Via Headline USA,

A federal appeals court has upheld a civil jury’s finding that President Donald Trump must pay $83.3 million to E. Jean Carroll for his repeated social media attacks against the longtime advice columnist after she accused him of sexual assault – even though a jury ruled that she lied about her rape allegations.

Carroll, whose advice column ran in the women’s magazine Elle from 1993 to 2019, has reportedly accused at least six prior men of raping her, including former CBS President Les Moonves.

Her bizarre social-media history also included posts making light of sexual trauma and even asking her followers if they found Trump sexually attractive.

Trump was prevented from submitting that evidence in his trial.

Despite her dubious track record, on Monday the 2nd U.S. Circuit Court of Appeals rejected Trump’s appeal of the defamation award, finding that the “jury’s damages awards are fair and reasonable.”

In case you didn’t know, E Jean Carroll has accused many men of raping or sexually assaulting her…

Including a babysitter’s boyfriend, a dentist, a camp counselor, an unnamed college date, an unnamed boss and CBS chief executive Les Moonves – Per The National Pulse

This is why…

— Ryan Fournier (@RyanAFournier) January 27, 2024

Trump had argued that he should not have to pay the sum as a result of a Supreme Court decision expanding presidential immunity.

His lawyers had asked for a new trial.

A civil jury in Manhattan issued the $88.3 million award last year following a trial that centered on Trump’s repeated social media attacks against Carroll over her claims that he sexually assaulted her in a Manhattan department store in 1996.

That award followed a separate trial, in which Trump was found liable for sexually abusing Carroll and ordered to pay $5 million.

That award was upheld by an appeals court last December.

In a memoir, and again at a 2023 trial, Carroll described how a chance encounter with Trump at Bergdorf Goodman’s Fifth Avenue in 1996 started with the two flirting as they shopped, then ended with a violent struggle inside a dressing room.

Carroll said Trump slammed her against a dressing room wall, pulled down her tights and forced himself on her.

A jury found Trump liable for sexual assault, but concluded he hadn’t committed rape, as defined under New York law.

Trump repeatedly denied that the encounter took place and accused Carroll of making it up to help sell her book.

He also said that Carroll was “not my type.”

A General Motors spokesperson confirmed to the Detroit Free Press that CEO Mary Barra sold 994,863 shares last month, valued at roughly $35.4 million. The sale accounted for 40% of Barra’s personal stake in the struggling legacy automaker, which is facing a slowdown in electric vehicle sales.

Barra’s fire sale, one of her largest ever, included shares linked to performance rewards dating back to 2011, plus a wind-down of her estate-planning trust. It should be noted that these sales occurred under her 10B5-1 plan. 

Here’s the breakdown (view Form 4 here) of the selling:

• Sold 297,000 shares at an average price of $58.24, making up to roughly $17.3 million.

• Sold 235,000 in money options at a strike price of $39, adding up to roughly $4.5 million.

• Sold 375,024 in the money options with a strike price of $35.49, adding up to roughly $8.5 million.

• Sold 87,839 shares from the annuity trust priced at $58.13, making roughly $5.1 million.

The Detroit Free Press cited Wedbush Securities analyst Dan Ives, who said Barra’s stock sale should not be viewed as alarming. 

“We are not concerned about this, and it’s about shares that hit some triggers,” Ives said, adding, “Barra remains a key part of the GM’s success, and we do not view this as a needle mover.”

Barra’s selling raises a new question: What does that say about GM’s future?

Bloomberg data shows that Barra’s stock sales began in the summer of 2024 and have continued ever since, reducing her total position to 2018 levels. Barra became CEO in January 2014.  

The selling comes as the Detroit Free Press announced in recent days that GM’s Spring Hill Assembly plant in Tennessee will experience several weeks of downtime. The plant makes the Cadillac Lyriq SUV and Vistiq. 

Additionally, GM’s Fairfax Assembly plant in Kansas City, Kansas, and its CAMI Assembly Plant line in Ingersoll, Ontario, are adjusting production plans.

“General Motors is making strategic production adjustments in alignment with expected slower EV industry growth and customer demand by leveraging our flexible ICE and EV manufacturing footprint,” GM spokesman Kevin Kelly told Detroit Free Press last week. 

Sales are slowing.

Only time will tell what 17 months of selling stock means for the future of GM’s leadership.

Update (1300ET): As we previewed and expected, French PM Francois Bayrou, the fourth prime minister in just 20 months, became the latest to depart having failed to get sufficient support to push a budget through parliament as 194 voted for him, 364 against.

Bayrou is reportedly going to submit his resignation to Macron early Tuesday, according to a government course.

Macron has limited options to steer France out of this crisis, according to PoliticoEU.

He is reportedly leaning toward appointing another prime minister — the fifth since January 2024 — but a new premier would face the same intractable parliament.

So too would a technical government made up of civil servants.

Another snap election looks unappetizing, though, as it could easily deliver another hung parliament.

In an extreme scenario, Macron could even resign, but that’s highly unlikely given his past statements.

Macron’s office hasn’t said whether he will speak tonight.

The EURUSD dipped very modestly on the news but remains higher on the day…

*  *  *

Prime Minister Francois Bayrou’s government will likely fall Monday, a victim of his push to chip away at France’s massive debt load.  The premier called the vote to rally lawmaker support for his plan to narrow France’s 2026 deficit to 4.6% of economic output from an expected 5.4% this year. That plan includes €44 billion ($51.6 billion) of spending cuts and tax hikes. He also floated an unpopular proposal to cut two public holidays as a way to reduce costs in Europe’s second-largest economy.  France’s fiscal deficit is now the widest in the euro area. Debt is rising by €5,000 ($5,840) a second, and the cost of servicing it is set to hit €75 billion next year, according to the government.

His plan may have backfired, however, as opposition parties in the National Assembly have mobilized against Bayrou’s minority government.

“There are moments when we need a rude shock,” Bayrou told France 5 television on Saturday. “There’s never been a situation as blindingly clear as this one.”

Bayrou will make a policy speech starting at 3 p.m. Paris time, followed by interventions by the political groups in the National Assembly.

The vote will take place in the evening, with the result expected between 8 p.m. and 9 p.m. (1400-1500ET)

Below is a full primer of what to expect, courtesy of Newsquawk

VOTE

• French PM Bayrou called a confidence vote in order to get support for his fiscal plans. The vote is scheduled for Monday, September 8th – timing TBC.
• As it stands, Bayrou is expected to lose the vote. There was some chance of his plans passing, though it would have required the support of at least one of the parties in opposition, as Bayrou’s government commands 210/577 Lower House seats, shy of the 289 majority figure.
• To obtain 289, Bayrou would have needed to court either National Rally (RN) or a minimum of two parties from the Left. Note, the actual threshold to remain may be less than 289, as officials who abstain are removed from the calculation i.e. the majority of votes cast determines the outcome.
• Parties on the Left have made clear that they will not be backing Bayrou; most pertinently, Socialist Party (PS/SOC) head Faure told Le Monde it would be “inconceivable’ for them to back Bayrou’s measures. Bayrou met with the Socialists on September 4th, but no breakthrough has been reported from this.
• At the other end of the spectrum, RN President Bardella said “the miracle did not happen” in talks between Le Pen and Bayrou, remarking that the PM’s fiscal plan crosses some RN red lines and they do not have confidence in the government.
• Overall, Bayrou’s failure to court support of the Left and/or Right means, barring an 11th hour change, that he will lose the confidence motion and Bayrou will have almost no choice but to resign.

TIMINGS

• In terms of the timing, Politico reports that PM Bayrou will speak in the National Assembly at 14:00BST/09:00ET to deliver a policy statement. Thereafter, each of the political groups will have the opportunity to speak and the PM can in turn respond to questions from the officials.
• Thereafter, the statement and responses by Bayrou will be subject to a confidence vote. The verdict of this, Politico estimates, will not be known until 18:00BST/13:00ET at the earliest.
• Following the vote, and assuming Bayrou loses the confidence motion, he submits his resignation to President Macron, who then dictates the next steps.

OUTCOMES

• There are a handful of potential scenarios ahead. 1) Bayrou wins the vote and pushes his reform plans through (very unlikely). 2) Bayrou loses, resigns and a new PM is appointed as part of the existing, or more likely an expanded coalition (possible). 3) Bayrou loses, resigns and a new PM cannot be agreed upon by the current parliament, causing President Macron to dissolve the Lower House and call new elections (possible). 4) Bayrou loses, either two or three occurs and the political instability continues, or three occurs and National Rally emerges victorious; at which point, President Macron could elect to resign (Macron cannot run for another consecutive term).
  • 1) Very slim chance of occurring, the market would likely see immediate relief from the surprise support for and progress on required fiscal reform. However, the French political landscape remains fractured so any relief may, ultimately, prove fleeting if the situation deteriorates once again in the weeks/months following.
  • 2) President Macron could appoint a new PM. However, any appointee would have the same issues Bayrou and Barnier before him, who faced a fractured political landscape, meaning this would be another sticking plaster rather than a lasting fix. One of the contenders for this could be current Finance Minister Lombard who, to the FT, outlined that Bayrou’s fall would necessitate concessions to the Left to secure broader support for reform. However, this feeler to the Socialist Party (PS) has already run into opposition from The Republicans (LR) as the right-leaning gov’t coalition member has made clear they will not work with PS.
  • 3) Fresh legislative elections could be called by President Macron. However, the polling situation has not moved in Macron’s favour since the 2024 election, as his Ensemble party has slipped by 21% of the vote share to c. 15% while RN and allies have been steady at around 32-33% (prev. 29%). Overall, the French system means an outright victory is very unlikely and as such the fractured political landscape would likely continue, with Macron running the risk of being President to a National Rally PM, likely Bardella.
  • 4) Macron has made clear that he has no intention of resigning ahead of his term ending around April 2027. Macron cannot seek a third consecutive term, though he could run again in 2032 or later, if he wished. If Macron stepped down, polling points to RN’s Bardella (Le Pen cannot run between 2025-2030 due to embezzlement, though she is planning to appeal this in the event of a Presidential election being called) securing victory in the first round with around 30% of the vote. Though, it is much less clear how he would fare in a second round vs Edouard Philippe, with polls for that round near-enough tied.
• Note. Macron is reportedly seeking to avoid legislative elections, according to Bloomberg. The President believes that elections would result in another fractured political situation (outlined in scenario 3 above). Instead, Macron wishes to appoint a PM who could hold together the centrist bloc and court support from the Left, i.e scenario 2 and potentially a direct reference to someone like Lombard. However, the source makes clear that Macron is not ruling out legislative elections.
• One final point of consideration are the strikes scheduled for September 10th, as there has been some talk of Macron potentially waiting until after the strikes pass before he announces his candidate to replace Bayrou.

MARKET REACTION

• Following the announcement of the confidence vote, French banks and bonds have been under pressure.
• Emphasis has been on the moves in French yields with respect to European peers, particularly the OAT-Bund 10yr yield spread. Following the announcement, this peaked at 82.19bps, shy of the YTD high of 88bps and then the 2024 90bps peak.
• Spreads have been gradually widening as we count down to the vote, though still shy of the mentioned YTD peak. Jefferies forecasts the spread to get towards 90bps into the vote and then, if Bayrou loses as expected, highlights a risk of an extension to 100bps if it results in fresh legislative elections. Note, the desk describes this as an attractive entry point as Presidential elections remain unlikely (Macron continues to make clear that he will not call for early Presidential elections).
• On spreads, ECB’s Lagarde has said they are attentive to the French movements but made clear that France is not in a situation which would require intervention.

RATING AGENCIES

• Given the tricky fiscal situation France is in, and the necessity for significant reform in order to bring key measures in-line with EU rules, rating agency updates have and continue to be keenly watched regarding France.
• Reviews are due as follows: Fitch (AA-, negative) 12th September, DBRS (AA, negative) 19th September, Scope (AA-, Stable) 26th September, Moody’s (Aa3, Stable) 24th October, S&P (AA-, Negative) 28th November.
• If Fitch were to downgrade on the 12th, after the vote, then this would push French assets close to the point at which some funds would be forced to divest. Fitch last updated on March 14th, highlighting high levels of debt and a poor record of fiscal consolidation as points of weakness, adding the negative outlook is reflective of significant fiscal risks. While the confidence vote raises the odds of a downgrade, it is worth noting that Fitch in March expected new elections to occur in H2-2025, so it remains to be seen how much of this has already been ‘priced’ by the agency.
• However, on the flip side, the agency highlighted a “failure to implement a medium-term fiscal consolidation plan…” as a factor that could spur negative rating action.
• As a reminder, the EU’s Stability and Growth Pact requires member nations to have deficits equal/less than 3% of GDP and public debt to a maximum of 60% of GDP; France comes in at around 5.8% and over 100% respectively. Though, the Commission has been and is expected to continue to be flexible with the rules, focusing primarily on the medium-term trajectory and credibility of fiscal plans.

WHAT HAPPENS IF THE FRENCH GOVERNMENT FALLS?

For Bayrou to survive, he needs to get the approval of a majority of those votes cast. Given that the groups that support the government represent just 210 seats out of 574 currently occupied (there are three vacant seats at the moment), Bayrou would need well over 100 abstentions in order to survive, assuming all members of those parties that support the government vote in his favor.

If Bayrou loses the vote, Macron’s options include naming a new premier or dissolving the lower house and calling early elections, which aides have said is not in the plans for now. Macron has repeatedly insisted he wouldn’t resign, as some parties have demanded.

If Macron were to name a new prime minister, it would leave unanswered the question of how the government passes an unpopular budget, which brought down the previous premier, Michel Barnier, last year. The context underscores the sudden return of France’s fiscal concerns to the forefront of investors’ attention at a time when European neighbors such as Italy are making comparative progress in taming deficits.

As Bloomberg’s Michael Msika and Julien Ponthus detail below, French assets are set for long-lasting underperformance as the country’s unstable politics keep investors at bay.

Since Prime Minister François Bayrou called a vote of confidence on Aug. 25, the CAC 40 Index has fallen more than a broad European stock benchmark. The extra yield investors demand to hold French 10-year government bonds over German bunds has surged. Even so, French assets aren’t yet pricing the instability that can unfold over the coming weeks or months.

“We’re not expecting for now a sudden tipping point by which bonds and stocks would suddenly collapse,” says Raphael Thuin, head of capital markets strategies at Tikehau Capital.

“It’s rather about pricing a potentially progressive and long-lasting decline. The feedback we get from our clients is that they’re getting used to the idea that there’s a durable risk premium being attached to France.”

France’s inability to fix its public finances has led to three governments in little more than a year, and there’s no sign that a fourth will fare any better.

So investors may be left facing another deadlock over the budget for months to come, the prospect of another snap parliamentary election and even persistent calls for President Emmanuel Macron to resign.

“The French equity market may be too optimistic about the political outcomes,” say Citi strategists led by Beata Manthey, who downgraded the country’s stocks to neutral at the end of August.

“Potential election would in our view imply about 5% lower equity market valuations. Combined with the fact that French equities tend to be more volatile than peers’ around elections, this could be a reason to expect additional choppiness.”

While the CAC 40 generates only 20% of revenues domestically, investors have been applying a discount to the benchmark since the snap elections last year and may continue to stay away on a relative basis. Sectors with the highest levels of local revenue reliance are telecoms, financials, and real estate, while technology, materials and health care are more internationally facing.

Banks are at the forefront of investor worries, given their exposure to government bonds.

Citi analysts note that key concerns include a higher cost of equity, increased funding costs and potential populist measures, but say that these fears remain “overblown” for now.

Defense stocks should also be watched, they add. While French defense spending will most likely trend upward in 2025 and 2026, things might become more difficult in the medium term out to 2030.

Construction and logistics companies like Vinci and Eiffage, residential real-estate developer Nexity and nursing-home operators Emeis and Clariane have also suffered recent bouts of volatility.

The discount on French assets is likely to be validated in the event of Bayrou’s ouster, because any new government will have to dial back his proposed budget cuts. The premier failed to find a majority to back his plan for €44 billion of spending reductions and tax hikes, with the goal of narrowing France’s 2026 deficit to 4.6% of economic output from an expected 5.4% this year.

The yield on France’s 10-year government bond climbed to almost 3.6%, threatening to surpass that of Italy, after Bayrou called the vote, though it has since receded to about 3.44%.

The yield premium on French bonds over bunds has risen to almost 80 basis points, roughly 10 basis points higher than prior to Bayrou’s political gamble.

Tension in the bond markets threatens to spill over to stocks, because higher benchmark yields mean higher borrowing costs, especially for smaller, indebted companies, says Thomas Helaine, head of equity sales at TP ICAP Europe.

That in return reduces the money available for capital spending and growth, he said, and as a result, investors are looking to other markets.

Authored by Lance Roberts via RealInvestmentAdvice.com,

Diversification has been the backbone of “buy and hold” strategies for the last few decades. It was a boon to financial advisors who couldn’t actively manage portfolios, and it created a massive Exchange-Traded Funds (ETFs) industry that allowed for even further simplification of investing. The message was basic: “Buy a basket of assets, dollar cost average, and given enough time, you will grow your wealth.”

But where did that marketing revolution come from? Based on the premise of index investing, it created massive firms like Vanguard, Fidelity, BlackRock, and others. For that answer, we need to go back in time to 1952. Then, Harry Markowitz revolutionized investment strategy with his portfolio choice theory. His work, for which he received a Nobel Prize, gave rise to what we now know as Modern Portfolio Theory (MPT), which proposed that the best portfolios don’t focus on individual securities but on how groups of assets interact.

The goal was to combine uncorrelated assets to reduce overall volatility while optimizing returns. This model encouraged investors to spread risk through diversification. Critically, it assumes that assets wouldn’t all move together in times of stress. This theory served as the bedrock of portfolio construction for decades, especially for institutional investors. The strategy worked well before the turn of the century, when sectors rotated leadership and assets moved independently based on distinct economic drivers. Back then, diversification across asset classes, sectors, and geographies was a reliable way to reduce portfolio risk.

However, over the last 15 years, following the financial crisis, the investing environment has changed. Monetary and fiscal interventions, global central bank interest rate policies, the maturity of algorithmic and computerized trading strategies, and concentration have reduced diversification’s value. As shown, any portfolio “diversified” between large, mid, and small-cap stocks, international and emerging markets, real estate, and gold, has significantly underperformed being invested solely in the S&P 500 index. Furthermore, in times of crisis, like 2020, the diversification failed to protect investors from the downturn as correlations went to “1.”

The reality is that markets have changed.

The assumptions that supported MPT, uncorrelated assets, stable relationships, and rational price behavior, have eroded. Central banks have injected liquidity, distorted yields, and suppressed volatility. Meanwhile, passive investing has reshaped how money flows into stocks.

The basic premise of diversification is under pressure from structural shifts that Markowitz could not have anticipated.

Passive Investing’s Impact on Market Structure

Passive investing has grown from a niche strategy into the dominant force in equity markets. Index funds and ETFs now account for over half of U.S. equity ownership. These vehicles allocate capital based on market capitalization, not valuation, fundamentals, or business quality. As more money flows into these funds, the largest companies receive the lion’s share of new capital. That’s created a powerful feedback loop, where price drives flows, and flows drive price.

This shift has radically changed the effectiveness of diversification. Investors who think they’re diversified across multiple ETFs often have overlapping exposure to the same few mega-cap names. For example, Apple, Microsoft, and Nvidia are top holdings in technology ETFs, dividend funds, and large-cap growth portfolios. In the U.S., there are roughly 4000 ETFs, and 771, approximately 20%, own Apple. Therefore, if you own an S&P index fund, a Nasdaq index ETF, and a technology-focused ETF, you have multiple holdings of the same companies. This overlap increases portfolio risk and concentration. What looks like diversification is often just duplicated exposure dressed up as balance.

As noted in “The Bull Market Is Alive And Well,” the top 10 stocks have a hefty weighting in the S&P 500 index, which absorbs $0.36 of every dollar invested. Furthermore, the top 10 stocks impact the S&P 500 index the same as the bottom 440 stocks combined.

Furthermore, the top ten stocks in the S&P 500 now account for more than 70 percent of the index’s return. These names dominate the performance of most portfolios, even those that appear broad on the surface. As passive flows continue to distort market mechanics, the ability of traditional diversification to reduce risk has declined. Assets that once behaved independently now rise and fall together, leaving portfolios more vulnerable when markets correct.

But that is where we find the demise of Modern Portfolio Theory, which assumes that asset classes will not move in perfect unison. Historically, this was true. Sector correlations typically ranged between 0.3 and 0.6, allowing diversification to smooth out returns. When one part of the market fell, others could rise or stay flat. That dynamic gave portfolios resilience. But today, those correlations are breaking down. During market stress, correlations spike as high as 0.9. Nearly every asset class sells off together, erasing the protective benefit of diversification.

This shift is driven by the rise of passive ownership, which has increased the linkage between stocks, sectors, and even asset classes. Academic research from INSEAD and UC Irvine confirms that companies with high passive ownership become more volatile and exhibit stronger co-movement, especially during sell-offs. Central bank interventions have added another layer of distortion by suppressing price discovery and inflating asset prices indiscriminately. Liquidity flows, not fundamentals, now drive much of market behavior.

Even portfolios designed to be “all-weather” or “risk-parity” have failed to deliver protection during sharp downturns. Diversification fails when everything is tied to the same flows and narratives. The illusion of balance breaks down exactly when it is most needed. This environment has made it harder to rely on traditional asset allocation strategies.

Therefore, given this change to market dynamics, investors must now think differently about managing risk.

New Approaches to Diversification in a Concentrated Market

Yes, diversification still matters. In fact, it matters more now than ever. While the traditional benefits of diversification have weakened due to high correlations and market concentration, the need to reduce risk remains unchanged. The objective is not to eliminate volatility, but to manage it intelligently. That means ensuring portfolios can withstand market downturns while still participating in upside when leadership changes or new trends emerge.

Surface-level diversification is no longer enough in a market increasingly driven by passive flows and dominated by a few mega-cap names. Owning multiple funds or asset classes does not guarantee protection if the underlying exposures overlap. Investors must go deeper and look beyond labels and into the actual drivers of risk and return. Here are seven strategies to help achieve more effective diversification in today’s environment:

1. Limit Overlap Across Holdings: To reduce concentration risk in your portfolio, ensure you limit duplicate positions across your funds.

2. Prioritize High-Conviction, Quality Holdings: Reduce broad exposure in favor of companies with consistent earnings, low debt, and durable competitive advantages. Quality stocks tend to be more resilient across market cycles.

3. Allocate by Investment Factors, Not Just Sectors: Diversify based on factors like value, size, momentum, and low volatility. These traits respond differently to economic conditions, creating more effective diversification than sector spreads alone.

4. Don’t Forget About Cash: When uncertain markets arrive, remember the value of cash as a hedge against volatility risk.

5. Use Active Management Where It Adds Value: Tactical funds or active managers can navigate around crowded trades and avoid the systematic exposures built into passive indexes.

6. Incorporate Alternative Allocation Models: Explore risk-based strategies like Hierarchical Risk Parity (HRP), which adapt to changing correlations and distribute risk more evenly than traditional mean-variance approaches.

7. Monitor Correlations Over Time: Correlations are dynamic, especially in periods of stress. Review your portfolio regularly to ensure your holdings are not moving in lockstep when it matters most.

Each of these steps is designed to restore the core purpose of diversification: risk control without sacrificing the opportunity for return.

In a market where broad ownership no longer guarantees safety, discipline, and deeper analysis make the difference.

Argentina’s President Javier Milei suffered a heavy defeat in Buenos Aires province, where the Peronist Fuerza Patria coalition won 47% of the vote against his Libertad Avanza’s 34%, according to FT.

Pre-election forecasts had predicted a closer contest, which Milei had hoped would boost momentum for the October 26 midterms.

“Buenos Aires province is traditionally very Peronist, but this margin is even worse than expected,” said Alberto Ades of NWI Management. He warned markets would react with weaker bonds, equities, and higher country risk.

FT writes that the setback comes amid Milei’s struggles in Congress, where his veto was recently overturned, and a corruption scandal involving leaked recordings and alleged kickbacks linked to his sister Karina. His approval has dropped below 40%.

“Without any doubt, today we suffered a clear defeat,” Milei conceded. “But the economic course for which we were elected will not change. We will continue to defend fiscal balance tooth and nail.”

Analyst Ana Iparraguirre said, “This result was primarily a negative message to Milei’s government,” warning financial turbulence could deepen voter discontent.

Markets are already stressed: short-term dollar bonds have fallen 15% since July, equities 34%, and debt spreads widened nearly 2 points to 9%. To defend the peso, Milei has raised rates, tightened reserves, and sold dollars, but economists fear recession.

“The resounding defeat of President Javier Milei’s La Libertad Avanza in the Province of Buenos Aires election will likely confirm the worst of market fears and unleash an adverse feedback loop of negative price action, unpleasant policy moves, and more downbeat expectations heading into October’s national mid-terms,” Bloomberg economist Jimena Zuniga said.

“The government engineered a sharp recession with high rates to defend the peso, but Buenos Aires voters are saying jobs matter more than squeezing out the last bit of inflation,” said Walter Stoeppelwerth of Grit Capital.

Despite this blow, polls still predict Milei’s coalition will gain seats in Congress, though it holds less than 15% in either chamber. The result, however, bolsters Peronist governor Axel Kicillof, a rising figure in the opposition.

The peso plunged 7% to 1,450 per US dollar, near the upper limit of its trading band, at the start of local trading.

Dollar notes due 2035, among the most traded, slid 5.56 cents to 56.09, pushing yields to 12.6% and leading losses across emerging markets.

“This was Peronism’s bastion. The national election will be different,” said Fernando Marengo of Blacktoro. “The focus has to shift to building agreements — the reforms that could be done by decree are done.”

Argentina’s sovereign bonds tumbled after the defeat in Buenos Aires, according to Bloomberg.

Investors had braced for a selloff if Milei lost by more than five points; instead, the 14-point margin magnified concerns ahead of October’s midterms.

Morgan Stanley swiftly closed its week-old buy call on Argentine assets, warning that Sunday’s outcome increases the risk of a “downside scenario in which the market questions the likelihood of continued reforms, and uncertainty rises around the future external financing sources,” according to economist Fernando Sedano and strategist Simon Waever.

Usually the post-payrolls week is quieter but not this time, as we get another bumper week of events as we build to next week’s FOMC. Although the Fed is now on its media blackout, Wednesday’s PPI and especially Thursday’s CPI will shape pricing ahead of that (note that the traditional order of CPI before PPI is flipped this week), with all eyes still focused on the tariff impact. 28bps of cuts are now priced in for the next meeting, so a quarter-point cut is fully priced but without much being priced in for a 50bps move (that will change after tomorrow’s negative benchmark revision). DB economists believe you’d need to see pretty weak inflation this week to get that. We preview that US inflation data below but before we do the main highlights for the rest of the week are: the French confidence vote in the National Assembly, German industrial production and the New York Fed’s inflation expectations today; the preliminary annual benchmark revisions by the US BLS for payrolls tomorrow; Chinese inflation, the State of the Union address by European Commission President von der Leyen, and a 10yr UST auction on Wednesday; the ECB decision and a 30yr UST auction on Thursday; and finally on Friday there’s the  University of Michigan survey. 

We’ll go through a few of these events now and review Friday’s payrolls and its impact below. But let’s first take a look at what’s expected in Thursday’s US CPI. In their preview. DB’s US economists expect monthly headline CPI to rise to +0.36% in August, which would be the strongest monthly print since January. That’s partly because of their forecast for a +1.7% increase in seasonally adjusted gas prices, along with some positive payback in food-at-home prices. At the same time, they think core CPI will be a little weaker at +0.32%, although that would still be in line with the six-month high we had last month. If that’s correct, then that would lift the year-on-year headline number by two-tenths to +2.9%, with core edging up a little but still rounding to +3.1%, the same as last month. Of course, the focus will very much be on the continued impact of the tariffs in core goods categories, and we know these are still filtering through, given several rates like the 50% on copper only came into force last month.

In terms of the implications for the Fed, the jobs report on Friday has seen the tide turn to increasing concern about tepid employment growth rather than permanently above-target inflation. That report showed nonfarm payrolls up just +22k (down from +79k in July and clearly beneath the +75k print expected). Moreover, there were another -21k of downward revisions to the previous two months, which was well below the huge -258k revisions in the previous report, but still the 6th time in the last 7 months that the revisions had been negative. So that meant the unemployment rate moved up a tenth to 4.3%, the highest since October 2021. And the broader U6 measure (which includes underemployed and marginally attached workers) moved up to 8.1%, again the highest since October 2021. As it stands, the latest revisions mean that June this year has a -13k print, which is the first negative month since December 2020. It also marks an end to the second-longest streak of consecutive positive payroll prints in data back to 1939. The one caveat they discuss around the weak data is that the slide in payrolls does look similar to that seen between June and August last year even if there is evidence of labor market weakness in the numbers.

Overall, they don’t view the report as soft enough to push the FOMC towards a larger-than-usual 50bp cut next week, partly because the median dot in June was in line with two cuts and an unemployment rate at 4.5% by year-end. So nothing out of the ordinary yet relative to this. However, as we warned two weeks ago, keep an eye out for the preliminary BLS annual benchmark revisions tomorrow for another rewrite of history. These only impact the period to March so it won’t have anything about the most recent five months. But there are likely to be downward revisions of as much as 50-60k per month over the year according to our economists, based on the survey linked to the revisions calculations. Bessent nodded to this sort of number yesterday in a press interview.

Elsewhere, we see what is likely to be a low-key ECB decision on Thursday. DB economists expect them to keep the deposit rate on hold at 2% and think the ECB has reached its terminal rate in this cycle.

More importantly in Europe is today’s confidence vote in France. Proceedings start at 3pm local time with the vote results likely to be known after 5pm CET. That’s likely to see a defeat for Prime Minister Bayrou’s minority government, but most interesting is what happens next. President Macron is expected to nominate a new PM that could achieve a majority to pass the budget. This would probably require the backing of the center-left Socialists as the right-wing populist National Rally has called for snap parliamentary elections to be held. There are also general strikes called in France for September 10 and September 18, and Politico reported over the weekend that Macron is aiming to have Bayrou’s replacement lined up before the second one of these. At the start of last week, France’s fiscal situation was a real pressing issue for markets, along with the UK gilt market selloff, but the US bond rally has taken some of the sting out of this. Nevertheless, both countries remain in a precarious situation if global rates turn again.

Speaking of politics, Japan’s PM Ishiba announced over the weekend that he will step down, after several weeks of speculation after the poor summer election results. The leadership race will now take place and likely take 2-3 weeks, although the new LDP leader will need some support from opposition parties to become PM given LDP-Komeito have lost their majority. A key issue at stake is the direction of monetary policy, and the two front runners seem to be Koizumi and Takaichi with the former more likely to coincide with higher Japanese rates. That’s contributed to a weaker Japanese yen overnight, which has fallen by -0.48% against the US Dollar to 148.15 per dollar. Meanwhile, yields are fairly stable, and the Nikkei (+1.33%) is closing back on its record high this morning after there were decent upward revisions to Japan’s growth data. It showed the economy growing at an annualised +2.2% rate in Q2, having initially pointed to a +1.0% rate. So that means the economy has expanded for 5 consecutive quarters now, the longest run since 2016-18.

Courtesy of DB, here is a day-by-day calendar of events

Monday September 8

• Data: US August NY Fed 1-yr inflation expectations, July consumer credit, China August trade balance, Japan August Economy Watchers survey, bank lending, July BoP current account balance, BoP trade balance, Germany July industrial production, trade balance
• Central banks : ECB’s Villeroy speaks
• Other: France confidence vote, Norway parliamentary election

Tuesday September 9

• Data: US August NFIB small business optimism, Japan August M2, M3, machine tool orders, France July industrial production
• Central banks: ECB’s Nagel and Villeroy speak, BoE’s Breeden speaks
• Earnings: Oracle, Synopsis
• Auctions: US 3-yr Notes ($58bn)

Wednesday September 10

• Data: US August PPI, July wholesale trade sales, China August CPI, PPI, Italy July industrial production, Sweden July GDP indicator, Denmark and Norway August CPI
• Earnings: Inditex
• Auctions: US 10-yr Notes (reopening, $39bn)
• Other: State of the Union address by the European Commission President von der Leyen

Thursday September 11

• Data: US August CPI, federal budget balance, Q2 household change in net worth, initial jobless claims, UK August RICS house price balance, Japan August PPI, Germany July current account balance
• Central banks: ECB decision
• Earnings: Adobe, Kroger
• Auctions: US 30-yr Bonds (reopening, $22bn)

Friday September 12

• Data: US September University of Michigan survey, UK July monthly GDP, Japan July capacity utilisation, Italy Q2 unemployment rate, Canada July building permits, Q2 capacity utilisation rate
• Central banks: ECB’s Rehn, Kocher and Nagel speak, BoE’s inflation attitudes survey

Finally, looking at just the US, the key economic data releases this week are the CPI report on Thursday and the University of Michigan report on Friday. Fed officials are not expected to comment on monetary policy this week, reflecting the blackout period ahead of the September FOMC meeting.

Monday, September 8 

• 11:00 AM New York Fed 1-year inflation expectations, August (last 3.1%) 

Tuesday, September 9 

• 06:00 AM NFIB small business optimism, August (consensus 100.5, last 100.3)
• 10:00 AM BLS releases preliminary annual payrolls benchmark revision: The Bureau of Labor Statistics (BLS) will publish a preliminary estimate of the benchmark revision to the level of nonfarm payrolls for March 2025. The final benchmark revision will be issued and incorporated into nonfarm payrolls alongside the January 2026 employment report in February 2026. Based on the Quarterly Census of Employment and Wages (QCEW)—the key source data for the annual benchmark revision—a large downward revision seems likely; we estimate on the order of 550-950k (or a 45-80k downward revision to monthly payroll growth over April 2024-March 2025). However, we believe next week’s estimate could revise payroll growth down by as much as 400k too much.

Wednesday, September 10 

• 08:30 AM PPI final demand, August (GS +0.2%, consensus +0.3%, last +0.9%); PPI ex-food and energy, August (GS +0.3%, consensus +0.3%, last +0.9%); PPI ex-food, energy, and trade, August (GS +0.3%, consensus NA, last +0.6%)

Thursday, September 11 

• 08:30 AM CPI (MoM), August (GS +0.37%, consensus +0.3%, last +0.2%); Core CPI (MoM), August (GS +0.36%, consensus +0.3%, last +0.3%); CPI (YoY), August (GS +2.90%, consensus +2.9%, last +2.70%); Core CPI (YoY), August (GS +3.13%, consensus +3.1%, last +3.06%): We estimate a 0.36% increase in August core CPI (month-over-month SA), which would leave the year-over-year rate unchanged at 3.1% on a rounded basis. Our forecast reflects increases in used car prices (+1.2%) reflecting an increase in auction prices, new car prices (+0.2%) reflecting a decline in dealer incentives, and the car insurance category (+0.4%) based on premiums in our online dataset. We forecast an increase in airfares in August (+3%), reflecting a boost from seasonal distortions and an increase in underlying airfares based on our equity analysts’ tracking of online price data. We have penciled in upward pressure from tariffs on categories that are particularly exposed (such as communication, household furnishings, and recreation) worth +0.14pp on core inflation. We expect the shelter components to be roughly unchanged on net (primary rent +0.25%; OER +0.26%). We estimate a 0.37% rise in headline CPI, reflecting higher food prices (+0.35%) and energy (+0.6%) prices. Our forecast is consistent with a 0.29% increase in core PCE in August. We will update our core PCE forecast after the CPI is released.
• 08:30 AM Initial jobless claims, week ended September 6 (GS 230k, consensus 234k, last 237k); Continuing jobless claims, week ended August 30 (consensus 1,950k, last 1,940k)

Friday, September 12 

• 10:00 AM University of Michigan consumer sentiment, September preliminary (GS 57.4, consensus 58.0, last 58.2)
• University of Michigan 5-10-year inflation expectations, September preliminary (GS 3.4%, consensus 3.5%, last 3.5%)

Source: DB, Goldman

Via American Greatness,

White House Deputy Chief of Staff Stephen Miller is warning that an ongoing Department of Justice (DOJ) investigation into whether Washington D.C. officials manipulated crime statistics is in the process of uncovering a “massive scandal.”

At an Oval Office press conference, Miller told reporters that when the results of the investigation are finally that, “It will stun you,” adding, “Even though D.C. had the worst crime in America–honestly measured–it dramatically understated how bad it was.”

🚨 BREAKING: In a shocking revelation, Stephen Miller uncovered a massive scandal in Washington, D.C. The Democratic-led police department has been systematically concealing crime statistics, even classifying homicides as accidents rather than murders. pic.twitter.com/WK1jG1tb9c

— TRUMP ARMY (@TRUMP_ARMY_) September 6, 2025

Miller said that DOJ investigators have uncovered evidence that crime data was manipulated to the point that some murders and homicides were falsely reported as accidents.

The White House Deputy Chief of Staff also assured reporters that the full extent of the manipulation “will be uncovered and it will all be brought to light.”

Miller told reporters that he’s had the opportunity to visit with police officers in the city who tell him that members of the public are going up to them and thanking them for finally being able to enjoy their parks and “walk freely at night without having to worry about being robbed or mugged.”

Stephen Miller: DC officials were covering up crime stats and even classifying m*rders as accidents. How many other Democrat-led cities have falsified crime data to this gross extent? pic.twitter.com/Lk6CVl7B62

— War Correspondent (@warDaniel47) August 26, 2025

Last month, House Oversight Committee Chairman James Comer (R-KY) informed Metropolitan Police Department (MPD) Chief Pamela Smith, in a letter, that his committee is “investigating disturbing allegations that DC crime data is inaccurate and intentionally manipulated.”

Comer told Smith that a whistleblower “with direct knowledge of internal MPD operations and crime data discussions” told his committee that “crime statistics were allegedly manipulated on a widespread basis and at the direction of senior MPD officials.”

In his letter to Smith, Comer notes, “The whistleblower stated this manipulation is accomplished by supervisors — with only a cursory understanding of the facts and circumstances of the crime — ignoring the judgement of patrol officers who actually interviewed witnesses and collected evidence by recommending reduced charges.”

MPD District 3 Commander Michael Pulliam, was reported last month to have been under investigation for allegedly manipulating crime statistics for his district, although Comer told Smith in his letter that, “Unfortunately, this practice does not appear to be isolated, nor is it a recent development.”

MPD data had shown violent crime decreases across all seven police districts, although D.C. Mayor Muriel Bowser said MPD leadership only found anomalies in data reporting in one district.

Elon Musk’s SpaceX struck a deal with EchoStar Corporation for 50 MHz of exclusive U.S. spectrum and global MSS licenses, a move that supercharges its Starlink Direct to Cell service worldwide. 

“This agreement will enable us to develop and deploy our next-generation Starlink Direct to Cell constellation, which will be capable of providing broadband service to cell phones globally,” SpaceX wrote in a press release on Monday morning. 

Here’s the breakdown of the SpaceX–EchoStar spectrum deal:

• SpaceX is acquiring 50 MHz of exclusive U.S. S-band spectrum (AWS-4 and PCS-H) plus global MSS licenses from EchoStar.

• This spectrum will power next-generation Starlink Direct to Cell satellites, enabling higher bandwidth, optimized 5G protocols, and 100x more capacity than the first generation.

• New satellites will be driven by custom SpaceX silicon and phased array antennas, supporting full 5G connectivity comparable to terrestrial LTE.

EchoStar wrote in a press release that SpaceX is paying $8.5 billion in cash and up to $8.5 billion in SpaceX stock for its AWS-4 and H-block spectrum licenses, adding that the proceeds will be used to “retire certain debt obligations and fund EchoStar’s continued operations and growth initiatives.” 

Shares of EchoStar jumped 24% in premarket trading and are up 193% year-to-date as of Friday’s close. Short interest stands at 12.37% of the float, or approximately 16.4 million shares, with a 6.1-day average trading volume to cover.

Additional color on Starlink Direct to Cell service:

• Service began deployment in January 2024, with early texting and video calling demos on unmodified phones.

• Now at 600+ satellites in orbit, the first-gen constellation provides 4G coverage across five continents, serving 6+ million users—the largest 4G footprint on Earth.

• Operates at 360 km altitude, using regenerative architecture and laser links to integrate with the 8,000-satellite Starlink backbone.

I see these messages from SpaceX almost daily so I took a look at the current constellation. Wow.

View it in 3D here: https://t.co/dMq8M8btgB
(click the hamburger menu at the bottom right and select “starlink FCC”)

Note: if you zoom in you will realize it’s a live map. They… https://t.co/USsWnVg5q3 pic.twitter.com/hVzfn39X4N

— Starship Alves 🚀 (@StarshipAlves) September 3, 2025

Starlink operations:

• Partnered with T-Mobile, Optus, Telstra, Rogers, KDDI, Kyivstar, and others for global coverage.

• Provided life-saving emergency connectivity during U.S. hurricanes, floods, and wildfires, delivering 1.5 million+ connections and hundreds of emergency alerts.

• Enabled rescues in remote areas.

In recent weeks, SpaceX’s Starship rocket deployed the first batch of mock Starlink satellites in space and tested new heat shield tiles on its plunge through Earth’s atmosphere, achieving new milestones in preparation to launch next-gen Direct to Cell satellites with EchoStar spectrum that will expand service, speeds, eliminate dead zones, and extend broadband and IoT connectivity to phones worldwide. 

Even though Musk has shown little interest in taking SpaceX public, rumors have circulated about a potential Starlink IPO.

Furthermore, whatever happened to Jeff Bezos’ rocket company and space internet company? 

US equity futures are higher ahead of today’s French vote of confidence which should end the Bayrou government, and into major inflation updates this week. As of 8:0am ET, S&P futures are up 0.2% and on pace for another record high after Friday’s post payrolls drop; Nasdaq futures gain 0.4% with all Mag7 names higher premarket, ex-AAPL which is flat into its product event tomorrow. Large caps are higher across virtually all sectors. In overnight news, US is reportedly considering annual export approvals to chip facilities in China. The yield curve is twisting steeper and the DXY is flat as USD / JPY appreciates after PM Ishiba announced his resignation, but is well off its session highs. Commodities are stronger, led by Energy, after OPEC+ confirmed a smaller than expected production increase of 137k bpd in Oct. Gold / silver continue to run higher, with the former hitting another record high of $3622; Ags are weaker. Today’s macro data focus is on NY Fed’s 1-Yr inflation expectations and Consumer Credit. 

In premarket trading, Magnificent Seven stocks are rising with the exception of AAPL (Tesla +1.3%, Microsoft +0.9%, Nvidia +0.5%, Amazon +0.4%, Meta +0.3%, Alphabet +0.4%, Apple -0.04%). 

• AppLovin (APP) rises 9%, Robinhood Markets (HOOD) advances +8% and Emcor Group Inc. (EME) is up 1.8% after S&P Dow Jones Indices said the stocks would be added to the S&P 500 Index.
• Chewy Inc. (CHWY) climbs 3% after Mizuho raised the recommendation on the online retailer of pet food to outperform.
• Dianthus Therapeutics (DNTH) shares were halted after announcing data for antibody claseprubart from a Phase 2 trial in generalized myasthenia gravis.
• EchoStar (SATS) rises 20% after SpaceX’s Starlink agreed to buy wireless spectrum from the company for about $17 billion.
• Forward Industries (FORD) soars 107% after the design company said it received $1.65 billion in cash and stablecoin commitments for a private investment in public equity offering to fund a Solana-focused digital asset treasury strategy.
• Ideaya Biosciences (IDYA) rises 6% after the drug developer gave initial data from an early-stage trial of its investigative therapy for lung cancer, with partner Hengrui Pharma.
• Nutanix (NTNX) is up 3% on inclusion in the S&P Midcap 400 Index.
• Premier Inc. (PINC) climbs 8% as investment firm Patient Square Capital is exploring an acquisition of the health-care services company Premier Inc., according to people familiar with the matter.
• Rapport Therapeutics (RAPP) jumps 155% after reporting positive topline results from its trial for focal onset seizures.
• Summit Therapeutics (SMMT) falls 22% after the release of new data cast doubt on the future of a closely watched lung cancer drug.

With stocks back at all time highs, investors will have to consider whether a cracking labor market could stall consumer spending, posing a headwind to equities. “For the time being, though, oodles of AI CapEx from the hyperscalers, plus solid earnings growth, calmer tones prevailing on trade, and a more accommodative policy stance, should all keep the path of least resistance leading higher,” Pepperstone strategist Michael Brown wrote. Among other events scheduled for the week, the ECB is expected to hold rates steady on Thursday, though President Christine Lagarde’s remarks will be parsed for signals on her readiness to contain French turbulence.

On Tuesday, the Bureau of Labor Statistics will release its preliminary payroll benchmark revision for the year through March, with another downward adjustment likely to show the labor market was weakening well before the recent slowdown in jobs growth.

Thursday’s consumer-price data is projected to show that progress on reducing inflation has stalled as higher US import duties filter through the economy. Still, investors see Fed officials lowering rates at their upcoming meeting, with some even expecting a jumbo half-point cut.

“Our economists believe you’d need to see pretty weak inflation this week to get that,” wrote Jim Reid, global head of macro research and thematic strategy at Deutsche Bank AG. “Of course, the focus will very much be on the continued impact of the tariffs in core goods categories, and we know these are still filtering through.”

In Europe, the Stoxx 600 rises 0.2% while the CAC 40 adds 0.3% ahead of a confidence vote in the French parliament later on Monday, where Prime Minister Bayrou’s government is likely to fall. The advance was fueled by energy stocks amid rising crude prices. The region’s bonds were broadly steady. Major markets are all higher led by Germany with UK lagging.

Earlier in the session, Asian equities rose, with Japanese stocks leading gains as investors looked to new leadership after Prime Minister Shigeru Ishiba announced his intention to step down. The MSCI Asia Pacific Index advanced as much as 0.8%, rising for a third session, with technology stocks including Alibaba, Tencent and Nintendo among the major contributors. Equity benchmarks in Japan added more than 1%, supported by a weaker yen and hopes for economic growth under the next government. While Ishiba’s departure had been expected since the ruling party’s poor election showing in July, uncertainty remained as he indicated his intention to stay on after securing lower US auto tariffs. Focus now shifts to who his successor will be, and the impact on plans for fiscal expansion and stimulus as well as central bank policy. Shares also gained Monday in Hong Kong, Taiwan and India, but slipped in Australia and Vietnam. Thailand’s SET gauge advanced as Anutin Charnvirakul’s election as prime minister was seen bringing stability after recent political turmoil. Asian equities overall have been tracking gains in global peers, as bets solidify for a Federal Reserve interest-rate cut later this month. The MSCI Asian stock benchmark is now around 3% away from topping its record high reached in 2021.

In FX, the euro is flat versus the dollar. OATs are also little changed with minimal movement in the 10-year yield spread with Germany. The yen has pared an earlier decline seen after Japanese Prime Minister Ishiba announced that he will step down. USD/JPY is up 0.2% at 147.70. The Bloomberg Dollar Spot Index falls 0.1% while the kiwi and Aussie dollar are leading gains against the greenback, rising 0.5% and 0.4% respectively.

In rates, treasuries are mixed in early US session, with intermediate to long-end yields cheaper and front-end tenors richer. 10-year yield near 4.07% is about 1bp lower on the day. UK and German counterparts outperforming by slightly; European regional yields are lower as curves bull flatten while Gilts curve bear flattens. Last week’s yield declines are stoking corporate bond sales anticipated to total $45 billion to $50 billion, concentrated ahead of August PPI and CPI reports Wednesday and Thursday. Political instability in Japan and France is also in focus. Fed officials are in external communications blackout ahead of Sept. 17 rate decision. 

In commodities, WTI crude futures climb 2% to $63 a barrel after OPEC+ agreed to raise production at a modest rate. Spot gold rises $27 to a record.  

The US economic data slate includes August New York Fed 1-year inflation expectations (11am New York time) and July consumer credit (3pm). In addition to PPI and CPI, Empire manufacturing and University of Michigan sentiment are  ahead this week. On Tuesday, the Bureau of Labor Statistics will release its preliminary payroll benchmark revision for the year through March, and another downward revision is expected

Market Snapshot

• S&P 500 mini +0.2%
• Nasdaq 100 mini +0.4%
• Russell 2000 mini little changed
• Stoxx Europe 600 +0.3%
• DAX +0.7%
• CAC 40 +0.3%
• 10-year Treasury yield +1 basis point at 4.09%
• VIX +0.4 points at 15.53
• Bloomberg Dollar Index little changed at 1201.19
• euro little changed at $1.1726
• WTI crude +2% at $63.1/barrel

Top Overnight News

• Trump said Waller, Warsh and Hassett are the three finalists for Fed chair nomination. In relevant news, White House’s Hassett said Fed monetary policy needs to be fully independent of political influence, including from President Trump: CBS News interview.
• Trump issued a “last warning” via social media to Hamas to accept his peace terms. The proposed deal would include the release of all remaining hostages in exchange for ending the war in Gaza. Axios
• Trump signed Executive Orders on Friday regarding changing the name of the Department of Defense to the Department of War, and on ordering penalties against countries complicit in holding wrongfully detained Americans.
• A huge downward revision to the March US jobs count is expected Tuesday, a markdown that sets the table for the Fed to cut rates. BBG
• The French government will probably fall in a confidence vote today after a push to rein in France’s massive debt load, leaving investors facing months of budget deadlock. BBG
• The US is proposing annual approvals for exports of chipmaking equipment to Samsung and SK Hynix’s factories in China, people familiar said. The so-called site licenses would supplant indefinite authorizations granted under the Biden administration
• China is prepared to open its domestic bond market to major Russian energy firms in the latest sign of improved relations between Beijing and Moscow (Russian energy firms have been locked out of many financial markets by Washington and Brussels, which makes this move by China particularly significant). FT
• China’s export growth slowed to a six-month low as US shipments slumped again, though stronger sales elsewhere kept Beijing on track for a record $1.2 trillion trade surplus this year. BBG
• The yen fell and Japanese stocks gained as PM Shigeru Ishiba’s resignation triggered speculation about fiscal stimulus and slower monetary tightening under his successor. Long-maturity sovereign bonds stand out as being particularly vulnerable to selling. BBG
• German exports unexpectedly fell in July on a sharp decline in U.S. demand due to tariffs, while industrial output rose. German industrial production for Jul comes in a bit better than expected (+1.3% M/M vs. the Street +1%) while exports fall short (-0.6% vs. the Street +0.1%). RTRS
• The European Union is exploring new sanctions on about half a dozen Russian banks and energy companies as part of its latest round of measures to pressure President Vladimir Putin to end the war against Ukraine. The package could also see the EU target Russia’s payment and credit card systems, crypto exchanges as well as further restrictions on the country’s oil trade. BBG

Corporate News

• SpaceX, the Elon Musk-backed company that owns the Starlink satellite network, agreed to acquire wireless spectrum from Charlie Ergen’s EchoStar Corp. for about $17 billion in cash and stock.
• The US is proposing annual approvals for exports of chipmaking supplies to Samsung Electronics Co. and SK Hynix Inc.’s factories in China, a compromise aimed at preventing disruptions to the global electronics industry.
• South Korea’s biggest conglomerates are rushing to contain fallout from a sweeping US immigration raid at a Hyundai Motor Co.-LG Energy Solution Ltd. battery venture in Georgia.
• More than a year after BBVA SA unveiled its unsolicited takeover offer for Banco Sabadell SA, shareholders finally get their say.
• RWE AG and Apollo Global Management Inc. agreed to form a joint venture to invest in Germany’s power grid as the country seeks to ease network congestion in Europe’s biggest energy market.

Trade/Tariffs

• Japan’s trade negotiator Akazawa said he cannot say the trade issues with the US have been resolved, while he added that a US presidential order on auto tariffs was issued, but there are no orders yet on the most favoured nation status for pharmaceuticals and semiconductors.
• US-China trade talks have reportedly made little progress towards a deal, and an impasse was hit on the fentanyl issue, while senior China negotiator Li Chenggang’s trip to Washington suggests that China is attempting to keep talks open but is not willing to give any ground, according to WSJ.
• European Council President said the EU and US President Trump have “turned the page” on their prior “rocky” relationship, according to the FT.
• US is reportedly considering annual China chip supply permits for SK Hynix (000660 KS) and Samsung (005930 KS), via Bloomberg; firms would be required to outline their annual requirements.
• EU reportedly weighs new sanctions on Russia to hit banks and oil trade, according to Bloomberg.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks began the week mostly positive but with some of the gains capped amid several key market themes, including last Friday’s disappointing US jobs data and the subsequent boost in Fed rate cut bets, as well as Japanese PM Ishiba’s resignation announcement and the latest Chinese trade data. ASX 200 was dragged lower by weakness in energy, utilities and financials, while participants also reflect on the latest  Chinese trade data. Nikkei 225 outperformed amid a weaker currency and as the political uncertainty following Japanese PM Ishiba’s resignation, was seen as potentially delaying the BoJ resuming its rate hikes, while upward revisions to Q2 GDP added to the heightened risk appetite in Tokyo. Hang Seng and Shanghai Comp were ultimately positive but with cautiousness seen amid the latest Chinese trade data in which exports and imports missed forecasts, while there was also a recent report that US-China trade talks have made little progress towards a deal, and an impasse was hit on the fentanyl issue.

Top Asian News

• Japanese PM Ishiba said he has decided to resign as LDP president and gave instructions to hold an emergency LDP leadership election, while he will continue to carry out responsibilities until a new leader is elected and thought it was the right timing to step down given the conclusion of the Japan-US trade agreement. Furthermore, he said the party will decide on the schedule for the leadership race and he will not run in the LDP leadership race.
• Japan LDP’s Aizawa said they are to set the LDP leadership election date on Tuesday, while it was separately reported that the LDP is making final arrangements for a leadership vote on October 4th, according to TBS. Furthermore, Japanese Chief Cabinet Secretary Hayashi intends to run in the next LDP presidential election and former Foreign Minister Motegi also revealed his intention to run in the next LDP presidential election.
• South Korea’s Foreign Minister said over 300 Koreans were detained by US authorities at the Hyundai plant and President Lee ordered all-out efforts to respond to the arrest of Korean nationals. However, it was later reported that South Korea said a deal was reached with the US to release workers in the Hyundai Motor raid, according to WSJ.
• China is preparing to reopen its domestic bond market to major Russian energy companies, according to FT.
• China Auto Industry Body CPCA says China sold 2.02mln passenger cars in August, +4.9% Y/Y.

European bourses (STOXX 600 +0.2%) opened with a positive bias and have traded sideways throughout the morning so far – action which follows on from similar sentiment in the APAC region. European sectors opened with a strong positive bias but are now mixed. Construction & Materials takes the top spot, joined closely by Energy and then Industrials to complete the top three. For Energy specifically; the complex has been boosted by significant upside in the crude benchmarks after eight core OPEC+ countries upped its oil output target by 137k bpd in October. For Industrials, the sector has seemingly been boosted by Alstom (+1%) after it received a EUR 538mln contract.

Top European News

• Italy’s Economy Minister said the government sees 2025 GDP growth in line with its 0.6% target.
• ECB and PBoC extend bilateral euro-renminbi currency swap arrangement.
• HSBC expects BoE to hold rates steady in November and February, revising previous forecast of rate cuts; now projects BoE to resume cutting from April 2026.

FX

• USD trickled lower in the European morning after rangebound APAC trade, and in the aftermath of last Friday’s disappointing jobs data, which boosted Fed rate cut bets with money markets fully pricing in at least a 25bps cut at the Fed meeting on September 17th and a slight off chance for a 50bps move. On the topic of Fed independence, US President Trump said Waller, Warsh and Hassett are the three finalists for Fed chair nomination. DXY resides closer to the bottom end of today’s current 97.644-97.942 range.
• EUR is holding modest gains against the softer dollar, though political risk remains in focus with French PM Bayrou’s government facing a confidence vote later today. On that, today’s French confidence vote (statement 14:00 BST / 09:00 ET, result ~18:00 BST / 13:00 ET), with PM Bayrou expected to lose as his coalition holds only 210/577 seats; failure likely forces resignation and raises risks of snap elections if no successor emerges. EUR/USD trades in a current 1.1703-1.1734 range.
• JPY briefly climbed above the 148.00 level overnight amid political uncertainty after PM Ishiba announced his resignation, although the yen is off its worst levels as participants also digested the stronger-than-expected revised GDP data. Japanese PM Ishiba said he has decided to resign as LDP president and gave instructions to hold an emergency LDP leadership election, while he will continue to carry out responsibilities until a new leader is elected. The political uncertainty from PM Ishiba’s resignation is seen as potentially delaying a resumption of BoJ’s rate normalisation. USD/JPY sits closer to the bottom of a 147.51-148.57 range.
• GBP lacks clear direction with price action contained near the 1.3500 level amid a very light calendar for the UK for most of the week until Friday’s monthly GDP and output data. Desks note sterling remains vulnerable via Gilts, with UK government bonds still the “weak link” despite the recent abatement of last week’s global bond sell-off. Starmer’s cabinet reshuffle left Chancellor Reeves untouched, preserving her market credibility, but fiscal challenges remain. GBP/USD resides in a narrow 1.3482-1.3526 range.
• Antipodeans lacked firm conviction in APAC trade but edged higher during European hours to become the clear G10 outperformers at the time of writing, with the high-beta FX coat-tailing on the broader rise of base metals and broader constructive sentiment across the market.
• EUR/NOK trades on either side of its 100 DMA (11.7274) in a current 11.6811-11.7554 range. Focus on Norwegian elections, where opinion polling currently points to a continuation of the current Red-Green bloc, with a lead of around 6pp.
• PBoC set USD/CNY mid-point at 7.1029 vs exp. 7.1317 (Prev. 7.1064)
• SNB Chairman Schlegel said there is a high bar to the next interest rate cut, according to Migros-Magazin. It was separately reported that Schlegel said he is aware of undesirable effects of negative rates, while he added that US tariffs raise uncertainty and have a negative impact on the economy.

Fixed Income

• USTs are contained, holding onto the bulk of the NFP induced upside we saw on Friday. On Friday, USTs hit a 113-21+ peak. Today, the benchmark holds at the upper end of 113-07+ to 113-14 parameters. The main update on the Fed front post-NFP has been Trump saying that Waller, Warsh and Hassett are the three finalists for the Chair role.
• JGBs are slightly firmer. PM Ishiba has announced that he will be stepping down as LDP leader and by extension PM. As such, a new LDP leadership vote is expected to take place on October 4th, according to Reuters sources. Ishiba’s resignation is not a huge surprise, as the tone in recent weeks had been moving towards him stepping down as various high-ranking LDP officials had announced their intention to resign, taking responsibility for the lower house election result. The announcement by Ishiba saw long-end yields climb amid concern that Ishiba’s successors may outline more expansionary fiscal policy than has been the case under Ishiba. Specifically, the 30yr yield climbed to a 3.299% peak, just eclipsing the record high set last week. JGBs themselves saw downside of just under 30 ticks following Ishiba’s announcement, with the 10yr yield moving a little higher as a result.
• OATs are near enough flat into the confidence motion. The base case remains that PM Bayrou will lose the motion and have to submit his resignation to President Macron, an outcome that is priced by the market now and as such, should not spur any significant widening of spreads; OAT-Bund remains around the 80bps mark. The process begins at 14:00BST but the actual vote and subsequent results are not expected until the evening. Politico guides that 18:00BST is the earliest the outcome could be known.
• Bunds are in-fitting with the above. Firmer by a handful of ticks in 128.91 to 129.21 parameters, eclipsing Friday’s peak by a tick. Focus for the bloc is firmly on France, but as it stands, the risk of contagion is regarded as slim by desks. Aside from France, today’s September EZ Sentix figure came in below the forecast range at -9.2 (exp. -2.0, prev. -3.7).
• Gilts echo above. Similarly to Bunds, Gilts have eclipsed Friday’s best at the top end of 91.09 to 91.34 parameters, besting Friday’s high by two ticks.

Commodities

• Crude gained following the decision by OPEC+ members to continue hiking production for October, albeit at a slower pace of increase of 137k bpd (as touted), while Goldman Sachs kept its Brent/WTI price forecast unchanged for 2025 and noted that the decision to start gradually unwinding the 1.65mln bpd of cuts likely reflects that OECD commercial stocks remain low. WTI currently resides in a USD 61.85-63.08/bbl range while Brent sits in a USD 65.51-66.78/bbl range.
• Precious metals climbed in the European morning after trading rangebound overnight as traders took a brief breather from the aftermath of last Friday’s jobs data, owing to a weaker dollar and Fed rate cut bets. – Drivers remain a mix of: 1) overhang from Friday’s data, 2) geopolitics (Trump-Russia tensions + more EU sanctions), 3) sustained central bank demand (PBoC), and 4) technical momentum after topping USD 3,600/oz. Spot gold currently resides in a USD 3,579.72-3,617.29/oz range after topping the psychological USD 3,600/oz for the first time.
• Base metals are a little firmer. Losses from last Friday were met with a limited APAC recovery as participants digested disappointing Chinese trade data. Prices then tilted firmer during the European morning amid the softer dollar and broader risk appetite. 3M LME copper resides in a USD 9,888.10-9,934.00/t range, at the time of writing.
• US President Trump issued an executive order on Friday exempting graphite, tungsten, uranium, gold bullion and other metals from tariffs, while silicone and certain pharmaceuticals/chemicals were included in the tariff list.
• Eight OPEC+ members agreed to raise the oil production by 137k bpd in October (as touted), citing a steady global economic outlook and current healthy market fundamentals, while the next meeting is to be held on October 5th.
• OPEC Secretary General said projections indicate OPEC+ under the leadership of OPEC members will increase production from 49mln bpd to around 64mln bpd by 2050.
• Iraq’s PM said they will make arrangements to facilitate the entry of oil majors into Iraq, and they are in talks with ExxonMobil (XOM) on major energy projects, while Iraq hopes fellow producers will reconsider its oil export quota to better reflect its production capacity.
• Iraq’s SOMO and Oman’s OQ signed two MOUs on oil storage and Iraqi oil trading, while one MOU includes developing an integrated crude oil storage project in Oman’s Raz Markaz with an initial capacity of 10mln bbls.
• Russia’s Novak said they discussed 7-month OPEC+ compliance, which is high, and they agreed to monitor the market further, while he added the market is balanced and Russia is fully compliant with the OPEC+ deal.
• ADNOC is said to mull USD 10bln plus financing for the Santos (STO AT) deal, according to Bloomberg.
• Italy’s Energy Minister said there is no plan to dismantle coal-fired plants in continental Italy by year-end, and they are relaxed about the level of gas storage filling in Italy and in Europe, while the official added that US suppliers are currently offering LNG at a competitive price.
• PBoC purchased gold in August for 10th month in a row, according to data cited by Reuters.

Geopolitics: Middle East

• US President Trump posted that he had warned Hamas about the consequences of not accepting a hostage deal and said this was his last warning.
• Hamas said it received some ideas from the US side through mediators to reach a ceasefire deal in Gaza.
• Israel’s Foreign Minister Saar said the war in Gaza can end tomorrow if hostages are released and Hamas lays down its arms, while he said establishing a Palestinian state would jeopardise Israel’s security and urged Denmark not to recognise a Palestinian state. It was also reported that Denmark’s Foreign Minister said they are not ready to recognise a Palestinian state but added Israel does not have a veto over any Danish recognition of a Palestinian state.
• Yemen’s Houthis targeted Israel’s Ramon Airport with drones, although operations at the airport were resumed following the drone strike from Yemen.
• Israeli Defence Minister Katz posts “Today a huge hurricane will hit the skies of Gaza City…The IDF continues as planned and is preparing to expand the manoeuvre to defeat Gaza”.
• Iranian Official Baghaei says “We have not yet reached a conclusion with the IAEA, but the process of talks has been positive”, via Iran International on X.
• Israeli PM Netanyahu says “We will complete our missions in the West Bank, Gaza and everywhere “, via Al Hadath.

Geopolitics: Ukraine

• Ukraine’s PM said the main building of the Ukrainian government was damaged by an enemy strike for the first time during the war and that firefighters were working to extinguish the blaze at the government building. In relevant news, Ukraine’s Air Force said on Sunday morning that Russia launched 805 drones and 13 missiles on Ukraine overnight, while it was separately reported that Ukraine attacked Russia’s Druzhba oil pipeline in the Bryansk region.
• Russian Defence Ministry said Russian forces took control of Khoroshe in Ukraine’s Dnipropetrovsk region and carried out strikes on Ukraine’s military-industrial complex and transport infrastructure facilities, according to TASS.
• US President Trump said he is ready to go to the second round of sanctioning Russia, while Trump commented on Friday that the Ukraine war will end, or there will be hell to pay, and they are working on security guarantees to Ukraine.
• US envoy to Ukraine said Russia’s latest strike on Kyiv is not a signal it wants to diplomatically end the war.
• US and the EU plan to discuss new Russia sanctions on Monday, according to AP News. European leaders will visit the US on Monday or Tuesday to discuss ways to end the war in Ukraine, according to the BBC.
• EC President Costa says the EU prepares 19th package of sanctions against Russia in close coordination with US.
• Russian Foreign Minister Lavrov says, “Moscow is ready for dialogue with everyone”, according to Al Arabiya.
• IAEA chief Rafael Grossi reports progress in talks with Iran over full resumption of nuclear inspections, hoping for a successful resolution within days; there is still time but not much.

Geopolitics: 

• Tensions rose in Istanbul as hundreds of Turkish police blocked access to the main opposition’s Istanbul headquarters following a court-ordered leadership change of the party’s local administration, according to Bloomberg.

US Event Calendar

• 11:00 am: NY Fed Inflation Expectations
• 3:00 pm: Jul Consumer Credit, est. 10.2b, prior 7.37b

DB’s Jim Reid concludes the overnight wrap

It’s another bumper week of events as we build to next week’s FOMC. Although the Fed is now on its media blackout, Wednesday’s PPI and especially Thursday’s CPI will shape pricing ahead of that, with all eyes still focused on the tariff impact. 28bps of cuts are now priced in for the next meeting, so a quarter-point cut is fully priced but without much being priced in for a 50bps move. Our economists believe you’d need to see pretty weak inflation this week to get that. We’ll preview that US inflation data below but before we do the main highlights for the rest of the week are: the French confidence vote in the National Assembly, German industrial production and the New York Fed’s inflation expectations today; the preliminary annual benchmark revisions by the US BLS for payrolls tomorrow; Chinese inflation, the State of the Union address by European Commission President von der Leyen, and a 10yr UST auction on Wednesday; the ECB decision and a 30yr UST auction on Thursday; and finally on Friday there’s the  University of Michigan survey. 

We’ll go through a few of these events now and review Friday’s payrolls and its impact below. But let’s first take a look at what’s expected in Thursday’s US CPI. In their preview here (“Webinar: August CPI preview & webinar registration”), our US economists are expecting monthly headline CPI to rise to +0.36% in August, which would be the strongest monthly print since January. That’s partly because of their forecast for a +1.7% increase in seasonally adjusted gas prices, along with some positive payback in food-at-home prices. So, they think core CPI will be a little weaker at +0.32%, although that would still be in line with the six-month high we had last month. If that’s correct, then that would lift the year-on-year headline number by two-tenths to +2.9%, with core edging up a little but still rounding to +3.1%, the same as last month. Of course, the focus will very much be on the continued impact of the tariffs in core goods categories, and we know these are still filtering through, given several rates like the 50% on copper only came into force last month.

In terms of the implications for the Fed, the jobs report on Friday has seen the tide turn to increasing concern about tepid employment growth rather than permanently above-target inflation. That report showed nonfarm payrolls up just +22k (down from +79k in July and clearly beneath the +75k print expected). Moreover, there were another -21k of downward revisions to the previous two months, which was well below the huge -258k revisions in the previous report, but still the 6th time in the last 7 months that the revisions had been negative. So that meant the unemployment rate moved up a tenth to 4.3%, the highest since October 2021. And the broader U6 measure (which includes underemployed and marginally attached workers) moved up to 8.1%, again the highest since October 2021. As it stands, the latest revisions mean that June this year has a -13k print, which is the first negative month since December 2020. It also marks an end to the second-longest streak of consecutive positive payroll prints in data back to 1939. See our economists’ “August employment: Summer slump redux” for more. The one caveat they discuss around the weak data is that the slide in payrolls does look similar to that seen between June and August last year even if there is evidence of labour market weakness in the numbers.

Overall, they don’t view the report as soft enough to push the FOMC towards a larger-than-usual 50bp cut next week, partly because the median dot in June was in line with two cuts and an unemployment rate at 4.5% by year-end. So nothing out of the ordinary yet relative to this. However, keep an eye out for the preliminary BLS annual benchmark revisions tomorrow for another rewrite of history. These only impact the period to March so it won’t have anything about the most recent five months. But there are likely to be downward revisions of as much as 50-60k per month over the year according to our economists, based on the survey linked to the revisions calculations. Bessent nodded to this sort of number yesterday in a press interview.

Elsewhere, we see what is likely to be a low-key ECB decision on Thursday. Our European economists expect them to keep the deposit rate on hold at 2% and think the ECB has reached its terminal rate in this cycle. In their preview here, they look at what is needed to build the case for a further easing.

More importantly in Europe is today’s confidence vote in France. Proceedings start at 3pm local time with the vote results likely to be known after 5pm CET. That’s likely to see a defeat for Prime Minister Bayrou’s minority government, but most interesting is what happens next. President Macron is expected to nominate a new PM that could achieve a majority to pass the budget. This would probably require the backing of the centre-left Socialists as the right-wing populist National Rally has called for snap parliamentary elections to be held. There are also general strikes called in France for September 10 and September 18, and Politico reported over the weekend that Macron is aiming to have Bayrou’s replacement lined up before the second one of these. At the start of last week, France’s fiscal situation was a real pressing issue for markets, along with the UK gilt market selloff, but the US bond rally has taken some of the sting out of this. Nevertheless, both countries remain in a precarious situation if global rates turn again.

Speaking of politics, Japan’s PM Ishiba announced over the weekend that he will step down, after several weeks of speculation after the poor summer election results. The leadership race will now take place and likely take 2-3 weeks, although the new LDP leader will need some support from opposition parties to become PM given LDP-Komeito have lost their majority. A key issue at stake is the direction of monetary policy, and the two front runners seem to be Koizumi and Takaichi with the former more likely to coincide with higher Japanese rates. That’s contributed to a weaker Japanese yen overnight, which has fallen by -0.48% against the US Dollar to 148.15 per dollar. Meanwhile, yields are fairly stable, and the Nikkei (+1.33%) is closing back on its record high this morning after there were decent upward revisions to Japan’s growth data. It showed the economy growing at an annualised +2.2% rate in Q2, having initially pointed to a +1.0% rate. So that means the economy has expanded for 5 consecutive quarters now, the longest run since 2016-18.

On that data theme, China’s trade numbers overnight showed export growth slowing to +4.4% year-on-year in August, which is its slowest in 6 months. Similarly, import growth also slowed to +1.3% (vs. +3.4% expected). That’s been driven by a big decline in exports to the US given the higher tariffs, with US exports down -33.1% on the previous year in August. But the major equity indices have mostly held up this morning across Asia, not least as expectations mount that the Fed will cut rates next week after the jobs report So the Hang Seng has advanced +0.35%, the Shanghai Comp (+0.17%) and the KOSPI (+0.12%) have posted modest gains, and the CSI 300 is only down -0.01%. US equity futures are also positive, with those on the S&P 500 up +0.09%, whilst Treasury yields have pared back their Friday declines, with the 10yr yield up +2.5bps to 4.10%.

Recapping last week in more detail now. US equities posted a modest advance, with the S&P 500 still up +0.33% (-0.32% on Friday), even as jitters mounted about a labour market slowdown give the jobs report. Interestingly, tech stocks outperformed despite initial concerns over AI-linked valuations, pushing the NASDAQ up +1.14% for the week (-0.03% Friday), whilst the Mag 7 were up +2.17% (-0.27% Friday). Equities were softer in Europe however, with the STOXX 600 -0.17% lower (-0.16% on Friday), with the DAX (-1.28%, -0.73% on Friday) and FTSE MIB (-1.39%, -0.91% Friday) leading the declines.

For bonds, last week started with a major selloff that initially pushed yields up to multi-year highs. Indeed, the 30yr UK gilt yield reached its highest since May 1998, and French OATs moved up to levels last seen in 2009 amidst ongoing fiscal concerns. But the US jobs report meant that reversed by the weekend as investors priced in faster rate cuts. So that left 2yr Treasury yields -10.8bps lower on the week (-7.9bps on Friday), while 10yr yields fell by a larger -15.4bps to 4.08% (-8.6bps on Friday), and 30yr yields by -16.9bps to 4.76% despite being just a whisker away from 5% on Tuesday. This reversal of the August curve steepening came despite ongoing questions about Fed independence. In a WSJ op-ed on Friday, Treasury Secretary Scott Bessent criticised the Fed for “mission creep” and called for an independent review of the central bank. Meanwhile in Europe, bonds saw a more modest rally, with 10yr bund yields down -6.2bps on the week to 2.66% while 10yr gilt yields fell -7.6bps to 4.65%.

The rally in bonds was also supported by lower oil prices, with Brent crude falling -3.85% (-2.22% Friday) to a 3-month low of $65.50/bbl amid the weaker US outlook as well as the news that OPEC+ was considering another oil production increase in October. This was confirmed over the weekend, with the group agreeing to raise production by 137kbbl/day. That said, the group’s statement also signaled some caution, with any further return of production “subject to evolving market conditions”. Brent crude oil prices are +1.21% higher this morning as a result. Meanwhile, with all the two-way turmoil last week, gold had its best week since April (+4.02%), reaching a new all-time high of $3,587/oz.

Submitted by Thomas Kolbe

In terms of media strategy, the German government operates on Champions-League level. While the Chancellor emphasizes the pressure for fiscal consolidation in statesmanlike interviews, party representatives simultaneously prepare the public—through coordinated media messaging—for tax increases. Meanwhile, the bond market has already given its verdict: thumbs down.

The Berlin political machine continues in routine mode: budget negotiations consistently end with new borrowing, the Chancellor calls for cuts in the social budget, while left-leaning factions across both parties aim to mobilize taxpayers to fill the yawning gaps in public finances. A hectic debate is underway about the dramatic state of the German economy and the immediate consequences for government coffers. There is no indication that policymakers are bending to reality or abandoning the ideological path that has led to this decline.

Infantile Envy Campaign

This debate is accompanied by an infantile envy campaign orchestrated by the DGB (German Trade Union Confederation), which once again proves itself to be a club of functionaries largely detached from its members. Rather than tackling the structural problems of the economy seriously, the union prefers to light divisive fires.

According to DGB strategists, the wealthy, heirs, and private investors are to blame for Germany’s economic catastrophe. It is a shameful campaign, which—hopefully—will not gain significant traction in the media.

The union confirms the diagnosis that eco-leftist policies and the leadership cadres of business and unions have largely merged into a corporatist unit—held together by the gigantic subsidy machine of the green transformation. The silent cartel is willing to accept the collapse of the German economy, as long as the sweet poison of corruption money—commonly known as subsidies—keeps flowing. As a result, Germany moves forward in a somber mood, socially unsettled, economically paralyzed, and heading toward eco-socialism.

Agenda 2030

The last remnants of bourgeois politics act clumsily, trapped in media routines.

CDU Secretary General Carsten Linnemann now calls for an “Agenda 2030,” apparently aimed at achieving a psychological effect—similar to Gerhard Schröder’s Agenda 2010. In reality, Agenda 2010 was mostly an administrative reform of social welfare: fiscally modest, with savings of at most ten billion euros per year and minimal tax cuts.

Its fame rested not on substance, but on favorable external circumstances: a low-interest cycle, strong global growth, and China’s expansive demand policies made the measures appear far larger than they actually were—a media-exaggerated myth that continues to resonate today.

From the south of the country, calls are growing to reverse destructive regulatory policies in the automotive sector. Bavarian Prime Minister Markus Söder demands the removal of the combustion engine ban and technology-neutral solutions for mobility. At the same time, however, he continues to support one-sided subsidies for e-mobility.

Neither fish nor fowl. He, too, has failed to recognize that the foundations of the German economy are fractured and that piecemeal reforms will no longer suffice. Germany continues to lose capital abroad and refuses to acknowledge the severity of the crisis it has itself triggered—through erratic energy policy, dogged support for the proxy war in Ukraine, and a grotesque open-border policy.

Heating Law as Blueprint

At least policymakers are beginning to realize that the economic disaster will soon manifest in sharply declining tax revenues. Now would be the time to unleash the economy and enable new growth. Yet no one dares challenge the green agenda. This is particularly evident in the Building Energy Act (GEG).

It will burden citizens with more than nine billion euros annually, even though households and businesses have already reached their limit. Rather than making rational corrections, policymakers insist on ideological mandates.

Emission targets remain unchanged; only timelines, financing, and alternative heating options—such as pellet stoves—are under discussion. Thus, the law remains a central pillar of the green agenda, fully absorbed by the party cartel.

Prisoners of the Cult

Berlin already knows this agenda has failed. Yet, from a media-psychological perspective, it has so thoroughly infected the parties that their representatives are unable to correct this dramatic mismanagement. Citizens now pay the price for political vanity and infantile ideology. Climate propaganda and Russia-phobia are used to align them with an economic artifice—whether it is the green subsidy economy or the new war economy—keeping it artificially alive.

When distilled, the German debate over state debt, regulation, climate policy, and the endless saga of defending democracy against supposedly imperial, invasion-ready Russia paints a clear picture: politicians have entrenched themselves in morally elevated narratives. With emphasis, plenty of historical bending, and reality denial, they persist undeterred.

Even the increasingly fragile situation in Ukraine hardly affects their decisions. There is no real Russian diplomacy; instead, the expensive war economy is pushed forward with full force—all to maintain the illusion of a functioning, morally superior state and to keep the credit mechanism alive.

Bond Markets Unimpressed

The German self-reflection meets deaf ears in the bond markets. Pressure is growing everywhere on over-indebted states. Interest rates are rising, and with them, fiscal leeway is shrinking. Germany’s debt mountain of 2.5 trillion euros currently costs the Treasury—i.e., taxpayers—around 34 billion euros per year in interest.

If interest rates continue to rise at a similar pace as in recent years, rough calculations suggest that about 13 percent of debt must be refinanced annually, adding roughly seven billion euros in interest costs each year.

Every one-percentage-point increase in interest rates triggers interest expenses of 27 billion euros under current debt levels. The situation is therefore more than merely dramatic. Neighboring France faces a week of truth, with a confidence vote in parliament. Prime Minister François Bayrou’s government is attempting budget cuts of 44 billion euros, which is already considered doomed given political divisions in parliament. The country braces for general strikes and political chaos.

Klingbeil Holds Course

In Germany, Finance Minister Lars Klingbeil continues on his course. Next year, he plans additional government spending of four percent, expanding the federal budget from 502 billion euros to over 520 billion euros. His calculations rely on overly optimistic assumptions. The ongoing economic depression will severely strain social funds and force the federal government into further borrowing and supplementary social payments.

Anyone who thought the economic crash would pressure policymakers to end their crash course with reality is sorely mistaken. Stubborn, ideologically radicalized, and detached from reality, the Merz-Klingbeil duo continues Brussels’ disaster agenda unabated. Debt and senseless government spending are intended to trigger a turnaround. Market-oriented reforms are nowhere in sight, as these would imply a loss of power and the political willingness to focus on core state responsibilities.

If economic decline materializes in the coming months through rising refinancing costs and widening deficits, it will be fascinating to see who the first strike-breakers in the political apparatus will be—who abandons the sinking ship or demolishes the firewall, forcing the collapse of the party cartel.

We must not underestimate the power of the bond market: no central bank in the world can permanently control the yield structure of over-indebted states if the market has already given its thumbs down.

* * * 

About the author: Thomas Kolbe, born in 1978 in Neuss/ Germany, is a graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.