Month: July 2024

The public consensus after Joe Biden’s incoherent performance during the first presidential debate and during his first major post-debate interview is that the candidate’s career is over.  Some have argued that the only way Biden can win now is for Democrats to cheat and cheat big, because this time the vote won’t be close.  Once blindly devoted progressives are starting to panic as they realize it’s not a conspiracy theory – Their guy is truly mentally disabled.

The typical spin brigade is scrambling to pick up the pieces of a clearly broken campaign.  Even Stephen Colbert is attacking his own leftist media allies, telling them to stop the coverage of Biden’s dementia.  “Whatabout-ism” is the only argument they have in favor of re-electing a man who barely knows where he is most of the time:  “What about Trump?  Didn’t you see what Trump was accused of?!” 

BREAKING: Stephen Colbert just demolished main stream media for their hypocrisy in how they are covering President Biden’s every word and completely ignoring anything Donald Trump says. Retweet so every American knows main stream media has lost its way. pic.twitter.com/ZkLa1vzbha

— Biden’s Wins (@BidensWins) July 7, 2024

Whatabout-ism is not going to win the public’s support, not when their wallets are increasingly empty and the west is increasingly approaching open global conflict with the east.  There are those that will argue that all of Biden’s important decisions are made for him by committee anyway, and they would be right. However, the American people don’t want shadow governance and they certainly don’t want a vegetable in the Oval Office making the country look weak. 

Reports indicate that numerous political representatives on both sides of the aisle are meeting out of public view to discuss what needs to happen next.  At least one Republican Senator, John Kennedy from Louisiana, has not been afraid to say exactly what he thinks of Joe Biden’s condition and the predicament the US faces.  Biden is cooked, and if he somehow stays in office, we’re all cooked.

 

You might be familiar with Kennedy from his hilarious viral campaign against “Defund The Police” policies promoted by Democrat run cities nationwide.

 

The Senator is telling it like it is.  Biden’s condition cannot be covered up or ignored any longer simply because the political left values “winning” over the truth.  For most people the election is purely symbolic, a representation of where the country stands ideologically.  We all know that there are other powerful elements at work influencing America’s path.  But if the public shows they are willing to tolerate something like this, then they’re telling the powers-that-be that they’re willing to tolerate anything. 

For the political left the election is not symbolic, it’s an existential crisis.  Any shift away from the woke ideal (even a symbolic shift) cannot be allowed.  For them, losing the election would mean the country has rejected their religion, not just Biden.  It’s unthinkable. 

Keep in mind, the DNC, some Neo-cons and the media have been consistently lying about Biden’s health for years.  They have been gaslighting the American people, suggesting that what the populace sees with their eyes is not what is really happening.  The exposure of Biden’s breakdown calls into question many things beyond the election; it calls into question the very fabric of American government.  

Submitted by Gary Brode via www.DeepKnowledgeInvesting.com,

5 Things to Know in Investing This Week

The British are Coming Issue

On the day that the United States celebrated declaring independence from the British, the UK elected a new Labor government. Is this a coincidence – definitely yes! Bitcoin falls on temporary trading issues. Hodlers shrug and don’t panic. DKI approves and sides with the hodlers. Chairman Powell comments on inflation and appears determined not to make the Arthur Burns mistake like Canada just did. I keep saying I won’t report on the jobs numbers because the data is unreliable. Instead, we report (again) on how unreliable the data is. Do I have macroeconomic OCD – possibly. Americans understood why restaurants needed to raise prices during Covid and many of us did all we could to keep our favorite local places in business during tough times. However, reduced spending power and constantly higher prices has led to declining restaurant sales. Yet again, DKI points to a bifurcated economy where the aggregate numbers are supported by massive government spending and a limited number of wealthy people. Most of the country isn’t doing great at the moment.

This week, we’ll address the following topics:

– Fed Chairman, Jerome Powell, provides the obligatory hat tip on disinflation. Then, he said inflation won’t get down to 2% for years!

– The jobs “data” is a predictable mess. Regular 5 Things readers are not surprised.

– Mt. Gox and the German government pressure the dollar price of Bitcoin. Hodlers shrug.

– The UK votes in a new Labour government in a massive landslide.

– Restaurant sales are declining. Is it higher prices, a tapped-out consumer, or both?

Let’s dive in:

1) Disinflation but not Enough to Cut:

Fed Chairman, Jerome Powell, spoke at the ECB Forum in Portugal. With Japan sticking with ultra-low rates and both the European Central Bank and Canada already cutting rates, the Fed remains an outlier. Powell noted that economic growth and a strong labor market combined with sticky inflation have led the Fed to keep rates steady. Powell echoed the DKI caution against making the Arthur Burns mistake (explained in last week’s 5 Things) and said that he’s concerned that cutting too soon will cause another inflationary spike. Powell thinks the strong economy gives the Fed time to proceed with caution.

A friendly reminder that many started calling for rate cuts more than two years ago.

DKI Takeaway: DKI has been critical of Powell and the Fed in the past, but think he has this one right. For the first time, he addressed the huge and unsustainable budget deficit giving voice to what DKI has called the secret war between the Fed on one side and Congress and the Treasury on the other. Massive government stimulus is creating GDP growth and causing inflation without creating value. Powell also said he didn’t think the Fed could get inflation down to the 2% target before the end of next year. The market is expecting rate cuts to start in September, but given Powell’s comments and the desire of the Fed to avoid appearing politically motivated, DKI thinks that absent a severe economic collapse this summer, the Fed won’t cut before the November election.

2) The Employment “Data” Gets Even Worse:

On Friday, the new jobs data showed June nonfarm payroll growth of 206k jobs beating expectations of 200k. That sounds good until you notice that the May data was revised down by 54k jobs and the April data was revised down again by an additional 57k jobs. Yet again, the historical downward revisions dwarf the current month “beat”. The chart below shows the magnitude and direction of those revisions. Notice how the red line showing the initial data is almost always the highest and the dark blue line showing the final revision is almost always the lowest? That’s because the revised numbers are worse than the attention-grabbing positive headlines. Unfortunately, this isn’t even the worst of the situation.

This is why no one trusts the employment data.

Government jobs growing while the private sector is shrinking. That’s not sustainable. Graph from ZeroHedge.

DKI Takeaway: DKI has been saying for months that Congressional overspending is crowding out the private sector economy.

Credit to ZeroHedge for illustrating that thesis in one graph. They point out that more than 100% of growth in job openings are in government while private sector job openings are declining. The fiat and MMT (modern monetary theory) economists are lauding our strong economy. DKI reminds you that more government jobs add to reported GDP even if they destroy value. A weak private sector is a bad sign for future economic prosperity.

3) Bitcoin and a Test of Strength:

The infamous Mt. Gox saga is finally nearing its conclusion. After a decade-long wait, 127,000 creditors are set to receive their share of 142,000 BTC starting in July. Mt. Gox, once the largest Bitcoin exchange, collapsed in 2014 following a series of hacks that resulted in the loss of 850,000 BTC. This long-anticipated pay-out is both a sigh of relief for formers users of the site and a potential market shaker for bitcoin holders. Alongside Mt Gox, the German government has been causing turbulence by offloading about 10,000 Bitcoin in recent weeks. This liquidation began on June 19th, 2024, with $130 million worth of Bitcoin sent to exchanges, followed by another $65 million on June 20th . The latest data reveals an additional $195 million worth of Bitcoin moved to various exchanges, including Coinbase and Kraken. Despite these sales, the German government still holds around 37,179 BTC, valued at approximately $2.4 billion. Although many Bitcoin enthusiasts view the German government’s decision to sell off its Bitcoin holdings as reckless, they are not alone in their concern. German parliament member Joana Cotar has also criticized the move, calling it “not sensible” and advocating for the government to retain Bitcoin as a strategic reserve currency.

Bitcoin is absorbing some selling pressure, but it’s from one-time events.

DKI Takeaway: Let’s not forget the Bitcoin ETFs. Approved by the SEC in January, these investment vehicles have seen massive inflows, signaling strong institutional interest. On March 12th alone, Bitcoin ETFs recorded an astonishing $1.05 billion of inflows in a single day. This surge in volume is a clear indicator of growing confidence in Bitcoin as a mainstream investment asset. Despite the recent price pullbacks and market jitters, the introduction of ETFs has provided a way for people comfortable with traditional finance to own and hold Bitcoin. The significant trading volumes following the ETF approvals far exceed those seen during the Mt. Gox repayments and the German government’s selloffs. Pullbacks of 20-30% are very common with Bitcoin, so the current market behavior is not unusual. Based on that and the continuing debasement of fiat currencies like the dollar and the euro, DKI maintains its long-term bullish stance on the future of BTC.

4) The UK Has its First Labour Government in 14 Years:

The UK 2024 general election has delivered a landslide victory for the Labour Party after 14 years of Conservative rule. Despite this convincing result, the election was not so much won by Labour, but lost by the Conservatives. The Reform UK Party under its leader Nigel Farage, the architect of Brexit, siphoned off key votes from the Conservative base. Many high-profile Conservatives were ousted, including immediate past Prime Minister Liz Truss; the first former prime minister to have lost a seat in almost ninety years. Nigel Farage, on his eighth attempt, has finally entered the House of Parliament. He plans to fill the gap on the centerright of politics and aims to create a mass national movement to challenge the government in 2029. His party, Reform UK, is responsible for two-thirds of the seats lost by the Conservatives.

Nigel Farage (right) taking votes from the Conservative party leading to a Labour landslide.

DKI Takeaway: Labour’s fiscal policies will increase taxes on the wealthy and large corporations to fund spending plans. New Prime Minister, Keir Starmer, has emphasized that “economic growth is our core business – the end and the means of national renewal”. This has echoes of the last Labour government of Tony Blair and Gordon Brown. Their focus on economic revitalization through increased public spending on education and health, is credited with substantial economic growth with low unemployment rates. However, the economic climate is much changed from 1997 and the decade that followed. With a cost-of-living crisis, higher debt-to-GDP levels, and high interest rates, the battle for economic growth and stability will be more challenging in the years ahead. The Labour government will need to navigate these complex issues to achieve their ambitious goals. (Credit to DKI Intern, foreign correspondent, and British Subject, Alex Petrou for this analysis.)

5) Restaurant Sales are Down:

One of the first areas where consumers have finally begun cutting back on spending is dining out at restaurants. While the impact might not be immediately apparent, some restaurants are raising concerns. Due to increasing food and labor costs, many restaurant chains are closing locations as staffing and other costs become more challenging. As we mentioned last week, overall customer experience has declined in various sectors, from airlines to retail. Many sit-down restaurant chains, including Cracker Barrel, Red Lobster, Hooters, Applebee’s, and TGI Fridays, have started to close stores.

It’s not tragic, but that dip down at the end isn’t encouraging.

DKI Takeaway: This isn’t even close to a disaster yet, but updated menus (with updated prices) have been a recurring trend over the past few years. Higher prices are driving  customers to cook more at home. A clear indicator of this shift was seen in Walmart’s $WMT earnings, which showed growth in their grocery sector due partly to the rising costs of restaurant food including at fast food/quick-service restaurants. While sales are still historically high, inflation is a contributing factor to recent relative weakness. As we pointed out in last week’s 5 Things, inflation is a benefit to the wealthy, who are less affected by food costs, while the less affluent face greater challenges.

Authored by Steve Watson via modernity.news,

MSNBC host Lawrence O’Donnell has called for allowing Joe Biden to have aides with him on stage to speak for him and help him sound coherent.

Yes, really. This is where we are now.

O’Donnell said that it would be good to “Allow the candidates to have as many staff as they want, join them on the stage throughout the debate, and make sure that all of them have microphones.”

He added that “the candidates should be allowed to turn to their staff and confer with them about anything at any time in the debate.”

“And we should be able to hear everything they say. So we can hear if the candidate has competent or incompetent staff, we could hear the candidate overrule some advisers and say something else,” he continued.

“We could watch the candidates actually think and process information, including including possibly information that they might not know until a staff member tells them or reminds them,” O’Donnell further suggested.

He continued, “A candidate should be allowed to let staff members actually answer questions for them.”

MSNBC host Lawrence O’Donnell calls for allowing Joe Biden to have aides with him on stage to speak for him and help him sound coherent during the next debate. This is where we are at now. Full report here: https://t.co/xEIFxG7LKI pic.twitter.com/Ty7EqvtDNt

— m o d e r n i t y (@ModernityNews) July 8, 2024

When he says ‘candidates’ he means Biden, because Trump clearly doesn’t need people talking for him. Only the mentally deficient, incoherent, bumbling Biden needs that.

What is this supposed to be? Show and tell at pre school?

It’s a debate between candidates who are expected to lead the country. They shouldn’t need people to help them talk.

It’s not a debate between the candidates if other people are doing the talking.

O’Donnell is only putting the ludicrous suggestion out because it is clear that Biden is not running anything. His aides are doing it all.

Indeed, an Axios report notes how literally everything Biden does is micromanaged and written down for him, down to where and when he walks and stands.

The report notes that “One template — a copy of which was obtained by Axios — is short and simple, with one large picture of the event space on each page, accompanied with big text such as: ‘View from podium,’ and ‘View from audience.’ In the five-page document, two pages are separate pictures of, ‘Walk to podium.’”

“Before a presidential event, the White House sends event staffers a document to emulate when preparing their own materials for the president,” the report further states.

One staffer told Axios that “It surprised me that a seasoned political pro like the president would need detailed verbal and visual instructions on how to enter and exit a room.”

This has been going on for years now:

‘YOU take YOUR seat’: Very specific cheat sheet reminds Biden how to act https://t.co/eGJGqRzzlY pic.twitter.com/lil708FVho

— New York Post (@nypost) June 23, 2022

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

Usually the macro calendar goes quieter the week after payrolls but that’s not the case now as there’s a lot to digest this week with the US CPI report (Thursday) and Fed Chair Powell’s testimonies to the Senate and House committees (Tuesday and Wednesday) the obvious highlights alongside PPI and the start of US Q2 earnings season on Friday with JP Morgan, Citi and Wells Fargo reporting. Besides Powell, we will also get numerous other Fed speakers this week.

Outside of these the day by day highlights are NY Fed 1-yr inflation expectations today, tomorrow’s US small business optimism survey to see if the “K” shaped recovery continues. Wednesday sees China’s CPI and PPI, Japan’s PPI, Norwegian and Danish CPI, Italian IP and a US 10yr Treasury auction. Thursday sees the latest US monthly budget numbers alongside jobless claims which will continue to get close attention given recent mixed signals on the US labor market. There is also a 30yr Treasury auction. On Friday the University of Michigan survey and Swedish CPI will be the highlight outside of the main events mentioned above. In geopolitics, there is a NATO summit Tuesday through Thursday, and Indian PM Modi visits Russia today and tomorrow both of which may generate headlines. The full week ahead is at the end as usual.

Let’s now preview the US CPI and PPI releases and review a mixed payroll print on Friday. The headline CPI should print soft (+0.09% MoM Deutsche Bank forecast vs. +0.01% previously) thanks to falling gas prices. However core is expected to edge up (+0.25% MoM vs. +0.16%).

If DB economists are correct, YoY headline CPI will fall by two-tenths to 3.1%, with core edging up a tenth to 3.5%. However three-month annualized core would fall four tenth to 2.9%, though the six-month annualized rate would stay at 3.7%. For the PPI we always look at the categories feeding into core PCE, namely health care services, airfares and portfolio management. The final of these three should be firm given the recent rally in equities and airfares could bounce back after a weak May. This also could be the end of easy comps as weak July and August prints will soon roll out of the YoY numbers. This is important as if markets do want a September cut then a bit more progress is needed on inflation absent an “unexpected weakening” (in Powell’s words) in the employment situation.

Finally, as noted above, Q2 earnings season begins Friday when JPM, Wells, Citi and BNY all report.

Finally, courtesy of DB, here is a day-by-day calendar of events

Monday July 8

• Data : US June NY Fed 1-yr inflation expectations, May consumer credit, Japan May labor cash earnings, BoP current account balance, BoP trade balance, June bank lending, Economy Watchers survey, Germany May trade balance
• Central banks : BoE’s Haskel speaks

Tuesday July 9

• Data : US June NFIB small business optimism, Japan June M3, M2, machine tool orders
• Central banks : Fed’s Powell testifies to Senate Banking, Housing, and Urban Affairs committee
• Auctions : US 3-yr Notes ($58bn)

Wednesday July 10

• Data : US May wholesale trade sales, China June CPI, PPI, Japan June PPI, Italy May industrial production, Norway June CPI, PPI, Denmark June CPI
• Central banks : Fed’s Powell testifies to the House Financial Services committee, Goolsbee and Bowman speak, ECB’s Nagel speaks, BoE’s Pill speaks, RBNZ decision
• Auctions : US 10-yr Notes (reopening, $39bn)

Thursday July 11

• Data : US June CPI, monthly budget statement, initial jobless claims, UK June RICS house price balance, May monthly GDP, Japan May core machine orders
• Central banks : Fed’s Bostic and Musalem speak
• Earnings : PepsiCo
• Auctions : US 30-yr Bond (reopening, $22bn)

Friday July 12

• Data : US June PPI, July University of Michigan survey, China June trade balance, Japan May capacity utilisation, Germany May current account balance, retail sales, June wholesale price index, Canada June existing home sales, May building permits, Sweden June CPI
• Earnings : JPMorgan Chase, Citigroup, Wells Fargo

* * *

Finally, looking at just the US, Goldman writes that the key economic data releases this week are the CPI report on Thursday and the PPI and University of Michigan reports on Friday. Chair Powell will testify to congressional committees on Tuesday and Wednesday, and there are several other speaking engagements from Fed officials this week, including Governors Barr, Bowman, and Cook and Presidents Goolsbee, Bostic, and Musalem.

Monday, July 8

• 11:00 AM NY Fed 1-year inflation expectations, June (last +3.17%)

Tuesday, July 9

• 06:00 AM NFIB small business optimism, June (consensus 90.2, last 90.5)
• 09:15 AM Fed Vice Chair for Supervision Barr speaks: Fed Vice Chair for Supervision Michael Barr will speak on financial inclusion at an event in Washington, D.C. Speech text is expected.
• 10:00 AM Fed Chair Powell speaks: Fed Chair Jerome Powell will present the semiannual monetary policy report to the Senate Committee on Banking, Housing, and Urban Affairs. Speech text and a Q&A are expected. On July 2, Chair Powell emphasized that there had been “a lot of progress” on inflation at the ECB Forum on Central Banking in Sintra, Portugal. Powell reiterated that the FOMC wanted “to be more confident that inflation is moving sustainably down” to its 2% target before starting to cut rates. He also emphasized that the FOMC faced more two-sided risks to achieving its inflation and employment goals, which had been “a big change” from a year ago. On July 3, the minutes to the FOMC’s June meeting emphasized that although inflation remained elevated, there had been “modest further progress” in recent months.
• 01:30 PM Fed Governor Bowman speaks: Fed Governor Michelle Bowman will speak on promoting an inclusive financial system at an event in Washington, D.C. Speech text and a Q&A are expected. On June 27, Bowman said, “Should the incoming data indicate that inflation is moving sustainably toward our 2% goal, it will eventually become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive…we are still not yet at the point where it is appropriate to lower the policy rate, and I continue to see a number of upside risks to inflation…I remain willing to raise the target range for the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed.”

Wednesday, July 10

• 10:00 AM Wholesale inventories, May final (consensus +0.6%, last +0.6%)
• 10:00 AM Fed Chair Powell speaks: Fed Chair Jerome Powell will testify before the House Financial Services Committee. Speech text and a Q&A are expected.
• 02:30 PM Chicago Fed President Goolsbee (FOMC non-voter) and Governor Bowman speak: Chicago Fed President Austan Goolsbee and Fed Governor Michelle Bowman will give opening remarks at a Fed Listens event focused on the childcare industry, working parents, and employers. Speech text is expected. On July 2, Goolsbee said, “we are on a path to 2%” inflation” and “if you just hold the rates where they are while inflation comes down, you are tightening—so you should do that by decision, not by default.” He added, “We got to this [federal funds] rate when inflation was over 4%, and inflation is now down close to 2.5%, so if you sit with the rate somewhere while inflation goes down you’re tightening. The reason that you would want to tighten is if you think that you’re not on a path to 2%.”
• 07:30 PM Fed Governor Cook speaks: Fed Governor Lisa Cook will speak on global inflation and monetary policy challenges in Australia. Speech text and a Q&A are expected. On June 25, Cook said, “With significant progress on inflation and the labor market cooling gradually, at some point it will be appropriate to reduce the level of policy restriction to maintain a healthy balance in the economy…The timing of any such adjustment will depend on how economic data evolve and what they imply for the economic outlook and balance of risks.”

Thursday, July 11

• 08:30 AM CPI (mom), June (GS +0.11%, consensus +0.1%, last flat); Core CPI (mom), June (GS +0.21%, consensus +0.2%, last +0.2%); CPI (yoy), June (GS +3.17%, consensus +3.1%, last +3.3%); Core CPI (yoy), June (GS +3.43%, consensus +3.4%, last +3.4%): We estimate a 0.21% increase in June core CPI (mom sa). Our forecast reflects a pullback in used car (-1.6%) and hotel lodging (-1.5%) prices and only a partial rebound in the car insurance category (+0.5%) based on decelerating premiums in our online dataset. However, we assume a modest rebound in new car prices (+0.2%), reflecting disruptions to dealer software systems and a (likely related) decline in incentives. We estimate a modestly slower pace of inflation in the housing measures (primary rent +0.36%; OER +0.39%). We estimate a 0.11% rise in headline CPI, reflecting lower energy (-1.0%) and flattish food (+0.1%) prices.
• 08:30 AM Initial jobless claims, week ended July 6 (GS 233k, consensus 239k, last 238k); Continuing jobless claims, week ended June 29 (consensus 1,855k, last 1,858k)
• 11:30 AM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will speak about economic inclusion in a moderated conversation at the National Credit Union Administration’s Diversity, Equity, and Inclusion Summit. A Q&A is expected. On June 27, Bostic reiterated that he expects one rate cut this year in Q4 and said, “I think my reluctance [to cut rates] and my desire to be patient is that I think we need to be absolutely certain that we’re going to get back to that 2% target. And I don’t have that confidence right now.”
• 01:00 PM St. Louis Fed President Musalem (FOMC non-voter) speaks: St. Louis Fed President Alberto Musalem will answer questions on the US economy and monetary policy in Little Rock, Arkansas. On June 18, Musalem said, “I will need to observe a period of favorable inflation, moderating demand and expanding supply before becoming confident that a reduction in the target range for the federal funds rate is appropriate. These conditions could take months, and more likely quarters to play out.”

Friday, July 12

• 08:30 AM PPI final demand, June (GS +0.1%, consensus +0.1%, last -0.2%); PPI ex-food and energy, June (GS +0.1%, consensus +0.2%, last flat); PPI ex-food, energy, and trade, June (GS +0.1%, last flat)
• 10:00 AM University of Michigan consumer sentiment, July preliminary (GS 66.2, consensus 68.2, last 68.2): University of Michigan 5-10-year inflation expectations, July preliminary (GS 2.9%, last 3.0%): We expect the University of Michigan consumer sentiment index decreased to 66.2 in the preliminary July reading, and we expect the report’s measure of long-term inflation expectations fell 0.1pp to 2.9%, reflecting lower gasoline prices and better (lower) inflation news.

Source: DB, BofA

Much to the chagrin of panicked Democrats, President Joe Biden isn’t going anywhere.

“I want you to know that despite all the speculation in the press and elsewhere, I am firmly committed to staying in this race, to running this race to the end, and to beating Donald Trump,” Biden ‘wrote’ in a Monday letter to congressional Democrats, undoubtedly penned by his cabal of unelected officials who can’t fathom releasing the ring of power.

This morning, I sent a letter to my fellow Democrats on Capitol Hill. In it, I shared my thoughts about this moment in our campaign.

It’s time to come together, move forward as a unified party, and defeat Donald Trump. pic.twitter.com/ABtAaJrr0n

— Joe Biden (@JoeBiden) July 8, 2024

“I have heard the concerns that people have … I am not blind to them,” the letter continues, adding “I wouldn’t be running again if I did not absolutely believe I was the best person to beat Donald Trump in 2024.”

The letter comes as Biden reportedly canceled a meeting with Senate Democrats led by Sen. Mark Warner (D-VA).

There are only two reasons to cancel such a meeting. One, that @POTUS Biden is not even willing to listen to calls for his stepping aside, or two, that the president has finally recognized that the time has come.

I would bet on #2.

By cancelling the meeting, he preserves his… https://t.co/4fl8HbDyiz

— Bill Ackman (@BillAckman) July 8, 2024

Meanwhile, five House Democrats have publicly called on Biden to drop out of the race, with several committee ranking members joining the call during a private call on Sunday, Axios reports.

•     Many more Democrats have privately expressed the view that Biden needs to drop out, and an even larger group has voiced concerns about his ability to take on former President Trump.
•     The Biden campaign’s efforts to address those concerns, largely by dismissing the president’s doubters, have stirred further discord among his fellow Democrats on Capitol Hill.

Biden, or someone who sounds like Biden, then reiterated his position in a Monday telephone interview with MSNBC.

CROOKED JOE BIDEN DOUBLES DOWN: “I am not going anywhere!” pic.twitter.com/Pa1VAVifZu

— RNC Research (@RNCResearch) July 8, 2024

No wait, it’s him:

BIDEN: “I am not letting up a little bit and by the way, you know, you know, France registered, uh, you know, I, look, you talk about Europe…” pic.twitter.com/YeRuWhlPV7

— RNC Research (@RNCResearch) July 8, 2024

Biden then took a few shots at Trump, reading all the things his team wishes he had the cognition to say in real time.

After going through Trump’s debate performance (Jan. 6, Putin, Roe), Biden tells Morning Joe:
“What the hell are we doing, Joe? What are we doing? This is bizarre!” pic.twitter.com/hOZI1rTb6q

— Alex Thompson (@AlexThomp) July 8, 2024

Joe Biden has been in Washington DC for 45 years. https://t.co/xCJPqlyMMa

— Stephen L. Miller (@redsteeze) July 8, 2024

Meanwhile, Biden’s odds of winning the Democratic presidential nomination are spiking after this display of vigor.

To be continued…

Authored by Jonathan Turley,

Below is my column in The Hill on the over-wrought reaction to the Supreme Court decision in Trump v. United States. Commentators seemed to compete for the most alarmist accounts from court-sanctioned death squads to political assassinations to the death of democracy. From the coverage of the immunity decision, one would think that the Madisonian Democracy was being replaced by a John Wick Republic. The academic and media accounts have little basis in the actual opinion. Despite the prediction of Rachel Maddow that this was a “Death Squad Ruling,” the only thing that seemed to die was objective reporting and commentary in the wake of the decision.

Futures are mixed with small-caps leading as calm returned to markets after traders focused on the positive implications from a French election where the far-left ended up winning and contemplated unleashing a flood of spending. European stocks rose and the euro pared earlier losses. At 8:00am S&P 500 futures were fractionally in the green, erasing an earlier loss, and following the biggest weekly advance for the index since April; the Nasdaq was in the green as has been the case pretty much every single day this year. US Treasuries started off the week on the backfoot, as traders braced for Federal Reserve Chair Jerome Powell’s congressional testimony and US inflation data this week: bond yields are +2-3bps and 10Y yield trade around 4:31%. The USD is flat following its worst week since early March. Commodities begin the week under pressure with weakness across all three complexes. Today’s macro data focus is on NY Fed’s 1-year inflation expectations, but the impactful data comes from CPI/PPI on Thurs/Fri and the ten Fedspeakers this week. We may see US markets chop sideways into CPI and the kick off of earnings season later this week, though we are still in a period of positive seasonality

Pre-mkt, semis are higher ex-NVDA with the balance of Mag6 names in the green. In other corporate news, Boeing agreed to plead guilty to criminal conspiracy to defraud the US after the Justice Department concluded the planemaker failed to adhere to an earlier settlement stemming from two crashes of its 737 Max jetliner. Here are the most notable premarket movers:

• Corning (GLW) rises 7% after posting preliminary 2Q core sales that topped expectations.
• Gilead Sciences (GILD) gains 2.7% after Raymond James upgraded the biotech to outperform on the potential for its HIV and liver disease treatments to drive growth.
• HilleVax (HLVX) shares are halted after the biopharmaceutical company said a clinical study did not meet its primary endpoints.
• Morphic (MORF) soars 76% after agreeing to be purchased by Eli Lilly in a  $3.2 billion deal.
• Paramount (PARA) rises 2% after it agreed to merge with Skydance Media in a deal that hands control of the storied Hollywood studio to producer David Ellison, ending one of the industry’s most dramatic acquisitions.
• R1 RCM (RCM) rises 13% after holder TCP-ASC said it’s in the process of finalizing a proposal to acquire all of the outstanding shares of the revenue-management company that it doesn’t already own.
• ServiceNow (NOW) slips 3% as Guggenheim cut its rating to sell, saying the software company’s valuation doesn’t match future risks.
• SolarEdge Technologies (SEDG) rises 5% after BofA upgrades the renewable energy equipment company to neutral, saying the stock is already pricing in the worse case scenario, including inventory write downs and liquidity constraints.

Over the weekend, in a stunning reversal a left-wing coalition of far-left parties received the most votes in French legislative elections on the weekend, but failed to secure enough seats to form a government. That outcome limits how much any party can do, leading to bets that President Emmanuel Macron will form a new coalition between the center and center-left. In the runup to the vote, investors had been concerned about the prospect of a Le Pen takeover after Macron’s crushing defeat in last month’s European parliamentary elections.  

“A hung parliament is not necessarily a bad outcome because it means that the most extreme policies are less likely to make it to the legislature,” said Azad Zangana, a senior European economist at Schroders. “It’s still a very uncertain period going forward.”

Meanwhile, the political situation in the US is even more ridiculous as Joe Biden’s continues to salvage his embattled reelection bid, fending off calls from Democratic lawmakers to step aside, although the chorus of voices against the dementia-addled president is too big and it is only a matter of time before Joe is forced to step down.

Turning to the calendar, Powell’s testimony on Tuesday and Wednesday will be closely watched ahead of Thursday’s consumer price figures for June. The Fed Chair is likely to say policymakers need further confirmation they have vanquished inflation before they’re ready to cut interest rates when he speaks to Congress. And yes, earnings season begins again: this Friday we get Q2 reports from major US banks including JPMorgan.

European stocks started off in the red but quickly traded higher as the narrative once again reversed itself and the Stoxx 600 was up 0.4%. French stocks rise while the yield spread with Germany narrows slightly as the worst-case scenarios in the French election have been avoided, although investors expect uncertainty to persist as political gridlock looms. The CAC 40 is up 0.5% after swiftly reversing an opening decline. The spread between French and German 10-year yields falls 1bps to 65bps.

Earlier, Asian stocks declined as a slump in Chinese equities extended ahead of a key policy meeting, weighing on the broader region. The MSCI Asia Pacific Index swung to a loss of as much as 0.3% after gaining 0.4% earlier. Industrial and Commercial Bank of China and Bank of China were among the biggest drags. TSMC, which has the highest weighting on the regional benchmark, jumped 3% to a record high after Morgan Stanley raised its price target. A selloff in equities in mainland China and Hong Kong deepened, with the Hang Seng China Enterprises Index nearing a technical correction. A patchy economic recovery and intensifying concern over potential geopolitical risks stemming from the upcoming US election have hurt investor sentiment.

In FX, the Bloomberg Dollar Spot Index is flat while the Japanese yen is among the weakest of the G-10 currencies, falling 0.2% against the greenback. The euro reversed an earlier loss and traded roughly flat around $1.0840 after falling to as much as $1.0802 earlier with traders mulling the impact of a political gridlock in France on the country’s finances. Options traders remain bearish on the euro versus Group-of-four peers over the next week, albeit with lower conviction compared to the run-up to the French legislative elections.

“The worst outcome for the euro has been averted for now,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets in Singapore. “But the political situation in France remains uncertain and the fiscal balance is unlikely to improve significantly as a result”

In rates, treasuries were slightly cheaper across the curve, led by bear-flattening in bunds after an unexpected win by a left-wing coalition in the second round of French legislative election gave no party an absolute majority. Treasury yields are cheaper by ~2bp across the curve with front-end and belly leading losses, flattening 5s30s spread slightly, and 10-year just under 4.30%. The French yield premium vs German counterparts increased. US session has few scheduled events; ahead this week are two days of congressional testimony on monetary policy by Fed Chair Jerome Powell and coupon auction cycle, both starting Tuesday. Treasury issuance resumes Tuesday with $58b 3-year note sale, followed by $39b 10-year and $22b 30-year reopenings Wednesday and Thursday.

In commodities, oil edged lower after four straight weekly gains, even as traders tracked twin threats to crude production posed by a hurricane in the US and wildfires in Canada. WTI fell 1.1% to trade near $82.25 a barrel. Spot gold falls $20 to around $2,372/oz. Gold was steady, and iron ore extended a decline from a one-month high.

Looking at today’s calendar, US economic data slate includes June New York 1-year inflation expectations (11am) and May consumer credit (3pm). Ahead this week are CPI, PPI and University of Michigan sentiment. No Fed speakers scheduled for Monday. Weekly calendar includes Barr, Bowman, Goolsbee, Cook, Bostic and Musalem in addition to Powell

Market Snapshot

• S&P 500 futures little changed at 5,620.25
• MXAP down 0.2% to 184.00
• MXAPJ little changed at 576.21
• Nikkei down 0.3% to 40,780.70
• Topix down 0.6% to 2,867.61
• Hang Seng Index down 1.5% to 17,524.06
• Shanghai Composite down 0.9% to 2,922.45
• Sensex little changed at 79,945.06
• Australia S&P/ASX 200 down 0.8% to 7,763.17
• Kospi down 0.2% to 2,857.76
• STOXX Europe 600 up 0.6% to 519.70
• German 10Y yield +1.6bps at 2.57%
• Euro little changed at $1.0841
• Brent Futures down 0.6% to $86.04/bbl
• Gold spot down 0.7% to $2,374.97
• US Dollar Index little changed at 104.87

Top Overnight News

• Biden said he is convinced he is the most qualified person to beat Donald Trump and has done ten major events since the debate, while he pointed to his successes when asked if he was the same man as he was when he took office three years ago. Biden also stated he is still in good shape and that no one has said he needs neurological and cognitive tests.
• Democrat Rep. Schiff said either Biden has to win overwhelmingly or he had to pass the torch and that Kamala Harris could win overwhelmingly but Biden needs to make a decision, according to Reuters.
• Microsoft orders China employees to only use iPhones for work from September, cutting off Android devices from the workplace, according to Bloomberg
• Japanese workers’ base salaries jumped the most since 1993, an encouraging sign that the underlying pay trend may start to support consumption and enable the Bank of Japan to raise interest rates again. Base pay increased 2.5% in May from a year ago, the fastest growth since 1993, outpacing the 1.9% gain in the headline figure, the labor ministry reported Monday. BBG
• The BOJ said wage hikes were broadening across the economy due to tight labor market conditions, signaling its confidence the country was making progress toward durably achieving its 2% inflation target. The optimistic assessment, made at the BOJ’s quarterly meeting of regional branch managers on Monday, may heighten the case for the central bank to raise interest rates as soon as its next meeting on July 30-31. RTRS
• European stocks edged higher as traders weighed the unexpected French election result, which leaves the left-wing grouping without enough seats to form a government.   France now heads into political gridlock, with no clear majority. Jean-Luc Melenchon vowed to implement the leftist New Popular Front’s entire spending program. President Emmanuel Macron’s group was second with Marine Le Pen’s National Rally trailing in third. BBG
• Hamas has dropped its objections over a US-backed cease-fire proposal to halt the Gaza conflict with Israel, a person familiar with the matter said, the clearest sign yet that a truce is possible after months of fruitless negotiations. BBG
• White House considers a fresh set of oil-linked sanctions on Russia focused on the tankers delivering Moscow’s crude around the world, but concerns about high gas prices are keeping them from being enacted. NYT
• Several influential congressional Democrats said on a private call they want Joe Biden to step aside, according to people familiar. The president remained defiant. He registered his best showing yet in a Bloomberg News/Morning Consult tracking poll of battleground states, but still trailing Trump. BBG
• Former president Donald Trump’s campaign is aiming to announce his running mate by July 15, the first day of the Republican National Convention, according to people familiar with the situation, and internal discussions have largely centered on two finalists as he nears a decision. Trump has not communicated his choice, the people familiar with the situation said, but discussions inside the campaign have narrowed in on Sens. J.D. Vance (R-Ohio) and Marco Rubio (R-Fla.). WaPo
• The start of the artificial-intelligence arms race was all about going big: Giant models trained on mountains of data, attempting to mimic human-level intelligence. Now, tech giants and startups are thinking smaller as they slim down AI software to make it cheaper, faster and more specialized. This category of AI software—called small or medium language models—is trained on less data and often designed for specific tasks. WSJ
• Boeing agreed to plead guilty to misleading air-safety regulators in the run-up to two deadly 737 MAX crashes. Boeing will formally acknowledge guilt and accept fresh punishment over its dealings with the Federal Aviation Administration before two 737 MAX crashes that killed 346 people. As part of a plea to one count of conspiracy to defraud the U.S., prosecutors have asked the company to pay a second $244 million criminal fine and spend $455 million over the next three years to improve its compliance and safety programs. WSJ

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly lower as the region failed to resume the momentum from last Friday’s dovish post-NFP reaction, while the weekend macro news flow was light aside from the French election results. ASX 200 was dragged lower by energy and mining stocks, while a surprise contraction in Home Loans added to the glum mood. Nikkei 225 faded after initially bucking the trend and hitting a fresh record high before reversing course, as participants digested mixed data. Hang Seng and Shanghai Comp. were pressured with underperformance in Hong Kong amid weakness in property stocks, while the mainland also lacked demand ahead of this week’s key releases from China including CPI and the latest trade data

Top Asian News

• PBoC said it will conduct a temporary repo or reverse repo based on market conditions effective from July 8th and the tenor of the temp repo or reverse repo will be overnight loans, while it added the move is to maintain banking system liquidity reasonably ample and to increase the accuracy and efficiency of open market operations.
• China’s MOFCOM said China’s Vice Premier will co-chair the fifth meeting of the Sino-Russian intergovernmental cooperation committee in Russia on July 9th, according to Reuters.
• China’s auto manufacturers association is strongly dissatisfied with the EU Commission’s anti-subsidy tax rate, according to Reuters.
• Tokyo Governor Koike won re-election for a third term, according to exit polls cited by Reuters.
• Japan’s government says regular pay rose 2.5% Y/Y, which was the fastest pace of increase since January 1993.
• BoJ raises assessment for 2 of Japan’s 9 regions in quarterly report; cuts assessment for 2 of Japan’s 9 regions; maintains assessment for 5 of Japan’s 9 regions. Many regions said wage hikes are spreading among smaller firms to retain and hire new workers.
• China Auto Industry CPCA says 1.78mln passenger cars sold in June -6.9% Y/Y (vs 1.72mln in May); Tesla (TSLA) exported 11,746 China-made vehicles in June (vs 17,358 in May); says new energy vehicle exports currently face “temporary” pressure.

European bourses, Stoxx 600 (+0.6%), began the session on a weaker footing with initial sentiment hampered by the French second round parliamentary elections, which resulted in a hung parliament. However, optimism soon lifted and benchmarks soared to session highs, CAC 40 +0.5%, potentially stemming from comments by French Socialist leader Faure who said the NFP will select a PM from within the alliance within the week, via AFP. European sectors hold a strong positive bias vs an initially negative bias. Insurance takes the top spot, with JPM noting that given the recent sell-off within the sector and specifically Axa (+1.5%), there is a buying opportunity. Elsewhere, Energy and Basic Resources both lag amid weakness in the crude and metals complex, respectively. US Equity Futures (ES U/C, NQ +0.1%, RTY +0.2%) are mixed and trading incrementally on either side of the unchanged mark. Sentiment has improved in recent trade, given the strength in European equities since the cash open.

Top European News

• German Economy Minister Habeck says the debt brake could only be held so far because defence spending goals were not reached; finance conditions do not fit to the security situation in Germany
• Maersk (MAERSKB DC) says extreme weather conditions are forecasted along the South African coastline for the next few days, particularly between Cape Town & Port Elizabeth. Weather will impact vessel movement and operation.

FX

• DXY is marginally lower and back on a 104 handle in what has been a relatively quiet start to the week. The index is managing to hold above last week’s NFP-induced 104.82 low with Thursday’s CPI report set to be the next big test for the greenback.
• EUR has been able to shrug off initial worries surrounding the fallout of the French election which showed a strong showing for the left and uncertainty stemming from a hung Parliament. EUR/USD gapped lower at the open to 1.08 before printing a subsequent session high at 1.0842.
• GBP is steady vs the Dollar with fresh fundamentals lacking, though with traders mindful of speak from BoE’s Haskel later on. 1.2821 is the high watermark for Cable thus far, with not much in the way of resistance until the 12th June high at 1.2860.
• JPY is a touch softer vs. the USD but near levels traded on Friday in the wake of the NFP report. USD/JPY made an incremental new low overnight at 160.27 before the USD clawed back some losses vs. peers.
• Antipodeans are trivially softer vs the Dollar; AUD advanced as high as 0.6761 overnight before scaling back gains and slipping back below its 50DMA at 0.6742.
• PBoC set USD/CNY mid-point at 7.1286 vs exp. 7.2640 (prev. 7.1289)
• CNB Minutes (June): Zamrazilova & Kubelkova dissented and voted for a 25bp move. At upcoming meetings, board should discuss the option of slowing the decline in rates or stabilising them for some time. Frait said the CZK may be undervalued.

Fixed Income

• OATs gapped lower by 39 ticks on the open before then slipping further to a 123.36 base. Pressure in the wake of the surprise election outcome where NFP won. However, OATs have since picked up and are near unchanged on the session up to a 123.95 peak, potentially a function of the market cheering a removal of the right-wing risk.
• USTs are slightly underperforming Bunds/Gilts but only modestly so. US enters a particularly busy week with dual-testimony from Powell and then CPI headlining. Treasuries are pressured by around 7 ticks to a 110-11+ base, but remains in relative proximity to Friday’s 110-20 peak.
• Bunds are softer and holding just below the 131.00 mark in a 130.77-131.13 band. Data saw EZ Sentix for July come in at -7.3 (exp. 0.0, prev. 0.3), though sparked no real reaction.

Commodities

• Crude is softer intraday despite the rebound in risk across stocks, amid positive vibes regarding the Israel-Hamas ceasefire proposal. Brent September slipped from a USD 86.92/bbl peak to a USD 85.95/bbl trough.
• Precious metals are lower across the board and giving back some recent gains as the Dollar attempts a recovery and the DXY tries to mount 105.00 once again.
• Base metals are flat/mixed, with prices recovering from the overnight weakness as Chinese property stocks slumped.
• Hurricane Beryl makes landfall in Texas after hitting Mexico
• NHC said Beryl is forecast to strengthen to a hurricane again before landfall and a storm surge warning was extended along the Texas coast. NHC also announced that a hurricane warning is in effect for the Texas coast from Baffin Bay northward to San Luis Pass and Galveston Island, as well as for the south of Baffin Bay to the mouth of the Rio Grande River, according to Reuters. Furthermore, the NHC later confirmed that Beryl became a hurricane again.
• US Coast Guard shut the Port of Houston ahead of approaching Beryl, while ports of Texas, Freeport & Galveston were also shut by the Coast Guard, according to Reuters.
• Citgo began cutting production at its Corpus Christi, Texas refinery (165k bpd) ahead of Beryl but plans to keep the refinery running at minimum rates during the storm, according to sources cited by Reuters. It was later reported that the Port of Corpus Christi announced the port was closed due to Beryl.
• A fire broke out at a gas pipeline in Crimea due to an accident although there were no casualties, according to Russia-installed officials.

Geopolitics: Middle East

• Israeli PM Netanyahu said any Gaza deal must allow Israel to continue fighting until all war objectives are met and the deal must not allow weapon smuggling to Hamas via the Gaza-Egypt border. Netanyahu added that thousands of armed militants cannot return to northern Gaza under the deal and that the proposal to which Israel agreed allows the return of hostages without compromising war objectives, according to Reuters.
• A revised proposal on a Hamas-Israel deal stated talks on the release of Israeli hostages including soldiers will start in a 16-day period after the first phase and an agreement on a hostage release deal is to be concluded before the end of the fifth week of the second phase, according to a senior Hamas source. Furthermore, the revised proposal involves mediators to guarantee a temporary ceasefire, aid delivery, and the withdrawal of Israeli troops as long as indirect talks continue to implement the second phase, according to Reuters.
• Egypt is to host Israeli and American delegations to discuss outstanding issues in Gaza and a ceasefire agreement, according to senior sources cited by Al Qahera News TV. It was also reported that CIA Director Burns is expected to visit Cairo this week for Gaza ceasefire talks.
• An Israeli air strike on a school sheltering displaced Palestinians in Gaza’s Al-Nuseirat killed at least 13 people, while the Israeli military said its airstrike targeted militants in an area near a Gaza school. It was also reported that senior Hamas government official Ehab Al-Ghussein was killed by Israel’s air strike in Gaza City, according to Reuters.
• Lebanon’s Hezbollah said it launched its “largest” air operation, sending explosive drones at a mountaintop Israeli military intelligence base in the annexed Golan Heights, according to SCMP.
• Moderate Pezeshkian beat his hard-line rival in the Iranian presidential race runoff, according to the interior ministry, while the vote is unlikely to result in a shift of policies but may shape the succession for Iran’s Supreme Leader Khamenei, according to Reuters.

Geopolitics: Other

• Local Ukrainian authorities say air defences are operating during a rare daytime Russian missile attack, strikes reported in Kyiv. “A series of violent explosions in the center of the Ukrainian capital Kiev”, according to Sky News Arabia
• Ukrainian security source said Ukrainian forces hit a Russian munitions depot in the Voronezh region using drones, while a state of emergency was introduced in some parts of the Voronezh region following the drone attack.
• Russia has halted a Ukrainian attempt to hijack a Russian strategic bomber to Ukraine, via Tass; Ozerne airfield was struck to stop this.
• NATO will need 35-50 additional brigades under new plans to defend against Russia; Germany will need to quadruple air defence capacities under new NATO defence plans, according to sources cited by Reuters.
• North Korean leader Kim’s sister said South Korea’s recent drills near the border are inexcusable and explicit provocation, while she added that if North Korea’s sovereignty is violated, North Korea’s armed forces will immediately carry out their mission and duty according to the constitution.
• China is developing a new stealth aircraft which will be a fifth-generation fighter jet with stealth function and is likely to be deployed on China’s third aircraft carrier the Fujian, according to Nikkei.
• Philippines President’s Office announced the Philippines and Japan signed a reciprocal access agreement

US Event Calendar

• 11:00: June NY Fed 1-Yr Inflation Expectat, prior 3.17%
• 15:00: May Consumer Credit, est. $9b, prior $6.4b

DB’s Jim Reid concludes the overnight wrap

The main story this morning is obviously the second round of the French elections where yet another electoral shock has been served up in 2024 with the far-left New Popular Front securing the surprise outcome of being the largest group. They are in line to win 182 seats (around 160 expected in the final Ifop poll on Friday). The far-right RN party and allies has claimed 143 seats (around 190 expected on Friday but edging lower all of last week). Macron’s ENS movement are looking set for 163 seats (around 135 expected on Friday). The tactical voting to block the far-right has succeeded so much that it’s swung the pendulum in the opposite direction but without anyone having an overall majority which would have been 289 seats.

The NPF have the most fiscally aggressive program in terms of both spending and taxation and the market will be suspicious that the prospect of them being in government now or later will bring higher deficits with the associated concerns about debt sustainability and tense relations with Europe. Last night the far-left were already talking about wealth taxes and increases on taxes on corporates which won’t be market friendly. However trying to build a government that has any kind of stability looks a very high bar this morning. Political paralysis for the next 12 months seems the most likely outcome. See our economists’ blog overnight here for the most likely scenarios.

In addition to this, our economists, strategists and Euro rates and credit traders will host a call at 10am London time this morning. Please register here if you’d like to attend. So far this morning the Euro (-0.08%) is only trading fractionally lower at 1.0831 against the dollar while European equity futures tied to the STOXX 50 (+0.32%) are edging higher as I type. OAT futures are lower but well within the trading range from Friday.

Moving on, there’s a lot to digest this week with the US CPI report (Thursday) and Fed Chair Powell’s testimonies to the Senate and House committees (Tuesday and Wednesday) the obvious highlights alongside PPI and the start of US Q2 earnings season on Friday with JP Morgan, Citi and Wells Fargo reporting.

Outside of these the day by day highlights are NY Fed 1-yr inflation expectations today, tomorrow’s US small business optimism survey to see if the “K” shaped recovery continues. Wednesday sees China’s CPI and PPI, Japan’s PPI, Norwegian and Danish CPI, Italian IP and a US 10yr Treasury auction. Thursday sees the latest US monthly budget numbers alongside jobless claims which will continue to get close attention given recent mixed signals on the US labour market. There is also a 30yr Treasury auction. On Friday the University of Michigan survey and Swedish CPI will be the highlight outside of the main events mentioned above. In geopolitics, there is a NATO summit Tuesday through Thursday, and Indian PM Modi visits Russia today and tomorrow both of which may generate headlines. The full week ahead is at the end as usual.

Let’s now preview the US CPI and PPI releases and review a mixed payroll print on Friday. The headline CPI should print soft (+0.09% MoM DB forecast vs. +0.01% previously) thanks to falling gas prices. However core is expected to edge up (+0.25% MoM vs. +0.16%). If our economists are correct, YoY headline CPI will fall by two-tenths to 3.1%, with core edging up a tenth to 3.5%. However three-month annualised core would fall four tenth to 2.9%, though the six-month annualised rate would stay at 3.7%. For the PPI we always look at the categories feeding into core PCE, namely health care services, airfares and portfolio management. The final of these three should be firm given the recent rally in equities and airfares could bounce back after a weak May. This also could be the end of easy comps as our econ team point out that weak July and August prints will soon roll out of the YoY numbers.

This is important as if markets do want a September cut then a bit more progress is needed on inflation absent an “unexpected weakening” (in Powell’s words) in the employment situation.

With that in mind it’s useful to review a mixed employment report on Friday. Payrolls at +206k were decent but the last 2 months of revisions were -111k and private payrolls only expanded at +136k. Unemployment edged up a tenth to 4.1% and is now 0.7pp above its cyclical lows. This hasn’t yet triggered the Sahm rule of a recession always occurring after unemployment rises 0.5pp from its lows, as the rule deals in 3 month moving averages. However at 0.43pp it is now close.

Where this time could be slightly different for the Sahm rule, or at least require a higher trigger, is that the participation rate continues to improve. On Friday for example, the prime-age (25-54 age group) participation rate hit 83.7%, its highest since 2001. Also new entrants to the labour force was the highest since 2017. So as unemployment rises go (and it was a soft 4.1% given the 2 decimal print was 4.05%) it was a decent one.

In Asia, Chinese stocks are underperforming with the Hang Seng (-1.21%) leading losses followed by the Shanghai Composite (-0.54%) and the CSI (-0.47%). The Nikkei (+0.20%) and the KOSPI (+0.10%) are seeing minor gains. S&P 500 (-0.12%) and NASDAQ 100 (-0.11%) futures are edging lower and 10yr UST yields are up a basis point.

Early morning data showed that labour cash earnings in Japan grew +1.9% y/y in May (v/s +2.1% expected), but still marking the biggest gain since June 2023. It followed a downwardly revised increase of +1.6% in April. Meanwhile, real wages fell -1.4% y/y in May (v/s -1.2% expected) with the decline extending to a record 26th straight month. Japan’s current account surplus grew for the 15th straight month swelling to 2.85 trillion yen in May (v/s 2.35 trillion yen expected) from the previous month’s 2.05 trillion yen surplus.

In central bank news, the People’s Bank of China (PBOC) revealed this morning that they would start conducting temporary bond repurchase agreements or reverse repos to make open market operations more efficient, aiming to maintain sufficient liquidity in the banking system.

Looking back at last week now and markets continued to advance, as poorer data led investors to dial up the chance of future rate cuts. Indeed on Friday, there was a very underwhelming US jobs report (discussed above), which added to the run of weak data recently.

The payrolls report came on the heels of some weak ISM services and manufacturing prints earlier in the week, and it led to a sharp rally in US Treasuries. For instance, the 2yr yield ended the week down -15.0bps (-10.2bps Friday) at 4.60%, which is its lowest closing level since March. And the 10yr yield was also down -11.8bps last week (-8.0bps Friday) to 4.28%. Hopes for a rate cut were also evident from fed funds futures, and by the end of the week they were pricing in 50.8bps of cuts by the December meeting, so at least two 25bp rate cuts are now fully priced in by year-end. But in Europe it was a different story, with yields on 10yr bunds ending the week up +5.6bps (-5.3bps Friday) at 2.55% as French political risk reduced.

Finally, risk assets did pretty well against this backdrop, as the prospect of rate cuts outweighed the weak economic data. That helped the S&P 500 to end the week at another all-time high, posting a +1.95% gain (+0.54% Friday). And the moves were echoed elsewhere, with Europe’s STOXX 600 posting a +1.01% gain (-0.18% Friday), whilst Japan’s Nikkei was up +3.36% (unch. Friday). Otherwise, we also saw Brent crude oil prices rise for a fourth consecutive week to $86.54/bbl, and gold prices were up +2.81% (+1.51% Friday) in their best week since early April.

Hurricane Beryl, the first Atlantic hurricane of the year to strike the US, made landfall in eastern Texas as a Category 1 storm in the early morning hours on Monday.

After causing billions of dollars of damage across the Caribbean and Mexico’s Yucatán Peninsula last week, Beryl has finally arrived near Matagorda Beach as a Cat. 1 storm with winds over 80 mph.

As the storm moves inland, torrential rains, surges, tornadoes, and high winds are expected across eastern Texas today. Some areas could receive 5-10 inches of rain, with isolated totals upwards of 15 inches. 

“Life-threatening storm surge and heavy rainfall is ongoing across portions of Texas. Sustained tropical storm-force winds and hurricane-force wind gust have already been reported along the coast, these winds will continue to spread inland,” warned the National Hurricane Center. 

A state of emergency has been declared across 121 counties. Nearly 300,000 Texas were without power as of 0600 ET, according to power tracking website poweroutage.us.

As the storm approached the Texas coast, we recently previewed (read: here & here) how major oil/gas infrastructure, either offshore or onshore, was possibly in the cone of uncertainty path. 

On Sunday, Exxon Mobil said it was adjusting some operations, while Freeport LNG reduced liquefaction operations with plans to resume once the storm passes, according to Bloomberg.

In markets, WTI briefly tagged two-month highs of $84.50bbl, last seen since mid-April, but has since slid to the low $82bbl level. 

“A much-anticipated move of Brent past $90 is going to be contingent on weather risk and a confirmation of a strong seasonal uplift in gasoline demand,” said Harry Tchilinguirian, group head of research at Onyx Capital Group.

Tchilinguirian noted, “If either does not materialize, the market is more likely to consolidate rather than race higher.”

Beryl was a close call for the Biden administration, which faces an active hurricane season threatening oil and gas refineries along the Gulf Coast. Any major storm that disrupts refineries or offshore drilling platforms could push the average price of gasoline to the politically sensitive $4 per gallon mark ahead of the presidential elections in the fall.

Authored by Mike Shedlock via MIshTalk.com,

The Biden campaign learned nothing from the debate about coverups.

This is not confidence inspiring.

CBS News reports Biden campaign provided a list of approved questions for 2 radio interviews

President Biden’s campaign provided lists of approved questions to two radio hosts who did the first interviews with him after his faltering debate performance, both hosts said on Saturday.

Mr. Biden’s Thursday appearances on Black radio shows in the critical states of Wisconsin and Pennsylvania were his first chances to show he could answer questions and discuss his record after a debate in which the 81-year-old repeatedly struggled to complete sentences and press his case against former President Donald Trump.

Radio host Earl Ingram said Saturday that Mr. Biden’s aides reached out to him directly for his interview that aired Thursday and sent him a list of four questions in advance, about which there was no negotiation.

“They gave me the exact questions to ask,” Ingram, whose “The Earl Ingram Show” is broadcast statewide across 20 Wisconsin outlets, told The Associated Press. “There was no back and forth.“

Appearing with Ingram earlier on CNN, Andrea Lawful-Sanders — host of “The Source” on WURD in Philadelphia — said that she had received a list of eight questions, from which she approved four.

When asked about the set list of questions, Ingram — who has been in radio for 15 years and said he doesn’t consider himself a journalist — said that the notion of receiving a set list of questions for a guest gave him pause, but also presented a perhaps once-in-a-career opportunity.

“I probably would never have accepted, it but this was an opportunity to talk to the president of the United States,” he said.

Policy Change

The New York Times has a similar take minus the quote “They gave me the exact questions to ask,” adding an official denial but also an ambiguous statement that one can take either way (third paragraph below).

Lauren Hitt, a spokeswoman for the Biden campaign, said it was actually campaign aides, not White House officials, who had sent the list of questions. She said it is “not uncommon” for the campaign to share preferred topics, but added that campaign officials “do not condition interviews on acceptance of these questions” by the interviewer.

“Hosts are always free to ask the questions they think will best inform their listeners,” she said.

Later on Saturday, a person familiar with the campaign’s booking operation, who spoke on condition of anonymity to discuss internal matters, said that policy had changed, and that while interview hosts have always been free to ask whatever questions they please, the campaign would no longer offer suggested questions to hosts.

That appears to be a denial but is purposely ambiguous. Judging from CBS, the correct interpretation appears to mean the the list of questions is anything but a suggestion.

An alternative interpretation is “Mercy, we have been found out, and the new policy is don’t risk it.”

No matter which of those is correct. It doesn’t look good.

How Long Has This Been Going On?

The Press has been going along with this for years now. Only asking pre-approved and scripted questions. The Press Secretary then writes them out with the “answer” he is supposed to give. It’s a disgrace.

Everything with Biden is a show. pic.twitter.com/rPcBWbJO5l

— Geiger Capital (@Geiger_Capital) July 6, 2024

If Harris Replaces Biden, She Will Deal With This

Me on a hurdle for VP Harris: “She has been one of the main public validators of [Biden’s] health. You remember after the Hur report, she went out there and said he is with it, he is commanding everything in the room. She is going to have to sit down & answer tough questions.” pic.twitter.com/MLoKDamdiK

— Alex Thompson (@AlexThomp) July 5, 2024

When the pack of lies starts unraveling, it is damn hard to contain them. Strike that. It’s impossible to contain them.

Who’s the Bigger Liar?

Democrats want you to believe they are the party of integrity while the press covered up everything about Hillary, Hunter, and Joe.

However, many of Trump’s lies are so preposterous no one in either party ever believed them. “Mexico will pay for the wall,” is a great example. “We will balance the budget with tariffs,” is another.

It would behoove Trump to not make such ridiculous statements but most are understood lies from the beginning.

For Democrats, the curtain has finally been pulled back. Biden and the press are unexpectedly caught in the same booth with their panties down.

That’s what voters are angry about. And it’s why Biden will pay a bigger price for his lies than Trump.

“It’s a Biden Question”

In case you missed it, please see “It’s a Biden Question” a Musical Tribute to the Stephanopoulos Interview

Was that a cream puff interview between George Stephanopoulos and President Biden? How did Biden do? What is the goal of the press now?

I address the question: Why Is the Press No Longer Covering Up for Biden?

One month ago, when momentum-chasing market pundits and other fair-weather experts were quick to throw Tesla out of the Mag7 and forecast that the stock would keep on sinking indefinitely even as the AI bubble took the Big 5 – MSFT, NVDA, AAPL, GOOGL and META – into the stratosphere, we observed that “TSLA remains one of the most shorted names in the hedge fund space and is one of the biggest mutual fund underweights”…

TSLA remains one of the most shorted names in the hedge fund space and is one of the biggest mutual fund underweights pic.twitter.com/fr3Rxju9Wq

— zerohedge (@zerohedge) June 4, 2024

…. implying naturally that a face-ripping short squeeze was imminent – and sure enough, just three weeks later we have seen the biggest meltup in TSLA history, the stock surging nearly 50% in just over a week.

We were once again about a month ahead of the curve, and now Bloomberg has caught up, writing that hedge funds had piled into short bets against Tesla right before the electric vehicle maker unveiled a set of numbers that triggered a hefty share-price rally.

Bloomberg notes that about 18% of the 500-plus hedge funds tracked by data provider Hazeltree, had a short position on Tesla at the end of June, the highest percentage in more than a year. That compares with just under 15% at the end of March. Of course, anyone who tracked our Twitter feed or had access to our premium subscription, was well aware of this and the imminent squeeze that would soon follow.

The next part is obvious: having ignored the inevitable meltup, Bloomberg now scrambles to catch up and writes that the massive pile up of short bets “now threaten to saddle the hedge funds behind them with losses.” Which is also wrong: the losses have already been booked and most funds were forced to close their shorts in the recent panic meltup. In fact, if anything, now that the squeeze is common knowledge thanks to Bloomberg pointing out what our readers know a month ago, it’s time to close the long and go short again, even if the fundamentals suggest that there is more potential upside.

Tesla is likely to see its profit margins improve, helped by lower production and raw material costs, according to Morningstar Inc.’s Seth Goldstein, one of the top three analysts covering the stock in a Bloomberg ranking that tracks price recommendations.

The company will likely “return to profit growth” next year, he said in a note to clients. But how Tesla handles the market’s intensifying focus on affordable EVs will be key, he added.

Not only that, but with the stock price surging 50% in just a few days, one can make the argument that most if not all good news for the foreseeable future was promptly priced in. Meanwhile, there is a growing sense of uncertainty around how to treat the wider EV market, amid a sea of conflicting dynamics. The industry benefits from generous tax credits. Yet it’s also contending with significant hurdles in the form of tariff wars and even identity politics, with some consumers rejecting EVs as a form of “woke” transport.

In the US, Donald Trump has said that if he becomes president again after November’s election, he’ll undo existing laws supporting battery-powered vehicles, calling them “crazy.” That said, Trump is a “huge fan” of Tesla’s Cybertruck, according to Elon Musk, who recently told staff to brace for major job cuts, with sales roles among those affected. And the Cybertruck, Tesla’s first new consumer model in years, has been slow to ramp up.

For that reason, some hedge fund managers have decided the stock is off bounds altogether. Tesla is “very difficult for us to position,” said Fabio Pecce, chief investment officer at Ambienta where he oversees $700 million, including managing the Ambienta x Alpha hedge fund.

Basically, it’s not clear whether investors are dealing with “a top company with a great management team” or whether it’s “a challenged franchise with deficient corporate governance,” he said.

However, “if Trump wins, it is truly going to be very positive” for Tesla, though “obviously not amazing for EVs and renewables in general,” he said. That’s because Trump is expected to impose “massive tariffs towards the Chinese players,” which would be “beneficial” to Tesla, Pecce said; this is also wrong since there is virtually no Chinese EV penetration in the US, and if anything it would force even more dumping of Chinese EVs in Europe which is also a huge market for Tesla.

While TSLA managedto go green for the year last week after a painful slump which nearly wiped out half the stock value since 2023, other EV companies have fared worse: the Bloomberg Electric Vehicles Price Return Index, whose members include BYD, Tesla and Rivian, is down about 22% so far in 2024. At the same time, the metals and minerals needed to produce batteries are at the mercy of wildly volatile commodities markets, with speculators regularly trying to make a quick buck on shifts in supply and demand. Price volatility means some battery manufacturers are having to adjust to a market in which their profit margins have been getting badly squeezed.

Against that backdrop, more traditional automakers are finding themselves under pressure from shareholders to slow down their capital expenditure on EVs, with recent examples including Porsche. Polestar Automotive, a high-end EV manufacturer, has lost almost 95% of its value since being spun out of Volvo Car AB two years ago. Fisker, another luxury EV maker, saw its value wiped out starting last year and has since filed for a second Chapter 11 bankruptcy protection.

Soren Aandahl, founder and CIO of Texas-based Blue Orca Capital, said “valuations in the EV space are so beat up” that he’s now avoiding shorting the sector. It’s no longer an obvious contrarian bet, because those tend to do best if investors enter “when things are a little bit higher,” he said. But at this point, “a lot of the air’s already come out of the balloon” and we certainly agree: the time to go long TSLA was a month ago. Now much of the immediate good news has been priced in.

But Eirik Hogner, deputy portfolio manager at $2.7 billion hedge fund Clean Energy Transition, suggests there may be more pain to come for the wider EV industry. There are still “way too many” startups that remain “sub-scale” and with gross margins that are simply “too low,” he said. As a result, the supply-demand dynamic of the EV market “is still very negative.”

“Ultimately, I think you need to see more bankruptcies” before the market starts to look healthier, Hogner said.