Month: July 2024

Iran’s Foreign Ministry has issued a fiery statement saying that Washington must also bear responsibility for the Israeli attack which killed Hamas leader Ismail Haniyeh in Tehran in the overnight and early morning hours of Wednesday.

“This terrorist act is not only a flagrant violation of the principles and rules of international law and the United Nations Charter, but also a serious threat to regional and international peace and security,” the Iranian Foreign Ministry statement began.

“The Islamic Republic of Iran emphasizes the responsibility of the US government as a supporter and accomplice of the Zionist regime in the continuation of the occupation and genocide of the Palestinians, in committing this heinous act of terrorism,” it added.

The vague language of general ‘support’ to Israel leaves open the question of whether Tehran believes the US had an actual direct operational role in Haniyeh’s killing.

However, Iran’s ambassador to the United Nations issued a more specific denunciation in tandem: “This act could not have occurred without the authorization and intelligence support of the U.S.,” it said in a letter submitted to the UN. According to fresh details of the strike:

HAMAS SENIOR OFFICIAL AL-HAYYA SAYS A MISSILE HIT HAMAS LEADER ROOM AND ‘STRUCK HIM DIRECTLY‘

Hours before the accusation, US Secretary of State Anthony Blinken definitively stated Washington had no involvement in the attack. 

“This is something we were not aware of or involved in. It’s very hard to speculate,” Blinken told a regional outlet while on an official trip to Singapore. He had been asked about what he thinks will happen next in the region.

Iran will more than likely retaliate in a big way, possibly with another wave of drones and missiles on Israel, but this time less telegraphed (compared to the initial April 13 attack, largely intercepted by Israel’s anti-air defenses)…

This reference to Iran’s territorial integrity is the clearest sign yet that Iran is viewing its response in the same light as its response to Israel’s bombing of its consulate in Damascus in April.

In other words, it’s going to be a big response. It has to be a big response. https://t.co/UIQX4LxSxR

— Sam (@sonofnariman) July 31, 2024

The aforementioned UN letter has also called for the UN Security Council to hold an emergency meeting over the Hamas chief’s killing. But likely the US and its allies will see this as a legitimate killing of a designated terrorist responsible for the atrocities against Israel on Oct.7.

Meanwhile as Israel appears to be on an ‘assassination spree’, the body of Hezbollah’s military commander Fuad Shukr (and close advisor to Nasrallah) has been pulled from the rubble in Beirut.

Regional sources say the death toll from the Tuesday strike on a southern neighborhood of the Lebanese capital has risen to five with at least 70 injured. Among the casualties were women and children.

Authored by Simon Watkins via OilPrice.com,

• The energy policies of the new U.S. president – Kamala Harris or Donald Trump – will be critical to how wider global events play out in the coming four years.

• The chance of the U.S. economy being in recession within two years of an upcoming election is dramatically increased as the oil price rises.

• During his term in office, President Trump very vigorously sought to enforce a ‘Trump Oil Price Trading Range’ with the lower part set at around US$40-45 per barrel of Brent and the upper part at US$75-80 per barrel.

The world has probably not been in such a pervasively dangerous position since the end of the Second World War, so the question of who leads the world’s leading power has never been more critical. As oil is a crucial determinant of every country’s financial and economic future, it plays a vital role in shaping the domestic and international politics of the world’s major oil producing and consuming countries. And because the stakes are so high, the energy policies of the new U.S. president – Kamala Harris or Donald Trump – will be critical to how wider global events play out in the coming four years.

Harris is expected to follow the broadly greener energy approach of the administration of President Joe Biden, while former President Trump has made it clear his priority is that the U.S. must have “the number lowest cost energy of energy of any industrial country anywhere on Earth”.

Crucially, though, on the issue of the price of oil – and gasoline, which historically is around 70 percent derived from this – the two candidates are likely to be in broad agreement that these should be kept in check. There are two key reasons for this, one political and the other economic, although they are closely related, as analysed in full in my latest book on the new global oil market order.

The political reason is that since the end of World War I in 2018, the sitting U.S. president has won re-election 11 times out of 11 if the economy was not in recession within two years of an upcoming election. However, sitting U.S. presidents who went into a re-election campaign with the economy in recession won only one time out of seven.

Even this only win is debatable, as the winner – Calvin Coolidge in 1924 – had not strictly speaking won the previous election (and thus could not be ‘re-elected’), but rather had acceded to the presidency automatically on the death in office of Warren G. Harding. The same pattern broadly applies to the re-election chances of candidates of the president’s party in U.S. mid-term elections as well, the outcome of which affects the ability of the incumbent leader to push ahead with their legislative agenda for the last two years of their presidency.

In turn, the chance of the U.S. economy being in recession within two years of an upcoming election is dramatically increased as the oil (and gasoline) price rises, as also detailed in my latest book.

Longstanding estimates are that every US$10 pb change in the price of crude oil results in a 25-30 cent change in the price of a gallon of gasoline, and for every 1 cent that the average price per gallon of gasoline rises, more than US$1 billion per year in consumer spending is lost. According to a 2016 study by Laurel Harbridge, Jon A. Krosnick, and Jeffrey M. Wooldridge called ‘Presidential Approval and Gas Prices’, a 10 cent increase in gasoline prices correlated with a 0.6 percent decrease in presidential approval over the study period from January 1976 to July 2007. In any event, the statistics make sober reading for incumbent U.S. presidents and the senatorial, congressional and gubernatorial candidates of their party when considering how to handle domestic and international policies related to the oil price. As Bob McNally, the former energy adviser to former President George W. Bush put it:

“Few things terrify an American president more than a spike in fuel [gasoline] prices.”

Historically, a gasoline price of under US$2 per gallon of gasoline has been most advantageous for U.S. economic growth, and US$2 per gallon has historically also equated to a West Texas Intermediate (WTI) oil price of around US$70 per barrel. As WTI has historically traded at a discount of between US$5-10 per barrel to the Brent oil benchmark, this US$70 per barrel of WTI price broadly equates to around US$75-80 per barrel of Brent.

This is why there has been far less divergence in such policies over the past 10 years that directly affect the oil price than many might imagine.

During his term in office, President Trump very vigorously sought to enforce a ‘Trump Oil Price Trading Range’ with the lower part set at around US$40-45 per barrel of Brent and the upper part at US$75-80 per barrel, as analysed in my latest book on the new global oil market order. The top side was geared to the optimal level to spur U.S. economic growth, and the bottom side to the minimum level required for healthy U.S. shale producers to breakeven and to make a decent profit on top. Following the end of the 2014-2016 Oil Price War instigated by Saudi Arabia to destroy or at least severely disable the then-nascent U.S. shale oil industry, the sector had stunned everyone by reorganising into a leaner, meaner oil-producing machine capable of breaking even at the low-US$30 per barrel pricing area of Brent level if needed.

Consequently, Trump was never in any mood to tolerate any nonsense from OPEC in general, and Saudi Arabia in particular, that affected his carefully chosen Oil Price Trading Range. When Saudi Arabia (with the help of U.S. Cold War nemesis Russia) was pushing oil prices up over the US$80 per barrel of Brent level in the second half of 2018, Trump sent a clear warning to Riyadh to stop doing this, as also detailed in my latest book. Specifically, in a speech before the United Nations General Assembly, he said:

“OPEC and OPEC nations are, as usual, ripping off the rest of the world, and I don’t like it. Nobody should like it.”

He added:

“We defend many of these nations for nothing, and then they take advantage of us by giving us high oil prices. Not good. We want them to stop raising prices. We want them to start lowering prices and they must contribute substantially to military protection from now on.”

As the Saudi Arabian- and Russian-led OPEC+ oil production cut agreement continued to push oil prices up in that period, to slightly over the top band of the Trump Oil Price Trading Range, Trump made the same warning again, even more clearly at a rally in Southaven, Mississippi, in October 2018. He said:

“And I love the king, King Salman, but I said, ‘King we’re protecting you. You might not be there for two weeks without us. You have to pay for your military, you have to pay.”’

Following Trump’s direct and clear warnings to Saudi Arabia’s Royal Family in the third quarter of 2018 of the catastrophic consequences if the Kingdom continued to keep oil prices higher than the US$80 per barrel Brent cap in the Trump Oil Price Trading Range, Saudi Arabia increased production and oil prices came down again. That period was the only part of Trump’s presidency that saw his Oil Price Trading Range breached.

The first half of Joe Biden’s presidency was able to keep this price range intact. However, following Russia’s invasion of Ukraine on 24 February 2022, it was significantly broken to the upside until around the end of December that year, when it settled back down to a level slightly above the top of the range.

It is a testament to the acute awareness of U.S. presidents of all political leanings to the crucial importance of the oil and gasoline price that when Brent crude was trading over the US$100 per barrel level in the early aftermath of Russia’s invasion of Ukraine, moves were well advanced to strike a scaled-down version of the Joint Comprehensive Plan of Action, JCPOA, or colloquially ‘the nuclear deal’) with Iran. This was solely aimed at bringing the Islamic Republic’s then-3.5 million barrels per day or so of oil back into the global oil market to bring down prices, as thoroughly detailed in my latest book on the new global oil market order.

These efforts were only truly derailed when Iran’s Islamic Revolutionary Guards Corps (IRGC) scuppered the possible deal (which still included within it measures aimed at destroying the IRGC) by giving the go-ahead to its proxy Hamas to launch murderous attacks on Israeli civilians on 7 October 2023. The strategy employed by Biden’s team since then, with Kamala Harris likely to follow if elected president, has been to balance the scaling up of sanctions against major energy producers Iran and Russia with allowing for the flow of sufficient of their oil and gas in the shadow market to keep prices at the lower end of recent historical levels.

It has always been Biden’s intention, according to a senior Washington-based legal source who works closely on the U.S. sanctions team, to “snap the trap shut” on Iran and Russia once their energy resources were no longer required to keep the Oil Price Trading Range intact.

As the market tries to digest Fed speak, here are some of the fastest Wall Street commentators and strategists piling on with their initial reactions to the FOMC statement, if not Powell’s presser.

UBS trader Leo He:

“The Fed keeps rates unchanged. In the policy statement, the Fed changes its language to “the Committee is attentive to the risks to both sides of its dual mandate,” where previously it said “the Committee remains highly attentive to inflation risks”. However, the Fed maintains: “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.” This statement is definitely more dovish than the June statement, as the Fed says they are focusing on dual mandates now. But this is definitely not a complete pivot. Austan D. Goolsbee, the most dovish FOMC member, voted as an alternate member at this meeting, as Mester retired. Beth M. Hammack will take the president office of Cleveland Fed later this month and likely take over the voter role from September.”

Derek Tang, economist with LH Meyer/Monetary Policy Analytics:

“Quite balanced, and nicely captures the moderation in inflation and the real side without fueling the flames of adding a November cut too. A September easing should still be a go, barring anything that would stay their hand. It would be hard to see what would do that at this point.”

Win Thin, global head of markets strategy at BBH:

“I think many were hoping for some sort of softening here, along the lines of ‘we have somewhat greater confidence’ but the Fed did not tip a September cut, by any stretch. I think they will cut, but the Fed is playing its cards close to its chest. Marginally less dovish than expected.”

Ira Jersey, Bloomberg Intel chief rates strategist:

“Overall, the Fed’s policy statement appears to meet our expectation in that it is balanced. The new phrase ‘risks to both sides of its dual mandate’ doesn’t signal a September cut is imminent. The front end of the curve selling off the knee-jerk bear flattener seems reasonable. Powell’s press conference may be more telling than the incremental shifts in the statement.”

George Catrambone, head of fixed income, DWS Americas:

“The risks are much more two-sided. They’ll be able to get more data to confirm the disinflationary path, but soft landings don’t materialize by waiting too long to cut.”

Neil Dutta, Renaissance Macro

“With language like this, it means the Fed will have to make a more pronounced shift in language in September. I am surprised stocks are holding up on this statement. Perhaps equities are looking ahead to the press conference. The minutes of today’s meeting, along with the Jackson Hole central banking conference in August, will offer further opportunities.”

Erica Adelberg, Bloomberg Intel Senior MBS strategist

“Some lenders have reported an increase in prequalification inquiries in anticipation of a potential rate cut this fall, which could filter through to mortgage rates, but actual housing activity and mortgage borrowing demand remain at multiyear lows for now.”

Ellen Zentner, Morgan Stanley economist:

“The FOMC statement showed an important change in the characterization of inflation and the labor market, emphasizing risks to the dual mandate. Emphasis on the cooling labor market was an important shift to a more balance tone that we think sets the Fed up to cut in September.”

Anna Wong, Bloomberg Economics chief economist

“The policy statement contained minimal redlines, but they sent a loaded message to investors: Officials definitely aren’t ready to cut in July, and don’t want to reassure investors that a 25-bp cut is assured for September either – let alone the 50-bp cut markets lately have contemplated.

“In a hawkish move, the new statement kept language that the committee ‘does not expect it will be appropriate’ to cut rates until it has ‘gained greater confidence’ about the disinflationary trajectory. Still, by acknowledging the recent rise in the unemployment rate — and adding they’re now equally attentive to the full-employment leg of their dual mandate – the FOMC did keep hopes of a September rate cut alive.

“We think the main reason they sent only a minimal hint of an imminent cut is the amount of data yet to come before the September FOMC meeting — two more inflation and job reports — and the data could change considerably by then. The best time to definitively signal a September cut would be at Powell’s Jackson Hole address in late August, when he’ll have another month of jobs and inflation data in hand.”

Michael Gapen, Bank of America economist:

“I think this was the right incremental move. I think the Fed feels that it’s in a sweet spot right now, that the data is moving in its direction, so it’s getting closer. It just needs a little bit more and then that nebulous confidence may be there.”

Brian Coulton, Fitch Ratings chief economist:

“The key is starting to turn slowly as the Fed prepares to unlock the door to a rate cut in September.”

Source: BBG

Senator Warren and her pals pressed Powell this morning to cut rates today (he didn’t – instead choosing the ‘waiting for more confidence’ route).

But the political pressure is building for the always apolitical Fed to do something “for democracy” or whatever it is that The Fed is battling now.

GDP growing fast, home prices at record highs, jobless claims not falling apart, inflation (supercore) sticky high…  but hey it’s time to cut rates “pre-emptively”…

And Powell once again walks the high-wire between sounding like an idiot ignoring (some of) the data and a partisan dove just doing the deep-state’s bidding…

Win Thin, global head of markets strategy at BBH, says:

“I think many were hoping for some sort of softening here, along the lines of ‘we have somewhat greater confidence’ but the Fed did not tip a September cut, by any stretch. I think they will cut, but the Fed is playing its cards close to its chest. Marginally less dovish than expected.”

Even if Powell doesn’t explicitly set up a September rate cut, Neil Dutta at Renaissance Macro points out that the minutes of today’s meeting, along with the Jackson Hole central banking conference in August, will offer further opportunities.

Watch the press conference here (due to start at 1430ET):

Since the last FOMC meeting on June 12, gold has outperformed (while the dollar and crude oil have lagged). Stocks and bonds are also both higher…

Source: Bloomberg

US macro ‘hard’ data has trended weaker overall since the last FOMC (albeit with a blip)…

Source: Bloomberg

…and the ‘bad news’ macro data has prompted ‘good news’ dovish shifts in rate-cut expectations which are dramatically higher since the last FOMC (pricing more than the Fed’s two cuts this year)…

Source: Bloomberg

Expectations for today’s FOMC are ‘nothingburger’-y with just a 2% chance of a cut implied by the market (from 100% certain at the start of the year).

Source: Bloomberg

But all eyes and ears will be on the statement (which is expected to reflect ‘more confidence’ in the disinflationary path) and on Powell’s soothingly dovish words.

So, what did The Fed say?

Key headlines (via Bloomberg)

• Federal Open Market Committee votes unanimously to leave benchmark rate unchanged in target range of 5.25%-5.5%, a more than two-decade high, for the eighth straight meeting

• Statement tweaks language to say “the committee is attentive to the risks to both sides of its dual mandate”; had previously said officials were “highly attentive to inflation risks”

• Statement repeats prior language saying the FOMC doesn’t expect to cut rates “until it has gained greater confidence that inflation is moving sustainably toward 2%”

• Fed also tweaks language to say price pressures remain “somewhat” elevated, and acknowledge “some further progress” toward inflation goal, from “modest further progress” in previous statement

• Officials also adjust their assessment of the labor market, saying job gains “have moderated” and the jobless rate “has moved up but remains low”

• Statement notes that risks to achieving employment and inflation goals “continue to move into better balance”

• Decision is unanimous for 17th straight meeting

Which has a hawkish bias to it compared to the market’s dovishness…

Win Thin, global head of markets strategy at BBH, says:

“I think many were hoping for some sort of softening here, along the lines of ‘we have somewhat greater confidence’ but the Fed did not tip a September cut, by any stretch.

I think they will cut, but the Fed is playing its cards close to its chest. Marginally less dovish than expected.”

George Goncalves, head of US macro strategy at MUFG, says the latest FOMC statement shows:

“there are enough elements that were re-written that it seems to us that there was careful consideration to how to express the start of a pivot towards easing.”

Read the full red-line below:

A new Homeland Security Investigations memo obtained by the New York Post revealed that the violent Venezuelan gang Tren de Aragua has given members the “possible green light” to attack law enforcement in Denver, Colorado

The memo states:

Please see attached officer safety / awareness bulletin from the Albuquerque Police Department (APD). APD received information from federal partners regarding possible “green light” attacks on law enforcement from the Tren de Aragua (TdA) criminal organization operating in Denver, Colorado. Credible human sources from Colorado provided information on TdA giving a “green light” to fire on or attack law enforcement.

As many of you know, we have a TdA presence here in Chicago, so please be vigilant as you encounter TdA members or affiliates during your investigative and operational activities. ​

Denver is a sanctuary city controlled by progressives who opened up shelters for illegal aliens. The city received 42,000 migrants via President Biden and VP Kamala Harris’ failed open southern border policies. 

NYPost explained, “The prison gang, whose name means “The Aragua Train” — a reference to the Aragua region in Venezuela — has infiltrated the US by sending members posing as asylum seekers across the southern border.” 

Meanwhile, leftist corporate media outlets have spent the last few weeks unleashing propaganda campaigns against the American people, attempting to convince folks that VP Harris was not crowned ‘Border Czar’. That’s because the open southern border is such a disastrous topic for VP Harris.

Let’s forget…

• South American Gangs Target Mansions In Baltimore As Biden’s Border Crisis Spreads Chaos

• Say Their Names: Young American Women Are Being Raped & Murdered By Illegal Aliens

• Moped-Mounted Crime Soars: Migrants Bring Third World Tactic To USA

It’s straightforward: Biden & Harris’ disastrous border policies have devastating effects on society, including increased crime. 

Harris, the border czar, is running from her record. pic.twitter.com/PCj0HhGuNZ

— Anna Paulina Luna (@realannapaulina) July 30, 2024

Omg Trump just brought the National Border Patrol Council President on stage and he RIPPED ‘border czar’ Kamala Harris

“I gave her all the policies she needed and she refused to implement them. She does not care about you — he does!” pic.twitter.com/XWOY6LXpgd

— johnny maga (@_johnnymaga) July 24, 2024

In reality, Border Czar Kamala Harris is complicit in aiding and abetting an invasion of our border.

President Trump secured the border, and he’ll do it again.pic.twitter.com/ww7DrI3V8u https://t.co/ke7RG4Vm2H

— GOP (@GOP) July 30, 2024

America needs law and order and secured borders. Most folks now reject failed social policies pushed by Biden and Harris (with Obama in the background likely pulling the strings). Let’s make America safe again.

By Michael Every of Rabobank

“He’s bullish”….  Hezbollah

The first market focus today is naturally the BOJ, and the second is the Fed. In both cases, the hope is that when the Governor/Fed Chair stop speaking, we will all be able to say, “he’s bullish”. Yet both central bankers will be talking as everyone in the Middle East, and those paying attention to it, will be saying, “Hezbollah.” It’s far from clear if that is bullish.

The market is pricing out the odds of a large –15bp– BOJ rate hike at this meeting, and this morning NHK is floating that a 10bp hike could come even though the consensus is no change. Given other central banks are leaning towards easing, or already are, one wonders if this is going to be the cycle peak anyway. In which case, one also has to wonder what the ceiling is on USD/JPY: it was back below 155 at time of writing. That will presumably depend on where the Fed stops easing.

As our Fed watcher Philip Marey makes clear in his FOMC preview, today’s meeting will open the door for the September cut he’s been calling for months, and one more in December. The Fed will also be able to squeeze in two more cuts in H1-2025. But then, based on poll tracking (not just one Bloomberg poll today) he assumes a Trump presidency and the introduction of tariffs; and the return of inflation. As such, the Fed will call a halt to cuts at a floor of 4.5%. Which, for keen market observers, is a lot higher than in Japan.

Meanwhile, Israel retaliated for the death of 12 children in Majdal Shams at the hands of Hezbollah by assassinating its number 2 and top military commander, Fuad Shukr, in Beirut – he had a $5m bounty on his head from the US for his past role in attacks on American forces. In military terms, this was a precise hit (with civilian casualties and injuries) rather than an assault on the Lebanese capital or a ground invasion. With it, Israel is attempting to show there’s a higher price for attacks on it to reassert deterrence, allowing tens of thousands of Israelis to return to border communities abandoned due to strikes from Lebanon. Israel also says it doesn’t seek war but is prepared for one.

The question now is how Hezbollah will respond to Beirut being hit, seen as a red line, and the killing of its number 2, a major blow. If it makes token retaliation, with no casualties, the region and markets can relax. Yet if it makes a large-scale move against Israel, or Jewish targets internationally, especially with further deaths, then Israel will move further up the escalation ladder, dragging Hezbollah behind it. Then there is less room to relax.

It’s important to recall that this is not about Israel vs. Hezbollah but rather Israel vs. Iran. At the inauguration ceremony for new president Pezeshkian, Iran just hosted senior leaders from the ‘Axis of Resistance’: Hezbollah, Hamas, Palestinian Islamic Jihad, and the Houthis, and we’ve already seen one round of direct –limited– Iran-Israel strikes. Were we to see Israel-Hezbollah escalation, the fat-tail risk would be that either Iran supports the latter, or Israel strikes the former again. In either case, the Middle East would be dragged towards the regional war we flagged immediately after 2023’s October 7 Hamas attack.

Even worse, Iran is a member of the ‘Axis of Upheaval’ (Russia-China-Iran-North Korea), which wants to heave the  aside on the world stage while upping their own global role. The fattest tail risk is therefore of something closer to Ukraine, where multiple parties/blocs get sucked into a conflict – only this time involving world energy centres, not grain centres.

Such an event would impact on economies, markets, and every central bank. Of course, if your job is to focus on the BOJ, Fed, or the BOE, there’s little or no room or time to write about things which fall well outside the realm of economics, vs. the balance of data that’s the usual driver of monetary policy. But that doesn’t stop the above being true.

Within the realm of economics, today’s Chinese PMI data were a non-event with manufacturing at 49.4 vs. 49.5 last month, and services at 50.2 vs. 50.3 expected.

Market-moving were Aussie retail sales at 0.5% m-o-m vs. 0.2% expected, and Q2 CPI weaker than seen at 1.0% q-o-q, in line with consensus, but 0.8% on a trimmed mean and a weighted median, both vs. 1.0% consensus. The reaction was a huge drop in Aussie bond yields across the curve, with a steepening tone. AUD tumbled in tandem.

The problem here is not anything Middle Eastern, which in far-away Australia means hummus with the barbie, but that these prints don’t imply inflation returns to 2%. Indeed, year-on-year CPI was 3.8%, the trimmed mean 3.9%, and the weighted median 4.1%. Goods inflation was 1.7% q-o-q after two previous negative prints, while services inflation was admittedly more positive at 0.7% vs. 1.5% prior. However, Australia still has a labour market showing bumper jobs growth, and a housing market not just on drugs, but so high up the drugs pyramid that it has smaller housing markets out on the streets doing the pushing and hustling for it while it sits next to the pool drinking cocktails. Which, substituting drugs for houses, is the Australian dream. Both of those trends are inflationary, especially in services, regardless of what today’s data show.

Regardless, the market reaction says the next RBA move is expected to be a cut, not a hike, which can’t be ignored. Our Australia/New Zealand strategist Ben Picton had a 25bp hike penciled in for August. The Reserve Bank admittedly had a high bar for further tightening given their ‘tolerance’ (a euphemism) for high house price inflation and intolerance for the slightest house price deflation: these CPI data are the get-out-of-jail-free card they needed to avoid putting a spike in housing spruikers. Ben now sees the RBA on hold as they wait and see. Unfortunately, however, if you don’t move when you should, at some point it comes back to hit you harder, in both monetary policy and geopolitics. Aussie bonds may rally, but that doesn’t mean “he’s bullish”.

Or Hezbollah.

Uber Technologies and China’s largest EV maker, BYD, announced a multi-year deal to bring 100k new BYD vehicles onto the Uber platform across top markets worldwide, excluding the US. 

A statement from both companies said the deal would first allow BYD vehicles to be offered to Uber drivers in Europe and Latin America and then expand to the Middle East, Canada, Australia, and New Zealand. The companies said drivers would be offered “access to best-in-class pricing and financing for BYD vehicles on the Uber platform.” 

“By working together, the companies aim to bring down the total cost of EV ownership for Uber drivers, accelerating the uptake of EVs on the Uber platform globally, and introducing millions of riders to greener rides,” the companies noted. 

Uber and BYD did not mention a future rollout in the US, likely because the Biden administration has vowed to increase tariffs on Chinese EVs to 102.5% this year, increasing the rate former President Trump raised to 27.5% during his first term. 

In the European Union, BYD faces a tariff of 17.4% – this is the lowest duty among all Chinese EV brands, and some have been slapped with new duties as high as 37.6%.

Vice President of BYD and CEO of BYD Americas Stella Li said, “This collaboration marks a new era in the electrification of urban mobility, and we look forward to seeing our cutting-edge EVs become a common sight on the streets of cities worldwide.”

US brands like Tesla, Rivian, and Lucid might need to get creative by partnering with ride-hailing apps domestically and internationally to boost sales amid the global EV sales slump.

By Sagarika Jaisinghani, Bloomberg Markets Live reporter and analyst

With European equities wrapping up their weakest July performance since 2020, sentiment is fragile just as a big risk event takes the spotlight: the Federal Reserve’s policy meeting.

As the benchmark Stoxx Europe 600 Index clings to gains of about 0.5% this month, investors are keen to hear whether Fed officials are likely to start easing policy shortly. While the central bank isn’t expected to announce a rate cut Wednesday, the market has fully priced in a reduction at September’s meeting.

Any hawkish signals from the Fed could upend the outlook for equities. Positioning in European futures is already bearish following the selloff since mid-July, according to data from Citigroup. Investors have also de-risked more broadly and overall exposure is now less extended in most markets, the figures showed.

As the long positions face losses instead of profits, that “creates short-term pressure ahead of central bank meetings” and other indicators, including the key US jobs report due Friday and big tech earnings, Citi strategist Chris Montagu says.

A major clue for investors will be the Fed’s reading of latest macro indicators. While recent figures showed inflation is indeed cooling, other data suggest some parts of the US economy are cracking — creating pressure on the central bank to act sooner rather than later.

“The very minimal amount of successful soft landings following a Fed hiking cycle demonstrates the dangers of waiting too long before cutting rates,” says Seema Shah, chief global strategist at Principal Asset Management. “There are already signs that consumers are starting to show fatigue and that companies are considering labor costs.”

In financial markets, equities have been jolted out of the relative calm that has characterized trading this year. The volatility curve, as measured by the VIX 2-8 spread indicator, briefly surged into an area of concern for the first time since April, when geopolitical and policy uncertainty had sparked a selloff.

Derivatives strategists at Bank of America say the risk of a further rotation away from big tech and into small caps is elevated ahead of the Fed’s meeting. They recommend funding puts on the blue-chip Euro Stoxx 50 — which is more sensitive to the way US large caps perform — by selling puts on the equal-weighted S&P 500.

“Indeed, if the rotation turns ugly and affects broader US stocks, we do not anticipate the Euro Stoxx 50 to do well in this environment,” BofA strategists led by Benjamin Bowler wrote in a note.

Not everyone agrees that the Fed’s meeting presents a major risk to stocks’ long-term outlook. BlackRock strategists Jean Boivin and Wei Li say the recent pullback had more to do with the fact that momentum trades had run too far, rather than due to weaker signals from corporate earnings or economic growth.

“We see central bank policy expectations, equity factor rotations and currency moves driving the recent market volatility,” they say. “We caution against extrapolating from these moves.”