Nvidia Plunges After Preannouncing Terrible Q2 Results, Slashes Guidance, Blames “Macroeconomic Headwinds”

Nvidia Plunges After Preannouncing Terrible Q2 Results, Slashes Guidance, Blames “Macroeconomic Headwinds”

Just as stocks were set to blast off right out of the gates as the “most hated rally” accelerates, moments ago investors got a cold shower after video chip giant Nvidia preannounced disappointing Q2 earnings more than 2 weeks early (originally scheduled for Aug 24), blaming the reverse bullwhip effect for taking $1.3 billion of charges “primarily for inventory” and slashing guidance due to “lower sell-in of Gaming products reflecting a reduction in channel partner sales likely due to macroeconomic headwinds” and “challenging market conditions that are expected to persist into the third quarter.” The only good news: the company isn’t trimming (or ending) its buybacks which will continue as scheduled.

Here are the details:

  • Prelim revenue $6.70 billion, far below the est $8.10, down 19% sequentially and up 3% from the prior year reflecting weaker than forecasted Gaming revenue
  • Prelim adjusted gross margin 46.1%
  • Prelim adjusted operating expenses $1.75 billion

Commentary and context:

  • Second quarter results are expected to include approximately $1.32 billion of charges, primarily for inventory and related reserves.
  • The only silver lining: buybacks will continue: “We plan to continue stock buybacks as we foresee strong cash generation and future growth.”
  • The shortfall relative to the May revenue outlook of $8.10 billion was primarily attributable to lower sell-in of Gaming products reflecting a reduction in channel partner sales likely due to macroeconomic headwinds. In addition to reducing sell-in, the company implemented pricing programs with channel partners to reflect challenging market conditions that are expected to persist into the third quarter.
  • Data Center revenue, though a record, was somewhat short of the company’s expectations, as it was impacted by supply chain disruptions.
  • The significant charges incurred in the quarter reflect previous long-term purchase commitments we made during a time of severe component shortages and our current expectation of ongoing macroeconomic uncertainty,” said Colette Kress, EVP and CFO of NVIDIA.
  • “Our gaming product sell-through projections declined significantly as the quarter progressed,” said Jensen Huang, founder and CEO of NVIDIA. “As we expect the macroeconomic conditions affecting sell-through to continue, we took actions with our Gaming partners to adjust channel prices and inventory.
  • There will be no call today, and instead NVIDIA will host its conference call on the previously scheduled time at Wednesday, Aug. 24, at 2 p.m. PT (5 p.m. ET).

Full release below (link):

NVIDIA (NASDAQ: NVDA) today announced selected preliminary financial results for the second quarter ended July 31, 2022.

Second quarter revenue is expected to be approximately $6.70 billion, down 19% sequentially and up 3% from the prior year, primarily reflecting weaker than forecasted Gaming revenue. Gaming revenue was $2.04 billion, down 44% sequentially and down 33% from the prior year. Data Center revenue was $3.81 billion, up 1% sequentially and up 61% from the prior year.

The shortfall relative to the May revenue outlook of $8.10 billion was primarily attributable to lower sell-in of Gaming products reflecting a reduction in channel partner sales likely due to macroeconomic headwinds. In addition to reducing sell-in, the company implemented pricing programs with channel partners to reflect challenging market conditions that are expected to persist into the third quarter.

Data Center revenue, though a record, was somewhat short of the company’s expectations, as it was impacted by supply chain disruptions.

Second quarter results are expected to include approximately $1.32 billion of charges, primarily for inventory and related reserves, based on revised expectations of future demand.

“Our gaming product sell-through projections declined significantly as the quarter progressed,” said Jensen Huang, founder and CEO of NVIDIA. “As we expect the macroeconomic conditions affecting sell-through to continue, we took actions with our Gaming partners to adjust channel prices and inventory.

“NVIDIA has excellent products and position driving large and growing markets. As we navigate these challenges, we remain focused on the once-in-a-generation opportunity to reinvent computing for the era of AI,” he said.

“The significant charges incurred in the quarter reflect previous long-term purchase commitments we made during a time of severe component shortages and our current expectation of ongoing macroeconomic uncertainty,” said Colette Kress, EVP and CFO of NVIDIA.

“We believe our long-term gross margin profile is intact. We have slowed operating expense growth, balancing investments for long-term growth while managing near-term profitability. We plan to continue stock buybacks as we foresee strong cash generation and future growth,” she said.

In kneejerk reaction, NVDA plunged more than 8%, hammering the broader semiconductor space and also dragging broader market futures modestly lower.

Finally, since we know everyone is concern, yes – Nancy Pelosi dodged the proverbial bullet by dumping all of her NVDA calls two weeks ago (at a loss).

Tyler Durden
Mon, 08/08/2022 – 09:18

via ZeroHedge News https://ift.tt/YOfkUmQ Tyler Durden

There Is A Giant Illusion For The Majority Of Market Commentators Choosing Not To See It

There Is A Giant Illusion For The Majority Of Market Commentators Choosing Not To See It

By Michael Every of Rabobank

Holy Illusions

Hands up how many of you had 528K down as your US payrolls guess? Nobody, because the Bloomberg survey low was 50K and the high 325K. While there are question marks over these data given Covid –nearly 3m people weren’t/couldn’t work due to it– and the “birth/death” model, the household survey saw jobs +179K; backwards payroll revisions were +28K; total employment was back to pre-pandemic levels, albeit with reallocation away from sectors such as leisure and hospitality (-1,214K) towards others, such as transport (+745K); the participation rate edged down to 62.1%, so the jobless rate fell to 3.5%, but even using pre-Covid participation rates unemployment would have been 5.4%, down from 5.5%; and average hourly earnings rose much faster than expected at 0.5% m-o-m, 5.2% y-o-y (and 6.0% annualized).

If it’s an illusion, and look at full-time vs. part-time and multiple jobs as a clue

… it still convinced Larry Summers to warn that if US CPI falls back this week, the Fed must not pivot, and Krugman to add it’d be “no justification for a pivot toward easier money.” Indeed, it now seems the Fed may go another 75bps in September, and Bowman implies afterwards as well perhaps, and the Wall Street Journal underlines, “Witness the small army of Fed officials who have fanned out to warn markets that the Chairman didn’t mean what he supposedly wasn’t saying last week.” In short, the illusion of a Fed dovish pivot is dispelled, with 2-year Treasury yields up 16bp to 3.23% Friday, and 10s up 14bp to 2.83%. More to come: or record yield curve inversion.

Add a Fed pivot to “transitory” inflation on the list of illusions fading for the same underlying reason: the global system is crumbling. They join EU energy, economic, and foreign policy, as the German regulator calls for 20% cuts in household gas usage, and the West’s ‘Great Illusion’ that war just can’t happen (to it) in the modern world.

On which, Ukraine just got another $1bn in US arms as a new phase of the war looms around Kherson: a counter-attack appears imminent. However, don’t be under the illusion that the US can keep up that pace of arms supply – and its stocks can’t be replaced quickly once depleted. The same is true for Russia, and in terms of men, but their media says North Korea might strike a deal to send 100,000 soldiers to fight in Ukraine in exchange for food and energy(!) If so, the war escalates further, and the EU energy outlook darkens further. NATO member Turkey on Friday also struck a deal with Russia to deepen economic ties: that is a terribly muddied picture for the EU and US as they try to isolate Moscow. However, illusions abound on all sides: Russia just released a video aimed at attracting people to move there due to its ‘hospitality, vodka, and an economy that can withstand thousands of sanctions’.

Elsewhere, Reuters warns Chinese military exercises around Taiwan could disrupt key shipping lanes, and Taipei states they “simulate an attack” on its main island, drawing condemnation from the G7, but Russian support. China has now halted: communication with US military theatre leaders; defence meetings; maritime security dialogue; and co-operation over illegal migration, criminal justice, transnational crime, narcotics, and the climate – the US says this “punishes the world.” The White House is now leaning on Congress to delay the bipartisan Taiwan Policy Act of 2022, which designates it a major non-NATO ally, provides $4.5bn in military aid, upgrades its international status, and allows the imposition of sanctions, including SWIFT bans, on major Chinese financial institutions. As the Carnegie Endowment think-tank notes, “The US and China are seriously talking past each other…That disconnect will lead to a very unstable new baseline.”

Linking back to today’s title, Friday saw the release of ‘Holy Illusions’, a report from a key think-tank backing UK PM candidate Truss. It argues, “Just as in the 1970s, the country faces many interconnected, serious but superficially very different problems.” True.

Controversially, it diagnoses that “The most significant underlying economic problem… is the malign consequences of low to negative interest rates over a prolonged period.”  Artificially low rates, it says, have “gradually prevented the normal mechanisms of a market economy from working properly… there has been a greater and greater search for yield on riskier and riskier assets, with everything that follows upon that, notably, market instability, huge asset price inflation, and inequality. The lack of rewards to enterprise and the ease with which fundamentally unproductive “zombie” companies can be maintained have made it difficult to generate those normal improvement mechanisms of a market economy which drive productivity and growth.” It’s hard to disagree with that Austrian and Marxist assessment.

The report then says other UK problems are manifold: “Implausible energy policies”; over-regulation, antipathy to risk; “Unsustainable” welfare; a shrinking labour force; a declining birth-rate (an issue in all major economies, except one); “Education systems that don’t educate”; and, it claims, high immigration. It warns that if current UK growth rates continue –and this was presumably before the BOE’s latest awful assessment– then by 2035 the likes of Poland will “overtake” the UK: will they then import British plumbers?

It unsurprisingly argues Brexit is not an issue, even if it means short-term costs (and clearly more immigration is not on the cards). It says the UK isn’t willing or able to do anything with the “full democracy” Brexit grants it, as “Our governing class seems to have forgotten how to govern, how to guide a state, and how to set a goal and direction of travel.”

Then –perhaps contradicting itself for some readers– it argues, “Given this set of daunting problems… there really ought to be strong political movements… to analyse and begin to deal with them. That is not the case. Instead we see the reverse – a refusal to get to grips with the problems or even to acknowledge them. It is easier to ignore the most pressing economic and societal issues of the day, pretend they don’t exist, or claim they will be solved automatically as normal conditions return. We are, it seems, studiously pretending to be asleep.” Again, no arguments here. To show it is not like the others, it dares to ask,What is to be done? – and it tells us government must:

Convince the public that change is needed. The public must come to feel that we have taken a wrong path and to react against it.” They are already there! Just as we have mortgage strikes in China, we may see energy strikes in the UK; and some warn of a looming ‘winter of discontent. (And don’t think Putin doesn’t see this too, and won’t act accordingly.)

Show the electorate an alternative,” which is “to increase the productive capacity of our economy (because without that other problems simply cannot be solved)”. They are with you! But here comes the rub. What does that mean on energy? Silence. Moreover, the government must “persuade the public… that collectivist, socialist solutions are incapable of achieving that.”

But how do you get the private sector to invest productively when other governments will? See ‘how the US gave away a breakthrough battery technology to China’, because the inventor “talked to almost all major investment banks; none of them [wanted to] invest in batteries,” as they “wanted a return on their investments faster than the batteries would turn a profit.” Will higher rates, lower taxes, and deregulation force banks to make loans to productive rather than “fictitious capital”? Austrians say yes: Marxists say not, and with the better track record; and they add that even productive loans will just be made abroad, where it is cheaper to invest.

That gaping theoretical/policy hole is more evident when we are then told the government must “persuade the public that this alternative route is actually possible; that [it] has a plan to get the country onto it; that continuing on the current path will simply make the inevitable correction measures more painful; and that failure to take such measures will mean a materially worse outcome. [It must] make this alternative politically feasible and hence potentially attractive.”

–But what alternative?!–

Its conclusion avoids the answer in saying that: “A successful nation state needs market economics to create prosperity, and requires solidarity and a clear sense of identity to sustain itself. A reform programme must be similarly broad-based. It should reject the artificial polarity between the “market”  –“right wing” economics and economic globalisation– and “society” –“left wing” statism and solidarity– but recognise instead that running a successful country involves elements of both.”

It just doesn’t say how beyond rates, taxes, and fostering ‘national unity’: yet the latter alone was *wrongly* presumed by Smith and Ricardo to stop capitalists investing abroad at all, which we just edit out of our textbooks! If only we could edit it out of our financial flows so easily.

Ironically, the report also says, ”the political difficulty is that governments and politicians have not for many years set out the reality of how economies work and how prosperity is created. Levels of understanding are low.” Yes, they are: if it was as simple as ‘getting the state out of the way’, China would not be an economic superpower and Afghanistan might be.

Yet the underlying message that we been ‘getting GDP wrong’, and we can’t get it right by only focusing on GDP is arguably very valid, as is the criticism of relying on low rates policy. We *do* need a higher common purpose, and higher rates, and others are saying similar things: here is an example arguing, “Without that, any aspiring state is just a gated community for the working wealthy, much like the ones for old retirees in South Florida.” It’s just that we need *more* than that structurally to boot, and ‘Holy Illusions’ still seems to cling to its own in avoiding that conclusion.

It *could* be seen as backing a neo-Hamiltonian free market behind high tariff barriers, with industrial policy, which was how the US (and China) developed. Yet that mercantilist model is also an illusion for the UK and others not large enough for economies of scale and a modern army, especially as large rivals *are* state-backed and have one; and as high debt levels logically require MMT and higher interest rates, if just to pay for that military. The flurry of legislation coming out of the US is not a million miles away from some of those ideas and developments.

But if we need ‘Hamilton’ in blocs, the UK still just rejected being a member of one. Does that mean it will end up in a new Holy Anglosphere? Some say that’s no illusion, other that it is. Regardless, the above still implies global national-security/commodity/supply-chain/tech/values fragmentation ahead; and higher interest rates; and lower asset prices; and more productive, higher-wage investment – as we had already projected as a 2030 scenario. Unless that’s just my own holy illusion.

What isn’t is that if you don’t keep track of these seemingly-esoteric developments, you won’t be in a position to call where rates are going – which is why nobody in markets called three (or four?) back-to-back 75bps Fed hikes this year. That was “not how the political economy works”. But the political economy had changed. To paraphrase Keynes, “When the facts change, I change my forecast. What do you do?”

That is what you should be focused on: not the illusion of the relevance/positivity of Chinese July trade data released Sunday, which showed exports up 18% y-o-y and imports only 2.3%, for a staggering trade surplus of $101.3bn. Does anyone think this $1.2 trillion annualised figure is good news for anyone: not China (where it means no demand); not globally (where it means no local supply). There is a giant illusion for the majority of market commentators choosing not to see it.

Tyler Durden
Mon, 08/08/2022 – 09:04

via ZeroHedge News https://ift.tt/oSDk4QZ Tyler Durden

China Extends Taiwan Drills Past Sunday Deadline, Says Training Under “Real War Conditions”

China Extends Taiwan Drills Past Sunday Deadline, Says Training Under “Real War Conditions”

China’s military drills in six zones surrounding Taiwan were scheduled to wind down and end on Sunday, but on Monday Beijing announced it is extending the threatening military drills which Taipei officials have slammed as a “blockade” and simulation for future invasion. The drills were originally set for four days, but have now been extended into this new week.

Not only have the drills launched in the wake of the last Tuesday into Wednesday visit to the self-ruled island of US House Speaker Nancy Pelosi disrupted surrounding air traffic and shipping lanes key to global trade, but they’ve upped tensions with Washington, given the USS Ronald Reagan carrier strike group was ordered to stay in waters near Taiwan for longer than planned.

The People’s Liberation Army (PLA) Eastern Theatre Command confirmed Monday that it is “continuing joint training under real war conditions, focused on organizing joint anti-submarine warfare and naval strikes.”

Image: Xinhua via AP

This follows, as we detailed Sunday, on the heels of a “close quarters” standoff wherein ten warships each from the Chinese and Taiwan sides closely shadowed each other the Taiwan Strait. A total of 66 PLA aircraft and 14 warships were observed conducting exercises aimed at Taiwan into Sunday evening, with the aircraft repeatedly violating Taiwan’s Air Defense Identification Zone (ADIZ).

In announcing its military on a high state of alert and confirming it sent additional ships through the strait, Taiwan’s defense ministry again said China is “simulating attacks on the island of Taiwan and our ships at sea.”

Further, according to the AP on Monday, “The exercises would include anti-submarine drills, apparently targeting U.S. support for Taiwan in the event of a potential Chinese invasion, according to social media posts from the eastern leadership of China’s ruling Communist Party’s military arm, the People’s Liberation Army.”

“The military has said the exercises involving missile strikes, warplanes and ship movements crossing the midline of the Taiwan Strait dividing the sides were a response to U.S. House Speaker Nancy Pelosi’s visit to the self-ruled island last week,” the report details. 

Meanwhile, at a moment it appears that China’s ongoing military squeeze is set to (at least for the foreseeable future) hold the democratic-run island ‘hostage’ – also threatening vital trade – the pressure on Washington to act more firmly in support of Taipei is growing

The latest Taiwan defense ministry statement said of the drills, “Their intention is to deal a blow to our morale and threaten regional security.” Alarmingly the statement also underscored the adverse effect on international air traffic in the region. 

Echoing the point of view of Taiwan officials and some regional allies, a Vietnam-based regional security analyst named Duan Dang was cited in FT as saying, “If the US doesn’t do something militarily to push back China in Taiwan Strait and re-establish a credible red line, it will be very bad! Frankly, no one in the region is going to believe in US commitments anymore.”

Tyler Durden
Mon, 08/08/2022 – 08:30

via ZeroHedge News https://ift.tt/2K0rWxe Tyler Durden

Futures Storm Higher To Start The Week As “Most Hated Rally” Steamrolls Bears

Futures Storm Higher To Start The Week As “Most Hated Rally” Steamrolls Bears

US equity futures rose to start the week as the “most hated meltup” continued just as we said it would over the weekend as stubborn bears are forced to cover and start chasing higher out of FOMO, while Treasury yields fell while investors assessed the path of monetary policy ahead of this week’s critical CPI data. Nasdaq 100 futures rose 0.7% while S&P 500 futures gained 0.5% by 7:30 a.m. in New York after the underlying benchmarks dropped on Friday following news that US job growth soared beyond expectations. Meanwhile, the yield on the 10-year Treasury dropped to 2.79% after soaring at the end of last week, while the dollar dipped and bitcoin jumped above $24K.

In premarket trading, stocks tied to renewable energy, such as Tesla, rose after the Senate passed a key bill that Democrats called the largest investment in fighting climate change ever made in the country. Meanwhile, cryptocurrency-exposed companies like Coinbase Global Inc. and Riot Blockchain Inc. climbed as Bitcoin breached $24,000. Bank stocks are also higher in premarket trading as the broader equity market rises. In corporate news, Avalara is being acquired by Vista Equity Partners for $93.50 a share in a deal that values the tax software maker at roughly $8.4 billion. Meanwhile, Robinhood is set to pay $9.9 million to resolve lawsuits over crashes on its trading platform in 2020.

“The sentiment will mostly depend on this week’s inflation data,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “If US inflation starts easing, the Fed could rethink about smaller rate hikes, which could give another positive swing to the stocks.”

Friday’s “stellar” jobs data eased fears of a recession while increasing the chances that the Federal Reserve will be more aggressive in its fight to tame inflation. Over the weekend, San Fran Fed President Mary Daly said the central bank is “far from done yet” in bringing down prices and suggested a 50 basis-point rate increase isn’t the only option on the table for the next meeting.

The Friday payrolls data surprise “was large enough to re-ignite the inflation debate and renew focus on US CPI prints,” said Peter McCallum, a strategist at Mizuho. “Indeed, a very unexpected move lower in US CPI is needed for the market to stop thinking about the Fed having to do more. And with more tightening, the probability of a hard landing rises.”

Meanwhile, as Bloomberg notes, the S&P 500 climbed more than 6% over the past four weeks, approaching the level of two standard deviations for data going back 30 years.

That’s unusual in the absence of a clearly event-driven market such as during the global financial crisis or the start of the Covid-19 pandemic. However, The advance in equities could face another test from a likely contraction in corporate margins next year as costs remain high, according to strategists at Morgan Stanley and Goldman Sachs.

“We think it’s premature to sound the all-clear simply because inflation has peaked,” Morgan Stanley strategists led by Michael Wilson said. “The next leg lower may have to wait until September” as the negative effects of falling inflation on company profits become more reflected in earnings.

Looking at the week’s key data, the closely watched CPI is seen rising 0.2% in July from a month earlier, which would be the smallest advance since the start of 2021. However, the so-called core measure, which strips out energy and food, probably climbed a concerning 0.5%, based on the median estimate in a Bloomberg survey of economists.

European stocks tracked US futures higher, with the Euro Stoxx 50 is up 0.5%. IBEX outperforms peers, adding 0.6%, FTSE MIB is flat but underperforms peers. Real estate, tech and financial services are the strongest-performing sectors.

Earlier in the session, Asian stocks edged lower as concerns about more aggressive interest-rate hikes by the Federal Reserve and fresh Covid lockdowns on the Chinese resort island of Hainan weighed on sentiment. The MSCI Asia Pacific Index dropped as much as 0.5% before paring, with losses in technology and consumer discretionary shares offsetting gains in materials firms. Hong Kong stocks led declines around the region, even as the government cut the hotel quarantine for inbound travelers to three days from seven. A better-than-expected July jobs report in the US fueled expectations of faster Fed monetary tightening, with investors monitoring this week’s inflation data for further clues. Meanwhile, the lockdowns in China’s Hainan province have stranded tens of thousands of tourists, dealing a blow to its duty-free retail industry.

Asian equities capped their third-straight weekly gain last Friday as the region shrugged off rising geopolitical risks in the Taiwan Strait. Investors also continue to assess the ongoing corporate-earnings season. “We believe markets have discounted a fair bit of the earnings cuts to come, partly driven by the tech inventory de-stocking cycle in the coming months,” said Soo Hai Lim, head of Asia ex-China equities, at Barings. “Improving fundamentals, more attractive valuations and relatively looser monetary conditions in Asia can help deliver relative equity outperformance for the region in the coming months.”

Japanese stocks reversed earlier losses with the Nikkei 225 Index closing at its highest since March 29, as investors assessed a slew of earnings reports from local firms. The Topix Index rose 0.2% to 1,951.41 as of market close Tokyo time, while the Nikkei advanced 0.3% to 28,249.24. Suzuki Motor Corp. was among the top performers on the Nikkei, jumping more than 10% after an earnings beat. Bandai Namco also advanced after its outlook was raised.   Daiichi Sankyo Co. contributed the most to the Topix Index gain, increasing 5.2%. Out of 2,170 shares in the index, 1,033 rose and 1,030 fell, while 107 were unchanged. “Today’s Japan stocks are moving over micro factors such as the earnings results,” said Hiroshi Matsumoto, a senior client portfolio manager at Pictet Asset Management. “Some Japanese companies are reporting good results.”

India’s equity index climbed to its highest level in nearly four months, boosted by gains in HDFC Bank and Reliance Industries.   The S&P BSE Sensex rose 0.8% to close at 58,853.07 in Mumbai, after falling by as much as 0.2% at the start of the session. The NSE Nifty 50 Index gained 0.7%. Of the 30 members on the Sensex, 20 rose and 10 fell. All but one of 19 sectoral indexes compiled by BSE Ltd. advanced, led by a gauge of capital goods companies. The market is shut on Tuesday for a local holiday.  HDFC Bank advanced to its highest level since April 13 as the Economic Times newspaper reported that the private sector lender raised $300 million in deposits from expat Indians, quoting unnamed people familiar with the matter.  Reliance Industries climbed most in a week as the oil-to-retail conglomerate said it will begin investing across the green-energy value chain. State Bank of India dropped after its quarterly report showed net income below analysts’ estimates.

Bloomberg dollar spot index flat after paring earlier decline. JPY and EUR are the weakest performers in G-10 FX, AUD and NZD outperform.

In rates, Treasuries held gains amassed during European session, led by bigger gains across core European bonds and unwinding a portion of Friday’s jobs-report selloff. US long-end yields richer by ~4bp, flattening 2s10s by ~2bp, 5s30s by less than 1bp; 10-year around 2.79% trails comparable bunds and gilts by 2bp-3bp. Treasuries 2s10s curve inversion deepens to as much as 42.3bps, the lowest since 2000. No US data or Fed speakers are slated for Monday; refunding auctions begin Tuesday, July CPI scheduled for Wednesday.short-end yields underperform bunds by about 4 bps. Peripheral spreads widen to Germany with 10y BTP/Bund adding ~7bps to 212.8bps after Italy’s outlook was cut to negative by Moody’s on political risk.

In commodities, WTI trades within Friday’s range, falling 0.3% to around $88. Base metals are mixed; LME nickel falls 2.4% while LME lead gains 1.9%. Spot gold is little changed at $1,775/oz. 

In crypto, noted upside for the space amid thin newsflow elsewhere, with Bitcoin surpassing USD 24k at best and thus marginally eclipsing last week’s USD 23.9k peak.

It’s a quiet start to the week in econ data with nothing scheduled on the economic slate and no Fed speakers either; refunding auctions begin Tuesday, July CPI scheduled for Wednesday.

Market Snapshot

  • S&P 500 futures up 0.3% to 4,157.75
  • STOXX Europe 600 up 0.6% to 438.13
  • MXAP down 0.1% to 160.53
  • MXAPJ down 0.4% to 524.35
  • Nikkei up 0.3% to 28,249.24
  • Topix up 0.2% to 1,951.41
  • Hang Seng Index down 0.8% to 20,045.77
  • Shanghai Composite up 0.3% to 3,236.93
  • Sensex up 0.8% to 58,862.37
  • Australia S&P/ASX 200 little changed at 7,020.62
  • Kospi little changed at 2,493.10
  • German 10Y yield little changed at 0.89%
  • Euro little changed at $1.0187
  • Gold spot down 0.1% to $1,773.21
  • U.S. Dollar Index down 0.11% to 106.50

Top Overnight News from Bloomberg

  • China Extends Military Exercises Near Taiwan With New Drill
  • Ships Resume Taiwan Routes Even as China Continues to Drill
  • Oil Endures Choppy Start to Week With Demand Concern to the Fore
  • Senate Passes Democrats’ Landmark Tax, Climate, Drugs Bill
  • Yen Shorts Crumble as 2022’s Hottest FX Trade Comes to an End
  • ‘Most Vulnerable’ Emerging Markets Now Face Euro Recession Risk
  • Jack Dorsey Tweets ‘End the CCP’ After China Covid Report
  • Carlyle CEO Resigns in Sudden Reversal of Generational Shift
  • SoftBank Reports Record $23.4 Billion Loss as Holdings Fall
  • India Seeks To Oust China Firms From Sub-$150 Phone Market
  • Five States Risk Undoing Legitimacy of 2024 Election
  • CVS Health Is Mulling a Bid for Signify Health, WSJ Reports
  • Winners and Losers in Democrats’ Signature Tax and Energy Bill
  • NYC Mayor Greets New Bus of Migrants Sent by Texas Governor
  • Daly Says Fed Is ‘Far From Done Yet’ on Bringing Inflation Down
  • Buffett’s Berkshire Pounces on Market Slump to Scoop Up Equities
  • Bitcoin Believers Are Back to Watching Stocks After Crypto Crash

A more detailed look at global markets courtesy of Newsquawk

Asia-Pacific stocks traded mixed with price action choppy as participants reflected on the encouraging Chinese trade data and post-NFP hawkish pricing of Fed rate hike expectations, with sentiment also clouded by geopolitical risks related to China’s military drills near Taiwan and renewed shelling of Ukraine’s Zaporizhzhia nuclear plant. ASX 200 traded indecisively around the 7,000 level as weakness in the consumer-related sectors was offset by a strong mining industry, with OZ Minerals the biggest gainer after it rejected an indicative proposal from BHP. Nikkei 225 pared opening losses although the upside was capped amid the ongoing deluge of earnings including SoftBank which is scheduled to announce its results later today and with a cabinet reshuffle set for later this week. Hang Seng and Shanghai Comp were varied with the mainland indecisive as mostly stronger than expected Chinese trade data, including a record surplus in July, was counterbalanced by COVID woes after Sanya in the Hainan province was placed on lockdown which has trapped tens of thousands of tourists.

Top Asian News

  • Chinese authorities locked down the southern coastal city of Sanya during the weekend after a highly infectious Omicron strain was detected in the Hainan province, according to FT.
  • China’s aviation regulator shortened the suspension time for inbound flights on routes found to have COVID-19 cases in which flights on a route with an identified COVID case will be suspended for a week if 4% of passengers test positive and will be suspended for two weeks if 8% of passengers test positive, according to Reuters.
  • Hong Kong Chief Executive John Lee announced that the hotel quarantine will be reduced to 3 days from 7, with arrivals to be subject to a 3 + 4 format in which the 4 days will be home monitoring.
  • Japanese PM Kishida said he will reshuffle the cabinet in the week ahead to address issues including COVID-19, inflation and Taiwan affairs, according to Reuters.

European bourses are firmer across the board after shrugging off mixed APAC trade, Euro Stoxx 50 +0.8%. Similar directional performance in US futures, though magnitudes are more contained amid limited newsflow with little scheduled ahead, ES +0.3%. Sectors are firmer with no overall theme emerging though Tech, Real Estate and Utilities are among the best performers.

Top European News

  • UK Tory party leadership frontrunner Truss is under pressure to promise more to poor households facing a cost of living crisis this autumn after she expressed her preference to reduce taxes over ‘handouts’, according to FT.
  • UK government plan to cut as many as 91k civil servant jobs over 3 years will require deep cuts to public services and cost at least GBP 1bln in redundancy payments, according to a Whitehall review cited by FT.
  • UK government is to conduct a review of the foreign takeover of the National Grid’s gas transmission business amid increased concerns regarding energy security, according to FT.
  • Italy’s centrist Azione party is to abandon the centre-left alliance with the Democratic Party just days after agreeing to an alliance to join forces in an effort to prevent a right-wing landslide, according to Bloomberg.
  • Moody’s has cut its outlook on Italy to Negative from Stable, affirms BAA3 rating; risks to credit profile have been accumulating more recently due to the economic impact of Russia/Ukraine and domestic politics. Under baseline scenario, Italian debt to continue declining in 2022.

FX

  • The USD index has pulled back further from Friday’s post-NFP 106.93 before seeing a bounce at its 10 DMA (106.25).
  • Non-Dollar G10s are gaining momentum against peers, and vs the Buck; AUD holds the top spot.
  • EUR/USD and GBP/USD trimmed earlier upside to trade back under 1.0200 and 1.2100.
  • The Yen is the current G10 laggard amid broader risk and as the FOMC-BOJ pricing once again widens.

Fixed Income

  • Core debt modestly firmer, experiencing some respite from Friday’s post-NFP pressure amid pronounced Fed repricing and yield upside.
  • Albeit, in the context of recent session the circa. 70 tick upside in Bunds is limited.
  • BTPs pressured as Moody’s cuts their outlook for Italy while further political developments seemingly strengthen the chances of the right.

Commodities

  • WTI and Brent front-month futures saw upside momentum fade alongside a Dollar-rebound off lows.
  • Spot gold is trading sideways around USD 1,775/oz amid a lack of drivers.
  • Overnight, Chinese base metal futures opened firmer with added impetus from the Chinese trade data, whilst LME contracts trade somewhat mixed.
  • Tesla (TSLA) has reportedly signed a contract worth circa. USD 5bln to purchase battery materials from nickel processing companies in Indonesia, via Reuters citing CNBC Indonesia.
  • Russian oil product exports from Black Sea port of Tuapse planned at 1.443mln in Aug (vs 1.388mln in July), according to traders cited by Reuters.
  • China is poised to begin another round of tax inspections on independent refiners, according to Reuters sources. Inspections are to last months, commencing later this month.

US Event Calendar

  • Nothing major scheduled

DB’s Jim Reid concludes the overnight wrap

August has been fascinating so far with US recession talk pushed back with a string of better than expected data last week. The US economy simply cannot be deemed to be in a recession in a month when +528k jobs have just been added as payrolls showed on Friday.

This still feels to me like a classic (albeit compressed), old fashioned boom bust cycle. The Fed has been aggressively behind the curve with monetary policy amazingly loose versus history. The Fed have tightened a bit but monetary policy operates with a lag and monetary policy was and is still very loose. Remember we’ve only been hiking since March and real Fed Funds are still c.-7%. I still think recession by around the middle of 2023 is a slam dunk and that risk assets will go well below their June 2022 lows when we’re in it but I’m still not convinced the official recession happens over the next few months. As a related aside, the 2s10s yield curve first inverted at the end of March. A recession always eventually follows this in the US but the shortest gap between that and a recession is c.9 months over the last 70 years of data covering 10 recessions. The fact that the yield curve is getting more inverted just cements the likely recessionary signal from the yield curve but it always takes time. Ultimately I think a recession will be a lagged response to the necessary tighter policy put in place since March and the hikes still to come.

If payrolls was a bit of a shock, next up will be US CPI on Wednesday which we will review below. Staying with US inflation we will also see PPI on Thursday and the inflation expectations in the University of Michigan consumer survey on Friday. Staying with prices China (CPI, PPI) and Japan (PPI) get in on the act on Wednesday too. A monthly dump of UK data including GDP will be out Friday and will attract attention after the BoE’s forecast of a 5 quarter upcoming recession last week. Elsewhere US earnings are 85% complete so the newsflow will slow down on this front. The full day by day week ahead is at the end but we’ll focus most attention on US CPI here today.

Our economists expect the headline YoY rate to finally dip after energy prices have fallen of late. They are looking for 8.8% (from 9.1%) with consensus a tenth lower. Core however is expected to increase two tenths to 6.1% YoY. If we see such an outcome it’ll be interesting if the market cheers what could be the start of a decline from the peak in the headline rate or remains concerned that core continues to edge up. Core should be more important to the Fed but the market has been known to take the dovish interpretation to events of late, payrolls notwithstanding.

On US PPI on Thursday, most of our economist’s attention will be on the healthcare component as this feeds directly into core PCE, the Fed preferred measure. So far the wedge between core CPI and PCE has been biased in CPI’s favour (i.e. higher) as CPI has a big bias to rents vs healthcare for PCE. Last month healthcare surged after 4 soft months. Our economists have detailed why they think it will continue to be strong in this note (Link here).

Across the Atlantic, this week’s UK GDP print is expected to be -0.2% QoQ, the first quarterly contraction since Q1 of 2021. The June figure is expected to contract by -1.2% MoM. Elsewhere earnings season is winding down after 423 S&P 500 and 403 Stoxx 600 companies have now reported. Our equity strategists have reviewed global earnings so far here, noting that while beats are roughly at the historical average in the US, they’re exceeding it elsewhere. Yet, bar energy stocks, consensus estimates for Q3 have been declining across regions. Looking at the line up for this week, notable reporters include Disney (Wednesday), Porsche (today), Deutsche Telekom, RWE, Orsted and Siemens (Thursday).

Asian equity markets are mostly on the softer side as we start the week. As I type, the Hang Seng (-0.73%) is lagging despite Hong Kong’s move to cut mandatory hotel quarantine from seven days to three. Additionally, the Kospi (-0.10%) is also trading lower in early trade whilst Chinese stocks are mixed with the Shanghai Composite (+0.19%) higher and the CSI (-0.33%) lower. Elsewhere, the Nikkei (+0.25%) is holding on to its gains this morning.

Moving ahead, US stock futures point to a slightly negative opening with contracts on the S&P 500 (-0.16%) and NASDAQ 100 (-0.11%) dipping in overnight trading.

Early morning data showed that Japan recorded its first current account deficit (-132.4 billion yen) in five months in June (v/s -706.2 billion yen expected) and reversing a +128.4 billion yen surplus in the preceding month as surging imports eclipsed exports.

Over the weekend, data revealed that China’s export growth unexpectedly picked up (+18.0% y/y) in July, the fastest pace this year, against a +17.9% increase in June and beating market expectations of a +14.1% gain, thereby offering an encouraging boost to the economy as its struggles to recover from a Covid-induced slump.

In overnight news, the US Senate approved a $739 billion climate and healthcare spending package ahead of crucial midterm elections in November. When signed into law, the bill, formally known as the Inflation Reduction Act, would allocate $369bn for climate action – the largest investment in US history. At the same time, it would increase corporate taxes and lower healthcare costs as part of the package.

Reviewing last week now and it was a pretty volatile start to August on the back of Pelosi’s visit to Taiwan, the better than expected ISM prints, hawkish Fed speak, and finally the monster payrolls report on Friday which finally got the message through that the narrative of a dovish Fed pivot the week before was exceptionally premature.

Quickly recapping Friday’s data, nonfarm payrolls came in at +528k – more than double the final estimate of +260k with a further boost from the upwardly revised June reading of +398k (vs +372k previously). It was also the highest reading since February’s +714k. The July payrolls gains also ensured that the US has now recovered the 22m of job losses in the aftermath of covid outbreak. Other indicators reinforced the risks to inflation – unemployment was down to 3.5% (3.6% previously) and average hourly earnings surprised to the upside at 0.5% or 5.2% YoY (vs consensus of 0.3% and 4.9%, respectively). Slight softness came from a -0.1ppt drop in the participation rate (62.1% vs 62.2% estimates) but this was mostly in the young and not the prime-age cohort which makes it less worrying. Upward beats in employment indices also came from ISM indices earlier in the week, with headline gauges for both beating economists’ estimates as well.

The payrolls beat led to the US 2yr and 10yr jumping by +18.3bps and +13.9bps on Friday bringing the total weekly yield gains to +34.1bps and +17.8bps, respectively. These gyrations also inverted the 2s10s further, with the slope touching a low of around -43bps intraday, before finishing the day at -40.3bps, a -4.0bps move, -16bps on the week and to the most inverted since 2000.

Fed futures now price in +69bps at the September meeting, so a roughly 76% probability of another +75bps hike in September (up from Thursday’s +59bps, 36%). There’s still along way to go before the next FOMC though with another set of payrolls and two CPI prints before the next meeting.

For the S&P 500 it was a week with a few ups and downs (including -1% immediately after payrolls) but ultimately the market rose +0.36% (Friday -0.16%). Higher yields on Friday also drove divergences between benchmarks, with the Nasdaq (-0.50%) struggling a bit but still +2.50% on the week amid decent earnings results. For small caps, though, better economic data than feared overpowered the effect of rates, sending the Russell 2000 up by +0.81% on Friday and +1.94% on the week.

Oil moved higher after payrolls (WTI +0.53% and Brent +0.85%), but were still down a significant -9.74% and -13.72% on the week.

In Europe, sovereign bonds were also hammered after the payrolls report although the steady march higher started early in the morning and continued until the end of the session. Unlike in the US, however, the curves mainly steepened, with 10yr bund yields +15.2bps (+21bps on the week) edging ahead of the 2yr ones +13.5bps (+19bps on week).

Friday also saw yields sell-off further in the UK, with the 2yr yield (+11.1bps) slightly less extreme than the 10yr (+16.0bps). But in part thanks to the BoE, the UK’s front end gained +25.5bps on the week relative to +28bps on the 10yr. The periphery was quiet last week with 10yr Italian spreads declining -6.5bps on Friday and -13.6bps on the week. The market has been more relaxed after the far-right populists (riding high in the polls) suggested they won’t abandon EU budget rules if they win the elections.

Finally, European stocks dipped as the STOXX 600 closed -0.76% on Friday, and -0.59% for the week. Financials (+0.16%) and energy (+0.54%) were the sole outperformers sector-wise on Friday after the robust payrolls.

Tyler Durden
Mon, 08/08/2022 – 08:03

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Bullwhip-Effect Reversal Is The Major Downside Growth Risk

Bullwhip-Effect Reversal Is The Major Downside Growth Risk

Via blog.VariantPerception.com,

The main downside risk today that the market may not fully appreciate is the reversal of the historically large post-Covid bullwhip effect, which pulled forward a lot of future demand.

The bullwhip effect started with surging consumer goods demand and led to a huge restocking impulse up the supply chain. The below is an excerpt from our July 19th report.

As we highlighted in our July Macro Snapshot:

“ISM new orders to inventory ratio has been collapsing, suggesting this is the beginning of the end of the bullwhip effect. The significant build-up of US retailer inventories is set to exert a strong deflationary force on the economy once the bullwhip effect reverses.”

Leading relationships for ISM manufacturing are bad and still deteriorating.

We are tracking “hard” data to confirm the message from LEIs and the intensity of the industrial slowdown. Absolute USD values of manufacturing new orders and durable goods consumption are still elevated compared to pre-pandemic levels.

More timely hard data confirms the industrial slowdown has started.

Production at US factories declined in June for a second month owing to higher inventories and total industrial production fell for the first time this year (link).

Chemical prices have weakened significantly, signaling falling demand in the face of high prices and weakness in downstream markets. (Ethylene and propylene are key inputs for plastic and household chemical compounds).

Retail sales growth has moderated and has closed the divergence with our retail sales LEI.

We expect further weakness ahead (left-hand chart). Oil consumption as % of GDP has fallen sharply suggesting US consumer resilience is cracking.

*  *  *

Get the full picture at variantperception.com

Tyler Durden
Mon, 08/08/2022 – 07:20

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French Farmers’ Union Official Warns Of Milk Shortage

French Farmers’ Union Official Warns Of Milk Shortage

The president of the largest farmers’ union in France has warned that a shortage of feedstock caused by severe drought may lead to a milk shortage.

istock

I think that in the coming months, we will have a shortage of milk in France. To make milk, you need fodder, mainly alfalfa and corn, which have grown little this year,” said Yannick Fialip, president of the economic commission of the FNSEA and a breeder (translated).

So we risk running out of milk this fall and winter,” he told France Info.

According to Fialip, during normal seasons animals are typically grazing in the meadows this time of year. Thanks to severe drought, however, “It is necessary to bring fodder stored this spring, which was intended to feed the animals in winter, which is used from July and August.”

“This severe drought brings together two conditions: a significant lack of rain and very high temperatures which had a “hair-drying” effect on the plants which dried out many plants, especially all that is fodder. We had to harvest very early, especially corn.” -Yannick Fialip

He also noted that the state does provide a “calamity fund” which helps breeders to buy fodder by splitting the cost, and which many breeders have tapped with success.

That said, Fialip also notes that the price of milk paid to breeders in France is 20% lower vs. other European countries, and he’s calling for a measure to “better renumerate our breeders, which would allow them to have better cash flow and ensure the sustainability of the sector,” because “there is a big risk that some breeders will decide to decapitalize their livestock in the face of this situation.

Tyler Durden
Mon, 08/08/2022 – 06:55

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Farage Warns, If America Falls To Marxists, Western Civilization Will Follow

Farage Warns, If America Falls To Marxists, Western Civilization Will Follow

Authored by Darlene McCormick Sanchez via The Epoch Times,

Marxism is threatening democracies across the globe—not just America—warned Britain’s Nigel Farage during a Saturday speech to conservatives in Dallas, Texas.

“Ladies and gentlemen, we are under attack,” said Farage, the past leader of Great Britain’s Brexit Party.

“The biggest threat we face is from within.”

Farage, an ally of former President Donald Trump, quickly became a favorite during the final day of the Conservative Political Action Conference (CPAC), where thousands of conservatives gathered for the event.

Farage said that democracies such as the United Kingdom, New Zealand, Canada, and Australia, are experiencing a Marxist threat similar to the one facing America.

Marxists are trying to destroy Judeo-Christian culture, the family unit, history, and the identity of Western nations, he said.

Socialist professors in universities have paved the way for the indoctrination of children in the school systems, Farage said. The left has co-opted the media for the most part, and it’s no coincidence that socialistic viewpoints of race—white oppression and black victimhood— have become mainstream, he added.

“This is a Marxist attempt to break everything we are,” he said. “We are going to fight back.”

The way to do that is to elect true conservatives, not RINOs, he said, adding that conservatives can not be afraid of being called “nasty names” by the left.

British Prime Minister Boris Johnson was elected as a conservative but governed as a liberal. Ultimately, he stepped down as prime minister in July after losing the confidence of those in his party.

In Australia, the same thing happened with Prime Minister Scott Morrison, who allowed state governments to impose oppressive lockdowns across the country during the pandemic and lost re-election in May, he said.

But of all the democracies in the world, it is America that must lead the fight against modern Marxism, he said.

“To save Western Civilization, this is the battleground—because if America falls, we all fall,” he said.

“You are the foot soldiers in this battle on behalf of not just America, but on behalf of the whole free world,” he added as thousands of CPAC attendees gave him a standing ovation.

Farage said the one element that can turn the tide against the Marxists is the silent majority in America. They don’t buy the left’s propaganda. Common sense Americans don’t believe in the concept of pregnant men, he said.

While it won’t be easy to stand up to the globalists, America has leaders who are up to the challenge, he said.

“I believe Donald Trump is the man to go out there and fight for America,” he said to wild applause. If Trump were in charge now, things would no doubt be different, he added.

Farage said Brexit won at the polls because conservatives in Britain made efforts to get reticent voters to use their voice at the polls.

The blood and treasure spent on the freedom enjoyed by the West could be for naught if conservatives don’t stand up to Marxism now, he added.

“The real hard work has just began,” he said. “Are you ready for the fight?”

And the crowd roared, “Ready!”

Tyler Durden
Mon, 08/08/2022 – 06:30

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Supercar Manufacturer McLaren Dives Into Fashion With $450 Sneakers

Supercar Manufacturer McLaren Dives Into Fashion With $450 Sneakers

British supercar manufacturer and Formula One team McLaren Group is getting into the sneaker game to drive additional revenue streams after it suffered financial turmoil during the virus pandemic. 

McLaren’s new running trainers, called “HySpeed,” are constructed with design elements from its supercars like carbon fiber and nitrogen-infused cushioning, according to Bloomberg

HySpeed will be sold under the Athletic Propulsion Labs (APL) brand, selling for a whopping $450, and offered at APL’s store in Los Angeles and various other high-end retailers online. 

The HySpeed is McLaren’s latest move into the fashion industry to develop new revenue streams following a restructuring in 2020, which included a layoff of 25% of its workforce and, more recently, funding injections as cash dwindled. 

McLaren Racing CEO Zak Brown recently made it clear the company is now on stable footing financially. 

APL’s athletic shoes have been a favorite among celebrities, including Khloe Kardashian, Lady Gaga, and Chrissy Teigen, which could propel the shoes into the spotlight with social media. 

“We have a lot of things planned in the future with them,” APL co-founder Ryan Goldston said. “This is a dream come true for us.”

And there it is, the birth of McLaren’s diversification into fashion… 

Tyler Durden
Mon, 08/08/2022 – 05:45

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Johnstone: “Russian Propaganda” Just Means Disobedience

Johnstone: “Russian Propaganda” Just Means Disobedience

Authored by Caitlin Johnstone via Medium.com,

You can always tell how important narrative control is by watching the way people react when their control of the narrative is jeopardized.

Empire apologists are raging at Amnesty International for pausing its aggressive facilitation of western imperialism to issue one brief criticism of the way Ukrainian forces have been endangering civilian lives with their warfare tactics against the Russian military.

Amnesty is far from the first to highlight this extensively documented issue; that Ukrainian forces have been deliberately positioning themselves in civilian populations without taking proper measures to protect noncombatants is a concern that has been voiced repeatedly since the war began and reported on by both mainstream western news outlets and the United Nations.

Nevertheless, Amnesty’s claim that “Ukrainian forces have put civilians in harm’s way by establishing bases and operating weapons systems in populated residential areas, including in schools and hospitals” has drawn fire from Ukrainian officials, from mass media pundits, from the brainwashed rank-and-file on social media, and from President Zelensky himself.

A common criticism circulating among the outrage is that Amnesty is facilitating Russian propaganda, has been influenced by Russian propaganda, or has itself become an instrument of Russian propaganda.

The head of Amnesty International’s Ukrainian branch resigned as a result of the report, saying that “the organization created material that sounded like support for Russian narratives” and that in an effort to protect civilians, “this study became a tool of Russian propaganda.”

“It is a shame that the organization like Amnesty is participating in this disinformation and propaganda campaign,” tweeted Zelensky advisor Mykhailo Podolyak.

“Amnesty International can go to hell for this garbage,” tweeted Human Rights Foundation Chairman Garry Kasparov. “Or go to Ukraine, which Putin’s war is trying to turn into hell. As with their actions on Navalny, it reeks of Russian influence turning Kremlin propaganda into Amnesty statements.”

The Daily Mail called the Amnesty report “a coup for Vladimir Putin’s propaganda machine.”

“The organization gives a huge assist to Russian propaganda,” tweeted Oleksiy Sorokin, chief operating officer of the NATO propaganda outlet Kyiv Independent.

“Shameful victim-blaming. Russia invaded Ukraine and is committing unspeakable war crimes there. Please do not amplify Russian lies,” tweeted Paul Massaro of the US government’s Helsinki Commission.

The underlying premise behind these complaints, of course, is that it is Amnesty International’s job to help Ukraine win a propaganda campaign against Russia. Which is odd, because Amnesty’s reporting on the war has actually been overwhelmingly biased in favor of Ukraine this entire time.

“Anger directed at Amnesty is surprising given that it is the first critical piece the group has written on Ukraine since the war began,” reports Unherd. “Over the last six months, Amnesty has published 40 articles on Ukraine, nearly all of which condemn Russia’s invasion, with only one exception — its latest — that could be conceivably described as critical of Ukraine.”

Even the Amnesty report currently sparking all the outrage contains repeated condemnations of Russia’s actions in Ukraine, citing “indiscriminate attacks by Russian forces” and “war crimes” Amnesty has found Russia guilty of committing, as well as decrying the use of “inherently indiscriminate weapons, including internationally banned cluster munitions.”

But even ninety-nine percent loyalty to the official line is not enough for imperial spinmeisters and the empire’s useful idiots. Anything short of 100 percent compliance counts as Russian propaganda.

But that’s precisely the notion that has been drummed into western consciousness with ever-increasing fervor since 2016: that any dissent about US foreign policy is Russian propaganda. Don’t support western interventionism in Syria? You’re spouting Russian propaganda. Worried about nuclear war? Russian propaganda. Don’t think the fight for US unipolar domination is worth all this dangerous brinkmanship? Russian propaganda. Don’t like the idea of an expensive proxy war with no exit strategy whose economic fallout is making life harder and harder for more and more people all around the world? Russian propaganda.

I myself am accused of being a peddler of Russian propaganda many times per day, and have been for years. This despite my hardly ever consuming Russian media, never receiving a penny from Russia, and never having worked for the Russian government or any other government at any time. Russian media have at times chosen of their own initiative to amplify my work since I have a standing invitation for anyone to do so, but I’m literally just an Australian woman writing her opinions online with her American husband. I only qualify as “Russian propaganda” because I disagree with US foreign policy.

Ask anyone who says a criticism of the western empire’s Ukraine policy is “Russian propaganda” to name a critic of western Ukraine policy who they don’t consider a Russian propagandist. They won’t be able to. For them, disagreeing with one’s government about Ukraine is itself Russian propaganda.

For empire apologists the measure of what constitutes “Russian propaganda” about Ukraine has nothing to do with whether or not what’s being said is true or valid; it’s literally just a question of obedience to one’s government about the decisions it’s been making with regard to that nation.

If the measure of whether something qualifies as propaganda is defined entirely by whether it agrees with one’s government, then that measure is itself propaganda.

That’s exactly what’s happening with criticism of the west’s interventionism in Ukraine. Something doesn’t have to come from Russia to be considered Russian propaganda, and its source doesn’t need to have any connection to the Russian government. It doesn’t even have to be false. All it needs to be is disobedient.

We saw this illustrated this past June when The Guardian published a NATO-backed claim that journalist Aaron Maté was “the most prolific spreader of disinformation” among a “Russia-backed network of Syria conspiracy theorists,” despite being incapable of citing a single false thing in Maté’s Syria reporting, and despite The Guardian having to hastily edit out their “Russia-backed” claim.

We also saw this illustrated this past June in a University of Calgary briefing paper on “disinformation” about the war in Ukraine which warns about “five primary narratives” being circulated online:

1. Implying NATO expansionism legitimizes the Russian invasion

2. Portraying NATO as an aggressive alliance using Ukraine as a proxy against Russia

3. Promoting a general mistrust in institutions and elites

4. Suggesting that Ukraine is a fascist state or has extensive fascist influences

5. Promoting a specific mistrust of Canada’s Liberal government, and especially of Prime Minister Trudeau

There are arguments of varying strengths to be made for every one of those points, but more importantly it is self-evident that all of them are matters of opinion and none of them meet any sane definition of “disinformation”. They also can’t in and of themselves rightly be called either “Russian” or “propaganda”.

Russian propaganda certainly exists, and the Russian government certainly has a vested interest in influencing western thought in its strategic favor to whatever extent it is capable. But its capability is very, very limited, especially compared to the exponentially greater influence that western institutions have over our minds.

Russia has a few trolls and some media outlets that were barely viewed by westerners even before they were banned; the US-centralized empire has the billionaire media, Silicon Valley, Hollywood, and the education system. Comparing the two is like comparing a candle to the sun, and the sun ain’t Russia. But that’s the one whose influence over our minds we’re meant to worry about.

In reality we are swimming in propaganda that is favorable to the US empire our entire lives; it’s so ubiquitous that people don’t even notice it. Claiming your support for US foreign policy on an issue has nothing to do with being propagandized is like someone who was raised in the Westboro Baptist Church claiming it was pure coincidence that he happens to agree with the church on the sinfulness of homosexuality. It pervades our minds and shapes our society, but they want us all freaking out about the virtually nonexistent problem of “Russian propaganda”.

This is a thought-killing dynamic, and it is a major problem. It is not good that propaganda is shoved into our minds manufacturing consent for dangerous escalations between the world’s two greatest nuclear powers while anyone who opposes any part of it is dismissed as a Russian propagandist or a useful idiot of the Kremlin.

We should be using our minds more at this critical juncture, but these dynamics put in place by imperial narrative managers have instead got us using them a lot less.

Old joke:

A Russian and an American get on a plane in Moscow and get to talking. The Russian says he works for the Kremlin and he’s on his way to go learn American propaganda techniques.

“What American propaganda techniques?” asks the American.

“Exactly,” the Russian replies.

* * *

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Tyler Durden
Mon, 08/08/2022 – 05:00

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Visualizing A Century Of Unions In Europe

Visualizing A Century Of Unions In Europe

On February 24th, Russia invaded Ukraine launching one of the biggest wars on European soil since World War II. The invasion reflects a longstanding belief of Russia’s that Ukraine – and much of the Soviet Union’s former republics and satellite states – is still their territory to claim. But what is the “former glory” of Russia?

As Visual Capitalist’s Avery Koop and Harrison Schell detail below, of the USSR’s former republics and satellite states, many have moved on to join the European Union, and in Putin’s eyes have become more “Westernized” and further from Russian values. In fact, Ukraine recently had its candidacy status approved with the EU.

It’s now been a full century since the formation of the USSR. Much has changed since then, and this visual timeline breaks down how countries within and near Europe have aligned themselves over those 100 years.

In the above visual, Soviet satellite states are not shown as a part of the USSR, as they were never formal republics. Candidate countries still in process to join the EU are not shown.

The USSR / Soviet Union

The Soviet Union—officially titled the Union of Soviet Socialist Republics (USSR)—was formed 100 years ago in 1922 and was dissolved in 1991 almost 70 years later. At its height it was home to 15 republics, over 286 million people, and stretched from the Pacific Ocean to Ukraine, with virtual control and influence in countries as far west as East Germany.

Notable leaders characterized both the rise and fall of the USSR, starting with its establishment under Vladimir Lenin until the union’s dissolution under Mikhail Gorbachev. Latvia and Lithuania were among the first republics to make the move for sovereignty, beginning the demise of the Soviet Union.

Here’s a look at which modern day countries were a part of the USSR.

Additionally, there were multiple satellite states, which were not formally joined with the USSR, but operated under intense Soviet influence.

Today, there are still some countries that align themselves with Putin and Russia over the EU.

Belarus, sometimes called Europe’s “last dictatorship”, shares a border with both Ukraine and Russia and facilitated the entry of Russian soldiers into Ukraine. Furthermore, according to the Pentagon, Russian missiles have been launched from Belarus.

The European Union

The European Union was officially formed in 1993 and has 27 member states. Some former USSR republics are now a part of the union including Estonia, Latvia, and Lithuania. The most recent member to join was Croatia in 2013.

The EU has its roots in the European Coal & Steel Community which was formed in 1952 with Italy, France, West Germany and a few other countries comprising its first members. There are currently six candidate countries on track to join the EU — all but one were either former Soviet satellite states or formal republics:

  •  Albania

  •  Montenegro

  •  North Macedonia

  •  Serbia

  •  Turkey

  •  Ukraine

  •  Moldova

There are many reasons countries opt to join the EU: a common currency, easier movement of goods and people between national borders, and, of course, military protection.

However, in 2020 the UK formally left the union, making it the first country in history to do so. Here’s a look at every EU member state.

 

Ukraine’s Outlook

 

The iron curtain that was draped across Europe, which used to divide the continent politically and ideologically, has since been drawn back. But the war in Ukraine is a threat to many in Europe, and countries such as Poland have voiced fears about the spillover of conflict.

In late June, the European Council approved Ukraine’s bid for expedited candidacy to the EU, but the process will still likely be lengthy—for example, it took Croatia 10 years to formally join at the normal pace.

Beyond other needs such as military support, joining the union would allow refugees from Ukraine the freedom to migrate and work in other EU countries with ease.

Tyler Durden
Mon, 08/08/2022 – 04:15

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