Month: August 2024

In 2023, roughly $150 billion in US taxpayer money was doled out for government services and support to help the 20 million illegals in the country, according to a study from the Federation for American Immigration Reform (FAIR).

US taxpayers paid $150 BILLION to care for illegal aliens… JUST LAST YEAR.

But a $5 billion wall is too expensive. pic.twitter.com/zPd9NPS3bq

— End Wokeness (@EndWokeness) August 29, 2024

Most of the money was borne by state and local governments, not the feds, the NY Post reports.

In Massachusetts, Republican leaders say there’s a $1 billion hole in state coffers — and they’re accusing the Democrat-controlled government of quietly siphoning off tax dollars to deal with the migrant crisis.

On Tuesday, the state’s Republican Party filed a Freedom of Information Act request demanding Gov. Maura Healey release Massachusetts’ full migrant budget, and alleging that the true cost has been hidden from the public. -NY Post

“The Healey-Driscoll Administration has shrouded nearly $1 billion spent in secrecy, leaving Massachusetts residents in the dark,” the party’s Amy Carnevale told Fox News. “They have withheld critical information on 600 incidents involving police, fire and EMT. Blocking journalists at every turn, the administration has obstructed the flow of information to the public.”

According to FAIR, in 2023, Massachusetts taxpayers paid closer to $3 billion in state services for illegals.

In New York, the comptroller estimated that the migrant crisis would cost roughly $4.3 billion through 2025, while NYC taxpayers will be on the hook for $3 billion this year.

According to the Post, while most states’ accounts of migrant expenses look mostly at emergency housing and aid, FAIR looked at the ‘full breadth’ of state services – including education, medical expenses, law enforcement, legal costs, and welfare.

They also included the costs of US-born children of illegal immigrants.

“As long as we keep allowing millions of people to come into the country illegally every year, it’s obviously going to continue to increase the costs,” spokesperson Ira Mehlman told The Post. “This seems to be just sort of basic, common sense. If you were going to be bringing in lots and lots of people, many of them working off the books for very low wages, that there are going to be enormous social costs incurred,” he added.

And Trump wanted $5 billion for his wall.

Read the rest of the report here…

The broadly weak trend of US macro data was jolted yesterday by the hotter than expected GDP print (hilariously driven by a surge in personal consumption at the same time as Dollar General announced the time of death of the US consumer), which prompted a hawkish shift in rate-cut expectations. However, this morning, the doves get another chance for some ‘bad news’ (disinflation) to support their ‘we must cut in September” narrative, unveiled by Powell himself last week during Jackson Hole, when the Fed’s favorite inflation indicator – Core PCE – came in line with expectations, and even missed estimates on a core YoY basis. Starting with headline: 

• PCE 0.2% MoM (unrounded 0.155%), in line with estimates of 0.2% and up from the 0.1% (0.0788%) last month
• PCE 2.5% YoY, in line with estimates of 2.5%, and unchnaged from last month’s 2.5% YoY increase.

And here is core:

• Core PCE 0.2% MoM (unrounded 0.1611%), in line with estimates of 0.2%, and unchanged from last month’s 0.2% (0.1818%) MoM increase
• Core PCE 2.6% YoY, missing estimates of a 2.7% increase and unchanged from last month.

Here is the MoM headline change…

…and the annual:

Under the hood, durable goods deflation continues to drag Core PCE lower while Services costs continue to rise…

Even more notably, the so-called SuperCore PCE rose 0.2% MoM, the highest in 3 months, and which pushed YoY supecore to 3.25%, which remains awkwardly stagnant at elevated levels…

This was the 51st straight monthly rise in SuperCore prices with virtually all costs except transportation rising:

Turning to the household income statemet, on A MoM basis, income growth was stronger than expected (+0.3% vs +0.2% exp), while spending came in line as expected at +0.5% as expected.

The problem, however, is that spending growth continues to tick far above income growth, and on a YoY basis, spending continues to outpace incomes.

The absolute delta between the two series is shown in the next chart

The result is another month of declining savings: in July, the US savings rate as a percentage of disposable personal income dropped below 3.0% for the first time since covid – 2.9% to be precise – from 3.1%. This was the lowest print since June ’22 and the second lowest of the post-QE era.

All of which takes place against a background of the eight straight month of rising government handouts (well it is an election year after all) which means the savings rate would have puked even more without it!

In other words, the consumer is now wiped out and yet inflation refuses to drop materially. So yes, the Fed will cut and then we can finally unleash the second coming of the Arthur Burns hyperinflation Fed.

Authored by Paul Joseph Watson via Modernity.news,

Donald Trump has warned that Mark Zuckerberg and anyone else who illegally interferes in the election will be jailed for life is he wins the presidency.

The claim appears in a new book written by Trump called Save America that is due to be published next week.

Trump says that the Facebook founder will “spend the rest of his life in prison” if there is proven meddling.

Zuckerberg’s Facebook played a key role in censoring the Hunter Biden laptop story before the 2020 election based on fake claims that the story was a ‘Russian disinformation’ operation, when in fact it was completely true.

“Former President Donald Trump railed against Meta CEO Mark Zuckerberg in his upcoming book, accusing the tech tycoon of undermining him in the last election and warning of possible jail time.

Trump, 78, recounted meeting with Zuckerberg, 40, and seethed over the 2020 election… pic.twitter.com/XPMdIjeM6Y

— Chief Nerd (@TheChiefNerd) August 28, 2024

Some observers say that the suppression of this story, along with a multitude of others, could have changed the outcome of the vote.

In the book, Trump says that he is “watching him [Zuckerberg] closely” ahead of the election in November.

While he was in office, Trump said that Zuckerberg would visit him and “bring his very nice wife to dinners, be as nice as anyone could be,” but was secretly mounting a “plot against the President”.

“He told me there was nobody like Trump on Facebook. But at the same time, and for whatever reason, steered it against me,” writes Trump.

“We are watching him closely, and if he does anything illegal this time he will spend the rest of his life in prison – as will others who cheat in the 2024 presidential election.”

Trump’s Facebook account was suspended after the January 6 riot, despite the president telling protesters to remain peaceful and go home.

He was only reinstated to the social media platform at the start of this year.

As we previously highlighted, Zuckerberg sensationally admitted that the Biden White House pressured Facebook to censor content about COVID-19 and the Hunter Biden laptop story and that he now regrets it.

“I believe the government pressure was wrong, and I regret that we were not more outspoken about it. I also think we made some choices that, with the benefit of hindsight and new information, we wouldn’t make today,” wrote Zuckerberg in a letter to the House of Representatives’ Judiciary Committee.

*  *  *

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.

Intel’s disastrous second-quarter report has forced management to scramble for new strategies to rescue the sinking ship. With shares in freefall, sales plummeting, layoffs mounting, and the dividend suspended for the first time in decades, it’s obvious the struggling chipmaker needs a major overhaul.

Bloomberg reports that Morgan Stanley and Goldman Sachs bankers are working with Intel to advise on several scenarios that could stop the market cap hemorrhaging, including a split of the chipmaker’s product design and manufacturing businesses. 

Morgan Stanley and Goldman Sachs Group Inc., Intel’s longtime bankers, have been providing advice on the possibilities, which could also include potential M&A, the people said. The discussions have only grown more urgent since the Santa Clara, California-based company delivered a grim earnings report this month, which sent the shares plunging to their lowest level since 2013.

The various options are expected to be presented during a board meeting in September, the people said.

…

A potential separation or sale of Intel’s foundry division, which is aimed at manufacturing chips for outside customers, would be an about-face for Chief Executive Officer Pat Gelsinger. Gelsinger has viewed the business as key to restoring Intel’s standing among chipmakers and had hoped it would eventually compete with the likes of Taiwan Semiconductor Manufacturing Co., which pioneered the foundry industry. But it’s more likely that Intel takes a less dramatic step before it reaches that point, such as holding off on some of its expansion plans, the people said.

Since Intel’s advisors are exploring every possible option, have they considered this? It could be worth pitching to management at next month’s board meeting.

Intel Is Said to Explore Options to Cope With Historic Slump: BBG https://t.co/AGB3k6ldxy

— zerohedge (@zerohedge) August 30, 2024

On Thursday, CEO Gelsinger told investors at the Deutsche Bank Technology Conference, “It’s been a difficult few weeks.” He noted that management tried to project a “clear view” of its next steps during its earnings report. He continued, “Obviously, the market didn’t respond positively. We understand that.”

In markets, Intel shares are up 3% to the high point of the $20 handle following the Bloomberg report. Shares are down 60% this year as the struggling chipmaker attempts a reboot.

Shares are currently at 2013 lows.  

Intel’s issue stems from its inability to read a rapidly shifting data center market to AI chips.

As for valuation, the Wall Street Journal recently pointed out, “Intel is also now trading below the company’s book value for the first time since at least 1981, which is as far back as data from FactSet goes. This means investors are now valuing one of the world’s largest chip manufacturers for less than the value of its facilities and other assets on its balance sheet.” 

Back to Bloomberg’s report, Gelsinger’s turnaround plan might split Intel into two divisions: one concentrated on chip design and the other on manufacturing. This would allow the production arm to increase business as a contract chipmaker. 

Could this be a move to take on the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Company? 

Authored by Ben Sellers via Headline USA,

Earlier this month, leftist secretaries of state pounced at the opportunity to attack Trump-backing billionaire Elon Musk over allegations that his artificial intelligence chatbot had errantly suggested that Vice President Kamala Harris would not make the ballot in several states.

Curiously enough, the complaint appeared to ignore three major battleground states where the law still stipulates that President Joe Biden will appear on the ballot as the Democrat candidate, according to a leading conservative think-tank, which suggested that claims of Harris being eligible to appear in all 50 states may be the real disinformation.

Grok—which is available only to subscribers of the premium versions of X—debuted last year and was touted by Musk as a “rebellious” AI chatbot that would answer “spicy questions that are rejected by most other AI systems.”

However, not all of its responses may be entirely accurate.

Top election officials from Michigan, Minnesota, New Mexico, Pennsylvania and Washington sent a letter to Musk on Aug. 5 complaining that the chatbot had produced false information about state ballot deadlines shortly after President Joe Biden dropped out of the 2024 presidential race.

According to the letter, Grok had indicated that the deadline for replacing Biden had already passed in nine states states where it had not: Alabama, Indiana, Michigan, Minnesota, New Mexico, Ohio, Pennsylvania, Texas and Washington.

“In all nine states the opposite is true: The ballots are not closed, and upcoming ballot deadlines would allow for changes to candidates listed on the ballot,” the secretaries wrote.

Following the fix, the chatbot now says, “For accurate and up-to-date information about the 2024 U.S. Elections, please visit Vote.gov” before listing responses to election-related questions.

“We appreciate X’s action to improve their platform and hope they continue to make improvements that will ensure their users have access to accurate information from trusted sources in this critical election year,” the secretaries of state wrote.

Even while Biden was in the race, ballot eligibility in Ohio, Alabama and Washington was a source of concern since all three initially had ballot deadlines that took effect prior to last week’s Democrat convention in Chicago.

In each case, however, the state legislature or the secretary of state worked to resolve the loophole and ensure that the Democrat nominee would be on the ballot.

That nominee, of course, proved not to be Biden but rather Harris, his former running mate, after party elites forced the incumbent president out of the race.

To play it safe, Democrats conducted a virtual nominating process that took place prior to Harris’s ceremonial nomination and acceptance speech at last week’s convention.

Yet, despite the focus on states where Harris is now assured her spot on the ballot, major questions remain as to whether she will be eligible to appear in at least three other crucial swing states.

According to the Heritage Oversight Project, an election-integrity watchdog launched by prominent conservative think-tank the Heritage Foundation, the deadline for removing Biden from the ballot has already long since passed in Georgia, Wisconsin and Nevada.

This is big. It’s likely already too late to remove Joe Biden from the ballot.

WISCONSIN — It’s already too late to remove Joe Biden from the ballot.

NEVADA—After tonight, the fourth Friday in June, it will be too late to remove Joe Biden.

GEORGIA—Only a few weeks remain…

— Charlie Kirk (@charliekirk11) June 28, 2024

Some have argued that the question may be moot since Harris absorbed Biden’s campaign into her own.

Under such circumstances, the Electoral College, which has been oft-reviled by the Left, may prove to be its savior.

The political parties’ “nominees for president and vice president are not the candidates who are elected on November 5th, the people running for presidential elector are,” explained Joel Watson Jr., Louisiana’s deputy secretary of state for communications, in a July article by the Iowa Capital Dispatch.

Those electors, like the ones pledged to Biden during the primary, would then exercise their discretion to cast a vote for Harris instead of Biden when they convene in December.

Additionally, the article, citing information from 39 state news bureaus, disputed the Heritage Oversight Project’s deadline claims and instead listed September deadlines for Georgia (9/17), Nevada (9/3) and Wisconsin (9/3) to finalize their ballots.

Yet, Mike Howell, the executive director of the Oversight Project, told Headline USA in an email that its researchers “were not mistaken at all” about their read on the state laws.

Democrats are “not out of the woods yet … and I’m wondering why no one with standing is suing,” Howell said.

“The DNC and Biden claimed that Biden was already the nominee before he was taken out, Howell added. “So now they have two nominees, without formally withdrawing and substi[tu]ting one of them, and I’m not sure why Secretaries of State are okay with that process.”

EDUCATIONAL REMINDER: the @DNC has TWO nominees for President right now, w/o having properly substituted or withdrawn the first one.

They jumped the gun and formally named Biden the nominee while coup was ongoing. Then they nominated Harris by Zoom post-coup to beat deadlines. https://t.co/EJ6fpEip6j

— Mike Howell (@MHowellTweets) August 27, 2024

Howell took credit for having forced the DNC’s pre-convention virtual-roll-call vote due to the prior threat of a lawsuit.

We have been preparing for this moment for months

Many in the media tried discrediting us

Who is laughing now?

No more “make it up as you go” elections

Stay tuned… https://t.co/eODcN7DpQP

— Oversight Project (@OversightPR) July 21, 2024

“The DNC admitted that it was a major legal problem so they moved up the DNC nomination process to a Zoom roll call vote in early [A]ugust without any citizen actually voting for Kamala Harris,” Howell said. “This is admitted in writing by the DNC and they reference us as the reason.”

As far as the three battleground states where Harris may be ineligible, it is not yet clear whether election officials will seek to swap out the nominee to accommodate Democrats—and avert a messy legal battle—or whether Republicans will press forward with any preemptive challenges.

Howell noted that a lawsuit from the Heritage Foundation inevitably would be dismissed due to its lack of standing, meaning it would likely fall on the Republican National Committee and the Trump campaign, or on a group of concerned voters in the state, to pursue litigation.

Complicating the matter may be the issue of whether plaintiffs could advance a case before the ballots were cast, or if it would be necessary to wait until after the grievance already had occurred—setting the stage for no-holds-barred courtroom brawls like the ones in 2020.

Not surprisingly, the Harris campaign has already secured a legion of lawyers, overseen yet again by prominent ‘electioneer’ Marc Elias.

Headline USA reached out to RNC co-chair Michael Whatley to inquire as to whether it had such a lawsuit planned; as well as to Gabriel Sterling, the chief operating officer for the Georgia secretary of state’s office, to inquire whether Republican Secretary Brad Raffensperger would adhere to the law or seek a workaround to accommodate Harris.

Neither had responded as of Thursday morning.

Ben Sellers is the editor of Headline USA. Follow him at twitter.com/realbensellers. The Associated Press contributed to this report.

US equity futures were set for a stronger open to close the week after two days of wobbles, with tech stocks outperforming, paring back some of the NVIDIA-induced losses as confidence mounted that the Fed and ECB will cut interest rates in the coming months, after inflation in Europe continued to sink and with today’s core PCE expect to confirm a taming of US inflation. As of 730am, S&P futures rose 0.5% while Nasdaq 100 Index added 0.7% as traders waited to see if the Fed’s favorite inflation indicator, core PCE, confirms the picture of moderating prices. Europe’s main stock index rallied to a record high as euro-area inflation eased to a three-year low, cementing the case for the ECB to cut rates in September. The dollar was flat and 10Y yields were unchanged around 3.86% as treasuries were poised for their longest monthly winning streak in three years. Gold traded near record highs, oil was flat and bitcoin was also unchanged. Today’s macro calendar has Personal Income, Spending and core PCE as well as the UMich consumer sentiment on deck.

In premarket trading, Nvidia edged higher after tumbling 6% the previous day, while other tech names, including Marvell Technology and Dell were boosted by forecast-beating results. Here are some of the other notable premarket movers:

• Abercrombie & Fitch shares rise 2.3% after the apparel retailer was upgraded to buy from neutral at Citi, which sees several reasons as to why the investment story for the stock remains attractive.
• Autodesk shares are up 3.7% after the maker of engineering software reported second-quarter results that beat expectations. The firm raised its full-year forecast for both revenue and adjusted EPS, impressing analysts after coming under pressure from an activist investor.
• Dell Technologies shares rose 5.9% after the computer hardware company reported second-quarter results that beat expectations, with particular strength in orders for AI servers.
• Elastic shares are down 27% after the application-software company cut its full-year revenue forecast. Analysts say execution problems around sales changes made at the start of the quarter had a negative impact on the software company’s results.
• Intel shares rise 2.6% after Bloomberg News reported that the company is discussing various scenarios, including a split of its product-design and manufacturing businesses, as well as which factory projects might potentially be scrapped.
• Intuitive Machines shares soar 19% after the company said it received a $116.9 million contract from NASA to deliver six science and technology payloads, including one European Space Agency-led drill suite to the Moon’s South Pole.
• Lululemon shares rise 4.2% after the the activewear company reported second-quarter earnings. While the firm reported a top-line miss in the second quarter and reduced its full-year guidance, Morgan Stanley sees the revised guidance as achievable, noting that investors might have assigned a floor to its valuation.
• MongoDB shares rise 15.14% after the database software company reported second-quarter results that beat expectations and raised its full-year forecast. Analysts say the results suggest that growth could accelerate with an improving underlying picture.
• Ulta Beauty shares drop 8.5% after the cosmetics retailer trimmed its sales forecast following weaker-than-expected second-quarter results. Analysts flagged the impact of competition as well as the softer macroeconomic environment.

Global stocks are on track for a fourth month of gains, with most data indicating the Fed has achieved a soft-landing, by taming inflation without tipping the economy into recession. While economists expect a slight pick-up in the year-on-year PCE reading later on Friday, that’s not expected to derail prospects for a September rate cut. Bloomberg Economics sees the inflation report reviving talk of a “Goldilocks” economy that allows the Federal Reserve to start cutting rates next month.

“When rates ease, it lifts all boats,” said Florian Ielpo, head of macro research at Lombard Odier Asset Management in Geneva. “Inflation is looking better and economic growth remains decent and that’s the environment we are in.”

No matter today’s PCE print, markets expect the Fed to cut rates next month by as much as 50 basis points (but more likely 25bps after yesterday’s hot GDP and initial claims reports), and by another half-point by year-end. Ielpo said that for traders watching for monetary-policy clues, the US monthly payrolls report due next week would be even more significant than today’s PCE reading. “Inflation is a done deal so markets are more likely to pay attention to what’s happening to employment and growth,” he added, just don’t forget to keep an eye on geopolitics and the price of oil which has resumed its latest ascent and may yet throw a wrench in the Fed’s easing plans.

Expectations for central bank easing saw investors pump $20.7 billion into global bond funds this past week, with Treasuries recording the largest inflow since last October, Bank of America said, citing EPFR Global data. Treasuries were on course for their longest monthly winning streak in three years. But the wagers have weighed on the dollar, which edged lower against a basket of currencies and was set for its worst monthly performance this year.

European stocks rise for a fourth session, taking the Stoxx 600 to another record intraday high as euro-area headline and core inflation slowed as expected in August. Real estate and consumer product shares are leading gains while technology is a drag. Here are some of the biggest movers on Friday:

• Chipmaker-machinery stocks decline in Europe after a Bloomberg report saying Intel is considering splitting the design and manufacturing businesses. BE Semi falls 2.5%, ASML -2.1%, ASMI -1.3%
• Ambu shares fall as much as 14%, the most since November 2022, after the Danish health-care equipment maker reported 3Q numbers that disappointed in its key endoscopy division. Analysts also said a correction was due after the shares gained 14% in July and August.
• BlueNord falls as much 6.1%, the most since July 8, after the Norwegian fossil-fuel exploration firm said operator TotalEnergies intends to implement measures that are expected to not allow maximum technical capacity at the Tyra II field to be reached until 4Q.

Earlier in the session, Asian equities cruised to a six-week high. Hang Seng Tech Index jumps more than 3% and CSI 300 climbs almost 2%. Japanese, South Korean and Australian indexes all firmly in the green.

In FX, the Bloomberg Dollar Spot Index falls 0.1% but is poised to snap its four-week declining streak ahead of US core PCE data, with it up 0.7% on week. Tthe euro is little changed around $1.1080. USD/JPY rose above 145 after dipping back under following a post-GDP spike on Thursday. GBP/USD hovers above mid 1.31-1.32. AUD/USD consolidates around 0.68. NZD/USD grinds higher but remains below Thursday’s peak of 0.6299.

In rates, treasuries are mixed with the yield curve flatter as US trading gets under way, led by similar price action in UK and German bonds after August euro-area headline and core inflation slowed as expected.  Long-end Treasury yields are richer by ~1bp curve with front-end and belly little changed, flattening 5s30s spread; the 10Y TSY yield traded 1bp lower to 3.85%. Long-end German yields richer by more than 2bps on the CPI data and held higher on the day with German 10-year yields down 2bps at 2.26%. UK’s by nearly 5bp, narrowing their curve spreads. Curve-flattening has support from anticipation of buying tied to month-end index rebalancing, which will extend the duration of the Bloomberg Treasury Index by an estimated 0.10 year as securities auctioned during the month are added to it. Also, traders anticipate flows tied to corporate bond offerings next week, a historically heavy issuance period

As noted earlier, treasuries are poised for their longest monthly winning streak in three years as traders look past US data on personal income and expenditure due Friday and prepare for the Federal Reserve to start cutting interest rates. US government bonds returned 1.5% in August through Thursday, set for a fourth month of gains that would be the longest run since July 2021, according to the Bloomberg US Treasury Total Return Index. The gauge has been rallying since the end of April, extending this year’s gain to almost 3%, as investors have grown more confident in the case for lower US borrowing costs.

In commodity markets, oil was steady with WTI trading near $76 a barrel, though the main crude benchmark is set for its first back-to-back monthly loss this year on fears that slowing economic growth, especially in China, will impact demand. Iron ore futures pulled back slightly after jumping by about 10% in 10 days to breach $100 a ton.  Spot gold climbs $4 to around $2,525/oz.

Bitcoin is holding steady just above USD 59.5k, whilst Ethereum slips slightly. Elon Musk and Tesla win dismissal of lawsuit claiming they rigged Dogecoin.

The US economic data calendar includes July personal income and spending with PCE price indexes (8:30am), August MNI Chicago PMI (9:45am, several minutes earlier to subscribers) and August final University of Michigan sentiment (10am). Fed speaker slate empty for the session. Meanwhile in the Euro Area, there’s the flash CPI release for August and the unemployment rate from July. We’ll also get German unemployment for August, UK mortgage approvals for July, and Canada’s GDP for Q2. From central banks, we’ll hear from the ECB’s Schnabel, Rehn, Kazaks, Simkus and Muller.

Market Snapshot

• S&P 500 futures up 0.4% to 5,633.25
• STOXX Europe 600 up 0.3% to 526.32
• MXAP up 0.8% to 186.82
• MXAPJ up 0.6% to 577.85
• Nikkei up 0.7% to 38,647.75
• Topix up 0.7% to 2,712.63
• Hang Seng Index up 1.1% to 17,989.07
• Shanghai Composite up 0.7% to 2,842.21
• Sensex up 0.4% to 82,426.55
• Australia S&P/ASX 200 up 0.6% to 8,091.85
• Kospi up 0.5% to 2,674.31
• German 10Y yield down 1.6 bps at 2.26%
• Euro up 0.2% to $1.1094
• Brent Futures up 0.6% to $80.42/bbl
• Gold spot up 0.2% to $2,526.17
• US Dollar Index little changed at 101.26

Top Overnight News

• China could allow homeowners to refinance as much as $5.4T worth of mortgages months before the process typically occurs in January, and potentially with different banks. BBG
• Offices in China’s biggest cities are emptier than they were during stringent Covid-19 lockdowns in what analysts say is a sign of how the country’s economic slowdown has hurt business confidence. FT
• Russian companies are having an increasingly difficult time transacting w/partners in China as Chinese banks become worried about running afoul of int’l restrictions and being subject to sanctions. RTRS
• Eurozone CPI is inline w/the Street for Aug, including +2.2% for headline (down from +2.6% in Jul) and +2.8% core (down from +2.9% in Aug). BBG  
• Israel’s defense minister said the country should expand its war goals to ensure that the ~60K people displaced from the north by Hezbollah rocket attacks can return home. FT   
• Harris is up 1 point in a head-to-head contest vs. Trump and up 2 points if all candidates are included. WSJ
• Intel is working with advisors to explore options, including potentially splitting off its manufacturing operations. BBG
• Apple and Nvidia are in talks to invest in OpenAI, a move that would strengthen their ties to a partner integral to their efforts in the artificial-intelligence race. WSJ
• Recent US inflation readings are “still far” from the Fed’s 2% goal, Raphael Bostic said. He may take some confidence from July’s core PCE deflator, due later. Bloomberg Economics said it probably increased at an annualized pace consistent with target, while the savings rate may have slid further. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded higher across the board despite a lack of fresh catalysts following a mixed lead from Wall Street, and ahead of US PCE and the US long weekend. ASX 200 remained in a narrow range (8,045.10-8,085.00) but was propped up by its Industrials, Energy, and Gold names. Nikkei 225 traded firmer following a choppy start after August Tokyo core CPI surprisingly ticked higher, whilst the Japanese unemployment rate surprisingly rose. Hang Seng and Shanghai Comp opened with modest gains and eventually soared despite a lack of newsflow, whilst Bloomberg suggested the CSI 300 rallied amid heavy volume. Sentiment in China could’ve also seen tailwinds from the PBoC yesterday suggesting it will step up counter-cyclical adjustments and will strengthen financial support to the real economy, whilst the mood was further lifted amid Bloomberg reports China reportedly mulls allowing refinancing on USD 5.4tln in mortgages.

Top Asian News

• China reportedly mulls allowing refinancing on USD 5.4tln in mortgages, according to Bloomberg.
• Japanese government official on industrial output, said if output falls short of plans, August production could fall M/M. September is expected to fall M/M on lower production of semiconductor production equipment and electronic component devices, although the assessment is revised upward, need to be vigilant about the outlook. The official added that the impact of Typhoon Shanshan was not taken into account in August data.
• PBoC injected CNY 30.1bln via 7-day Reverse Repo at a maintained rate of 1.70%.
• China’s major state-owned banks seen buying USD in onshore foreign exchange market to prevent CNH from appreciating too fast, via Reuters citing sources.
• China’s FX Regulator to launch foreign currency non-deliverable forwards (NDFs) on 2nd September within the interbank market.
• PBoC purchased net CNY 100bln of gov’t bonds from dealers during August, via Bloomberg.

European bourses, Stoxx 600 (+0.3%) began the session with a mixed picture, and traded tentatively on either side of the unchanged mark. As the morning progressed, indices gradually picked up and edged towards session highs. European sectors hold a strong positive bias; Real Estate is found at the top of the pile, alongside Basic Resources. Tech is found at the foot of the pile, paring back the prior day’s advances and accounting for the post-earning losses in NVIDIA. US Equity Futures (ES +0.4%, NQ +0.6%, RTY +0.5%) are entirely in the green, with the NQ outperforming, paring back some of the NVIDIA-induced losses. The docket ahead includes the Fed’s preferred measure of inflation, PCE (July).

Top European News

• ECB’s Schnabel: “while risks to growth have increased, a soft landing still looks more likely than a recession”; “Incoming data broadly confirm the baseline scenario”. “In particular, the closer policy rates get to the upper band of estimates of the neutral rate of interest – that is, the less certain we are how restrictive our policy is –, the more cautious we should be to avoid that policy itself becomes a factor slowing down disinflation.”; “In other words, the pace of policy easing cannot be mechanical. It needs to rest on data and analysis.”; “Wage pass-through may be stronger.”. In short, remarks from Schnabel are in-fitting with the data-dependent approach the ECB has been taking but with a slight hawkish skew from the ECB official, in-fitting with her general bias.
• ECB’s Kazaks says services inflation remains sticky. Open to a September discussion on policy easing.

FX

• The Dollar is broadly softer vs. peers in the run-up to US PCE metrics. DXY is currently contained within yesterday’s 100.88-101.57 range.
• EUR is steady post-EZ inflation data which was broadly in-line. However, greater concern could come via the services metric which rose to 4.2% from 4.0%. EUR/USD is contained just below the 1.11 mark and within yesterday’s 1.1055-1.1139 range.
• GBP is firmer vs. the USD but Cable is unable to reclaim the 1.32 handle with the current session high at 1.3198 and south of yesteday’s 1.3227 peak.
• JPY was a touch firmer vs. the USD following firm Tokyo inflation data overnight. In terms of price action for USD/JPY, the pair is back on a 144 handle but still some way north of yesterday’s 144.22 trough.
• AUD/USD is mildly extending on its recent uptrend which has seen the pair breach 0.68 to the upside with newsflow out of China providing support.
• USD/CNH has continued its recent move to the downside with the latest leg lower prompted by reporting from Bloomberg that China is mulling allowing refinancing on USD 5.4tln in mortgages.
• PBoC set USD/CNY mid-point at 7.1124 vs exp. 7.1116 (prev. 7.1299)

Fixed Income

• USTs are flat ahead of monthly US PCE, afterwhich conditions will likely become thinner than normal on account of Monday’s US market holiday. A few fleeting ticks higher on EGB-drivers, but not sufficient to merit a range of more than a couple of ticks; additionally, yields are pivoting the unchanged mark but with an incremental flattening bias.
• Bunds were slightly firmer after French inflation metrics and climbed above 134.00 into the EZ-wide figures. Headline cooled to 2.2% Y/Y as expected, whilst Services rose to 4.2% (prev. 4%); no real reaction was seen in Bunds.
• Gilts are firmer and specifics quite light, though the UK Nationwide House Price index saw an unexpected drop for the month. Gilts at the top-end of the session’s range but shy of the 99.00 handle.
• China’s major state-owned banks seen buying USD in onshore foreign exchange market to prevent CNH from appreciating too fast, via Reuters citing sources.

Commodities

• Crude benchmarks began with a modest upward bias and have continued to inch higher throughout the European morning despite a lack of fresh drivers.
• Thus far, WTI & Brent have been as high as USD 76.53/bbl and USD 80.60/bbl respectively, just shy of Thursday’s USD 76.87bbl and USD 80.78/bbl best.
• Spot gold is essentially unchanged, in-fitting with the tentative performance of FX into monthly US PCE; in a relatively thin USD 2512-2523/oz band, which is towards the upper-end of yesterday’s parameters.
• LME Copper is firmer but around familar levels after a choppy and shortened week; upside being driven by the modestly constructive risk tone and USD pressure.
• Liberian Environmental Protection Agency said China Union’s iron ore Bong Mines is shut down for several environmental violations, according to Reuters.

Geopolitics

• “Lebanese sources: Israeli raids on different areas in southern Lebanon”, according to Sky News Arabiya.
• Missile attack launched on US military base in eastern Syria, according to IRNA.
• There is now a planned call at the theatre commander level between the US and China, according to Fox’s Heinrich. “It comes after China bristled at US Indo-Pacific Command’s Adm. Paparo suggesting this week US forces could escort Philippine ships through the South China Sea, following a months-long series of violent confrontations between Chinese and Philippine ships”.
• Israeli military says local Hamas commander in West Bank City of Jenin killed by Israeli police.

US Event Calendar

• 08:30: July Personal Income, est. 0.2%, prior 0.2%
  • July Personal Spending, est. 0.5%, prior 0.3%
  • July Real Personal Spending, est. 0.3%, prior 0.2%
• 08:30: July Core PCE Price Index MoM, est. 0.2%, prior 0.2%
  • July PCE Price Index YoY, est. 2.5%, prior 2.5%
  • July PCE Price Index MoM, est. 0.2%, prior 0.1%
  • July Core PCE Price Index YoY, est. 2.7%, prior 2.6%
• 09:45: Aug. MNI Chicago PMI, est. 44.8, prior 45.3
• 10:00: Aug. U. of Mich. Sentiment, est. 68.1, prior 67.8
  • U. of Mich. Current Conditions, est. 61.2, prior 60.9
  • U. of Mich. Expectations, est. 72.4, prior 72.1
  • U. of Mich. 1 Yr Inflation, est. 2.9%, prior 2.9%
  • U. of Mich. 5-10 Yr Inflation, est. 3.0%, prior 3.0%

DB’s Jim Reid concludes the overnight wrap

Risk assets put in a decent performance over the last 24 hours, as solid US data outweighed investors’ disappointment about Nvidia’s latest results. It’s true that the S&P 500 was unchanged on the day, but the index was weighed down by the Magnificent 7 (-0.72%) and the equal-weighted S&P 500 (+0.37%) moved up to a new record, as did the Dow Jones (+0.59%) and Germany’s DAX (+0.69%). So in most places it was a pretty decent performance, and overnight the Hang Seng (+1.76%) is also on track to close at a 7-week high. Other risk assets were on the stronger side, with EUR HY spreads at their tightest level in over a month, whilst oil prices moved higher as well. The main exception were sovereign bonds however, which mostly lost ground as investors dialled back the chance of a 50bp rate cut from the Fed next month.

This positivity was driven by several US data releases that collectively pointed away from a recession, leading to a fresh bout of optimism about the outlook. The key headline came from the Q2 GDP numbers. They were actually the second estimates rather than the original release, but they painted an even more positive story than the first estimate released in late July. For instance, headline GDP was revised up to show an annualised growth rate of +3.0% (vs. +2.8% previous estimate). On a year-on-year basis, that leaves real GDP up +3.1%, so these are very good numbers that really don’t look like a recession. On top of that, the GDP release included downward revisions to PCE inflation in Q2, which is the measure the Fed officially targets. Headline PCE was revised down a tenth to an annualised +2.5% rate, whilst core PCE was also revised down a tenth to +2.8%. So a bit closer to the Fed’s 2% target than we previously thought. Today we’ll get the first look at PCE inflation for the month of July, so one to keep an eye on.

On top of the GDP release, yesterday also brought the weekly initial jobless claims, which were basically in line with expectations at 231k over the week ending August 24 (vs. 232k expected). That wasn’t a shock, but it helped to bring down the 4-week moving average as well, which now stands at a two-month low of 231.5k. So again, that’s another release pointing away from a recession, with the weekly claims looking in better shape than they did at the end of July.

With all that data in hand, the general perception was that the economy was doing better than thought, and that a larger 50bp cut from the Fed was now less likely. Indeed, futures lowered the chance of a 50bp move in September from 36% to 32%. And the number of cuts priced in by December also came down from 103bps to 100bps. In turn, that led to a selloff across US Treasuries, with the 2yr yield up +2.9bps to 3.90%, whilst the 10yr yield was up +2.6bps to 3.86%.

For equities, the stronger data initially pushed the S&P 500 nearly 1% higher intra-day, but those gains were pared back and the index ended the day unchanged. Even so, the overall performance still leaned on the positive side, with more than two thirds of the S&P 500 higher on the day, and the equal-weighted version of the index (+0.37%) actually hitting a new record. That came amid gains for more cyclical sectors including financials (+0.85%) and industrials (+0.70%), while energy stocks (+1.26%) led the way as oil prices rallied, with Brent crude up +1.64% to $79.94/bbl. The small cap Russell 2000 (+0.66%) also posted a solid gain. On the downside, the NASDAQ (-0.23%) and the Magnificent 7 (-0.72%) retreated, mostly due to a -6.38% loss for Nvidia after its results the previous evening. To be fair, 5 of the Magnificent 7 were higher on the day, but it is notable how the weakness among the Mag-7 group (which is now -11.7% beneath its peak) has been holding back the overall S&P 500 (-1.3% beneath its peak) from new all-time highs.

In Europe, the main story came on the inflation side, as the initial flash CPI releases came in softer than expected. In particular, Germany’s CPI fell to +2.0% on the EU-harmonised measure, which was the lowest since March 2021, and also beneath the +2.2% reading expected. Similarly in Spain, harmonised CPI was down to a one-year low of +2.4% (vs. +2.5% expected). So that added to investors’ confidence that the ECB were set to keep cutting rates over the coming months, with rising expectations that they might move to a more regular pace of cuts where they happen at every meeting, rather than every other meeting. In light of those releases, European sovereign bonds outperformed US Treasuries. Front-end yields declined, with those on 2yr German yields down -2.9bps, while 10yr yields saw only modest increases for bunds (+1.3bps), OATs (+0.5bps) and BTPs (+0.8bps).

It was a very strong day for European equities as well, with the STOXX 600 (+0.76%) closing just -0.03% beneath its all-time high from May. Tech stocks led the gains, and the advance was seen across the continent, with the DAX (+0.69%) closing at an all-time high, and other indices including the FTSE 100 (+0.43%) and the CAC 40 (+0.84%) posting gains.

Overnight in Asia, the positive sentiment among investors has continued, with gains across all the major indices. In Japan, both the Nikkei (+0.48%) and the TOPIX (+0.45%) are on track for their highest closing levels so far in August, moving past the turmoil from earlier in the month. Elsewhere, the Hang Seng (+1.76%), the CSI 300 (+1.72%) and the Shanghai Comp (+1.34%) have posted very strong gains, and the KOSPI is also up +0.59%. In the meantime, US equity futures are also pointing higher, with those on the S&P 500 up +0.16% this morning.

On the data side, we’ve had several releases from Japan overnight, including the Tokyo CPI reading for August. That showed CPI was stronger than expected at +2.6% year-on-year (vs. +2.3% expected), whilst the core measures were also above consensus. That said, the activity data in Japan was a bit weaker than expected, with retail sales only up +0.2% on the month in July (vs. +0.4% expected), whilst industrial production was only up +2.8% (vs. +3.5% expected). Moreover, the jobless rate ticked up to 2.7% in July (vs. 2.5% expected), which is the highest since March 2023.

To the day ahead now, and data releases from the US include the PCE inflation data for July, along with the University of Michigan’s final consumer sentiment index for August. Meanwhile in the Euro Area, there’s the flash CPI release for August and the unemployment rate from July. We’ll also get German unemployment for August, UK mortgage approvals for July, and Canada’s GDP for Q2. From central banks, we’ll hear from the ECB’s Schnabel, Rehn, Kazaks, Simkus and Muller.

Authored by Charles Hugh Smith via OfTwoMinds blog,

When everyone finally leaves the La-La-Land casino and abandons the fairy tale, household wealth held in stocks is a fraction of what it was in the heady days of hot hands rotating into the next hot sector.

The reason why a “soft landing” is a fairy tale straight out of La-La-Land is all bubbles pop, and a “soft landing” is based on bubbles remaining unpopped. In the “soft landing” scenarios, mind-boggling bubbles remain at “permanently high plateaus” as gamblers rotate out of one soaring sector into another soaring sector, in an endless rotation that keeps the entire speculative bubble fully inflated forever–or close to forever, which in today’s world is a few years.

In the fairy tale, the economy is “strong” for all the right reasons: people are investing in new companies, spending lots of money, hiring more employees, and so on. In this fairy tale version of economics, the occasional spot of bother– a “weakening economy”–is deftly resolved by the central bank lowering interest rates, which magically encourages everyone to return to their happy speculative, consumerist ways.

In La-La-Land, there are no bubbles, just enthusiasm for new technologies with limitless potential to reap billions in new profits. It’s not a bubble, we’re assured, it’s simply strong fundamentals: sales are soaring, profit margins are fattening, and there’s no end in sight.

In March, 2002, two years after the dot-com bubble had topped out, Scott McNealy, co-founder and CEO of dot-com darling Sun Microsystems, wrote a now-famous encapsulation of the difference between strong fundamentals and a bubble:

“At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes which is very hard. And that assumes you pay no taxes on your dividends which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?”

The chart of the dot-com bubble’s euphoric ascent and eventual collapse is instructive: note how strong fundamentals eventually returned to the pre-La-La-Land level, wiping out all the wealth created by the bubble.

In response to the “weakening economy,” a.k.a. the bubble popping, the Federal Reserve duly slashed rates, and talked up the “soft landing” fairy tale. Nothing stopped the bubble popping, something the leadership in China is discovering the hard way as their decades-long real estate bubble is popping despite a slew of subsidies, incentives, rate cuts and other forms of stimulus: even a Command Economy can’t stop a bubble from deflating.

Which leads to this question: if the “soft landing” fairy tale is, well, a fairy tale, then what happens to the current Everything Bubble? If history is any guide, this chart of bubble symmetry will play out in the years ahead: strong fundamentals eventually return to the pre-La-La-Land level, wiping out all the wealth created by the bubble.

In the La-La-Land fairy tale, the solution is to play one’s hot hand in speculation in a new sector, rotating seamlessly from one hot sector to the next, continuing to build wealth at each turn of the wheel. History tells a different story: all the punters and players keep playing until they run out of money or enthusiasm, and they exit the casino. This is reflected in this chart of household wealth held in stocks in the choppy stagflationary era of the 1970s:

When everyone finally leaves the La-La-Land casino and abandons the fairy tale, household wealth held in stocks is a fraction of what it was in the heady days of hot hands rotating into the next hot sector. It’s OK to love fairy tales, for they appeal to our deepest emotions, our desires and our fears. But it’s problematic when we let the fairy tale seep into reality.

*  *  *

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How it started. 

How it’s going: Just days after Robert F. Kennedy Jr., a vocal critic of ultra-processed foods, endorsed former President Donald Trump to promote the “Make America Healthy Again” agenda, Time Magazine—a publication not to be taken seriously—published this…

Time published the initial headline, “What if Ultra-Processed Foods Aren’t as Bad as You Think?”

What if ultra-processed foods aren’t as bad as you think? https://t.co/0qyUZVLXob

— TIME (@TIME) August 27, 2024

‘Trust the science’ journos at the left-leaning media outlet probably changed the headline after the uproar on X.  

Well well well.

Time just changed its headline, due to all our pushback.

THIS is how you fight back against the Matrix. pic.twitter.com/WLh83vTKRZ

— Suneel Dhand MD (@DrSuneelDhand) August 29, 2024

James Lindsay, a mathematician turned culture critic and author of the website New Discourses, pointed out on X, “I am once again reminding you that Time Magazine is owned by Marc Benioff, who is closely tied to the World Economic Forum and its agendas.”

I am once again reminding you that Time Magazine is owned by Marc Benioff, who is closely tied to the World Economic Forum and its agendas. https://t.co/YQfQrfy3T7

— James Lindsay, anti-Communist (@ConceptualJames) August 28, 2024

What could those WEF agendas be? Well, for one, the elites at WEF have pushed to reset the food supply chain for ‘sustainable’ reasons and implement insect diets worldwide. Also, these elites have a fascination for banning cow farts and eventually force the world to eat printed meat from a lab. Furthermore, governments across the West have waged war against small farms… 

RFK Jr.’s push to “Make America Healthy Again” by breaking the grip of the processed food industry’s control of the nation’s food supply chain must have angered big food. That’s because shortly after, the response was Time gaslighting readers into believing ultra-processed foods are safe. 

RFK Jr: “We’re being mass poisoned by processed foods, by pesticides, by chemicals, by pharmaceutical drugs”

“There’s now a bill before Congress that would force … Medicare to pay for Ozempic for every American who’s obese.

That’s 74% of our population … $3 trillion a year.… pic.twitter.com/4hEWORiLoV

— Holden Culotta (@Holden_Culotta) August 28, 2024

Here’s an excerpt from Time’s reporting:

A weird thing happened. Wilson found that she had more energy and less anxiety. She didn’t need as much coffee to get through the day and felt more motivated. She felt better eating an ultra-processed diet than she had before, a change she attributes to taking in more calories by eating full meals, instead of haphazard combinations of whole-food ingredients.

Nothing to see here.

Not so safe…

This is true. Processed food is killing you.

One of the things I teach my clients is how to eat healthy. And I’m not talking about salad and rice all the time.

You can eat the foods you enjoy, you just have to be smart about it! https://t.co/HGwMjmT43N

— Wendy Lynn Myers (@wendylynnmyers) August 26, 2024

You become what you eat.

Always be mindful of what you let enter your body.

The food you eat is building you one bite at a time.

Ultra-processed food doesn’t just fill you up.

It steals from your potential.

Every bite counts.

Make it work for you, not against you. pic.twitter.com/J5lNhlHBwk

— Fredo (@FredosRippleEF) August 28, 2024

A study revealed the shocking truth about processed food. Participants who ate a homemade meal experienced complete digestion within four hours, while those who consumed processed noodles still had visible teeth marks on the food after four hours. This suggests that processed… pic.twitter.com/RWJDec2G9C

— Gary te Roller (@gary_teroller) August 27, 2024

The manipulation of the people seems to be nonstop by far-left MSM and their corporate partners. This time, folks have had enough, and the propaganda has failed. 

By Charles Kennedy of OilPrice.com

China has yet to see its carbon dioxide emissions peak as it is a developing nation and has a massive population.

The message comes from the country’s National Energy Administration in response to speculation that China had achieved peak emissions before its own deadline.

“We should not forget that China is still a developing country, pursuing modernization for a huge population,” the head of law and institutional reform at the NEA, Song Wen, told media. “Great efforts are still needed to achieve the goals of peak carbon and carbon neutrality,” Song also said, as quoted by Bloomberg.

China has been at the forefront of the energy transition, accounting for most of the world’s total spending on things such as wind, solar, and EVs, and turning into the biggest producer of all three. However, this has not changed its status as one of the biggest emitters of carbon dioxide either.

Beijing is working to change this, however. Earlier this month media reported that the country planned to build 11 new nuclear reactors to boost the share of the zero-emission electricity source in its energy mix.

China is building more nuclear power plants than any other country in the world—just like its coal power plants—and based on those record approvals, it plans to build even more, becoming the world’s biggest nuclear generator by 2030, according to BloombergNEF.

There are 26 nuclear reactors under construction in the country, set to add over 30 GW in generation capacity to the country’s total when completed.

At the same time, Chinese authorities reduced significantly the number of approvals for new coal capacity. The total approved during the first half of the year was as much as 80% lower than the new coal capacity approved during the same period in 2023.

The question here, however, is whether the approvals are down because after last year’s push the country will have all the coal capacity it needs or because of efforts to reduce the dominance of coal in the energy mix.

The United States has agreed to help combat illicit drug trafficking in the Pacific Islands – a key node for drug trade between China and the United States.

According to a Thursday announcement by United States, Deputy Secretary of State Kurt Campbell – speaking in Vanuatu at the formal launch of the U.S. embassy in Port Vila, which opened last month, said that criminals have begun to use the Pacific Islands as transit points.

“We are concerned some of the networks that have grown in China and South East Asia are beginning to use the Pacific for transshipment both to Latin America and the United States,” he said. “Many of our partners in the Pacific want to work with us to try to get a handle on that.”

The announcement comes amid an opioid crisis that has caused tens of thousands of overdose deaths annually, with the US criticizing Chinese firms for their role in the global fentanyl supply chain. Meanwhile, island nations such as Fiji and Tonga have seen a rise in meth seizures this year.

As the Epoch Times notes further, the deputy secretary said an announcement will be made next week on law enforcement regarding drugs in the Pacific.

He also said the United States could help with efforts in areas such as drug interdiction, treatment, and prevention.

Campbell visited Vanuatu a day after his meeting with leaders at the Pacific Islands Forum in Tonga.

Campbell said after meeting with Prime Minister Jeremiah Manele, who was elected in May, that the Solomon Islands, which struck a security pact with China under its previous leader, wants to re-engage with the United States.

Campbell also met China’s Pacific envoy Qian Bo in Tonga on Wednesday and said they discussed finding areas of cooperation in the Pacific, such as a climate change project, which he said regional leaders had welcomed.

He said the United States was working to offer financing for small businesses to revive tourism, hospital infrastructure, and telecoms links in Vanuatu and ensure Pacific Island countries a choice of partners.

China is Vanuatu’s largest external creditor after a decade of infrastructure construction by its companies.

On Wednesday, the Pacific Island Forum backed an Australian-funded $271-million plan to improve police training in the region and create a mobile policing unit.

Australia previously said it was concerned about China’s growing police presence in the region, and boosting the capability of Pacific police will reduce the need for Chinese police.

Illicit Drug Trafficking

Campbell’s announcement came as U.S. National Security Adviser Jake Sullivan raised similar issues, including drug trafficking to the United States, over 14 hours of meetings with Chinese leader Xi Jinping in Beijing.

“More specifically, we’re going to look for further progress on counternarcotics and reducing the flow of illicit synthetic drugs into the United States,” Sullivan told reporters on Thursday.

China has been one of the primary sources of fentanyl and fentanyl-related drugs—the leading cause of overdose deaths in the United States.

In May 2019, Beijing added fentanyl-related substances to its list of control substances, a move applauded by former President Donald Trump, who had repeatedly called on Xi to stem the flow of the drugs. However, Trump said three months later that the Chinese leader had failed to keep his promise.

Beijing also halted talks with Washington on several issues, including counternarcotics, in August 2022 after then-House Speaker Nancy Pelosi visited Taiwan.

While talks resumed in January this year, the halt raised concerns that the Chinese regime will always be willing to use the issue as leverage when tensions increase in the Taiwan Strait.

In April this year, the House Select Committee on the Chinese Communist Party (CCP) published a report saying evidence showed that the regime was directly subsidizing the manufacturing and export of illicit fentanyl materials and other synthetic narcotics, many of which have no known legal use worldwide, through tax rebates.

The report also said the regime gave monetary grants and awards to companies openly trafficking illicit fentanyl materials and other synthetic narcotics, that it holds ownership interest in several Chinese companies tied to drug trafficking, and it prevented U.S. law enforcement from investigating manufacturers by tipping them off in advance.

Reuters contributed to this report.