PBOC rate tweak ahead of ECB/Hopes for a restock

The PBOC trimmed its reserve requirement ratio by 25 bps to 10.5% (weighted average though for whole banking system is about 7.5% as some banks are at 5%) and the yuan immediately sold off and copper rallied as the algos go to work. This is the 2nd move this year where the first one was back in March. China is juggling with the dilemma of wanting to delver parts of the economy at the same time it's trying to stimulate it. While maybe this will add to the supply of credit, they still need greater demand for it. 

MMM was down 6% yesterday after speaking at a Morgan Stanley conference. Here is what they said that caught attention, "when we came into the year we had said we see weakness in electronics, we see weakness in consumer and China was a watch item. As we now look at the third and fourth quarter, we are still seeing significant slowness in electronics and consumers. I would say that destocking, I think we have gotten through the worst of it. Of course, what's going to happen is we'll see how the back to school and holiday season play itself out, but we believe that weakness in consumer will continue through the year. China has been slower. It was slower in the first half. We are continuing to see it slower in the third quarter." 

This is what they said on inflation, "I would say we are in a disinflation environment, not a deflationary environment...Inflation is still sticky. For us, where we are seeing it being sticky is labor costs are still quite sticky and we see it from suppliers...Logistics costs, you've seen it come down." 

JB Hunt saw a 4% pop in its stock yesterday after they said at the same MS conference that "Most of our customers are saying freight will be up slightly coming through the back half of the year...Slow and steady up would be more what we're planning for and hopefully we'll have a nice surprise." A key part of the cautious optimism was "I think our customers have their inventories right sized and they're going to make sure that they've got not just resiliency in their supply chain but agility in their supply chain to keep that inventory flowing."