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While equities continue to take the risk of escalating trade wars in stride, ignoring the threat of an additional $200BN in tariffs on Chinese exports and pushing the S&P back above 2800, some investors are taking a far more cautious approach: instead of piling into tech names – the most popular trade of 2018 bar none – Australian investment manager AMP Capital Investors, which manages $139BN, is instead buying ultra-long bonds as a hedge for a worst case scenario, according to Ilan Dekell, the head of macro for global fixed income at the asset manager.

“Six weeks ago, we started increasing our duration in the 30-year part of the curve,” Dekell told Bloomberg in an interview in Sydney.  “It gives us a bit of protection. I can’t forecast the trade war.”

Doing the opposite of Horseman Capital, AMP Capital is also betting on continued dollar strength by shorting a basket of emerging-market currencies which have been pounded in recent months amid tightening global liquidity.

Looking ahead, Dekell said that “the best is probably behind us,” referencing the environment of synchronized and rising global growth and benign inflation seen earlier this year, which have since seen the US emerge as the leading dynamo of global growth largely on the back of Trump’s fiscal stimulus. And then there is the great unknown of what Trump may do or tweet at any moment: “The trade war adds to our concerns – our book overall is very conservative.”

While betting on lower long-term yields, the fund is also shorting two-year government notes, betting the ongoing yield curve steepening will continue as it sees the Federal Reserve raising interest rates two more times this year and thrice in 2019.

“We held our shorts in the two-year part of the curve” because of the rate hikes, said Dekell. “We’ve become more concerned and conservative about tightening conditions and we think the policy bias is higher.”

As the latest CFTC data reveals, the AMP position is against the market grain, with specs putting on record bets that the curve will steepen in the near future, as 2Y shorts have shrunk even as 10Y net spec shorts remain at record levels.

Dekell also has a negative outlook on emerging markets, seeing further weakness in EM assets, particularly in countries with current-account deficits such as Indonesia and India. Looking at the Australian dollar, Dekell said the currency is currently trading at “fair value” after predicting earlier in the year that the AUD would fall to 73 U.S. cents before the end of the year. “If you go down the route of trade wars and people getting concerned about China growth, then that would put downward pressure on the Aussie.”

AMP Capital is not alone to seek refuge from the coming storm in 30Y bonds: as Bloomberg notes, the same strategy is being used by Goldman Sachs Asset Management and QIC, while PIMCO previously said that it would seek a Treasury safe haven “if things get worse.”

The 30Y Tsy was yielding 2.93%, down from 3.26% mid-May, when it hit the highest level since September 2014. Recently, Morgan Stanley went so far as to call the peak in the 10-year yields amid trade concerns with the number of stories referencing “trade war” closely following the price on the 30Y Tsy.

Meanwhile the broader market remains overwhelmingly short the 30Y, with non-commercial net spec shorts targeting the Ultra bond in record amounts, providing continued ammo for a material short squeeze if economic growth in the US or globally were to take a leg lower, an outcome that is quite possible should the global trade wars accelerate . 

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Following May’s exuberant jump (revised even higher to +1.3% – biggest since Sept 2017) which coincided with a massive spike in consumer credit, June’s retail sales growth slowed notably (+0.5% as expected).

Retail Sales ex-Autos beat expectations, rising 0.5% vs 0.4% expected, but slowing dramatically from an upwardly revised May spike of 1.3% MoM; but retail sales ex-autos and gas disappointed.

However, the control group’s growth (ex-food, auto dealers, building materials, and gas stations) collapsed to unchanged in June (against expectations of a 0.4% MoM jump)…

 

Under the hood it was a mixed picture, with 8 of 13 major retail categories showed increases, according to the Commerce Department data.

Up:

• Motor Vehicle and parts dealers: +0.9%
• Furniture and home furnishing stores: +0.6
• Building material and garden equipment: +0.8%
• Health and personal care stores: +2.2%
• Gasoline stations: +1.0%
• Nonstore (internet) retailers: +1.3%
• Food service and drinking places: +1.5%
• Miscellaneous store retailers: +0.2%

Down:

• Electronics and appliance stores: -0.4%
• Food and beverage stores:  -0.3%  
• Clothing and clothing accessories stores: -2.5%
• Sporting goods, hobby, musical and book stores: -3.2%
• General Merchandise stores: -0.8%

So, once again, retail sales seems as dependent on the gusher of available consumer credit as any sentiment-driven impact.

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Authored by Michael Snyder via The American Dream blog,

Events are beginning to greatly accelerate, and many believe that the ingredients for a “perfect storm” are starting to come together as we enter the second half of 2018.

Other than the continual drama surrounding the Trump presidency, things have been quite calm for the past couple of years. We have been enjoying a time of peace, safety and relative economic prosperity that a lot of Americans have begun to take for granted. But great trouble has been brewing under the surface, and many are wondering if we are about to reach a major turning point. Our planet is being shaken physically, emotionally and financially, and it isn’t going to take much to push us over the edge. The following are 15 flashpoints which could create world changing events during the 2nd half of 2018…

#1 War In The Middle East – A state of war already exists in Israel. 200 rockets and mortar shells were fired into Israel on Saturday alone, and it won’t take much to spark a much broader regional war.

#2 Civil Unrest In U.S. Cities – Progressives are promising a “summer of rage”, and they are assuring us that all of the anger that has been building up against President Trump and his administration is about to starting boiling over onto the streets of our major cities all across America.

#3 The Nomination Of Brett Kavanaugh To The Supreme Court – Prominent liberals are stoking fears that the Supreme Court will start taking away “our most cherished liberties” if Brett Kavanaugh is confirmed by the Senate. Expect Washington D.C. to be the focus for a lot of the chaos that will happen later this summer.

#4 Tensions In The Windy City – The City of Chicago is a powder keg that could erupt at any moment. The recent shooting of a young African-American man resulted in a violent night of protests, and we should expect much more chaos in the days ahead.

#5 The 2018 Mid-Term Elections – These are probably the most important mid-term elections in modern American history, and tempers are running high on both sides. At this point the left appears to have more energy than the right, as they have accumulated a voter registration lead of 12 million in states that require party affiliation.

#6 Hillary Clinton – Hillary has been acting very much like a presidential candidate in recent days, and she has been continually fueling hatred for Donald Trump during her public appearances. Many believe that she will launch yet another campaign for the presidency once the 2018 mid-term elections are over.

#7 The U.S. Border With Mexico – President Trump’s immigration policies have absolutely infuriated the left, and Mexico’s new president is a radical socialist that absolutely hates Donald Trump and that has declared that immigration to the United States is a “human right”. It is difficult to see how this crisis is going to end well.

#8 The Trade War Between The United States And China – A full-blown trade war has erupted between the two largest economies on the entire planet. U.S. consumers are going to have to start paying much more for certain goods, and U.S. businesses that are heavily dependent on exports are going to have to start laying off workers.

#9 The Deteriorating Relationship Between The United States And Russia – Russia has become the “boogeyman” that gets blamed for everythingthese days, and relations between our two nations are the worst that they have been since the Cold War. Hopefully Trump and Putin can change that, but it is hard to be optimistic at this point.

#10 Will NATO Survive? – Donald Trump has threatened to pull the United States out of NATO if European leaders do not “immediately” begin increasing defense spending.

#11 The Stock Market – Markets all over the world have already been plummeting, and the smart money in the United States is getting out of the market at a pace that we haven’t seen since 2008. We are way overdue for a major crash, and if one happens during the second half of 2018 it definitely will not be a surprise.

#12 The Price Of Oil – The price of oil has reached levels not seen in many years, and many believe that the price is going to go much higher. This is already putting a tremendous amount of strain on working families all over America.

#13 The Political And Financial Crisis In Italy – The Italian government is going through an enormous amount of turmoil right now, and there are rumblings that the Italians may decide to leave the euro altogether. If that happens, we should expect to see the greatest financial shaking in modern European history.

#14 Earth In Travail – More than 30 volcanoes are erupting all around the world right now, and seismic activity appears to be escalating along the Ring of Fire. It is only a matter of time before we have a major seismic event in the United States, but hopefully that will not happen within the next six months.

#15 Drought In The Southwest – A devastating drought of historic proportions has already caused “Dust Bowl conditions” to return to some areas of the Southwest. If more rain doesn’t start falling, farmers and ranchers in the region are going to be absolutely crippled.

Of course it is inevitable that we will face some moments of crisis during the second half of 2018 that have nothing to do with the items on this list. One thing that is always true about life is that it is unpredictable, and so we should expect the unexpected.

But what virtually everyone should be able to agree upon is the fact that we are witnessing a very strange confluence of events that is unlike anything that we have witnessed in a very, very long time.

Is America about to plunge into a time of unprecedented turmoil? Only time will tell, but all of the ingredients are definitely there, and if a “perfect storm” does emerge during the second half of 2018 there are many of us that won’t be shocked at all.

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Today’s edition of “George Soros Meddles” is brought to you by ten-week-old political advocacy group Demand Justice – a Soros-linked organization which has pledged $5 million towards a “multi-platform” campaign to stop Judge Brett Kavanaugh’s confirmation to the US Supreme Court.

Headed by former Clinton campaign press secretary Brian Fallon and longtime Obama aide Christopher Kang as chief counsel, Demand Justice was created and financed by nonprofit organization the “Sixteen Thirty Fund,” which has received millions from the Open Society Policy Center (OSPC), according to the Daily Caller‘s Kevin Daley and Andrew Kerr.

As we reported two weeks ago, Demand Justice intends to fight “Trump’s hateful vision for America” by opposing his Judicial picks across the country – including the Supreme Court.  

The campaign will feature television spots promoting embattled Democratic Senate incumbents in West Virginia, Indiana, and North Dakota, who face competitive Republican challengers this November.

They will also run ads in Maine and Alaska, urging GOP Sens. Susan Collins and Lisa Murkowski to oppose the nomination. Collins and Murkowski are pro choice moderates who have broken with their party on Obamacare repeal and federal funding for Planned Parenthood. The spots urge the senators to protect abortion access by withholding support for nominees who oppose the 1973 Roe v. Wade decision. –Daily Caller

The Sixteen Thirty Fund collected some $2.2 million in contributions from the OSPC between 2012 and 2016 – while more recent records are not available. The OSPC, meanwhile, is virtually indistinct from Soros’s Open Society Foundations (OSF), the 87-year-old’s grant-giving and philanthropic network. 

The [Sixteen Thirty] Fund is largely financed by a handful of donors. Financial statements filed with state oversight officials in 2014 show just three contributors accounted for 70 percent — or some $11.5 million — of the Fund’s total donations and grant revenue. Disclosure forms filed with the same agency in 2016 present similar facts. Fewer than five donors gave $13.3 million to the Fund, representing 63 percent of their donations.

One of those donors is the OSPC. The Center’s tax forms show the Soros group gave hundreds of thousands of dollars to the Fund each year between 2012 and 2016, the last year in which records are publicly accessible. The Center gave the Fund $350,000 in 2012, $772,000 in 2013, $125,000 in 2014, $550,000 in 2015, and $481,483 in 2016. –Daily Caller

The Caller reports that the OSPC has no staff of its own – rather, Open Society Foundation employees are compensated for work done on OSPC efforts. 

“OSPC has no employees,” the form reads. “Employees of Open Society [Foundations], a related section 501(c)(3) tax-exempt organization, perform services for OSPC. OSPC advances funds to Open Society [Foundations] for their services based on the time they spend on OSPC matters. Their compensation is determined by Open Society [Foundations], and is based on market comparability data and is documented in Open Society [Foundations’] records.”

The Sixteen Thirty Fund created Demand Justice in May of this year in order to counter a network of conservative advocacy groups which “advertise and organize around judicial confirmations,” according to the Caller. 

Republicans have significantly outpaced Democrats in this space in recent years, given conservative voters’ sustained interest in the federal courts.

Executive director Brian Fallon told The New York Times that DJ hopes to “sensitize rank-and-file progressives to think of the courts as a venue for their activism and a way to advance the progressive agenda.” –Daily Caller

Kavanaugh:
✔️ Praised *dissent* in Roe
✔️ Criticized Roberts ruling on Obamacare
✔️ Says sitting POTUS can’t be indicted/can fire special counsel whenever he wants
✔️ Opposes net neutrality
✔️ Opposes consumer bureau
✔️ Says assault weapon bans are unconstitutional

— Brian Fallon (@brianefallon) July 10, 2018

Hillary Clinton threw her support behind her former Press Secretary’s new political machine in a late June tweet:

Given the news coming out of the Supreme Court this week, I’m excited to support @WeDemandJustice‘s critical work by welcoming them into the @OnwardTogether family. https://t.co/DrxSqwVn4H

— Hillary Clinton (@HillaryClinton) June 29, 2018

“Long after Donald Trump is no longer our President, his takeover of our courts will keep alive his hateful vision for America for decades to come,” their website reads. “Trump’s judges are overwhelmingly white men. Many are not at all qualified for their posts. And they consistently hold extreme, right-wing views.”

“If we truly want to stop Trump, we can’t surrender this fight.” -Demand Justice

Since the Sixteen Thirty Fund serves as Demand Justice’s fiscal sponsor, it doesn’t submit its own tax returns or disclose its supporters. As such, beyond the Soros network’s $2.2 million contribution to Sixteen Thirty over five years – it’s difficult to determine how much money individual donors like Soros have channeled directly to Demand Justice since its inception ten weeks ago. 

The National Council of Nonprofits says that fiscal sponsors provide “fiduciary oversight, financial management, and other administrative services” for its dependents, like Demand Justice. As such, many grants or donations DJ receives are awarded by way of the Fund. Both organizations are based out of the same Washington, D.C., address.

Supporters can also give to DJ through ActBlue Civics, a major fundraising platform for leftwing causes.

Given this structure, it is difficult to know how much money individual donors like Soros have channeled to Demand Justice. Daily Caller

Meanwhile, Capital Research noted last month that “coupled with the fact that Fallon recently spoke at the Atlanta Conference of the Democracy Alliance, a shadowy network of left-leaning donors including George Soros, it is clear that Demand Justice could be well on its way to becoming something much bigger than the obscure nonprofit it is now. As a (c)(4), it is allowed to engage in unlimited lobbying. But it can also support or oppose candidates for election (as long as that activity isn’t the organization’s primary purpose, which currently means spending no more than 49 percent of expenditures on electioneering).”

And just like that, the newly formed, Soros-linked, Obama and Clinton alum operated nonprofit has sprung up with a $5 million “multi-platform effort” to prevent Judge Brett Kavanaugh’s ascension to the US Supreme Court.

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Bank of America joined JPMorgan (if not Wells Fargo) in reporting Q2 earnings that beat on the top and bottom line, reporting Q2 Net Income of $6.8 BN, up 33% from the $5.1BN a year ago, and EPS of $0.63, above consensus exp. of $0.57, and the highest quarterly EPS in the past decade, on revenue of $22.6BN, less than last year’s $22.8BN but better than the $22.1BN expected. According to CFO Paul Donofrio on the earnings call, this was “the best first half in the company’s history.”

A big contributor to the jump in the bottom line is the lower tax rate, although pretax income also jumped 11% due to “improved operating performance.”

CEO Moynihan noted the bank’s expense cutting, expenses as well as growth in different areas of the bank:

Solid operating leverage and client activity drove earnings higher this quarter. Responsible growth continued to deliver as a driver for every area of the company. We grew consumer and commercial loans; we grew deposits; we grew assets within our Merrill Edge business; we generated more net new households in Merrill Lynch; and we supported more institutional client activity — all of this while we continued to invest in our businesses and began an additional $500 million technology investment, which we intend to spend over the next several quarters, due to the benefits we received from tax reform.’

As it has done in recent quarters, BofA showed a chart demonstrating its improving operating leverage, which has increased for 14 consecutive quarters, with Q2’s decline in revenue growth offset by a bigger Y/Y drop in operating expenses.

Looking at the balance sheet, BofA reported a very modest, 2% Y/Y increase in loans and leases, which rose to $935BN in Q2 from $932BN in Q1 and up from $915BN a year ago, missing expectations of $943BN and surprising many market observers . The modest increase was the result of an increase in loans in Consumer banking, Wealth Management, Global Banking and Global Markets, offset by a drop in Residential Mortgage and Home Equity loans.

While loans increased, deposits declined modestly, from $1.328TN  in Q1 to $1.310TN in Q2. The bank notes that rising rates are causing some wealthy clients to move their money from lower-yielding deposits to higher yielding investments in the Global Wealth and Investment Management business, a part of the so-called “deposit beta” shift.

Looking at the bank’s asset quality, the bank reported total net charge-offs of $1.0B, which increased $0.1B from 1Q18; with the net charge-off ratio increasing 3 bps to 0.43%.  Consumer net charge-offs were flat at $0.8B, and reflected seasonally higher losses in credit card, offset by improvement in home equity. Meanwhile, provision expense of $0.8B decreased modestly from 1Q18. BofA also took advantage of a net reserve release of $0.2B in 2Q18, which reflected “improvements in consumer real estate and energy, partially offset by portfolio seasoning in consumer credit card.”

The Provision for credit card losses also jumped by just over $100MM Y/Y to $827MM, from $726MM a year earlier.

BofA’s allowance for loan and lease losses of $10.1B, represented 1.08% of total loans and leases, while nonperforming loans (NPLs) decreased $0.5B from 1Q18, “driven by improvements in both consumer and commercial.”

In its consumer bank, BofA’set setting aside more money for credit losses, with provisions increasing $110 million, which the bank attributed to credit-card portfolio seasoning and loan growth.

Looking at the income statement, the bank reported a 6% increase in net interest income to $11.7 billion, driven by higher interest rates and one additional interest accrual day, partially offset by seasonally lower Global Markets and credit card NII, and increased $0.7BN from 2Q17, reflecting higher interest rates and loan and deposit growth, offset by a decline resulting from the sale of the non-U.S. consumer credit card business in 2Q17 and higher funding costs in Global Markets.

However, in a disappointing tangent, BofA also reported a decline in its NIM, with net interest yield declining by 1 basis point to 2.38% from 2.39% last quarter, if 4 bps higher from 2Q17, which “reflected the benefits from spread improvement, offset by a reduction in the non-U.S. consumer credit card portfolio (higher-yielding asset), as well as the impact from an increase in Global Markets assets (lower-yielding).” BofA also clarified that excluding Global Markets, the net interest yield would have been 2.95%, up 12 bps from 2Q17.

While net revenue dipped by $200MM, this was more than offset by a $600MM drop in noninterest expense, which declined 5% from $14.0N to $13.3BN Y/Y, “due to the absence of a $0.3B impairment charge in 2Q17 related to certain data centers, as well as reduced support costs and lower litigation.” Noninterest expense also declined from 1Q18, due primarily to the absence of seasonally elevated payroll taxes, while the efficiency ratio improved to 59% in 2Q18.

Revenues at the consumer bank were up from higher interest rates, deposit and loan growth, and higher income from cards. The one offset was lower mortgage banking income.

The consumer bank’s also said that deposit transactions over mobile devices exceeded ones in the bank’s financial centers for the first time. Digital sales now account for 24% of all consumer banking sales, BofA says.

* * *

But focusing on the one income segment which is of most interest to investors, the bank’s Global Markets, the bank reported beats across all key segments. Sales and trading revenue of $3.4B increased 6% from 2Q17, with FICC flat at $2.1B and Equities up 19% to $1.3B.

A detailed breakdown below:

• Trading revenue (ex DVA) $3.6BN, up 7% Y/Y, beating the estimate $3.39BN
• FICC trading revenue (ex DVA) $2.29 billion, up 2% Y/Y, beating the estimate $2.17BN
• Equities trading revenue (ex DVA) $1.31 billion, up 17% Y/Y, beating the estimate $1.21BN.

As Bloomberg notes, looking at BofA’s sales & trading revenues, it “looks like a 17% boost in equities helped them post flat results, similar to what happened at JPMorgan last Friday. As we know, volatility (judging by the VIX index) increased a little bit in June compared to the first two months of the quarter.”

Separately, average total assets increased 5% from 2Q17, while the average VaR declined once more, to a multi-year low low of $30MM in 2Q18 as the bank refuses to take on substantial trading risk.

Net, the results were hardly impressive, with results across the various individual business lines slightly better than expected but hardly spectacular, with loan growth disappointing, however the negative was more than offset by the big drop in expenses. Bank of America shares are up some 1% in the pre-market.

Full presentation below (link).

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Following new last week that billionaire investor Steven Cohen was said to have put money into a hedge fund focusing on crypto, Bitcoin et al. are extending gains today following headlines that BlackRock has formed a team to look into ways to take advantage of the cryptocurrency market and blockchain.

In the last week we have seen the owner of Switzerland’s securities exchange in Zurich say it’s creating a platform for trading digital assets.

Then, according to Fortune, none other than billionaire Steve Cohen has decided to join the bitcoin party and has invested in a Autonomous Partners, a relatively new hedge fund that is acquiring both cryptocurrencies and blockchain-related companies.

And now, as Financial News reports, the world’s largest asset manager will examine whether the manager of $6.3 trillion of assets should invest in Bitcoin futures.  It is also reportedly reviewing what competitors are doing with cryptocurrencies and how it would affect its business.

Notably, the formation of the team marks a change for the company after CEO Larry Fink said in October cryptocurrencies are a speculative platform in Asia and heavily used for money laundering. He has also said Bitcoin and other cryptocurrencies were “far from” being an opportunity for institutional investors, and none of BlackRock’s clients wanted to invest in it, according to Financial News.

And all of this comes after JPMorgan, Fidelity, and CME among others have stepped into the crypto mix.

Bitcoin has spiked back above $6500, back at one-week highs…

And the rest of the crypto space is rising also – led by Bitcoin Cash…

So the big question is – Is the institutional investor finally ready to join the crypto party?

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President Trump and First Lady Melania Trump arrived in Helsinki late Sunday night for his long-awaited summit meeting with Russian President Vladimir Putin, according to the Financial Times. And though the two leaders have met before, Monday’s summit will mark the first sit down meeting between the two leaders since Trump’s inauguration. In an interview that aired yesterday, Trump cautioned that he has “low expectations” going into the summit, because no matter what he accomplishes, the media and Trump’s political opponents will treat him like it wasn’t enough.

Trump said Friday during his press conference with UK Prime Minister Theresa May that he expects to discuss Syria, Ukraine and terrorism with Putin. He said later that he would consider asking Putin about the possibility of extraditing the more than two dozen Russians who have now been indicted by the DOJ over allegations of interference in the 2016 election.

Just hours before meeting with Putin, Trump blamed former President Barack Obama for the so-called Russian interference during the election because Obama knew about the interference but chose to do nothing, and slammed his political opponents for allowing the US’s relationship with Russia to deteriorate to a point where it “has never been worse.”

President Obama thought that Crooked Hillary was going to win the election, so when he was informed by the FBI about Russian Meddling, he said it couldn’t happen, was no big deal, & did NOTHING about it. When I won it became a big deal and the Rigged Witch Hunt headed by Strzok!

— Donald J. Trump (@realDonaldTrump) July 16, 2018

Our relationship with Russia has NEVER been worse thanks to many years of U.S. foolishness and stupidity and now, the Rigged Witch Hunt!

— Donald J. Trump (@realDonaldTrump) July 16, 2018

Following Friday’s latest round of indictments against a dozen Russian military intelligence officials, Democratic lawmakers slammed Trump for refusing to cancel the meeting.

And while Trump berated his political opponents for taking advantage of the indictments and their timing to try and foil the long-anticipated meeting between the two world leaders, National Security Advisor John Bolton said on Sunday that the president had been briefed in advance about the indictments of the Russian intelligence agents. According to Reuters, Trump appeared upbeat during a breakfast meeting with Finland’s president before the meeting with Putin in the Finnish capital, even tweeting his thanks to his hosts for their hospitality.

It was an honor to join you this morning. Thank you! https://t.co/NOUTroe8MV

— Donald J. Trump (@realDonaldTrump) July 16, 2018

Shortly before the meeting was set to begin, Putin was filmed getting off his presidential aircraft in Helsinki.

JUST IN: Russian Pres. Vladimir Putin arrives in Helsinki, Finland, ahead of meeting with Pres. Trump. https://t.co/pnM34fHNdQ pic.twitter.com/QwCcMh6OSC

— ABC News (@ABC) July 16, 2018

The Kremlin has said it doesn’t expect an easy meeting after pushing back against President Trump’s criticisms of a planned Russian gas pipeline to Germany, while suggesting it could be difficult to find common ground on Syria thanks to tensions over Iran.

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U.S. futures are fractionally higher, following European shares in the green as Asian equities retreated ahead of today’s historic Trump-Putin summit and the first big week of earnings for US corporations.

The key economic catalyst overnight was the latest batch of Chinese data, where GDP rose as expected 6.7% – the slowest since 2016 – however Industrial Production missed badly as discussed last night, printing at 6.0%, below the 6.5% expected and the lowest since Dec 2015, pressuring regional equities.

Chinese Economic Data

The data indicates that Chinese economic growth momentum slowed further, but investors are more worried about coming quarters as U.S. tariffs come into effect, says Ben Kwong, executive director at KGI Asia; sentiment remains quite cautious.

As a result, Chinese stocks slumped after data showed GDP grew at the slowest since 2016 in the second quarter, while Xiaomi dropped after being excluded from a list of stocks eligible for trading via connects with mainland as China aims to protect retail investors using HK link from less understood securities. The Shanghai Composite Index closed down 0.6% at 2,814, while the CSI 300 was also 0.6% lower, ChiNext down -0.1%.

Offsetting some of the gloom, the PBoC injected CNY 170bln via 7-day and CNY 130bln via 14-day reverse repos for a net CNY 300bln daily injection.

“Investors will watch for signs of monetary and fiscal policy loosening from the upcoming central economic work conference, and first-half results for stocks with cheap valuations and earnings growth that beat estimates,” said Central China Securities strategist Zhang Gang.

Elsewhere in Asia, shares were lower, the MSCI Asia Pacific index declining -0.3%, with volumes down in most markets while Japan was shut for a public holiday.

Europe bucked the trend with banks rising on the Stoxx Europe 600 Index, after Deutsche Bank said its earnings are likely to be above market expectations, offsetting a drop in miners. The biggest European bank whose stock price recently a new all time low, said it sees net income of about 400 million euros ($468 million) and pretax income of 700 million euros, “considerably” above estimates. The news sent DB stock surging 8% in early trading, its biggest daily gain since April 2017.

In FX, the dollar weakened against most G-10 peers ahead of an expected slowdown in U.S. retail sales data, set to be reported at 830am ET. The Bloomberg Dollar Spot Index fell 0.2%, taking its three-day decline to more than 0.3%; Treasury 10-year yields rose 1bp to 2.84%

“The USD’s sharp turnaround late on Friday may be telling of the currency’s waning bullish momentum –- or the fact that the dollar looks to be running out of positive catalysts,” wrote ING Groep FX strategist Viraj Patel. “We may need a very strong U.S. retail sales print today to see the dollar push higher.”

The pound rose a third day ahead of a vote later Monday on U.K. Prime Minister Theresa May’s Brexit legislation in Parliament, while the euro was stuck in a small range near the $1.17 level, while the yen edged lower, adding to its biggest weekly slide in 10 months.

In rates, US Treasuries inched lower, tracking bond declines across most of Europe: the 10Y TSY yield dipped 1 basis point to 2.84%; German 10Y Bund yields climbed 1bps to 0.35% while Britain’s 10-year yield also climbed 1bp to 1.273%.

Meanwhile, as Bloomberg notes, with no fresh signs of a trade war escalation and President Donald Trump heading to a summit with Vladimir Putin, investors will focus on a barrage of economic data including Monday’s mixed figures from China, and company earnings, with Bank of America Corp. due to report. The big event this week is Federal Reserve Chairman Jerome Powell’s semi-annual testimony where he is expected to lay the groundwork for further tightening.

Commodities traded mixed with WTI and Brent leak lower: Brent flirted around USD 75.00/bbl while WTI hovered near the USD 70.50/bbl level in the aftermath of a pullback from last Friday’s settlement amid reports that the Trump administration was said to be considering tapping into the Strategic Petroleum Reserve to rein in prices. Sentiment also hampered by the weekly Baker Hughes rig count showing an increase of 2 rigs in operation compared to the prior week. Elsewhere, gold (+0.2%) prices are buoyed by the softer USD. London Copper slipped this morning while Chinese Q2 growth printed a slight downtick (yet in-line with expectations), focus continues to remain on China’s response to US tariffs. Steel-linked metals, Nickel and Zinc, are subdued on lower demand expectations amid China’s top steelmaking city ordering steel mills to shut sintering plants for five days due to adverse weather conditions.

Expected data today includes retail sales, which should decline from last month’s 0.8% to 0.5%, and the Empire State Manufacturing Survey. Bank of America, BlackRock, and Netflix are among companies reporting earnings.

Market Snapshot

• S&P 500 futures up 0.1% to 2,805.25
• STOXX Europe 600 up 0.2% to 385.64
• MXAP down 0.3% to 165.20
• MXAPJ down 0.4% to 538.17
• Nikkei up 1.9% to 22,597.35
• Topix up 1.2% to 1,730.07
• Hang Seng Index up 0.05% to 28,539.66
• Shanghai Composite down 0.6% to 2,814.04
• Sensex down 0.2% to 36,455.29
• Australia S&P/ASX 200 down 0.4% to 6,241.52
• Kospi down 0.4% to 2,301.99
• German 10Y yield rose 1.6 bps to 0.356%
• Euro up 0.08% to $1.1694
• Italian 10Y yield fell 7.2 bps to 2.286%
• Spanish 10Y yield rose 0.7 bps to 1.27%
• Brent futures down 0.1% to $75.28/bbl
• Gold spot little changed at $1,244.21
• U.S. Dollar Index down 0.1% to 94.61

Top Overnight News from Bloomberg

• President Donald Trump prepared to meet Vladimir Putin in Helsinki on Monday, under pressure to confront his Russian counterpart over Kremlin meddling in the 2016 election and with concerns rising that the U.S. is abandoning the current international order
• Goldman Sachs Group Inc. bank plans early this week to name company President David Solomon — whom Blankfein has publicly referred to as his successor — as its next CEO, the New York Times reported Sunday, citing people briefed on the plan
• European Union President Donald Tusk called on Donald Trump to reform the world order rather than bring it down, warning that trade wars can lead to “hot conflicts.”
• China’s economic expansion slowed in line with expectations, signaling broadly stable output as the trade conflict with the U.S. intensifies. GDP increased 6.7 percent in the second quarter from a year earlier, slowest since 2016 and down slightly from the 6.8 percent pace in the previous quarter. Investment growth and industrial output also slowed in June.
• Theresa May’s long-running battle with her divided Conservative Party took a potentially more dangerous turn, as one of her former ministers began assembling lawmakers to vote against her Brexit plans. Steve Baker, a former Brexit minister, is coordinating lawmakers on WhatsApp ahead of key parliamentary votes, according to a person familiar with the strategy
• Bank of England policy makers are getting a crucial glimpse of the health of the U.K. economy before their crunch August meeting. A deluge of numbers on wages, inflation, retail sales and public borrowing are coming over the next five days

Asian stocks began the week subdued with the region lacklustre amid the absence of Japanese participants and following a quiet weekend in terms of newsflow, while the region also digested a deluge of mixed Chinese data including a slowdown in Q2 GDP. ASX 200 (-0.4%) was on the backfoot from early trade amid cautiousness prior to the key Chinese releases and with the index dragged by losses in miners and financials. Elsewhere, Shanghai Comp. (-0.6%) and Hang Seng (+0.1%) were initially downbeat after the mixed data in which GDP topped estimates on a Q/Q basis at 1.8% vs. Exp. 1.6%, but GDP Y/Y slowed inline with forecasts to 6.7% vs. Prev. 6.8%. In addition, Retail Sales was better than expected and Industrial Production disappointed, while the lending and money supply data late last week was also varied and added to the uninspired tone. In terms of today’s notable movers, ZTE shares surged after the US confirmed to lift the ban on US sales to the Co. while Xiaomi were on the other side of the spectrum after the Shanghai Stock Exchange banned investors from trading in a dozen of foreign companies and firms with weighted-voting rights via the stock-connect. Chinese Premier Li reiterated China and EU are to uphold multilateralism and free trade during meeting with EU officials, while EU’s Tusk said trade wars can result to hot conflicts and that EU is seeking support for WTO reform.

Top Asian News

• China’s Economy Slows as Expected With Trade War Dimming Outlook
• China Stocks at Record Lows Make Case for $941 Billion Fund
• Bank of Thailand Says 4.5% Growth May Spur More Hawkish Stance
• Malaysia to Propose 10% Sales Tax on Goods, 6% on Services
• Iron Ore’s Top Grade May Hit $100 as China Chases Blue Skies

European equities opened relatively flat and since then have traded in no firm direction (Eurostoxx 50 +0.1%). Financials (+0.7%) outperform as Deutsche Bank (+6.5%) ignited a bid in the sector after announcing better than expected Q2 preliminary results. Banks dominate gains in their respective bourses. Meanwhile, Indivior (+27.1%) shares sky-rocketed after a US court blocked Indian competitors from selling a cut-price version of Indivior’s bestselling opioid addiction treatment in the US. Due to the Farnborough Air Show, it may be worth keeping an eye on BAE Systems (BA/ LN), Rolls-Royce (RR/ LN), Leonardo (LDO IM), Boeing (BA) and Airbus (AIR FP).

Top European News

• Buy Europe’s Defensives as Economic, Earnings Growth Slows: HSBC
• Another Week, Another Brexit Showdown for Theresa May

In FX, the DXY index is meandering within a narrow 94.558-776 band in line with restrained Dollar movement vs its G10 counterparts after last week’s volatile trade and relatively big swings culminated in the Usd netting decent gains, with the DXY briefly over 95.000 at one stage on Friday. Ahead, some data to provide impetus in the form of retail sales. JPY – A marginal underperformer after suffering heaviest losses vs the Usd of late and closing below a key 76.4% Fib (112.33) on Friday, However, the absence of Japanese participants due to the Marine Day holiday has impacted trade overnight between 112.20-55. CHF – Back on a par with the Greenback and still straddling 1.1700 vs the Eur, awaiting the next moves in global trade/tariff wars and anything from Trump’s meeting with Putin.  CAD – The Loonie is pretty level vs its US peer and pivoting 1.3150 ahead of some Canadian data that could impact and/or offset any Usd-led moves in the form of existing home sales.

Commodities trade fairly mixed while WTI and Brent continue to leak with losses. Brent has broken below USD 75.00/bbl while WTI has taken out USD 70.00/bbl to the downside in the aftermath of a pullback from last Friday’s settlement amid reports that the Trump administration was said to be considering tapping into the Strategic Petroleum Reserve to rein in prices. Sentiment also hampered by the weekly Baker Hughes rig count showing an increase of 2 rigs in operation compared to the prior week. Meanwhile, in talks with the Saudi’s Energy Minister, Iranian Oil Minister said OPEC decision does not give members the right to raise their production level above targets Elsewhere, gold (+0.2%) prices are buoyed by the softer USD. London Copper slipped this morning while Chinese Q2 growth printed a slight downtick (yet in-line with expectations), focus continues to remain on China’s response to US tariffs. Steel-linked metals, Nickel and Zinc, are subdued on lower demand expectations amid China’s top steelmaking city ordering steel mills to shut sintering plants for five days due to adverse weather conditions. Iran warns OPEC it will be less effective if the production cap slip.

Looking at today’s calendar, the highlight is likely to be the June retail sales report, while the July empire manufacturing report and May business inventories data are also due. Away from that, Bank of America and Netflix are due to report their Q2 earnings while the IMF is due to release its World Economic Outlook. Politics is likely to be a big focus too with US President Trump holding talks with his Russian counterpart President Vladimir Putin and the China – EU summit starting in Beijing.

US Event Calendar

• 8:30am: Empire Manufacturing, est. 21, prior 25
• 8:30am: Retail Sales Advance MoM, est. 0.5%, prior 0.8%;
  • Retail Sales Ex Auto MoM, est. 0.3%, prior 0.9%
  • Retail Sales Ex Auto and Gas, est. 0.4%, prior 0.8%
  • Retail Sales Control Group, est. 0.4%, prior 0.5%
• 10am: Business Inventories, est. 0.4%, prior 0.3%

DB’s Craig Nicol concludes the overnight wrap

Congratulations to our readers from France this morning following the country’s highly entertaining 4-2 win over Croatia in the World Cup final yesterday. We’ll have to find something else to talk about now but the good news is that it’s just 25 days until the Premier League season gets underway again. So a decent window to get life admin out of the way. Jim was in France for the game yesterday and  we haven’t heard from him so we can only assume he’s still out celebrating with the locals.

Aside from the football, as we’ve become slightly accustomed to of late, much of the weekend newsflow has centred around President Trump. Specifically, it’s an interview released on CBS‘s ‘Face the Nation’ yesterday which has attracted  the main headlines as during it, President Trump was asked to name the US’s “biggest foe globally”. It’s fairly quiet outside of that in terms of weekend news; however, this morning we’ve already had one of the bigger data releases expected this week. China’s Q2 GDP reading has come in at 6.7%, in line with expectations and down one-tenth of a percent from Q1. The rest of the June activity data out of China was a bit mixed, with retail sales above market at 9.0% (vs. 8.8% expected), fixed asset investment in line at 6.0% while industrial production was weaker than expected at 6.0% (vs. 6.5% expected). The Shanghai Comp (-0.47%) and CSI 300 (-0.45%) are both lower following the data while the rest of Asia is also trading down with the Kospi (-0.27%), Hang Seng (-0.17%) and ASX 200 (-0.44%) all modestly in the red. Markets in Japan are closed for holidays. The CNY and CNH are little changed along with base metals (Oil is about 0.5%  lower, however) although US equity index futures are flat slightly higher as we type.

To be honest that China GDP print is probably the most significant data release this week. This afternoon we’ll get US retail sales data for June where our US economists expect a healthy +0.6% mom headline print and +0.4% mom retail control reading; however, the rest of the calendar is reasonably sparse of data. Markets are likely to spend most of their time preoccupied with any further (unpredictable) developments on the trade front, while, as mentioned at the top, the first summit between President’s Trump and Putin in Helsinki today should be worth watching as a bit of potential political drama to start the week, as well as the EU-China summit which gets going today and where one would expect there to be plenty of debate on both trade and also the WTO.

As far as central banks are concerned, Fed Chair Powell’s semi-annual monetary policy testimony to the Senate Banking Committee on Tuesday and then the House Financial Services Committee on Wednesday will likely be the main highlight, although the latter is usually a copy and paste of the former. Our US economists expect Powell’s testimony to largely reflect the minutes of the June 13th FOMC meeting as he will be testifying on behalf of the committee. As a reminder those minutes presented a generally upbeat economic outlook and broad based support amongst participants for continuing along the path of gradual policy firming. That said policymakers did note the rising risks to the outlook associated with trade policy and given the news last week, Congress will no doubt question Powell as to how the Fed views these risks. The yield curve could also be a point of debate however our economists do not expect Powell to raise alarm bells about the recent flattening.

Elsewhere earnings season is set to ramp up in the US this week too with 64 S&P 500 companies slated to report. We’ll get the remaining banks with Bank of America today, Goldman Sachs on Tuesday and Morgan Stanley on Wednesday. Ahead of those, Friday’s earnings releases from JP Morgan, Citi and Wells Fargo were a bit of a mixed bag. Results for Wells in particular were taken fairly negatively with the stock falling -1.20% following a miss at both the revenue and EPS lines, while disappointing revenues at Citi saw the stock -2.20% lower by Friday’s close. JP Morgan’s numbers were a bit more positive but the stock still slid -0.46%. It’s worth noting that JP’s CEO Jamie Dimon addressed the trade war situation, calling it a “worry” but also saying that its “affecting psyche more than it is economics”. Away from the banks this week we’ve also got some notable tech names reporting including Netflix today, eBay on Wednesday and Microsoft on Thursday.

Coming back to the trade debate, despite last week seemingly marking an escalation of the trade war between China and the US, markets were pretty well behaved for the most part and the one-week returns particularly for equity markets suggest little sign of concern for now. The lack of any retaliation is certainly a big part in that, but the +3.06% and +3.79% five-day returns for the Shanghai Comp and CSI 300 certainly stand out especially with the former seeing the biggest weekly gain since June 2016. The likes of the Kospi (+1.67%) and Nikkei (+3.71%) also had solid weeks while the MSCI EM index also put up a +1.48% return. In Europe the Stoxx 600 returned a more modest +0.70% but has still gained in 8 out of the last 9 trading days. Meanwhile the S&P 500 returned +1.50% and is also up on 6 out of the last 7 trading days. It also passed the elusive 2800 level on Friday. Vol measures are back down near their YTD lows with the VIX closing at 12.18 on Friday (compared to the YTD average of 16.11) and the VSTOXX at 12.80 (YTD average 15.86). So no real signs of stress.

Bond markets meanwhile have been incredibly quiet with 10y Treasury yields just 0.5bps higher than last week and 10y Bunds 4.8bps higher. Both remain in incredibly tight ranges for now although the relentless flattening of the Treasury curve remains a feature with 2s10s closing at 24.5bps on Friday, meaning it flattened 3.6bps last week alone. To be fair commodities did have a tougher time of it but the moves are hardly eye watering. The likes of copper, lead and zinc fell -0.72%, -5.57% and -5.74% last week while WTI Oil fell -3.78%, albeit still only a few bucks off its YTD high.

In terms of Friday’s session itself, risk assets nudged higher in the absence of further escalation in trade tensions. The Stoxx 600 rose +0.17% while the S&P (+0.11%) pushed through the 2,800 mark for the first time since February, with gains led by industrials and consumer staple stocks. Meanwhile core bonds firmed slightly with 10y yields down c.2bp (UST -1.9bp; Bunds -1.7bp) while IG credit spreads also tightened 1-1.5bp. Measures of volatility were little changed with the VIX down 0.4pts to 12.18.

Friday was dominated by a steady slate of central bank speak. The Fed’s Bostic noted that the flattening yield curve requires monitoring by policymakers, but also noted that “to the extent the whole market believes that (relationship),  whether it’s true or not is kind of immaterial because it can become a self-fulfilling prophecy”. Earlier on, the Fed’s Kaplan told Reuters that an escalation of US tariffs would harm the economy and “what’s going on in the short run certainly is not positive, but for me, it isn’t sufficient yet to materially change my outlook”. In the UK, the BoE’s Cunliffe signalled that the BoE should take a cautious approach to rate hikes as he noted that there remains a case for “a little stodginess”.

Finally wrapping up with the data releases from Friday. In the US, the July University of Michigan consumer sentiment index dipped 1.1pts mom to a below market print of 97.1 (vs. 98.0 expected). In the details, inflation expectations for 1yr ahead moderated 0.1ppt from last month’s 3 year high to 2.9% yoy, while the 5yr ahead expectations index also edged down 0.2ppt mom to 2.4% yoy.

Looking at today’s calendar, in Europe today, the July Rightmove house price data in the UK followed by the release of the May trade balance for the Eurozone are due. In the US, the highlight is likely to be the June retail sales report, while the July empire manufacturing report and May business inventories data are also due. Away from that, Bank of America and Netflix are due to report their Q2 earnings while the IMF is due to release its World Economic Outlook. Politics is likely to be a big focus too with US President Trump holding talks with his Russian counterpart President Vladimir Putin and the China – EU summit starting in Beijing.

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Despite John McCain and the neocon’s best efforts to disrupt it, his advisors (and the Democrats) warnings, and the rest of the Deep State’s concerted plans with the liberal media to paint Trump into a lose-lose situation, the Trump-Putin Summit in Helsinki is due to start within the next hour or two.

As President Trump noted in a tweet earlier, “Unfortunately, no matter how well I do at the Summit, I would return to criticism that it wasn’t good enough.”

As The Hill notes, Trump has long wanted a closer relationship with Putin, something he believes can mend frayed ties between their two countries. But beyond his apparent affinity for Putin, many in Washington have questioned why the president is sitting down with his Russian counterpart and what he seeks to accomplish.

Here are five things to watch for when Trump and Putin meet in Helsinki:

Election interference

Russia’s interference in the 2016 election, already at the front of observers’ minds, has rocketed to the top of the agenda ahead of Monday’s summit. Deputy Attorney General Rod Rosenstein announced Friday the indictment of 12 Russian intelligence officers who allegedly hacked into the Democratic National Committee and other Democratic groups. The announcement comes just days before the Helsinki summit, ramping up pressure on Trump to raise the issue with Putin. But the president has long wavered on the matter, despite the U.S. intelligence community’s assessment that Russia interfered in the election. Just last month, Trump tweeted that “Russia continues to say they had nothing to do with Meddling in our Election!”

Trump has repeatedly highlighted that denial — which Putin made during their first face-to-face meeting at last year’s group of Group of 20 summit — as a way of downplaying the issue. “President Trump is now the outlier in his own administration, seemingly,” said a former Trump transition official. The president has promised multiple times to press Putin on election interference, saying Friday he would “absolutely firmly ask the question” when they meet. Trump has expressed a belief, however, there is not much he can do to deter their activity. “I don’t think you’ll have any ‘Gee, I did it, I did it, you got me.’ There won’t be a Perry Mason here,” Trump said at a press conference with British Prime Minister Theresa May.

National security figures with ties to the White House hope Trump publicly warns Putin against interfering in the midterms and threatens the Russian leader with consequences.

But the worst-case scenario they fear is Trump remaining silent on the issue and raising the possibility of lifting sanctions on Moscow, something that would fuel criticism from political opponents who believe he is too close to Putin.

Democrats in Congress have called on Trump to cancel the summit entirely in response to the indictment, but there is no sign Trump is interested in doing so.

Syria

Trump has reportedly been eying a deal with Putin in Syria that is aimed at moving Iranian forces away from the border with Israel in exchange for withdrawing U.S. troops. But both U.S. and Russian officials have been reluctant to give ground on thorny issues such as troop levels or territory, and experts are not optimistic a deal will be made in Helsinki. “To me, this whole issue of expecting the Russians or hoping the Russians are going to deliver Iranian concessions in Syria is the triumph of blind hope over grim analysis,” said Robert Ford, former U.S. ambassador to Syria under former President Obama.

Under the terms of a possible deal, Russia would promise to limit Iranian presence near Syria’s border with Israel and Jordan and, in turn, the U.S. would allow Syrian President Bashar Assad’s forces to take control of the area. U.S. forces have an outpost in southern Syria near the border with Jordan and Iraq known as al Tanf, which Pentagon officials have said is key to ensuring Iran does not complete the Tehran-to-Beirut land bridge it desires. But under the reported deal, U.S. forces would leave al Tanf — and eventually Syria — altogether. Experts have warned Trump not to repeat the mistakes of his summit with North Korean leader Kim Jong Un, when he did not come away with an ironclad plan for denuclearization.

“If he buys a vague promise, then it looks like the Singapore summit where he gets some nice words without details from the other side of the summit table,” said Ford.

Crimea

Crimea has been at the heart of U.S.-Russia tensions since 2014. That’s when Russia annexed the peninsula off Ukraine, sparking a wave of international sanctions and other measures aimed at isolating Moscow. But Trump has repeatedly left the door open to recognizing Russia’s claim over Crimea during his meeting with Putin, even repeating Moscow’s talking point that it has a rightful claim to the territory because most residents speak Russian. The president stoked further concern this week when he again did not rule out the possibility during his press conference at the end of the tumultuous NATO summit.

“That’s an interesting question, because long before I got here President Obama allowed that to happen, that was under his watch, not my watch,” Trump said. “What will happen with Crimea from this point on? That, I can’t tell you.”

One of the post-Crimea punishments for Russia was getting booted from the then-Group of Eight world economic powers. But last month, on his way to the Group of Seven summit in Canada, Trump said that should be reversed. “Russia should be in this meeting,” he said at the time. “Why are we having a meeting without Russia being in the meeting?”

The U.S. and its European allies stepped up their military posture and exercises in Eastern Europe after the Crimea annexation. But after Trump unilaterally agreed to cancel joint military exercises with South Korea during his summit with North Korea’s Kim, allies are fearful of him doing the same with Putin. Republicans in Congress are cautioning Trump against a repeat performance. “I think the president should listen to his security council and our secretary of Defense and our NATO allies on anything of substance dealing with the U.S. military posture. We’ve got to be careful, we’ve got to be strong,” said Sen. Richard Shelby (R-Ala.), who recently led a congressional delegation to Russia.

Arms control

Trump has said one of his top priorities for the summit is arms control, a topic that could produce a rare opportunity for the U.S. and Russia to find common ground. Arms control advocates say Trump can score an easy win with Putin by agreeing to extend the New START Treaty for another five years. The treaty, negotiated by the Obama administration, caps the U.S. and Russia’s deployed nuclear warheads to 1,550 each and comes up for renewal in 2021. “[Renewal] would ensure that we do not return to a numerical arms race,” said Thomas Countryman, former assistant secretary of State on international security and nonproliferation.

But most experts do not believe a decision on New START will come at the summit. Trump has dismissed the treaty as one of Obama’s “bad deals,” and it could take some convincing to get him on board. Republicans have argued the treaty should not be extended while Russia is in violation of a separate arms control agreement known as the Intermediate-Range Nuclear Forces (INF) Treaty. That agreement, which has been credited with helping end the Cold War, bans ground-launched ballistic and cruise missiles with ranges between 500 and 5,500 kilometers. The United States has repeatedly accused Russia of violating the INF Treaty by developing and deploying a banned missile, a charge Moscow denies.

The summit could provide an opportunity for Trump to address the INF violation directly with Putin, but experts say Russia has shown little appetite for reversing course.

Stagecraft

Even more than contentious policy issues, the visuals could be the most memorable part of the Trump-Putin summit. Trump and Putin will hold a joint press conference, which should be a spectacle in and of itself and give U.S. media a chance to rare opportunity to press the Russian leader on election meddling and other key issues. It could cause problems for Trump if he appears too friendly with Putin, especially given the timing of the meeting, just days after the hacking indictments.

But Trump’s desire to form a close bond with Putin could lead the president to give his Russian counterpart a warm reception, just like he did with Kim in Singapore. It could fuel criticism back home that Trump has a greater affinity for strongmen than he does for longtime U.S. allies.

Days before the summit, Trump was shown grimacing during a group photo with NATO partners in Brussels and rolled his eyes when he was asked during a meeting with British Prime Minister Theresa May about critical comments he made about the U.K. leader. Putin, a former KGB officer with a flair for the dramatic, could also have some tricks up his sleeve.

The Russian leader frequently shows up late for meetings with world leaders, even forcing Pope Francis to wait for 50 minutes before a 2015 sit-down in Vatican City. Putin even brought his pet Labrador to a 2007 meeting with German Chancellor Angela Merkel, who has a well-known fear of dogs. The Russian president later said he did not mean to scare Merkel and claimed he apologized after learning she is scared of dogs.

*  *  *
And in case it’s not immediately obvious, as Jim Jatras recently noted, there are many reasons the bipartisan US establishment hates Trump. His heresies from neoliberal orthodoxies on immigration and trade are prominent. But top among them is his oft-stated intention to improve relations with Russia.

That’s fighting words for the Deep State and its mainstream media arm, for which demonizing Russia and its president Vladimir Putin is an obsession.

The fact that Donald Trump made his intention to get along with Moscow a priority during his 2016 campaign, both against his Republican primary rivals and Hillary Clinton (who has compared Putin to Hitler) was cause for alarm. This is because far more than even the frightening prospect that the 70-year state of war on the Korean Peninsula might end, US reconciliation with Russia would yank the rug out from under the phony justifications for spending hundreds of billions of dollars annually to counter a “threat” that ceased to exist over a quarter century ago. Absent hostility to Russia that money has no reason to keep sustaining the power, privilege, and prosperity of a horde of moochers and profiteers, both at home and abroad.

That’s why when it was reported soon after his January 2017 inauguration that Trump was seeking to open dialogue with the Kremlin and set an early summit with Putin there was a hysterical counteraction.

*  *  *

Finally, watch out for any ‘hot mic’ incidents, because it would very awkward if a president on the United States was caught offering himself up to a Russian leader…

Trump never colluded with the Russians, but guess who did? 👇 pic.twitter.com/5dzmR1lFyK

— Christine (@Tweetsfor45) July 14, 2018

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