Month: June 2023

Days after US Secretary of State Antony Blinken held high-level talks in China with President Xi Jinping that turned out to be a bust after President Biden, who should quite honestly be in a nursing home, called Xi a “dictator,” The Wall Street Journal published a piece, citing what it does best: anonymous sources, which detailed the Chinese spy balloon that the Biden administration allowed to float over the US earlier this year was equipped with American-made equipment. 

On Wednesday, WSJ revealed an analysis by US defense and intelligence agencies of the debris recovered from the spy balloon shot down by a stealth fighter jet off the South Carolina coast in February was equipped with commercially available US equipment, some of which could easily be purchased online. 

*CHINESE BALLOON USED AMERICAN TECH TO SPY ON US: WSJ pic.twitter.com/QVnEl9fVwO

— zerohedge (@zerohedge) June 29, 2023

The US-made equipment was “interspersed with more specialized Chinese sensors and other equipment to collect photos, video, and other information to transmit to China,” officials told WSJ. The conclusion of the analysis disproves China’s claim the balloon was for ‘meteorological-puproses‘ and intended for intelligence gathering.

One of the officials said the Biden administration has not publicly shared its findings on the balloon and what components were used from the US. 

What’s still a mystery, and perhaps why some members of Congress are pressuring the administration to release critical information about the balloon’s capabilities, is why Biden allowed the spy balloon to fly over several sensitive US military sites. 

“Your administration has yet to provide the American people a full accounting of how this spy platform was allowed to traverse across sovereign US territory, what the balloon carried, and what it collected during its mission,” Republican Sens. Roger Wicker of Mississippi and Marco Rubio of Florida wrote to Biden earlier this month. 

Officials provided more insight into the balloon’s satellite-like device, including high-tech sensors, solar panels for power, and devices to capture photos, videos, and even radar. Biden has said the balloon was carrying a payload equivalent to “two boxcars full of spy equipment.” 

Investigators “traced purchase orders for some of the equipment and the purchasers’ relationship to the Chinese government,” the officials said. 

Meanwhile, members of the Select Committee on the CCP sent a letter to Blinken this week, requesting the Biden administration to sever the “Agreement Between the United States and the People’s Republic of China on Cooperation in Science and Technology” because US researchers have helped China advance weather balloon technology over the years:

“As you know, a few years later, the PRC used similar balloon technology to surveil US military sites on US territory,” representatives wrote.

The WSJ piece was published days after Blinken visited Xi to restore Sino-US relations and one day after reports the Biden administration is preparing to tighten export controls on some artificial intelligence chips to China. 

Authored by Christian Britschgi via RealClear Wire,

In April 2021, Adele Fox received a single shot of the Johnson & Johnson COVID-19 vaccine. Within a few hours, the 60-year-old resident of Portsmouth, New Hampshire, started feeling shooting pains in her legs, arms, and neck. The pain didn’t abate over the next few days. Instead, it got worse and was accompanied by nausea and debilitating fatigue.  

Within a few weeks, neurologists affiliated with Massachusetts General Hospital diagnosed her with several serious conditions they say were a result of her COVID-19 vaccine, including small-fiber neuropathy (which causes a painful tingling in the extremities) and Sjögren’s Syndrome (which leaves patients pained and fatigued, and in extreme cases, can damage internal organs).  

This shot, which was supposed to get Fox back to normal, instead left her with diminished ability to work and enjoy life. Persistent physical therapy and experimental treatments she’s taken since have done little to alleviate her symptoms.  

“I used to do so much, and now it’s a struggle,” she says. “Sometimes you just get down.” 

With her medical bills mounting and her condition not improving, Fox sought compensation for her damaged health. Federal liability protections prevent the vaccine-injured from directly suing vaccine manufacturers like Johnson & Johnson. Instead, claimants have to go to the federal government for compensation.  

But as Fox would soon learn, the government has two starkly different injury programs for vaccines. One operates like a civil court with a neutral judge, lawyers on both sides, and a guaranteed right of appeal. In recent decades, it has approved about 75% of claims and pays out hundreds of millions of dollars per year.  

The other, which handles COVID-19 vaccines, has rejected almost every claim brought to it, awarding less than $10,000 since the pandemic. And in a nation nearly numb to the pandemic’s toll and its scandals, the program is adding seething frustration atop lasting injury to Fox and people like her in a little reported aftermath to the government’s much criticized performance on vaccines – ranging from erratic booster advice to broad-brush vaccine mandates that cost people their jobs. 

Fox filed her claim two years ago, submitting hundreds of pages of medical documents about her condition and diagnoses. She’s nevertheless one of the 10,887 people still waiting on a decision. “You’re not even hearing anything from the organization that’s supposed be helping you,” she says. “The phone keeps ringing, no one is emailing, nobody is doing anything.”   

The federal agency overseeing the program, the Health Resources and Services Administration, said in a statement to RealClearInvestigations that the current number of claims “significantly exceeds the previous volume in the program” and that the program has “hired additional staff to address this growth in claims, and the President’s budget requests additional funding to support the additional staffing needed to process claims.”  

Tale of Two Compensation Programs 

The government’s two contrasting vaccine compensation programs are similarly named and thus easily confused. The first, Vaccine Injury Compensation Program (VICP) was created in the 1980s and covers most routine vaccines. The second, the Countermeasures Injury Compensation Program (CICP), is a result of war-on-terror legislation in 2005 and now covers COVID-19 vaccines. Their bureaucratic differences help explain why a nation that has spent trillions of dollars on COVID relief programs has provided almost no assistance to people harmed by the vaccines that the government encouraged, and sometimes required, them to take. 

The earlier program was supposed to shore up pharmaceutical companies’ willingness to make childhood vaccines in the face of persistent vaccine injury lawsuits, while also giving the vaccine-injured a fair and expedited process for compensation.  

The vaccine-injured would not sue pharmaceutical companies. Instead, they’d petition the government in Federal Claims Court, where special masters (judges) would decide cases. Compensation came from a government-administered trust fund paid for by excise taxes levied on vaccine manufacturers.  

Between 2006 and 2021, this court adjudicated cases from 10,602 petitioners and issued compensation to 7,618 of them. The compensation trust fund sits at $4 billion and pays out about $200 million in compensation and attorneys’ fees each year.  

This earlier program bears little resemblance to the Countermeasures Injury Compensation Program, where the COVID-vaccine cases of Fox and many others are languishing. 

It was meant to incentivize pharmaceutical companies to be part of the federal response to one-off, one-in-a-million events like a bioweapon attack or an outbreak of a deadly pandemic. Although almost one billion doses of COVID-19 vaccines have been administered in the United States, and health authorities say boosters could become as common as the annual flu shot, it remains the only way people harmed by the shot can receive compensation. 

It’s far from guaranteed they’ll get it. 

Before the pandemic, this program received a little over 500 claims and had paid out compensation to only 30 people – mostly for H1N1 (swine flu) vaccine injuries. In just the past two years, it has been asked to make decisions on over 10,000 injury claims related to COVID countermeasures.  

As of June, it made decisions on just 919 of these COVID-related claims and rejected 894 of them. It has so far paid out only $8,593 in compensation to just four people who were injured by a COVID vaccine. The program has deemed another 20 people eligible for compensation, but has yet to pay them.  

It’s not a judicial process either. Rather, it’s an administrative process overseen by Health Resources and Services Administration, which is housed within Department of Health and Human Services (HHS). People file a claim and government medical reviewers decide whether to pay out or not. That’s an awkward arrangement, given that HHS is deciding whether to pay for damages caused by products it approved and in some cases mandated.  

Because it’s an administrative process, there’s no right to counsel and no neutral arbitrator. A denied claimant can file for reconsideration with HRSA, but otherwise has no right to appeal. 

Unlike the earlier program, the CICP offers no compensation for pain and suffering and doesn’t pay attorneys’ fees. Most successful claimants have received compensation totaling a few hundred dollars or a few thousand dollars. The highest award for a COVID-19 vaccine injury sufferer was $3,957.66 to a person who got myocarditis (a heart condition) from a vaccine.  

It also has shorter filing deadlines. People have to file a claim within one year of vaccination, a much shorter window than the earlier program’s standard of three years from the onset of symptoms. Of the 894 claims that CICP has rejected, 444 of them were for missing the filing deadline.  

CICP also only awards compensation in cases where there’s “compelling, reliable, valid, medical, and scientific evidence” that someone’s injury is linked to a covered countermeasure. HRSA describes this as “a high evidentiary standard.” Renée Gentry, a practicing vaccine injury lawyer who directs the Vaccine Injury Litigation Clinic at George Washington University, says it’s a much higher bar than what the earlier vaccine injury compensation program requires, which contributes to a much lower rate of successful claims.  

The Countermeasures Injury Compensation Program’s nature as a small emergency program has seen its capacity strained by a flood of COVID-related injury claims. Of the 11,806 COVID-related claims filed, 10,887 are still pending. Those four cases where COVID compensation was paid out didn’t come until after April 2023, over two years since the first vaccines were administered.    

Pain and Suffering  

The shortcomings of CICP are all too apparent for the people who are forced to wade through it. Even folks who seem to have done everything right are left waiting or disappointed by the program.  

Fox filed her claim in May 2021, which was relatively early in the immunization campaign. She also had clear diagnoses from well-credentialed doctors linking her conditions to her COVID-19 vaccination. Fox says she provided the program with no shortage of documentation as well. 

After filing all that paperwork, she hasn’t been idle either. After months of not hearing anything back from CICP, Fox started to reach out repeatedly to anyone she thought might be able to move the needle. She spoke repeatedly with representatives from Sen. Jeanne Shaheen’s and Rep. Chris Pappas’ offices. She also kept calling program administrators, trying to figure out what was taking so long.  

“I’m sure they saw my number, and said ‘Ah, Fox, oh no, not her [again]’,” she jokes.  

Her congressional representatives did reach out to CICP on her behalf. That was at least effective at getting program administrators to call Fox personally twice, once in July 2022 and again in June 2023. But each time, they could only offer her reassurance that her paperwork had been received. On both calls, Fox says she was told that the program was vastly overburdened by the flood of COVID-19 claims it had received. She, like thousands of others, would have to wait.  

The few decisions on COVID-19 claims that have trickled out haven’t offered much relief to the people who’ve received them. That includes Cody Flint, one of the 894 people who’ve had their COVID-related claims rejected.  

Flint was vaccinated in February 2021, when he received a single Pfizer dose. He says that he started to feel headaches and had affected vision within 30 minutes of the shot. He was still experiencing symptoms two days later when he headed to his job as a crop-dusting pilot.  

While flying that day, he started to experience extreme tunnel vision, followed by a sensation he describes as “a bomb [going] off in my head.” He barely managed to get his plane back to his runway, where his coworkers found him slumped over his controls and shaking. 

He was diagnosed with perilymphatic fistula (or tear of the inner ear) caused by elevated intracranial pressure – which could only be relieved through repeated draining of his spinal fluid. Given the timing of his symptoms and the fact that he’d passed a flight physical just a couple weeks prior, his doctors said his condition was almost certainly caused by the vaccine. His injury prevented him from returning to work as a pilot, and his mounting medical bills saw him draw down all of his savings.  

In April 2021, Flint filed a claim. In May 2022 – just a few weeks after Sen. Cindy Hyde-Smith asked HHS Secretary Xavier Becerra about his case specifically in a committee hearing – Flint’s claim was rejected. The program’s medical reviewers told Flint that it was more likely his injuries were caused by barotrauma from flying a plane.  

He petitioned for a reconsideration of his case. His doctors argued that there was no way he’d have experienced barotrauma from flying just a few hundred feet off the ground. Commercial airliners, they noted, are pressurized at 6,000 to 8,000 feet of elevation. Flint’s lawyers also submitted recent studies linking the symptoms he’d experienced to COVID-19 vaccinations.  

Nevertheless, a separate medical reviewer at HRSA upheld the CICP’s initial denial in January 2023. That letter succinctly stated that HHS has “no appeals process beyond this reconsideration” and “there is no judicial review of a final action concerning CICP eligibility.”  

Efforts at Reform  

The federal government’s liability protections for COVID-19 vaccines aren’t scheduled to expire until the end of 2024. Once they do, those claiming a vaccine injury will be able to pursue claims against vaccine manufacturers in state courts.  

While liability protections remain in effect, the federal program is injured claimants’ only potential source of compensation.  

Whether or not the HRSA succeeds in boosting staffing in line with its statement to RCI, those seeking compensation have started to get organized. They’ve formed the group React19, which is dedicated to advocating for additional research into the side effects of COVID-19 vaccines. It’s grown into a network of tens of thousands of people who say they suffered adverse injuries from the shot. Flint, the pilot, is on its board of directors.  

“It’s a very pro-vaccine community,” says Christopher Dreisbach, the group’s legal affairs director. “You say anything about vaccine injuries, you’re branded as anti-vaxxers. We are pro-science, we are not political. We’re just dealing with a very politicized issue.”  

He says the politicization of vaccines has made their efforts at compensation reform a challenge.  

When the CICP, and the 2005 Pandemic Response and Emergency Preparedness (PREP) Act that created it, were first being debated, Republican lawmakers were its main advocates, while its main critics were Democrats. The partisan politics of the program and liability protections for pharmaceutical companies has done a 180 since COVID.  

In 2005, Rep. Sheila Jackson Lee argued during the House floor debate on the PREP Act that the law’s liability shield would leave injured healthcare workers with little protection or chance of compensation. Come 2023, she would return to the floor of the House to argue in favor of mandating those same healthcare workers receive a vaccine covered by the PREP Act’s liability shield.   

The PREP Act’s harshest critics during COVID, meanwhile, have mostly been Republicans.  

“I call the PREP Act medical malpractice martial law,” says Rep. Thomas Massie, who complains that its liability shield is both incredibly broad and improperly preempts state law. “I think it’s sort of anathema to the way our government is set up. I found it hard to believe that Congress would pass something, much less that a Republican president would invoke it.”  

In March 2022, Sen. Mike Lee introduced a bill that would have amended CICP to give claimants the same framework for pursuing compensation as the VICP. They could file in Federal Claims Court and receive an expedited, judicial adjudication of their injury claim.  

Gentry argues that it would be far simpler to just move the COVID-19 vaccines into the VICP program, which already has a successful track record of adjudicating injury claims. In order for that to happen under the law that created the VICP, the CDC needs to recommend the vaccines for routine administration to children (which has already happened) and vaccine manufacturers would have to start paying excise taxes. That latter condition will require action from Congress.   

VICP needs a number of updates as well, says Gentry, including expanding the number of special masters to handle the backlog of cases and increasing the available levels of compensation (which haven’t been updated since the 1980s).  

Increasing the number of special masters is particularly important if the VICP program is going to be expected to process tens of thousands of COVID claims, she says. But she argues it’s the best way of getting the vaccine injured out of CICP and into a program that will work for them. “If you’re taking away someone’s constitutional right to sue, you really have to give them a reasonable and meaningful alternative and that’s what this program is, for all of its faults,” says Gentry.  

While efforts at reform in Washington lumber on, React19 has started a privately funded compensation program that’s thus far paid out $552,000.  

“Is that making a meaningful difference to all the vaccine injured everywhere? No, that’s not enough,” says Dreisbach, but he notes that it’s far more than what CICP has paid out. “That should be pretty embarrassing to the federal government.”   

A bizarre surge in exports (came out of nowhere) sent Q1 GDP jumping to 2.0% this morning (in its 3rd look), and that is very much not what the market was looking for.

Rate-hike expectations soared with markets now pricing in a 50% or so chance of 2 more rate-hikes by year-end…

Source: Bloomberg

Equities swung wildly as the rotation back to value from growth  (Small Caps outperforming Nasdaq) stirred…

Gold was pummeled down near $1900 – another lower high and lower low…

Treasury yields soared, with the short-end underperforming…

Which sparked a serious flattening in the yield curve (deeper inversion), erasing almost all of the SVB steepning…

Finally, the dollar rallied on the hawkish reaction in rates…

Nomura’s Charlie McElligott asked yesterday (reflecting oin the equity market meltup) – So what would it take to blow this thing out?  

His answer may well be worth paying attention to this morning…

Just spitballing…

Perhaps what is required (easier said than done!) is a proper “Correlation 1” event where the current dispersion wave reverses, especially if Grosses keep growing – potentially requiring some sort of AI crunch from the Long side (earnings expectations mania overshoots reality? – seems too early for that just yet)…

…or maybe from the Short-side, where US economic data does indeed see that aforementioned “animal spirits” trade and actually reaccelerates to such an extent that markets either begin adding-in fresh terminal rate…

…OR where heavily-short economically sensitives begin trading “early cycle” and get grabbed-into / painfully.squeezed.

No one was expecting that kind of ‘animal spirits’ growth? And The Fed can’t stand for that.

The second revision to Q1 GDP – data which comes some three months after the quarter in question is long over (and is still not the final revision as the data continues to be massaged higher or lower for years to come) – is usually a very boring affair: after all, the BEA is supposed to have all of the estimates and soft data replaced with hard actuals by now, and the bottom line number should be fine-tuned at best to the tune of 0.1%, 0.2% at most.

Not this time: moments ago, the BEA reported that according to the third estimate of Q1 GDP, the US economy grew much faster than expected at the start of the year, rising at a 2.0% SAAR, up dramatically from the 1.3% GDP print reported in the second estimate one month ago, and up almost 100% from the 1.1% initial Q1 GDP report published two months ago.

More importantly, the number was a two-sigma beat to consensus expectations of a 1.4% increase, the biggest outlier to the third GDP estimate in over a decade, a testament to how unexpected today’s beat was.

The GDP estimate for the first quarter was revised up 0.7 percentage point from the “second” estimate, primarily reflecting upward revisions to exports and consumer spending.

The increase in the first quarter primarily reflected an increase in consumer spending that was partly offset by a decrease in inventory investment.

• The increase in consumer spending reflected increases in both goods (led by motor vehicles and parts) and services (led by health care, food services and accommodations, and “other” services).
• The decrease in inventory investment primarily reflected decreases in wholesale trade and manufacturing.

Looking at the bottom-line contributors we get the following breakdown:

• Personal Consumption: 2.79% of the bottom line number, up from 2.52% in the second estimate.
• Fixed Investment: down modestly to -0.08% from -0.03%
• Change in private investment was unchanged at -2.14% of the bottom line GDP print.
• Net trade was the biggest change: exports were revised from 0.58% to 0.86%, while imports subtracted only -0.28% from the bottom line GDP, a big drop from the -0.57% subtraction previously. In total, net trade became a 0.58% contributor to growth, up from a tiny 0.01% booster in the latest revision, effectively responsible for almost all of the 1.3% to 2.0% GDP increase.
• Finally, government consumption was almost unchanged at 0.85%, down from 0.89%.

It was not immediately clear what was the source of this dramatic trade data revision.

Elsewhere, while very much irrelevant now that we are about to enter July and the second half of the year, the report also revealed that according to the BEA, the GDP price index rose 4.1%, below the 4.2% expected, but up from 3.8% in the previous estimate. Core PCE also rose less than expected, up 4.9% vs exp. 5.0%.

While today’s number is irrelevant for markets and the bigger picture, what is curious is how aggressive the upward data revision was. And as such, it suggests that the BEA’s bean counters have far less “fudge” space to make Q2 and Q3 GDP look stronger, as such don’t be surprised to find GDP in the current and next quarters come in well weaker than expected, which is key since many analysts expect the recession to start some time this summer.

Authored by Peter Barry Chowka via AmericanThinker.com,

NewsNation’s 90-minute town hall broadcast live from Chicago Wednesday with Robert F. Kennedy, Jr. was an intellectually stimulating and emotionally moving event. Despite the hour of mostly put downs that preceded it (hosted by Chris Cuomo with featured guest Bill O’Reilly) and the half hour of analysis that followed it (Chris Cuomo again with a panel that included Former Wisconsin Republican Gov. Scott Walker – the most fair and objective), Kennedy more than met the challenging questions presented to him by town hall host Elizabeth Vargas and a number of pre-selected Democrat and Independent voters in Chicago, New Hampshire, and South Carolina.

Elizabeth Vargas and Robert F. Kennedy, Jr. on stage at the NewsNation Town Hall June 28, 2023, Photo courtesy NewsNation

By the end of the ninety minutes of town hall, I kept thinking of this statement attributed to Ronald Reagan: “The person who agrees with you 80 percent of the time is a friend and an ally – not a 20 percent traitor.”

I found myself agreeing with Kennedy at least 80% of the time.

[ZH: Early on he addressed the small elephant in the room – explaining how he came to have a raspy voice, noting a neurological disease in his 40s.]

Even when, near the end, Kennedy countered a particularly obnoxious and challenging gay voter from South Carolina who attempted to get him off stride and sandbag him with a snide accusation, Kennedy pledged his lifelong support of LGBTQ rights (which he described as “LGBQT”) I could sympathize with what Kennedy was trying to do – in essence, to reach out in the darkness. Too bad that he wasn’t asked about his feelings about the current move to give special rights to transgender people, as in allowing them to participate in sporting events with people of the opposite biological sex.

The issues at hand were much larger and more significant as the hour-and-a-half provided Kennedy with time to expand on the points that he’s made in his half dozen live interviews on FOX News since he declared for president two months ago. Thus far, to my knowledge, he has not been invited to appear on CNN or MSNBC.

As in the FOX interviews, Kennedy revealed himself to be a thoughtful, sincere, and passionate man of significant achievement – who himself, as he confided, had endured a 14-year long addiction which he overcame four decades ago. His accomplishments since then have been hardly insubstantial.

After the debate, a complete transcript was not available – only selected excerpts provided to journalists by NewsNation. An article at the channel’s Web site (one of a number) reported the highlights.

Democratic presidential candidate Robert F. Kennedy Jr. would not pledge to support his party’s nominee, stood by his claims about vaccines and announced that “I want my party back” in his first national town hall presented by NewsNation on Wednesday.

“I’m running because I feel like my party has lost its way,” Kennedy told NewsNation’s Elizabeth Vargas.

Kennedy — an environmental lawyer and nephew of President John F. Kennedy — has positioned himself as a populist set on returning to the “exact values that would have been promoted by my father and uncle.”

Despite never holding elective office, Kennedy’s campaign has generated attention within the party. Among Democrats, Kennedy is polling at 15%, according to a recent Harvard CAPS-Harris Poll. Still, Biden is well ahead at 62%.

In order to win the nomination, Kennedy will have to do something no primary challenger has done in modern U.S. history — unseat an incumbent president for their party’s nomination.

Right out of the gate, Kennedy declined to take the bait and attack his potential opponents.

Vargas asked Kennedy what he thought of Donald Trump after the former president praised him as a “common sense guy” in a recent interview.

The Democratic hopeful said he’s focused on unity, not division.

“I’m not going to attack other people personally,” he said. “What I’m trying to do in this race is bring people together.”

Kennedy had the same attitude toward the current president.

“You won’t hear me saying bad things about President Biden,” Kennedy said. “I’m not going to attack him as a man.”

Instead, Kennedy said he is focused on policy disagreements, such as his differing views on war, censorship and COVID lockdowns.

[ZH: Additionally, Robert F. Kennedy Jr. says sealing the border is “not that hard.” He discusses his immigration plan.]

Kennedy’s comments and particularly his answers to questions seemed incredibly honest and thoughtful – which took some getting used to since this is hardly the domain of almost all major politicians today.  For example:

When asked whether he would support the Democratic nominee no matter what, Kennedy declined.

“Of course, I’m not gonna do that,” he said.

Kennedy said he’ll wait to see if the person who emerges from his party is “living up to Democratic values.”

Those values, as he described them, include fighting for the middle class, protecting civil liberties and embracing debate.

“We need to figure out a way to start talking to each other and start healing each other,” Kennedy said.

“This polarization is more dangerous” than at any time since the Civil War, he added.

And that was my major takeaway from the Kennedy town hall – a pledge on the candidate’s part to truly try to unify this sickly divided country. Of course, talk is easy – but Kennedy indicated his interest in reaching out to a wide variety of voters with his startling positions (for a Democrat) on, among others, the border, the war in Ukraine, guns (he’s more interested in solving the problem of why people want to kill), and the medical-industrial complex and its propaganda stranglehold on modern medicine and public policy.

[ZH: RFK Jr expanded on his vaccine stance, saying that the FDA can’t be trusted when it gives regulatory approval, noting that “saying I’m anti-vaccine is a way of silencing me”. ]

It’s these and other positions of his that have caught the attention of many conservatives including Tucker Carlson and suggested that there is potential support for RFK, Jr. across a broad spectrum of Americans, and not just the left

[ZH: Robert F. Kennedy Jr. struck a personal tone, talking about his battles with addiction. He said he would decriminalize marijuana, tax consequent income federally and “use that money to build these healing centers in rural areas” for those struggling with addiction.]

In watching and listening to Kennedy, I felt like he was channeling the best energy of and the inspiration represented by his father, Sen. Robert F. Kennedy, and his uncle, President John F. Kennedy, both of whom were assassinated in the prime of life.

It has often been said that if either man were alive today, he’d be unwelcome in the current Democrat party and would likely be a Republican.

While Kennedy insisted that he is a lifelong Democrat, he cited his research and writings about his family and his commitment to their ideals. Think JFK’s “Ask not what your country can do for you, ask what you can do for your country,” and his father’s stand in 1968, unpopular among most 1960s Establishment Democrats, against the continuation of the Vietnam War – at a time when the Pentagon Papers (published in June 1971 after being leaked by the late Anthony J. Russo, Jr. and Daniel Ellsberg, who died earlier this month) confirmed that the powers that be had determined that the war was lost.

Kennedy:

“I’m running because I feel like my party has lost its way [emphasis in NewsNation transcript] – that the values, my uncle represented, my father represented when they were Democrats have been neglected, let’s say. And I want to try to bring the Democratic Party back to those values, the values that were you know, in favor of a focus on on the middle class in this country focused on, on on labor on racial on you know, on the well-being of minorities in this country, focused on the environment, particularly on civil liberties and freedom of speech which the party has, seems to have forgotten about.”

Regarding Ukraine (again, almost channeling his late father in 1968 during the height of the Vietnam War), Kennedy said (to paraphrase) that in ten years history will show that our country’s course in encouraging the prolongation of the war in Ukraine would be seen as a failure.

Robert F. Kennedy, Jr. from his campaign Web site kennedy24.com

I have been following national politics for a long time – and for many years early on, reporting from the campaign trail. My first political hero was Arizona Republican conservative Sen. Barry Goldwater, who ran against President Lyndon Johnson in 1964 and lost in a landslide. In March 1968, as a student, and a student journalist, in Washington, D.C., I attended a nighttime rally in a black ghetto in the nation’s capital featuring Sen. Robert F. Kennedy, who had declared his candidacy for the presidency the week before. A friend and I were among the handful of white people in attendance – and the vibe, as they say, was good. Sen. Kennedy had that rare ability, by his very presence and his words, to unify and unite – as he did a week or so later when he addressed a mostly black crowd at a campaign speech in Indianapolis, Indiana and announced the news that Rev. Martin Luther King had just been assassinated. His spontaneous remarks were later made into a documentary film, A Ripple of Hope. That city was one of the few that was not burned during the riots that followed the death of Rev. King. From the Wikipedia entry about that speech:

William Crawford, a member of the Black Radical Action Project who had stood about 20 feet from Kennedy, credited Kennedy’s speech for not resulting in riots. Crawford claimed to the Indianapolis Star in 2015 “Look at all those other cities” and “I believe it would have gone that way (in Indianapolis) had not Bobby Kennedy given those remarks.”

And last night, as I heard a genuine echo of the energy, the hope, and the optimism of America a half century ago, these were the closing comments by RFK, Jr. at the end of the NewsNation town hall:

Our country is going to start healing when the government tells the truth.

The number of Americans filing for jobless claims for the first time last week tumbled last week to 239k, from the 265k – 20-month high – the prior week.

Source: Bloomberg

California and Texas saw the biggest drop in claims last week by a long way while Connecticut and New Jersey saw the biggest increase…

While smoother 4-week average of initial claims rose to its highest since Nov 2021, Continuing claims continued to drift lower (to 1.742mm) – the lowest since Feb 2023.

Source: Bloomberg

Very much not what The Fed wants to see after 500bps of rate-hikes.

Authored by Simon White, Bloomberg macro strategist,

Idling credit spreads are increasingly unreflective of underlying credit conditions, leaving them exposed to a significant widening.

Credit spreads – investment grade and high yield – have in net terms gone nowhere over the last nine months. But this is concealing a worsening backdrop in the economy, less credit availability, and burgeoning credit stress.

Take bankruptcy filings. They are – and it’s not melodramatic to phrase it like this – soaring. The chart below shows the number of bankruptcy filings of US companies with more than $50 million of liabilities. At the current rate, they will soon exceed the 2009 and 2020 peaks.

The chart above also shows that normally wider credit spreads would presage a rise in filings, but that has signally not happened thus far.

Also, credit spreads are not reflecting stress building in the jobs market. Typically, when we see an increasing percentage of US states whose unemployment claims are rising steeply, credit spreads rise too.

The pervasive worsening in the labor market is an early-warning signal of oncoming economic distress that credit spreads tend to pick up too. But again, that has failed to happen this time.

What’s behind this?

One likely culprit is speculation in equity markets is repressing volatility and this is flattering companies’ implied probability of default.

Speculation can keep markets aloft for longer, but they will become increasingly unstable.

When the party’s over though, credit markets face a rude awakening as they reprice to what is actually happening on the ground.

S&P 500 futures are higher, rising above Wednesday highs despite hawkish commentary from Powell at Sintra who left open the option for consecutive hikes while trying to keep soft landing hopes alive and the big 4 central banks reiterated their view that more tightening is needed to cure inflation. Risk appetite was stoked by Wednesday’s Federal Reserve’s stress tests which saw all banks pass as usual (no surprise there), but calculated that they would suffer losses of over $500 billion in a bad recession. Nasdaq futures outperform, boosted by Micron which gained more than 3% in pre-market trading after it reported third-quarter results that came ahead of expectations, and provided an upbeat fiscal fourth-quarter forecast.

As of 7:45am, S&P futures are higher by 0.3% to 4,431 while Nasdaq 100 futures rose 0.4%. KRE +1.4%, XLF +64bps pre-market. AAPL market cap reaches $2.977T, just 78bps away from hitting ~$3trn mkt cap. For context, $3trn is larger than the market cap of 5 entire GICS sectors – not combined – REITs, Mats, Utes, Energy, Cons Staples. Treasury yields have ticked higher across the curve, while the Bloomberg dollar index strengthens slightly. Gold prices are flat while oil reverses earlier losses. Iron ore meanwhile is continuing its winning streak for a third day. Today’s macro data is the latest revision to Q1 GDP, Consumption, and PCE as well as the latest Jobless/Continuing Claims and Pending Home Sales.

In premarket trading, Micron gained more than 3% and the SMH was up 0.85% after it delivered an upbeat sales forecast late on Wednesday. Bank of America and Wells Fargo led gains in financial companies as the lenders passed the Federal Reserve’s stress test, clearing the way for shareholder payouts. Here are some of the other most notable European movers:

• BioXcel Therapeutics falls 38% after the company said it’s investigating data integrity at one of the clinical trial sites of its study for the treatment of Alzheimer’s disease- related agitation, after it found a principal investigator fabricated email correspondence.
• Blackberry jumps as much as 26%, set to build on this year’s 54% rally, as RBC noted a boost to the cybersecurity firm’s earnings from the sale of its patent portfolio, which tempered otherwise weak results. Investor focus also remains on results awaited from its strategic review.
• ContextLogic which does business as Wish, was cut to sell from hold at Loop Capital Markets based on topline concerns for the e-commerce company. The stock drops 3.2%.
• Freyr Battery shares gain as much as 9.3% after the lithium-ion battery maker was upgraded to overweight from equal-weight at Morgan Stanley on the potential for the company to reach commercial milestones including battery production.
• JPMorgan and Bank of America rose while BNP and UniCredit were among European lenders outperforming on Thursday, after Wall Street’s biggest banks and US units of European lenders passed the Fed’s annual stress test.
• Joby Aviation rises 8.9% after saying that South Korean telecommunications company SK Telecom is investing $100 million in its business as part of an expanded partnership between the two companies.
• Netflix rises 1.6% after Citi raised its price target on the stock, saying the streaming service has performed well since announcing the ad-supported subscription plan and the introduction of paid sharing.
• Overstock jumps as much as 9.6% after the online household products retailer said it plans to relaunch Bed Bath & Beyond online in the US and Canada.
• Pfizer slides 0.6% after Credit Suisse downgraded it to neutral, saying the pharmaceutical company is entering a phase of uncertainty.
• Virgin Galactic shares gain as much as 5.5% as the space exploration company is set to begin commercial operations today, taking paying passengers to the edge of space and back.

On Wednesday, Fed Chair Jerome Powell said at least two interest-rate increases are likely necessary this year to bring the inflation rate down to the central bank’s 2% target. ECB President Christine Lagarde and BOE Governor Andrew Bailey also said at this week’s conference in Portugal that they have a ways to go in reining in price increases. While their comments lifted bond yields across the board, BBG notes that equities have clunged to recent gains (the S&P 500 is up 5% this month) with investors focusing on the (politically) resilient economic backdrop that should support company earnings, especially in the technology sector.

“We are seeing a tug of war. Markets are not buying into what all the major central banks are saying,” said Peter Garnry, head of equity and quantitative strategy at Saxo Bank AS. “Even Powell’s comments have not been enough to really dent sentiment in equity markets.” He warned that unless the earnings outlook worsens dramatically, especially in technology and artificial intelligence-linked companies, “it will be hard to see markets’ animal spirits disappear.”

And while consensus still expects the US economy to slide into a recession over the next year, many now expect the downturn will be less severe than feared. Strength in consumer confidence and a bizarre surge in home sales buoyed stocks earlier in the week, and data later on Wednesday is expected to show first-quarter GDP expanded at 1.4% at an annualized rate.

Daniel Lam, head of equity strategy for Standard Chartered Wealth Management, said on Bloomberg Television that positive economic surprises help explain the gains across equities. But “if the hurdle gets higher and higher, becomes harder to beat, investors may be rotating into other regions such as Japan and Asia,” Lam warned.

European stocks are ahead with the Stoxx 600 up 0.1%, rising for the third day, with auto, retail and banks the best performing sectors. Renault SA jumped after raising its full-year earnings guidance, thanks to strong sales momentum from new models. Hennes & Mauritz AB surged more than 15% after the Swedish retailer reported a smaller-than-expected decline in earnings as it cut costs and made progress reducing its inventory build-up. Here are the other notable premarket movers:

• Serco gains as much as 12% and is best performer in the Stoxx 600 industrials index after the UK outsourcing company raised its guidance, boosted by strong demand for its immigration services
• Renault advances as much as 7.7% after it upgraded its 2023 earnings guidance. Morgan Stanley says the midpoint of the new operating margin guidance implies a ~16% upgrade to full-year operating profit
• Ipsen gains as much as 6.3%, the most since February, after the French drugmaker’s rare bone disease drug palovarotene got a positive recommendation from an FDA advisory panel
• Aixtron gains as much as 4.1% after Citi initiated the chip-tool maker at buy. Soitec also jumps as much as 2.6% after Citi gave the shares a buy rating, while BE Semiconductor was rated as neutral
• Moonpig gains as much as 7.3%, among the top performers in the UK, after the online gifting company reported FY23 results that beat expectations. Citi calls the firm’s performance “resilient”
• GN Store Nord shares gain as much as 2.7% after the Danish audio technology firm agreed to sell BelAudição. Morgan Stanley says the announcement is a sign that GN’s divestment plan is on track
• Engie rises as much as 3.7% after the French utility reached a deal with Belgium to extend the life of two nuclear reactors beyond 2025, a move that’s positive for the stock, according to Morgan Stanley
• Kering falls as much as 2% after HSBC cuts rating to hold, citing uncertain timing of Gucci recovery and lack of near-term catalyst, adding that signs of improvement are not visible yet
• Baloise drops as much as 4.4% after the insurance company said it’s moving to new accounting standards. Analysts noted a potential Ebit impact for the company’s life and non-life segments
• Casino shares fall as much as 38%, to a record low, after it warned its shareholders will be “massively diluted” as part of a restructuring plan

Earlier in the session, Asian stocks traded mixed amid some indecision heading closer towards month/quarter/ half-year end and after the choppy performance stateside as global markets digested the slew of central bank rhetoric from the Sintra Forum.

• Hang Seng and Shanghai Comp were subdued amid ongoing frictions and the potential for additional US tech export restrictions on China but with losses in the mainland cushioned by the PBoC’s liquidity efforts.
• ASX 200 was kept afloat as strength in the tech and telecom sectors offset the losses in utilities, real estate and miners, with some encouragement also from better-than-expected Australian Retail Sales.
• Nikkei 225 extended on gains and briefly climbed back above 33,500 as it coat-tailed on the recent advances in USD/JPY and after Japanese Retail Sales topped forecasts.

In FX, the Bloomberg Dollar Spot Index was little changed as markets weigh further tightening from global central banks. The euro pared an earlier drop to trade little changed versus the dollar. The Swedish krona is also little changed after a choppy reaction to the Riskbank raising rates. The yen touched a fresh seven-month low against the dollar before recovering.

• EUR/USD steadied at 1.09 after Spanish inflation slowed to below the ECB’s 2% target.
• SEK/EUR slumped to a record low after the Riksbank raised rates by 25 basis points and signaled at least one more increase this year
• AUD/USD and NZD/USD rose on better- than-expected retail sales data and improved business confidence respectively

In rates, treasuries eased across the curve with two-year yields climbing five basis points to 4.76% and yields on the 10- year rising four basis points to 3.75%; money-markets continue to price one more 25 basis points hike by July. Bund futures are lower after Spanish inflation topped estimates and initial German state data suggested national CPI will accelerate. German 10-year yields are up 4bps

In commodities, crude futures are flat with WTI trading near $69.50. Spot gold drops 0.1% to $1,905. Bitcoin rises 1.1%.

Looking at today’s calendar, we get Initial Jobless Claims and first quarter GDP data at 8:30 a.m. and then May Pending Home Sales at 10 a.m. The US will sell $70 billion 4-week and $60 billion 8-week bills at 11:30 a.m.  Earnings today include Nike, McCormick & Co., and Paychex.

Market Snapshot

• S&P 500 futures little changed at 4,421.00
• MXAP down 0.3% to 163.30
• MXAPJ down 0.5% to 512.91
• Nikkei up 0.1% to 33,234.14
• Topix down 0.1% to 2,296.25
• Hang Seng Index down 1.2% to 18,934.36
• Shanghai Composite down 0.2% to 3,182.38
• Sensex up 0.8% to 63,915.42
• Australia S&P/ASX 200 little changed at 7,194.91
• Kospi down 0.6% to 2,550.02
• STOXX Europe 600 little changed at 456.41
• German 10Y yield little changed at 2.34%
• Euro little changed at $1.0914
• Brent Futures down 0.4% to $73.72/bbl
• Gold spot down 0.0% to $1,906.60
• U.S. Dollar Index little changed at 102.98

Top Overnight News from Bloomberg

• China will likely disappoint those hoping the government will roll out massive stimulus to shore up the weakening economic recovery, said Zhu Min, a former deputy managing director of the International Monetary Fund. BBG
• US Treasury Secretary Janet Yellen said one of the reasons she hopes to travel to China is to establish contact with “a new group of leaders” as she reiterated calls for the world’s two largest economies to work together on crucial global challenges. BBG
• German regional CPIs tick higher in June vs. May: Baden Wuerttemberg +6.9% (vs. +6.6% in May), Brandenburg +6.7% (vs. +6.3% in May), Bravaria +6.2% (vs. +6.1% in May), Hesse +6.1% (up from +5.9% in May), North Rhine Westphalia +6.2% (vs. +5.7% in May), and Saxony +6.8% (vs. +6.5% in May). BBG
• Spain’s June headline inflation drops below the ECB’s 2% target (it came in at +1.9%, down from +3.2% in May), but core continues to run hot (the core CPI came in at +5.9%, down from +6.1% in May but ahead of the Street’s +5.5% forecast). RTRS
• Top Russian army general Sergei Surovikin has been detained as the Kremlin cracks down on Wagner sympathisers following the militia’s failed mutiny last week. Surovikin, a senior Russian general known to have a good relationship with Wagner’s leader Yevgeny Prigozhin, has not been heard from for several days and has been detained, according to three people familiar with the matter. FT
• The Federal Reserve said the biggest U.S. lenders remain healthy, a vote of confidence for the financial system after a series of midsize bank failures earlier this year. All 23 firms that participated in the latest stress tests performed well, the Fed said, meaning they would stay above minimum capital levels and keep lending to businesses and households in a severe recession. WSJ
• Jerome Powell doubled down on his view that at least two more interest-rate increases are probably necessary this year to bring inflation down. “The process of getting inflation back down to 2% has a long way to go,” he told a conference in Madrid. He also said regulators are committed to learning lessons from the failure of Silicon Valley Bank and more oversight may be needed. BBG
• Lina Khan’s Federal Trade Commission has already filed three cases against Amazon.com Inc. Now she’s gearing up for the Big One. In the coming weeks, the agency plans to file a far-reaching antitrust suit focused on Amazon’s core online marketplace. BBG
• Bank of America is bearing the cost of decisions made three years ago to pump the majority of $670bn in pandemic-era deposit inflows into debt markets at a time when bonds traded at historically high prices and low yields. The moves left BofA, the second-largest US bank by assets, with more than $100bn in paper losses at the end of the first quarter, according to data from the Federal Deposit Insurance Corporation. The sum far exceeds unrealized bond market losses reported by its largest peers. FT

A more detailed look at global markets courtesy of Newsquawk

Asia stocks traded mixed amid some indecision heading closer towards month/quarter/ half-year end and after the choppy performance stateside as global markets digested the slew of central bank rhetoric from the Sintra Forum. ASX 200 was kept afloat as strength in the tech and telecom sectors offset the losses in utilities, real estate and miners, with some encouragement also from better-than-expected Australian Retail Sales. Nikkei 225 extended on gains and briefly climbed back above 33,500 as it coat-tailed on the recent advances in USD/JPY and after Japanese Retail Sales topped forecasts. Hang Seng and Shanghai Comp were subdued amid ongoing frictions and the potential for additional US tech export restrictions on China but with losses in the mainland cushioned by the PBoC’s liquidity efforts.

Top Asian News

• Chinese state banks spotted selling USD in onshore currency markets at around the 7.25 mark, according to sources cited by Reuters.
• Chinese Regulators are stepping up Yuan surveys “as currency slump worsens”, according to Bloomberg; stepping up scrutiny of currency trading and cross-border capital flows.
• US Treasury Secretary Yellen said the US will continue to take actions to protect national security interests with regards to China even if that imposes some economic cost, while she hopes to travel to China and wants to re-establish contact, as well as discuss disagreements, according to an interview with MSNBC.
• Top US diplomat for East Asia Kritenbrink said they have seen a clear and upward trend of Chinese coercion in the South China Sea and China’s provocative behaviour poses risks for businesses, while Kritenbrink also said the US and China discussed ways to increase commercial flights in a phased manner.
• Chinese Embassy Spokesman Liu Pengyu said US and China working groups will discuss the journalist issue and said China has not seen positive US initiatives on semiconductors, while Liu added that the US must remove sanctions before military talks with China.
• Chinese balloon that flew over the US earlier this year reportedly used American-made equipment to spy on Americans, while preliminary US findings showed the craft collected photos and videos but didn’t appear to transmit them, according to WSJ.
• US officials reportedly consider tightening the export of AI chips to China based on computing power in which an update to the rules may come by late July, according to Reuters sources, although one source cautioned that such US actions involving China often get delayed.
• Nvidia (NVDA) CFO said they are aware of reports on new China export restrictions but expect no material change to earnings from rules, while the CFO added that China accounts for 20%-25% of Data Centre sales and the China export ban will result in a loss of opportunities.
• Japan Finance Minister does not comment on FX levels; one-sided and unstable moves are undesirable; will not rule out any options if FX moves are excessive. Japan and South Korea agreed to resume a bilateral currency swap deal worth USD 10bln, according to Reuters.
• China issued measures to promote opening in some free trade zones and ports on a pilot basis to meet high international standards, according to Reuters.

European bourses trade with little in the way of firm direction following a similarly indecisive close on Wall Street yesterday. US equity futures are around flat with the ES holding above the 4400 mark. In terms of newsflow, markets were treated to another set of remarks from Fed Chair Powell, where he revealed his expectations for Friday’s PCE data (Core PCE likely rose 4.7% Y/Y in May, overall PCE estimated to have risen 3.9%) and remarked that a strong majority of Fed policymakers see two or more rate rises by the end of this year. Equity sectors in Europe are mixed with Autos top of the leaderboard, supported by Renault after the Co. raised its FY 23 outlook for group operating margins and automotive operational FCF. Retail is another leading sector amid gains in H&M after Q2 profits exceeded estimates and noted that Q3 has seen a “good start”. To the downside, Travel & Leisure, Chemicals and Industrials lag peers.

Top European News

• ECB’s Centeno said “we are reaching the time when monetary policy may pause and that we are very close”, according to Reuters.
• ECB’s de Cos said ECB September meeting is absolutely open regarding interest rates, according to Reuters.
• Swedish Riksbank Rate 3.75% vs. Exp. 3.75% (Prev. 3.5%); forecast expects at least one more hike this year and increased the pace of bond sales

FX

• DXY lost a bit of momentum after its firm midweek bounce as several rivals recovered some poise on the back of supportive macro fundamentals, while the Yuan benefited from reports of more Chinese state bank buying and the Yen got a boost from another verbal riposte by Japanese Finance Minister Suzuki.
• Yen saw some sudden strength at one point with no notable headlines to drive price action at the time but with participants cognizant of Japanese MoF presence.
• Aussie outperforms following an overnight boost from the much firmer-than-expected Aussie Retail Sales.
• EUR/SEK was extremely volatile within 11.8175-11.7140 extremes in wake of the Riksbank opting to stick with guidance for a 25 bp hike, as the repo rate path was ratcheted higher and the two dovish dissenters refrained from objecting this time.

Fixed Income

• Sellers into upticks have dominated price bond action across bonds and the general direction.
• Eurozone inflation data has surprised to the upside, latest remarks from Fed Chair Powell had a hawkish twist and the Riksbank continued its tightening cycle with a loftier rate path for the rest of 2023.
• Bunds, Gilts and the T-note hover just above intraday lows.

Commodities

• WTI and Brent futures have tilted modestly firmer on the session after a horizontal APAC session, with the sector buoyed by this week’s inventory data.
• Spot gold is subdued given the strengthening of the Dollar seen this week, with the yellow metal hovering just north of the USD 1,900/oz mark as it returned to levels seen mid-March.
• Base metals are softer across the board amid the recent hawkish central bank commentary, whilst concerns surrounding China’s economic recovery remains a grey cloud.

Geopolitics

• EU is preparing to offer ‘security commitments’ to Ukraine although some member states are reportedly wary of the French-led plan to offer Kyiv assurances, while it was also reported that Denmark said the EU should not lower the bar to take in Ukraine, according to FT.
• Israeli PM Netanyahu said he wants to find a middle ground on court-system changes in Israel and regarding Ukraine, while he added Israel couldn’t allow the US to give Ukraine the Iron Dome air-defence system developed jointly with the US and he has conveyed his concerns to Russia about growing military ties with Iran, according to WSJ.

US Event Calendar

• 08:30: 1Q GDP Annualized QoQ, est. 1.4%, prior 1.3%
  • 1Q Personal Consumption, est. 3.8%, prior 3.8%
  • 1Q PCE Core QoQ, est. 5.0%, prior 5.0%
• 08:30: June Initial Jobless Claims, est. 265,000, prior 264,000
  • June Continuing Claims, est. 1.77m, prior 1.76m
• 08:30: 1Q GDP Price Index, est. 4.2%, prior 4.2%
• 10:00: May Pending Home Sales YoY, est. -20.5%, prior -22.6%
  • May Pending Home Sales (MoM), est. -0.5%, prior 0%

DB’s Jim Reid concludes the overnight wrap

Subdued market volatility remained the dominant theme over the last 24 hours, even as central bank governors pointed to further tightening ahead. The main news came from a panel at the ECB’s conference in Sintra, which featured Fed Chair Powell, ECB President Lagarde, BoJ Governor Ueda and BoE Governor Bailey. Arguably, it was Fed Chair Powell who generated the biggest headlines, since he said that Fed policy “has not been restrictive for long enough”, and that he wouldn’t take the prospect of consecutive hikes off the table. So if the Fed do hike in July, which Powell has previously described as a “live” decision, then those remarks leave open the chance of another hike at the September meeting as well.

Those comments meant investors ratcheted up the chances of further tightening from the Fed over the months ahead. In fact, futures are now pricing in a 79% chance of a July hike as of this morning, which is the highest probability to date. And looking further out, they’re increasingly discounting the chances of rate cuts at all this year, with pricing for the policy rate in December meeting now at a post-SVB high of 5.31%. In turn, that meant Treasury yields at the very front-end of the curve hit their highest levels of this cycle so far yesterday, with the 12m yield closing at 5.32%.

Although investors became more confident in the chances of near-term rate hikes from the Fed, bonds rallied across longer maturities. For example, even as the US 12m yield hit its highest of this cycle, the 10yr yield was down -5.6bps on the day to 3.71%. And back in Europe, yields on 10yr bunds (-4.1bps), OATs (-3.5bps) and gilts (-5.9bps) all saw decent declines of their own. Despite the sizeable rally over the course of the day, the 10yr US Treasury yield traded within the second narrowest daily range of 2023 so far (Monday this week was the narrowest). Indeed, over the last 3 weeks as a whole, the 10yr yield has consistently closed between 3.71% and 3.81%.

While bonds rallied, equities had a mixed but also low vol day, with the S&P 500 down -0.04% by the close. In fact for 14 of the past 17 trading sessions (82%), the S&P 500 has traded within a 1% range, which contrasts with last year when it traded within a 1% range for only 10% of trading days. Within equities, a significant underperformer was the Philadelphia Semiconductor Index (-0.90%), which lost ground following the news we mentioned yesterday that the Biden administration were planning to tighten export controls that would restrict the sale of AI chips to China. That was first reported in the WSJ, but has since been reported in several media outlets, and Nvidia shed -1.81% yesterday. Otherwise though, there was quite a bit of divergence between sectors, with utilities (-1.48%) leading the declines, whereas energy (+1.02%) outperformed against the backdrop of higher oil prices. Meanwhile in Europe there was also a decent rally, with the STOXX 600 (+0.70%) posting its biggest advance in 3 weeks.

When it comes to the ECB, yesterday’s panel saw President Lagarde stick to her existing language on the next hike in July, saying that the baseline was to proceed with a further move. However, beyond that she said they’d decide meeting-by-meeting, which was in line with other ECB speakers yesterday. For instance, Vice President de Guindos said that a September move would depend on the data, and that “I think it’s open”. The vast majority of ECB speakers have not ruled out a September hike either, with Croatia’s central bank governor Vujcic saying that “Given the persistence of inflation, we do realise that there might not be a pause in September”, and the usually dovish Bank of Greece Governor Stournaras noted that “we cannot say if in July it’s going to be the last hike”. Market pricing for the ECB remains pretty consistent with that messaging, with a 82% chance of a July hike priced in, but only a 43% chance that we’d have two hikes by the time of the September meeting. The other focus among ECB speakers has been on a longer period of elevated rates, with Banque de France governor Villeroy commenting that the ECB are close to terminal but that they must be patient on keeping rates at the terminal rate.

In terms of the ECB’s decision, an important component for that will be the Euro Area flash CPI print for June tomorrow, where our economists are looking for a decline in headline inflation to +5.8%. Ahead of that, we’re now starting to get some of the country releases, and yesterday saw Italian CPI fall a bit more than expected to +6.7% on the EU-harmonised measure (vs. +6.8% expected). That’s the lowest inflation has been in 14 months, but clearly that’s still some way above the ECB’s 2% target. Later today, we’ll get the numbers from Germany and Spain as well, which should help shape expectations for the Euro Area print tomorrow. In other Euro Area data, yesterday we received the latest evidence of the impact of central bank tightening on money supply, with the May release seeing growth in the liquid M1 component falling to a new historic low of -6.4% year-on-year.

Overnight in Asia, equities have struggled on the whole, with losses for the Hang Seng (-1.57%), the CSI 300 (-0.42%), the Shanghai Comp (-0.17%) and the KOSPI (-0.18%). The exception to that pattern has been the Nikkei (+0.42%), which followed dovish comments from BoJ Governor Ueda yesterday at the Sintra panel. He said that they needed more confidence about inflation in 2024 for a policy shift, and this morning the Japanese Yen is trading at 144.55 per US Dollar, the weakest since last November. Elsewhere overnight, equity futures in other regions are pointing to modest gains, with those on the S&P 500 up +0.08%.

Looking ahead, today will see EU leaders gather in Brussels for a summit that will extend into tomorrow. The meeting will be preceded by a working lunch with NATO’s Secretary-General Jens Stoltenberg, which comes less than a couple of weeks away from the summit of NATO leaders on July 11-12 as well. For this EU leaders’ summit, the items on the agenda include Ukraine and economic security, with the latter being an important topic as countries around the world are moving towards more active industrial policies.

Finally, there wasn’t much in the way of US data yesterday, but we did get the advance goods trade balance for May, which showed a trade deficit of $91.1bn (vs. $93.7bn expected).

To the day ahead now, and central bank speakers will include Fed Chair Powell, the Fed’s Bostic, the ECB’s De Cos, and the BoE’s Tenreyro. The ECB will also publish their Economic Bulletin. Data releases include the German flash CPI reading for June, UK mortgage approvals for May, the US weekly initial jobless claims, pending home sales for May, and the third estimate of Q1 GDP. Finally, a summit of EU leaders is taking place in Brussels.

“Presumed human remains” were “recovered within the wreckage” of the doomed Titan submersible that imploded last week in the North Atlantic while on a dive to the Titanic wreckage site. 

The US Coast Guard announced Wednesday that “debris and evidence” of the submersible recovered 2.5 miles down on the ocean floor was unloaded at a port in St. John’s, Newfoundland and Labrador. A Coast Guard cutter is expected to transport the mangled sub to a port in the US for further analysis and testing into what caused the implosion, killing five people. 

“The evidence will provide investigators from several international jurisdictions with critical insights into the cause of this tragedy. 

“There is still a substantial amount of work to be done to understand the factors that led to the catastrophic loss of the [Titan] and help ensure a similar tragedy does not occur again,” Coast Guard Capt. Jason Neubauer, who is leading the investigation, said of the debris pulled out of the ocean.

The company that owns a remote submersible that recovered Titan’s remains, Pelagic Research Services, told The New York Times that it had “successfully completed offshore operations.” 

Debris and presumed human remains from the Titan submersible have been recovered and returned to land, the U.S. Coast Guard announced Wednesday, nearly a week after a search-and-rescue operation ended and the vessel’s five passengers were presumed dead. https://t.co/6NJiKLON93 pic.twitter.com/YGo9xmwuMO

— The New York Times (@nytimes) June 28, 2023

Investigators will be sifting through Titian’s carbon fiber and titanium to determine the failure point. 

Titian’s pieces were loaded onto a truck. 

One recognizable piece of the craft is the titanium porthole. 

J. Carl Hartsfield, an underwater vehicle designer at the Woods Hole Oceanographic Institution, told NYTimes investigators would be looking at several things:

1.  A point of failure of the hull;
2. How pieces of carbon fiber and titanium, the submersible’s materials, were connected; 
3. And if any electronic data was recoverable.

So who is paying for the weekslong search-and-rescue effort and the investigation? 

Authored by Simon White, Bloomberg macro strategist,

Money growth in Europe continues to decelerate, suggesting that the recent amplification of the ECB’s hawkishness will be dialed back down sooner than the market currently projects.

M3 money for Europe showed a deceleration to 1.4% year-on-year in May from 1.9% the previous month, according to data released earlier. More consequential for economic activity is lower forms of money, especially M1. The latter is mainly made up of demand deposits – i.e. deposits created when new loans are made, and deposits that are ready to be deployed into the real economy.

Real M1 growth continues its steep decline. Soft data in Europe such as PMIs had been surprising to the upside previously but are now catching down to hard data such as money growth. As the chart below shows, the fall in real M1 growth points to a continuation of weakening growth in Europe.

Higher forms of money tend to be counter-cyclical. For instance M2 minus M1 is rising sharply as savings deposits are rising. Savings accounts offer a higher rate of interest, which is attracting deposits. But money being locked up for saving purposes cannot boost economic activity.

Curiously, economists in the aggregate don’t seem to follow M1 as a leading indicator. If they did, then we shouldn’t see the leading relationship between real M1 growth and economic surprises in the chart below.

As the chart shows, we should expect economic data from Europe in the coming months to increasingly disappoint.

This leaves the ECB’s recent amping up of its hawkish rhetoric vulnerable to being eased back again as the data deteriorates, and inflation continues to fall in the coming months at a decent clip (as projected by fixing swaps).

Like the Fed, the ECB is using “talk” to bend the rates curve to its will, i.e. “higher for longer”.

Thus far the Euribor curve has been listening, with the December 2023 vs December 2024 steepening.

 But weaker-than-expected growth could soon convince the market cuts are coming sooner than the ECB is currently intimating, re-flattening the curve.