Month: September 2024

Authored by Chris Summers via The Epoch Times,

Mexican President Andrés Manuel López Obrador has blamed the United States for an upsurge in violence between cartel factions in the state of Sinaloa, which has left at least 30 people dead.

Two factions of the powerful Sinaloa cartel have attacked each other in the state capital of Culiacan recently, with teams of gunmen—or sicarios—firing at each other and at the security forces.

The uptick in violence followed the capture on July 25 of Ismael “El Mayo” Zambada, 76, in El Paso, Texas.

Zambada has since claimed that he was ambushed and taken to the United States by Joaquín Guzmán López, one of the sons of former Sinaloa cartel leader Joaquín “El Chapo” Guzmán, who is serving a life sentence in a U.S. prison.

The two factions at war are the MZ/MF, which is loyal to El Mayo, and the El Chapitos, aligned with Guzmán López and El Chapo’s other sons.

During a press briefing on Sept. 19, López Obrador—who is often referred to by his initials AMLO—described the operation to capture El Mayo as “totally illegal.”

‘Instability’ in Sinaloa

He said of the U.S. government, “If we are now facing instability and clashes in Sinaloa, it is because they made that decision.”

López Obrador said there “cannot be a cooperative relationship“ between the United States and Mexico ”if they take unilateral decisions” such as going ahead with the capture of El Mayo without informing the Mexican government.

On Sept. 13, López Obrador asked Sinaloa’s warring factions to act “responsibly” and said he believed the cartels would listen to him.

But the killings have not abated, and many parents have kept their children home from school in Culiacan for fear they will get caught up in the intra-cartel violence.

Businesses are closing early, and few people are venturing out after dark in the city.

On Sept. 17, Mexican Defense Secretary Luis Cresencio Sandoval said two members of the military were among those killed in the fighting, which broke out on Sept. 9.

About 2,000 security personnel have been sent to Sinaloa and the neighboring state of Durango to patrol areas seen as the cartel’s strongholds.

‘Hugs Not Bullets’ Strategy

Unlike some of his predecessors, López Obrador has refused to confront Mexico’s drug cartels and has referred to his strategy as “hugs not bullets.”

Mexican prosecutors have even said they are considering bringing treason charges against those involved in the capture of El Mayo, whose cartel has killed thousands of people over the past two decades.

(Left) Ismael “El Mayo” Zambada; (Right) Joaquín Guzmán López. U.S. Department of State via AP

López Obrador is Mexico’s outgoing president, but his successor, Claudia Sheinbaum, is from the same Morena party. She will be inaugurated in January.

López Obrador’s relationship with the Biden administration has steadily deteriorated. Last month, he said he was putting relations with the United States and Canadian embassies “on pause” after their ambassadors criticized his controversial judicial reforms.

The U.S. ambassador to Mexico, Ken Salazar, said one element of the reforms—the election of judges by popular vote—constituted “a major risk to the functioning of Mexico’s democracy.”

The U.S. government has not responded to López Obrador’s comments.

However, on Sept. 13, the U.S. Department of Justice published a statement in which Attorney General Merrick B. Garland said: “We allege that El Mayo built, and for decades led, the Sinaloa cartel’s network of manufacturers, assassins, traffickers, and money launderers responsible for kidnapping and murdering people in both the United States and Mexico, and importing lethal quantities of fentanyl, heroin, meth, and cocaine into the United States.

“Now, El Mayo joins the many other Sinaloa cartel leaders who have faced charges in an American courtroom for the immeasurable harm they have inflicted on families and communities across our country.”

One month ago, when describing the rapid deterioration in China’s economy – including the crumbling welfare state, the country’s dwindling savings rate, the soaring youth unemployment and jump in labor strikes and overall social discontent – we said that despite its stubborn unwillingness to stimulate the economy, “Beijing will have no choice but to blink in the end, and that will mean unleashing a much delayed stimulus bazooka that likes of which have not been seen yet.”

Then, last Friday, when pointing out the record plunge in the China’s all-important M1 monetary aggregate…

… we said that it’s time for China to turn on the printing press.

Time For China To Turn On The Printing Press https://t.co/IDBjhxAs90

— zerohedge (@zerohedge) September 21, 2024

We had to wait just a few hours for this prediction to come true, and while it’s not the full-blown massive bazooka we expect will be revealed in due course (as the alternative is civil insurrection), overnight China’s central bank lowered a key short-term policy rate and pumped more liquidity into the financial system, in its latest effort to boost the sagging economy.

Early on Monday, the People’s Bank of China cut the 14-day reverse repurchase interest rate by 10 basis points to 1.85%, and injected 74.5 billion yuan, equivalent to $10.6 billion, of liquidity via the policy tool, it said on its website.

The latest cut is a reflection of the reduction in the 7-day reverse repo rate in July, during which the PBOC didn’t conduct a 14-day reverse repo operation, said Zhiwei Zhang, an economist at Pinpoint Asset Management.

The central bank also injected 160.1 billion yuan through 7-day reverse repo agreements, keeping the interest rate unchanged at 1.7%, it said Monday.

Last week, the PBOC unexpectedly held its benchmark lending rates steady, despite rising expectations for easing following the U.S. Federal Reserve’s own rate cut. But with its economy in shambles, it’s just a matter of time before Beijing scrambles to catch down to the Fed.

Economists anticipate the Chinese central bank will lower its 7-day reverse repo rate—now seen as the key rate for pricing benchmark lending rates—in the coming months, as the Fed’s cut gives it more room for monetary policy easing.

But more important than the rate cut, China also announced plans for a rare briefing on the economy by three top financial regulators fueling speculation officials are preparing to ramp up efforts to revive growth. According to Bloomberg, authorities announced that central bank governor Pan Gongsheng will hold a press conference tomorrow on financial support for economic development, alongside two other officials. Minutes later, the People’s Bank of China lowered the 14-day reverse repurchase rate, catching up with reductions initiated in July.

The moves bolstered expectations that PBOC will further lower rates, after the US Federal Reserve finally started cutting last week easing pressure on China’s need to defend its currency. A slew of disappointing data in August raised concerns that President Xi Jinping’s government could not only miss its annual growth target of around 5% without unleashing more support, but is gambling with a total deflationary collapse of the Chinese economy, where housing is now at the lowest level since the global crisis.

Meanwhile, traders understandably are pricing in more stimulus, with the yield on China’s 10-year government bonds falling to a fresh low of 2.03% in the Monday morning session. The benchmark CSI 300 Index for onshore stocks marked their fourth straight day of increases, the longest streak in two months.

“I do expect the PBOC to cut the 7-day reverse repo rate as well as the reserve requirement ratio in the coming months,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. The briefing will give regulators a chance to “shed light on their policy stance,” he added.

Others were more willing to cut to the chase: according to Evercore ISI’s Neo Wang, PBOC Governor Pan Gongsheng’s planned presence at a rare joint briefing by top financial regulators scheduled for Tuesday makes a cut to reserve requirement ratio for financial institutions look likely. Pan may personally announce the RRR reduction, just like he did at a Jan. 24 press conference, two weeks ahead of time, when authorities tried to halt a $6 trillion stock-market rout. Wang said that the medium-term lending facility maturity wall before year-end also justifies a RRR reduction, and added that the presser is also valuable for any hint at the likelihood of future loan prime rate cuts.

That event kicks off at 9 a.m. — 20 minutes before the PBOC’s daily announcement on its short-term policy loans and their costs, in contrast to more typical 10 a.m. start times.

While the Fed’s bigger-than-expected half-percentage point slash has given central banks across Asia more room to move, not all are immediately following suit. Indonesia’s central bank unexpectedly reduced its main rate last week, but the Bank of Australia is set to hold on Tuesday, echoing last week’s decision by Japan’s monetary authority which is on a hiking path.

Unfortunately, even another RRR cut is unlikely to achieve much: China’s string of rate cuts has done nothing to stimulate an economy that most recently expanded at the slowest pace in five quarters, and to contain a years-long real estate crisis that’s wiped out an estimated $18 trillion in wealth from households has crushed appetite for spending and pushed China into its longest streak of deflation since 1999.

That means real interest rates — which are adjusted for changes in prices — have stayed elevated, weakening the impact of any moderate easing. A plunge in revenue from land sales has also held back fiscal spending, leaving indebted local governments struggling to pay their bills and with little bandwidth to invest in growth-boosting projects.

Now, the focus is on whether China’s fourth-quarter growth can get “remotely close” to the annual target, said Ken Wong, Asia equity portfolio specialist at Eastspring Investments, adding that a 4.8% expansion looked most likely for 2024. “Monetary policy could help,” he said, “but ultimately getting the consumer to spend, and building up consumer confidence, is going to be key to China.”

Economists in a Bloomberg poll pinpointed enforcement of the housing rescue package China unveiled in May as the single most-impactful way officials can give the economy a kick. So far, uptake has been weak with only 29 of some 200 cities heeding the call to absorb a housing glut.

“It is also needed for the PBOC to guide lower the interest rates on existing mortgages,” said Credit Agricole Chief China Economist Xiaojia Zhi, responding to the Monday cut. Regulators are also working on a proposal that would allow mega cities such as Shanghai and Beijing to relax restrictions for non-local buyers, Bloomberg News previously reported.

The PBOC’s decision to lower the 14-day rate to 1.85% from 1.95% Monday came ahead of the week-long nationwide break that begins Oct 1. The central bank typically offers fortnight-long loans ahead of extended breaks, previously doing so in February ahead of the week-long Lunar New Year break. The last time officials cut the RRR came on the cusp of the Lunar New Year holiday, as they looked to smooth liquidity.

“A bigger package is needed” than Monday’s 10-basis-point trim, said ANZ Chief Greater China Economist Raymond Yeung. “Other policy measures in the tool box such as RRR cut, MLF cut and mortgage rate cut will likely be announced.”

Authored by Daniel Lacalle,

The Federal Reserve decided to cut rates by 50 basis points despite what Chairman Powell considers “no risk of a recession or downturn,” a “solid economy,” and a “strong job market.”

After ignoring the impact of monetary aggregates and the warning signs of inflation, the Federal Reserve has breached its price stability mandate for three consecutive years, preferring to prioritize liquidity injections, i.e., printing money, to the recovery of the currency’s purchasing power.

The “higher for longer” policy only lasted eighteen months. Furthermore, the latest reading of the Chicago Fed National Financial Conditions Index indicates extremely loose conditions. In fact, the Fed has never cut rates by so much when financial conditions have been this loose.

If financial conditions are extremely loose and the economy and the labor market are strong, according to the FOMC minutes, there is no sign of recession and inflation remains above target, especially the core CPI, why should they cut rates so fast? What happened?

The Fed decided to bail out the government in the middle of an election process of all moments. The Fed’s questioned independence is even more doubtful today. Cutting rates to help an overly indebted government has become part of the electoral campaign.

The Fed did not panic in September after the negative revision that lost 818,000 jobs from the previous reading. The Fed had already panicked in June when it delayed its tightening cycle, which coincided with a burst in sovereign bond yields. Despite persistent inflation and an overheated economy, the Committee decided to “slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.” Additionally, the Fed announced it would “reinvest any principal payments in excess of this cap into Treasury securities.” The Fed panicked because the two-year Treasury yield soared to 5.03% between January and May 2024, despite an alleged robust economy and very encouraging official headline figures.

The fiscal irresponsibility of the Biden-Harris administration had driven the annual deficit to new highs despite record tax receipts and better-than-expected GDP growth. Of course, we all know that the economy is not as strong as it looks and that headline figures disguise a much weaker labor market and productive economy, but the Fed reacted with its first loosening action once it saw that Treasury yields soared to new highs and because the demand for U.S. public debt of foreign investors started to decline visibly.

Things just got worse on the fiscal front after the “quiet easing” announced in June. The U.S. budget deficit reached $1.897 trillion in the first eleven months of the 2024 fiscal year, and annual interest costs on the public debt topped $1 trillion for the first time, according to the Treasury Department. Furthermore, in its own projections, the Treasury expected an increase of $16 trillion in government debt between 2024 and 2034. The Congress Budget Office estimates that the implementation of the Harris economic plan will result in a further $2.25 trillion increase in debt.

The Fed had to act with a large rate cut to bail out the Treasury. It has certainly impacted the markets. On September 20, the two-year yield was 3.59, the lowest level since September 2022. However, artificially reducing sovereign bond yields will not disguise the enormous fiscal problem of the United States; it will make it worse.

Lowering rates will have a limited impact on the real economy because a 15-year effective mortgage rate remains at 5.6%, and financial conditions will not ease significantly. Furthermore, it is difficult to believe that families and businesses will start demanding more credit with record levels of credit card debt and an already weak economy that has seen no growth in sales or earnings of the Russell 2000 in the past four years.

Lowering rates is a tool to rescue the government, but it will also make the Treasury add more debt in the next few months. If you make it easy for governments to borrow, they will gladly do it and continue printing currency, leading to the currency’s slow decline.

The Fed rate-cut cycle will likely continue. However, this will also continue to erode confidence in the currency and international demand for government bonds, perpetuating the U.S. dollar’s loss of purchasing power.

The Fed is now in campaign and will support the government debt as much as possible, passing the negative impact to real wages and small businesses. If the Fed cannot curb the appetite for deficit spending and debt of the government, it will lose one of its reasons to exist.

If the Federal Reserve becomes a government agency that prioritizes sovereign debt issuance over price stability, the endgame is likely to be a Japanese-style stagnation and the end of the US dollar as the world’s safest asset in global central banks’ balance sheets.

Modern vehicles have GPS tracking, cameras, microphones, and other optical sensors connected to the internet. If Chinese-made software and hardware were integrated into these vehicles, then there’s a genuine risk America’s highways could be flooded with rolling spying machines.

The Biden-Harris administration is getting tougher on China ahead of the November elections to show the American people that they mean business with Beijing. A newly proposed rule from the US Commerce Department reveals the potential to ban Chinese-made software and hardware in vehicles connected to the internet. 

Here’s more from the White House:

Today, President Biden is announcing strong action to protect America from the national security risks associated with connected vehicle technologies from countries of concern. The Department of Commerce is issuing a notice of proposed rulemaking (NPRM) that would, if finalized as proposed, prohibit the sale or import of connected vehicles that incorporate certain technology and the import of particular components themselves from countries of concern, specifically the People’s Republic of China (PRC) and Russia.

The announcement is the next step in a process President Biden announced in February, 2024. This NPRM incorporates public feedback submitted in response to the Department’s advance notice of proposed rulemaking (ANPRM) issued on March 1, 2024, which sought public comment on the national security risks associated with certain technologies used in connected vehicles.

…

As the Department of Commerce has found, vehicles’ increasing connectivity creates opportunities to collect and exploit sensitive information. Certain hardware and software in connected vehicles enable the capture of information about geographic areas or critical infrastructure, and present opportunities for malicious actors to disrupt the operations of infrastructure or the vehicles themselves. Commerce has determined that certain technologies used in connected vehicles from the PRC and Russia present particularly acute threats. These countries of concern could use critical technologies within our supply chains for surveillance and sabotage to undermine national security.

On Sunday, US Secretary of Commerce Gina Raimondo told reporters during a conference call that “in extreme situations, a foreign adversary could shut down or take control of all their vehicles operating in the United States, all at the same time, causing crashes (or) blocking roads.” 

A senior administration official told CNN that the proposed rule would not apply to vehicles already on US highways with Chinese software or hardware installed. The software ban is expected to begin for the model year 2027, and the hardware ban for the model year 2030. 

Raimondo said the proposed rule, which is now undergoing a 30-day public comment period, is not a protectionist move, yet Chinese critics have disputed this. She noted, “This is not about trade or economic advantage,” adding, “This is a strictly national security action.”

Meanwhile, Tesla vehicles have faced concerns about spying in China in the last several years. In response, Elon Musk’s EV company established a data center in China to store and process data collected from vehicles, aiming to appease authorities and demonstrate compliance with Beijing regulators to address spy fears. 

Former President Trump’s would-be assassin Ryan Wesley Routh wrote a chilling letter admitting he failed in trying to take the life of the former president, and offering a reward for anyone who can finish the job…

The note was addressed to the “World” and reads:

“This was an assassination attempt on Donald Trump but I failed you. I tried my best and gave it all the gumption I could muster. It is up to you now to finish the job; and I will offer $150,000 to whomever can complete the job,” according to court papers.

Routh dropped off a box at a person’s home that included the letter, the court documents state.

As Jack Phillips reports at The Epoch Times, law enforcement officials were contacted on Sept. 18, or three days after he was arrested, by a person who said that Routh dropped off the box at his location in the months prior to the incident. The witness opened the box after learning of Routh’s arrest, finding ammunition, phones, and various letters.

Prosecutors said the note and other evidence found at the scene show a need for Routh to be detained while the government builds its case against him. A detention hearing is scheduled for Monday morning at a federal court in Florida.

“Because the facts are offered for the limited purpose of supporting the United States’s request for pretrial detention, the facts in this written proffer do not set forth all of the information and evidence known to the United States in this ongoing investigation,” the court documents state.

Prosecutors found “a notebook with dozens of pages filled with names and phone numbers pertaining to Ukraine, discussions about how to join combat on behalf of Ukraine.”

“He [the former President] ended relations with Iran like a child and now the Middle East has unraveled,” Routh wrote in one of the documents, according to the court papers.

“Everyone across the globe from the youngest to the oldest knows that Trump is unfit to be anything, much less U.S. president. U.S. presidents must at the bare miminum embody the moral fabric that is America and be kind, caring and selfless and always stand for humanity.”

Cellphone records from two of the recovered phones show that Routh traveled from Greensboro, North Carolina, to West Palm Beach on Aug. 14, 2024, prosecutors wrote.

Further, on “multiple days and times from Aug. 18, 2024, to Sept. 15, 2024, Routh’s cellphone accessed cell towers located near Trump International and the former president’s residence at Mar-a-Lago,” the filing said.

A cellphone that was recovered by authorities showed a Google search of how to travel from Palm Beach County, Florida, to Mexico. Federal officials also found a list with dates in August, September, and October as well as venues where the former president had appeared and was scheduled to appear, prosecutors say.

During his first court appearance last week, Routh declared that he had no assets and only owned two trucks worth $1,000. In a 2023 book that apparently written by him, Routh also wrote that he had no bank account and no retirement savings.

Posts made by Routh on X and other social media sites show that he was an avid supporter of Ukraine in the ongoing Russia–Ukraine conflict, even posting images and videos of himself in Kyiv and other areas in Ukraine since the war started. He also made critical comments about the former president, including several in July that referenced the first assassination attempt.

Routh faces federal firearms charges in connection to the Sept. 15 incident. Prosecutors say that Routh, 58, camped out near Trump’s Florida golf course for 12 hours before his gun barrel was spotted by a Secret Service agent, who then fired at the suspect before he fled the scene.

Authorities also discovered an SKS-style rifle with 11 rounds, including one round in the chamber, according to the court papers. Officials previously said that the suspect did not fire any shots and had no direct line of sight to Trump, who was golfing at the time of the incident. The former president also was not harmed.

In July, Trump survived his first assassination attempt and was shot in the ear by a gunman who fired at a rally while he was speaking in Butler, Pennsylvania, prompting questions about the Secret Service’s ability to protect him.

The FBI said that when its agents attempted to interview Routh after he was detained on Sept. 15, he invoked his right to an attorney. Routh has not entered a plea.

Finally, Matt Walsh brings up a crucial point about the release of this letter:

“They didn’t release the Covenant shooter manifesto because they were allegedly afraid it would inspire more shootings. And yet within a week they release a letter from Trump’s would-be assassin where he openly encourages more shootings and offers to pay for them.”

Routh is set to appear in federal court on Monday for a detention hearing after the attempted assassination on September 15 at Trump International Golf Club in West Palm Beach.

Better keep an eye out for ‘Jack Ruby’-esque followers…

By Benjamin Picton, Senior Macro Strategist

Gold prices traded at fresh all-time highs on Friday, closing well above the $2600/oz barrier. The rally in gold seems unstoppable at this point and resets on the all-time-high are becoming a frequent occurrence. This perhaps comes as no surprise given that the Fed wrong-footed many economists to start the easing cycle with a supersized rate cut even as growth has remained strong, inflation above target and the Federal deficit at eyewatering levels.

The contrast between the yellow metal and the bond market is worth exploring. While gold was resetting records, the 2s10s Treasury curve was busy bear-steepening. Usually we would expect a zero-yield asset that some disparagingly refer to as a “pet rock” to perform poorly when market yields are rising. Equity markets responded to the lift in long-end yields by closing the session flat in the case of the ‘money today’ Dow Jones, and down by 1/3rd of a percentage point in the case of the ‘money tomorrow’ (we hope!) NASDAQ. So why was gold insensitive to higher yields while equities were not?

Some have suggested that Fed dovishness was already ‘in the price’ for bonds, but that doesn’t fully explain the price action. The Dollar spot index was down by just 0.39% last week (the third consecutive weekly fall) as yields rose and spot gold lifted 1.71%. Is this an example of market inefficiency, or is this a least-dirty-shirt effect where the DXY (a relative price) doesn’t fully reflect a devaluation of all currencies being priced into gold as the market considers the potentially infinite supply nature of Treasury bonds?

Perhaps markets simply picked up on Christine Lagarde’s comments in Washington about the parallels between the 2020s and the 1920s? Particularly the bit where she cautioned that adherence to the gold standard in the 1920s induced deflation (true) and contributed to the rise of economic nationalism. Lagarde’s point seems to be that deflation is worse than the alternative of inflation; so perhaps it makes sense to get long pet rock while the world’s second most powerful central banker is openly hinting that she views the erosion of your salary and savings as the lesser of two evils. Bitcoin also had a pretty good week and is up more than 1% in early Monday trade.

Oil prices might offer further clues. Crude had fallen sharply in the fortnight prior to last week as markets started to get jittery about slowing demand in China and the USA and the prospect of a 180,000 bbl/day rebound in supply from OPEC+ later in the year. OPEC+ has now announced that production cuts will be extended and the Fed has delivered a supersized rate cut. Are those actions sufficient to justify last week’s 4% rally in crude prices, or might other commodity markets also be tentatively pricing in a secular inflation theme? The Bloomberg Commodity Index has closed higher in 9 of the last 10 sessions.

This week is a little less action packed in terms of market-sensitive data, but there are still a few points of interest on the calendar. Friday brings the August PCE price index for the USA, where a 0.1% M-o-M headline rate is anticipated, along with a 0.2% core rate. That would translate to a 1-tick lift in the Y-o-Y core rate to 2.7% (courtesy of base effects). Imagine the Fed’s discomfort if that figure comes in materially higher having just delivered a 50bps rate cut. Image the discomfort of traders pricing in 25bps of cuts in addition to the 50bps of additional cuts this year implied by the Fed’s latest dot plot!

Also, this week we will see the Reserve Bank of Australia’s September policy rate decision and the release of its semi-annual Financial Stability Review. The RBA has been talking tough on their willingness to raise rates again to tame inflation, but few expect them to ever make good on those threats. Consequently, the December OIS has an RBA rate cut 66% priced even after a strong(ish) August employment report released last week and repeated protestations from Bank speakers that the Board doesn’t expect that they will be able to cut rates in 2024.

The RBA’s credibility was dealt a severe blow by repeated assurances as late as November 2021 that the cash rate was unlikely to rise until “2024 at the earliest”. By November of 2023 the RBA had raised rates 13 times. So, now that the RBA is saying that they could hike again many analysts (including yours truly) seem to have concluded that the Aussie central bank is a sheep in wolf’s clothing and if they were really going to raise rates again, they would have done it by now.

Of course, the RBA has been under political pressure all year not to raise rates. Political interference in monetary policy re-emerged as a theme following the Fed’s decision to deliver a 50bps cut 48 days out from an election. The antipodean expression of this is found in Aussie Treasurer Jim Chalmers is trying to steer a bill through Parliament to reform the RBA to make it look more like the Bank of England (!), abolish its powers to direct the lending of commercial banks (which would be handy in a crisis) and abolish his own power to override RBA policy rate decisions (also handy in a crisis).

With the main opposition parties opposed to the bill the Treasurer must now rely on the left-wing Greens party to get it passed, but in one of the great ironies the Greens have demanded that the Treasurer retain his power to override the RBA and exercise that power immediately to cut interest rates! Clearly, there is nothing more political than the price of money, and the gold price knows it.

After a fast and furious week which saw not just key economic data but also central banks galore, fedspeak will dominate the week until we reach the core PCE number on Friday with Bostic (voter – dovish) opening up proceedings today, followed by Goolsbee (non-voter – dovish) who may give indications that he is looking for a continuation of large rate reductions. Tomorrow and Thursday, Bowman will tell us why she was the first governor to dissent at an FOMC since 2005. Kugler (voter – neutral) speaks on Wednesday and then takes part in a fireside with Collins (non-voter – dovish) on Thursday. Also on Thursday we have the 10th annual US Treasury Market Conference. Powell opens it up with pre-recorded remarks with Williams (voter – dovish) and Barr (voter – dovish) also speaking. So a busy array of speakers and plenty of focus of all of them.

In terms of data, DB’s Jim Reid notes that Thursday’s final reading of US Q2 real GDP (expected to be unchanged at 3.0%), and the personal income and consumption report which contains the core PCE will be the main highlights. DB expect core PCE to post a +0.18% gain in August, helping the YoY rate tick up a tenth to 2.7%. The GDP report includes 5 years of revisions up to Q1 2024 so that will be an interesting curiosity that could slightly reshape how we think about this cycle. Elsewhere in the US, tomorrow’s consumer confidence, Wednesday’s new home sales, Thursday’s durable goods orders and Friday’s advance goods trade balance round out the week. The full day-by-day week ahead appears at the end as usual.

Over the weekend Olaf Scholz’s SPD party has narrowly held onto first place in Brandenburg, pipping far right AfD with around 30.9% of the votes to the latter’s 29.2%. This has been an SPD stronghold since unification in 1990 and the popular regional premier did distance himself from the federal government during the campaign so there is less of a read through to national politics than could be thought at first glance. There will also be some concern that this is the third regional election in a row where the AfD has come first or second with around 30% of the votes. Perhaps some tactical voting stopped them winning over the weekend? However no main party will power-share with them so at the moment there is limited implications of their current poll standings, but their rise continues to be on a broadly upward path.

Courtesy of DB, here is a day-by-day calendar of events

Monday September 23

• Data: US, UK, Germany, France and Eurozone September PMIs, US August Chicago Fed national activity index
• Central banks: Fed’s Bostic, Goolsbee and Kashkari speak, ECB’s Cipollone speaks

Tuesday September 24

• Data: US September Conference Board consumer confidence index, Richmond Fed manufacturing index, business conditions, Philadelphia Fed non-manufacturing activity, July FHFA house price index, Japan September PMIs, Germany September Ifo survey
• Central banks: ECB’s Nagel speaks, RBA decision
• Auctions : US 2-year Notes ($69bn)

Wednesday September 25

• Data: US August new home sales, China 1-yr MLF rate, Japan August PPI services, France September consumer confidence, Australia August CPI
• Central banks: Riksbank decision
• Earnings: Micron
• Auctions: US 2-year FRN (reopening, $28bn), 5-year Notes ($70bn)

Thursday September 26

• Data: US August durable goods orders, pending home sales, September Kansas City Fed manufacturing activity, initial jobless claims, Germany October GfK consumer confidence, Italy September consumer confidence index, manufacturing confidence, economic sentiment, Eurozone August M3
• Central banks: Fed’s Powell, Collins, Kugler, Williams, Barr and Kashkari speak, ECB’s Lagarde speaks, ECB’s economic bulletin, BoJ minutes of the July meeting, SNB decision
• Earnings : Costco, H&M
• Auctions : US 7-year Notes ($44bn)

Friday September 27

• Data: US August PCE, personal income and spending, wholesale inventories, advance goods trade balance, September Kansas City Fed services activity, China August industrial profits, Japan September Tokyo CPI, Germany September unemployment claims rate, France September CPI, August consumer spending, PPI, Italy July industrial sales, August PPI, Eurozone September economic confidence, Canada July GDP
• Central banks: ECB consumer expectations survey, ECB’s Rehn, Lane, Cipollone and Nagel speak

Finally, looking at just the US, the key economic data releases this week are the durable goods report on Thursday and the core PCE inflation report on Friday. There are many speaking engagements from Fed officials this week.

Monday, September 23

• 08:00 AM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will give a keynote speech on the economic outlook at an event convened by the European Economics and Financial Centre at the University of London. Speech text and Q&A are expected. On August 28, Bostic said, “Both [inflation and unemployment] would suggest that we’re closer to where we want to be than I had anticipated but suggest we should move our policy action closer.”
• 09:45 AM S&P Global US manufacturing PMI, September preliminary (consensus 48.6, last 47.9); S&P Global US services PMI, September preliminary (consensus 55.3, last 55.7)
• 10:15 AM Chicago Fed President Goolsbee (FOMC non-voter) speaks: Chicago Fed President Austan Goolsbee will participate in a fireside chat on monetary policy and the economy at the National Association of State Treasurers Annual Conference. A Q&A is expected. On August 14, Goolsbee said, “It feels like, on the margin, I’m getting more concerned about the employment side of the mandate.” And on August 23, he said, “We’re not just fighting inflation now—inflation is on a path to 2%.”
• 01:00 PM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will participate in a Q&A about the economic impact of early childhood education at an event hosted by the Greater Kansas City Chamber of Commerce at the Science Museum of Minnesota. A Q&A is expected. On August 19, Kashkari said, “The balance of risks has shifted.”

Tuesday, September 24

• 09:00 AM FHFA house price index, July (consensus +0.2%, last -0.1%)
• 09:00 AM S&P Case-Shiller 20-city home price index, July (GS +0.3%, consensus +0.40%, last +0.42%)
• 09:00 AM Fed Governor Bowman speaks: Fed Governor Michelle Bowman will speak on the economic outlook and monetary policy at Kentucky Bankers Association Annual Convention. Speech text and a moderated Q&A are expected. On September 20, Bowman published an essay addressing her dissent to the 50bp cut at the FOMC’s September meeting. Bowman agreed that it was appropriate to begin the process of lowering the fed funds rate “toward a more neutral policy stance” at the meeting but stated that she would have preferred a 25bp cut. Bowman characterized the economy as “strong” and the labor market as “near full employment,” but highlighted that inflation remains above the Fed’s 2 percent target. Bowman said she was concerned that the 50bp cut might be interpreted as a “premature declaration of victory” on the price stability goal and that a 25bp cut would have posed less of a risk of “unnecessarily stoking demand.”
• 10:00 AM Conference Board consumer confidence, September (GS 103.5, consensus 103.0, last 103.3)
• 10:00 AM Richmond Fed manufacturing index, September (consensus -12, last -19)

Wednesday, September 25

• 10:00 AM New home sales, August (GS -6.0%, consensus -6.0%, last +10.6%)
• 04:00 PM Fed Governor Kugler speaks: Fed Governor Adriana Kugler will speak on the economic outlook at Harvard’s Kennedy School of Government. A moderated Q&A is expected. Kugler has not recently commented on monetary policy.

Thursday, September 26

• 08:30 AM GDP, Q2 third release (GS +2.9%, consensus +2.9%, last +3.0%); Personal consumption, Q2 third release (GS +2.9%, consensus +2.9%, last +2.9%): The third release of Q2 GDP will coincide with the 2024 annual update to the National Economic Accounts, which incorporates source data that are more complete than those previously available and methodological changes.
• 08:30 AM Durable goods orders, August preliminary (GS -2.0%, consensus -2.7%, last +9.8%); Durable goods orders ex-transportation, August preliminary (GS +0.2%, consensus +0.1%, last -0.2%); Core capital goods orders, August preliminary (GS +0.2%, consensus +0.1%, last -0.1%); Core capital goods shipments, August preliminary (GS +0.2%, consensus +0.1%, last -0.3%): We estimate that durable goods orders declined 2.0% in the preliminary August report (month-over-month, seasonally adjusted), reflecting a decline in commercial aircraft orders. We forecast a 0.2% rebound in core capital goods orders and shipments—reflecting potential payback for outsized declines in the prior month.
• 08:30 AM Initial jobless claims, week ended September 21 (GS 220k, consensus 225k, last 219k); Continuing jobless claims, week ended September 14 (last 1,829k)
• 09:10 AM Boston Fed President Collins (FOMC non-voter) and Fed Governor Kugler speak: Boston Fed President Susan Collins and Fed Governor Adriana Kugler will participate in a fireside chat focusing on the intersections between bank supervision and financial inclusion. A Q&A with the audience or media is not expected. On August 22, Collins said, “I think a gradual, methodical pace once we’re in a different policy stance is likely to be appropriate.”
• 09:15 AM Fed Governor Bowman speaks: Fed Governor Bowman will speak on the economic outlook and monetary policy at the Mid-Size Bank Coalition of America Board of Directors Workshop. Remarks are expected to be similar to those delivered to the Kentucky Bankers Association. Speech text and a moderated Q&A are expected.
• 09:20 AM Federal Reserve Chair Powell speaks: Federal Reserve Chair Jerome Powell will give pre-recorded opening remarks at the 10th annual US Treasury Market Conference. The event is co-hosted by the US Department of the Treasury, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, the US Securities and Exchange Commission, and the US Commodity Futures Trading Commission. After the September FOMC meeting, Powell argued that the logic for the larger cut was clear “both from an economic standpoint and also from a risk management standpoint.”
• 09:25 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will give remarks at the 10th annual US Treasury Market Conference. Speech text is expected and a Q&A is not. On September 6, Williams said, “It is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the fed funds rate…Looking ahead, with inflation moving toward the target and the economy in balance, the stance of monetary policy can be moved to a more neutral setting over time.”
• 10:00 AM Pending home sales, August (GS -2.0%, consensus -0.8%, last -5.5%)
• 10:30 AM Fed Vice Chair for Supervision Barr speaks; Fed Vice Chair for Supervision Michael Barr will give remarks at the 10th annual US Treasury Market Conference.
• 10:30 AM Fed Governor Cook speaks: Fed Governor Cook will participate in a roundtable discussion hosted by the Cleveland Fed and Columbus State Community College on artificial intelligence and workforce development. A moderated Q&A is expected. Cook has not recently commented on monetary policy.
• 11:00 AM Kansas City Fed manufacturing index, September (last -3)
• 01:00 PM Minneapolis Fed President Kashkari (FOMC non-voter) and Fed Vice Chair for Supervision Barr speak: Minneapolis Fed President Neel Kashkari will host a fireside chat with Federal Reserve Vice Chair for Supervision Michael Barr on exploring the relationship between banking supervision and inclusive lending practices, including the Community Reinvestment Act. A Q&A with the audience or media is not expected.
• 06:00 PM Fed Governor Cook speaks: Fed Governor Lisa Cook will deliver the Ohio State University President and Provost’s Diversity Lecture on artificial intelligence and the labor force. Speech text and a moderated Q&A are expected.

Friday, September 27

• 08:30 AM Personal spending, August (GS +0.1%, consensus +0.3%, last +0.5%); Personal income, August (GS +0.5%, consensus +0.4%, last +0.3%); Core PCE price index, August (GS +0.16%, consensus +0.2%, last +0.2%); Core PCE price index (YoY), August (GS +2.69%, consensus +2.7%, last +2.6%); PCE price index, August (GS +0.12%, consensus +0.1%, last +0.2%); PCE price index (YoY), August (GS +2.25%, consensus +2.3%, last +2.5%): We estimate personal income increased 0.5% and personal spending increased 0.1% in August. We estimate that the core PCE price index rose +0.16%, corresponding to a year-over-year rate of 2.69%. Additionally, we expect that the headline PCE price index increased by 0.12% from the prior month, corresponding to a year-over-year rate of 2.25%. Our forecast is consistent with a 0.17% increase in our trimmed core PCE measure (vs. +0.14% in July and +0.13% in June).
• 08:30 AM Wholesale inventories, August preliminary (consensus +0.2%, last +0.2%)
• 08:30 AM Advance goods trade balance, August (GS -$97.7bn, consensus -$99.7bn, last -$102.8bn)
• 09:30 AM Boston Fed President Collins (FOMC non-voter) and Fed Governor Kugler speak: Boston Fed President Susan Collins and Fed Governor Adriana Kugler will meet with small business and community leaders in a series of meetings. Highlights from these engagements will be shared online. Speech text and Q&A are not expected.
• 10:00 AM University of Michigan consumer sentiment, September final (GS 69.4, consensus 69.3, last 69.0); University of Michigan 5-10-year inflation expectations, September final (GS 3.1%, last 3.1%)
• 01:15 PM Fed Governor Bowman speaks; Fed Governor Michelle Bowman will speak in a moderated conversation at the Alabama Bankers Association Bank CEO Meeting. A moderated Q&A is expected.

Source: DB, Goldman, BofA

Following the shitshow that was European PMIs overnight, preliminary September soft survey data for the US was expected to be mixed with Services weaker but Manufacturing bouncing back a little.

Despite strength in ‘hard’ data relative to expectations, PMIs disappointed in the early September print with both Services and Manufacturing falling.

• S&P Global US Manufacturing PMI 47.0 (48.6 exp, 47.9 prior) – lowest since June 2023

• S&P Global US Services PMI 55.4 (55.2 exp, 55.7 prior) – two-month lows

Source: Bloomberg

Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“The early survey indicators for September point to an economy that continues to grow at a solid pace, albeit with a weakened manufacturing sector and intensifying political uncertainty acting as substantial headwinds. A reacceleration of inflation is meanwhile also signalled, suggesting the Fed cannot totally shift its focus away from its inflation target as it seeks to sustain the economic upturn.

“The sustained robust expansion of output signaled by the PMI in September is consistent with a healthy annualized rate of GDP growth of 2.2% in the third quarter. But there are some warning lights flashing, notably in terms of the dependence on the service sector for growth, as manufacturing remained in decline, and the worrying drop in business confidence.

Under the hood, things are more worrisome:

“Business sentiment, demand, hiring and investment are being subdued by uncertainty surrounding the Presidential Election, casting a shadow over the outlook for the year ahead at many firms.

“The survey’s price gauges meanwhile serve as a warning that, despite the PMI indicating a further deterioration of the hiring trend in September, the FOMC may need to move cautiously in implementing further rate cuts. Prices charged for goods and services are both rising at the fastest rates for six months, with input costs in the services sector – a major component of which is wages and salaries – rising at the fastest rate for a year.”

Stagflation Anyone… Not exactly what a 50-bps-rate-cutting Fed wants to see!!!

Just ahead of his trip to the United States where he’s expected to meet with President Biden later this week, Ukraine’s President Volodymyr Zelensky gave an interview to The New Yorker wherein he mounted a risky and unexpected direct attack on Trump’s pick for Vice President, Ohio Senator JD Vance.

Zelensky told The New Yorker in response to Trump’s promises to negotiate an end to the Ukraine war that “Trump doesn’t really know how to stop the war even if he might think he knows how.”

“With this war, oftentimes, the deeper you look at it the less you understand,” Zelensky contined.

The Ukrainian leader was then asked about Trump’s VP pick, to which the reply was “He is too radical.” Here is how that section of the interview began…

New Yorker: Vance has come out with a more precise plan to—

Zelensky: To give up our territories.

New Yorker: Your words, not mine. But, yes, that’s the gist of it.

Zelensky: His message seems to be that Ukraine must make a sacrifice. 

And Zelensky continued: “This brings us back to the question of the cost and who shoulders it. The idea that the world should end this war at Ukraine’s expense is unacceptable.”

“This would be an awful idea, if a person were actually going to carry it out, to make Ukraine shoulder the costs of stopping the war by giving up its territories,” Zelensky said. 

He asserted that this wouldn’t bring an end to the fighting regardless and that Trump and Vance’s vows to end the war is “just sloganeering”.

Zelensky then suggested that it is “dangerous” for men which such talking points to rise to power and that they could spark global war through irresponsible policies. He was then quoted in The New Yorker as follows:

[Vance and others who share his views] should clearly understand that the moment they start trading on our territory is the moment they start pawning America’s interests elsewhere: the Middle East, for example, as well as Taiwan and the U.S. relations with China. Whichever President or Vice-President raises this prospect—that ending the war hinges on cementing the status quo, with Ukraine simply giving up its land—should be held responsible for potentially starting a global war. Because such a person would be implying that this kind of behavior is acceptable.

I don’t take Vance’s words seriously, because, if this were a plan, then America is headed for global conflict. It will involve Israel, Lebanon, Iran, Taiwan, China, as well as many African countries. 

He then in a patronizing way told “Mr. Vance” to “read up on the history of the Second World War” while suggesting that his plan with Russia is tantamount to ‘appeasing’ Hitler.

JD Vance on the people of Ukraine:

“I’m sick of being told that we have to care more about people 6,000 miles away than we do people like my mom…” (2023) @Acyn.pic.twitter.com/RTep657awP

— The Intellectualist (@highbrow_nobrow) July 15, 2024

We expect that the Trump team isn’t going to take too kindly to Zelensky’s attack on both Trump and Vance.

The rhetoric from the interview specifically in regards to Vance was much more direct than usual.

Typically Zelensky has appeared more cautious with his criticisms, not wishing to offend a potential future Republican administration; however, that caution seems to have gone out the window.