Cryptos Rip Higher On Back Of Big Short Squeeze

Bitcoin is up 12% from Friday’s close and the rest of the crypto space is also surging as chatter of a major short-squeeze is underway.

 

Chatter is that it’s some major short liquidations driving the spike…

Pushing Bitcoin back well above $6,000…

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“Trump Will Never…”

Via Nordea 

Trump seems to be winning the trade war from an equity market point-of-view. At the same time the implied probability of Trump leaving office prematurely has plummeted. Yet many keep saying that “Trump will never..”, but we think he means business.

TRUMP WILL NEVER

The market has been awash with trade war fears, and these worries appear to have been picking up recently, as evidenced by commentary from multinational companies as well as from ECB and Fed officials (e.g. Bullard, Bostic). The trade war noise is, however, becoming a negative risk for global macro as it is easy for companies to delay investment plans when uncertainty picks up. This is something that could expedite our grinding slowdown scenario and, if worse comes to worse, lead to a more pronounced recession risk.

CHART 1: TRUMP LEAVING PREMATURELY? FUHGEDDABOUDIT

Alas, these trade fears have yet to affect his popularity, which has been on a rising trend. Indeed, on a recent Gallup poll, he had the highest approval rate since his inauguration. Maybe the market is still underestimating him, as it has had a tendency to do for some years. For instance, Donald Trump spoke about slapping 25% tariffs on China already in early 2011, and here we are. He does seem to mean business.

TABLE 1: TRUMP WILL NEVER

And while many expect that the eventual Mueller report (“Russiagate”) to doom the White House any day now, that has been a losing proposition so far. The likelihood that President Trump will be forced out of the White House prematurely has actually been plummeting. It does seem as if the market will remain stuck with the guy.

CHART 2: US IS WINNING ITS TRADE WAR AGAINST CHINA, FROM AN EQUITY MARKET POINT-OF-VIEW

From the perspective of the equity market, it seems as if the US is indeed winning the trade war, at least vs China. The S&P500 index holds up quite well, while the Shanghai Composite index has tanked 15% year-to-date in CNY. The recent swoon in Chinese equities suggests downside risks to activity, and indicators such as Chinese PMI manufacturing. If the authorities try to cushion this blow via allowing a weaker CNY, well, who can be surprised?

CHART 3: CHINESE EQUITIES INDICATE DOWNSIDE RISKS TO PMI

Interestingly, it might be that the money which has left EM en masse in recent months has entered US small caps which have outperformed. FAANGs, BATs, small caps and momentum strategies have all performed well recently. Alas, we do not expect small-caps to provide a safe haven in the macro climate which will gradually unfold in H2, 2018.

CHART 4: HAS EM OUTFLOWS LED TO INFLOWS TO SMALL CAPS?

IS THE EU SWERVING?

Only a few days ago, EU’s trade commissioner Malmström insisted EU had no plans to talk with the US about trade, at least as long as the US’ tariffs were in place. But suddenly, after the save-Merkel EU summit, Juncker has been tasked to go to Washington later in July “to talk trade”.

We have earlier compared the trade situation to a chicken race between e.g. EU and the US. In a classical example of a chicken race “two drivers drive towards each other on a collision course: one must swerve, or both may die in the crash, but if one driver swerves and the other does not, the one who swerved will be called a “chicken” (i.e. losing). Both the EU and the US would naturally be less well-off economically in a full-scale trade war, but if the US can extract some concessions from the EU (getting EU to swerve) it would be a relative winner. Now it looks as if the EU may be swerving. This may be good news for global trade, as it could de-escalate the situation.

CHART 5: WHEN WILL EM WORRIES START TO SHOW UP IN GLOBAL PMI?

EXPECT GLOBAL PMI TO WEAKEN FURTHER LATER THIS YEAR

We don’t sound the all clear in any way however. The Fed is letting its balance sheet shrink at a quicker and quicker pace, with a maximum shrinkage of USD50bn/month reached in Q4, 2018 (of which 30bn can be Treasury bonds and notes). This has process has contributed to EM weakness this year, and may undermine EM further in H2. We moreover think the recent tightening of global financial conditions, especially in emerging markets, will bring about plenty of negative spillovers on global macro.

You also have to wonder what’s going in the Euro-area, where the recent spread widening and underperformance of certain sectors indicate further downside to the EUR. In the bigger picture, we add the widening of Itraxx indices to our list of canaries in the coal mine. The popping of the crypto currency bubble, liquidity problems in China, the collapse of inverse volatility products, EM commotion and Italian and Spanish bond market turmoil are examples of what you might expect to see if global growth is slowing, the cost of capital, especially in the US, is rising, and global central banks offer less liquidity support. Expect more of the same.

CHART 6: ITRAXX INDICES INDICATE FURTHER EUR WEAKNESS

You also have to wonder what’s going in the Euro-area, where the recent spread widening and underperformance of certain sectors indicate further downside to the EUR. In the bigger picture, we add the widening of Itraxx indices to our list of canaries in the coal mine. The popping of the crypto currency bubble, liquidity problems in China, the collapse of inverse volatility products, EM commotion and Italian and Spanish bond market turmoil are examples of what you might expect to see if global growth is slowing, the cost of capital, especially in the US, is rising, and global central banks offer less liquidity support.

We expect more of the same.

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This Stuttering Prankster Just Poked a Big Hole in Trump’s Claim to Secure Communications: Reason Roundup

“Stuttering John” proves president will call back any idiot. “Whether you’re a republican or democrat you should be truly scared by how easily I got through to the President,” says comedian, actor, and podcaster John Melendez. “This is not partisan. It’s just plain scary.”

Last Thursday, Melendez—a Howard Stern and Tonight Show alum also known as “Stuttering John”—got through to the president by pretending to be Sen. Bob Menendez (D–N.J.). “Sen. Menendez” called Trump as he was traveling on Air Force One, and Trump returned the call.

The comedian teased the podcast as the one “where I prank call the President,” followed by:

After a few more attempts to publicize his prank, with scant results—this was the day of the Capital Gazette shooting in Annapolis—Melendez tweeted that he found it “astounding that the news media’s not picking up the fact that I totally duped the President & got in touch within less than 2 hours while he was on Air Force One.” That one finally got some attention.

Melendez was quiet online for a few days, but on Saturday he claimed that Secret Service was at his door. “I guess my old friend Donald wants to continue this,” Melendez tweeted. “Stay tuned.”

He claims he did not answer his door and the agents left (a time period during which Melendez managed to fire off a bad prison rape joke and several other tweets). On Sunday evening, he stated that he was headed to talk to the Secret Service at 10 a.m. Monday and that Michael Avenatti had agreed to be his lawyer.

Whatever happens to Melendez, the incident has already set up a new line of criticism against Trump—led in large part by Melendez himself.

“I flew on Air Force One with President Obama … and their security systems are supposed to be pretty tight,” he told CNN. “There’s a whole protocol for making phone calls and receiving phone calls. I’m shocked this was able to get through, and it really does raise questions about what kind of security filter do we have on Air Force One, presumably the most secure set of communications in the world?”

“It’s a very chilling thing to contemplate,” Rep. Gerry Connolly (D-Virginia) told Wolf Blitzer on CNN. A White House spokesperson told the news agency:

The President wants to be accessible to members and likes engaging them and wants them to have the opportunity to connect. The downside of that is sometimes the channels are open too widely and mistakes like this happen.

During the fake phone call with “Sen. Menendez,” Trump congratulated him on his recent acquittal for corruption. “You went through a tough, tough situation, and I don’t think a very fair situation,” said Trump. The pair discussed border security and Supreme Court picks as well.

Meanwhile, Melendez’s new lawyer had this to say about the situation:

FREE MINDS

First FOSTA challenge in the works. The Electronic Frontier Foundation (EFF) is suing to invalidate the Allow States and Victims to Fight Online Sex Trafficking Act of 2017 (“FOSTA”), the recently-enacted law making prostitution ads a federal crime.

“The law was written so poorly that it actually criminalizes a substantial amount of protected speech and, according to experts, actually hinders efforts to prosecute sex traffickers and aid victims,” says the organization, which is joining forces with the Internet Archive, “two human rights organizations, an individual advocate for sex workers, [and] a certified non-sexual massage therapist,” EFF notes.

Although the law was passed by Congress for the worthy purpose of fighting sex trafficking, its broad language makes criminals of those who advocate for and provide resources to adult, consensual sex workers and actually hinders efforts to prosecute sex traffickers and aid victims. EFF strongly opposed FOSTA throughout the legislative process. During the months-long Congressional debate on the law we expressed our concern that the law violated free speech rights and would do heavy damage to online freedoms. The law that was ultimately passed by Congress and signed into law by President Trump was actually the most egregiously bad of those Congress had been considering.

Read more from EFF here—and expect a lot more on this suit here at Reason in the days and weeks to come.

See also: What is “Switter,” and why it matters.

FREE MARKETS

A leaked draft of a bill “ordered by the president himself” was obtained by Axios and “would declare America’s abandonment of fundamental World Trade Organization rules.” More from Axios:

The draft legislation is stunning. The bill essentially provides Trump a license to raise U.S. tariffs at will, without congressional consent and international rules be damned.

[…] The bill, titled the “United States Fair and Reciprocal Tariff Act,” would give Trump unilateral power to ignore the two most basic principles of the WTO and negotiate one-on-one with any country:

  1. The “Most Favored Nation” (MFN) principle that countries can’t set different tariff rates for different countries outside of free trade agreements;
  2. “Bound tariff rates” — the tariff ceilings that each WTO country has already agreed to in previous negotiations.

“It would be the equivalent of walking away from the WTO and our commitments there without us actually notifying our withdrawal,” said a source familiar with the bill

Read more here.

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Tesla Reports 5,031 Model 3s Produced In Last 7 Days, Expects Production To Hit 6,000 By “Late Next Month”

Following a surge in production in the last days of the month which as Reuters reported saw the company produce its 5,000th unit a few hours after the midnight deadline, on Monday Tesla published its Q2 production and delivery update, and confirmed that “In the last seven days of Q2, Tesla produced 5,031 Model 3 and 1,913 Model S and X vehicles.”

According to the release, in Q2 production totaled 53,339 vehicles, “a 55% increase from Q1, making it the most productive quarter in Tesla history by far.” Tesla also claims that the first time, Model 3 production (28,578) exceeded combined Model S and X production (24,761), and it produced almost three times the amount of Model 3s than it did in Q1.

Commenting on the controversial “tent”, Musk said that “GA4, our new General Assembly line for Model 3, was responsible for roughly 20% of Model 3s produced last week, with quality from that line being as good as our regular GA3 line. We expect that GA3 alone can reach a production rate of 5,000 Model 3s per week soon, but GA4 helped to get us there faster and will also help to exceed that rate.”

In total, Q2 deliveries totaled 40,740 vehicles, of which 18,440 were Model 3, 10,930 were Model S, and 11,370 were Model X.

Looking ahead, an optimistic Tesla expects to increase production to 6,000 Model 3s per week by late next month.

This won’t be the first time the company has been overly aggressively on the future, and it was exactly one year ago that Elon Musk predicted he can reach 20,000 Model 3 cars per month in December.

There was also no mention of the “factory gating” definition used by Musk in his public statements over the weekend, prompting many to wonder what is the difference between produced and “gated” units. We look forward to finding out.

On the delivery side, Tesla reported Q2 deliveries totaled 40,740 vehicles, of which 18,440 were Model 3, 10,930 were Model S, and 11,370 were Model X adding that “Model S and X deliveries are in line with our guidance provided on May 3.”

Additionally, Tesla also reaffirmed its guidance for positive GAAP net income and cash flow in Q3 and Q4, “despite negative pressures from a weaker USD and likely higher tariffs for vehicles imported into China as well as components procured from China.”

Some other comments from the release:

As we previously noted, we are in the process of changing the quarterly production pattern of those vehicles for the various worldwide regions to ensure a more linear flow of deliveries through the quarter. Both orders and deliveries for Model S and X were higher in Q2 than a year ago. Our overall target for 100,000 Model S and Model X deliveries in 2018 is unchanged.

The press release ends on an oddly emotional note:

The last 12 months were some of the most difficult in Tesla’s history, and we are incredibly proud of the whole Tesla team for achieving the 5,000 unit Model 3 production rate. It was not easy, but it was definitely worth it.

And to underscore that, the release carried this photo of the “Tesla team celebrates production milestone.”

With many traders having shorted into today’s release, the outcome was predictable: yet another TSLA short squeeze.

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Mexico Just Elected a New President. Is He the Left-Wing Version of Trump?

Mexicans elected a populist president yesterday. Andrés Manuel López Obrador—nicknamed “AMLO”—defeated the country’s two major parties with promises to clean up corruption and to impose greater government control over the economy, to stop what he sees as the fleecing of Mexico’s domestic interests by free trade agreements. He is short on concrete policy proposals and has shown authoritarian tendencies.

Despite all that, López Obrador is unlikely to be a close friend to U.S. President Donald Trump. About the only thing they might agree on is blowing up the North American Free Trade Agreement (NAFTA).

Indeed, López Obrador published a book last year, titled Oye, Trump! (“Listen Up, Trump!”), that reprints a series of speeches he gave to Spanish-speaking communities in the United States after Trump’s 2016 election. He’s been sharply critical of Trump’s hardline stance on immigration, and he has condemned the much-ballyhooed plans for a stronger border wall, promising supporters in a speech last week that Mexico will “never be the piñata of any foreign government.”

But almost everyone has something negative to say about Trump. More worrying are the similarities between López Obrador and Hugo Chavez, who ruled Venezuela from 1999 through 2013 and pushed the once-prosperous nation onto the path of its current socialist nightmare.

López Obrador has called for the nationalization of Mexico’s oil industries (although he has contradicted himself on that claim) and has promised to impose price controls on gasoline. Investment banks such as Citigroup have warned that his election means uncertainty in “monetary, fiscal, and commercial policy.”

“Nobody knows exactly what to expect from an AMLO administration. His proposals are a collection of notions with few details and plenty of contradictions,” write Juan Carlos Hidalgo and Ian Vasquez, two Latin America policy experts at the libertarian Cato Institute.

Beyond concerns over López Obrador’s plan to reshape Mexico’s energy industries, they point to his call for agricultural self-sufficiency. While that message has played well with farmers across Mexico, achieving that goal would likely require tearing up NAFTA and would increase the cost of living for many Mexicans.

“With protectionists at the helm in its two biggest member states, NAFTA could well collapse,” The Economist foreshadows.

We will soon find out. López Obrador, a former mayor of Mexico City who had ran two unsuccessful campaigns for president in 2006 and 2012, won easily on Sunday. Running for a third party that he founded, López Obrador finished more than 10 percentage points ahead of the candidates from Mexico’s two largest parties, the National Action Party and the Institutional Revolutionary Party—that have shared power in Mexico since the country became a full-fledged multi-party democracy in 2000.

It’s not much of a surprise that a populist message would succeed in Mexico. The country is famous for its high levels of political corruption, and it has weak democratic institutions. It’s hard to overstate how badly the current crop of cronies have handled Mexico. Transparency International ranks Mexico 95th out of 167 countries for corruption—23 spots behind El Salvador and 39 spots behind Cuba.

“Overcharges by the country’s telecommunications monopoly are estimated to cost 2 percent of Mexico’s total economic output. That monopoly earns profits almost double those of its U.S. and Canadian counterparts,” David Frum wrote in a 2016 piece for The Atlantic. “Unsurprisingly, the monopoly’s owner, Carlos Slim, ranks among the world’s richest men.”

Elba Esther Gordillo, the “president for life” of Mexico’s national teachers’ union, was busted in 2013 for spending the equivalent of $2.1 million in public funds at a Neiman Marcus store in San Diego, California, and using other union funds on plastic surgery. The wife of Mexico’s outgoing—and deeply unpopular—current president was busted in 2016 for living in a condo owned by a company that contracts with her husband’s government. The reporter who broke that story quickly lost her job.

As elsewhere in America and Europe, Mexico’s turn toward a populist president with half-formed economic ideas is at least partially the fault of previous leaders, who have allowed corruption to take root and have not made a compelling political case for free trade, despite all the good it has done. This isn’t the first time that voters, feeling like they want to burn everything down, have turned to a politician like López Obrador.

“No one can blame Mexicans for being under the impression that they have little to lose by voting for a firebrand populist,” write Hidalgo and Vasquez. “But this is a miscalculation that we have seen in other Latin American nations, and one that has terrible long-term consequences.”

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Did Sen. Warner And Comey ‘Collude’ On Russia-gate?

Authored by Ray McGovern vi ConsortiumNews.com,

The U.S. was in talks for a deal with Julian Assange but then FBI Director James Comey ordered an end to negotiations after Assange offered to prove Russia was not involved in the DNC leak…

An explosive report by investigative journalist John Solomon on the opinion page of Monday’s edition of The Hill sheds a bright light on how Sen. Mark Warner (D-VA) and then-FBI Director James Comey collaborated to prevent WikiLeaks editor Julian Assange from discussing “technical evidence ruling out certain parties [read Russia]” in the controversial leak of Democratic Party emails to WikiLeaks during the 2016 election.

A deal that was being discussed last year between Assange and U.S. government officials would have given Assange “limited immunity” to allow him to leave the Ecuadorian Embassy in London, where he has been exiled for six years. In exchange, Assange would agree to limit through redactions “some classified CIA information he might release in the future,” according to Solomon, who cited “interviews and a trove of internal DOJ documents turned over to Senate investigators.” Solomon even provided a copy of the draft immunity deal with Assange.  

But Comey’s intervention to stop the negotiations with Assange ultimately ruined the deal, Solomon says, quoting “multiple sources.” With the prospective agreement thrown into serious doubt, Assange “unleashed a series of leaks that U.S. officials say damaged their cyber warfare capabilities for a long time to come.” These were the Vault 7 releases, which led then CIA Director Mike Pompeo to call WikiLeaks “a hostile intelligence service.”

Solomon’s report provides reasons why Official Washington has now put so much pressure on Ecuador to keep Assange incommunicado in its embassy in London.

Assange: Came close to a deal with the U.S. (Photo credit: New Media Days / Peter Erichsen)

The report does not say what led Comey to intervene to ruin the talks with Assange. But it came after Assange had offered to  “provide technical evidence and discussion regarding who did not engage in the DNC releases,” Solomon quotes WikiLeaks’ intermediary with the government as saying.  It would be a safe assumption that Assange was offering to prove that Russia was not WikiLeaks’ source of the DNC emails. 

If that was the reason Comey and Warner ruined the talks, as is likely, it would reveal a cynical decision to put U.S. intelligence agents and highly sophisticated cybertools at risk, rather than allow Assange to at least attempt to prove that Russia was not behind the DNC leak.

The greater risk to Warner and Comey apparently would have been if Assange provided evidence that Russia played no role in the 2016 leaks of DNC documents.

Missteps and Stand Down

In mid-February 2017, in a remarkable display of naiveté, Adam Waldman, Assange’s pro bono attorney who acted as the intermediary in the talks, asked Warner if the Senate Intelligence Committee staff would like any contact with Assange to ask about Russia or other issues. Waldman was apparently oblivious to Sen. Warner’s stoking of Russia-gate. 

Warner contacted Comey and, invoking his name, instructed Waldman to “stand down and end the discussions with Assange,” Waldman told Solomon.  The “stand down” instruction “did happen,” according to another of Solomon’s sources with good access to Warner.  However, Waldman’s counterpart attorney David Laufmanan accomplished federal prosecutor picked by the Justice Departent to work the government side of the CIA-Assange fledgling deal, told Waldman, “That’s B.S.  You’re not standing down, and neither am I.”

But the damage had been done.  When word of the original stand-down order reached WikiLeaks, trust evaporated, putting an end to two months of what Waldman called “constructive, principled discussions that included the Department of Justice.”

The two sides had come within inches of sealing the deal.  Writing to Laufman on March 28, 2017, Waldman gave him Assange’s offer to discuss “risk mitigation approaches relating to CIA documents in WikiLeaks’ possession or control, such as the redaction of Agency personnel in hostile jurisdictions,” in return for “an acceptable immunity and safe passage agreement.”

On March 31, 2017, though, WikiLeaks released the most damaging disclosure up to that point from what it called “Vault 7” — a treasure trove of CIA cybertools leaked from CIA files.  This disclosure featured the tool “Marble Framework,” which enabled the CIA to hack into computers, disguise who hacked in, and falsely attribute the hack to someone else by leaving so-called tell-tale signs — like Cyrillic, for example. The CIA documents also showed that the “Marble” tool had been employed in 2016.

Misfeasance or Malfeasance

Comey: Ordered an end to talks with Assange.

Veteran Intelligence Professionals for Sanity, which includes among our members two former Technical Directors of the National Security Agency, has repeatedly called attention to its conclusion that the DNC emails were leaked — not “hacked” by Russia or anyone else (and, later, our suspicion that someone may have been playing Marbles, so to speak). 

In fact, VIPS and independent forensic investigators, have performed what former FBI Director Comey — at first inexplicably, now not so inexplicably — failed to do when the so-called “Russian hack” of the DNC was first reported. In July 2017 VIPS published its key findings with supporting data. 

Two month later, VIPS published the results of follow-up experiments conducted to test the conclusions reached in July. 

Why did then FBI Director Comey fail to insist on getting direct access to the DNC computers in order to follow best-practice forensics to discover who intruded into the DNC computers?  (Recall, at the time Sen. John McCain and others were calling the “Russian hack” no less than an “act of war.”)  A 7th grader can now figure that out.

Asked on January 10, 2017 by Senate Intelligence Committee chair Richard Burr (R-NC) whether direct access to the servers and devices would have helped the FBI in their investigation, Comey replied “Our forensics folks would always prefer to get access to the original device or server that’s involved, so it’s the best evidence.” 

At that point, Burr and Warner let Comey down easy. Hence, it should come as no surprise that, according to one of John Solomon’s sources, Sen. Warner (who is co-chairman of the Senate Intelligence Committee) kept Sen. Burr apprised of his intervention into the negotiation with Assange, leading to its collapse.

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Key Events This Week: All Eyes On Friday

It may be a holiday-shortened week in the US, but there is still a lot of market-moving data over the next 5 days with payrolls report and FOMC minutes to look forward as well as a number of manufacturing sector reports around the world.  Politics shouldn’t be too far from the spotlight either with Germany’s domestic political situation over the weekend in focus, while tariff deadlines between the US and China/ROW also come to the fore.

All traders will be on deck for Friday, July 6th when not only get June payrolls, but growing trade wars culminate as the US is set to launch 25% tariffs on $34 billion of Chinese imports, provoking instant retaliation.

According to DB’s Craig Nicol, politics could be the biggest test for markets next week starting with Germany this weekend. News of the migration deal at the EU summit last week has been welcomed in early comments from CSU leaders however the collapse of weekend talks and Seehofer’s resignation offer, which then morphed into yet another ultimatum, has left Merkel’s fate hanging on an announcement potentially any second.

Meanwhile there are several critical trade-related dates next week. Sunday marked the deadline for the US Treasury Department to release its report outlining investment restrictions on Chinese investments in certain US industries. Sunday was also the day that Canada’s retaliatory tariffs on US steel and aluminium kicked in. But it is Friday that all eyes will be on when the US is scheduled to impose tariffs on $34bn of Chinese goods. So expect trade-related headlines to continue.

On the data front, we’ll have to wait until Friday for the most significant release of the week with the June employment report due out in the US. At the time of writing, the consensus is for a 198k nonfarm payrolls reading. As a reminder May printed at a stronger than expected 223k. Average hourly earnings is expected to come in at a solid +0.3% mom which, if true, would push the annual rate up one-tenth to +2.8% yoy and back to the January highs. The unemployment rate is expected to hold at 3.8% and average weekly hours also stay unchanged at 34.5hrs.

In terms of other US data next week, we’ll get confirmation of the final June PMIs (manufacturing on Monday and services/composite on Thursday) as well as the ISM manufacturing reading for June on Monday (small decline to 58.0 expected).

As a reminder, US markets will close early on Tuesday and then all day on Wednesday for Independence Day.

* * *

Away from the data the FOMC meeting minutes on Thursday evening should be one to watch with the market likely looking for confirmation of the more hawkish tilt that we got from the meeting statement, dot plots and Fed Chair Powell’s press conference. Recent Fedspeak has been focused on trade war developments so it’ll perhaps be interesting to see how much acknowledgment this gets, if any. In Europe the main highlight will likely be the final June PMI revisions on Monday (manufacturing) and Wednesday (services and composite). This will include a first look at the data for the periphery and UK. The 55.0 flash manufacturing and services prints are both expected to hold for the Eurozone.  Other potentially market sensitive data in Europe next week includes Germany’s industrial production report for May on Friday (+0.2% mom expected).

In Asia the main focus will likely be tomorrow’s official PMIs in China as well as the Caixin releases on Monday and Wednesday.

Finally, other things worth watching include European Council President Donald Tusk and European Commission President Jean-Claude Juncker addressing the European Parliament on Tuesday, BoJ policy board member Harada speaking on Wednesday along with the BoE’s Woods and Saporta, and finally BoE Governor Carney speaking on Thursday along with Bundesbank President Weidmann.

A full breakdown of the week’s events on a day by day basis from DB:

  • Monday: Its a busy start to the week on Monday with a first look at June manufacturing PMIs for China (overnight), Spain, Italy and the UK along with final June manufacturing PMI reads for Japan, France, Germany, the Eurozone and the  US. The Q2 Tankan Survey is also out in Japan while in the US the June ISM manufacturing will also be closely watched in the afternoon. Other data due out includes May PPI and the unemployment rate reading for the Euro area.
  • Tuesday: Tuesday is a fairly light day for data with the only the May YTD budget balance in France, June construction PMI in the UK and May retail sales data for the Eurozone due in the morning. In the US we will get May factory orders and also final reads for May durable goods and consumer goods orders. Later in the evening June vehicle sales data will be released. Aside from the data, the ECB’s Peter Praet will speak at a Romanian Central Bank conference in Bucharest while the European Council President Donald Tusk and European Commission President Jean-Claude Juncker will address the European Parliament.
  • Wednesday: On Wednesday we will get a first look at June services and composite PMIs for Japan and China (overnight), Spain, Italy and the UK along with final June services and composite PMI reads due for France, Germany and the Eurozone. There is nothing of note in the US with markets closed for Independence Day. Away from the data the BoE’s Sam Woods and Vicky Saporta will be speaking at different times at a seminar in London on building a resilient U.K. financial sector. The BoJ’s Harada will be also speaking at an event in the early morning.
  • Thursday: The main focus on Thursday will likely be the release of the FOMC meeting minutes for the June 13th policy meeting. In terms of data, the only release of note in Europe is May factory orders data in Germany. In the US it’s a little busier with final June services and composite PMIs due along with the June ISM non-manufacturing, and June ADP employment change reading. The latest weekly initial jobless claims data will also be due. Away from that, BoE Governor Mark Carney is due to speak at an event in Newcastle while the ECB’s Mersch and Nowotny along with Bundesbank President Jens Weidmann will also be speaking at different times at the Central Bank of Austria’s annual conference. The  BoJ’s Masai will also speak at an event.
  • Friday: The big highlight of the week comes on Friday in the form of the June employment report in the US, including of course the latest payrolls and average hourly earnings data. Away from that, overnight May household spending, labor cash earnings and real cash earnings data will be released in Japan. Post that we will get May industrial production in Germany along with the May trade balance and current account balance in France and Q1 unit labor costs in the UK. Aside from the data, the ECB’s Nouy and the EU’s Dombrovskis will be speaking at Central Bank of Austria’s annual conference. Friday also marks the day that the US is scheduled to impose tariffs on $34bn of Chinese goods.

Finally, looking at just the US, here is BofA with a visual summary of what to expect:

And here is Goldman with a detailed breakdown together with consensus expectations:

The key economic releases this week are the ISM manufacturing survey on Monday and the employment report on Friday. We expect nonfarm payrolls to rise by 200k and the unemployment rate to edge down to 3.7%. Minutes from the June FOMC meeting will be released on Thursday.

Monday, July 2

  • 09:45 AM Markit Flash US Manufacturing PMI, June final (consensus 54.7, last 54.6)
  • 10:00 AM Construction spending, May (GS +0.7%, consensus +0.5%, last +1.8%): We estimate construction spending increased 0.7% in May, following a fairly large increase in April driven in large part by private multifamily construction. Levels were revised up for March and April, suggesting somewhat firmer momentum going into the second quarter.
  • 10:00 AM ISM manufacturing, June (GS 58.8, consensus 58.5, last 58.7): Manufacturing surveys improved slightly on net in June. Our manufacturing survey tracker—which is scaled to the ISM index — rose by 0.1pt to 60.5, overcoming early month manufacturing survey weakness. Though the NACM index fell slightly, the sales component remains strong, and the Richmond Fed, Empire State, and Dallas Fed surveys improved.

Tuesday, July 3

  • 10:00 AM Factory orders, May (GS -0.2%, consensus flat, last -0.8%): We estimate factory orders declined 0.2% in May following a 0.8% decrease in April. Headline durable goods orders were soft in the May advance report, reflecting broad-based weakness in nondefense goods but a large increase in defense goods orders.
  • 4:00 PM Total vehicle sales, June (GS 17.0mn, consensus 17.0mn, last 16.8mn)

Wednesday, July 4

  • US Independence Day holiday observed. US equity and bond markets are closed.

Thursday, July 5

  • 08:15 AM ADP employment report, June (GS +185k, consensus +190k, last +178k): We estimate a 185k increase in ADP payroll employment in June, reflecting inputs utilized in the ADP model. While we believe the ADP employment report holds limited value for forecasting the BLS nonfarm payrolls report, we find that large ADP surprises vs. consensus forecasts are directionally correlated with nonfarm payroll surprises.
  • 08:30 AM Initial jobless claims, week ended June 30 (GS 225k, consensus 225k, last 227k): Continuing jobless claims, week ended June 23 (consensus 1,718k, last 1,705k): We estimate initial jobless claims declined by 2k to 225k in the week ending June 30 following a 9k increase in the prior week. We expect the temporary boost from auto plant shutdowns to continue this week, but the underlying trend level of claims is likely to continue moving down. Consensus expects continuing claims—the number of persons receiving benefits through standard programs—to increase by 13k to 1,718k.
  • 09:45 AM Markit Flash US services PMI, June Final (consensus 56.5, last 56.5)
  • 10:00 AM ISM non-manufacturing, June (GS 58.3, consensus 58.2, last 58.6): We expect the ISM non-manufacturing index to move down 0.3pt to 58.3 in June. On net, our nonmanufacturing survey tracker moved up 1.1pt higher to 58.6, reflecting a general improvement in service-sector surveys, but we expect stock market weakness to weigh on ISM responses.
  • 02:00 PM Minutes from the June 12-13 FOMC meeting: At its June meeting, the FOMC raised the target range for the policy rate by 25bp to 1.75-2%, as widely expected, but the statement and projections were hawkish relative to market expectations. In the post-meeting press conference, Chairman Powell noted the intention to continue raising the federal funds rate and downplayed several dovish arguments as well as trade tensions. The policy implementation changed with the decision to keep the IOER 5bp below the upper bound of the target rate. In the minutes, we will look for further discussion of trade policy and possible future realignments of IOER.

Friday, July 6

  • 8:30 AM Nonfarm payroll employment, June (GS +200k, consensus +195k, last +223k); Private payroll employment, June (GS +195k, consensus +190k, last +218k); Average hourly earnings (mom), June (GS +0.3%, consensus +0.3%, last +0.3%); Average hourly earnings (yoy), June (GS +2.8%, consensus +2.8%, last +2.7%); Unemployment rate, June (GS 3.7%, consensus 3.8%, last 3.8%): We estimate nonfarm payrolls increased 200k in June. Our forecast reflects the continued strength of jobless claims and our services employment tracker reapproaching its cycle high. After a one tenth decline in May, we expect the unemployment rate to fall another tenth to 3.7%, reflecting the further decline in continuing claims over the payroll month. Finally, we expect average hourly earnings to increase 0.3% month over month and 2.8% year over year, reflecting favorable calendar effects.
  • 08:30 AM: Trade balance, May (GS -$43.9bn, consensus -$43.6bn, last -$46.2bn): We estimate the trade deficit decreased by $2.3bn in May to $43.9bn, after falling by more than $18bn over the last two months.

Source: DB, BofA, GS

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Cohen Warns Trump He’ll “Put Family And Country First” In First Interview Since FBI Raid

Since the FBI raided Trump attorney Michael Cohen’s home, office, and hotel room earlier this year, the press has speculated that the former Trump Organization attorney would turn state’s evidence against his former boss if it might help him get out from under possible bank fraud and campaign finance charges. Both Cohen and Trump had refused to comment on the rumors, until now…

In his first interview since the raid, Cohen told ABC News’ George Stephanopoulos (President Bill Clinton’s former press secretary) that he would put his “family and country first” if prosecutors decide to file charges against him.

But in his first in-depth interview since the FBI raided his office and homes in April, Cohen strongly signaled his willingness to cooperate with special counsel Robert Mueller and federal prosecutors in the Southern District of New York – even if that puts President Trump in jeopardy.

According to Stephanopoulos, Cohen disagreed with Trump’s criticism of federal prosecutors, and said that his family is “my first priority” in response to a question about what he would do if he had to choose between protecting himself and protecting President Trump. Stephanopoulos added that Cohen “did not praise” the president during their conversation.

 This from the man who once said that he’d “take a bullet” for Trump, a man he’d “do anything” to protect. ABC also pointed out that once Cohen’s new lead attorney, Guy Petrillo, takes over, a joint defense agreement between Cohen’s legal team and Trump’s legal team will be rendered ineffective.

Asked what he would do if Trump and his legal team came after him, Cohen said he wouldn’t be “a punching bag” as part of anybody’s defense strategy.

“I will not be a punching bag as part of anyone’s defense strategy,” he said emphatically. “I am not a villain of this story, and I will not allow others to try to depict me that way.”

[…]

“My wife, my daughter and my son have my first loyalty and always will,” Cohen told me. “I put family and country first.”

Cohen refused to discuss the prosecution, adding that “I respect the prosecutors…I respect the process” and that he doesn’t agree with “those who demonize or vilify the FBI” – a remark that appeared to be directed at the president and his allies. 

“I respect the prosecutors. I respect the process,” Cohen said. “I would not do or say anything that might be perceived as interfering with their professional review of the evidence and the facts.”

[…]

“I don’t agree with those who demonize or vilify the FBI. I respect the FBI as an institution, as well as their agents,” Cohen told me. “When they searched my hotel room and my home, it was obviously upsetting to me and my family. Nonetheless, the agents were respectful, courteous and professional. I thanked them for their service and as they left, we shook hands.”

In the past, Cohen has insisted that he made a $130,000 “hush money” payment to adult-film actress Stormy Daniels on his own initiative. But when asked about the payment by Stephanopoulos, Cohen offered a slightly different take.

“I want to answer. One day I will answer,” he said. “But for now, I can’t comment further on advice of my counsel.”

Moving on to the subject of the Russia investigation, Cohen said he condemned Russia for interfering in the 2016 election, adding that accepting Russian President Vladimir Putin’s denial was “unsustainable.”

“As an American, I repudiate Russia’s or any other foreign government’s attempt to interfere or meddle in our democratic process, and I would call on all Americans to do the same,” he said.

And in a direct rebuttal to President Trump, who sent out a tweet last week repeating Vladimir Putin’s claim that Russia did not interfere in our election, Cohen added this: “Simply accepting the denial of Mr. Putin is unsustainable.”

Back in April, President Trump tweeted that he didn’t expect Cohen to turn on him to save himself.

If he didn’t have the president’s full attention before, Cohen almost certainly has it now.

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US Conducts Successful Field Test Of New Nuclear Bomb

The US Air Force completed two more tests of the B61-12 gravity nuclear bomb by dropping a dud (or “non-nuclear test assembly“) from a B-2 Spirit stealth bomber at the Tonopah Test Range in Nevada on June 9, as part of the multi-billion dollar project to extend the service life of the bomb, introduced in 1968, by another 20 years.

“The Department of Energy’s National Nuclear Security Administration (DOE/NNSA) and the US Air Force completed two non-nuclear system qualification flight tests of the B61-12 gravity bomb on June 9 at Tonopah Test Range in Nevada,” the Department of Energy announced in a statement. “These tests are the first such end-to-end qualification tests on a B-2A Spirit Bomber for the B61-12.”

The tests involved releasing a B61-12 non-nuclear test assembly, which includes the NNSA designed bomb assembly and U.S. Air Force acquired tail-kit, from a B-2A Spirit Bomber operated by the 419th Test & Evaluation Squadron at Edwards Air Force Base in California. These tests are the first such end-to-end qualification tests on a B-2A Spirit Bomber for the B61-12.

Over the past five decades, the US has used different versions of the B-61 nuclear gravity bomb, which is a core part of the US nuclear triad and has been deployed across the US and NATO bases for five decades. While, over the years, the Pentagon produced numerous modifications to the deadly weapon, B61 variants of 3, 4, 7, and 11 remain in service.

The bomb tests are a part of the Pentagon’s $7.6 billion ‘B61-12 Life Extension Program‘, which aims to “refurbish, reuse, or replace all of the bomb’s nuclear and non‐nuclear components” and extend the service life of the B61 by at least 20 years. The “first production unit” is scheduled for completion in 2020.

As RT notes, besides deploying B61-12 on modern and future long range bombers such as the B-2A Spirit bomber, the Pentagon is making sure the bomb can be easily used by F-15E fighter jets, and wants to integrate it with the F-35 Lightning II fifth generation combat jets, raising concerns it is creeping towards lowering the threshold for tactical use of nuclear weapons.

After former President Barack Obama authorized a nuclear modernization program, Trump revised it into an ambitious 30-year project that would cost at least $1.2 trillion to complete. Some $800 billion will be spent on maintaining nuclear forces, while about $400 billion will be spent on modernizing them, under the pretext of an existential need to deter “revisionist powers” such as China and Russia.

To justify the massive taxpayer spending on nuclear upgrades, Washington has constantly pointed the finger at Russia, accusing it of threatening its neighbors and US national security. “Russia has demonstrated its willingness to use force to alter the map of Europe and impose its will on its neighbors, backed by implicit and explicit nuclear first-use threats,” the NPR report claims, despite Russian military doctrine clearly stating that nukes can only be used in response to a nuclear attack, or when the state’s very existence is put under threat by a massive conventional attack.

* * *

The latest test was the third in a series that will be conducted over the next three years to qualify the B61-12 for service. Three successful development flight tests were conducted in 2015.

“These qualification flight tests demonstrate the B61-12 design meets system requirements and illustrate the continued progress of the B61-12 life extension program to meet national security requirements” said Brig. Gen. Michael Lutton, NNSA’s Principal Assistant Deputy Administrator for Military Application. “The achievement is also a testament to the dedication of our workforce and the enduring partnership between NNSA and the U.S. Air Force.”

“The flight test included hardware designed by Sandia National Laboratories and Los Alamos National Laboratory and manufactured by the Nuclear Security Enterprise plants. The tail-kit assembly section was designed by the Boeing Company under contract with the Air Force Nuclear Weapons Center,” the NNSA statement said.


Phil Hoover, an engineer at Sandia National Laboratories, shows off a flight test

body for a B61-12 nuclear weapon

The B61-12 consolidates and replaces four B61 bomb variants in the nation’s nuclear arsenal. The first production unit is scheduled to be completed by March 2020.

The original B61 gravity bomb is the mainstay of the Air Force’s nuclear arsenal and one of the legs of the so-called nuclear triad, along with the intercontinental ballistic missiles deployed from either ground-based silos or oceangoing submarines. The B61 nuclear gravity bomb, deployed from U.S. Air Force and NATO bases, has almost 50 years of service, “making it the oldest and most versatile weapon in the enduring U.S. stockpile.” Numerous modifications have been made to improve the B61’s safety, security, and reliability since the first B61 entered service in 1968, and four B61 variants remain in the stockpile: the 3, 4, 7, and 11. However, the aging weapon system requires a life extension to continue deterring potential adversaries and reassuring our allies and partners of our security commitments to them.

The B61-12 LEP will refurbish, reuse, or replace all of the bomb’s nuclear and non-nuclear components to extend the service life of the B61 by at least 20 years, “and to improve the bomb’s safety,  effectiveness, and security” according to the NNSA. The B61-12 first production unit will occur in FY 2020. The bomb will be approximately 12 feet long and weigh approximately 825 pounds. The bomb will be air-delivered in either ballistic gravity or guided drop modes, and is being certified for delivery on current strategic (B-2A) and dual capable aircraft (F-15E, F-16C/D & MLU, PA-200) as well as future aircraft platforms (F-35, B-21).

President Trump has endorsed the ambitious and expensive plan to modernize the US nuclear triad, begun under his predecessor.

The June test of the B61-12 was the third in a series with the final design review due in September 2018 and the first production unit scheduled for completion by March 2020. Once the bomb is authorized for use in 2020, the US plans to deploy some 180 of the B61-12 precision-guided thermonuclear bombs to five European countries as follows:

  • Belgium – 20;
  • Germany -20;
  • Italy – 70;
  • Netherlands – 20;
  • Turkey -50;

… although in light of the recent developments, the Turkish deployment will likely be scrapped.

 

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Comedian Who Prank-Called Trump Hires Stormy Daniels’ Lawyer Michael Avenatti

Stormy Daniels’ lawyer Michael Avenatti, who recently pivoted to represnting separated migrants or anything else that is in the news for at least 15 minutes, has found another client.

It started when John Melendez, the comedian who prank called President Trump while the president was traveling on Air Force One, tweeted late Sunday night that the Secret Service had asked to meet with him early Monday morning, along with a plea for Avenatti to accompany him to the meeting. “I am meeting with the Secret Service tomorrow at 10 am. @MichaelAvenatti I need your help.”

Confirming that he had seen Melendez’s request, Avenatti retweeted him, then followed up with a jab at President Trump. Instead of “wasting time” holding Melendez accountable (something that is the duty of the Secret Service, not the president himself) Avenatti suggested that Trump “focus on the numerous other things that are of a greater priority… [like] reuniting over 2,000 children with their parents immediately.”

According to the Hill, the White House has launched an internal investigation into how Melendez was able to get through to the president. The White House switchboard operator contacted Sen. Menendez’s office following the call, and confirmed that he had made no request to speak with the president.

John Melendez
John Melendez

The comedian said last week that he had tricked the White House staff into believing that he was Democratic New Jersey Sen. Bob Menendez. Melendez shared a recording of the his call during his “the Stuttering John Podcast”. “This just shows you how easy it is to infiltrate the White House,” Melendez said.

Melendez said that Trump son-in-law Jared Kushner was the one who connected the call. Democrats rushed to criticize the White House over the deception, with Gerry Connolly saying that the call had “chilling” implications for the future of White House security.

Michael Avenatti

Melendez later confirmed in a tweet that Avenatti had agreed to represent him:

We imagine there will be a race by both “publicity shy” men to tweet the outcome of the meeting, which is, according to Melendez, set to take place at 10 am Pacific Time.

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