of the September 18th vote, which would mean dividing up the UK’s debt, North Sea oil assets, currency, and much more in the spring of 2016.  Several other polls show a lead for unionists, but the pound and European equities are reacting negatively to the news, and interest rates are lower at the short end due to bets that policy rates will stay low in a break-up scenario.

*The NFP report showed 0.2% wage gains MoM, which was in line with consensus and good news to boot.  ADP private payrolls rose 204,000 in August, well ahead of the government data, and Challenger reported 40k new job cuts, down 6,000 from July.  ISM manufacturing and services indices both throttled expectations and printed above 59, showing great accelerating growth for the entire economy in their surveys.  Markit’s flash PMI for manufacturing also stayed in the uptrend, reading 57.9.   Construction spending rose 1.8% MoM, twice the consensus, and factory orders surged 10% thanks to the same Boeing aircraft orders that skewed durable goods orders higher last week.  Strong exports pushed the trade deficit down to -$40.5 billion for July, and nonfarm productivity expanded 2.3% QoQ while unit labor costs fell 0.1%.  The Fed’s Beige book release compiled data from its twelve districts showed moderate to modest growth nationwide, with limited pricing pressure visible.  Treasury will auction $61 billion in 3-, 10-, and 30-year paper this week.  Over the weekend, Japanese GDP was revised lower to -7.1%, its worst contraction in over five years, while China and Germany both reported record trade surpluses.

*It will be a light data calendar this week, with Friday retail sales the most interesting report (+0.6% headline, +0.3% core expected), so we expect the focus to remain on the global landscape, the Middle East turmoil that will be addressed in a Wednesday speech from President Obama, and European quantitative easing.  Import and export prices are both expected to fall MoM, the former more than the latter, business inventories should grow 0.4% MoM while wholesale inventories rise 0.5% MoM, and consumer sentiment is expected to stay near its five-year high.  Consumer credit is expected to rise $17 billion MoM, the same as the June increase and likely fueled by auto and student loan growth.

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