Month: August 2024

Authored by Charles Hugh Smith via OfTwoMinds blog,

The global economy is toast. All that’s left is the distribution of the burned bits.

The six one-offs that drove growth and pulled the global economy out of bubble-bust recessions for the past 30 years have all reversed or dissipated. Absent these one-off drivers, the global economy is stumbling off the cliff into a deep recession without any replacement drivers. Colloquially speaking, the global economy is toast.

Here are the six one-offs that won’t be coming back:

1) China’s industrialization.

2) Growth-positive demographics.

3) Low interest rates.

4) Low debt levels.

5) Low inflation.

6) Tech productivity boom.

Cutting to the chase, China bailed the world out of the last three recessions triggered by credit-asset bubbles popping: the Asian Contagion of 1997-98, the dot-com bubble and pop of 2000-02, and the Global Financial Crisis of 2008-09. In each case, China’s high growth and massive issuance of stimulus and credit (a.k.a. China’s Credit Impulse) acted as catalysts to restart global expansion.

The boost phase of picking low-hanging fruit via rapid industrialization boosting mercantilist exports and building tens of millions of housing units is over. Even in 2000 when I first visited China, there were signs of overproduction / demand saturation: TV production in China in 2000 had overwhelmed global and domestic demand: everyone in China already had a TV, so what to do with the millions of TVs still being churned out?

China’s model of economic development that worked so brilliantly in the boost phase, when all the low-hanging fruit could be so easily picked, no longer works at the top of the S-Curve.

Having reached the saturation-decline phase of the S-Curve, these policies have led to an extreme concentration of household wealth in real estate. Those who favored investing in China’s stock market have suffered major losses. (see chart below)

This is the problem with overproduction as a model of endless growth: it eventually overwhelms demand and the income needed to pay for it.

Where China’s workforce was growing during the boost phase, now the demographic picture has darkened: China’s workforce is shrinking, the population of elderly retirees is soaring, and so the cost burdens of supporting a burgeoning cohort of retirees will have to be funded by a shrinking workforce who will have less to spend / invest as a result.

This is a global phenomenon, and there are no quick and easy solutions. Skilled labor will become increasingly scarce and able to demand higher wages regardless of any other factors, and that will be a long-term source of inflation. Governments will have to borrow more–and probably raise taxes as well–to fund soaring pension and healthcare costs for retirees. This will bleed off other social spending and investment.

The era of zero-interest rates and unlimited government borrowing has ended. As Japan has shown, even at ludicrously low rates of 1%, interest payments on skyrocketing government debt eventually consume virtually all tax revenues. Higher rates will accelerate this dynamic, pushing government finances to the wall as interest on sovereign debt crowds out all other spending. As taxes rise, households are left with less disposable income to spend on consumption, leading to stagnation.

At the start of the cycle, global debt levels (government and private-sector) were low. Now they are high. The boost phase of debt expansion and debt-funded spending is over, and we’re in the stagnation-decline phase where adding debt generates diminishing returns.

The era of low inflation has also ended for multiple reasons. Exporting nations’ wages have risen sharply, pushing their costs higher, and as noted, skilled labor in developed economies can demand higher wages as this labor cannot be automated or offshored. Offshoring is reversing to onshoring, raising production costs and diverting investment from asset bubbles to the real world.

Higher costs of resource extraction, transport and refining will push inflation higher. So will rampant money-printing to “boost consumption.”

The tech productivity boom was also a one-off. Economists were puzzled in the early 1990s by the stagnation of productivity despite the tremendous investments made in personal and corporate computers, a boom launched in the mid-1980s with Apple’s Macintosh and desktop publishing, and Microsoft’s Mac-clone Windows operating system.

By the mid-1990s, productivity was finally rising and the emergence of the Internet as “the vital 4%” triggered the adoption of the 20% which then led to 80% getting online combined with distributed computing to generate a true revolution in sharing, connectivity and economic potential.

The buzz around AI holds that an equivalent boom is now starting that will generate a glorious “Roaring 20s” of trillions booked in new profits and skyrocketing productivity as white-collar work and jobs are automated into oblivion.

There are two problems with this story:

1) The projections are based more on wishful thinking than real-world dynamics.

2) If the projections come true and tens of millions of white-collar jobs disappear forever, there is no replacement sector to employ the tens of millions of unemployed workers.

In the previous cycles of industrialization and post-industrialization, agricultural workers shifted to factory work, and then factory workers shifted to services and office work. There is no equivalent place to shift tens of millions of unemployed office workers, as AI is a dragon that eats its own tail: AI can perform many programming tasks so it won’t need millions of human coders.

As for profits, as I explained in There’s Just One Problem: AI Isn’t Intelligent, and That’s a Systemic Risk, everyone will have the same AI tools and so whatever those tools generate will be overproduced and therefore of little value: there is no pricing power when the world is awash in AI-generated content, bots, etc., other than the pricing power offered by monopoly, addiction and fraud–all extreme negatives for humanity and the global economy.

Either way it goes–AI is a money-pit of grandiose expectations that will generate marginal returns, or it wipes out much of the middle class while generating little profit–AI will not be the miraculous source of millions of new high-paying jobs and astounding profits.

What we now have is a hyper-centralized, hyper-connected (i.e. tightly bound), hyper-globalized and hyper-financialized global economy of extreme fragility, over-indebted and hollowed out by speculation, fraud, corruption, leverage, sclerosis and by an unbreakable addiction to doing more of what’s failed spectacularly.

The downside slide into recession and polycrisis-collapse is not as fun as the boost phase.

Concentrating assets, capital, control, debt and leverage also concentrates risk, which eventually leaks through the illusion of resilience and melts down the entire economy:

In a word, the global economy is toast. All that’s left is the distribution of the burned bits. Those who end up with collapsing currencies experience hyper-inflation, and those who manage to wallow in deflation experience stagnation as the best-case scenario. In all cases, the pool of creaky policies from the 1930s that will actually work has dried up: all the “fixes” that were solutions in the past are now accelerating the slide into a post-bubble recession with no visible exit.

*  *  *

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Authored by Philip Wegmann via RealClearPolitics,

As Republicans began scrutinizing the military record of Minnesota Gov. Tim Walz, the Harris campaign released a statement supporting the vice-presidential nominee, in part, by pointing to his time in Congress and claiming that “he chaired Veterans Affairs.”

While the former congressman spent over a decade in the House, serving on Veterans Affairs and eventually rising to become the ranking member of that committee, at no time was he ever the chairman.

Vice President Kamala Harris correctly characterized Walz’s time in Congress when introducing her running mate in Philadelphia, calling him “the top Democrat on the Veterans Committee.”

It was her campaign, however, that erred.

The statement in question reads, “after 24 years of military service, Governor Walz retired in 2005 and ran for Congress, where he chaired Veterans Affairs and was a tireless advocate for our men and women in uniform — and as Vice President of the United States he will continue to be a relentless champion for our veterans and military families.”

It was printed in RealClearPolitics, NBC News, and numerous other outlets, further raising the ire of Republicans who already claim that Walz has misrepresented his record. A Harris aide told RCP Thursday morning that the error “was an innocent mistake” made by staff.

“Governor Walz was ranking member/top Democrat on the House Committee on Veterans’ Affairs,” a spokesman for the Harris campaign said, for the 115th Congress between 2017 and 2018.

A spokesman for Illinois Republican Rep. Mike Bost, current chairman of the committee, told RCP the same, saying that “Rep. Walz was only ever ranking member and he served in that role from 2017-2019.”

“When Tim Walz was asked by his country to go to Iraq, do you know what he did? He dropped out of the Army and allowed his unit to go without him – a fact that he’s been criticized for aggressively by a lot of the people that he served with,” said GOP vice presidential nominee J.D. Vance. A Marine Corps veteran who served in Iraq, Vance added, “I think it’s shameful to prepare your unit to go to Iraq, to make a promise that you’re going to follow through, and then to drop out right before you actually have to go.”

It was a reference to the fact that Walz retired from the National Guard in 2005, ending a 24-year career before his unit, the National Guard’s 1st Battalion, 125th Field Artillery, deployed to Iraq.

Walz eventually reached the rank of a command sergeant major, the most senior enlisted noncommissioned officer in a battalion and represented himself previously as “the highest-ranking enlisted service member ever to serve in Congress.”

As Army Lt. Col. Kristen Augé, public affairs officer for the Minnesota National Guard, told NBC News, however, Walz “culminated his career serving as the command sergeant major for the battalion” and “retired as a master sergeant in 2005 for benefit purposes because he did not complete additional coursework at the U.S. Army Sergeants Major Academy.”

Another discrepancy: In a video clip promoted by the Harris campaign, Walz called for gun control on the grounds that “we can make sure those weapons of war, that I carried in war, are only carried in war.” The candidate did not, however, ever serve in a war zone.

A spokesperson for the Harris-Walz campaign did not dispute that the governor may have overstated his case when claiming he carried a weapon in combat. “In his 24 years of service, the governor carried, fired and trained others to use weapons of war innumerable times. Gov. Walz would never insult or undermine any American’s service to this country – in fact, he thanks Senator Vance for putting his life on the line for our country,” the campaign said in a statement to RCP on Wednesday. “It’s the American way.”

Authored by Daniel Lacalle,

The recent market weakness suggests a combination of profit-taking and concerns about the latest United States jobs and manufacturing figures, added to the abrupt unwinding of part of the yen carry trade. Valuations had soared and market participants now demand central bank easing. However, rate cuts may not be enough to send markets to new all-time highs. Money supply growth and quantitative easing are needed to maintain these valuations.

Investors are turning to utilities and real estate stocks, but these sectors need more than low rates; they need a buoyant economy and strong consumer demand, so interest rate decisions may be insufficient.

If we look at the long-term trend, the market remains in a cyclical bullish mode, but we need to understand why and be aware of the rise in volatility.

Markets have been rising, discounting an ever-increasing money supply and future currency debasement. However, the next wave of central bank easing may not come until 2025.

Fundamentals may have been weak and earnings not as robust as required by demanding valuations, but investors understand that the fiscal challenges posed by rising government expenditure and public debt will ultimately mean ultra-loose monetary policies, which make sovereign bonds more expensive, erode currency purchasing power and, by comparison, make equities and risky assets more attractive.

Investors may continue to accept higher valuations for equities and risky assets because they fear monetary and fiscal insanity more than they are concerned about a recession.

It is not that markets like fiscal imprudence. Extreme monetary policies erode the currency’s purchasing power, and equities and risky assets become protection for real inflation. Murray Rothbard calculated the true money supply (TMS), which is the most realistic indicator of inflation. As Professor Joseph Salerno explains, “three items which are not included in any Fed measure of the money supply (Ml, M2, M3) or even of overall “liquidity” (L) find a place in the TMS.”. These are the demand and other deposits held by the U.S. government, foreign official institutions, and foreign commercial banks at “U.S. commercial and Fed banks.”.

When we look at True Money Supply, we can understand what market participants really look at for a bullish market trend, even if they may not be calculating it in the Rothbard way. The available money for market transactions. The quantity of money that is put to work to generate a return that offsets inflation. “Liquidity,” as most market participants call it.

Mike Shedlock, a great macroeconomic analyst and investor, discusses these important differences when analyzing money growth because they basically give us an idea of the buying or selling pressure in a market. The True Money Supply (TMS) includes the currency component of M1, total checkable and savings deposits, as well as U.S. government deposits, note balances, and demand deposits from foreign banks and public institutions. Any market trader understands this when they are talking of “cash on the sides,” “high liquidity,” and “bullish sentiment.”. All these money measures, when rising, indicate stronger demand for risky assets looking for a return. Alternatively, Professor Frank Shostak’s definition of total money supply includes cash plus demand deposits with commercial banks and institutions plus government deposits with banks and the central bank.

Why are these measures more important than the traditional M2 and M3 money aggregates? Because they show us the level of buying pressure in the market.

Many Keynesian economists see deposits and savings accounts as idle money and invented the ludicrous “excessive savings” concept. There is no such thing as excessive savings or idle money. The reason they see those savings as negative is because their political view of economics perceives that any money not spent by the government is not productive. Far from it. Those savings and deposits are invested in the capital markets and are the key to originating lending, investment, and growth in the real economy. Keynesians tend to think of the “social use of money,” which means more printing of currency through deficit spending, because they mostly perceive that the government is the only one making a real social use of currency issued. However, inflationism is not a social policy but a tool for serfdom that creates hostage clients of citizens by destroying the purchasing power of their wages and deposit savings. It is a transfer of wealth from the middle class to the government.

Once we understand that what matters for market participants is the elusive “liquidity” and “sentiment” perception and that bullish sentiment and liquidity come from a rising true money supply, while bearish signals arise from a decline in this measure of liquidity, then we can understand that the allegedly hawkish messages of central banks disguise a much looser policy than headlines suggest. Furthermore, using any of the different measures of true money supply previously mentioned, we can understand why market participants try to defend their clients from the current and future loss of purchasing power of the currency by taking more risk and accepting higher valuations for growth assets.

Most market participants are aware that higher liquidity injections will mask the current fiscal imbalances. Unsustainable deficit spending is money printing, which creates strong long-term pressure on the purchasing power of fiat currencies. Thus, market corrections are always an opportunity to buy stocks and risky assets that will always rise in value in fiat currency terms because the unit of measure, money, loses purchasing power.

Once it is established that fiscal insanity will make currencies fall in value and, consequently, markets denominated in that currency rise, investors need to understand the timing and where to invest.

The difficulty this time is that now we have persistent inflation and central bank losses in their bond portfolio. Thus, timing is essential. The lag effect of a market correction and its subsequent bounce may be longer. It will happen, but we need to guess when.

After the Fed decided to hold rates steady at its two-day meeting, equities slumped, even though Powell seemed to signal that rate cuts could be coming as soon as September. Markets discounted a slump in liquidity, therefore lowering buying pressure. Hence, multiple compressions. Rate cuts do not signal a healthy economy but a slowing one, so equities slump despite the promise of a rate cut because investors continue to see lower buying pressure.

Even with the bounce after Black Monday, most indices remain significantly below the level when markets started to weaken on July 22. The lag effect of the true money supply started to show its effect on March 13. The Nasdaq and the S&P 500 were leading markets that had begun to slow down and pointed to lower highs and deeper lows.

What can we learn ahead of the next bullish wave of money growth? First, pay attention to the components mentioned above and their trends. Second, analyze when the Fed may start a true easing path, being realistic. The trend now signals liquidity drying up. There may not be a recession, but monetary buying pressure is slowing down markedly. The tap is not closed, but the flow is slow.

The Fed may cut rates in September, but that is only realizing that the economy is weaker than headlines suggest. A rate cut of 25 or 50 basis points is unlikely to generate an immediate burst in credit demand or rising deposits. Hence, the truly bullish signal would come when the Fed returns to purchasing mortgage-backed securities and treasuries. However, that may not happen until elections have passed and there is clarity about the next chairman of the Fed. We may be talking about March 2025.

Before that money growth bounces abruptly and leads to the next multiple expansion phase, we must remember the lessons of this correction. So-called defensive indices do not protect investors. Japan and Europe remain bad options in a liquidity drought. Cryptocurrencies do not show defensive qualities and their correlation to US tech stocks remains elevated. Gold is a better defense against a market correction than most risky assets, and commodities do not perform well in a slowing economy with diminishing liquidity.

 

Most investors will look at the recent slump with prudence, knowing they need to leave some dry powder (less liquidity, less buying pressure) to take advantage of opportunities.

In this era of monetary insanity, ignoring the macroeconomic, geopolitical, and earnings’ realities may lead to excessive risk-taking and significant losses in a correction. We must consider the fundamentals when looking at buying opportunities and pay attention to when liquidity will flow back to capture the currency debasement trend that leads to the next bull market. It’s not easy. Risks accumulate slowly but manifest quickly, and we tend to blame one catalyst instead of the complacency built after years of fiscal and monetary excess.

The next wave of monetary excess will be more aggressive than the past one, that is guaranteed. That means markets will soar again. However, timing is key… and it may take a few painful months to arrive.

Former President Donald Trump is set to sue the DOJ for $100 million in damages over the 2022 raid on his Mar-a-Lago property in Palm Beach, Florida – arguing that it was done “clear intent to engage in political persecution.”

According to a memo obtained by Fox News, the lawsuit will claim “tortious conduct by the United States against President Trump.”

Trump and his legal team intend to sue the Justice Department for its conduct during the FBI’s raid on Mar-a-Lago on Aug. 8, 2022, amid the federal investigation into his alleged improper retention of classified records.

After the raid, Special Counsel Jack Smith was appointed to investigate. Smith ultimately brought 37 felony counts against Trump, including willful retention of national defense information, conspiracy to obstruct justice, and false statements. Trump pleaded not guilty to all counts.

Last month, US District Judge Aileen Cannon dismissed the DOJ’s case against Trump – ruling that Smith was unlawfully appointed and funded, citing the Appointments Clause in the constitution.

The notice to sue was filed by Trump attorney Daniel Epstein, and gives the DOJ 180 days from the date of receipt to respond and come to a resolution. If no agreement is made, Trump’s case will move to federal court in the Southern District of Florida.

“What President Trump is doing here is not just standing up for himself – he is standing up for all Americans who believe in the rule of law and believe that you should hold the government accountable when it wrongs you,” Epstein told Fox Business’ Lydia Hu.

According to the filing, the “tortious acts against the president are rooted in intrusion upon seclusion, malicious prosecution, and abuse of process resulting from the August 8, 2022 raid of his and his family’s home at Mar-a-Lago in Palm Beach Florida,” adding that decisions made by the DOJ and FBI in conducting the raid were “inconsistent with protocols requiring the consent of an investigative target, disclosure to that individual’s attorneys, and the use of the local U.S. Attorney’s Office.”

Epstein further argues that decisions made by Attorney General Merrick Garland as well as FBI Director Christopher Wray were not based on “social, economic, and political policy,” but instead were in “clear dereliction of constitutional principles, inconsistent standards as applied to” Trump and a “clear intent to engage in political persecution – not to advance good law enforcement practices.”

“Garland and Wray should have never approved a raid and subsequent indictment of President Trump because the well-established protocol with former U.S. presidents is to use non-enforcement means to obtain records of the United States,” wrote Epstein. “But notwithstanding the fact that the raid should have never occurred, Garland and Wray should have ensured their agents sought consent from President Trump, notified his lawyers, and sought cooperation.”

“Garland and Wray decided to stray from established protocol to injure President Trump,” the filing continues.

Epstein argued that the DOJ violated Florida law, intrusion upon seclusion, which is recognized as a form of invasion of privacy. Intrusion upon seclusion includes “an intentional intrusion, physically or otherwise, into the private quarters of another person” and the intrusion “must occur in a manner that a reasonable person would find highly offensive.” -Fox News

“The FBI’s demonstrated activity was inconsistent with protocols used in routine searches of an investigative target’s premises,” the filing continues, adding that Trump “had a clear expectation of privacy at Mar-a-Lago. Worse, the FBI’s conduct in the raid – where established protocol was violated – constitutes a severe and unacceptable intrusion that is highly offensive to a reasonable person.”

The filing also argues that the DOJ and special counsel’s office “brought a lawless criminal indictment,” which constitutes “malicious prosecution.”

“As such, given the Supreme Court’s immunity decision and Judge Cannon’s dismissal of the prosecution on grounds that the Special Counsel’s appointment violated the appointments clause and his office was funded through an improper appropriation, there was no constitutional basis for the search or the subsequent indictment.”

Trump is also planning to sue for punitive damages.

“For these harms to President Trump, the respondents must pay punitive damages of $100 million,” Epstein wrote, adding that there was an “abuse of process,” and that the methods used against Trump were “unconstitutional and aimed at politically persecuting the former President, which led to extensive legal costs and negative consequences for him.”

In a statement to Fox Business, Epstein said: “You have clear evidence that the FBI failed to follow protocols, and the failure to follow protocols shows that there was an improper purpose,” adding “f the government is able to say, well, we don’t like someone, we can raid their home, we can violate their privacy, we can breach protocols when we decide to prosecute them, we can use the process to advance our personal motive–not a motive of justice–if someone doesn’t stand against that in a very public way and seek to obtain and protect their rights, then the government will have a mandate to roughshod over every American.”

Authored by Paul Joseph Watson via modernity.news,

President Joe Biden uttered an interesting Freudian slip when he said that “if Trump wins” the election he’s not confident there’ll be a peaceful transfer of power.

Biden made the remarks during an interview with CBS News.

“Are you confident that there will be a peaceful transfer of power in January 2025,” Biden was asked.

“If Trump wins, no, I’m not confident at all,” he responded.

Well, that’s one hell of a powerful Freudian slip.

“Are you confident that there will be a peaceful transfer of power in January 2025”

“if Trump wins, no, I’m not confident at all!” -Joe Biden

Cut (because there is an edit/cut)

“I mean, if Trump loses, I’m not confident at… pic.twitter.com/VXrbKmVlnZ

— Viva Frei (@thevivafrei) August 12, 2024

There then appeared to be a cut in the interview before Biden corrected himself, “I mean, if Trump loses, I’m not confident at all.”

While Biden is infamous for his verbal gaffes, many respondents on X actually believed this to be a revealing Freudian slip.

As we highlighted earlier, during the same interview, Biden confirmed that high ranking Democrats pushed him out of the race, essentially corroborating the accusations of a coup.

“A number of my Democratic colleagues in the House and Senate thought that I was going to hurt them in the races,” Biden said.

The president was reportedly told by Nancy Pelosi that he would be removed either by means of “the easy way” or “the hard way,” after he desperately tried to cling onto the nomination despite being humiliated during a presidential debate with Donald Trump.

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Hezbollah has fired dozens of rockets from Lebanon into northern Israel, calling it retaliation for Israeli attacks last week. Israel’s military says its Iron Dome defence system intercepted some, but not all, of the projectiles.

In the overnight and early morning hours Hezbollah pounded northern Israel and the Western Galilee with at least 30 rockets. While Israel’s military says intercepted some of the rockets, it is clear from widely circulating videos (though unverified) that many of them got through Israel’s sophisticated anti-air systems.

IRON DOME FAILURE!!! pic.twitter.com/6tgd8CFTW5

— Sulaiman Ahmed (@ShaykhSulaiman) August 12, 2024

A number of regional analysts are remarking on the utter failure of Israel’s Iron Dome air defense system during the salvo; however, Ynet says many rockets struck open fields and uninhabited areas, causing fires. 

Lebanese Hezbollah said the target was an IDF military installation near Kibbutz Ga’aton. The Israeli side reported no casualties in the wake of the overnight assault. A regional source indicates that “One of Israel’s interceptors hit the Hydro Therapy Centre located in the Mount Hermon region, damaging a building.”

The Iran-backed Lebanese paramilitary group has been vowing revenge for the assassination strike by Israel of senior Hezbollah commander Fuad Shukr in Beirut on July 30. The next day, an Israeli operation in Tehran killed Hamas leader Ismail Haniyeh.

Israel says it is busy strengthening defenses ahead of the still anticipated Iranian response, which is expected to include stepped-up Hezbollah action.

Defense Minister Yoav Gallant told a meeting of defense leader, “We are in the days of vigilance and readiness, the threats from Tehran and Beirut may materialize and it is important to explain to everyone that readiness, preparedness, and vigilance are not synonyms for fear and panic.”

As for the claims of the Iron Dome utterly failing in the latest attack, others pointed to the following video, which like the above remains unverified…

The Irone Dome at work last night, shooting down Hezbollah rockets over northern Israel pic.twitter.com/2JdYjXsncP

— Visegrád 24 (@visegrad24) August 12, 2024

Israeli officials are meanwhile monitoring Lebanese media reports which say Hezbollah has entirely evacuated its Beirut headquarters in anticipation of a significant flareup.

Some Hezbollah-aligned Lebanese politicians have also issued new threats:

Nabih Berri, the speaker of the Parliament of Lebanon and a staunch Hezbollah ally, says of a tensely anticipated joint Iranian and Hezbollah attack on Israel that “revenge is a dish best served cold.”

He warns that the “response is inevitable” after the recent killings of top Hezbollah military commander Fuad Shukr in an Israeli airstrike in Beirut and Hamas leader Ismail Haniyeh in Tehran.

Below: Iron Dome missiles have reportedly landed on Israeli residences over the last several days. Last week a 27-year old man was critically injured by a malfunctioning Iron Dome interceptor missile when it fell on a northern highway he was traversing.

The Pentagon has said it is speeding up its naval assets heading to regional waters, including the USS Abraham Lincoln carrier strike group and the deployment of the USS Georgia guided missile submarine, in anticipation for a potential Iranian attack on Israel.

Authored by Katabella Roberts via The Epoch Times (emphasis ours),

NASA’s Office of Inspector General (OIG) has raised concerns over quality control and standards at plane maker Boeing and its efforts to help the space agency return astronauts to the Moon.

A report from NASA’s OIG released on Aug. 8 focuses on the Space Launch System (SLS) version 1B—the powerful heavy-lift rocket system that NASA plans to use to send the crewed Orion spacecraft and large cargo to the Moon in 2028 as part of the Artemis IV mission.

According to NASA’s report, a “critical component” of this upgrade is Boeing’s development of the SLS’s new upper stage, the Exploration Upper Stage (EUS), which will aid in sending the Orion on its mission.

Once it is complete, EUS will give the SLS a 40 percent upgrade in carrying capability, going from 27 metric tons under Block 1—the SLS rocket’s first iteration—to 38 metric tons with Block 1B, according to the report.

However, progress on the SLS, which has been under development since 2014, has been plagued with issues, including Boeing’s “ineffective quality management and inexperienced workforce,” along with continued cost increases and schedule delays, the report said.

As part of its report, NASA’s OIG interviewed officials at NASA Headquarters, Marshall Space Flight Center, Boeing, and DCMA between August 2023 through May 2024.

It also visited the Michoud Assembly Facility in New Orleans, Louisiana, to observe the SLS core stage and EUS production.

The OIG found that Boeing’s quality management system at Michoud “does not adhere” to international standards established under the global association SAE International.

The report pointed to 71 “Corrective Action Requests”(CARs) issued by the Defense Contract Management Agency (DCMA) at Michoud between 2021 and 2023 to address “deficiencies in quality.”

NASA’s OIG said this is a “high number of CARs for a space flight system at this stage in development and reflects a recurring and degraded state of product quality control.”

“Boeing’s process to address deficiencies to date has been ineffective, and the company has generally been nonresponsive in taking corrective actions when the same quality control issues reoccur,” the report said.

‘Foreign Object Debris’ Found in Fuel Tank

The report highlights other issues, including “foreign object debris ” identified inside the SLS Core Stage 2 liquid hydrogen fuel tank.

The debris included “metal shavings, Teflon, and other debris on and underneath the entry platform and ladder assembly on the forward dome panels inside of the tank.”

“Foreign object debris can damage hardware and potentially injure flight crew when entrapped within crewed flight articles,” the report stated.

The liquid hydrogen fuel tank was subsequently cleaned, reinspected, and found to meet standards, according to the report.

In another incident during its visit to Michoud in April 2023, the OIG said it observed substandard welding on a liquid oxygen fuel tank dome, a critical component of the SLS Core Stage 3.

The report said that on another occasion, Boeing officials “incorrectly approved hardware processing under unacceptable environmental conditions.”

“Quality control issues at Michoud are largely due to the lack of a sufficient number of trained and experienced aerospace workers at Boeing,” the report said.

To mitigate such challenges, Boeing provides training and work orders to its employees, the report noted.

However, the OIG said it found these efforts to be “inadequate” considering the “significant quality control deficiencies at Michoud.”

Rising Costs

Boeing’s EUS contract has soared from the initially agreed-upon cost of $962 million in 2017 to over $2 billion through 2025, and the company’s delivery of the EUS to NASA has been postponed six years from an initial February 2021 date established in 2016 to April 2027, the report stated.

“Given Boeing’s quality management and its related workforce challenges, we are concerned these factors could potentially impact the safety of the SLS and Orion spacecraft including its crew and cargo,” it concluded.

The OIG report included a number of recommendations, including that Boeing work with the Associate Administrator for Exploration Systems Development Mission Directorate (ESDMD), among others, to develop a quality management system training program compliant with international standards.

The report said that NASA officials would review the program.

It also recommended financial penalties for Boeing’s “noncompliance with quality control standards,” although NASA ultimately decided not to fine the planemaker, according to the report.

The Epoch Times has contacted Boeing for comment.

Stuck in Space

The report comes as NASA astronauts Butch Wilmore and Suni Williams remain stuck in space aboard the Boeing Starliner due to ongoing issues with its thrusters.

NASA said during a press conference earlier this week that it is considering bringing the two astronauts back on SpaceX’s Crew-9 mission in February 2025.

Wilmore and Williams launched on June 5 from Cape Canaveral Space Force Station in Florida and docked with the ISS on June 6. They were originally set to return around one week later, on June 14.

Authored by Mike Shedlock via MishTalk.com,

Over ten percent of credit card outstanding debt is over 90 days delinquent. Banks will be curtailing credit…

This a second look at some interesting charts from the New York Fed Quarterly Report on Household Debt and Credit.

Over 10 Percent of Credit Card Debt is Seriously Delinquent

Serious Delinquency for Auto Loans by Age

Serious Delinquency for Credit Cards by Age

Lenders Took More Risk

The Consumer Financial Protection Bureau (CFPB) reports Credit Card Delinquencies are Higher than in 2019 Because Lenders Took on More Risk.

After falling during the pandemic, the share of consumers with a delinquent credit card has increased rapidly since 2021 and is now higher than in 2019. While consumers with delinquencies clearly show signs of struggling, news reports have taken the rising delinquency rate as a sign that financial distress is becoming more widespread, suggesting underlying weakness in the U.S. economy. We show that rather than being a sign of broader distress, this increase in delinquencies is explained by a substantial increase in the riskiness of recently issued credit cards.

Delinquencies have been concentrated among credit cards originated in the last few years and we show these credits cards were much riskier than in previous years. Two factors explain this extra risk: First, lending standards loosened a bit in 2021 and 2022 judging by a decline in credit scores at origination. At the same time, pandemic aid and forced savings pushed average credit scores up sharply. Effectively, by not tightening significantly, lenders were originating cards much further down the risk spectrum. We show this shifting risk composition explains why delinquencies are higher than in 2019.

Overall delinquencies increased rapidly over the last few years because the credit cards originated in 2021, 2022, and 2023 have gone delinquent much more rapidly than credit cards originated in other years. About 8 percent of credit cards originated in 2016 became delinquent about four years after origination. Meanwhile, the 2021 vintage reached an 8 percent delinquency rate just after 2 years while the 2022 vintage reached 8 percent after less than two years and 2023 has followed 2022 closely so far. (The 2020 vintage is in between the pre-pandemic and post-pandemic vintages reaching 8 percent delinquency after 3 years.) At the same time, credit cards originated in earlier years have not seen a similar increase in delinquencies in recent years.

Cards Originated in 2021 Through 2023 Were Riskier than Before

Figure 3 [Above Image] shows the credit score of new credit cards originated each month and the average credit score of all consumers on the left axis. During the Great Recession, lending standards tightened sharply, so that consumers with a new credit card had average scores above 720, even while the average credit score among all consumers was around 690. As a result, the average credit score rank for consumers with a new credit card was above 55 percent from 2008 to 2014, as shown on Figure 3’s right axis. A consumer’s credit score rank is what percentage of all consumers with a score have a score lower than that consumer.

Credit stress is rising just as layoffs are increasing and it’s getting much harder to find a job if you lose one.

That newer issued credit is failing faster again suggests it is renters and generation Z that is most impacted.

But it’s not just Millennials and Zoomers. Delinquencies are rising in all age groups, just more steeply in age groups 39 and younger.

Recession Debate

On August 9, I discussed why things are worse than they look.

If you missed it, please see Recession Debate: Citing the Sahm Rule, WSJ’s Greg Ip Says No Recession

Recessions frequently start with positive job growth and positive industrial production.

And jobs are highly likely to be seriously overstated. My calculations of pending negative revisions is similar to that of Bloomberg’s chief economist.

For discussion, please see Expect the BLS to Revise Job Growth Down by 730,000 in 2023, More This Year

If you think jobs are strong, you are very mistaken.

In a major shift in its recent assessment of Iran’s intentions, Israeli intelligence reportedly now believes that Iran is preparing a major strike on Israel after all — and that it will happen in the next few days. This comes after Israel had concluded that international pressure and US saber-rattling had persuaded Iran to leave it to Lebanese militant group Hezbollah to strike Israel for blowing up Hamas political leader Ismail Haniyeh in Tehran on July 31.

Israeli Defense Minister Yoav Gallant shared his country’s latest assessment with US Secretary of State Lloyd Austin in a Sunday conversation, Axios reported — telling Austin that Iranian actions signify the country is readying a major strike. Also on Sunday, Gallant told an Israeli Defense Forces unit that Iran and Hezbollah “are threatening to harm us in a way they haven’t done in the past.”

Israeli intelligence’s see-sawing assessment reflects an ongoing debate inside the Iranian government, a source with access to the intelligence told Axios: 

The Iranian Revolutionary Guards Corps [IRGC] is pushing for a more severe and broader response than Iran’s April 13 attack on Israel, but the new Iranian president and his advisers believe a regional escalation now wouldn’t serve Iran’s interests, the source said.

A Pentagon spokesman said Austin assured Gallant that America is committed “to take every possible step to defend Israel and noted the strengthening of U.S. military force posture and capabilities throughout the Middle East in light of escalating regional tensions.”

The strengthening of the US force posture included the deployment of the USS Georgia guided missile submarine to the Central Command theater. Armed with up to 154 Tomahawk land-attack cruise missiles, the Kings Bay, Georgia-based vessel recently completed joint training exercises in the Mediterranean with force recon Marines and special operations forces, including units from the UK, Norway and Italy. Austin also ordered the USS Abraham Lincoln carrier strike group, already steaming to the conflict zone laden with F-35C and F/A-18 fighters, to “accelerate its transit“, the Pentagon said.  

Last week, CENTCOM confirmed that an unspecified number of F-22 Raptor stealth fighter jets had arrived somewhere in its area of responsibility to “mitigate the possibility of regional escalation by Iran or its proxies.” Meanwhile, Russia has been delivering air defense equipment to Iran, including radars and possibly S-400 anti-aircraft missile components.  

See how all this works? Israel provokes Iran with a sensational violation of its sovereignty, and then the US government spends untold millions of dollars to protect Israel from the ensuing response — while putting in harm’s way service members who’ve who’ve been led to believe it’s a way of serving their country. 

If you sense a pattern, it’s because the same scenario unfolded a few months ago, when Israel bombed an Iranian diplomatic facility in Syria. When Iran struck back, US forces intervened to destroy the incoming projectiles. Without breaking down costs by country, analysts estimated Iran’s April strike cost only $80 to $100 million, while the defense mounted by the US, Israel and its allies cost around $1 billion.

Talk about asymmetrical warfare. 

US equity futures are seeing a slight bid, tracking Asian and European markets higher, as the week starts off more muted than last week but with a preference towards Quality. As of 7:45am, S&P 500 and Nasdaq 100 contracts are about 0.3% higher as Mag7 names are mixed but net higher and Semis are bid, while Europe’s Stoxx 600 index erased most of a 0.5% advance. Bond yields are flat as is the USD while the yen continued dropping as more jawboning from an ex-BOJ member suggested that rate hikes in Japan are effectively over, giving a green light to restart carry trades . Commodities are stronger led by Energy, WTI is higher after adding 4.5% last week. Copper is higher after 5 consecutive weekly losses and 11 of last 12 weeks, -20% from highs. Today’s macro focus is the NY Fed’s 1-year inflation expectation (3.02% prior). This is a heavy macro data week with both growth and inflation measures and the market is waiting on that data to determine the next market narrative. Earnings are almost complete but DE, HD, and WMT will provide important updates on the Consumer.

In premarket trading, Starbucks rose 2% after the WSJ reported that activist investor Starboard Value has taken a stake. Here are the other notable premarket movers:

• B. Riley Financial tumbles 25% after suspending its dividend as the boutique investment bank wrote down a portion of its stake in a US retail business.
• Hawaiian Electric falls 11% after pegging losses from estimated accrual of liabilities stemming from one of the worst wildfires in US history at $1.7 billion and issuing a going-concern warning.
• Humacyte sinks 12% as the FDA needs more time to review a biologic license application.
• JetBlue Airways slips 5% after announcing a $400 million convertible senior notes offering.
• KeyCorp (KEY) gains 14% after receiving a minority investment from Scotiabank.
• Monday.com (MNDY) rises 8%  after posting a 2Q profit that topped estimates.
• Pacira BioSciences (PCRX) drops 4% after a court found its Exparel 495 patent not valid.

There was some relief for investors Monday from the volatility that ripped through markets in recent sessions, fueled by concerns the Fed is waiting too long to cut rates. The S&P 500 last week posted both its biggest one-day slump and best rebound since 2022.  

“We all know that August tends to be a market in which we could see massive volatility simply because the liquidity does tend to be lower,” Sonja Marten, head of FX and monetary policy research at DZ Bank, said in an interview with Bloomberg TV. “This complete overreaction, panic move last week kind of goes to prove that.”

And while the VIX has retreated from its highest levels since the early days of the Covid-19 pandemic, there’s no certainty the relative calm will continue, with Wednesday’s US inflation data the key volatility event for the week. According to Citigroup, traders are positioning for the S&P 500 to move 1.2% in either direction when the consumer price index report is released.

Meanwhile, as bond markets have moved to account for a Fed that is “behind the curve,” the risk isn’t “priced into current equity multiples,” according to Morgan Stanley strategists. The team led by Michael Wilson said economic growth is the primary concern for investors, rather than inflation and rates. “Markets are looking for better growth or more policy support to get excited again,” the team wrote in a note. “We don’t see confirming evidence in either direction near term, leaving the index to trade in a tight range for now.”

Still, investors did take flight from stocks during last week’s wild swings. They reduced their equity allocations at the sharpest pace since the onset of the Covid pandemic, according to data from Deutsche Bank. Aggregate allocation to stocks is now in the 31st percentile and underweight, strategists including Parag Thatte wrote in a note dated Aug. 9. Just three weeks ago, exposure was at the top of the historical range in the 97th percentile.

Meanwhile, over the weekend we got a stark reminder that inflation still faces upside risks, after Fed Governor Michelle Bowman said she still sees upside risks for inflation and continued strength in the labor market, signaling she may not be ready to support an interest-rate decrease when US central bankers next meet in September. Money markets have fully priced a rate cut in September and about 100 basis points of easing for the year, according to swaps data compiled by Bloomberg. Separately, continued gains in oil in the next few weeks may throw a wrench in the Fed’s rate cutting plans.

“The problem is also that central banks have been emphasizing that they are acting very data-dependent these days,” DZ Bank’s Marten said. “Investors are trading from one data point to the next. That does also create additional volatility.”

Elsewhere, the European Central Bank is now seen as likely to cut its deposit rate once a quarter through the end of next year, a timetable that will see its easing cycle end sooner than previously anticipated. A Bloomberg survey of forecasters shows that benchmark hitting 2.25% in December 2025 following six consecutive quarter-point reductions.

European stocks erased gains as more sectors turn red, with traders preparing for a busy week on the data front. Real estate and health care lag peers, while energy and miners lead climbers. UK’s FTSE 100 outperforms regional peers with a 0.3% rise.  In London, BT Group Plc rallied more than 7% after Bharti Global agreed to buy a stake of about 24.5% in the UK carrier. Here are some of the other biggest European movers on Monday:

• Hannover Re rises as much as 6.3%, the most since November 2020, after the German reinsurer reported net investment income that beat the average analyst estimate in the second quarter. Jefferies says the strength of mid-year renewals prices supports the outlook.
• Eutelsat shares rise as much as 4.6% Monday after the satellite operator said it’s exploring a sale of a majority stake in its satellite ground infrastructure to EQT.
• Orlen shares rose most since April 2 after Poland’s largest energy company reported preliminary earnings that beat analyst expectations.
• JDE Peet’s shares fall as much as 1.7% after the coffee company announced its interim CEO and chairman Luc Vandervelde will step down, just five months after the exit of its former chief executive. The loss of yet another CEO in a short space of time makes the company look “careless,” ING analysts say.
• JD Sports shares fall as much as 2.8% after the sporting goods retailer was downgraded to sell from hold at Deutsche Bank, which said the stock is trading at an “unwarranted” free cash flow yield premium to peers.
• Marshalls shares drop as much as 5.3% after the landscaping, building and roofing products supplier reported sharp double-digit drops in revenue and earnings in the first half. Peel Hunt said this was driven by challenging conditions for its Landscaping arm.
• Aryzta shares decline as much as 4.5% after the Swiss industrial baker reported first-half organic growth that Vontobel described as “weak.”

Earlier, Asian equities advanced for a second session as technology stocks in South Korea and Taiwan extended a rebound from last week’s rout. The MSCI Asia Ex-Japan Index climbed 0.4%, kicking off the week on a positive note after declining for four straight weeks. Technology stocks in the region, including Taiwan Semiconductor Manufacturing Co., Tencent Holdings Ltd., Hon Hai Precision Industry Co. and Samsung Electronics Co., were among the biggest contributors to the gains. Japan is closed for a holiday. Artificial intelligence-related stocks are regaining momentum after a brutal selloff last week that saw an unwinding of some of these crowded trades. Traders will shift their focus to key US data prints this week as they assess the possibility of a recession in the world’s largest economy.

In FX, the Bloomberg dollar spot index is steady. NZD and AUD are the strongest performers in G-10 FX, JPY and CHF underperform. Dollar-yen is at around 147.6: the yen dropped the most against the dollar among major peers after former board member Makoto Sakurai said the Bank of Japan won’t be able to raise the policy rate again this year, given the market turmoil that followed its recent hike and the low likelihood of the nation’s economy seeing a rapid recovery. That followed last week’s surge as traders slashed bearish bets in the wake of the Bank of Japan’s July 31 rate hike. The BOJ’s move prompted investors to dump carry trades, unleashing turmoil that ricocheted across global markets.

In rates, treasuries are slightly cheaper across the curve, although yields remain near to Friday’s closing levels and spreads remain steady. Treasury 10-year yields trade around 3.955%, cheaper by about 1bp on the day, with bunds lagging by ~1bp in the sector. Treasury spreads are broadly within 1bp of Friday’s close. Fed comments over the weekend included Governor Michelle Bowman, who said she sees upside inflation risk, signaling caution on rate cuts. In Asia, China 10-year yields rose as much as 5bps, as the central bank warned on potential risks arising from the relentless rally in the debt market.

In commodities, oil extended its first weekly gain since early July, with traders continuing to monitor Iran’s response to last month’s assassination of a Hamas leader in Tehran. WTI futures are higher by 1.1%, supporting energy names; Brent rises 0.6% near $80.15. Spot gold rises roughly $13 to trade near $2,444/oz, the highest in a week. Spot silver gains 1.4% near $28. Most base metals trade in the green.with traders focused on the week’s key US data. Bullion has gained more than 18% this year and remains in touching distance of last month’s all-time high. Along with rate-cut expectations, it’s also been supported by firm central bank buying and robust demand from Chinese consumers.

Looking today’s calendar, it is a quiet session for scheduled events: the US data slate includes July New York Fed 1-year inflation expectations (11am) and monthly budget statement (2pm).No Fed speakers scheduled for the session

Market Snapshot

• S&P 500 futures up 0.3% to 5,384
• STOXX Europe 600 up 0.3% to 500.51
• MXAP up 0.1% to 175.65
• MXAPJ up 0.4% to 555.47
• Nikkei up 0.6% to 35,025.00
• Topix up 0.9% to 2,483.30
• Hang Seng Index up 0.1% to 17,111.65
• Shanghai Composite down 0.1% to 2,858.21
• Sensex up 0.3% to 79,947.89
• Australia S&P/ASX 200 up 0.5% to 7,813.70
• Kospi up 1.2% to 2,618.30
• German 10Y yield little changed at 2.24%
• Euro little changed at $1.0919
• Brent Futures up 0.6% to $80.14/bbl
• Gold spot up 0.4% to $2,439.83

Top Overnight News

• Federal Reserve Governor Michelle Bowman said she still sees upside risks for inflation and continued strength in the labor market, signaling she may not be ready to support an interest-rate decrease when US central bankers next meet in September
• US VP Harris said she will work to raise the minimum wage and eliminate taxes on tips for service and hospitality workers, copying Trump policy promises
• US-China working group set to meet in China this week: NYT
• In Secret Talks, U.S. Offers Amnesty to Venezuela’s Maduro for Ceding Power: WSJ
• Oil steadied after its first weekly gain since early July, with the market still waiting for Iran’s response to last month’s assassination of a Hamas leader in Tehran
• The Bank of Japan won’t be able to raise the policy rate again this year, given the market turmoil that followed its recent hike and the low likelihood of the nation’s economy seeing a rapid recovery, according to a former board member
• Former Treasury Secretary Lawrence Summers urged the Securities and Exchange Commission and relevant exchanges to look into the historic surge in the most-watched gauge of US financial volatility on August 5

A more detailed look at global markets courtesy of Newsquawk

APAC stocks began the week mostly higher following last Friday’s gains on Wall St and light macro newsflow over the weekend, but with gains capped amid an indecisive mood in China and holiday closure in Japan for Mountain Day. ASX 200 advanced with the upside led by outperformance in Consumer Discretionary, Tech, Telecoms and Financials. Hang Seng and Shanghai Comp. were indecisive as lingering economic concerns offset the PBoC’s liquidity efforts.

Top Asian News

• PBoC’s low carbon financing scheme which provides financial institutions with low-cost loans targeting carbon emission cuts was extended to the end of 2027, according to the State Council.
• RBA Deputy Governor Hauser said economic forecasts are subject to huge uncertainty and assume inflation stickiness due to weaker supply and labour market tightness, while he added there is risk consumption could rise more strongly, in part due to an increase in wealth and it is uncertain how far and fast the savings rate might rise.
• Chinese brokers curb bond trading amid warnings of a rally, via Bloomberg; at least four brokerages have started fresh measures to cut back trading on government bonds since last week.

European equities, Stoxx 600 (+0.3%) have started the week on a mostly firmer footing, taking positive leads from a constructive APAC session. European sectors hold a strong positive bias. Insurance takes the top spot, propped up by post-earning strength in Hannover Re. Basic Resources and Energy are both higher, given the strength in underlying commodity prices. US Equity Futures (ES +0.2%, NQ +0.3%, RTY -0.1%) are mixed, with the ES and NQ very modestly firmer, benefiting from the generally positive risk tone.

Top European News

• BoE’s Mann said UK wage growth is still a concern for inflation and goods and services prices were set to rise again, while she added that wage pressures in the economy could take years to dissipate. Furthermore, Mann said she moved down from ten to seven on a scale of “hawkishness” since the start of the year as price pressures eased, according to FT.
• Fitch affirmed Netherlands at AAA: Outlook Stable, while it affirmed Finland at AA+; Outlook Revised to Negative.

FX

• DXY is trading relatively flat and within tight ranges of 103.12-24, in what has been a catalyst thin session thus far. This week’s focus is on US inflation data, followed by Retail Sales.
• EUR is choppy but within tight ranges and largely moving at the whim of the buck in the absence of any further catalysts. EUR/USD remains within Friday’s 1.0908-1.0931 parameter.
• GBP/USD experienced early upticks as EUR/GBP briefly dipped under 0.8550 (to 0.8544 low) in turn propping up GBP/USD which found resistance just shy of its 50 DMA (1.2784), with the pair’s current range between 1.2748-1.2782 range. Overnight, BoE’s Mann said UK wage growth is still a concern for inflation.
• JPY is the marked laggard with Japanese players away overnight on Mountain Day holiday. Traditional haven FX are hit despite the geopolitical uncertainty. Price action in the JPY has been gradual and contained to within Friday’s range between 146.26-147.81.
• Antipodeans outperform, benefitting from the overall risk tone and strength in the metals complex. NZD/USD is back above the 0.6000 level ahead of the RBNZ meeting where there are mixed views on whether the central bank will cut rates or not.
• PBoC set USD/CNY mid-point at 7.1458 vs exp. 7.1777 (prev. 7.1449)

Fixed Income

• USTs are subdued after hitting a high of 113-05 last Friday, leading to a slight pullback. Price action has been fairly rangebound, given the lack of pertinent newsflow, so attention remains firmly on US CPI mid-week. Currently trading around 112’25.
• Bunds are modestly softer with the broader bond complex inching lower since the uneventful APAC trade, with some potential follow-through from the upticks in oil and gas prices on yields.
• Gilts are slightly lower but still comfortably above the Aug 8 low of 99.20. The UK docket is quiet today. Overnight, BoE’s Mann said UK wage growth is still a concern for inflation and goods and services prices were set to rise again.

Commodities

• Crude is firmer intraday and inching higher amid geopolitical uncertainty over Iran and Lebanon’s response against Israel to the assassinations of the Hamas leader and Hezbollah commander, with the risk of the response sparking a region-wide war.
• Natural Gas is firmly in the green amid broader energy upside. Dutch TTF holds north of EUR 40/MWh and closer to EUR 41/MWh as the Ukrainian offensive within Russia widens, with Russian authorities suggesting the situation in the Belovsky border region in Kursk is very tense.
• Metals are firmer across the board with precious metals buoyed by geopolitical angst and base metals held up by the broader risk tone alongside some fears of sluggish global growth abating. Spot gold topped last week’s high to trade in a current USD 2,423.67-2,442.70/oz range at the time of writing.
• Iran’s President nominated Mohsen Paknezhad as Oil Minister and Abbas Aragchi as Foreign Minister.
• OPEC Monthly Oil Market Report to be published at 11:45BST / 06:45EDT

Geopolitics: Ukraine

• “IDF Radio: The final decision on the direct attack has not yet been made and is in the hands of the Iranian leader… The Iranian attack, if carried out, will be limited and will not lead to a wide regional war”, Via Ashaq News. “Israeli Army Radio: Iran is close to deciding to launch a direct attack from its territory towards Israel”
• Israel conducted an air strike which killed nearly 100 in a Gaza school refuge, according to civil defence officials cited by Reuters. It was also reported that Israel ordered a major evacuation in Gaza’s Khan Younis.
• Israeli media reported that at least 30 rockets were fired by Hezbollah towards Israel of which some were intercepted by air defences, while no casualties were reported from the rocket shelling on the city of Nahariya and its suburbs.
• Israeli intelligence believes Iran has decided to attack Israel directly and may do so within days, according to Axios’s Ravid. It was also reported that Israeli Defence Minister Gallant spoke to US counterpart Austin and told him Iranian military preparations suggest Iran is getting ready for a large-scale attack, while Israeli intelligence assessment indicated an Iran attack may precede ceasefire talks scheduled for Thursday. Furthermore, Israel’s military intelligence and air force raised the alert level amid the threat from Iran.
• US Defence Secretary Austin told Israeli counterpart Gallant he ordered the USS Abraham Lincoln carrier strike group to accelerate its transit to the Middle East, while he also ordered the USS Georgia guided missile submarine to the Central Command region.
• Iran’s Revolutionary Guards held a military drill in West Iran, according to IRNA.
• Hamas asked mediators to present a plan based on past talks instead of engaging in new negotiations, according to a statement.
• Several US and coalition personnel suffered minor injuries in an attack in Syria on Friday, according to a US official cited by Reuters.

Geopolitics: Other

• IAEA said its experts witnessed a strong dark smoke coming from the northern area of the Zaporizhzhia nuclear plant following multiple explosions but added that there was no safety impact reported.
• Ukrainian President Zelensky said Russia started a fire on the premises of the Zaporizhzhia nuclear plant in southern Ukraine but added that radiation indicators are normal. It was also reported that the Russian management of the Zaporizhzhia nuclear plant accused Ukraine of causing a fire near the cooling towers of the Zaporizhzhia nuclear plant by shelling the nearby city of Enerhodar although it noted that the fire had no impact on its plant and its safe use.
• Main fire at the Russian-controlled Zaporizhzhia power plant in Ukraine had been extinguished, while Russian and Ukrainian authorities said in separate statements that one of the cooling towers at the power plant was damaged, according to Reuters. Furthermore, Russian President Putin ordered tighter security at strategic facilities in Zaporizhzhia including the nuclear plant.
• Ukrainian President Zelensky said Russia conducted nearly 2,000 cross-border strikes on Ukraine’s Sumy region from the Kursk region this summer and such strikes deserve a fair response from Ukraine. Zelensky also commented that Russian forces used a North Korean missile in a strike on the Kyiv region which killed two people, while the Ukrainian military said it destroyed 53 attack drones launched by Russia during a strike over the weekend.
• Russia’s Kursk region governor ordered a faster evacuation of civilians in areas at risk of Ukraine’s attack and announced that thirteen people were injured from a downed Ukrainian missile in Russia’s Kursk city, while it was reported that Russia’s air defence systems destroyed 14 Ukraine-launched drones and four missiles over the Kursk region.
• Belarusian President Lukashenko said Belarus’s air forces were put on high alert after Ukraine violated Belarus’s air space and Belarus destroyed objects thought to be Ukrainian drones that had entered their air space.
• Philippine military said a Chinese air force aircraft executed a dangerous manoeuvre and dropped flares in the path of a Philippine air force aircraft in the South China Sea shoal. Furthermore, the Philippines presidential office said the action of the Chinese aircraft was unjustified, illegal and reckless, while President Marcos strongly condemned the air incident at Scarborough Shoal.

US Event Calendar

• 11:00: July NY Fed 1-Yr Inflation Expectat, prior 3.02%
• 14:00: July Monthly Budget Statement, est. -$242b, prior -$66b