Global markets have kicked off the new quarter with solid gains from Asia to Europe (as previewed last week in “The Technical Overhang Is Done, July Starts With A Bullish Eruption“) while US equity futures were in the green, with sentiment getting a boost thanks to Tesla and BYD climbing on record quarterly sales. Oil rallied as Saudi Arabia and Russia extended oil supply cuts. At 7:45am ET, S&P emini  futures were flat, reversing an earlier rally, with trading activity subdued by today’s half-day schedule ahead of the upcoming July 4 holiday; Nasdaq futures rose 0.2% on the back of strength from TSLA and Ai stocks; the tech is green fresh off its best-ever first half of a year. Asian stocks were broadly higher, boosted by China markets, while Europe’s Stoxx 50 Index climbed 0.4% to highest intraday level since Dec. 2007, as energy stocks outperform. Treasury yields are ticking higher at the short end of the curve, and edging lower at the longer end, pushing the 2s10s inversion to a whopping 110bps. The Bloomberg dollar index strengthened slightly. Gold prices are sliding, while oil has erased early losses to climb higher. Iron ore prices have dropped substantially today, continuing a volatile few weeks.

In premarket trading, Tesla gained 6.5% while BYD climbed in Hong Kong trading, leading shares of battery suppliers also higher. Shares of electric-vehicle makers jumped in sympathy: Rivian +2.1% and Lucid +1.7%. Cryptocurrency-exposed stocks also rose in premarket trading as Bitcoin hovers above the closely watched $30,000 level for a twelfth consecutive session. Riot Platforms +0.8% (RIOT US), Marathon Digital (MARA US) +1.6%. Here are some other premarket movers:

• Fidelity National Information Services (FIS US) gains 2.5% in US premarket trading as the Financial Times reports that private equity firms, including Advent, are considering buying its majority stake in Worldpay at a valuation exceeding $15 billion. Analysts see the interest as positive for the share price of FIS.
• Shares in air taxi companies are poised to extend gains after Joby Aviation posted its best weekly climb ever as it received approval from the Federal Aviation Administration to test its electric-powered flying taxis. Joby Aviation (JOBY US) rises as much as 4.8%.

Investors are tempering expectations for stocks after an unexpectedly strong first half. While central banks have kept up their hawkish rhetoric, signs of moderating US inflation has fueled big gains across technology shares. Traders are looking to the upcoming earnings season and data such as Friday’s nonfarm payrolls for clues on the health of the economy. Markets in the US may be quieter ahead of the Independence Day holiday on Tuesday

Adding to bullish sentiment, crude prices reversed earlier losses to jump after Saudi Arabia’s state-run news agency said the country will prolong its unilateral oil production cut by one month, keeping a lid on supply even as the market is expected to tighten. Its OPEC+ ally Russia also announced fresh curbs on exports.

“Stocks have done well in the first half because a US recession didn’t happen,” said Nikolaos Panigirtzoglou, global market strategist at JPMorgan Chase & Co. Moreover, he added, the tech trade has turned into “a pain trade for institutional investors, causing them to capitulate. This first-half back drop creates vulnerabilities for the second half as it means if a US recession happens, there would be a rather abrupt market repricing.”

A report on Chinese manufacturing on Monday showed the economy is still struggling to rebound, while in Europe, Italy’s factories had their worst month since Covid-19 lockdowns in early 2020.

Also in focus this week will be US Treasury Secretary Janet Yellen’s trip to Beijing on July 6-9 as the world’s two largest economies look to mend ties after a spate of bilateral tensions.

After outperforming the S&P in the first half, the Euro Stoxx 50 Index climbed 0.4% to highest intraday level since Dec. 2007, as energy and mining shares led gains while AstraZeneca Plc led health-care shares lower as results from a high-level study of its new cancer medicine raised concern the drug might not work as well as anticipated. The Stoxx 600 is up 0.2% and on course to extend its winning streak to five sessions. Here are the most notable European movers:

• Assicurazioni Generali rises as much as 5.6% in Milan after Italy’s insurance watchdog approved a request made by Del Vecchio family holding Delfin to raise its stake in the insurer above 10%
• Dormakaba jumps as much as 6.2% after it announced a plan to cut as many as 800 additional full-time jobs. Stifel welcomes this “new and seemingly more impactful restructuring program”
• Nokia shares rise as much as 3.1%, the most since March, after the telecom equipment maker announced a new multi-year patent agreement with Apple, six months before the current contract expires
• PGS gains as much as 9.3% after it gets a “large” offshore wind farm site characterization contract in the US by a renewable energy company; project is expected to be completed by February 2024
• AstraZeneca falls as much as 6.2%, the most since November 2021, after the UK drugmaker announced fresh data from a trial for its lung cancer treatment datopotamab
• TietoEVRY drops as much as 2.9% after Handelsbanken cuts its rating on the IT services company to hold, with the broker saying that the near-term outlook is “soft” for the company amid a slowdown
• UK utilities, including Pennon and Severn Trent, remain under pressure after last week’s talk about a potential nationalization of UK Thames Water, with Citi seeing a possible value trap remaining for months
• Casino shares fall as much as 21%, extending their plunge to fresh record lows, after it said the company may be in default under its revolving credit facility by end of August at the latest

The MSCI Asia Pacific Index rose as much 1.2%, a strong start to the new quarter and half, led by advances in Chinese and Japanese benchmarks. Technology shares including Tencent and Samsung Electronics are the best-performing sub-sector on the regional gauge, which is set for its best day in about three weeks. A Hang Seng index of Chinese tech stocks jumps as much as 2.6%. Hong Kong’s Hang Seng benchmark up as much as 1.7%, Japan’s Topix +1.4%. Japan’s Topix index was on course for a fresh 33-year high as confidence among the nation’s big manufacturers gained in the first improvement in almost two years

• Hang Seng and Shanghai Comp conformed to the positive mood after Chinese Caixin Manufacturing PMI topped forecasts for its second consecutive monthly expansion and the PBoC recently pledged that China will continue to provide inclusive loan support for small and micro businesses. In addition, the US confirmed that Treasury Secretary Yellen will visit China on July 6th-9th for meetings with senior Chinese officials although a Treasury official already tempered expectations and noted that no significant breakthrough was anticipated.
• Nikkei 225 was underpinned following the BoJ’s quarterly Tankan survey which mostly topped estimates and showed Japanese large manufacturers’ sentiment improved for the first time in seven quarters.
• ASX 200 was positive as gains in the commodity-related sectors offset the losses in tech stocks and with encouragement from a surge in Building Approvals, although further upside was capped ahead of tomorrow’s RBA meeting with analysts near-evenly split regarding forecasts for a hike or a pause.
• Stocks in India extended record run as Asian peers rallied upon start of quarter. Index-heavy ITC surged to its all-time high while Reliance Industries posted biggest gain in more than a month.   The S&P BSE Sensex rose 0.8% to 65,205.05 in Mumbai, while the NSE Nifty 50 Index advanced 0.7%. The gauges have been trading at all-time high levels and extended their gains this year to more than 6%. Foreigners have purchased $12.2b of local shares in quarter through June, their biggest since December 2020. Reliance Industries contributed the most to the index gain, increasing 2.6%, its biggest single-day advance since May 26. Out of 30 shares in the Sensex index, 16 rose, while 14 fell. ITC gained 2.6%.
• Pakistan’s equity gauge index surged after the nation clinched an initial $3 billion loan deal from the International Monetary Fund, easing default fears.

In FX, the Bloomberg Dollar Spot Index erased an early drop to rise 0.2%, supported by the view that US interest rates may keep rising even as inflation in the country shows signs of easing.  Traders are betting on a more than 90% possibility that the Federal Reserve will raise rates by 25 basis points later this month, and see a nearly 50% chance of an additional hike by the end of the year. The euro fell as much as 0.4% to 1.0871; EUR/GBP was little changed at 0.8592. The yuan spiked in opening trading Monday, in a hint that authorities may have taken another tool back out of the box to help stabilize the under-pressure currency. The yen fell and remained this year’s worst performing Group-of-10 currency, with traders watching for any central bank intervention should the yen depreciate further. The Swiss franc is the weakest of the G10 currencies after inflation slowed more than expected, falling 0.5% versus the greenback. 

In rates, treasuries were mixed as US trading gets under way, with 2- and 5-year yields higher after reaching new multi-month highs, dragging the inverted 2s10s spread to within 0.1bp of multi-year low -110.9bp reached in March. 2-year yields remains cheaper by more than 5bp on the day as rate-hike premium continues to firm for this year. Yields out to the 10-year are cheaper on the day with long-end little changed; 2s10s is flatter by ~4bp, 5s30s by ~3bp; The 10-year yield is around 3.85% up 1.6bp vs Friday close with bunds and gilts cheaper by 1.5bp and 2bp in the sector. German yield curve twist- flattened with two-year yield up 3bps to 3.22%.

In commodities, oil prices added to earlier gains on reports Saudi Arabia would extend a voluntary output cut into August. Soon after, Russia announced it would reduce its own exports by 500K bbl/day. US crude futures rise 1.1% to trade near $71.40. Spot gold falls 0.3% to around $1,913.

Bitcoin is modestly firmer and continuing to hold firmly above the USD 30k mark with specifics light in recent trade after overnight attention on the unconfirmed social media rumours that SEC’s Gensler is to resign.

Looking at the calendar of today’s pre-July 4 shortened session, we get US June ISM, total vehicle sales, and May construction spending,

Market Snapshot

• S&P 500 futures little changed at 4,491.00
• MXAP up 1.3% to 165.40
• MXAPJ up 1.3% to 520.80
• Nikkei up 1.7% to 33,753.33
• Topix up 1.4% to 2,320.81
• Hang Seng Index up 2.1% to 19,306.59
• Shanghai Composite up 1.3% to 3,243.98
• Sensex up 0.7% to 65,187.92
• Australia S&P/ASX 200 up 0.6% to 7,246.12
• Kospi up 1.5% to 2,602.47
• STOXX Europe 600 up 0.2% to 463.02
• German 10Y yield little changed at 2.39%
• Euro down 0.2% to $1.0887
• Brent Futures down 0.8% to $74.82/bbl
• Gold spot down 0.3% to $1,912.77
• U.S. Dollar Index up 0.24% to 103.16

Top overnight News

• US Treasury Secretary Janet Yellen will travel to Beijing on July 6-9, becoming the second member of Joe Biden’s cabinet to head to the Chinese capital in recent weeks, as the world’s two largest economies look to mend ties after a spate of bilateral tensions.
• Investors on the hunt for higher-yielding debt can look no further than Japan where recent signs from the central bank point to short-term interest rates staying below zero for some time.
• South Korean bonds have been the standout pick in Asia for foreign investors this year and their recent decline should be seen as just another window to buy, according to market watchers
• Saudi Arabia will prolong its unilateral oil production cut by one month, keeping a lid on supply even as the market is expected to tighten. Its OPEC+ ally Russia also announced fresh curbs on exports
• Carry traders betting on emerging-market currencies have been raking up winnings this year

A more detailed look at global markets courtesy of newsquawk

Asia-Pacific stocks began the new trading month on the front foot with momentum from last Friday’s rally on Wall Street and as participants digested key data releases including an improved Tankan survey and better-than-expected Chinese Caixin Manufacturing PMI. ASX 200 was positive as gains in the commodity-related sectors offset the losses in tech stocks and with encouragement from a surge in Building Approvals, although further upside was capped ahead of tomorrow’s RBA meeting with analysts near-evenly split regarding forecasts for a hike or a pause. Nikkei 225 was underpinned following the BoJ’s quarterly Tankan survey which mostly topped estimates and showed Japanese large manufacturers’ sentiment improved for the first time in seven quarters. Hang Seng and Shanghai Comp conformed to the positive mood after Chinese Caixin Manufacturing PMI topped forecasts for its second consecutive monthly expansion and the PBoC recently pledged that China will continue to provide inclusive loan support for small and micro businesses. In addition, the US confirmed that Treasury Secretary Yellen will visit China on July 6th-9th for meetings with senior Chinese officials although a Treasury official already tempered expectations and noted that no significant breakthrough was anticipated.

Top Asian News

• PBoC Deputy Governor Pan Gongsheng was named as the PBoC’s Party Secretary which was suggested to likely be a prelude to becoming Governor, while PBoC Governor Yi and former Party Secretary Guo stepped down from their party roles, according to WSJ and FT.
• PBoC survey found that China’s urban residents were more willing to raise consumption in Q2 compared with Q1 and residents are hoping to increase their spending mostly on education, medical care and tourism in Q3.
• China’s MOFCOM expressed dissatisfaction regarding export controls of semiconductor products imposed by the Netherlands, while it urged the Netherlands to not hinder bilateral cooperation in the semiconductor industry and to not abuse export controls, according to Reuters.
• US Treasury said Treasury Secretary Yellen will visit China on July 6th-9th for meetings with senior Chinese officials and will underscore that targeted US actions are not intended to gain economic advantage. US senior Treasury official said the US is not seeking to decouple US and Chinese economies, while the US is looking for open communication and cooperation on global challenges. Furthermore, the official is not expecting significant breakthroughs from Yellen’s visit and noted they are seeking to expand communications at a sub-cabinet level, while US concerns about Chinese actions on Micron are expected to come up broadly during Yellen’s meetings, according to Reuters.
• US National Counterintelligence and Security Center warned about the risk of engaging in business with China after Beijing implemented a revised counterespionage law on July 1st.
• CIA Director Burns said the answer is not to decouple from an economy like China’s which would be foolish, while he added the answer is to sensibly de-risk and diversify by securing resilient supply chains, protecting US’s technological edge and investing in industrial capacity, according to Reuters.
• More than 50,000 were affected and nearly 7,000 were evacuated after heavy rain in China’s Hunan Province, according to China.org.cn.
• China’s Commerce Ministry bans the exports of Gallium and Germanium related products, from August 1st.

European bourses are firmer across the board, Euro Stoxx 50 +0.4%, after a modestly supportive open given Friday’s Wall St. tailwind and APAC strength on this and data. As such, sectors primarily reside in the green with Basic Resources gaining on APAC strength while Autos draw focus after Tesla’s record Q2 deliveries, TSLA +6.2% in pre-market.
Stateside, futures are ticking higher but yet to deviate significantly from the unchanged mark in thin pre-holiday trade though the docket features ISM PMI; ES U/C. Japan is said to be leaning towards softer AI rules compared to the EU, according to an official cited by Reuters; goal is to work out an AI approach by year-end with rules that align more with the US. EU Industry Chief Breton says EU has similar economic concerns to Japan and discussed a lot about AI in talks in Tokyo.

Top European News

• Financial advisers warned that steps by banks and building societies to help UK borrowers cut their monthly mortgage payments risk storing up financial trouble in later life as they face a higher total interest bill and lower income in retirement, according to FT.
• French President Macron postponed his state visit to Germany amid unrest in France and met ministers to discuss a response to the unrest, while he asked his ministers to continue mobilising until complete calm is restored. It was also reported early on Sunday that the arrests in France overnight had increased to 719 and that the Paris suburb mayor’s home was attacked using a burning car.
• Foreign buyers are reportedly driving up demand and prices of real estate in Spain with buyers, especially from the US and northern Europe snapping up homes on Spain’s southern coast, according to Bloomberg.
• Germany’s VDMA says German engineering orders in May -10% Y/Y (domestic +9%; Foreign -18%); May-May orders -12% Y/Y.
• German Finance Ministry record budget of EUR 51.8bln planned in defence for 2024 and EUR 19.2bln outflows from special funds, via Reuters citing sources.

FX

• Buck recovers following post-PCE and Chicago PMI setbacks as DXY bounces from 102.860 to 103.270.
• Franc flounders as Swiss CPI misses consensus marginally, but headline slows to 1.7% y/y from 2.2% previously, USD/CHF tops 0.9000 from sub-0.8950 low.
• Euro undermined by mixed to weaker EZ PMIs, with EUR/USD losing 1.0900+ status amidst a decent spread of expiry interest.
• Yen weakens as UST/JGB differentials widen and regardless of better than forecast Japanese Tankan survey, USD/JPY above 144.50 within 144.23-88 range.
• Aussie defensive ahead of RBA as analysts are split between another 25 bp hike and pause, AUD/USD pivots 0.6650 and AUD/NZD cross retreats through 1.0850 regardless of booming building approvals.
• PBoC set USD/CNY mid-point at 7.2157 vs exp. 7.2464 (prev. 7.2258)
• Czech Central Bank Governor Michl said they are not considering cutting rates and will likely get inflation to below 10% in the next two months, while he added that inflation can be more persistent than they think and they would have to raise rates if demand was to revive, according to Pravo.

Fixed Income

• Bonds choppy at the start of the new month in NA holiday-thinned volumes, EGBs mostly firmer amidst mixed EZ manufacturing PMIs and weak German VDMA engineering orders as Bunds hold within 134.14-133.62 range.
• Gilts fade from 95.55 to 95.10 as upward tweak to final UK manufacturing PMIs outweighs cooler Citi/YouGov inflation expectations.
• T-note depressed between 112-06/111-29 confines after big block sale and ahead of US PMI, ISM construction spending before early pre-Independence Day close

Commodities

• Crude benchmarks spent the initial part of the session contained before seeing some modest two-way action with catalysts light prior to the renewed upside on the below Russian and Saudi production cut extensions.
• Currently, WTI Aug’23 and Brent Sep’23 are at the top-end of USD 69.93-71.77/bbl and USD 74.75-76.60/bbl parameters.
• Saudi Press Agency reports that Saudi will extend the voluntary cut of 1mln BPD for an additional month to include August.
• Russian Deputy PM Novak says Russia will reduce oil supply in August by 500k BPD, via cutting exports by this figure to the global market.. Subsequently,
• Russian Deputy PM Novak says they will cut production by an extra 500k BPD.*
• Iraq’s June oil exports averaged 3.3mln bpd, according to the Oil Ministry, cited by Reuters.
• Kuwait’s KIPIC has put out the fire at the Al-Zour (615k BPD, at peak) without any reported injuries, via Reuters; operations back to normal; production and export operations continue.
• Indian refiners have reportedly began paying in Yuan for some Russian crude oil imports, via Reuters citing sources; in June, IOC was the first state refiner to use Yuan for such payments.
• Spot gold is slightly softer given the USD’s strength with the yellow metal erring towards the lower end of USD 1910-1920/oz bounds, while base metals are somewhat mixed though with Copper underpinned on the latest data from the National Statistics Institute of Chile showing that domestic copper output contracted for a second consecutive month.

Geopolitics

• Russian President Putin is reportedly seeking control of more than 100 Wagner Group companies and Russian security services raided Wagner Group institutions, according to Al Jazeera.
• Russian Duma defence committee head said the Wagner Group’s departure from Russia’s operation does not threaten Russia’s combat potential and there is no need for a new conscript mobilisation wave, according to TASS.
• Ukrainian President Zelensky said a serious threat remains at the Zaporizhzhia nuclear plant because Russia is technically ready to provoke a localised explosion at the facility, according to Reuters.
• Ukrainian Deputy Defence Minister Maliar said Russian troops are advancing in four frontline areas in eastern Ukraine amid fierce fighting, while she added that Ukrainian troops were making advances in one eastern area and two southern areas, according to AFP.
• Ukraine urges the US to follow the EU’s four-year funding pledge, while it was also reported that the EU considers a Russian bank concession to safeguard the Black Sea grain deal, according to FT.
• CIA Director Burns said it is always a mistake to underestimate Russian President Putin’s fixation to control Ukraine and that the war in Ukraine has already been a strategic failure for Russia, while he also stated that the disaffection in Russia is a once in a generation opportunity for an intelligence agency such as the CIA which is not letting it go to waste, according to Reuters.
• Belarusian President Lukashenko signed a law allowing to ban media from ‘unfriendly countries’ in Belarus, according to RIA.
• Chinese military declaration visited the UK and France from June 4th and July 1st to discuss the development of bilateral defence relations, according to Reuters.
• China’s Defence Minister met with Russian Navy Commander-in-Chief on Monday in Beijing, according to Reuters; hopes both sides will strengthen communication at all levels.
• Iran’s MOF Spokesperson says, on talks to remove sanctions, that recently they have observed some signs of realism and a shift away from non-constructive attitudes. Though, this is not enough. In talks to achieve an outcome.

US Event Calendar

• June Wards Total Vehicle Sales, est. 15.3m, prior 15.1m
• 09:45: June S&P Global US Manufacturing PM, est. 46.3, prior 46.3
• 10:00: May Construction Spending MoM, est. 0.5%, prior 1.2%
• 10:00: June ISM Manufacturing, est. 47.2, prior 46.9
  • June ISM Employment, prior 51.4
  • June ISM Prices Paid, est. 44.0, prior 44.2
  • June ISM New Orders, prior 42.6

DB’s Jim Reid concludes the overnight wrap

Welcome to July, Q3 and the second half of the year. After a Q1 that was positive across the board, Q2 was more mixed for financial markets. Some assets did really well, with tech stocks seeing a strong outperformance thanks to excitement around AI. That extended to other risk assets, and volatility continued to fall as there were no signs of broader financial contagion after the issues in March. However, sovereign bonds lost ground after inflation remained sticky and central banks kept taking rates higher. Commodities also struggled across the board, with Brent crude oil prices down for a 4th consecutive quarter. All-in-all, that meant we had one of the most even quarters in a while in performance terms, with 22 of the 38 non-currency assets in our sample ending Q2 in positive territory. But the strong Q1 means that more assets are still positive over the year as a whole, with 31 out of 38 in positive territory on a YTD basis. Topping the charts, the Nasdaq has had its best first half for 40 years. See Henry’s review of June/Q2 and H1 here that was published earlier this morning

As we kick off July, US Independence Day tomorrow will ensure a stop start week but it remains a big one with US payrolls (Friday) and the global PMIs and US ISMs through the week. May’s JOLTS (one month behind), June’s ADP and weekly claims (all Thursday) will give us a payrolls appetiser. Elsewhere the RBA (tomorrow) is seemingly a 50/50 call and staying with central banks, the Fed minutes are out on Wednesday with the ECB survey of consumer expectations the same day.

In terms of the key event, all roads of course lead to payrolls on Friday. With the headline number ranging from +217k to +472k over the last 6 months, these are not currently close to recessionary levels. However, the average recession through history has seen payrolls move from an average of just over +100k in the 3-6 months before to very suddenly negative in the first month of the recession where it tends to stay for several months. You don’t tend to get any warning from prior payroll prints that its going to turn negative but with the range this year, and last month being at +339k, we probably need to move down into the 100-200k range before we can be on more near-term recession watch. Even then it still might not happen but that’s probably a necessary condition outside of a shock.

For Friday, our economists expect headline (consensus +225k, DB +200k vs. +339k previously) and private (consensus +200k, DB +175k vs. +283k) payroll gains to slow relative to their three-month averages of +283k and +231k, respectively. This should still edge unemployment back down a tenth to 3.7% (consensus 3.6%) after a surprise spike last month. Hours worked was weak last month and our economists expect that to bounce from 34.3 to 34.4hrs. Hourly earnings are expected to be steady at 0.3%.

In terms of the US ISMs this week, today manufacturing index is expected to come in at 47.1 at DB vs 46.9 last month (consensus 46.3), continuing a trend of all but one month being below 50 since November. Thursday’s services ISM (52.9 at DB, consensus 51.3, vs, 50.3 last month) is expected to see a rebound from the second surprise stagnation print in the last 6 months. So put any rebound in some perspective. In addition the employment component in both ISMs may be used to fine-tune payroll predictions. As our economists point out, the three-month average for the ISM manufacturing employment series stood at 49.5 as of May while that of services was 50.4, near the lows of the last cycle. So one to watch. Broadening the focus, various other global PMIs come through in the first half of the week.

Other notable indicators due include the US trade balance on Thursday and factory orders on Wednesday. There will be plenty of activity in Europe as well. In Germany, these include the trade balance tomorrow, followed by factory orders on Thursday and industrial production on Friday. In France, investors will keep an eye on industrial production (Wednesday) and the trade balance (Friday) and, in Italy, PMIs (Monday and services on Wednesday) and retail sales (Friday) are out.

Apart from data, investors may also pay attention to OPEC’s 8th International Seminar running on Wednesday-Thursday, with several CEOs and oil ministers expected among the speakers. With oil prices bouncing around $70/bbl amidst the lack of a demand catalyst, the focus will be on whether some OPEC+ members will again try to put a firmer floor under prices.

Asian equity markets are seeing a strong start to the second half, catching up to the broadly positive cues from Western markets on Friday. Across the region, the Hang Seng (+1.69%) is leading gains followed by the Nikkei (+1.55%), the KOSPI (+1.43%), the Shanghai Composite (+1.28%) and the CSI (+1.22%). US stock futures are not seeing the momentum gather any more pace for now with contracts tied to the S&P 500 (-0.03%) just below flat and those on the NASDAQ 100 (+0.07%) trading marginally higher.

Early morning data showed that China’s factory activity growth slowed in June after the Caixin manufacturing PMI slipped to 50.5 in June (v/s +50.0 expected) from 50.9 in May, corroborating last week’s official PMI data even if it was slightly above expectations. Chinese data is at a point where markets are now expecting additional policy support from the administration to support the recovery despite the People’s Bank of China (PBOC) cutting key lending rates last month.

Elsewhere, business sentiment among Japanese firms improved in the second quarter suggesting that the economy was on course for a steady recovery. The BOJ’s quarterly Tankan survey showed that the headline index, measuring the mood of big manufacturers’, stood at +5 in June (v/s +3 expected), and up from +1 in Q1 while the index for large non-manufacturers improved to +23, moving up from a level of +20 in March and hitting its highest reading since June 2019.

Now, turning our attention back to last week, on Friday, we had several key data releases. In the US, we had the PCE price index for May, which was in line with expectations, at 0.1% month-on-month, and 3.8% year-on-year. US core inflation softened in year-on-year terms, at 4.6% (vs 4.7% expected), and month-on-month met expectations at 0.3%. However, it was US core services inflation, excluding housing, that caught the market’s attention, which posted its smallest advance since June 2022, rising 0.23% month-on-month, and up 4.53% year-on-year. Consumer spending for May was also soft at 0.1% (vs 0.2% expected). This story was echoed in Europe, as year-on-year CPI came in a touch below expectations at 5.4% (vs 5.5% expected).

Market expectations of US rate hikes for the next three Fed meetings eased a touch following the data releases on Friday, with the expected rate for July down -0.6bps on the day (though still up +2.4bps in weekly terms). Despite a slight retreat on Friday, the expected rate priced in for December 2023 moved up +13.6bps in weekly terms to 5.38%, its highest weekly close of this hiking cycle. Expectations that central banks might have to hold rates at restrictive levels for longer saw pricing for the Fed’s policy rate in December 2024 move up to 4.155%, up +25bps on the week (and +4.0bps on Friday), its highest level since pre-SVB crisis.

While largely unchanged on Friday (-0.1bps), 10yr US Treasury yields were up +10.4bps week-on-week, most of the move coming after the more encouraging US jobless claims data on Thursday. With 2yr yields climbing +3.6bps to 4.90% (and up +15.6bps in weekly terms), the 2s10s slope inverted further to -106.0bp, with just one lower daily close (on 8 March this year) in over 40 years. Earlier on Friday, there was a modest rally in fixed income in Europe as 10yr bund yields fell -2.4bps on Friday, though they were up +3.8bps on the week.

While fixed income was largely subdued, equity markets took Friday’s data as a sign that inflation was moderating. The S&P 500 gained +1.23% on Friday, reaching its highest level since April last year, up +2.35% week-on-week. Information technology once again led the charge, up +1.82% on Friday. As a result, the tech-heavy NASDAQ outperformed on Friday, climbing +1.45% (and +2.19% week-on-week), with the top seven tech megacaps all gaining ground. In this vein, the FANG+ index was up +1.16% in weekly terms (and +1.89% on Friday). A noteworthy event from last Friday was Apple’s market capitalisation crossing the $3 trillion mark for the first time, further driving the tech rally. In Europe, the risk-on tone continued as the STOXX 600 gained +1.94% week-on-week (and +1.16% on Friday).

Lastly, looking to commodities, oil rose on Friday after the weaker US inflation data release. Brent crude gained +0.75% on Friday, and +1.42% week-on-week, to $74.90/bbl, whilst WTI gained +1.12% to $70.65/bbl on Friday, and +2.14% in weekly terms.

While the US deposit fight that started with the failure of three major US banks in March, has alternated between a bank jog, run and a sprint, depending on whether one uses actual data or the Fed’s politically-mandated seasonal adjustments to deposit outflows…

… the rest of the “developed world” has so far avoided a similar cascade of bank failures (who knew that injecting trillions in reserves to artificially preserve bank viability would make them beyond brittle and terminally fragile the moment liquidity was withdrawn) and by extensions, a sweeping bank run.

Or maybe not, because while no other western nation suffered a recent bank crisis as painful as that of the US, it doesn’t mean that other nations are immune to deposit flight.

Consider the UK, where households just withdrew a record amount from bank accounts last month; and while in lieu of a bank failure panic that would suggest consumers are looking elsewhere for higher interest rates, the reason why deposits are fleeing banks in the US may have a much simpler reason: tapping savings to pay bills.

As the FT reported, a net £4.6bn was taken out from banks and building societies in May, the highest level of withdrawals since monthly records began in 1997, according to the Bank of England data published on Thursday.

And since the large net withdrawals from instant-access accounts were only partially offset by net inflows into fixed-term accounts, which typically pay higher rates, and individual savings accounts, which offer tax-free dividends and interest on shares or cash, this suggests that the deposit flight wasn’t the result of rate arbitrage.

BoE figures showed the effective rate on instant-access accounts dropped 8 basis points to 1.33 per cent in May. That lags considerably both the central bank’s benchmark rate, now at a 15-year high of 5 per cent, and rates for two-year fixed mortgage deals, which are above 6 per cent.

In its latest report, the BoE’s Monetary Policy Committee noted that “the pass-through [of higher interest rates]” to these accounts had “been unusually weak” since it began raising rates in December 2021.

So if not merely moving deposits from Bank A to Bank B, what’s going on? According to Ashley Webb, UK economist at consultancy Capital Economics, some of the fall to “people moving money into other investments outside of the banking sector, such as UK gilts”. But he added: “It’s possible that households’ pandemic savings are being depleted to support spending.”

UK households are contending with high inflation, which stood at 8.7% in May, and many have complained that bank savings rates are failing to catch up with the BoE’s rate hikes.  Yields on UK 10-year gilts stand at about 4.3%, up from 3.3% in March, while two-year government bonds have a yield of 5.2% up from 3.2% in March, reflecting the changing outlook for interest rates.

Daniel Mahoney, UK economist at Handelsbanken, said the record £4.6bn figure provided “strong evidence” that people were “dipping into excess savings built up during the pandemic to sustain living standards” amid the cost of living squeeze.

While Charlotte Nixon, mortgage and financial planning expert at Quilter, said bank executives had been under pressure to raise interest rates for savers as they have done for borrowers, she warned that banks had argued that “mortgage rates would need to get pushed even higher for them to still achieve their margins”, in the process forcing savers to pull even more money from banks.

Separately, the BoE figures also showed that net mortgage approvals for house purchases rose to 50,000 in May from 48,690 in the previous month. The number was higher than the 49,700 forecast by economists polled by Reuters but well below the average of 66,000 between 2015 and 2019, as higher mortgage payments hit prospective buyers. The figures, however, do not fully capture the sharp rise in mortgage rates since the end of May, after official data showing stronger than expected wage growth and inflation pushed up interest rate expectations.

Thomas Pugh, economist at the consulting firm RSM UK, said the rise in approvals in May was “likely to be reversed” this month “as the recent surge in mortgage interest rates depresses demand”. He forecast a peak-to-trough decline in house prices of about 10%, “with the risk of bigger falls if interest rates continue to rise”.

Ironically, even with a relatively stable banking system, the UK is already suffering from a surge in deposit outflows merely to offset the crippling stagflation that has gripped the nation. But at this rate, it’s only a matter of time before the bank run leads to one or more bank failures, which will only accelerate the deposit flight, lead to more bank failures, and so on as the BOE finds itself in an impossible pickle: keep rising rates to contain inflation or try to break the vicious loop of soaring prices, less savings, and rising bank failures.

An excerpt from the latest market note from One River Asset Management CIO Eric Peters

“Capital markets and combat are not turn-based games like chess,” said the Deputy CIO, top decile performer, Marine Force Recon veteran.

“This means that there’s no such thing as waiting to make a decision, because waiting is a decision,” he continued.

“Waiting can frequently be correct near-term, but you need to be intentional about how to use that time – to gather information, prioritizing the data that will have the most significant impact on your probability of a favorable outcome.”

There’s a vast difference between incomplete and insufficient information.

“Defining the threshold for information sufficiency is an art, honed through experience, often indistinguishable from intuition.”

Acting with insufficient information imposes an unnecessary risk that will get you killed in combat or cause avoidable losses as an investor.

“But waiting for complete/perfect information is foolish because it’s an illusion – it’s not possible, because events move in real time.”

You cannot fall victim to the zero-defect mentality – the search for perfect information cripples your ability to execute.

“There are two contrasting philosophies in military science about the best use of reserves; plugging holes or reinforcing success.”

The US Marine Corps has decisively adopted the latter.

“We don’t apply resources evenly across a front.”

Our forces search for gaps.

“As a battle develops we don’t deploy reserves to areas where we experience the most resistance. We deploy them to the areas where we’re experiencing the most success.”

The Germans pioneered this doctrine between WWI and WWII, devastating their neighbors through the lightning of Blitzkrieg.

“Portfolio rebalancing is an expression of this philosophy. It’s a rules-based process that forces you to do what everyone says they’re trying to do, but few do.”

Which is to redeploy resources through selling high and buying low, applying pressure to gaps in the market.

“The Special Operations community selects and trains with the expectation that we will always be outnumbered but must never be outmanned,” he said.

“We only play away games. And we’re expected to win every one.”

Early this morning, Saudi Arabia announced it will extend its voluntary, unilateral oil production cut by one month, at least through August (the output cut can and likely will be extended further), keeping a ceiling on supply even as the market is expected to tighten further.

Moments later, its OPEC+ ally Russia announced it will “voluntarily” extend a reduction of its oil exports in August by 500K bbl/day to ensure the oil market remains balanced, Deputy Prime Minister Alexander Novak says in statement.

The Saudi output reduction of 1 million barrels a day that started this month — which comes in addition to existing curbs agreed by OPEC+ — will continue into August and could be extended further, according to a statement published by state-run Saudi Press Agency.

The cuts will take the kingdom’s production to about 9 million barrels a day, the lowest level in several years. 

The news sent the oil and energy complex to the highest level in at least a week: Brent rose 1.5% to $76.50 a barrel; WTI for August delivery advanced 1.4% to $71.60. The Stoxx 600 Energy subsector outperformed the broader European benchmark on Monday. The energy sub-index rises as much as 1.9%, the most in a month; Shell (+2%) was the biggest contributor to the gains by index points. Other movers are Harbour Energy +4.7%, Galp +3.1%, Aker BP +2.7%, BP +2.7%, TotalEnergies +2.6%.

Tesla reported its Q2 production and deliveries on Sunday, posting numbers that exceeded analyst estimates, despite doubts about demand throughout the quarter.

At the end of Q2, Tesla once again proved that price cuts can help move metal, posting 466,140 deliveries for the quarter, ahead of Bloomberg’s consensus estimate of 448,351. The auto manufacturer produced 479,700 vehicles in the quarter, exceeding estimates of 456,617.

Tesla delivered 19,225 Model S/X vehicles in the quarter, beating expectations of 14,606.

The EV manufacturer also delivered 446,915 Model 3/Y vehicles in the quarter, exceeding estimates of 437,386.

Despite the beat on both deliveries and production, some investors are beginning to notice the gap between the two numbers and are beginning to raise questions about the automakers’ inventory.

🚨🚨🚨 $TSLA inventory increases for the 5th quarter in a row.
Of these 109k produced-but-not-sold, I estimate that about 90k are in active inventory. With additional production coming online, it would seem that more price cuts should be expected pic.twitter.com/hnrnQ5K6N9

— CoverDrive (@CoverDrive12) July 2, 2023

We’ll be sure to keep an eye on this trend in future quarters, especially as Tesla continues to expand globally. For now, however, the market’s focus will likely remain on the headline numbers beating expectations.

Recall, over the last month, we have been covering how legacy automakers like Ford and GM, paired with new EV companies like Rivian, have adopted Tesla’s charging standard, allowing their vehicles to utilize Tesla’s nationwide network of Superchargers. As such, we have been documenting how Tesla’s charging standard is now quickly becoming the EV industry’s charging standard. 

Days ago both Goldman Sachs and Morgan Stanley downgraded Tesla. Despite the downgrade two weekends ago, shares held steady after their recent 3 month rally, up nearly 75% off their 52 week lows. Goldman, led by analyst Mark Delaney, noted that the stock price moving higher, in addition to a tougher pricing environment for autos, were two of the reasons for downgrading the name:

We’re downgrading Tesla shares to Neutral from Buy, as we believe the stock now better reflects our positive long-term view of the company’s growth potential and competitive positioning post the substantial move higher YTD (up 108% vs. the S&P 500 up 13%) and in the last month (up 38% vs. the S&P 500 up 5%). While the primary reason for the change in our view is that we think the market is now giving the stock more credit for its longer-term opportunities, we are also cognizant of the difficult pricing environment for new vehicles that we think will continue to weigh on Tesla’s automotive non-GAAP gross margin this year.

Morgan Stanley’s Adam Jonas’ bull case remains at $450 and his bear case remains at $90 for shares. Analyst Adam Jonas admitted that Tesla “remains a ‘must own’ company in any EV portfolio” and that it “is emerging as an industrial ‘standard bearer’ for one of the greatest industrial changes we’ve witnessed in over a century.

TSLA shares are up 6% in the pre-market, erasing all of the post-MS/GS downgrade losses…

We can’t wait to see how quickly these analysts change their tunes once again, after these Q2 delivery numbers.

Despite price cuts to start 2023, Tesla has been slowing walking the price of its most popular models higher again, with the latest hikes coming in early May. 

Authored by Christina Maas via ReclaimTheNet.org,

In France, a storm is brewing (again), and French President Emmanuel Macron appears to have figured it all out – it’s social media and video games that are to blame for the ongoing riots in France!

This came following five nights of rioting initially triggered by the fatal police shooting of a Muslim teenager, Nahel M.

Macron’s comments are hardly original, yet they warrant scrutiny from a free speech perspective.

One cannot help but raise an eyebrow as President Macron pleads with social media giants to erase the “most sensitive” content pertaining to the rioting.

With a wave of his hand, he decrees, “platforms and networks are playing a major role in the events of recent days.”

His words, veiled under a guise of concern, echo a familiar tune that has been played on the world stage before.

“We’ve seen them; Snapchat, TikTok and several others, serve as places where violent gatherings have been organized, but there’s also a form of mimicry of the violence which for some young people leads them to lose touch with reality.

“You get the impression that for some of them they are experiencing on the street the video games that have intoxicated them,” he added.

It’s fascinating that social media platforms and video games are often the easiest targets when those in power look for a scapegoat.

It’s like a well-rehearsed performance: when there’s unrest, point fingers at technology.

Surely, Snapchat and TikTok are not centuries-old entities that have been brewing riots since the French Revolution.

Is it not reasonable to ponder if this fervor in urging platforms to suppress content may serve a dual purpose? On the surface, it appears to be an act of preventing violence, but does it not also conveniently serve as an avenue for controlling narratives and stifling voices?

One must also critically examine the role of parents, which Macron emphasized by stating that a third of those arrested were “young or very young,” adding that “it’s not the state’s job to act in their place.”

Indeed, parental responsibility is paramount, but it’s equally critical to recognize that riots don’t just happen because the youth are playing video games.

The situation is precarious, with more than 200 police officers injured, and 875 people arrested. The nation watches on as buildings are torched and stores are looted.

A UK woman has been awarded £100,000 ($127,000) after the woke anti-poverty organization she worked for fired her for saying that people cannot change their biological sex.

Maya Forstater was fired by the Centre for Global Development (CGD), which refused to renew her contract in March 2019 after she posted tweets opposing proposals by the government to reform the Gender Recognition Act to allow those who identify as the opposite sex to do so without a medical diagnosis of gender dysphoria.

Three London judges handed down the decision on Friday, doling out compensation of £91,500 ($116,000) and interest of £14,904.31 (almost $19,000) to Forstater for loss of earnings, injury to feelings and aggravated damages after CGD failed to renew her contract.

I have received the “remedy” judgement in my case. @cgdev has been ordered to pay over £100k in compensation for loss of earnings, injury to feelings and aggravated damages for their high-handed conduct.

Thank-you to everyone who supported my casehttps://t.co/N9NlRT5gw6

— Maya Forstater (@MForstater) June 30, 2023

Two years ago Forstater co-founded the Sex Matters campaign. In a statement following the verdict, she told the Times of London: “I’m happy it’s over and happy I got significant compensation.

“I think it sends a message to employers that this is discrimination like any other discrimination and that the compensation can be significant.

“Organisations are going to have to rethink all of their approach to equality and diversity to make sure they really are following the law and not just what activists tell them.”

Harry Potter author JK Rowling congratulated Forstater, tweeting: “Congratulations to @MForstater, who receives over £100k in compensation from @cgdev, who were found to have discriminated against her due to her gender critical beliefs, which, as her case established, are worthy of respect in a democratic society. #SexMatters.”

Congratulations, you star. It’s the husband’s birthday, so I’ve got two reasons to crack open the champagne this evening 😘

— J.K. Rowling (@jk_rowling) June 30, 2023

More via the Epoch Times;

Protected Belief

Forstater’s victory against the CGD came after a ruling at an employment tribunal in June 2021 when she successfully established a binding legal precedent that “gender-critical beliefs were in principle protected by the Equality Act.”

In July 2022, a fresh employment tribunal ruled that the negative consequences from Forstater’s expressions of her protected gender-critical beliefs were “unlawfully discriminatory” and constituted “direct discrimination.”

Commenting on the verdict at the time, Forstater said that her case “matters for everyone who believes in the importance of truth and free speech.”

“We are all free to believe whatever we wish,” she said. “What we are not free to do is compel others to believe the same thing, to silence those who disagree with us, or to force others to deny reality.”

“Human beings cannot change sex. It is not hateful to say that; in fact it is important in order to treat everyone fairly and safely. It shouldn’t take courage to say this and no-one should lose their job for doing so,” she added.

Commenting on Friday’s ruling on compensation, a CGD spokesperson said: “Following the employment tribunal’s remedy judgment, the case brought against CGD, its president, Masood Ahmed, and CGD Europe by Maya Forstater will come to a close.”

“CGD has and will continue to strive to maintain a workplace that is welcoming, safe, and inclusive to all,” the spokesperson added.

Legal Cases

In addition to Forstater’s case, there have been several legal cases involving “gender-critical” beliefs.

Last week, Denise Fahmy won her claim against her former employer, Arts Council England (ACE), at the Leeds Employment Tribunal.

In a unanimous judgment, the tribunal ruled that Fahmy was subjected to harassment at her workplace for expressing her belief that people cannot change sex.

In July 2022, London-based barrister Allison Bailey won a discrimination case against her own firm after she was placed under investigation for opposing what has been characterised as LGBT charity Stonewall’s “trans extremism.”

Some cases remain ongoing.

In 2021, former criminal defence barrister James Esses was expelled from his psychotherapist training course, three years in. He alleges that this was for openly discussing his fear that young children are actively encouraged to transition gender.

In October 2022, a judge ruled that his claim can be heard in court.

Esses told NTD’s “British Thought Leaders” programme last month that he fears the gender ideology will have “serious negative repercussions” if unchallenged.

Owen Evans and PA Media contributed to this report.

Poland is preparing to bolster defenses along its border with Belarus in the wake of the Wagner mercenary mutiny in Russia and the relocation of the group’s controversial leader Yevgeny Prigozhin to Minsk.

Politico is reporting Sunday that the Polish government will send an additional 500 police officers from elite counterterrorism and riot control units to the border, amid concerns that Wagner bases have been established inside Belarus. Already last week Ukraine said it would strengthen its military positions along the northern border. 

Writes Politico, “The move comes after 187 people tried to cross from Belarus into Poland illegally on Saturday, according to the Polish Border Guard. Warsaw accuses Minsk of trying to create a migrant crisis by attempting to push people from Africa and the Middle East across the border into Poland. Belarus denies the accusation.”

Polish officials have confirmed there are currently 5,000 security guards and 2,000 soldiers at the border with Belarus, to be joined by the newly deployed 500 police officers from specialized units.

Law and Justice leader Jarosław Kaczynski warned days ago that Wagner fighters in Belarus could mean “a new phase of hybrid warfare, a phase much more difficult than the one we have dealt with so far,” as cited in Reuters.

While there’s been nothing in the way of confirmation that a large-scale movement of Wagner fighters have entered, Western media reports on Friday referenced satellite images which they say suggests new Wagner encampments on Belarusian soil: 

The satellite image appears to show activity at a disused military base about 13 miles (21km) from the town of Asipovichy – around 64 miles from Minsk, the capital of Belarus. The area has been reported in Russian media as a place which could house Wagner fighters.

BBC Verify has identified over 300 tent-like structures erected within the past two weeks.

A satellite image from 15 June shows none of these structures visible. The most recent high-resolution image we’ve obtained is from 30 June and reveals the extensive work being carried out at the base

Polish officials have recently suggested that 8,000 Wagner fighters are currently in Belarus.

New satellite imagery analyzed by The New York Times shows hundreds of large tents at an unused military base in Belarus. The base could be a home for Wagner fighters who were given the option to relocate to Belarus after an aborted mutiny. https://t.co/KzywjwKM4M

— The New York Times (@nytimes) July 1, 2023

Warsaw plans to additionally add to its fortifications along the Belarusian border, also amid ongoing NATO troop build-up along the alliances ‘eastern flank’, also in places like Lithuania.

Authored by Ryan McMaken via The Mises Institute,

Daniel Ellsberg died on June 16, and he remains one of the nation’s most prominent whistleblowers who leaked secret government information to the public. Upon his death the general consensus among the writers of memorials for Ellsberg was that he was right to leak government secrets. As the editorial board at The Orange County Register recently put it, he was “a true American hero.” 

They’re right about Ellsberg. During the Vietnam War, through his release of the so-called Pentagon Papers in 1971, Ellsberg made public a large trove of secret government documents that exposed many of the Federal government’s lies about its involvement throughout Indochina. Much of the information applied to the Johnson Administration which had been lying about the war to both the public and the Congress. Naturally, the release of this information, which smashed the Federal government’s credibility on foreign policy, also called into question countless claims about the Nixon Administration. Nixon, of course, had already authorized an illegal and secret bombing campaign in Cambodia in 1969. 

At the time, the response to Ellsberg’s deeds was hardly one of universal acclaim. Yet, over time, criticism has waned and Ellsberg’s critics have been exposed for what they were: knee-jerk defenders of a regime devoted to war crimes and crimes against the Bill of Rights. 

In fact, it has become so difficult to criticize Ellsberg that defenders of today’s regime have had to devise ways to claim that Ellsberg’s leaks were heroic, but the leaks by more recent whistleblowers—such as Julian Assange and Edward Snowden—have been traitorous. The fact that Ellsberg himself always supported leakers like Snowden and Assange is studiously ignored. 

Yet, what was true for leakers in 1971 remains true today: it is heroic to expose the lies of governments, and those who seek to jail truthtellers are the real criminals who choose to protect state power at the expense of freedom and basic human rights. 

The Original Response to Ellsberg’s Leak

It does not require any courage or independent thinking to support Daniel Ellsberg in 2023. To do so is to do what is already accepted and popular. This is why journalists almost universally support Ellsberg today. It’s easy. 

Yet, to support modern-day Ellsbergs—such as Assange, Snowden, Reality Winner, Chelsea Manning, and Jack Texeira—requires some degree of independent thought, skepticism, and disregard for the regime. This is why so few journalists in the corporate media support these modern-day leakers. To do so might endanger journalists’ positions with the organs of power within mainstream media. Moreover, most corporate journalists are firmly on the side of the regime. They have no interest whatsoever in undermining it. 

Indeed, many journalists at the time of the release of the Pentagon Papers condemned Ellsberg. For example, at the 1971 meeting of the Associated Press Managing Editors Association a speaker insisted that approval of Ellsberg is akin to approval of any “pamphleteer” who publishes “a plan of a secret submarine or a list of foreign agents abroad, obtained from any peddler of secrets.” The editors of TIME magazine, meanwhile, reminded readers that the federal government ought to use the “remedy” of prosecuting whistleblowers if publishing secrets might “endanger national security.” The editors fail to mention that the federal government itself gets to determine what the amorphous phrase “national security” actually means. 

Politicians, of course, freely attacked Ellsberg with that term that is forever a favored refuge of the simple-minded:  “traitor.” The Nixon Administration prosecuted him under the Espionage Act of 1917. Ellsberg himself suspected he would spend the rest of his life in jail, but he escaped conviction thanks to the administrative incompetence of Nixon’s “Plumbers.” The Nixon Administration had already violated so many of Ellsberg’s basic procedural rights in the lead up to the trial that no court would side with the administration. Ultimately, however, it must be noted that the Supreme Court took no action to meaningfully limit the Espionage Act. The Court took the easy way out in spite of the fact that the Act has always been unconstitutional, immoral, and contrary to basic property rights. As David Gordon has summed it up: 

The [Espionage Act] blatantly violated the text of the Constitution. The First Amendment states that “Congress shall make no law . . . abridging the freedom of speech”; and as Justice Hugo Black liked to say, “‘no law’ means ‘no law’.” Congress had earlier violated the First Amendment with the Sedition Act of 1798; but along with the Alien Act of the same year, it was repudiated by Thomas Jefferson and was generally regarded as a disaster. Nevertheless, the Supreme Court said that the Espionage Act was constitutional.

In other words, Ellsberg managed to walk free on a technicality, but the threat of prosecution against other whistleblowers, who have done the same thing as Ellsberg, remains. 

The Myth of the “Good” Leaker

The fact that media opinion and public opinion generally sides with Ellsberg has done little to shield modern-day leakers from both public condemnation and legal prosecution. 

Modern supporters of Ellsberg who also condemn men like Snowden and Assange attempt to justify this contradiction by creating narratives like the myth of the “good leaker.” Kevin Gosztola has shown this tendency in how many who favor prosecuting Snowden and Texeira have attempted to claim that Ellsberg was a “responsible” leaker who held back information that might have been damaging to US national security. Yet, Gosztola shows this was not actually the case. Ellsberg did indeed expose the name of at least one clandestine CIA officer. Moreover, Ellsberg himself has noted that when he did withhold information from his leaks, it was not to protect the regime or its agents. Rather, Ellsberg feared releasing that data might hurt efforts to negotiate an end to the war. Ellsberg did not care “if the names of U.S. intelligence sources were exposed.”

Ellsberg was also aware that defenders of the US security state used his case to discredit modern-day leakers and manipulate the narrative. Gosztola notes:

Ellsberg said the pundit class has used him as a “foil” against any “new revelations” of systematic government abuses of power. They have claimed certain leaks were different than his leaks to make it easier to discredit people who took great risks to reveal the truth.

Why the Regime Loves Secrets

Naturally, it is necessary to create the myth that Ellsberg is “good” and Assange, et al, are “bad” so as the get around the pesky reality that most everyone today accepts it was for the best that many Vietnam-era lies were exposed. At the time, of course, this was hardly self-evident to millions of Americans who had been sufficiently propagandized into the idea that the federal government ought to be able to do more or less whatever it wants in the name of “national security.”

This attitude certainly continues today, and it is this lazy deference to the prerogatives of the federal security state that allows federal agents and their enablers to keep alive efforts to arrest Assange and Snowden so the CIA and FBI can take their pound of flesh. 

This attitude, of course, is thoroughly incompatible with the idea of self-government and the rule of law. In the years immediately following the end of the Cold War, even many Conservatives began to see the damage the Cold War had done to basic American freedoms in this respect. Thus, Sam Francis would write in 1992: 

A self-governing people generally abhors secrecy in government and rightly distrusts it. The only way, then, in which those intent upon . . . the expansion of their power over other peoples, can succeed is by diminishing the degree of self-government in their own society. They must persuade the self-governing people that there is too much self-government going around, that the people themselves simply are not smart enough or well-informed enough to deserve much say in such complicated matters as foreign policy. . . . We hear it . . . every time an American President intones that “politics stop at the water’s edge.” Of course, politics do not stop at the water’s edge unless we as a people are willing to surrender a vast amount of control over what the government does in military, foreign, economic, and intelligence affairs.

Governments like to keep secrets because it is politically expedient. It helps smooth the ways for more wars, and larger wars. It helps ensure the taxpayer gravy train keeps flowing, and that the taxpayers are untroubled by real facts about government lies and government crimes. Ellsberg—and other heroes like Assange, Snowden, and Manning—undermine the regime by telling the truth. This is why modern journalists and politicians hate them.

Authored by Pepe Escobar,

The main problem faced by Russia is not the Hegemon and NATO: it’s domestic…

The secret of a perfect psyop is that no one really understands it.

A perfect psyop accomplishes two tasks: it renders the enemy dazed and confused while achieving a set of very important goals.

It goes without saying that sooner rather than later we should see the real goals emerging out of the strategic play in Russia I described as The Longest Day.

The Longest Day may or may not have been a larger than life psyop.

To clear the fog, let’s start with a roundup of the usual “winner” suspects.

First one is undoubtedly Belarus. Due to the priceless mediation of Old Man Luka, Minsk is now gifted with the most experienced army in the world: the Wagner musicians, masters of conventional (Libya, Ukraine) and non-conventional (Syria, Central African Republic) war.

That is already inflicting the Fear of Hell in NATO, which is suddenly facing in its eastern flank a super pro army, very well equipped, and de facto uncontrollable, and on top of it hosted by a nation now equipped with nuclear weapons.

Simultaneously, Russia props up dissuasion on its western front. Like clockwork that is leading NATOstan to invest in ballooning military budgets (with funds it doesn’t have). That process happens to be a key plank of Russian strategy since at least March 2018.

And as an extra bonus Russia creates a 24/7 threat to the whole of Kiev’s northern front.

Not bad for a “mutiny”.

The Dance of the Oligarchs

Way more complex is Russia’s internal dynamics. Putin’s current and subsequent difficult decisions may entail loss of popularity coupled with loss of internal stability -depending on the manner Kremlin-defined strategic victories are presented to Russian public opinion.

Whatever 24/7 NATOstan mainstream media spin may come up with, the Kremlin’s official explanation for June 24 boils down to a Prighozin demonstration: he was just trying to shake things up.

It’s way more complicated than that. There were strategic gains, of course, and Prighozin seems to have followed a very risky script that in the end favors Moscow. But it’s still too early to tell.

A key sub-plot is how the Dance of the Oligarchs will proceed.

Independent Russian media was already expecting some – treasonous – players, including state functionaries, to buy their one-way ticket when the going got tough (or to say they were “ill”, or refuse to answer important calls). The Duma – fed by Bortnikov’s FSB – is already working on a hefty list.

The Russian system – and Russian society as well – see people like these as supremely toxic: in fact much more dangerous than the demshiza (a term that mixes “democracy” and “schizophrenia”, applied to globalist neoliberals).

On the military front, it gets even more complicated. Putin has charged Defense Minister Shoigu to compile the list of Generals to be promoted after The Longest Day. To put it mildly, for quite a few people, from many different persuasions, Shoigu has become a toxic element in Russian politics.

Wagner – rebranded, and under new management – will continue to serve Russia’s interests via Minsk, including in Africa.

Old Man Luka, wily as ever, has already firmly stated there won’t be any provocations against NATO via Wagner. Wagner recruiting bureaus will not be opened in Belarus. Belarussians may join Wagner directly. As it stands, most of Wagner fighters are still in Lugansk.

For all practical purposes, from now on the Russian government won’t have anything to do, militarily and financially, with Wagner.

Additionally, there are no heavy weapons to be confiscated. Already on Monday, June 26, Wagner had moved their heavy weapons to Belarus. What remains – and had not been moved during The Longest Day – was returned to the Ministry of Defense (MoD).

The Dance of the Generals

A clear winner in the whole process is Russian public opinion: they made that graphically clear in Rostov. Everyone was supporting Putin, Russian soldiers, Wagner and Prighozin – at the same time. The overall objective was to improve the Russian army to win the war. It’s as straightforward as that.

The purge inside the MoD will be tough. Under the pretext of repression or “rebellion”, operetta Generals” (as defined by Putin himself) that did not train their soldiers properly, did not organize the mobilization properly, or were incompetent in battle, will definitely be axed.

The problem is that they’re all part of Gerasimov’s circle. To put it diplomatically, he needs to answer a lot of serious questions.

And that’s what brings us to the “General Armageddon has been arrested” monster fake news gleefully parroted by the whole of the NATOstan info universe.

General Surovikin did receive Prighozin in Rostov – but he was never an accomplice to the “rebellion”. Vice-Minister of Defense Yevkurov was also at the HQ in Rostov, and received Prighozin alongside Surovikin. Yevkurov may have played the role of strategically-placed observer.

The Prighozin rebellion soap opera de facto started back in February – and nothing was done to stop it. Regardless whether one shares the official narrative – or not.

What this implies is that the Russian state saw it coming. Does that make The Longest Day the Mother of All Maskirovskas?

Once again: it’s complicated.

Unlike the collective West, Russia does not practice or enforce cancel culture. Wagner was protected via martial law. Any insult against a “musician” fighting neo-nazi Banderistan would be met by as much as a 15-year jail term. Each Wagner fighter is officially a Hero of Russia – something Putin himself always stressed.

On the maskirovka front, there’s no question the simmering tensions in Russian military circles before The Longest Day were manipulated, fog of war-style, to disorient the enemy. It worked like a charm. On the fateful June 24 itself, Surovikin was running a war, and not spending the day drinking brandy with Prighozin.

The NATOstan axis is really clutching at straws. It took just a Surovikin-related rumor to send them into rapture – proving once again how deeply they fear General Armageddon.

A key vector is how Surovikin is regarded by public opinion compared to the surviving “operetta Generals”.

He built the now legendary three-layered defense which is already burying the “counter-offensive”. He introduced the wildly successful Shahed-136 Iranian drones in the battlefield. And he organized the meat grinder devastation in Bakhmut/Artemyovsk – which has already entered the military annals.

Way back in the Autumn of 2022, it was General Armageddon who told Putin that Russian forces were not ready for a large-scale offensive.

So whatever the 5th columnists fabricate, General Armadeggon is not going anywhere – except to win a war. And Russia is not “leaving” Africa. On the contrary: a rebranded Wagner is there to stay, and remains on speed dial in several latitudes.

The trend, short term, seems to point to a – convoluted – draining of the Russian military swamp. The Longest Day seems to have galvanized Russians of all stripes into identifying who the real enemy is – and how to defeat it, whatever it takes.

“Nothing happens by chance”

Historian Andrei Fursov, reviving Roosevelt, observed that “in politics, nothing happens by chance. If it happens, you bet it was foreseen.”

Well, maskirovska rides again.

Yet the main problem faced by Russia is not the Hegemon and NATO: it’s domestic.

Based on conversations with Russian analysts, and their impressions from very sharp people who lived in Russia, Ukraine and in the West, it would be possible to identify basically four main groups trying to impose their idea of Russia.

1. The “Back to the USSR” gang. Includes, of course, some former KGB. Have some kind of support from the general population. A lot of educated specialists (old school pros, mostly pension age). This project suggests a revolution – a 1917 on steroids. But where is Lenin?

2. The “Back to the Tsar” people. That would imply Russia as the “Third Rome” and a prominent role for the Orthodox Church. Hefty funds behind it. A big question mark is how much popular support, especially in “deep” Russia, they really have. This group has nothing to do with the Vatican – which is sold to The Great Reset.

3. The Plunderers – as in robbing Russia blind in favor of the Hegemon. Congregates 5th columnists, and all manner of “totalitarian neoliberals” worshipping the “values” of the collective West. The remaining ones will soon get a knock on the door by the FSB. Their money is already blocked.

4. The Eurasianists. This is the most feasible project – in close collaboration with China, and aiming towards a multipolar world. There’s no place for Russian oligarchs here. Yet the degree of collaboration with China is still highly debatable. The real burning question: how to really integrate, in practice, the Belt and Road Initiative with the Greater Eurasia Partnership?

This is just a sketch – open for discussion. The first three projects may hardly work – for a series of complex reasons. And the fourth still has not gathered enough steam in Russia.

What is certain is that all of them are fighting each other. May the current draining of the military swamp also serve to clear the political skies.