Month: August 2024

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

Profitable bond trading opportunities arise when your expectations about Fed policy differ from those of the market. Therefore, with the Fed seemingly embarking on a series of interest rate cuts, it behooves us to appreciate how many interest rate cuts the Fed Funds futures market expects and over what period. Equally important, Fed Funds futures help us assess the market’s economic growth and inflation expectations.

Currently, Fed Funds futures imply the Fed will start cutting rates in September and reduce them by 2.25% to 3.09% in early 2026. From that point, the market expects the Fed to slowly increase Fed Funds to 3.50%. The limited rate cuts and relatively high trough in Fed Funds tell us the market is not pricing in a recession but a normalization of GDP with inflation running at or slightly above the Fed’s 2% target.

If the Fed Funds futures market is correct, the upside in bond prices may be limited, especially compared to prior easing cycles. However, suppose the market underestimates the probability of a recession or a sharper-than-expected inflation drop over the coming few years. In that case, there is significant upside potential in bond prices.

Fed Funds Futures Caveat

Before we provide historical context for what the Fed might do and a historical track record of Fed Funds futures estimates, it’s important to caveat that market beliefs about future Fed actions and, consequently, the economy and inflation can swing wildly.

The graph below shows that expectations for the Fed Funds rate at the coming September 24th FOMC meeting have whipped around over the past year. Fed Funds futures currently imply that the Fed will cut rates by 34 bps at the September meeting. This includes a 100% chance of 25 bps and a 36% (.34-.25)/.25) chance of 50 bps. Only two months ago, it was priced at a 50/50 chance of only one 25-bps rate cut. Furthermore, at the start of the year, the market thought the Fed would cut rates by 1.34% by next month’s meeting. The data suggest that the markets’ collective assessment of economic conditions can be volatile.

Fed Funds and Fed Funds Futures

The graph below charts the effective Fed Funds rate since 1955. As implied by Fed Funds futures, we added the future rates for the next three years.

The market expects Fed Funds to decline from the current rate of 5.33% to 3.09% by March 2026. Following that, Fed Funds futures imply Fed Funds will slowly rise to 3.50% by the end of 2027.

The table below quantifies the thirteen easing cycles shown above. Of these easing cycles, only two periods saw declines of less than 2.23%. 2.23% represents current market expectations. Of the two instances, the economy did not enter a recession (1966-1967 and 1995-1998).

Since 1980, only two easing cycles have seen the Fed cut Fed Funds by less than 5%. The most recent, 2020, was limited as the Fed could only bring rates down to 0%. The other was 1995-1998.

Based on history, the market is betting on an anomaly, like 1995-1998, and not normal monetary policy behavior.

What Is The Market Expecting?

Given that the market expects a relatively minimal rate cut, we should suppose it’s expecting a 1995-1998 economic scenario, i.e., no recession.   

John Authers of Bloomberg recently opined what Fed Funds futures may imply regarding inflation. To wit:

So even if markets buy the notion that the Fed will have to cut soon, they also seem convinced by the theory that the very low rates of the last three decades were an aberration, and that the norm for monetary policy will be tighter in future. That presumably goes hand-in-hand with slightly higher inflation rates.

Presuming the collective market thinks this time is different, they must believe that economic growth and inflation trends of the pre-pandemic have been reversed. We have discussed such a forecast many times. To wit, we share a section from Our Elevator Pitch For Bonds, published in July 2023.

Our view of the attractiveness of bonds can be honed into an elevator pitch. It essentially boils down to a straightforward question – Is this time different? Have the forty-year pre-pandemic economic trends reversed, and the economy’s inner workings changed permanently over the last three years? More specifically, are slowing productivity growth, weakening demographics, and rising debt levels about to reverse their prior trends and become a tailwind for economic growth?

If you think, as we do, that the last three years are an economic, fiscal, and monetary anomaly, then the opportunity to earn 4% or more on a longer-term bond is a gift.

We think yields will revert to low levels when the pre-pandemic economic and inflation trends reemerge. Negative interest rates are not out of the question.

Traders Consistently Underestimate The Fed

While the market appears to be pricing a “this time is different” scenario, it frequently prices in such a scenario, only to find out this time is no different.

In 2019, we quantified how accurately Fed Funds futures predict the future. The graph below shows our results. We recently released the article describing our analysis HERE. 

The graph compares the effective Fed Funds rate to what was implied by the futures contract for that same period six months earlier.

The gray shading represents periods in which the Fed consistently raised or lowered the Fed Funds rate. The three easing cycles shown are 1989-1991, 2000-2003, and 2007-2009. At one point during each of those cycles, the market underestimated the amount of Fed rate cuts by roughly 2.50%. The yellow-shaded circles highlight these gross underestimations.  

While not pertinent to this article, the futures market also underestimates rate increases but to a much lesser extent.

In late 2019, when we published the findings, we theorized:

 “If the Fed initiates rate cuts and if the data in the graphs prove prescient, current estimates for a Fed Funds rate of 1.50% to 1.75% in the spring of 2020 may be well above what we ultimately see.”

It turns out we were prescient. Fed Funds went to 0%.

What Do Economists Think?

With an idea of what the market forecasts for longer-term economic growth and inflation, let’s compare that to economists’ expectations.

The table below is from the Fed’s most recent series of economic projections. As circled, they forecast the long-term economic growth rate of the U.S. is 1.80%. The second table compares the projections below with those from December 2019.

The difference column shows that the Fed doesn’t believe this time is different. On the contrary, it thinks real GDP in the “longer run” will run 0.1% less than before the pandemic. Furthermore, it expects a slightly higher long-term unemployment rate. The Fed believes inflation will run around 2% in the future, as it did in 2019.

The CBO also forecasts that pre-pandemic GDP and inflation trends will prevail over the next decade.

Don’t believe the government?

The following commentary is from the Blue Chip Economic Indicators, compiled by Wolters Kluwer. The report polls 50 leading business economists to arrive at its forecasts.

In general, the longer-term outlook in the most recent survey is little changed from that in the March survey. Forecasters usually anticipate that the real GDP will grow on average at its potential rate over the longer term. The BCEI consensus looks for 1.9% growth in real GDP over the 2025- 29 period, the same estimate as in March but much slower than the 2.5% growth experienced during the five years prior to the Covid pandemic. On inflation, the consensus expects the Federal Reserve to essentially achieve its 2% target with the PCE price index inflation rate (the measure that the Fed targets) expected to average 2.1% from 2025-29. This is slightly higher than the 2.0% estimate in the March survey.

Both public and private sector economists are forecasting that this time is not different. They believe the pre-pandemic trends of lower economic growth and stable 2% inflation will prevail.

Summary

History shows that Fed Funds futures are volatile and consistently underestimate the amount of Fed easing in a cycle. Their forecast of relatively minimal Fed Fund rate cuts implies that the economy will remain strong and, to some degree, start reversing the economic and price trends existing before the pandemic.

Economists, however, believe that the major factors that drove a steady trend of declining economic growth before the pandemic will continue.

We side with the economists. There is little evidence that productivity and demographic trends have changed. The nation is more indebted today than it was before the pandemic. Given those essential economic factors remain intact, it’s difficult for us to believe that this time is different. Therefore, should we expect this coming rate-cutting cycle to differ from the past?

If the answer is no, bond investors could be on the cusp of outsized returns. 

Democrats saw continued momentum during day two of their convention in Chicago on Aug. 20, as delegates from across the country officially coronated Vice President Kamala Harris as the party’s presidential nominee.

The packed crowd in the United Center heard from former President Barack Obama, former First Lady Michelle Obama, Second Gentleman Doug Emhoff, and two notable Republicans who crossed party lines to endorse Harris this year.

Amid the euphoria sweeping across the arena, protesters continued to clash with police, resulting in multiple arrests as a frantic atmosphere brewed throughout the streets.

Jacob Burg and Nathan Worcester of The Epoch Times, lay out the five key takeaways from day two of the Democratic National Convention (DNC).

The Obamas Take the Stage

When Michelle Obama stepped up to the podium, she told the crowd, “Something magical is in the air.”

“You know, we’re feeling it here in this arena, but it’s spreading all across this country. We love a familiar feeling that’s been buried too deep or far too long.”

The former first lady called it the “contagious power of hope” for the anticipation, energy, and exhilaration for being on the cusp of a brighter day.

“Hope is making a comeback,” Michelle Obama said.

“To be honest, I am realizing that until recently, I have mourned the dimming of that hope, and maybe you’ve experienced the same feelings in that deep pit in my stomach, a palpable sense of dread about the future,” she said, explaining that it was her first time back in Chicago since her mother’s death.

She attended the convention “to honor her [mother’s] memory and to remind us all not to squander the sacrifices our elders made to give us a better future.”

Michelle Obama added, “My girl, Kamala Harris, is more than ready for this moment. She is one of the most qualified people ever to seek the office of the presidency.”

When Barack Obama took the stage, he honored his former vice president, Joe Biden.

“It’s been 16 years since I had the honor of accepting this party’s nomination for president … and looking back, I can say without question, that my first big decision as your nominee, turned out to be one of my best. And that was asking, Joe Biden to serve by my side, as vice president,” he said.

Barack and Michelle Obama hug on stage at night two of the 2024 DNC held in Chicago, Ill., on Aug. 20, 2024. John Fredricks/The Epoch Times

“We needed a leader with the determination to drive what would become the world’s strongest recovery, 15 million jobs, higher wages, lower health care costs,” he added.

“We needed a leader who was steady and brought people together and was selfless enough to do the rarest thing there is in politics, putting his own ambition aside for the sake of the country.”

He criticized former President Donald Trump, and said only Harris has a vision for the future.

“The torch has been passed,” Obama said, referring to Biden’s exit from the race in favor of Harris.

“Now it’s up to all of us to fight for the America we believe in.”

“America is ready for a new chapter. America is ready for a better story. We are ready for a president, Kamala Harris.”

Obama drew an indirect comparison during his remarks.

“I am feeling hopeful because this convention has always been pretty good to kids with funny names who believe in a country where anything’s possible,” Obama said, recalling the self-deprecating description he used to introduce himself to America in 2008.

Harris Roll Call, Emhoff Speech

Moments after delegates officially nominated Harris as the Democratic Party’s presidential nominee, she appeared on video from a Milwaukee rally to address the crowd.

Harris said she was honored to be the party’s nominee.

“This is a people-powered campaign, and together we will chart a new way forward, a future for freedom, opportunity, of optimism, and faith. So to everyone in Chicago and across America, thank you.”

U.S. Vice President Kamala Harris speaks on the first day of the Democratic National Convention (DNC) at the United Center in Chicago, Illi., on Aug. 19, 2024. Robyn Beck/AFP via Getty Images

She emphasized the importance of the present election and her uphill battle taking on the former president in November.

“So we know what we’re dealing with in this moment, and we must remember as the generations of Americans before us who led the fight for freedom, the baton is now in our hands,” said the vice president.

“We carry the baton. And so much is on the line in this election.”

Harris’s husband Emhoff spoke around 9:30 p.m. CDT on Tuesday night, beginning with the story of how they two met roughly 10 years ago on a blind date.

“[Harris] stands up to bullies,” Emhoff said. “She likes to see people do well, but hates when they’re treated unfairly. She believes this work requires a basic curiosity and just how people are doing. Her empathy is her strength.”

“She’s always been there for our children, and I know she’ll always be there for yours, too,” he added.

Republicans Speak

Two notable Republicans joined their colleagues on the other side of the aisle on Tuesday,

Former Trump White House press secretary Stephanie Grisham and Mesa, Arizona Mayor John Giles.

Former Trump White House press secretary Stephanie Grisham departs after speaking on stage during the second day of the Democratic National Convention at the United Center in Chicago, Ill., on Aug. 20, 2024. Kevin Dietsch/Getty Images

Grisham said she wasn’t just a Trump supporter but a “true believer.”

“I was one of his closest advisors,” she said.

“The Trump family became my family. I spent Easter, Thanksgiving, Christmas, and New Year’s all at Mar a Lago. I saw him when the cameras were off, behind closed doors.”

Grisham alleged that she was asked to lie in her job and that she finally reached a tipping point.

“On January 6, I asked Melania [Trump] if we could at least tweet that while peaceful protest is the right of every American, there’s no place for lawlessness or violence. She replied with one word, ‘no,’” Grisham said, displaying the text message on screen behind the stage.

“I became the first senior staffer to resign,” she added.

“Now here I am behind a podium advocating for a Democrat, and that’s because I love my country more than my party. Kamala Harris tells the truth. She respects the American people, and she has my vote,” Grisham said.

Giles said as a lifelong Republican, he felt a little out of place that night, but “more at home here than in today’s Republican Party.”

“Trump made a lot of lofty promises, unlimited economic growth, American manufacturing reborn, a secure border,” Giles said.

“Turns out Donald Trump was all talk. He wanted our votes, but he couldn’t deliver a thing.”

The mayor said he goes to ribbon-cutting ceremonies every week due to infrastructure investments from the Biden-Harris administration.

“So let’s turn the page. Let’s put our country first.”

Rogue Protest Unfolds Outside Israeli Consulate

A non-permitted pro-Palestinian protest outside the Israeli consulate in Chicago led to violent clashes and arrests on the evening of Aug. 20.

The Chicago Police Department did not immediately clarify how many protesters had been taken into custody when asked via email. The Epoch Times, however, witnessed numerous arrests as speeches continued inside.

Police line up amid a protest at the Israeli consulate during the Democratic National Convention in Chicago, Ill., on Aug. 20, 2024. Scott Olson/Getty Images

Organized by the group Behind Enemy Lines, the march began at 7 p.m. Dozens to a few hundred demonstrators, some with faces covered by keffiyehs or other garments, listened to speeches and chanted. Chants included “Long live the intifada!” and “The whole world is watching”—the latter taken straight from 1968, when confrontations between police and protesters over the Vietnam War marred an earlier Democratic National Convention in Chicago.

The protesters then marched directly into a line of Chicago Police Department officers at the Madison Street and Clinton Street intersection, just west of the Chicago River. At the head stood Chicago Police Superintendent Larry Snelling, who also led the pushback of journalists.

After some initial arrests, a remaining group of protesters moved east on Madison, and were soon surrounded by law enforcement. Behind one police line was a group of pro-Israel demonstrators, who eventually moved back a block.

After a long standoff, a more hardcore group ended up reversing west. Chased by police and journalists, protesters maneuvered through the streets south of the Israeli consulate.

At various points, one police representative threatened to strip journalists of their credentials if they stepped off a narrow sidewalk into the street.

As protesters were being handcuffed near a police vehicle, law enforcement indicated that only “green hats”—members of the progressive National Lawyers Guild—could cross a police line.

Pro-Palestinian demonstrators ended up near Union Station, where, after more than two hours, things began to die down. At one point, the Chicago police and the Illinois State Police formed lines perpendicular to each other.

More protests are expected over the remaining days of the convention, including on Aug. 22

The Chicago Police Department did not immediately clarify how many protesters had been taken into custody when asked via email, saying a summary of the events would come during the Aug. 21 morning press conference.

Democrats Thank Biden, Turn Focus to Harris

Many at the convention, including state delegates, honored Biden after he delivered the headlining speech on Monday night to pass the party’s torch to Harris.

“I think Biden made a wonderful decision when he decided to step down and let a younger generation of Democrats take over,” Henry Fries told The Epoch Times.

President Joe Biden speaks during the first day of the Democratic National Convention in Chicago on Aug. 19, 2024. Madalina Vasiliu/The Epoch Times

The Wisconsin delegate and Dane County Supervisor added that the candidate switch worked.

“We see that younger people are getting fired up to support Kamala Harris, who may have sat out before. You see that even the older Democrats are ready to welcome in these new ideas and new people, new faces, to politics. So, it’s really great. It’s really fun.”

Sandra Green Thomas, a delegate from New Orleans, Louisiana, agreed that the retooled campaign has energized young voters.

“It’s the same message they need to send all around this country. I think young people are the key to them winning this race and young people are the key to preserving our democratic traditions. It’s time to pass … the baton,” she told The Epoch Times.

Deborah McGrath, an alternate delegate from Menomonie, Wisconsin, said the atmosphere in the arena during Biden’s speech was energizing and remembered seeing the president hold his great-grandson’s hand as the two smiled.

“It was just such a poignant moment. I’ll never forget it.”

Global markets and US equity futures rose as investors awaited the annual BLS payrolls revisions – where as many as 1 million jobs can be eliminated – due at 10am ET, as well as the FOMC meeting minutes for further clues on interest rate cuts. US equity futures pointed to small moves at the Wall Street open as Europe’s Stoxx 600 edged 0.2% higher amid thin volumes while Asian stocks snapped a 3-day winning spree. As of 7:45am S&P futures were up 0.2% at 5,629 having fully recovered from the early August swoon; Nasdaq futures also gained 0.2%. The yield on 10-year Treasuries was steady at 3.81%, while the dollar paused a three-day run of declines. Oil was flat, halting the recent rout.

In premarket trading, technology stocks dipped on concerns over the country’s consumption outlook, Walmart’s planned sale of its stake in JD.com Inc. and poor earnings from key players including Kuaishou Technology. JD.com ADRs dropped 7% after Walmart raised about $3.6 billion by selling its stake in the Chinese e-commerce firm. Macy’s fell 7% after slightly missing analysts’ estimates for its quarterly revenue and lowering its outlook for sales during the rest of the year, while Target rose 12% after ending a string of sales declines in the 2Q, citing improved discretionary spending. Here are some other notable premarket movers:

• Arch Resources gains 3% after agreeing to be bought by Consol Energy (CEIX) for $2.3 billion as the transition to greener fuels threatens the industry’s long-term outlook.
• BigBear.ai surges 26% after the artificial intelligence software developer said it received an award as a subcontractor to Concept Solutions.
• Keysight Technologies rises 12% after the measurement instruments company issued a 4Q forecast range with a midpoint that came in ahead of the analyst consensus.
• Macy’s falls 7% after slightly missing analysts’ estimates for its quarterly revenue and lowering its outlook for sales during the rest of the year.
• Stronghold Digital Mining soars 60% after Bitfarms Ltd. agreed to acquire the company.
• Vector Group gains 7% after the discount cigarette maker agreed to be acquired by JT Group for about $2.4 billion.

Today’s main event is the annual payrolls revision where Goldman and Wells Fargo economists expect the government’s preliminary benchmark revisions on Wednesday to show payrolls growth in the year through March was at least 600,000 weaker than currently estimated. While JPMorgan forecasters see a decline of about 360,000, Goldman indicates it could be as large as a million. Investors will also be watching the latest FOMC minutes for further clues on the Fed’s September rate cut.

Beyond today’s FOMC minutes, anticipation is mounting before Fed Chair Jerome Powell’s Jackson Hole speech at the end of the week that could decide whether the market rebound has further to run. As traders look to Wednesday’s payrolls revisions, there’s concern signs of excessive weakness will revive fears the Fed is behind the curve on lowering rates.

“Given that the US labor market is at the center of the Fed’s policy, the publication is of unusually high interest,” said Amanda Sundstrom, interim chief strategist for Norway at SEB AB. “A large downward revision in the number of new jobs created could add new fuel to concerns that the Fed has waited too long to cut interest rates.”

A lot of Fed-related negatives appear to be priced in already as the US rates market prices in almost 100 basis points of cuts this year, he said. Gold held steady near a record high after the dollar’s recent run of losses. A weaker greenback typically aids gold as it is priced in the US currency.

European stocks make modest but broad gains as miners outperform.  Basic resources is the strongest-performing sector, while energy is the biggest laggard. The Stoxx 600 Europe index is up 0.4% near session highs.  Here are some of the biggest European movers on Wednesday:

• European miners are outperforming as iron ore rises for a third straight session. The commodity recovered more of its 9% plunge last week on signs Chinese authorities will take further steps to revive the country’s moribund property market.
• Biggest gainers by points are Rio Tinto (+2.2%), Anglo American (+1.9%), Glencore (+2.1%), Antofagasta (+2.0%) and steelmaker ArcelorMittal (+1.5%)
• Demant gains as much as 4.9%, its biggest advance since February, after Morgan Stanley double-upgrades the stock to overweight from underweight. Broker says the current “extreme” valuation levels provide an attractive entry point for the Danish hearing-aid company.
• Mobico shares rise as much as 19%, the most since March 2022, after the passenger transportation company reported first-half results and reiterated profit guidance. Analysts note that the sale of Mobico’s American school bus business is underway, which could be a positive catalyst for the stock.
• Elementis shares rise as much as 4.7% as the British specialty chemicals firm gets an upgrade to overweight from Barclays, which sees further upside from the strategic review of Talc business and sets price target for the stock at Street high.
• Alcon’s shares fall as much as 3.3% in Zurich after the Swiss eye-care products maker’s second-quarter sales undershot expectations. Analysts pointed to weakness in the vision care segment after a supplier-related quality issue affected its operating margin.
• Sonova shares drop as much as 4% after Morgan Stanley downgraded its recommendation on the hearing-aids maker to underweight from equal-weight, noting the “all-time high” valuation compared with Demant and other peers.
• Grieg Seafood declines as much as 16%, the most since September 2022, after the Norwegian seafood and salmon farming firm reported an operational loss for the second quarter of NOK35m, in stark contrast with an expected profit of NOK132m.
• SoftwareOne shares fall as much as 5.2% to the lowest since May after the Swiss IT service provider reported a first-half adjusted Ebitda miss, cut its full-year revenue guidance and said it was in talks about a potential sale. Baader sees an improvement in coming quarters despite the weaker-than-expected second-quarter results.

Meanwhile, stocks in Asia snapped a three-day winning streak, dragged down by Chinese stocks in Hong Kong. The MSCI Asia Pacific Index dropped as much as 0.7%, after gaining nearly 4% over the previous three sessions. The biggest contributors to the  gauge’s slide included TSMC, Commonwealth Bank and JD.com. Hong Kong was among the worst-performing markets in the region, with JD.com leading a rout in the tech sector on Walmart’s sale of its stake in the Chinese e-commerce company. Kuaishou Technology also tumbled, after reporting mixed earnings.

In FX, the dollar rises 0.1%, snapping a three-day decline. The Japanese yen is the weakest of the G-10 currencies, falling 0.5% against the greenback. British pound holds above $1.30. Rate-cut bets have driven a bout of dollar weakness, but the US currency halted the slide on Wednesday on speculation the drop may be overdone. “The dollar selloff is taking a breather given the speed of recent losses,” said Valentin Marinov, a Credit Agricole strategist in London.

In rates, treasuries are slightly cheaper across the curve, erasing a portion of Tuesday’s gains, as investors look ahead to the release at 10am New York time of revisions to US labor-market data. US session also includes 20-year bond auction at 1pm. Treasury yields cheaper by about 2bps across the curve with 10-year around 3.81%; bunds in the sector trade keep pace with Treasuries while gilts outperform by around 1bp. Most curve spreads are within 1bp of Tuesday’s close, which saw 2s10s steepen as additional Fed easing was priced into swaps; around 97bp remains priced in over the year’s three remaining policy meetings. Treasury issuance resumes at 1pm with $16 billion 20-year new-issue auction; WI yield is around 4.180%, 28.6bp richer than last month’s sale.

In commodities, oil prices advance, with WTI rising 0.4% to trade near $73.50. Gold held steady at $2,512/oz  near a record high after the dollar’s recent run of losses. A weaker greenback typically aids gold as it is priced in the US currency.

Bitcoin is steady and holds just beneath USD 60k; Ethereum briefly topped USD 2.6k, but has since slipped below the level. Mt.Gox transferred USD 75mln in Bitcoin to BitStamp, according to Arkham cited by Block Pro.

Looking at today’s calendar, US economic data calendar only includes the BLS payroll revisions which will be closely watched to see just how many jobs are wiped out from the historical record. The Fed speaker slate is empty with the July FOMC meeting minutes release at 2pm.

Market Snapshot

• S&P 500 futures little changed at 5,620.00
• STOXX Europe 600 up 0.1% to 513.02
• MXAP down 0.5% to 184.20
• MXAPJ down 0.5% to 572.68
• Nikkei down 0.3% to 37,951.80
• Topix down 0.2% to 2,664.86
• Hang Seng Index down 0.7% to 17,391.01
• Shanghai Composite down 0.4% to 2,856.58
• Sensex little changed at 80,791.00
• Australia S&P/ASX 200 up 0.2% to 8,010.50
• Kospi up 0.2% to 2,701.13
• German 10Y yield little changed at 2.22%
• Euro down 0.1% to $1.1117
• Brent Futures little changed at $77.24/bbl
• Gold spot down 0.2% to $2,509.31
• US Dollar Index little changed at 101.53

Top Overnight News

• Bond traders are taking on a record amount of risk as they bet big on a Treasury market rally fueled by expectations the Federal Reserve will embark on its first interest-rate cut in more than four years.
• China set its daily reference rate for the yuan broadly in line with expectations for the first time in more than a year, signaling its comfort with current currency levels following a rebound.
• US job growth in the year through March was likely far less robust than initially estimated, which risks fueling concerns that the Federal Reserve is falling further behind the curve to lower interest rates.
• Russian air defenses shot down 10 drones approaching Moscow in what Mayor Sergei Sobyanin called one of the largest attacks on the capital since the beginning of the war on Ukraine.
• Barack and Michelle Obama delivered blistering critiques of Republican nominee Donald Trump while painting Vice President Kamala Harris as the heir of their historic political legacy in addresses that capped the second night of the Democratic National Convention.
• A signal from the Bitcoin derivatives market points to the growing risk of a “short squeeze” that can stoke sharp rallies in the largest digital asset, according to cryptocurrency specialist K33 Research.

A more detailed look at global markets courtesy of newsquawk

APAC stocks were subdued following the lacklustre performance stateside where the major indices traded sideways and finished with mild losses amid the absence of macro drivers ahead of the FOMC Minutes. ASX 200 declined amid a deluge of earnings with underperformance in energy following a retreat in oil prices and with Santos shares pressured after it reported an 18% drop in H1 underlying profit. Nikkei 225 slumped at the open amid pressure from recent currency strength but is off worst levels. Hang Seng and Shanghai Comp. retreated with the former ragged lower by tech weakness as JD.com suffered a double-digit drop after reports Walmart is seeking to offload its USD 3.5bln stake in the Co. However, the losses in the mainland are limited following the PBoC’s firm liquidity effort.

Top Asian News

• China Automobile Manufacturers Association firmly opposes the EU Commission’s final draft on high tariffs on Chinese-made electric vehicles and said the tariff decision brings enormous risks and uncertainty for Chinese firms’ operations and investment in the EU, according to CCTV.
• Chinese Commerce Ministry launched an anti-subsidy investigation into dairy products imported from the EU from August 21st; dairy product probe includes Ireland, Austria, Italy, Belgium and Finland.
• China Financial Regulator Official says will strengthen supervision of the behaviour of major shareholders of small and medium size financial institutions.
• Chinese Chamber of Commerce for Machinery and Electronics says China will continue to respond on behalf of China’s EV industry and will resolutely defend the rights of their firms through various means.
• Xiaomi (1810 HK) Q2 (CNY): Revenue 88.9bln (85.8bln), Adj. Net 6.2bln (exp. 4.8bln), Repurchase programme of HKD 10bln; June MAUs reached another record high at 675.8mln.

European bourses, Stoxx 600 (+0.2%) are mostly firmer, in contrast to a largely subdued APAC session overnight. European sectors are mixed and with the breadth of the market fairly narrow. Basic Resources takes the top spot, benefiting from gains in underlying metals prices. Energy is found at the foot of the pile, hampered by losses in the crude complex. US Equity Futures (ES U/C, NQ U/C, RTY +0.3%) are flat/firmer, finding its footing following the modest pressure seen in the prior session. There are two notable releases on the docket for today; US Payrolls Revisions and the FOMC Minutes thereafter.

Top European news

• UK Chancellor Reeves plans to increase social housing rents by more than inflation for the next 10 years to boost the building of affordable homes, according to FT.

FX

• DXY is sitting just above the 101.50 mark with the USD mostly marginally firmer vs peers. US payrolls revisions will be in focus today with Goldman Sachs suggesting that the data series in the year to March could be revised lower by as much as 1 million, a potential driver for Dollar selling.
• EUR is trivially lower vs. the USD but still holding onto a 1.11 handle. The next upside target for EUR/USD comes via the December 2023 high at 1.1139.
• GBP is marginally softer vs. the USD but with Cable still maintaining its position on a 1.30 handle.
• JPY is the laggard across the majors with not much in the way of fresh fundamental drivers. USD/JPY still has some way to go before approaching yesterday’s 147.34 peak.
• Antipodeans are both a touch softer vs. the USD in quiet newsflow after a recent run of gains. AUD/USD has maintained a footing on the 0.67 handle.
• PBoC set USD/CNY mid-point at 7.1307 vs exp. 7.1303 (prev. 7.1325).

Fixed Income

• USTs are unchanged ahead of payroll revisions, and within a six tick range and holding in proximity to Tuesday’s 113-20 peak. Significant downward revisions could spark a dovish move as it adds to the factors in favour of the Fed commencing the easing cycle in September.
• Bunds are slightly softer after being the relative outperformer in Tuesday’s European session. Currently holding just above the 134.50 mark with a double-bottom from Monday/Tuesday at 134.09 providing near-term support. Bunds were unreactive to the German 2034 auction.
• Gilts are flat and pivoting the 100.00 mark. No real move to the morning’s PSNB release or the region’s auction.
• UK sells GBP 3.75bln 3.75% 2027 Gilt: b/c 3.33x (prev. 3.26x), average yield 4.068% (prev. 4.441%) & tail 0.3bps (prev. 0.4bps)
• Germany sells EUR 3.67bln vs exp. EUR 4.5bln 2.60% 2034 Bund: b/c 2.0x (prev. 1.8x), average yield 2.22% (prev. 2.43%), retention 18.44% (prev. 17.16%).

Commodities

• Crude is flat/choppy start to the European session following a subdued APAC trade after recent declines amid China demand concerns and Gaza ceasefire efforts, while the latest private sector inventory data showed a surprise build in headline crude stockpiles. Brent Oct in a USD 76.95-77.46/bbl parameter.
• Mixed/uneventful trade across precious metals with the complex taking a breather following yesterday’s price action. XAU within a tight USD 2,507-519/oz range.
• Base metals are mostly firmer but to varying degrees despite the firmer Dollar and tentative risk tone.
• ANZ Research sees Gold price to hit fresh highs to USD 2550/oz later this year.
• Earthquake of magnitude 5.58 strikes the Jujuy province in Argentina, according to GFZ.
• US Private Inventory Data (bbls): Crude +0.3mln (exp. -2.7mln), Distillate -2.2mln (exp. -0.2mln), Gasoline -1.0mln (exp. -0.9mln), Cushing -0.6mln.

Geopolitics – Middle East

• “Israel Broadcasting Corporation: The meeting between Blinken and Netanyahu did not succeed in reducing the gaps and did not make progress on the deal”, according to Al Jazeera”Differences on outstanding issues have not been resolved despite optimistic US statements”.
• Israeli raids were reported on towns in Baalbek, eastern Lebanon, while Hezbollah said it confronted an Israeli warplane that violated Lebanese airspace in the southern region with a surface-to-air missile, according to Sky News Arabia. Furthermore, Lebanese media reported that 4 people were killed and 10 others wounded in Israeli raids on the Bekaa region.
• Islamic Resistance in Iraq said it attacked a vital target in Eilat, according to Al Jazeera.
• A deal to bring an end to the fighting in Gaza was said to be on the brink of collapsing and there is no clear immediate alternative agreement that could be put forward in its place, according to two US and two Israeli officials cited by POLITICO.
• Israeli PM Netanyahu met with Finance Minister Smotrich over the past two days to convince him to support the hostage deal, according to sources cited by Walla News.
• Hamas refuted US President Biden’s claim that it is backing away from a Gaza ceasefire and hostages deal, while it insisted that the US is yielding to Israel’s interests in negotiations, according to FT.
• US Secretary of State Blinken said they need to get a ceasefire and hostage release agreement over the finish line now, while he said they will do everything possible over the coming days to get Hamas on board with the bridge proposal.
• UK Foreign Secretary Lammy said he spoke with US Secretary of State Blinken to discuss the ongoing Gaza ceasefire negotiations, while he added that an immediate cessation of fighting in Gaza and release of all hostages is vital.
• Qatari Foreign Minister told US Secretary of State Blinken that Qatar is committed to its mediating role with Egypt and the US to end the war in Gaza.

Geopolitics – Ukraine

• Russian air defences repelled a Ukraine drone attack on Moscow, according to the Moscow Mayor.
• Russia’s foreign intelligence agency said, without providing evidence, that Ukraine’s incursion into Kursk was prepared with the participation of the US, UK, and Poland, while it added that NATO advisers are providing assistance to Ukraine in its incursion into Kursk, according to TASS.

US Event Calendar

• 07:00: Aug. MBA Mortgage Applications, prior 16.8%
• 10:00: BLS releases preliminary annual payrolls benchmark revision
• 14:00: July FOMC Meeting Minutes

Central Banks

• 14:00: July FOMC Meeting Minutes

DB’s Jim Reid concludes the overnight wrap

After a significant rally for risk assets, the market advance finally came to a halt over the last 24 hours, with the S&P 500 (-0.20%) falling back after its longest run of gains so far this year. There wasn’t an obvious catalyst, and the index was little changed on the day, but it was always going to be tough to sustain such a long run of gains, and several risks are now coming into focus again. In particular, today will bring the preliminary benchmark revision to US nonfarm payrolls, and given the recent jobs report, there’s quite a bit of concern this will show a weaker labour market than previously thought.

The revisions are happening because each year, the payroll numbers are benchmarked against the Quarterly Census of Employment and Wages (QCEW) for March. At the last QCEW, employment growth through end 2023 was running at +1.5%, which was beneath the +2.0% year-on-year growth in nonfarm payrolls. So that points to a downward revision in the payroll numbers. However, the important thing to note, whatever the numbers show today, is that these revisions would only affect the numbers up to the March payrolls, and don’t cover the job gains since. And ultimately, it’s those more recent numbers that really matter for the Fed and the pace of any future rate cuts.

With those revisions in focus, a more risk-off tone prevailed yesterday, and investors moved to raise the probability that the Fed will start cutting rates with a 50bp move in September. Indeed by the close, futures had increased the likelihood of a 50bp cut to 34%, up from 24% the previous day. That narrative also got a further boost from the latest Canadian CPI data, which showed that core inflation was weaker than expected in July. Specifically, the median core measure was down to +2.4% (vs. +2.5% expected), and the trim core measure was down to +2.7% (vs. +2.8% expected). In turn, that led to growing confidence that the Bank of Canada were on course to deliver another rate cut in September, and yields on 10yr Canadian government bonds were down -5.8bps.

That dovish narrative was evident elsewhere, as Sweden’s Riksbank had already cut their policy rate yesterday morning by 25bps to 3.5%. The move was in line with expectations, but they also said in their statement that if the inflation outlook was unchanged, then “the policy rate can be cut two or three more times this year.” That’s their second rate cut this year, and it adds to the signs that the global monetary policy cycle has now turned, with most of the major central banks now either cutting rates or moving closer towards cuts (with the notable exception of the Bank of Japan).

All these developments supported a sizeable bond rally on both sides of the Atlantic. In the US, it saw the 10yr Treasury yield fall by -6.4bps to 3.81%, and the 30yr yield (-6.2bps) fell to a YTD low of 4.06%. That marked the largest decline for both since the July payrolls release on August 2 and leaves the 10yr yield not far away from its recent closing low of 3.79% on August 5. And with investors dialling up the likelihood of a 50bp cut, the 2yr yield came down by an even larger -8.2bps to 3.99%. That helped the US Dollar to weaken further, pushing the dollar index (-0.44%) to its lowest level since December. Meanwhile in Europe, yields on 10yr bunds (-3.2bps), OATs (-2.4bps) and BTPs (-2.3bps) all saw a smaller decline, whilst the Euro closed at its highest level so far this year, at $1.1130.

When it came to equities, the relentless rally over recent sessions finally ran out of steam, and the S&P 500 (-0.20%) had a small decline. On a sectoral basis, the biggest underperformer were energy stocks (-2.65%), which lost ground as oil prices fell for the 5th time in the last 6 sessions, and Brent crude (-0.59%) closed at a two-week low of $77.20/bbl. The Magnificent 7 (-0.33%) were weighed down by a -2.12% decline for Nvidia, which also saw the Philadelphia Semiconductor Index fall -1.33% on the day. There were also broader elements of softness, with the equal weighted S&P 500 down -0.42% and the small-cap Russell 2000 (-1.17%) underperforming.

That weakness was clear amongst other risk assets, and the VIX Index of volatility (+1.23pts) ticked up to 15.88pts, ending a run of 5 consecutive declines. Similarly, US IG spreads were up +2bps to 97bps, which is their biggest daily move wider in the last two weeks, whilst US HY spreads widened by +6bps to 318bps. Over in Europe it was much the same story, with the DAX (-0.35%) finally ending a run of 10 consecutive daily gains, and the broader STOXX 600 (-0.45%) also lost ground.

Many of those themes have continued in Asian markets overnight, with losses across the major equity indices. In Hong Kong, the Hang Seng (-0.95%) is the biggest underperformer, having been pulled lower by JD.com (-10.25%). That comes as several outlets including Bloomberg have said that Walmart are selling their stake in the firm. Other indices also fell back, with losses for the Shanghai Comp (-0.39%), the CSI 300 (-0.10%), the Nikkei (-0.33%) and the KOSPI (-0.05%). However, US and European equity futures are now pointing to gains, with those on the S&P 500 (+0.12%) and the STOXX 50 (+0.14%) both higher this morning.

Overnight, we’ve also had the latest data on Japan’s trade balance, which showed that export growth accelerated up to +10.3% year-on-year (vs. +11.5% expected), whilst imports were up by +16.6% (vs. +14.6% expected), which is the fastest growth for imports since January 2023. Yesterday however, there wasn’t much data of note, although the final release for Euro Area inflation in July was confirmed at +2.6%, in line with the flash estimate. Similarly, the core inflation reading was unchanged at +2.9%. In Germany, we had the latest PPI reading for July, which came in at -0.8% year-on-year as expected. It was also the highest reading since June 2023, after falling as low as -9.1% in September 2023.

To the day ahead now, and data releases include the UK public finances for July, whilst in the US, the Bureau of Labor Statistics will release the preliminary estimate of the annual benchmark revision to payrolls. From central banks, we’ll get the minutes from the FOMC’s July meeting and hear from the ECB’s Panetta. Finally, today’s earnings releases include Target.

A commercial vessel in the southern Red Sea has been hit by “two unidentified projectiles” and “hit by a third projectile,” according to a post on X by UK Maritime Trade Operations (UKMTO). The UK Navy said the vessel was “not under command” following the attack. 

UKMTO said the Red Sea incident occurred about 77 nautical miles west of Al Hudayah, Yemen. No details were given about the type of vessel or the ship’s name.

Here are more details about the attack as reported by UKMTO: 

The Master of a merchant vessel reported at 0257UTC that the vessel was approached by two small craft. The first craft had 3-5 persons onboard, while the second had approximately 10. The two small craft hailed the merchant vessel, leading to a brief exchange of small arms fire. The distance between the small craft and the merchant vessel subsequently increased to 2NM. Subsequently at 0500UTC, the Master reported that the merchant vessel had been struck by two unidentified projectiles before being hit by a third projectile. The vessel reports being not under command. No casualties reported.

There was no immediate claim for the attack. Still, Iran-backed Houthi rebels based in Yemen have carried out dozens of attacks on commercial ships in the Red Sea and Gulf of Oman since the Israel-Hamas war erupted last October. In June, Houthis used a sea drone for the first time to sink a merchant ship. Biden-Harris administration’s Operation Prosperity Guardian to ensure freedom of navigation in the Red Sea has largely failed, sparking supply chain snarls across the global shipping market.

Meanwhile, a spokesperson for the Islamic Revolutionary Guard Corps said Tuesday that Iran’s retaliation attack against Israel for the killing of Hamas political leader Ismail Haniyeh in Tehran will take time. 

State media quoted Ali Mohammad Naeini as saying, “Time is on our side, and the waiting period for this response may be prolonged.”

The Middle East has been on high alert for broadening conflict since last month’s assassination of Haniyeh in Tehran. This followed the assassination of Hezbollah commander Fu’ad Shukr in Beirut.

Furthermore, Iran rejected a call Tuesday by Britain, France, and Germany to refrain from any retaliatory attacks against Israel that could spark regional conflict. 

Authored by Mark Green via RealClearPolitics,

Ever since early 2021, Americans have watched as illegal aliens have flooded across the Southwest border unimpeded. They have read with horror the accounts of innocent Americans victimized by those here unlawfully. They have seen family and friends die after being poisoned by fentanyl coming across the border. And the Biden-Harris administration has largely done nothing.

Yet now, following a few months of somewhat-reduced numbers of apprehensions between ports of entry along the Southwest border, the Biden-Harris administration is taking a victory lap. Such premature celebration, however, ignores the reality of the continuing nature of this crisis.

Before explaining why, Americans must understand that even if not one more inadmissible alien crossed our borders for the remainder of Biden and Harris’ term, the millions they have already allowed into our country have done damage that will take decades to remedy. For many families, like those of Laken Riley, Rachel Morin, and Jocelyn Nungaray, the damage can never be undone.

But if Biden and Harris want to talk about numbers, the president and his “border czar” will find no exoneration. On their watch, Customs and Border Protection (CBP) has recorded more than 10 million encounters nationwide, plus another two million known “gotaways” who have crossed our borders uncaught.

Many on the left like to appeal to the history of Ellis Island as an excuse for mass immigration – despite the fact that these individuals arrived in accordance with then-existing law. However, the number of people who came through Ellis Island was also roughly 12 million – in the 62 years between 1892 and 1954.

The number of inadmissible aliens who have been encountered at our borders or crossed uncaught since the start of Fiscal Year (FY) 2021 is unprecedented. Claiming victory now due to temporarily reduced border crossings displays a willful ignorance of the nature of this ongoing crisis, because these numbers alone do not tell the full story of what Americans are experiencing.

First, there are the continuing financial impacts. As of mid-June 2024, more than 205,000 illegal aliens had arrived in New York City since the spring of 2022. Mayor Eric Adams has declared that these arrivals and the resultant costs “will destroy New York City.” Small towns will also be struggling for years with the consequences of unchecked crossings. Springfield, Ohio, home to 60,000 people, has seen roughly 20,000 Haitians arrive since the crisis began, putting major strain on housing and other services. Whitewater, Wisconsin, a town of just 15,000 people, has been overwhelmed by the arrival of 1,000 illegal aliens “often lacking basic English skills.” According to one official in Sanford, Maine last year, “We’re tapped. … We’ve been overrun,” after costs to care for illegal aliens tripled.

DHS has reported that more than 80% of illegal aliens who are “neither expelled or repatriated directly by CBP nor continuously detained by ICE” remain in the United States years later. These communities, and thousands more like them, are going to be dealing with these costs for years.

Second, consider the ongoing public safety implications of what’s happening at the Southwest border. Border Patrol arrests of illegal aliens with criminal histories since FY2021 have more than doubled from FY2017-2020. Worse, criminals and individuals with possible ties to terrorism have been, and continue to be, released into the interior. In fact, news recently broke that the Biden-Harris administration actually released into the interior 99 individuals whom they knew were on the terrorist watchlist. According to one DHS source, ICE officials have been “discouraged from deporting even illegal immigrants who had final deportation orders and were linked to gangs.” Former ICE Field Director John Fabbricatore has said, “I was being forced to release people that should not have been allowed on the street.”

How many other threats to our safety and security have likewise been unwittingly released or entered as gotaways? How many more, who either did not commit crimes in their home country or were never caught, will do so for the first time against American victims?

Finally, despite a recent decrease in illegal crossings between ports of entry, encounters of inadmissible aliens at ports of entry are at record highs, in large part because the administration has devised numerous, unlawful mass-parole programs encouraging them to enter this way. Consider that in February 2021, Biden and Harris’ first full month in office, CBP recorded just 17,744 encounters at ports nationwide. By July 2024, that number was 110,615. Encouraging would-be border crossers to cross at ports of entry certainly cuts down on the embarrassing optics of overwhelmed Border Patrol agents and facilities, but ultimately leads to the same result – inadmissible aliens being released into the interior. And now, one of these mass-parole programs has been temporarily shut down due to massive fraud.

This border crisis is not over – not by a long shot. It is time for Congress, and the American people, to say enough is enough.

Rep. Mark E. Green, chairman of the House Committee on Homeland Security, represents Tennessee’s 7th Congressional District.

With 93% of S&P 500 companies reporting, Goldman analysts have found a sharp increase in earnings calls mentioning election uncertainty, likely dampening capital expenditure growth for companies through the end of the year. There are currently 76 days (as of Tuesday) until the November 5th US presidential elections.

“Election discussions have entered management commentary earlier than in past election cycles, with some companies—particularly financials, government contractors, and those with exposure to the Inflation Reduction Act—noting that either they or their customers are postponing some investment decisions until after the election,” a team of Goldman analysts led by Jan Hatzius wrote in a note to clients. 

The bank’s chief economist said, “Consistent with an election drag, we find that capex growth has been 5pp lower for companies citing election uncertainty on Q2 earnings calls, and that capex growth is expected to accelerate disproportionately post-election for those same companies.” 

The analysts pointed out that election discussions during the current earnings season has been “more abruptly than in previous election cycles.” 

In the bank’s mid-year capex update, Goldman highlighted that policy uncertainty leading up to the November election is expected to impact business investment modestly.

Here’s a list of companies mentioning election uncertainty: 

Companies citing election uncertainty on the earnings calls are facing lower capex growth. However, capex growth is expected to tick higher after more economic clarity is realized after the elections. 

“We expect business investment growth in the national accounts to slow from a roughly 5% pace in 2024H1 to a roughly 3% pace in 2024H2. That’s in part because there could be an election drag worth a few tenths, but mostly because the factory-building boom catalyzed by CHIPS Act and Inflation Reduction Act subsidies—which played such a large role in business investment growth over the last year and a half—has now peaked,” the analysts said. 

Wall Street is certainly on edge as this is one of the most important presidential elections in the nation’s history. Folks will choose between VP Harris’ communist-style price controls and or former President Trump’s pro-America agenda. 

Ukraine’s incursion into Russia’s Kursk region earlier this month rattled the European natural gas market, pushing prices above 40 euros per megawatt-hour amid concerns that Russian natural gas supplies to the EU might be severed. However, prices have since receded, with Goldman’s Samantha Dart telling clients Monday that the price rally is mostly “overdone.”

Last week, Ukraine’s president claimed that troops have control over the Russian town of Sudzha, about six miles inside Russian territory. Within the town is a critical gas measuring station where NatGas flows from West Siberian gas fields through pipelines that pass through Sudzha and cross into Ukraine and then into utilities in Austria, Slovakia, and Hungary. 

Despite the fierce fighting and alleged Ukrainian control of Sudzha and the metering station, Russian state-owned energy giant Gazprom recently said NatGas flows into Ukraine from Sudzha have not been disrupted. Network operators in Austria and Hungary have also confirmed no disruptions. 

Given this, Goldman’s Dart believes the price rally that surged from 30-35 EUR/MW to the 40 EUR/MW level on the pipeline supply fears has largely run its course. 

“In our view this gas price rally is overdone for three main reasons,” she told clients. 

Here are the three main reasons: 

First, since Russian gas has continued to flow through the Ukraine, there has been no actual physical tightening of the balance, and we maintain our view that these flows will only halt from Jan25, when the existing Ukraine gas transit agreement with Russia expires.

Second, while there has been no loss of pipeline supply, the longer these higher European gas prices are sustained relative to European coal and Asia LNG prices (Exhibit 1 and Exhibit 2), the lower the gas demand (owing to gas-to-coal switching) and the higher (potentially) European LNG imports, especially if the ongoing heat wave in Northeast Asia ebbs, helping soften the forward balance outlook for European gas.

Third, even if the current Ukraine flows were interrupted, we would not expect that to translate into a 1:1 tightening of the NW European balance. This is because other suppliers can step in to help offset the lost gas, such as higher Algeria flows to Italy, as we have seen during a previous interruption to the region, and higher gas flows to Hungary via Turkey, consistent with a gas trade deal announced earlier this year. From Jan25, when the Russian gas transit deal through the Ukraine expires, we expect German pipeline exports to Central/Eastern Europe to rise by 16 mcm/d on average as a result, which is already embedded in our balances.

Looking ahead, Dart forecasts Europe’s NatGas storage will be at a “comfortable 95% full” by the end of October. 

She concluded:

That said, the TTF rally illustrates how sensitive the market remains to any tightening risks into this winter, and we agree that winter TTF price risks remain skewed to the upside relative to our 35 EUR/MWh forecast.

Austria, Hungary, and Slovakia still import NatGas from the Russian pipeline. The looming threat is if war persists and Moscow weaponizes energy flows to Europe in the dead of winter. 

Authored by Jack Phillips via The Epoch Times (emphasis ours),

An official with the World Health Organization (WHO) said that mpox is not the same as COVID-19 and signaled there will not be lockdowns or similar measures, in comments about a week after the UN health agency declared an emergency over the virus.

“Are we going to go in lockdown in the WHO European region, it’s another COVID-19? The answer is clearly: ‘no,’” said Han Kluge, WHO regional director for Europe, in a live-streamed media briefing on Tuesday. “Two years ago, we controlled mpox in Europe thanks to the direct engagement with the most affected communities of men who have sex with men,” he said.

Mpox, a viral infection known as monkeypox, causes pus-filled lesions and flu-like symptoms. It is usually mild but can kill.

Officials say that a subvariant of the Clade I mpox strain called Clade Ib has caused global concern because it seems to spread more easily through routine close contact. A case of the variant was confirmed last week in Sweden and linked to a growing outbreak in Africa, the first sign of its spread outside the continent.

The WHO declared the recent outbreak of the disease a public health emergency of international concern. The Clade I mpox variant has been spreading outside of the Democratic Republic of the Congo since last year, with reports of the virus being found in about a dozen other African nations.

Kluge said that the focus on the new Clade I strain will also help in the fight against the less severe Clade II variety that has spreading globally since 2022, allowing Europe to improve its response through better health advice and surveillance.

During the 2022–23 outbreak, U.S. and worldwide officials warned that the virus was primarily spreading in males who engage in sexual activity with other males. But with the Clade Ib variant, which has been described as more severe, WHO and other agencies such as the U.S. Centers for Disease Control and Prevention (CDC) have not made similar warnings.

About 100 new cases of the Clade II mpox strain are now being reported in the European region every month, added Kluge. According to a news release from the United Nations, Congo has reported 15,600 mpox cases in 2024 along with 540 deaths.

Mpox transmits through close physical contact, including sexual contact, but unlike previous global pandemics such as COVID-19, there is no evidence it spreads easily through the air.

“We can and must tackle mpox together,” said Kluge on Monday. “So will we choose to put the systems in place to control and eliminate mpox globally? Or we will enter another cycle of panic and neglect? How we respond now and in the years to come will prove a critical test for Europe and the world,” he added.

Health authorities need to be on alert and flexible in case there are new, more transmissible clades or ones that change their transmission route, but there are no recommendations for people to wear masks, WHO spokesman Tarik Jasarevic said.

CDC Issues Mpox Update

In an update late last week, the CDC said that mpox currently poses a low risk to the United States, and no cases of Clade I mpox have been found in the country.

“The risk to the general public in the United States from the type of mpox circulating in the DRC is very low,” the federal health agency said. However, it stressed that the situation “might change as more information becomes available” or if cases of the Clade I variant appear outside of Africa.

That’s because there have been a limited number of individuals traveling on direct commercial flights from Congo or nearby countries to the United States.

Reuters contributed to this report.

Authored by Owen Ashworth via The Mises Institute,

It’s not unfair to say that the current unrest and rioting in the UK has been accompanied by a lot of inaccurate information. As with any event, everyone should be aware that it becomes a lot easier to spread false information and have people believe it. Tensions are boiling over and emotions are running amok, and it does not take a genius to understand why you should be more wary of misinformation when emotion is in the driver’s seat.

Unfortunately, the #1 rule of government is to never let an emergency go to waste. The relationship between emergencies and the state is a symbiotic relationship. Supposed “emergencies” almost always lead to the growth of government and a creeping infringement on natural rights. Take the current events in the UK—the riots accompany a crackdown on an individual’s right to say what they wish on their property, free from punishment by the government or anyone else.

During the riots, misinformation has been used manipulatively, amid extremely volatile emotions, by people for their own ends. This has been very public, with the most prominent example being the claim that the Southport stabber was a Muslim named Ali Al-Shakati. This was entirely false, but it spread all over social media and angered the people that were looking for a reason to be violent.

The public nature of the misinformation, combined with the emergencies caused by the riots, has allowed the UK prime minister, Keir Starmer, to threaten social media platforms, stating:

Let me also say to large social media companies, and those who run them, violent disorder clearly whipped up online: that is also a crime. It’s happening on your premises, and the law must be upheld everywhere.

In the spirit of an assault on our natural right to free speech, Starmer announced that his government would be re-examining existing legislation related to regulation of social media, even threatening to bring back proposed legislation that was abandoned in 2022 due to its open assault on free speech. Starmer’s government has suggested measures that would remove “legal but harmful” content. At least Cicero had a somewhat clear political philosophy before he violated all his beliefs about the universality of law. Starmer has yet to flesh out his actual political philosophy but followed Cicero down the path of violating individual rights.

In 2012, Keir Starmer was the director of public prosecutions and he was for reforming a clause of the Public Order act that made insults a criminal offense, stating:

The clear problem of the outlawing of insult is that too many things can be interpreted as such. Criticism, ridicule, sarcasm, merely stating an alternative point of view to the orthodoxy, can be interpreted as insult.

Many people who are ardent believers in two-tier policing may post a statement along the lines of, “Keir Starmer, you are a Muslim-sympathizer, and you just don’t care about the communities outside of the Islamic community.” Is this an insult or an incitement of hatred?

It could be both, but Starmer’s lack of thought concerning basic political philosophy and ethics means that he can feel comfortable holding both positions, completely unaware that his actions are nonsensical and entirely inconsistent.

Your right to say what you want, post what you want, express the feelings that come from the deepest reaches of your being, does not come from the state, a document, or a politician. It comes from the undeniable fact that you are your own being—you own yourself and only you can exert any action you wish over the many appendages of your body. Only you can produce the thoughts that constitute reason from your brain. No one else is able to take control of your brain and make you think a certain way. Proponents of restrictions on man’s ability to reason through the tool of speech should admit that they do not believe they own themselves since that is the logical conclusion of their position. Admit that you do not own yourself and we can discuss the immense political power that comes from that logic. You will soon realize just how dangerous this position is to yourself, those you love, and everyone else under which your position is enforced.

Free speech does have consequences, but those do not and can never involve the violation of the immutable fact that you own your body. You cannot sentence someone to any criminal offense due to what they say. They have not violated anyone else’s right to property, which includes your body, thus, it is manifestly immoral to use the heavy iron hand of the state to punish them for it.

If you disagree or dislike what another person says, then challenge that view, converse and debate to come to the truth, and spread it as far as you can. Unfortunately, many prominent political commentators and politicians feel the need to say that your natural right to your ability to reason is, in fact, not absolute, but qualified.

The political figures should consider why there are so many people with “ghastly” views. Members of the establishment ponder why their arguments are not taken seriously, and mistakenly come to the conclusion that it must be due to the volatile state of human nature—some people are just idiotic plebs to them. The lack of self-awareness is breathtaking. The establishment spends decades lying to the public, manipulating emotions, and lambasting them for their lying eyes. After a lot of what our lying eyes have told us becomes true years later, not even one of these figures will admit their error. Perhaps this is why so many have views they despise enough to wish them arrested.

You should listen to those you oppose so you can better understand their worldview and get a measure of how much thought they have put into their positions. In this spirit, there have been some interesting takes on free speech.

Keir Starmer’s government is suggesting removing “legal but harmful” speech. What is harmful? Hypothetically, if I state that the chancellor of the exchequer is a dull and bland orator who inspires very little confidence in anything and does not show any sign of truly understanding economics, is that harmful?

The chancellor may very well claim that her feelings have been hurt, that her reputation has been damaged, and thereby the great institution that is the treasury has been brought into disrepute, causing her ability to operate to be restricted by widely-perceived incompetence. If you have an establishment worldview, you probably believe that’s harmful. If I post it, should it be removed? The subjectivity implies inconsistent application of the law to target opinions that are uncouth. Think of the politician that you find the most duplicitous and hate the most, would you trust them with these powers? Remember, your guys won’t be in power forever.

Another take I’ve seen is this from a fairly prominent KC in the UK.

She attempts to justify the crackdown on free speech by suggesting that because the British parliament is adopting it, not the government, that this is an expression of “the will of people.” It is critical to make readers aware that this justification shows how shallow her thought process is. She has put zero thought into how this justifies the worst possible attacks on an individual’s natural rights since, per her own logic, if the parliament adopts the legislation, then that’s democracy in action and, therefore, justified. There is nothing in her own logic that theoretically would prevent parliament from adopting legislation that takes away your right to have a trial that is based on only the available evidence, then this is justified as its “the will of the people.”

She would probably oppose this, but if follows the same reasoning she uses to justify the restriction of speech.

We can add these events to the very long list of cases where governments exploit emergencies to expand their powers. Natural rights are inherent to every human being. Free speech plays a vital role to express why a society that wants to remain free should fight against forces that seek to diminish it. Those who argue that free speech is not absolute should think about this. Every dictatorship in the history of man started by suppressing speech because they knew that it helped shape their narrative and shut out opposing opinions from the mainstream. History is not binary, nations are not either fully free or totally authoritarian. Are you willing to take the risk of unleashing a power that could be dispensed by those you vehemently dislike? Man is fallible and politicians certainly aren’t altruistic, they all have their own agendas, so is there not an incentive to use this power to push their narrative? Questions to truly ponder and discuss before taking the leap.

Ukraine’s parliament on Tuesday voted to approve a bill outlawing religious organizations linked with Russia. But it has been clear from the start that “Bill 8371” is really all about banning the country’s largest Orthodox Church, which is called the Ukrainian Orthodox Church (UOC), merely because it maintains communion with the Moscow Patriarchate. 

The move was somewhat expected given it follows two-and-a-half years of Zelensky frequently sending authorities to seize Orthodox churches and monasteries, particularly in the capital, in the wake of the Russian military invasion.

Members of parliament celebrated the bill’s approval: “It’s a historical decision! Parliament passed a bill banning a subsidiary of the aggressor country in Ukraine,” MP Irina Gerashchenko wrote on Telegram.

265 MPs voted to pass the bill, which far surpassed the required minimum of 226 votes. Only 29 voted against the measure called “On the Protection of the Constitutional Order in the Sphere of Activity of Religious Organizations,” while another four abstained.

It should be remembered that back in the spring of 2022, Zelensky signed a law which effectively banned all ‘pro-Russian’ political parties in Ukraine. This meant that overnight at least eleven significant opposition parties were barred from parliament or representation.

Bill 8371 will next pass the desk of President Zelensky, where he’s expected to sign it. It will pave the way for a much bigger persecution to ramp up against the UOC, after already in some cases priests and bishops have been thrown in jail.

Last October, when the draft version of the bill was first presented to parliament, the UOC announced it was taking significant legal steps to defend itself in courts:

The Ukrainian Orthodox Church (UOC) has announced the appointment of international lawyer Robert Amsterdam of Amsterdam & Partners LLP to assist the international response to escalating attacks by the Government of Ukraine.

…”Protecting freedom of religion of all Ukrainians is essential to the continued support for Ukraine in both Washington and key European capitals,” said Amsterdam. “Draft Law 8371 represents a significant step backwards, a violation of Ukraine’s international legal commitments and the nation’s own constitution.”

Amsterdam continued: “Contrary to the Ukrainian government’s propaganda, the UOC is an independent church – instead we are witnessing pure political persecution and opportunism, which has nothing to do with Ukraine’s national security.”

In some recent instances, Orthodox clergy members have seen jail time or have been placed under house arrest, or else harassment by mobs of far-right Ukrainian nationalists, for merely calling for peace between the two countries. 

Banning the Orthodox Church will bring misery to millions of Ukrainians.
– However, if it will be supported by Washington and its minions to the extent it contributes to “de-russify” Ukraine. If the cultural & political purge is anti-Russian, then it is considered “pro-Ukrainian” pic.twitter.com/r4vBr8nE7a

— Glenn Diesen (@Glenn_Diesen) August 20, 2024

Even a remote or potential ‘Russian connection’ – be it related to culture, music, language, or religion – has put ordinary Ukrainians under the suspicion of the state and the military of late. This despite that some one-third of the country has always spoken Russian as their first language, especially in the east and parts of the south. All of this has also gone hand in hand with the Zelensky government’s efforts to eliminate the Russian language altogether from public life.

Hours after Tuesday’s parliament vote, a Russian Orthodox Church spokesman stated: “This is an unlawful act that is the grossest violation of the basic principles of freedom of conscience and human rights.”