NOT GOOD: Global Canary In The Coal Mine Looks Sick

Korea Customs Service, CEIC, SG Cross Asset Research/Economics

The June South Korean trade data is out.

Exports unexpectedly fell 0.9% year-over-year.

Economists were looking for a modest 0.1% year-over-year increase.

This could be an ominous sign of things to come as we stand by for a slew of economic data coming up.

Economists across Wall Street dub South Korean exports as the global economic canary in the coal mine.

Korean trade data usually comes before the first trading session of the month in Asia, which makes it the first of the world's major economic indicators to be released.

Since the yen-devaluing era of Abenomics began, Korean exports have been more volatile due to currency swings.

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The Second Half Of The Year Has Begun, And Markets Are Rallying

Peter Wallis/REUTERS

The first half of the year was very strong for developed markets.

The second half of the year is now off to a good start.

US futures are higher by a bit over half a percent.

Asia rallied overnight, with Shanghai gaining 0.8%, and Japan rallying 1.3%, with both indices having been negative earlier in their respective sessions.

Meanwhile, European markets are generally higher, following a set of strong manufacturing reports, particularly in peripheral countries.

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Eurozone Unemployment: 12.1%

There are clear signs that the Euro economy is coming back from the brink.

But the situation is dismal, and if there's not a decisive turnaround, then mass unemployment threatens to destroy the whole thing.

For May, Eurozone unemployment has hit a new record of 12.1%.

That's actually down from the last reading, but that last reading was revised lower to 12.0%, so this is technically a new record.

Eurostat.eu

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CHINA'S MANUFACTURING SECTOR DECELERATES

REUTERS/David Gray

China's National Bureau of Statistics will release its June manufacturing PMI report. The headline number crossed Bloomberg at 8:59 p.m. ET.

The headline number fell to 50.1 from 50.8 in May.

This was right in line with expectations.

Any reading below 50 signals contraction, so this deteriorating number reflects just marginal expansion.

China is the world's second largest economy and one of the remaining engines of global growth.

Here is a breakdown of the last two month's PMI reports:

Supplier delivery times   

Business Activity Expectation

Earlier today, we learned that South Korean exports unexpectedly contracted in June. Korea is facing its own challenges, especially as its currency strengthens substantially against the Japanese yen. Still, its exports are hugely exposed to mainland Asia, and is therefore sensitive to demand out of China.

All of this comes as interest rates rise in China, signaling financial stress.  For the most part, China and its central bank has been standing by quietly.

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Here Comes US PMI...

REUTERS/Yuri Gripas

Markit Economics says US PMI fell to 51.9 in June.

Consensus was for 52.3. 

Prior was 52.2.

For Q2 as a whole the reading was 52.1, the lowest reading since Q3 2012.

“Manufacturing clearly down-shifted a gear between the first and second quarters, and is at risk of losing further momentum as we head into the second half of the year," Markit chief economist Chris Williamson said.

Employment was even uglier, he said:

The employment picture from the survey is the weakest for almost three-and-a-half years, consistent with
roughly 30,000 jobs being lost per month in the manufacturing sector. We will need to see a swift turnaround in this employment trend if the Fed’s projection of a drop in the unemployment rate to 7.0% by the end of the year is to be achieved.”

New export orders fell -3.5 points to 46.3, the sharpest decline rate since 2009.

Here's the full breakdown:

We've been following PMI data for the past 24 hours, and the story so far has been positive in Europe but negative in Asia.

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Big Upturn In French PMI

So far, all of the big European PMI readings have been strong.

France has jumped to 48.4 from 46.4 last month.

From Markit

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