Just like the last time when Chinese flash PMI data came out at the lowest level since the financial crisis, so overnight when both the official Chinese manufacturing and service PMI data, as well as the Caixin final PMI,s confirmed China's economy has not only ground to a halt but is now contracting with the official manufacturing data the lowest in 3 years and the first contraction in 6 months, stocks around the globe tumbled on concerns another major devaluation round by the PBOC is just around the corner (especially following the unexpected strenghtening in the CNY in the past week which has cost China even more billions in reserve outflows) with the drop led by the Shanghai Composite which plunged as much as 4% before, the cavalry arrived and bought every piece of SSE 50 index of China's biggest companies it could find, and in a rerun of yestterday sent it to a green close, with the SHCOMP closing just -1.23% in the red. So much for the "no interventions" myth. We wonder which journalist will take the blame for today's rout. Despite the latest attempt by Chinese authorities to smooth the drop, Asian equity markets traded lower as the rout in global stocks continued which saw US stocks post its worst month since May 2012 (S&P 500 -0.8%). Nikkei 225 (-3.8%) traded in negative territory in the wake of weak CAPEX (5.6% vs. Exp. 8.8%) figures, while ASX 200 (-2.1 %) is dragged lower by weakness in large banks. JGBs traded higher following the stellar 10yr JGB auction where b/c was at its highest in a year. RBA kept official cash rate unchanged at 2.00% as expected. In Europe, stocks traded lower since the open in Europe (Euro Stoxx: -3.0%), following on from a negative session for Asian equities, with indices further weighed on by the latest manufacturing PMIs, which generally printed lower than expected (EU Manufacturing PMI 52.3 vs. Exp. 52.4). On a sector specific break down, materials are the session's laggard amid the latest indication out of China that the country is facing an economic slowdown. "Markets may have overemphasized China’s impact, but markets are also in relatively bad shape and we’re getting more negative technical signals,” says Otto Waser, chief investment officer at R&A Research & Asset Management AG in Zurich. "It’s a close call for the Fed and as long as markets are in turbulence, I don’t think it will raise rates." US equity futures were down 40 points at last check, having traded well lower only saved in the last few minutes by yet another violent rebound in the USDJPY, and oil which after crashing 4% earlier has also managed to recoup nearly all losses on even more speculation someone in OPEC is willing to be the first to cut production and push prices higher (hint: nobody will). Fixed income markets have seen choppy price action in Bunds , with the German benchmark falling during the European morning as it grappled with supply and risk-averse related factors, before paring the losses ahead of the North American open to trade relatively flat, however continuing to underperform its US counterparts, with T-Notes firmly in the green. Safe-haven related flows were particularly evident in FX during the European morning, where broad based JPY gains saw USD/JPY fall by around 150 pips to break below the 120.00 level, with EUR/JPY breaking below its 100DMA line. At the same time, the resulting USD weakness (USD-Index: -0.4%) supported EUR/USD, which also benefited from the un-wind of carry trade positions. Elsewhere, commodity sensitive currencies such as AUD, CAD and RUB continued to come under pressure , amid the decline in energy and base metal prices, with WTI and Brent crude futures trading lower by over USD 1.50 heading into the NYMEX pit open after sharp gains seen yesterday. Going forward, market participants will get to digest the release of the latest US manufacturing PMI, ISM manufacturing and the release of the latest US API crude oil inventories report after the closing bell on Wall Street. In commodities, WTI and Brent crude futures traded lower amid renewed concerns of a slowdown in China, as well as a paring of the aggressive advance yesterday, which rounded off their largest 3 day gains since 1990. This comes with some market participants downplaying the significance of the OPEC report yesterday. Subsequently, however, oil managed to stage a substantial rebound from the lows and at last check was trading entirely based on what some momentum algo thought it was "worth." The metals complex has generally seen weakness today, with most metals lower as a result of Chinese concerns, with the exception gold, which has seen a bout of strength today on the back of USD weakness. Market Wrap Euro up 0.5% at $1.1271 German 10Yr yield down 1bp at 0.79% V2X up 9% at 33.8 S&P 500 futures down 2% at 1930.1 Brent futures down 2.6% at $52.8/bbl LME 3m Copper down 0.9% at $5091/MT Gold spot up 0.8% at $1143.7/oz Overnight Media Digest Chinese Caixin Manufacturing PMI ebbed lower to print in contractionary territory, while the official figure printed its lowest level in 3 years and 1st contraction in 6 months Stocks traded lower since the open in Europe, following on from a negative session for Asian equities, with indices further weighed on by the latest manufacturing PMIs Today's highlights include the latest US manufacturing PMI, ISM manufacturing and the release of the latest US API crude oil inventories report after the closing bell on Wall Street Treasuries rally as stocks, oil and industrial metals fall on weak China eco data; China also said to make banks trading FX forwards hold reserves. PBOC will mandate a deposit of 20% of sales to be held at zero interest for a year on financial institutions trading FX forwards, according to six people familiar with matter U.K. manufacturing growth slipped to 51.5 in August from 51.9 the prior month; firms cites strong pound, weak euro area sales, China’s economic slowdown, Markit said Australia left interest rates unchanged Tuesday as a declining currency cushions the impact of lower commodity prices and a weaker outlook for key trading partner China Greenlight Capital, the investment firm led by David Einhorn, fell 5.3% in its main hedge fund in August as volatility in oil and Chinese stocks rattled markets $63.625b IG priced in August, $10.185b HY deals. BofAML Corporate Master Index holds at +169; reached +172 last week, widest since Sept 2012; YTD low 129. High Yield Master II OAS -2bp to +570; reached +614 last week, widest since July 2012; YTD low 438 Sovereign 10Y bond yields mostly lower. Asian and European stocks side, U.S.equity-index futures decline. Crude oil and coppper lower, gold gains US Event Calendar 9:45am: Markit US Mfg PMI, Aug F, est. 52.9 (prior 52.9) 10:00am: Construction Spending m/m, July, est. 0.6% (prior 0.1%) 10:00am: IBD/TIPP Economic Optimism, Sept., est. 47.1 (prior 46.9) 10:00am: ISM Mfg, Aug., est. 52.5 (prior 52.7); ISM Prices Paid, Aug., est. 39 (prior 44) Wards Domestic Vehicle Sales, Aug., est. 13.7m (prior 13.92m); Wards Total Vehicle Sales, Aug., est. 17.3m (prior 17.46m) 1:10pm: Fed’s Rosengren speaks in New York The balance of the overnight wrap comes as usual from Jim Ried Well today we're all coming back from a summer holiday and ushering in September. It was clearly one of the most tumultuous Augusts in recent memory but one that ended on the stronger side with Oil climbing into bull market territory after a 3-day rally continued yesterday. We'll go through a performance review of the month and YTD at the end and publish all the usual charts and table in the pdf. We'll also repeat the week ahead that Craig published yesterday at the end for those out yesterday. Craig also fully reviewed the weekend's Jackson Hole news, so for a recap see yesterday's EMR. It’s been a less than impressive start to September in Asia this morning where equity bourses have taken another tumble following some more soft PMIs out of China. The official manufacturing PMI for August fell 0.3pts last month to 49.7, in line with expectations but down from 50 last month and the first sub-50 reading since February. The Caixin measures have shown similar pain with the manufacturing PMI reading coming in at 47.3 (vs. 47.1 expected), down 0.5pts from last month and signaling the sixth straight month of contraction in the sector and to the lowest print since March 2009. With also a fall for the Caixin services reading to 51.5 (from 53.8), the composite print has declined 1.4pts to 48.8 and below 50 for the first time this year. The Shanghai Comp has declined 1.06% into the midday break on the back of the data, although paring earlier losses of more than 4% with the move coming despite a report from the China Securities Regulatory Commission saying that it would encourage companies to increase dividends and stock buy backs in a bid to support the equity market. There’s also been declines for the Shenzhen (-2.85%) and CSI 300 (-1.24%), while the Nikkei (-2.26%), Hang Seng (-0.47%), Kospi (-1.02%) and ASX (-1.33%) have all followed suit. Oil markets have tumbled nearly 3% following yesterday’s rally while S&P 500 futures are over a percent and a half down as we go to print. EM FX markets are generally trading stronger meanwhile, supported by a strengthening of the Yuan fix this morning by the PBoC by the most (+0.22%) since November. The AUD is little moved meanwhile after the RBA kept rates on hold as expected. Looking back at the price action yesterday, despite the strong surge in Oil it was a weak end to the month in equity markets. A late rebound in oil stocks failed to stop the S&P 500 from closing down 0.84% and in the process marking its biggest monthly slide since May 2012. The DOW (-0.69%) and NASDAQ (-1.07%) saw similar declines yesterday with those indices having their worst months since May 2010 and May 2012 respectively. It was a similar story closer to home where the Stoxx 600 (-0.38%), DAX (-0.38%) and CAC (-0.47%) taking similar legs lower with the falls yesterday coming on the back of more weakness in Chinese equity markets and the comments from Fischer over the weekend which left investors mulling over a higher probability of a September Fed move. That probability edged up to 42% yesterday from 38% on Friday, although still tracking below the 54% we saw earlier this month. On this theme, yesterday DB’s Peter Hooper reiterated his September liftoff view but noted that the call is very close at this point. Peter believes that there are three key factors which will drive the outcome; fundamental economic developments and prospects (including upcoming data), financial market conditions and thirdly Fedspeak. In his view the strongest case for delaying is uncertainty about inflation prospects, however this is somewhat offset by progress in the labour market. On top of this, recent financial turbulence and global uncertainties make this a close call and caution may dictate accumulating more evidence in the wake of market gyrations. Looking forward, Peter notes that assumptions for a good August employment report, no significant weakness in the August CPI report and markets settling down following the equity volatility of late should help support his September call. However, should these assumptions prove wrong, then the schedule could well slip to December or even 2016. Back to markets yesterday. 10y Treasury yields surged higher in the last couple of hours of trading, finishing 3.7bps higher at 2.219% and over 8bps off the day’s lows as the Oil complex rallied late in the day. Indeed, Brent finished the session 8.19% higher at $54.15/bbl, over $10 higher than Wednesday’s closing price with the three-day rally of 27% the most in 25 years. WTI (+8.80%) had a similar move higher, closing at $49.20/bbl. Yesterday’s extension of gains is largely being attributed to hints of a potential softer stance from OPEC after reports that the cartel may be ready to talk with other crude exporters to reach ‘fair and reasonable prices’. Also contributing to the price action was the latest US oil output data from the EIA which showed production in June fell to 9.3m barrels a day after peaking at 9.6m in April while the WSJ reported a Kremlin aide as saying that Russia President Putin is set to discuss ‘potential mutual steps’ to stabilize global oil prices with Venezuelan President Maduro on Thursday. Elsewhere, data flow in the US was a touch on the weaker side yesterday. The August Chicago PMI reading declined 0.3pts to 54.4 (vs. 54.5 expected) while the details revealed some declines in the new orders and production components, as well as the employment, offset by a significant bounce in inventories. The ISM Milwaukee for August also came in below consensus (47.7 vs. 50 expected) although it was up slightly from the 47.1 in July. Meanwhile there was another negative reading for the Dallas Fed manufacturing activity index which fell to -15.8 (vs. -4.0 expected) from -4.6 in July. The reading marks the 8th consecutive negative print while the six-month outlook fell to 3.4 from 18.8 in the prior month. Despite the slightly softer readings in the US yesterday, dataflow in Europe was slightly more upbeat. The August headline CPI reading was left unchanged at +0.2% yoy after expectations for a fall to 0.1%, while the core was also left unchanged at +1.0% yoy (vs. +0.9% expected). German retail sales for July were strong meanwhile, with the +1.4% mom print ahead of expectations of +1.0% and together with upward revisions to June seeing the annualized rate come in well above consensus estimates (+3.3% yoy vs. +1.7% expected). European sovereign bond yields were little moved following the data however the leg up in Oil helped push the bulk of the region higher later in the session with 10y Bunds closing up 5.6bps at 0.795% and the periphery around 4bps higher.