Authored by Tom Ozimek via The Epoch Times (emphasis ours),

CNN has announced new details of its finalized rules for the first presidential debate of the 2024 election cycle, which will see a rematch between President Joe Biden and former President Donald Trump.

The network revealed on June 15 that the debate will last 90 minutes and will include two commercial breaks during which the candidates will not be able to interact with their respective campaign staff.

The candidates will appear at a uniform podium, with a coin flip to determine their podium positions.

No pre-written notes or props will be allowed, but the candidates will have a pen and paper so they can take notes during the debate.

There will be no studio audience for the debate, which will be held in Atlanta on June 27.

The debate will be moderated by CNN’s Jake Tapper and Dana Bash, who the network said “will use all tools at their disposal to enforce timing and ensure a civilized discussion.”

The candidates will each be given a bottle of water.

‘Not Impossible’ for RFK Jr. to Qualify

CNN also said that a condition for participation in the debate is that the candidates must obtain at least a 15 percent share in four separate national polls from a list provided by the network. They also must appear on a sufficient number of state ballots to be able to reach the 270 electoral vote threshold needed for a candidate to win the race for the White House.

The network said it’s “not impossible” for independent presidential candidate Robert F. Kennedy Jr. to meet these conditions, given that he has met the 15 percent threshold in three qualifying polls and, per CNN, is on the ballot in six states, making him eligible for 89 electoral votes.

Mr. Kennedy’s campaign said in a June 14 statement that he is on the ballot in eight states and has collected enough signatures needed for ballot access in a total of 22 states, which would total 538 electoral votes.

Still, CNN said that it appears “less likely” that anyone other than President Biden and President Trump will satisfy its conditions, setting the stage for a repeat of the 2020 showdown between the two men.

The Kennedy campaign didn’t return a request for comment regarding CNN’s remarks that it’s unlikely he’ll qualify for the debate, as well as for clarification on the ballot access figures, by press time.

Mr. Kennedy has said repeatedly that he expects to satisfy CNN’s requirements. He filed a complaint with the Federal Election Commission on May 28, claiming that CNN collaborated with the Trump and Biden campaigns to keep him off the debate stage.

A CNN spokesperson told The Epoch Times on June 12 that Mr. Kennedy does not currently meet the criteria for debate eligibility, while defending the conditions as “objective” and set before invitations were sent out to campaigns to participate.

Independent presidential hopeful Cornel West, Green Party nominee Jill Stein, and Libertarian Party nominee Chase Oliver remain far from CNN’s debate qualification guidelines.

So far, the Trump and Biden campaigns have agreed to two presidential debates—the first one hosted by CNN on June 27 and the second one by ABC News on Sept. 10, for which a location has not yet been decided.

ABC News’s conditions for debate participation eligibility are basically identical to CNN’s, with candidates having to appear on a sufficient number of state ballots to reach the 270 electoral vote threshold, receive at least 15 percent in four separate national polls, and agree to the debate format.

The two rival campaigns have bypassed the traditional process run by the Commission on Presidential Debates and have arranged their own debate schedule.

In November 2023, the commission proposed three presidential debates (on Sept. 16, Oct. 1, and Oct. 9) and one vice presidential debate scheduled for Sept. 25.

Both campaigns separately notified the commission that they prefer earlier debates.

In a May 1 statement, the commission defended its scheduling of debates, arguing that the first debate—scheduled for Sept. 16—would be the earliest televised general election debate ever held.

Jeff Louderback contributed to this report.

Nvidia (NVDA) accounts for 34% of the 14% SPX year-to-date gain, and five stocks have accounted for 60% of the S&P 500 total YTD return; MSFT, NVDA, GOOGL, AMZN, and META have collectively surged by 45% and now comprise 25% of the S&P 500 equity cap.

A key reason for this unprecedented outperformance is that these five companies posted Q1 EPS growth of 84% YoY vs 5% for the typical S&P 500 stock. Furthermore, strong results for the past four quarters have prompted analysts to raise their 2024 EPS forecasts by 38% for these five Tech stocks. In contrast, the profit forecast for the other 495 stocks in the index have been reduced by 5%.

That said, while consensus 2024 forecasts imply a 31% gap between EPS growth for these five stocks and the median S&P 500 firm (37% vs. 6%) the gap is expected to narrow to 8% in 2025 and only 4% in 2026.

The performance gap between the SPX cap-weighted and equal-weight indices over the last two years is the widest in nearly 24 years. In fact, the equal-weighted index is now unchanged since the start of 2022.

The consequences are clear: breadth is catastrophic, and according to Morgan Stanley, one month breadth just hit a new low, with the percentage of stocks outperforming the S&P reaching the lowest level on record.

That has not stopped the cap-weighted SPX to officially be back in “overbought” territory with RSI at 75 but only 49% of S&P companies are above their 50dma.

Within the broader S&P, the six mega-caps with $1+ trillion market caps are up an average of ~11.5% in Q2. The remaining 490+ stocks in the index are down an average of ~3% in Q2.

AAPL was up 8% last week, adding $260B in market cap this week alone after a flood of stock buybacks, a burst of retail buying…

… and a gamma squeeze, all of which combined to help the (formerly) world’s biggest company soar nearly 30% from its year-to-date lows as Tim Cook was hell-bent to reverse the narrative after dismal initial reception to the “Apple Intelligence” WWDC day.

Bloomberg’s John Authers asks:

‘Can this last’?

The question rings louder with every record the market breaks. Momentum tends to carry on for a long time until something stops it, but it’s very rare for such a rally to persist as long as this one.

The one snag with momentum strategies is that when they reverse, they can do so in a very serious way. There hasn’t been a momentum crash for a while; the closest approach came when tech stocks sold off on April 19 after results from Netflix that were better than official forecasts but disappointed the market.

This was nothing compared to sharp moves in response to dovish signals from inflation data or from the Federal Reserve earlier in this cycle.

The biggest momentum reversal this decade came on the day in November 2020 when the results of Covid-19 vaccine tests convinced investors that the worst of the pandemic could be over much earlier than thought.

The reshuffle in the stock market was spectacular.

The Problem With Momentum – When it reverses, it can do so in a big way

Source: Bloomberg

With the same winners winning day after day, largely on growing enthusiasm rather than their results, it does make sense to fear a big reverse at some point, or indeed a bubble.

It’s perhaps even more concerning that the force driving the winners on is mostly valuations; it’s not about any great momentum in growing earnings, even though several companies have very much shown it.

The S&P 500 Momentum index’s earnings multiple tripled after plumbing its lowest point in over a decade only last May.

Over that period, its multiple growth has far outstripped that of the Magnificent Seven — although it’s obvious that the AI craze has a stake in this:

Source: Bloomberg

As one veteran trader remarked (while we note he admits participating tactically in this farce):

“This won’t end well…”

Authored by Matthew Vadum via The Epoch Times (emphasis ours),

The Supreme Court agreed on June 17 to hear a case from Silicon Valley giant NVIDIA that could make it more difficult for shareholders to pursue securities fraud lawsuits.

The justices granted the petition for certiorari, or review, in NVIDIA Corp. v. E. Ohman J:or Fonder AB in an unsigned order. No justices dissented. The Court did not explain its decision. At least four of the nine justices must vote to grant a petition for it to advance to the oral argument stage.

NVIDIA is a high-tech company known for its graphics processors commonly used in artificial intelligence development, based in Santa Clara, California. E. Ohman J:or Fonder AB is an investment management firm in Stockholm, Sweden.

Investors sued NVIDIA claiming the company misrepresented how dependent it was on revenue from cryptocurrency mining before a market setback in 2018. The company argues that the legal complaint filed against it lacks sufficient specificity to move forward.

A lower court resurrected the proposed class action lawsuit brought by shareholders in California and the Swedish firm against the company. Those suing alleged that NVIDIA and senior company officials violated the federal Securities Exchange Act of 1934 by making statements that downplayed how much of the company’s revenue growth grew out of crypto-related transactions.

Those omissions misled market participants who wanted to understand the impact of crypto-mining on the company’s business, the plaintiffs argued.

U.S. District Judge Haywood Gilliam Jr. threw out the lawsuit in 2021 but a divided U.S. Court of Appeals for the 9th Circuit reinstated it. The circuit court determined that the plaintiffs had adequately alleged the company’s CEO made “false or misleading statements and did so knowingly or recklessly,” and permitted the case to go ahead.

This is a developing story. This article will be updated.

It turns out the boycott of Bud Light over its employ of trans influencer Dylan Mulvaney a year ago wasn’t just a passing fad, as many on the left and in the media laughed it off to be.

In fact, the Bud Light brand is still suffering a year later, according to a new report from 6ABC. 

The report says that the backlash against Bud Light is still causing significant disruption, affecting the brand and its network of independent local wholesalers more than a year later, according to third-party sales data and interviews with six Anheuser-Busch wholesalers shared with ABC News

Many of these wholesalers, primarily small to medium-sized enterprises that rely heavily on Bud Light sales, continue to suffer from reduced revenue and face uncertainty about the brand’s full recovery.

An Anheuser-Busch wholesaler owner in Northeast Philly, who has a trans child, told ABC News they took a 30% pay cut due to losses and are thinking about retiring: “It was really hurtful personally. I’m trying to understand what my kid is going through and then this happens.”

They added: “It’s still very upsetting. It’s very difficult to come in every day and look at those sales numbers, knowing I have a responsibility for everyone here.”

An executive in the Mid-Atlantic has been strategizing ways to cut costs without layoffs due to ongoing Bud Light sales declines, and a top official in the Southeast predicts sales will stay down for two more years.

Despite these challenges, harassment towards employees and drinkers has lessened, suggesting the boycott has cooled and Bud Light’s reputation is recovering. Most wholesalers report an uptick in sales and confirm Bud Light is still their bestseller.

They spoke on condition of anonymity due to the sensitivity of discussing financial impacts publicly. Anheuser-Busch’s spokesperson emphasized the brand’s enduring leadership in the market, underscoring partnerships and the company’s proactive engagement with over 350 wholesaler partners.

Sales of Bud Light dipped by about 25% after the controversial product endorsement, but recent trends indicate a slow recovery, although still below pre-boycott levels.

Dave Williams, the president of Bump Williams Consulting, told ABC News: “Sales cratered and sat there. They didn’t get any worse but they sure as heck didn’t get any better. I don’t think there are a lot of examples where the king of the castle, someone in such prominence, took such a public and drastic hit in beer.”

Via SchiffGold.com,

The Biden Administration’s Consumer Financial Protection Bureau (CFPB) just issued a proposal to ban medical debt from factoring into your credit score. But for free-money socialists and their Keynesian bedfellows, this doesn’t go nearly far enough: short of canceling medical debt entirely, nothing else is acceptable.

The proposal addresses a loophole so that Americans with medical debt aren’t prevented from getting loans or even losing their home due to unpaid medical bills. The announcement has set a chorus into motion from those who believe money grows on trees, and debt can be magically erased. For economically-illiterate, quixotic activists who think money can (and should) be printed out of thin air, hundreds of billions of dollars in debt can just as easily be made to disappear without economic consequences.

Medical debt shouldn’t show up on credit reports. But also, medical debt shouldn’t exist.

Seeking medical treatment in America should not saddle people with debt.

It’s time to cancel medical debt and pass Medicare for all.

— Nina Turner (@ninaturner) June 13, 2024

Even just banning medical debt from credit scores could potentially fuel inflation and lead to higher medical costs – but the one thing the free money advocates have right is that healthcare is too expensive in America.

The system is in dire need of reform.

But we have a very large country with low homogeneity where the socialized healthcare systems of high-trust societies, like some Nordic nations, would be impossible — not only economically, but culturally as well.

CFPB Data: Medical Debt Collections in Consumer Credit Panel, 2018 – 2021

Medical debt total balance and total tradelines from the CFPB’s Consumer Credit Panel, a 1-in-48 sample of de-identified credit records from one of the three major national consumer reporting agencies

Source: US Consumer Finance Protection Bureau, Medical Debt Burden in the United States. February 2022. Accessed June 2024

We also have an out-of-shape populace locked in a vicious downward cycle of atrocious nutrition, deteriorating health, and compounding pharmaceutical interventions. A “Medicare For All” scheme would inevitably translate to the constant and astronomical (lifestyle-induced) medical costs of the morbidly unhealthy being passed onto Americans who take reasonable steps to stay in decent health. Somewhere around half of adult Americans have totally preventable chronic diseases, and price inflation only worsens this pattern as people turn to cheaper and lower-quality foods to sustain their families.

But in its current form, the system itself is basically devoid of any real free market price discovery mechanism. There’s cartel-ized healthcare pricing where the total on your bill has as much to do with the dynamics of corporate and State monopolies than the cost of the service, materials, and medicines. There isn’t enough competition between giant healthcare providers, and the FDA has created a revolving door system for rubber-stamping products from pharmaceutical giants at the cost of innovation.

There’s little to no incentive to lower costs. Government intervention abounds more than ever with Obama’s Affordable Care Act, and while some are getting affordable insurance who couldn’t before the ACA, it has only achieved this by shoving those costs onto other people.

State intervention, guaranteed loans, and “debt relief” programs in medicine, education, and other industries push up prices for consumers needlessly and arbitrarily by cutting out free market mechanisms, shifting the burden to the rest of us. It’s a political ploy to curry favor to the indebted by selling out the next generation. We need the government involved less, not more, except to the extent that Americans must be protected from entrenched corporate monopolies and public-private cartels. Let the free market speak, let it set the fairest-possible prices through genuine competition, and let it self-regulate.

But a deeper root of the problem is the US dollar itself. Problems ripple outward from this common denominator — when a central bank can set monetary policy and print money on a whim, inflation is inevitable, and costs will go up. If you don’t fix the money, you can’t fix the other issues — and attempts to do so are inevitably trying to address symptoms without addressing foundational causes. From the central bank to the healthcare system, cartels and monopolies and walled gardens abound. It’s Americans who pay the price.

Passing existing debt along to the rest of the country isn’t the answer, and to truly fix healthcare in a lasting way, we must first abolish fiat money.

Authored by Mike Shedlock via MishTalk.com,

Was there a surge? Or was it a mirage?

A few polls showed slight improvement for Biden immediately after the election.

For example, the New York Times reports Small Shift Toward Biden After Trump Verdict

It’s one of the biggest questions in the wake of Donald J. Trump’s conviction: Did the verdict change anyone’s mind?

Early on, the answer appears to be an equivocal “yes.”

In interviews with nearly 2,000 voters who previously took New York Times/Siena College surveys, President Biden appeared to gain slightly in the aftermath of Mr. Trump’s conviction last week for falsifying business records.

The group favored Mr. Trump by three points when originally interviewed in April and May, but this week they backed him by only one point.

Recontact Voters

Was this due to the conviction or something else?

Contacting previous respondents may be an excellent way to track how people’s views change over time, but it’s not necessarily the best way to represent the whole electorate. On the one hand, Mr. Biden’s supporters were slightly likelier to retake the survey than those who backed Mr. Trump, 37 percent to 35 percent. The voters we reached again were generally older, more educated, more highly engaged and more likely to be white than those who did not respond.

This is sampling bias.

Curiously …

In fact, the voters we spoke to who continue to support Mr. Trump appear to be more enthusiastic than ever. Many of his previously disengaged supporters seemed newly energized by the verdict, with 18 percent of his supporters who previously said they were unlikely to vote now “almost certain” to do so, compared with just 3 percent of Mr. Biden’s supporters who moved into that category.

It’s easy to spin this however you want. But it is far from clear what, if anything happened.

Another recontacting study by Echelon Insights, a Republican firm, found Mr. Biden gaining two points compared with its previous survey.

In a Times/Siena poll of six battleground states conducted in November, about 7 percent of Mr. Trump’s supporters said they would switch their support to Mr. Biden if Mr. Trump were to be convicted and sentenced to jail in an unspecified criminal trial. Other pre-verdict polls asking specifically about the Manhattan hush money trial found a similar share of Mr. Trump’s supporters nationally who said they intended to switch their support if there were a guilty verdict.

Let’s discuss The New York Times vs the New York Times.

The New York Times View #1

It’s one of the biggest questions in the wake of Donald J. Trump’s conviction: Did the verdict change anyone’s mind?

Early on, the answer appears to be an equivocal “yes.”

The New York Times View #2

While recontacting studies can help answer important questions of whether individuals are changing their minds, this study is not necessarily representative of the entire electorate.

It is not possible to calculate a conventional margin of sampling error. And while all surveys have sources of error beyond sampling, such as nonresponse bias, this study in particular may be more likely than the typical Times/Siena poll to overrepresent the most politically engaged voters.

538 Forecast

538 forecast with Mish comments

538 calls the above its 2024 Election Forecast.

Biden vs. Trump: Who is Leading the Polls?

Reuters asks Biden vs. Trump: Who is leading the polls?

Donald Trump, the Republican challenger in the U.S. presidential contest, opened up a marginal 2 percentage point lead over U.S. President Joe Biden this week in the race to win the November election, as voters weigh the recent criminal convictions of Trump and of Biden’s son, according to a new Reuters/Ipsos poll.

Some 41% of registered voters in the two-day poll, which closed on Tuesday, said they would vote for Trump if the election were held today, while 39% picked Biden, a Democrat. Some 20% of voters in the poll said they had not picked a candidate, were leaning toward third-party options or might not vote at all in the Nov. 5 election.

Spotlight Virginia

Newsweek reports Joe Biden Suffers Shock Poll in State Democrats Have Not Lost in 20 years

However, according to polling by firm co/efficient, Biden and Trump are now tied in Virginia, a state which has not backed a Republican for president since George W. Bush in 2004.

According to their survey of 851 likely voters, 41 percent would vote for Biden while 41 percent would vote for Trump. A further 12 percent are undecided and seven percent would vote for a third-party candidate like Robert F. Kennedy Jr.

Post-Conviction Coefficient Virginia Poll June 11-12

In that poll, Trump picked up more votes than he lost post conviction.

And this is before the conviction is overturned, which I expect it will be.

That is only one poll. We should not read too much into it yet. However, Biden is going to have to defend some states Democrats never thought they would have to spend money defending.

Newsweek reports polling aggregator FiveThirtyEight awarded co/efficient 1.1 stars out of three and has given it a transparency score of 3.2 out of 10, raising questions about the reliability of the poll.

OK, what about Fox?

The Wall Street Journal notes “A Fox News Voter Analysis poll of registered voters, conducted from June 1 to 4, also found Biden tied with Trump” in Virginia.

Fox News Polls are done by Beacon Research/Shaw & Co. Research.

Conducted under the joint direction of Beacon Research (D) and Shaw & Company Research (R), Fox News national surveys include interviews with a representative sample of approximately 1,200 registered voters who were randomly selected from a national registered voter list sourced from Aristotle. About 75% of completed interviews are with respondents on the telephone (roughly 15% on landlines and 85% cellphones) and the remainder are with respondents contacted by text message who then complete the survey online. The total sample has a margin of sampling error of plus or minus three percentage points. When necessary, minor weights are used to ensure the demographics of survey respondents are representative of the national registered voter population. All sample frames are weighted together. Generally, weights are applied to age, race, education, and area variables. The Fox News poll is not weighted by party identification. (statement updated February 2024)

538 gives 2.8 stars out of 3 to Beacon Research/Shaw & Co. Research. The company was rated 15th out of 277pollsters analyzed.

Key Dates and Events

• June 27 Debate: All eyes will be on Biden. He will not have a teleprompter. Neither will Trump, but Biden shows no ability to think on his feet, confusing names, dates, and facts. This debate will be hosted by CNN.

• July 11 Sentencing: Trump sentencing is coming up. He could be sentenced to prison. My guess no.

• Immediate Appeal: Whatever the sentence, it will be appealed immediately. I strongly believe conviction will be overturned. If the sentence is prison, the appeal resolution may be quicker.

• July 15-18 Republican National Convention: The event is anticipated to potentially bring 50,000 visitors to Milwaukee.

• August 19-22 Democratic National Convention: This will take place in Chicago. There’s a decent chance it could get ugly.

• September 10 Second Debate: Assuming Biden is still standing, the second debate will be on September 10. This one will be hosted by ABC news.

• Tuesday, November 5: Election

The election is now less than five months away.

Models Can’t Think

538 says “Trump wins 51 times out of 100 in our simulations of the 2024 presidential election. Biden wins 48 times out of 100.” The missing result is a recount or a tie.

I look at the 538 model and say WTF?

Biden needs to do well in the debates. He rates to lose ground if the Trump conviction is overturned. And anyone watching him knows he might not make it to November. No one has any idea what would happen if Biden were to drop out.

But as it stands, the path for Biden is much narrower than the path for Trump. Yet Nate Silver effectively calls it a dead heat.

538 ignores the path and just looks at polls, despite knowing that support for Trump is historically higher than polls suggest.

History may not be the guide this time. but we need to think Trump may outperform the polls again.

GDPNow Analogy

After slamming the 538 forecast, models have some advantages.

People can overthink things. There is also a tendency to make excuses to believe what you want. That is the benefit to models.

I have been watching the Atlanta Fed GDPNow GDP model for many years.

It cannot think either.

And at the start of every quarter the nowcast can be wildly off. But as data comes in, the model gets more an more accurate. For about eight quarters, the final model forecast has outperformed professional forecasters.

Nate Silver’s 538 model will get better over time after some of those scheduled events happen.

As for now, this thinking person suggests 538 is way off base because it cannot make a judgment on anything but polls. It also seems to underestimate the narrow path Biden has.

If so, it’s a 538 model error to arrive at 51-48 looking ahead to November. T

Trump Found Guilty – a Travesty of Justice for America

On May 30, I wrote Trump Found Guilty – a Travesty of Justice for America

Trump was found guilty of a crime, but can anyone say what it is? Prosecutorial misconduct is dripping. It’s the judge, not Trump who belongs in prison.

This conviction will be overturned. Put that in your model.

Also note Trump raised nearly $53 million in the 24 hours after his felony conviction, shattering online records for Republicans and helping him close a substantial financial gap with President Biden.

Did any model predict that?

On Monday Israeli Prime Minister Benjamin Netanyahu dissolved his war cabinet, which comes closely on the heels of leading opposition figure Benny Gantz quitting it last week.

National Unity party lawmaker Gadi Eisenkot, who has accused Netanyahu of allowing himself to be bullied by the far-right over Gaza strategy, had also resigned. The high-level resignations have exacerbated the deep divide over war strategy against Hamas and the question of the remaining hostages.

Netanyahu has been cited by Haaretz as saying he’ll now consult a limited “forum” for sensitive wartime decisions. And The New York Times cited an Israeli official who suggested that “Mr. Netanyahu’s decision to disband the body — which was communicated to ministers at a wider cabinet meeting on Sunday — was largely symbolic given that Mr. Gantz and Mr. Eisenkot had already resigned.”

Dissolving the war cabinet could also be a way to prevent hardliners like the minister of national security Itamar Ben-Gvir from pressuring and forcing their way in.

Ben-Gvir had quickly demanded to join the wartime decision-making body within hours of Gantz quitting, writing on X that it was “about time to take brave decisions, achieve true deterrence, and bring true safety to the residents of the south, north, and all of Israel.”

Netanyahu has meanwhile continued to be dogged by accusations that he’s intentionally prolonging the Gaza operation for the sake of his own political survival and interests. For example the aforementioned lawmaker Eisenkot had this to say to Israeli media:

In previous years, Netanyahu would have made decisions “based purely on security considerations,” Eisenkot said. “Here, I saw decisions being made entirely differently, with delays… with antics.”

“Even the story of the invasion of Rafah was simmering away for three months,” he continued. “Over on their [media] channels, they report that Gadi Eisenkot and Benny Gantz are the ones who [prevented] the attack on Rafah, that the prime minister is determined and wants to proceed in Rafah, only we’re the ones holding him back.

“On the contrary,” Eisenkot said, accusing the prime minister of stretching out the process “like chewing gum.”

Eisenkot had some interesting things to say about Ben-Gvir’s surprising level of influence even while not holding a seat within the war cabinet. “…Ben Gvir, is the most influential minister,” he said, describing that this was in a highly negative sense (weighing heavily over Netanyahu’s calculations and how to react).

🚨 @Haaretz photographer Itay Ron arrested during tonight’s protest in Tel Aviv.

Ben Gvir’s police thugs cracking down on the press.

pic.twitter.com/2kPOREQwcQ

— Etan Nechin (@Etanetan23) June 15, 2024

“Even though he is not part of the war cabinet, he’s there in spirit. We wanted to invade Rafah in February, and Netanyahu dragged out the decision until May,” Eisenkot added. Meanwhile, large and at times violent protests have continued raging on Tel Aviv’s streets, with many hostage victims’ families demanding that Netanyahu step down. They have been outraged that no Hamas prisoner exchange deal has materialized for the rest of the captives held in the Gaza Strip.

By Stefan Koopman, Senior Macro Strategist at Rabobank

The G7 is a forum where Europe holds a clear numerical advantage over the United States. However, the geopolitical vulnerabilities and precarious political positions of Sunak, Scholz, and Macron compelled them to toe the line of the United States. Consequently, the communique following the summit in Italy incorporated hawkish language on China, mentioning the country 29 times. The G7 said their intention was not to thwart China’s development, but will “continue to take actions to protect our businesses from unfair practices, level the playing field, and remedy ongoing harm”. Additionally, the G7 endorsed the deal proposed by President Biden three weeks ago regarding Israel, which includes a ceasefire, a hostage-prisoner exchange, and Gaza reconstruction, but did not condemn Israel for some of its recent military actions.

The G7 pic.twitter.com/IBaSo7UR4f

— Ryan Gerritsen🇨🇦🇳🇱 (@ryangerritsen) June 13, 2024

The G7’s decision to extend a USD 50 billion loan to Ukraine, backed by immobilized Russian assets, was this summit’s most significant step forward. This loan structure reflects a typical compromise between the US and Europe. While the straightforward solution would involve seizing all of Russia’s frozen assets (estimated at USD 280 billion) to directly fund Ukraine’s war efforts, European countries – particularly France, Germany, and Belgium – continue to shy away from this, viewing it as too aggressive and fearing Russian reciprocation. Instead, they opted for using the interest on matured assets, which amounts to only a few billion dollars per year. The first option would be a game changer, whereas the second option falls embarrassingly short.

True, asset seizure is not without costs. Concerns about weaponizing the Western financial system drives interest in alternative financial infrastructures and spur de-dollarization initiatives. However, we’ve repeatedly argued that this is easier said than done. Another risk lies in the West and Ukraine losing some of their coercive leverage in future negotiations with Russia, potentially complicating conflict resolution. But if anyone thinks Putin’s in it for the money, they’re still not getting it.

That said, Europe’s position still really mattered. Almost all of Russia’s immobilized reserves are held by European custodians, primarily in Belgium. So, the cunning compromise involves redirecting and pulling forward all future interest income from the Russian reserves trapped in these custodians while leaving the principal untouched. Details are still being fleshed out, but the argument is that this approach acts as a punitive tax on the windfall profits made on the immobilized assets held in Europe. Consequently, the interest on the loan will be covered by the Russian assets, not by Ukraine. And if Ukraine defaults, Russia will be on the hook.

Despite the USD 50 billion loan (following the US approval of USD 60 billion in military aid), it may not be a game changer. Estimates suggest that this fresh funding would only cover approximately six months of Ukraine’s requirements. While it may help Ukraine navigate the upcoming political transitions in Europe and the United States, further funding will likely be necessary from mid-2025 onwards. The possibility of Trump returning to the presidency adds uncertainty – this is in fact our base case scenario. This weekend he said, again, that he will put an immediate end US funding for Ukraine. As has been a near-constant theme throughout the war, the West tends to do the right thing only when the alternative is even worse. Given that risk, the G7 may have to revisit this deal later this year.

China appears to be developing a limited and targeted retaliation against Europe after the bloc unveiled expanded tariffs on Chinese electric vehicles last week. A tit-for-tat retaliation between Brussels and Beijing risks triggering another trade war. 

On Monday, the Chinese Ministry of Commerce launched an anti-dumping probe on pork imports from the European Union. 

According to Bloomberg, this “will be viewed as Beijing’s counter to similar investigations being conducted by the EU, which is looking at Chinese subsidies across a range of industries and will impose tariffs on electric car imports from July.” 

Europe’s pork exports to China amounted to $1.83 billion last year, with farmers in Spain, Denmark, and the Netherlands benefiting the most. In the grand scheme, pork exports to China are only a fraction of a percent of overall trade between the bloc and China. Last year, China imported $282 billion worth of goods from the bloc. 

EU farmers are on high alert as Beijing’s probe on pork imports could potentially expand to other food products. These investigations, whether anti-dumping or anti-subsidy, could have a significant impact. There’s a looming threat that the EU’s luxury products sector, home to top brands such as LVMH, Gucci, and Prada, could also be targeted.

While the situation is troubling for the EU, there could be a silver lining for hog farmers in the US, Canada, and Brazil.

“If China responds in kind with aggressive tariffs, they risk triggering a trade war,” Joe Peissel, an economic analyst at research firm Trivium China, said, adding, “Beijing is desperate” to avoid that. 

Both the EU and China may engage bilaterally to resolve trade disputes. If not, and negotiations break down this summer, then expect a tit-for-tat trade war.

In terms of the holiday-shortened week ahead, the main data highlights are US retail sales tomorrow, UK CPI on Wednesday, and Japanese inflation and the global flash PMIs on Friday. For central banks, we have meetings concluding in Australia (tomorrow), UK, Switzerland and Norway (Thursday) with a few additional EM meetings spread through the week. There is also a fair degree of Fed and ECB speak to throw into the mix.

Tomorrow’s US retail sales will likely be the focal point in the US and even with a pretty poor UoM consumer sentiment figure from Friday, most economists think we’ll see a decent tick up in retail control (+0.3% consensus vs. -0.3% last month) which would equate to around 3% annualized for Q2 (vs. 1.5% in Q1). There have been some signs recently that the US consumer is starting to show some fatigue so this will be an important data point. Also keep a watchful eye on initial jobless claims on Thursday. While consensus expects a modest drop from 242K to 235K, DB’s economists see a further rise from 242k to 250k but so far it seems the rise is concentrated in similar states to that seen last year and is likely to be due to difficulties seasonally adjusting to the end of the school year. For more on the week ahead, the full day-by-day week ahead calendar is at the end as usual.

This morning, Asian equity markets are struggling at the start of the week with majority of the region’s markets trading lower this morning. As DB’s Jim Reid notes, across the region, the Nikkei (-1.82%) is the biggest underperformer dragged down by energy and real estate stocks while the KOSPI (-0.40%), the Shanghai Composite (-0.56%) and the CSI (-0.13%) also trading trade in negative territory. However, the Hang Seng (+0.50%) is the notable exception, having reversed its opening losses. In overnight trading, US equity futures are struggling to gain momentum with those on the S&P 500 (-0.05%) just below flat and those tied to the NASDAQ 100 (+0.06%) just above flickering near the flatline. Meanwhile, yields on the 10yr USTs (+2.32 bps) have moved upwards to trade at 4.24%.

Staying on China retail sales rose +3.7% y/y in May, exceeding market expectations for a +3.0% gain and increasing pace from a +2.3% increase in the previous month. However, other economic metrics failed to surpass market forecasts with industrial output growing +5.6% y/y in May (v/s +6.2% expected), down from an increase of +6.7% in April. Meanwhile, the nation’s real estate crisis continued to weigh on investment in fixed assets with the overall YTD investment figures expanding +4.0%, just shy of Bloomberg forecast of +4.2% gain. Additionally, new home prices dropped at the fastest pace since October 2014, falling -0.7% m/m in May (v/s -0.58% in April) and marking the 11th straight decline despite the government’s stimulus to support the property market.

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

Monday June 17

• Data : US June Empire manufacturing index, China May retail sales, industrial production, new home prices, Japan April core machine orders, Canada May housing starts, building permits, April international securities transactions
• Central banks : Fed’s Harker speaks, ECB’s Lagarde, Lane and Guindos speak, China 1-yr MLF rate

Tuesday June 18

• Data : US May retail sales, industrial production, capacity utilisation, June New York Fed services business activity, April business inventories, total net TIC flows, Germany and Eurozone June Zew survey
• Central banks : Fed’s Cook, Barkin, Logan, Kugler, Musalem, Goolsbee and Collins speak, ECB’s Knot, Cipollone, Guindos and Villeroy speak, RBA decision
• Auctions : US 20-yr Bond (reopening, $13bn)

Wednesday June 19

• Data : US June NAHB housing market index, UK May CPI, RPI, PPI, April house price index, Japan May trade balance, Italy April current account balance, ECB April current account, Eurozone April construction output, New Zealand Q1 GDP
• Central banks : BoJ minutes of the April meeting, BoC summary of deliberations, ECB’s Centeno speaks

Thursday June 20

• Data : US Q1 current account balance, May housing starts, building permits, June Philadelphia Fed business outlook, initial jobless claims, China 1-yr and 5-yr loan prime rates, Germany May PPI, EU27 May new car registrations, Eurozone June consumer confidence
• Central banks : BoE decision, SNB decision, Norges Bank decision, Fed’s Barkin speaks, ECB’s economic bulletin
• Auctions : US 5-yr TIPS (reopening, $21bn)

Friday June 21

• Data : US, UK, Japan, Germany, France and the Eurozone June PMIs, US May leading index, existing home sales, UK June GfK consumer confidence, May public finances, retail sales, Japan May national CPI, France June manufacturing confidence, Canada April retail sales, May industrial product price index, raw materials price index
• Central banks : ECB’s Nagel speaks

Finally, looking at just the US, the key economic data releases this week are the retail sales report on Tuesday and the Philly Fed manufacturing index on Thursday. There are several speaking engagements from Fed officials this week.

Monday, June 17

• 08:30 AM Empire State manufacturing survey, June (consensus -12.0, last -15.6)
• 12:00 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will moderate a discussion with Strauss Zelnick, CEO of Take-Two Interactive, at the Economic Club of New York. On May 30th—before last week’s CPI report and FOMC meeting—President Williams argued that “some of the recent inflation readings [represented] mostly a reversal of the unusually low readings of the second half of last year, rather than a break in the overall downward direction of inflation.” President Williams also said he saw “the current stance of monetary policy as being well positioned to continue the progress we’ve made toward achieving our objectives.” While he noted that he doesn’t “feel any urgency” to cut the fed funds rate, he also said that the FOMC didn’t “need to be at 2%” inflation to lower rates and would “want to be able to move before that.”
• 01:00 PM Philadelphia Fed President Harker (FOMC non-voter) speaks: Philadelphia Fed President Patrick Harker will deliver a speech on the economic outlook at an event hosted by the Philadelphia Fed. Text and Q&A are expected.
• 09:00 PM Fed Governor Cook speaks: Fed Governor Lisa Cook will deliver acceptance speech for the 2024 Marshall Medal at the 2024 Marshall Forum. Text is expected.

Tuesday, June 18

• 08:30 AM Retail sales, May (GS +0.3%, consensus +0.3%, last flat); Retail sales ex-auto, May (GS +0.2%, consensus +0.2%, last +0.2%); Retail sales ex-auto & gas, May (GS +0.5%, consensus +0.4%, last -0.1%); Core retail sales, May (GS +0.5%, consensus +0.4%, last -0.3%): We estimate core retail sales rebounded 0.5% in May (ex-autos, gasoline, and building materials; mom sa). Our forecast reflects a pick up in credit card spending among retailers. We estimate a 0.3% rise in headline retail sales, reflecting higher auto sales but lower gasoline prices.
• 09:15 AM Industrial production, May (GS +0.2%, consensus +0.3%, last flat); Manufacturing production, May (GS +0.2%, consensus +0.3%, last -0.3%); Capacity utilization, May (GS 78.5%, consensus 78.6%, last 78.4%): We estimate industrial production increased 0.2%, as strong oil and gas and electricity production outweigh weak mining production. We estimate capacity utilization increased to 78.5%.
• 10:00 AM Business inventories, April (consensus +0.3%, last -0.1%)
• 10:00 AM Richmond Fed President Barkin (FOMC voter) speaks: Richmond Fed President Thomas Barkin will speak at an MNI webcast. Q&A is expected. On May 16th, President Barkin argued that “to get to 2% [inflation] sustainably in the right kind of way, I just think it’s going to take a little bit more time.” He said that he thought there was “just a lot of movement on the services [inflation] side and it’s going to take a little bit of time,” but that he believed the FOMC was “on the right path here.”
• 11:40 AM Boston Fed President Collins (FOMC non-voter) speaks: Boston Fed President Susan Collins will deliver a keynote address at the Lawrence Partnership Annual Meeting and 10th Year Anniversary. Text is expected. On May 21st, President Collins said that she thought “this is a period when patience really matters” because “the data has been very mixed,” and that it would likely “take longer than [she] had previously thought” for the FOMC to start lowering the fed funds rate. President Collins noted that “there are a lot of reasons why special dimensions of this cycle could explain why we’re moderately restrictive and we have perhaps still more in the pipeline.”
• 01:00 PM Dallas Fed President Logan (FOMC non-voter) speaks: Dallas Fed President Lorie Logan will take part in a moderated Q&A at the Headliners Club in Austin, Texas. Q&A is expected. On May 30th, President Logan noted that “there’s good reasons to think that we’re headed to 2% or we’re still on that path, perhaps a bit slower and a little bit clunkier maybe than we thought at the beginning of the year, but there’s a lot of uncertainty.” She noted that “it also may be that policy is just not as restrictive as we think it might have been relative to the level of interest rates before the pandemic,” and that “it’s really important to keep all options on the table and that we continue to be flexible.” On May 10th, President Logan had said that it was “just too early to think about cutting rates.”
• 01:00 PM Fed Governor Kugler speaks: Fed Governor Adriana Kugler will speak at a virtual event hosted by the Peterson Institute of International Economics. Text and Q&A are expected. On April 3rd, Governor Kugler said that “if disinflation and labor market conditions proceed as I am currently expecting, then some lowering of the policy rate this year would be appropriate.” Governor Kugler also noted that “with demand growth cooling, given the backdrop of solid supply, my baseline expectation is that further disinflation can be accomplished without a significant rise in unemployment.”
• 01:20 PM St. Louis Fed President Musalem (FOMC non-voter) speaks: St. Louis Fed President Alberto Musalem will deliver a speech on the US economy and monetary policy at a luncheon hosted by the CFA Society of St. Louis. Text and moderated Q&A are expected. These will be President Musalem’s first public remarks since becoming President of the St. Louis Fed.
• 02:00 PM Chicago Fed President Goolsbee (FOMC non-voter) speaks: Chicago Fed President Austan Goolsbee will speak in a panel discussion at the 2024 Marshall Forum. On June 14th, President Goolsbee noted that the May CPI was a “very good” report but cautioned that it was only one month of data. President Goolsbee said that “if we got a lot of months like this, we would be feeling so much better.” On May 10th, President Goolsbee had stressed that “there isn’t at this time much evidence, in my view, that inflation is stalling out at 3% … we hit this bump [in Q1] and now I think we wait.”

Wednesday, June 19

• Juneteenth National Independence Day. NYSE will be closed. SIFMA recommends bond markets also remain closed.
• 10:00 AM NAHB housing market index, June (consensus 45, last 45)

Thursday, June 20

• 08:30 AM Initial jobless claims, week ended June 15 (GS 245k, consensus 235k, last 242k); Continuing jobless claims, week ended June 8 (consensus 1,802k, last 1,820k)
• 08:30 AM Housing starts, May (GS -0.8%, consensus +1.1%, last +5.7%); Building permits, May (consensus +0.7%, last -3.0%)
• 08:30 AM Philadelphia Fed manufacturing index, June (GS 5.5, consensus 4.8, last 4.5): We estimate that the Philadelphia Fed manufacturing index edged up by 1pt to 5.5 in June, reflecting the foreign manufacturing rebound but downward convergence to other surveys.
• 08:45 AM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will participate in a fireside chat at the Michigan Bankers Association Annual Conference. Q&A is expected. On May 28th, President Kashkari said that he didn’t think that “anybody has totally taken rate increases off the table,” while also noting that “the odds of us raising rates are quite low.” President Kashkari stressed that “wage growth is still quite robust relative to ultimately what we think would be consistent with the 2% inflation target.”
• 04:00 PM Richmond Fed President Barkin (FOMC voter) speaks: Richmond Fed President Thomas Barkin will take part in an even hosted by the Richmond chapter Risk Management Association. Q&A is expected.

Friday, June 21

• 09:45 AM S&P Global US manufacturing PMI, June preliminary (consensus 51.0, last 51.3); 09:45 AM S&P Global US services PMI, June preliminary (consensus 53.8, last 54.8)
• 10:00 AM Existing home sales, May (GS +1.1%, consensus -1.2%, last -1.9%)

Source: DB, Goldman, BofA