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Global Stocks Weaker on Manufacturing Data

Global stocks are slightly weaker as manufacturing figures for China, Korea, and Europe came in on the weak side. The U.S. August ISM figure is out at 10 a.m.—it, too, is expected to be weak. Consensus is about 48, anything below 50 indicates contraction.

Watch what happens if the figure is weaker than consensus—say, 44 or below. If the market rises, that's a sign of gaming the Fed—traders expecting another round of quantitative easing.

August unit labor costs, up 3.3 percent, was higher than expected. More money in people's pockets is not a problem for me...even if it means somewhat lower corporate profits. Productivity was down 0.7 percent was a bigger decline than expected, and that is a bit troubling—wages should typically be rising with rising productivity.

Euro skeptics are getting a real hearing. The flip-flopping of Italian Prime Minister Silvio Berlusconi is a troubling sign of the difficulties austerity programs face in southern Europe. Take a look at this interview with historian Hans-Joachim Voth in the German magazine Der Spiegel. Voth gives the euro only another five years unless the euro zone is transformed into a full transfer union with massive redistribution.

He also talks about the increasing likelihood of social unrest in southern Europe due to austerity programs that are coming, and makes some comparisons to what happened in Weimar, Germany, in 1930-32.

Elsewhere:

1. Irene’s effect of retail sales:

a) BJ’s Wholesale Club saw August same-store sales rise a robust 11.5 percent, far exceeding expectations, as customers stock up on supplies ahead of Hurricane Irene. The warehouse club noted that the hurricane threat positively impacted same-store sales by about 2.5 to 3.0 percentage points.

b) Macy’s reported a better-than-expected 5 percent rise in August same-store sales, even after more than 100 of its stores closed because of Hurricane Irene. The department store noted that same-store sales would have been 1.5 percentage points higher if the Hurricane hadn’t hit the East Coast.

c) JCPenney reported a disappointing 1.9 percent decline in August same-store sales. The department store said sales in the last week of August were hurt by the arrival of Hurricane Irene.

2. A host of corporate leadership changes this morning:

a) Costco’s co-founder and current CEO Jim Sinegal announced his resignation effective Jan. 1. He will be replaced by the warehouse club’s President and COO Craig Jelinek.

b) Wendy’s CEO Roland Smith is announcing his retirement according to the Wall Street Journal. The fast food chain has lured Emil Brolick from rival Yum Brands to succeed him as CEO.

c) Bank of New York Mellon’s CEO Robert Kelly abruptly resigned due to differences with the bank’s Board of Directors. Replacing him as CEO is Gerald Hassell, the company’s current President.

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