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There’s going to be a long list of topics on the mind of Tesla investors, skeptics, analysts and the financial media alike during Tesla’s upcoming Q2 earnings report. Ahead of the electric automaker’s earnings report today after the bell, here are some of the key issues and concerns Tesla may touch on.

The State Of Tesla’s Union In China

The company’s ongoing love/hate relationship with China is likely going to be in focus, since China’s production and sales play a key role in Tesla meeting its company-wide estimates. It has been tough to distinguish at points whether China has grown tired of Musk, or whether or not the company and the country are growing much closer. Recall, back in early July it was reported that Tesla had even asked the Chinese government to help censor social media posts that were critical of the company. We were first, with the help of well-known short seller Montana Skeptic to ask in April of 2020 whether or not Musk risked becoming a Chinese asset, due to how much of a necessity China was becoming to Tesla’s business operations.

Things were mostly quiet until the beginning of 2021, when in January, Musk called the Chinese government “more responsible” to its citizens than the U.S. government. In March we noted how Musk continued to kiss the ass of the CCP, singing the praises of the country and its government. Then, in April 2021, a spat emerged between Musk and the CCP, supposedly after a protestor at the Shanghai Auto Show in April “went viral” after standing on top of a Tesla vehicle and decrying the car’s brakes. This led to intense shaming by Chinese media, who called Tesla’s handling of the situation a “blunder” and suggested it could “inflict serious damage” on Tesla with the Chinese market. 

Since then, we noted that the Chinese government still didn’t seem amused by Musk until May of this year, when Musk made a public about-face on Bitcoin and was then immediately praised by China’s state owned Global Times. In fact, the Global Times then published a piece stating that “work at Tesla’s Shanghai Gigafactory is going smoothly,” just days after it was reported that Tesla was halting its expansion in China, seen as key to its plans to export from its Asia headquarters. 

“China is the linchpin to the bull thesis,” Wedbush’s Dan Ives told Reuters this week. 

As of July, deliveries in China have picked back up and Musk is back to his old self, praising China, even in response to Chinese state-owned media.

In case anyone was wondering who is pulling the strings: https://t.co/9WAAkwI1PA

— Quoth the Raven (@QTRResearch) July 1, 2021

Tesla’s New Batteries

The batteries proposed by Musk last year “would have higher energy density and would extend ranges of current vehicles and let Tesla offer a $25,000 car in three years, sharpening its technology edge as rivals flood the market with EVs,” Reuters reported Monday morning. Recall, last month Tesla pushed back the debut of these batteries by cancelling plans for the Model S Plaid +. Musk has since said the batteries would “go into volume production next year”.

“It has required an *immense* amount of engineering to take Maxwell’s proof-of-concept to high-quality, volume production & we’re still not quite done,” Musk recently commented about its dry battery electrode manufacturing process.

The Cybertruck and Full Self Driving/Summon Walk-Backs

Investors will likely also be looking for color on the Cybertruck and Full Self Driving/Summon, Tesla “sales pitches” that Musk has recently walked back his promises on. The walk back of history began with a mega-huge whopper about 2 weeks ago when, at the beginning of July, Musk admitted that Full-Self Driving – a non-existent feature customers have been paying for for a half-decade – was a “hard problem”, casually dropping into conversation the idea that the company may not be anywhere close to meeting Musk’s promises about FSD. 

In another walk-back and reset of expectations last week, Elon Musk also Tweeted that there was “always some chance” that the Cybertruck – a product introduced almost two years ago in November 2019 to ridiculous fanfare – could “flop”. 

Shortly after Musk’s Cybertruck comments came Musk’s “realigning” of expectations about Tesla’s Summon feature, which Musk has been boasting about whilst collecting order money, for years. “Current Summon is sometimes useful, but mostly just a fun trick,” Musk nonchalantly wrote on Twitter earlier this month. 

The Ongoing Trial Alleging Musk Unilaterally Bailed Out Solar City When It Wasn’t In Shareholders’ Best Interests

We also can’t forget that Musk spent several days this month testifying in Wilmington, DE about Tesla’s bailout buyout of Solar City. Hanging in the balance of the trial is the question of whether or not Tesla was damaged as a result of the merger and, if so, if Elon Musk was the responsible party.

As the Wall Street Journal noted earlier this month:

“If Vice Chancellor Joseph Slights III, the presiding judge, finds Mr. Musk didn’t control the deal, the case is likely over for the plaintiffs, Mr. Hamermesh said. Case law in Delaware generally defers to the business judgment of independent and properly motivated directors. On the other hand, if the evidence points to control, the court would assess whether the deal process and price were fair and, if not, whether Mr. Musk should be ordered to pay money back to Tesla, Mr. Hamermesh said.”

Tesla has argued that the company’s shareholders “overwhelmingly voted” to approve the bailout, according to FT. Ann Lipton, law professor at Tulane University in New Orleans told FT: “The case has the potential to provide more guidance not only to courts, but also to deal planners, as to the factors courts are likely to take into account when determining whether someone is a controller.”

Delaware Court of Chancery vice-chancellor Joseph Slights wrote in 2018 that “it is reasonably conceivable that Musk, as a controlling stockholder, controlled the Tesla board in connection with the acquisition” and that “there were practically no steps taken to separate Musk from the board’s consideration of the acquisition”.

Analyst Expectations

For the current quarter, analysts have an average estimate of $0.98 per share in earnings on $11.4 billion in revenue. 

With so many question marks up in the air, even some Tesla bulls weren’t super optimistic about Q2 numbers. Tesla uber-bull and talking head Ross Gerber is already trying to divert attention to Q3, telling Reuters: “I just don’t see any huge catalyst, like, oh, they’re gonna blow out their numbers this quarter. We are much more bullish for Q3 than Q2.”

Meanwhile, GLJ Research’s Gordon Johnson took to CNBC early Monday morning to offer his analysis of the upcoming report.

Among Johnson’s points were that Tesla is ceding “significant market share” in key markets globally and that “there’s risk to the consensus estimate” due to a loss of a big credit customer. “We think there’s a potential miss in the offing,” Johnson said. He backed that up in a note released Monday, stating: “We believe there is a strong probability TSLA will disappoint on earnings either in 2Q21 (which our modeling suggests) or 3Q21,” with much of his case resting in Stellantis’s purchases of credits from Tesla drying up.

On the topic of Bitcoin affecting Tesla’s earnings, Johnson said: “They’re going to take about an $85 million charge on Bitcoin” for the second quarter. “Bitcoin is actually going to be a headwind for them,” he continued. 

When talking about deliveries, Johnson commented: “If you look at their valuation [100x earnings], I think [Tesla’s deliveries] are a disappointment.”

“When the market comes to realities, drastic things can happen,” Johnson concluded.

Johnson also released a report on Monday morning with his own estimates. Johnson said he expects the automaker “to report 2Q21 rev/GAAP EPS of $11.5bn/$0.37 vs. Cons’ $11.4bn/$0.51 – i.e., a top line beat, yet bottom line miss.”

As a reminder, the company produced 204,081 cars and delivered 199,360 Model 3/Y vehicles, the company said, in Q2. It produced just 2,340 Model S and Model X vehicles and delivered just 1,890 of them. 

In total, the company’s delivery of 201,250 vehicles for the quarter missed estimates, CNBC noted. Analysts had been expecting the automaker to deliver 207,000 cars during the quarter. Estimates for the quarter ranged from 195,000 to 231,000. 

Authored by Michael Snyder via TheMostImportantNews.com,

We are witnessing an epic global struggle for freedom, and the outcome of that struggle is going to greatly shape what our world is going to look like in the years ahead.  Ultimately, one of the most fundamental rights that we have is the right to make our own health decisions.  If someone else has the authority to make those decisions for you, then you aren’t really free.  This pandemic has transformed the debate over health freedom into the most hotly contested political issue on the entire planet, and the intensity seems to have been turned up a few more notches in recent days.  As governments around the world have begun instituting new lockdowns, new mandates and new “health passports”, we have seen huge eruptions of anger all over the world.

For example, over the weekend there was an enormous health freedom protest in London…

Thousands have gathered today Saturday, July 24, in London’s Trafalgar Square to protest against the lockdown rules and COVID-19 vaccinations. A wide range of speakers is attending the event, including well-known British conspiracy theorist, Kate Shemirani, who spoke to the crowd. Demonstrators are angry about the recent move which will see vaccine passports becoming compulsory in England to access nightclubs and other packed venues.

At the same time, there were also massive protests in the heart of Paris…

French anti-riot police fired tear gas Saturday as clashes erupted during protests in central Paris against COVID-19 restrictions and a vaccination campaign, television reported.

Police sought to push back demonstrators near the capital’s Gare Saint-Lazare railway station after protesters had knocked over a police motorbike ridden by two officers, television pictures showed.

Images showed a heavy police presence on the capital’s streets. Scuffles between police and demonstrators also broke out on the Champs-Elysees thoroughfare, where tear gas was fired and traffic was halted, the pictures showed.

On the other side of the globe, we continue to see violent protests in Sydney and other major Australian cities…

Thousands of people took to the streets of Sydney and other Australian cities on Saturday to protest lockdown restrictions amid another surge in cases, and police made several arrests after crowds broke through barriers and threw plastic bottles and plants.

The unmasked participants marched from Sydney’s Victoria Park to Town Hall in the central business district, carrying signs calling for “freedom” and “the truth.”

Millions upon millions of people are fed up and are refusing to accept any more violations of their fundamental rights.

But of course there are millions of others that are eagerly embracing the tyrannical measures that have been implemented by national governments around the globe.

In the end, the scale is going to tip one way or the other, and the outcome is going to greatly shape the direction of humanity’s future.

So let us hope that freedom wins.

Right now, the corporate media continues to work very hard to generate as much panic as possible.  Earlier today, I found it quite comical when one news outlet ran a story about how authorities are now warning us that COVID can be spread by flatulence…

The official advice is to open a window to increase ventilation and slow the spread of Covid, but now there could be an added incentive – the virus may also be spread by flatulence.

Ministers have privately pointed to evidence that Covid could be spread by people breaking wind in confined spaces such as lavatories. One said they had read “credible-looking stuff on it” from other countries, although government scientists are yet to produce a paper on the matter.

The source said there had been evidence of a “genomical-linked tracing connection between two individuals from a [lavatory] cubicle in Australia.”

You better run out and do as they say, because someone sitting in the next bathroom stall may have gas.

Here in the United States, we are now being told that more mandates and more lockdowns are coming because “this pandemic is spiraling out of control yet again”…

“More mitigation is coming. Whether it’s masking, or whether it’s closures or whether it’s your kids having to return to virtual learning, that is coming,” the Trump administration surgeon general told CBS’ “Face the Nation” on Sunday.

“And it’s coming because this pandemic is spiraling out of control yet again. And it’s spiraling out of control because we don’t have enough people vaccinated.”

In fact, we are already starting to see some local governments put new mandates into place.

For instance, a new mask mandate has just been announced in St. Louis and St. Louis County…

Faced with a rising tide of COVID-19 infections and hospitalizations, St. Louis and St. Louis County leaders announced Friday that they will reinstate a mask requirement, for vaccinated and unvaccinated residents alike.

As more mandates are instituted by local governments around the country, it is inevitable that we will see widespread protests break out just like we are seeing in other countries.

Meanwhile, other “pestilences” continue to make headlines as well.  A drug-resistant “superbug” that is “resistant to all existing treatments” is causing quite a bit of alarm for U.S. health officials at this moment…

Cases of a deadly fungal infection resistant to all existing treatments have been spreading through nursing homes and hospitals in the United States for the first time, health officials said.

In the past we have seen isolated cases, but now we are being told that it looks like this “superbug” is spreading pretty easily from person to person…

“This is really the first time we’ve started seeing clustering of resistance” in which patients seemed to be getting the infections from each other, said Dr Meghan Lyman, a medical officer at the Centers for Disease Control and Prevention (CDC).

If that wasn’t bad enough, scientists have recently confirmed cases of the Bubonic Plague “in animals and fleas” in six different Colorado counties…

The Colorado Department of Public Health and Environment says there have been laboratory-confirmed reports of plague in animals and fleas from six counties.

One of the six counties with confirmed plague is LaPlata County, where a 10-year-old resident died from causes associated with the plague. Laboratory testing has since confirmed the presence of plague in a sample of fleas collected in the county, according to CDPHE.

For even more examples like this, please see my previous article entitled “4 ‘Pestilences’ That Everyone Should Be Keeping An Eye On Right Now”.

As I have stated before, I believe that we have entered a new era of great pestilences.  Scientists all over the globe are constantly playing around with deadly diseases, and in many instances they are actually attempting to make them even deadlier.

With that in mind, it chilled me to the core to read that 33 ancient viruses were recently discovered “trapped in the ice of the Tibetan Plateau”…

Glaciers can preserve all sorts of relics from the distant past. So could they also be home to a pandemic from prehistoric times as well? It’s possible. A team from The Ohio State University has discovered a collection of viruses that have never been seen before in the ice of a glacier in China.

Scientists say the viral samples date back nearly 15,000 years and may reveal how pathogens evolve over the centuries. Of the 33 viruses found trapped in the ice of the Tibetan Plateau, the team considers 28 to be completely novel. About half of them also seem to have survived specifically because of the freezing conditions.

Now these ancient viruses will be “brought back to life”, and it is inevitable that scientists around the world will start playing around with them.

So what happens when there is an “accident” and one of those ancient viruses gets released?

We live at a time of incredible stupidity, and our stupidity is going to end up getting a whole lot of people killed.

*  *  *

It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon.

After existing-home sales printed a very modest rebound from lowered numbers, analysts expect new home sales to rebound from 12-month lows in June (even as homebuilder confidence sinks to an 11-month low), but boy oh boy were they wrong.

Against expectations of a 3.7% MoM jump, new home sales plunged 6.6% MoM in June (and worse still May was revised lower from -5.9% to -7.8%)

Source: Bloomberg

Even more amazing is the fact that new home sales are down almost 20% YoY – the worst since 2011.

This leaves the SAAR at its lowest since April 2020.

Source: Bloomberg

The median new home price dipped…

Source: Bloomberg

Supply is finally beginning to pick up (up 7% MoM) to highest since March 2020

Something has to give in this chart…

Source: Bloomberg

Will Jay Powell be the trigger at J-Hole?

Cutting to the chase, it’s a very busy week, perhaps the most important week for markets this summer. Clearly the Federal Reserve’s decision on Wednesday is likely to be the focal point. As well as that, there are a number of key data releases, including the first look at Q2’s GDP reading for the US (Thursday) and the Euro Area (Friday), whilst earnings reports will include Tesla (today), Alphabet, Apple, Microsoft (all tomorrow), and Facebook (Wednesday). So get ready for a barrage of early week tech earnings after a good start to the US season.

Looking at some of the highlights in more detail let’s start with the Fed. As DB’s Jim Reid writes, at last meeting in June the FOMC undertook a hawkish shift by moving their median dot to show two rate hikes in 2023, compared to none before. Meanwhile inflation data has continued to surprise to the upside since then, with the latest CPI reading at +5.4%, and core CPI at +4.5%, which is the highest for the latter since 1991. At this meeting, DB economists are expecting them to provide an update on the progress of taper discussions that will help refine the likely timeline for an announcement in the coming months. Their view is that there’ll be a clearer signal from the Fed’s leadership that the timeline is coming into view at the Jackson Hole economic symposium in August or at the September meeting, before an official announcement at the November meeting, though the incoming data will dictate the exact sequence. Basically the meeting can be simplified to working out which the committee sees as the biggest risk – the recent rise in inflation vs the recent rise in the delta variant.

Elsewhere it’s quite an eventful week ahead on the data front, and we’ll get the first look at the Q2 GDP figures for a number of key economies. On Thursday we could well see US real GDP exceed its pre-Covid peak for the first time since the crisis began, which would be a much, much quicker return to the pre-crisis peak than after the GFC. We’ll also get the Q2 GDP release for the Euro Area (Friday), but they remain some way behind their pre-crisis level, having contracted in Q4 2020 and Q1 2021 as further restrictions were imposed again. Inflation will also be in focus, with the Euro Area flash CPI reading out this week (Friday) for July. Economists are expecting headline inflation to tick back up to +2.0% this month, which is exactly at the ECB’s new target, before peaking at c.3.0% yoy in the latter months of the year.

Moving on to earnings releases, and the coming week will see the season in full flow, with 177 companies in the S&P 500 reporting and Europe starting to get busy too. Among the highlights are Tesla, LVMH and Lockheed Martin today. Then tomorrow we’ll hear from Apple, Microsoft, Alphabet, Visa, UPS, Starbucks and General Electric. Wednesday sees releases from Facebook, PayPal, Pfizer, Ford, Thermo Fisher Scientific, McDonald’s, Barclays, Qualcomm, Bristol Myers Squibb and Boeing. On Thursday, we’ll then get reports from Amazon, Mastercard, Comcast, L’Oréal, Merck & Co., T-Mobile US, AstraZeneca, Volkswagen, Sanofi, Credit Suisse and Lloyds Banking Group. Finally on Friday, the releases include Procter & Gamble, Exxon Mobil, AbbVie, Chevron, Charter Communications, Linde, Caterpillar, Natwest Group and BNP Paribas.

Finally tomorrow, the IMF will be releasing their latest projections for the global economy in their World Economic Outlook Update. So expect plenty of headlines.

Day-by-day calendar of events, courtesy of Deutsche Bank

Monday July 26

• Data: July flash PMIs from Japan, Germany July Ifo business climate, US June new home sales, July Dallas Fed manufacturing activity
• Central Banks: BoE’s Vlieghe speaks
• Earnings: Tesla, LVMH, Lockheed Martin

Tuesday July 27

• Data: China June industrial profits, Euro Area June M3 money supply, US preliminary June durable goods orders, May FHFA house price index, July Conference Board consumer confidence, Richmond Fed manufacturing index
• Earnings: Apple, Microsoft, Alphabet, Visa, UPS, Starbucks, General Electric
• Other: IMF release World Economic Outlook Update

Wednesday July 28

• Data: Germany August GfK consumer confidence, France July consumer confidence, Italy July consumer confidence, US preliminary June wholesale inventories
• Central Banks: Federal Reserve monetary policy decision
• Earnings: Facebook, PayPal, Pfizer, Ford, Thermo Fisher Scientific, McDonald’s, Barclays, Qualcomm, Bristol Myers Squibb, Boeing

Thursday July 29

• Data: France June PPI, Germany July unemployment change, preliminary July CPI, UK June consumer credit, mortgage approvals, M4 money supply, Euro Area final July consumer confidence, US advance Q2 GDP, core PCE, weekly initial jobless claims, June pending home sales
• Earnings: Amazon, Mastercard, Comcast, L’Oréal, Merck & Co., T-Mobile US, AstraZeneca, Volkswagen, Sanofi, Credit Suisse, Lloyds Banking Group

Friday July 30

• Data: Japan June jobless rate, retail sales, industrial production, preliminary Q2 GDP reading from France, Germany, Italy and Euro Area, preliminary July CPI from France, Italy and Euro Area, June unemployment rate from Italy and Euro Area, US Q2 employment cost index, June personal income and personal spending, July MNI Chicago PMI, final July University of Michigan consumer sentiment index
• Earnings: Procter & Gamble, Exxon Mobil, AbbVie, Chevron, Charter Communications, Linde, Caterpillar, Natwest Group, BNP Paribas

* * *

Finally, looking at just the US, Goldman notes the key economic data releases this week are the durable goods report on Tuesday, the Q2 GDP report on Thursday, and ECI and core PCE inflation on Friday. The July FOMC meeting is this week, with the release of the statement at 2:00 PM ET on Wednesday, followed by Chair Powell’s press conference at 2:30 PM. Governor Brainard is scheduled to speak on Friday following the end of the FOMC blackout period.

Monday, July 26

• 10:00 AM New home sales, June (GS +3.7%, consensus +4.0%, last -5.9%): We estimate that new home sales increased by 3.7% in June, reflecting mean-reversion and a rise in starts but a slowdown in permits and mortgage applications.
• 10:30 AM Dallas Fed manufacturing index, July (consensus 32.3, last 31.1)

Tuesday, July 27

• 8:30 AM Durable goods orders, June preliminary (GS +4.5%, consensus +2.0%, last +2.3%); Durable goods orders ex-transportation, June preliminary (GS +0.5%, consensus +0.8%, last +0.3%); Core capital goods orders, June preliminary (GS +0.5%, consensus +0.8%, last +0.1%); Core capital goods shipments, June preliminary (GS +0.8%, consensus +0.8%, last +1.1%): We estimate durable goods orders rose 4.5% in the preliminary June report, reflecting a large increase in commercial aircraft orders. We estimate +0.5% for core capital goods orders and +0.8% for core capital goods shipments, reflecting rising machinery prices and output but some deceleration in orders activity.
• 09:00 AM FHFA house price index, May (consensus +1.6%, last +1.8%)
• 09:00 AM S&P/Case-Shiller 20-city home price index, May (GS +1.6%, consensus +1.5%, last +1.62%):We estimate the S&P/Case-Shiller 20-city home price index rose by 1.6% in May, following a 1.62% increase in April.
• 10:00 AM Conference Board consumer confidence, July (GS 122.5 consensus 124.0, last 127.3):We estimate that the Conference Board consumer confidence index decreased by 4.8pt to 122.5 in July. Our forecast reflects weaker signals from other consumer confidence measures.
• 10:00 AM Richmond Fed manufacturing index, July (consensus +20, last +22)

Wednesday, July 28

• 08:30 AM Wholesale inventories, June preliminary (consensus +1.1%, last +1.3%); Retail inventories, June (consensus +0.6%, last -0.8%)
• 08:30 AM Advance goods trade balance, June (GS -$90.9bn, consensus -$88.0bn, last -$88.2bn): We estimate that the goods trade deficit increased by $2.7bn to $90.9bn in June compared to the final May report, reflecting inventory restocking and weakening exports.
• 02:00 PM FOMC statement, July 27-28 meeting: As discussed in our FOMC preview, we continue to expect the first hint about tapering in August or September, followed by a formal announcement in December and the start of tapering at the beginning of next year.

Thursday, July 29

• 08:30 AM GDP, Q2 advance (GS +8.25%, consensus +8.5%, last +6.4%); Personal consumption, Q2 advance (GS +10.4%, consensus +10.5%, last +11.4%): We estimate GDP growth improved to +8¼% annualized in the advance reading for Q2, following +6.4% in Q1. Our forecast reflects another large gain in consumption driven by reopening and fiscal stimulus (+10.4% annualized) that embeds a sizeable increase in virus-sensitive services categories in June. We also expect strength in business fixed investment (+10%) led by the intellectual property category (+14%). On the negative side, we expect a pause in residential investment growth (+0.6%) following the sharp increases over the prior three quarters. We also estimate a drag on GDP growth from inventories (-0.6pp qoq ar) and net trade (-0.1pp). The report will also include annual revisions to incorporate 2020 annual source data.
• 08:30 AM Initial jobless claims, week ended July 24(GS 400k, consensus 380k, last 419k); Continuing jobless claims, week ended July 17 (consensus 3,192k, last 3,236k): We estimate initial jobless claims declined to 400k in the week ended July 24.
• 10:00 AM Pending home sales, June (GS +1.0%, consensus +0.5%, +8.0%): We estimate that pending home sales increased 1.0% in June.

Friday, July 30

• 08:30 AM Employment cost index, Q2 (GS +0.8%, consensus +0.9%, prior +0.9%): We estimate that the employment cost index rose 0.8% in Q2 (qoq sa), which would boost the year-on-year rate by three tenths to +2.9%. Despite the high unemployment rate, labor shortages exerted upward pressure on wage growth in the second quarter, and the ECI measure is also running below our composition-adjusted wage tracker (+3.3% in Q2). At the same time, we expect normalization in incentive payments to weigh on the headline ECI series.
• 08:30 AM Personal income, June (GS -0.1%, consensus -0.4%, last -2.0%); Personal spending, June (GS +0.8%, consensus +0.7%, last flat); PCE price index, June (GS +0.51, consensus +0.6%, last +0.45%); Core PCE price index, June (GS +0.45%, consensus +0.6%, last +0.48%); PCE price index (yoy), June (GS +3.93%, consensus +4.0%, last +3.91%); Core PCE price index (yoy), June (GS +3.50%, consensus +3.7%, last +3.39%): Based on details in the PPI, CPI, and import price reports, we forecast that the core PCE price index rose by 0.45% month-over-month in June, corresponding to a 3.50% increase from a year earlier. Additionally, we expect that the headline PCE price index increased by 0.51% in June, corresponding to a 3.93% increase from a year earlier. We expect a 0.1% decrease in personal income and a 0.8% increase in personal spending in June.
• 09:45 AM Chicago PMI, July (GS 62.0, consensus 63.3, last 66.1): We estimate that the Chicago PMI pulled back by 4.1pt to 62.0 in July, reflecting continued supply chain disruptions and weak international trade data.
• 10:00 AM University of Michigan consumer sentiment, July final (81.0, consensus 80.8, last 80.8): We expect the University of Michigan consumer sentiment index increased to 81.0 in the final July reading.
• 08:30 PM Fed Governor Brainard (FOMC voter) speaks: Fed Governor Brainard will speak to the Aspen Institute on Rebuilding the Post-Pandemic Economy. Prepared text and Q&A are expected.

Source: Deutsche Bank, BofA, Goldman

China has quickly gone on the offensive as US Deputy Secretary of State Wendy Sherman is in the county for high level talks with a delegation led by her Chinese counterpart, as the world’s two largest economies seek a way forward out of their long time impasse. This week’s talks seemed to have picked right up where the prior contentious Anchorage talks left off. Beijing essentially issued Sherman a list of grievances that must be remedied before authentic diplomacy can even get off the ground.

Official Xinhua News Agency identified “two lists” described as a ‘List of US Wrongdoing That Must Stop’ and ‘List of Key Individual Cases that China Has Concerns With’ – both of which included a litany of overreaching Washington actions that must be rolled back before any hope of positive relations. 

All of the grievances are part of what China calls the US making an “imaginary enemy” of Beijing. Sherman’s counterpart, Vice Foreign Minister Xie Feng, conveyed this bluntly to Sherman at the meeting in the northeastern port city of Tianjin. The US “wants to reignite the sense of national purpose by establishing China as an ‘imaginary enemy,'” he said in the Monday statements.

“The hope may be that by demonizing China, the US could somehow… blame China for its own structural problems,” Xie told Sherman further, also blaming the United States for the ongoing “stalemate” in bilateral relations. He slammed Washington’s “highly misguided mindset and dangerous policy” – also highlighting the hypocrisy of the US daring to call out others on human rights related issues.

According to Chinese state media the “lists” included “urging the US to lift sanctions and visa restrictions targeted at Chinese officials and entities, and withdraw Meng Wanzhou’s extradition.”

Further, “In the lists, China asked the US to unconditionally lift visa restrictions on members of the Communist Party of China (CPC) and their families, as well as on Chinese students and stop suppressing Chinese companies and hindering the development of the Confucius Institutes, Xie told the media after the meeting.” He also demanded the US cease labeling Chinese media as “foreign missions” among other specific requests. 

China called relations with the United States in a “stalemate” on Monday during a meeting in Tianjin with U.S. Deputy Secretary of State Wendy Sherman, the highest-level visit so far by a member of the Biden administration. By ⁦@evadou⁩ https://t.co/Op18zLAh3f

— Michelle Ye Hee Lee (@myhlee) July 26, 2021

Xie unveiled the lists at the briefing following the talks with Deputy Secretary of State Sherman, with CCTV providing further details of the demands as follows: 

• to unconditionally revoke visa bans on CCP members and their relatives;
• revoke sanctions on Chinese leaders, officials, government departments;
• revoke visa restrictions for Chinese students;
• withdraw extradition of Huawei Technologies Chief Financial Officer Meng Wanzhou;
• stop oppressing Chinese companies;
• stop harassing Chinese students;
• stop oppressing Confucius Institutes;
• revoke requirements to register Chinese media as foreign agents or foreign missions

Sherman, for the US part, reportedly said Washington “welcomed” competition with Beijing so long as a “level playing field” is in place with “guardrails” to avoid conflicts, according to a State Department preview. 

Previously State Dept. spokesman Ned Price asserted she’d be traveling to the talks in China “from a position of strength” – something which the Chinese delegation specifically tried to bat down during the talks Monday.

Authored by Bill Blain via MorningPorridge.com,

“Stormy weather…”

Don’t be fooled by thin summer markets – the world has changed, markets no longer take August off. Yet, finance changes slowly – for all the talk about diversity it’s taking generations to change the mindset and sense of entitlement that underlies markets. Maybe a good shock will be no-bad-thing – but banks making statements about their diversity ambitions should be treated with suspicion.

So many things should be worrying about in markets this morning… but after last week’s V-shaped recovery, and the weekend storms clearing the sweltering high pressure, the mood in the City seems to be “let’s not be hasty and just go with the flow.” Afterall, “nothing ever happens in August”, does it…? (Rhetorical question…)

A classic summer mindset seems to have seized the markets: “no point worrying about stuff today we are only going to worry about tomorrow…”

Don’t be fooled. Under the calm surface there is an incredible amount of friction developing… The ducks may look serene, but they are paddling furiously… and the duck season is not that far off.

The stock market is telling us all is fine and dandy – it is not. Last Monday’s momentary slip – on half-baked inflation fears and the pandemic – reversed itself, apparently confirming the underlying strength, health, wealth, resilience and a dozen other false-friend words about the market. Let us not concern ourselves with the trivia: the shape of the yield curve, the thinking (or not) of central bankers, the real inflationary outlook, the money now rolling out of SPACs, the consequences of retail gaming the stock markets, or even how stupid do crypto-proponents look now.

Over a glass of fine wine at a dear friend’s long delayed wake we came to the conclusion one major reason stock markets are so high because too much money in financial markets is chasing so few assets – a factor compounded by monetary policies – and that its too dangerous for central banks to step back for bailing them.

Clearly money chasing money is a classic recipe for investors bidding ever higher. It’s destined to result in someone paying too much. Trying to guess when that point is past, and the mood is going to deflate is just a game… I asked people when they thought it might happen, but no one really knew, except its unlikely to happen now, in the middle of a thin summer market.

Hmm… don’t be fooled.

It might be nearly August, but if the market sincerely believes in stock-stability then it should remember the only reason markets shut for the summer was bankers tended to take August off to go shooting on their Scottish estates. Most of us don’t have estates any more… just mortgages, school fees and underfunded pensions. Yet the mindset persists that nothing can wrong in thin summer markets.

Never forget … the market has but one objective: to inflict the maximum amount of pain on the maximum number of participants. The received wisdom is that can’t happen when the market is on holiday… but what if it does? Stay vigilant.

In the meantime, all these valid financial questions about how wobbly markets should be will have to wait a moment while I divest myself of Santander shares… I am also considering the tale of two aged-50-something advertising executives who successfully sued after being sacked for criticising a new “diversity” director’s pledge to “obliterate” the firm’s reputation for being “full of white me”: Ad men sacked to improve gender pay gap win sex discrimination claim.

The Spanish bank intends to reward senior bankers based on diversity targets, progress on climate change, and “aligning their financial incentives with their corporate objectives.” All laudable goals – but is this is the same bank that remains a personal fiefdom of the Botín family? Where, until recently your position in the hierarchy was defined by the question: “Botín o Boton”? Translation roughly: are you a Botín or just a servant?

Santander is terribly progressive having Ana Patricia Botín as chairman (according to Forbes she is ranked 8th most powerful woman in the world… wow..), but she is also the 4th generation of her family running the family bank. I’m told (usually by bankers trying to court her) she is remarkably clever and a very good banker.

But strip out all the noise about Gender, Race and Diversity in the Woke/ESG agenda, and it boils down to equality. That includes equality of opportunity. I posit the question how do the opposing forces of Nepotism and Gender & Diversity align themselves in the new woke multiverse of business objectives?

Diversity is a damn good thing. When I joined the City in the 1980s I was the outsider – a rough spoken Scot from the wrong school and wrong university. The City then was dominated by public school boys with double barrelled names who never had to compete for their jobs. Over the years its changed – but the mindset has not really changed. The same ways of thinking, values and that overarching sense of entitlement is perpetuated by outsiders adopting the same values and think-set as the previous financial princes.

Finance still has to be democratised! Do so, and it will become more inventive and healthy.

At the moment there is still a smell of entitlement hanging like a bad odour over much of the City and particularly the quangos associated with it. When I meet the quango-ochracy I cant help but notice how smoothly many of them fit, their sense of entitlement… and how there may be more women, but all come from similar backgrounds, shared schools and are PLU (people like us!) Something needs to be shaken up.

Now… I have no reason to be particularly down on Santander except the outright foolishness of their diversity statement. Greater diversity in finance will improve markets. We need a much broader range of thinking and backgrounds to improve the financing response to climate change.

But, I take the view is any firm, be they in manufacturing, commerce or finance should be doing these things as a matter of course. When they have to state it out-loud, like Santander has just done – then it’s a clear signal something is significantly wrong, and it’s time for a grandiose gesture to camouflage the reality and reverse any negative perceptions.

It’s also a bit of a new headquarters moment… Whenever you see a Bank or Financial Institution embark on building a new grandiose Headquarters then you know it’s time to sell.. Which will be interesting as I am flying up to Edinburgh later this morning and will be having a good look at how the new headquarters of an investment firm I’ve put rather too much of my pension pot into is coming along… More on that later this week.

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