Authored by Daniel Lacalle via Dlacalle.com,

Allow me to explain why we have not seen a recession yet despite the collapse in base money supply. We are witnessing the stealth nationalization of the economy. What does this mean?

The entire burden of the monetary collapse and rate hikes is falling on the shoulders of families and small businesses, while large corporations and governments are virtually unaffected.

Thus, when an agent like the state, which weighs 40 to 60 percent of GDP in most economies, continues to consume wealth and spend, gross domestic product does not show a recession even though consumption and private investment in real terms is declining. Bloated government spending is disguising a private sector recession and the decline in real disposable income, real wages, and margins of SMEs (small and medium enterprises). Furthermore, the accidental and exogenous factor of widespread weaker commodities is boosting the external contribution of gross domestic product.

These are the main reasons why we are living in the middle of a recession and destruction of private wealth and wages, but the official data does not reflect it. As government weight in the economy rises faster, technical recessions may not appear in the official data, but citizens suffer it, nevertheless. The reader may think that this is good news because the spending of governments goes straight to the citizens via social spending. However, there is nothing that the state provides that it does not take away from the private sector now or in the future -deficit spending now means higher taxes and lower real wages afterwards-. Therefore, the flipside of “no official recession yet” is “more public debt now and after”.

The rapid decline in global money supply is staggering, at -3,4% at the end of the first quarter according to Longview. Meanwhile, in the United States, money supply is also contracting at the fastest pace since the great recession. Consider that, in the same period, government indebtedness at a global level is up 3% and United States borrowing has also risen faster than real GDP, according to the IIF. And those deficits are financed even if the cost is higher. Governments do not care about rising borrowing costs, because you pay for it.

This all basically means a drain of liquidity for the private sector will continue for a prolonged period. Central banks scratch their heads wondering why inflation remains persistent despite the complete reversal of the supply chain disruptions and the roundtrip of the international prices of commodities, so they keep hiking rates which have a direct negative impact on families and SMEs. Large corporations have no significant problem with higher rates, as they can access credit without any problem, finance themselves at better rates than many sovereigns and most are swimming in cash after years of prudent balance sheet management. Some may go bust, but this is not a monetary tightening that will affect the mega caps in most cases.

So why does inflation, especially core CPI, not react faster to rate hikes? Because the largest economic agent in the economy does not care and is not reducing its imbalances. Bloated governments are consuming even more units of newly created money and that is why aggregate prices fail to reflect the price contraction of external factors like freight or energy. Furthermore, as we have seen in the gross domestic product figures of many European nations, the rents components of GDP show a massive increase in the tax rents side, while gross added value of businesses and the gross wage component remains below pre-pandemic levels. Congratulations, you wanted socialism, this is socialism: Lower real wages, lower real disposable income, and lower real savings.

With the current slump in money supply, inflation should be half what it is now, and this is even considering the tweaks in the official calculation of CPI. However, money velocity is not declining because state consumption of newly created currency units is rising despite poor real private consumption and investment. If we think of the quantitative theory of money, this may be the first private-only recession because money supply declines and money velocity growth coming from the public sector offsets it.

I am writing this column from Argentina, which is suffering a 108% inflation. The problem when government spending ignores any monetary tightening is that the second leg up of inflation comes from even higher state subsidies using new units of currency, and the downward spiral may start and become impossible to stop. As the interest rate and credit access of the backbone of the economy, households, and SMEs, gets worse and dries up, governments step in to solve a problem they caused by creating even more entitlement and subsidy expenditures with constantly depreciated units of currency. Of course, the U.S. and developed economies are still far from the insanity of Argentina’s 1,670% increase in base money (M2) in the past ten years but remember that “once you pop you cannot stop”.

The money supply slump and rate hike path so far are destroying the backbone of the economy, families, and small businesses. Normalization of monetary policy without normalization of government spending and deficits is the recipe for stagnation.

Aston Martin Lagonda Global Holdings Plc hit the accelerator on its electric vehicle ambitions Monday by announcing a new supply agreement with Lucid Group.

Under the agreement, Financial Times said Lucid would receive a 3.7% stake in Aston Martin and receive about £104 million cash payment from the British sportscar maker. 

The deal greenlights Aston Martin to source “Lucid’s current and future powertrain and battery technology will be at the center of Aston Martin’s all-new in-house Battery Electric Vehicle (BEV) platform,” the British carmaker wrote in a press release. 

“The supply agreement with Lucid is a game changer for the future EV-led growth of Aston Martin. Based on our strategy and requirements, we selected Lucid, gaining access to the industry’s highest performance and most innovative technologies for our future BEV products,” Lawrence Stroll, Executive Chairman of Aston Martin, said. 

Lucid Air 

Aston Martin will also extend a years-long partnership with Mercedes-Benz for EV parts. This allows Aston Martin to source EV parts from two suppliers.

How much influence did Saudi Arabia’s sovereign wealth fund have in connecting Aston Martin with Lucid? The fund has stakes in both auto manufacturers. 

The deal sent Aston Martin shares in the UK higher by as much as 15%. 

Lucid shares trading in premarket in New York were up nearly 9%. 

“This partnership will represent a landmark collaboration between Aston Martin, a storied marque with a rich history, including winning at Le Mans and its current successes in F1, and the very best of Silicon Valley innovation and technology from Lucid,” Peter Rawlinson, CEO and CTO, Lucid, wrote in a press release. 

With the Fed rate hikes on pause – at least until next month – today’s 2Y auction was closely watched for clues whether demand would slump ahead of what consensus see as another 25 bps rate hike in a few weeks. It did not: in fact, today’s 2Y auction was one of the strongest in recent months.

The high yield of 4.670%, while well above last month’s 4.30%, stopped through the 4.678% When Issued, and failed to top the record high hit in February when the auction stopped at 4.673%.

The bid to cover of 2.860 was below last month’s 2.90, if well above the recent average of 2.71%.

The internals were also solid, with Indirects taking down 68.5%, which would have been the highest on record, with the exception of an odd, outlier print back in June 2009 when Indirects were awarded just fractionally more or 68.74%.

And with Directs taking down 18.2%, that meant Dealers were left holding 13.3%, which was just shy of an all time low.

Overall, this was a stellar 2Y auction, and while the sale may have benefited from a modest short squeeze, the 2Y tenor was not trading very special in repo, so much of the demand for the short-end today was likely organic.

Authored by Michael Snyder via TheMostImportantNews.com,

At this point, nobody can deny that we are a society in decline. 

In America today, you can buy a U.S. Senator for 10,000 dollars, test scores for 13-year-olds have dropped to alarmingly low levels, and the CDC is telling us that more people than ever are getting depressed.  Our streets are filled with crime, the ranks of the homeless are absolutely surging, and we are facing the worst drug crisis in the entire history of our nation.  Meanwhile, corruption is seemingly everywhere.  The guy in the White House and his son have made millions of dollars in an epic influence-peddling scheme that stretched over many years, and the mainstream media doesn’t seem to care.  Of course they know exactly what it is like to be bought and paid for, because the only reason the big news networks can survive is because of the millions of advertising dollars that the pharmaceutical industry continues to inject into their dying carcasses.

As Victor Davis Hanson has astutely observed, America was once experiencing a “gradual decline”, but now the fall of our nation “has accelerated at such an astonishing rate we can scarcely recognize our country”…

Twenty-first-century America was on a trajectory of gradual decline—until it began to implode.

Was the accelerant the COVID-19 pandemic and unhinged lockdowns? Or was the catalyst the woke revolution fueled by the 2020 summer of exempted rioting, looting, arson, and violence? Or was it perhaps the deranged fixation on removing Donald Trump from the presidency and destroying the rule of law in the process? Or all that and more?

Now with the election of Joe Biden, what had been a fast-tracked decline has accelerated at such an astonishing rate we can scarcely recognize our country.

I wish that what he is saying wasn’t true.

But it is.

Just a few years ago, organized looting was something that was fairly uncommon.

Sadly, now we have reached a point where groups of people are constantly storming into our major retailers, grabbing whatever they want, and then storming out…

Retail crime is at a record high, and thieves are becoming bolder than ever.

“We’ve just had a lot of stressful situations where me or like one of my coworkers have gotten hit trying to get stuff back,” said Mae McRae, the manager of Las Vegas boutique Eden Sky. “We have people who completely fill up their hands and just run out. No care in the world.”

The riots of 2020 were a real turning point, and retail theft hit the 100 billion dollar mark for the very first time in 2022…

The National Retail Federation found retailers lost approximately $100 billion last year, which is up from $94 billion in 2021 and $91 billion in 2020.

“They’re getting more comfortable with it because we won’t chase after them,” McRae said of shoplifters, noting how many retailers train employees to not go after the shoplifter for safety reasons.

It is being projected that retail theft will be way above the 100 billion dollar mark this year.

Unfortunately, most of our politicians don’t seem interested in solving this crisis.

So large retailers are starting to flee the areas that have been hit the hardest, and that even includes very wealthy cities such as San Francisco…

A slew of companies have indicated in the past few months that they will exit locations in San Francisco’s downtown area, moves AT&T, Westfield and Nordstrom recently said they would also make.

Reports of AT&T’s closure of its San Francisco flagship, located at 1 Powell Street in the Union Square area, first came about late last week. That will take place in August, with the workers getting “offered jobs at one of the many other retail locations in the city,” an AT&T spokesperson told FOX Business on Monday.

Instead of working hard to fix our growing problems, our politicians are busy working hard to win their next elections, and for most of them that means making appearances at the “pride parades” that are taking place all over America this month.

In New York, approximately 100,000 people marched in the Big Apple’s world famous pride parade on Sunday, and it was expected “to draw roughly a million spectators”…

Spotted among the amalgam of drag queens and activists marching down Fifth Avenue were figures like Eric Adams, Kathy Hochul, and Chuck Schumer – three of roughly 100,000 participants taking part in the parade’s main procession.

This year’s march – the 53rd in the city’s history – is expected to draw roughly a million spectators, while featuring some 60 floats that speak to the LGBTQ situation not only in New York, but across the country.

There is absolutely no doubt about where the financial capital of the world stands.

At one point, some participants in the parade began chanting slogans that caused great alarm, but the mainstream media will not be covering this.

Needless to say, the mainstream media will not cover anything that puts such festivities in a bad light.

During the Seattle pride parade, men that were fully exposed were allowed to participate.

In the old days, that would get you arrested for “indecent exposure”, but in our time we celebrate that sort of a thing.

Of course there were lots of young children along the parade routes in Seattle, New York and in all of the other cities where such parades have been held this month.

Their innocence is being stolen from them.

But nobody seems to care, because this is what we have become as a nation.

If we were given another 20 or 30 years, what would our society look like?

You might want to think about that, because the truth is that time is running out for America.

If we stay on the self-destructive path that we are on, we will reach the end of the road very rapidly, and so let us hope for a great awakening to happen soon.

*  *  *

Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.

Authored by Dave DeCamp via AntiWar.com,

Secretary of State Antony Blinken suggested on Sunday that the US was expecting more unrest in Russia following Wagner chief Yevgeny Prigozhin’s two-day uprising.

“I think we’re in the midst of a moving picture. We haven’t seen the last act. We’re watching it very closely and carefully,” Blinken told CBS News on Sunday.

When asked if the US was in touch with Russia about the crisis, Blinken said he instructed his team to engage with Russia to ensure “they understood their responsibilities in terms of protecting our own personnel.”

There’s no sign Blinken has attempted to speak with Russian Foreign Minister Sergey Lavrov about the incident.

Blinken said Prigozhin’s dissent showed “real cracks” in Russia. “It was a direct challenge to Putin’s authority. So this raises profound questions. It shows real cracks. We can’t speculate or know exactly where that’s gonna go. We do know that Putin has a lot more to answer for in the weeks and months ahead,” he said.

French President Emmanuel Macron made similar comments on Sunday, saying the mutiny shows “the divisions that exist within the Russian camp, and the fragility of both its military and its auxiliary forces.”

Macron said the crisis justifies Western support for Kyiv, while stressing the West must remain vigilant regarding its posture of readiness to support Kiev:

“All this should make us very vigilant, and fully justifies the support that we are giving to the Ukrainians in their resistance,” he said.

Also on Sunday, President Biden spoke with Ukrainian President Volodymyr Zelensky about the situation in Russia. “Yesterday’s events exposed the weakness of Putin’s regime,” Zelensky said, according to a press release from his office.

Still unclear what the actual terms of the agreement are that Prigozhin reached with the Kremlin.

This public messaging might be a means of trying to force Prigozhin to abide by them—whatever they are—by threatening criminal proceedings. https://t.co/2xom0qSqWP

— Rob Lee (@RALee85) June 26, 2023

“I am grateful for your readiness and the readiness of the American people to stand side by side with Ukraine until the full liberation of all our territories within internationally recognized borders,” Zelensky added.

Bill Maher slammed the mainstream media over their biased coverage of Democratic presidential candidate Robert F. Kennedy, Jr.

“I want to take issue with the media because it incenses me how they write about you,” Maher told Kennedy on an episode of Maher’s podcast, “Club Random,” released Sunday.

“In Chat With Musk, Kennedy Pushes Right-Wing Ideas and Misinformation,” Maher said, citing a NY Times headline from June 5.

“Right away I’m pissed off,” Maher said in reaction. “Because, misinformation? How about you’re the newspaper. Just tell me what was said and I’ll decide what’s misinformation. This arrogance of ‘we know what the misinformation is about science.'”

Maher then read from the Times piece; “‘Mr. Kennedy is a long time amplifier and propagator of baseless theories.’ Again,” he stopped to qualify, “not the editorial page, this is like the regular newspaper.”

The HBO host then cited a fact check within the Times piece claiming Kennedy was wrong when he said that Democrats earned more money from the pharmaceutical industry than Republicans.

“Because the Obama administration made a deal with the pharmaceutical industry to support the bill … today I believe the Democrats are getting more money from pharma than Republicans,” argued Kennedy.

“Even if that’s not exactly the case, the spirit of the answer is correct,” Maher opined. “Fuck them,” he added. “I’m doing this for a reason because I believe they deserve richly to be mocked for that attitude.”

Watch:

Meanwhile, while the press is doing it’s best to marginalize Kennedy, 80% of Democratic voters want President Joe Biden to debate during the 2024 primaries, including an overwhelming 72% of Biden supporters, according to a USA Today/Suffolk University poll.

That said, ‘the odds of that actually happening are as close to zero as you can get in politics,” according to the report.

“As you know, no incumbent R [Republican] or D [Democrat] have done debates,” said Kevin Munoz, a Biden campaign spokesman.

Biden’s claim to the nomination hasn’t been seriously threatened, but the findings underscore his need to consolidate and energize the Democratic base. In the poll, 58% of Democrats support Biden for the nomination while 15% back Kennedy and 6% back Marianne Williamson; 21% are undecided.

There could be at least a bit of a political downside to ducking debates. -USA Today

“The decision not to debate is ignoring the 82% of women, 84% of union households, 86% of independents, and 90% of young voters who are not only planning to vote in their state’s Democratic primary or caucus next year but also would like to see a series of Democratic primary debates,” said Suffolk Political Research Center director, David Paleologos.

RFK Jr. calls it “unfortunate” that no debates appear to be on the horizon.

Despite a downgrade from Goldman Sachs over the weekend, shares of Tesla continue to show strength, going green less than an hour after Monday’s cash open and settling near unchanged heading into the 11AM EST hour as the broader market rallied.

In a note out over the weekend, 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.

Delaney noted that recent strength in the name was likely a factor of better than expected sales in April and May and less price cuts than expected, among other things:

We attribute the recent move higher in Tesla shares (which significantly exceeded our expectation) to a combination of factors including: 1) relatively solid monthly sales in April and May; 2) less price declines/discounting from Tesla in 2Q than investors (and we) had expected (with prices for some new vehicles being slightly increased in the US recently post the larger cuts in January and April, and price reductions being focused on vehicles in inventory); 3) incremental IRA credits for RWD Model 3; 4) several companies now planning to use Tesla’s charging network in North America (which we think will help Tesla to build a small but growing new charging business, drive awareness of Tesla products, and help Tesla/NACS connectors be a larger part of the market all else equal); and 5) incremental market focus on companies that benefit from AI.

And despite the price target cut, he actually raised the company’s EPS estimates to “assume a more moderate rate of price declines going forward”.

Similar to Morgan Stanley last week, Delaney couldn’t avoid the fact that he still thinks Tesla is positioned for the long term but believes the stock may be overextended, stating: “Overall we believe our view that Tesla is well positioned for long-term growth, given its leading position in the EV and clean energy markets (which we attribute in part to its ability to offer full solutions including charging, storage, software/FSD and services with a direct sales model), is now better reflected in the stock.”

Goldman says it believes that Q2 deliveries are tracking in the right direction, to 445-450k:

We believe that Tesla’s deliveries are off to a solid start for 2Q, with volumes in the first two months of the quarter for the US, Europe and China higher than the first two months of deliveries in prior quarters (Exhibit 1). It’s important to note that Tesla has been in the process of transitioning to a more even delivery schedule throughout the quarter in order to ease logistics and operational constraints. As a result, we expect less of an increase in the last month of the quarter than was the case historically. We believe that volumes are tracking to be roughly in line with consensus at ~445-450K (per FactSet and Visible Alpha) as our base case.

He also hones in on the fact that pricing cuts haven’t been as egregious as once predicted. Delaney writes: “We had previously been expecting additional price reductions in 2Q given company commentary on the 1Q23 earnings call and due to a relatively tepid macroeconomic backdrop (with easing vehicle supply/demand). However, Tesla pricing has been stronger than we had expected (with some small price increases on certain models, and discounting focused on vehicles in inventory).”

“We view Tesla as an industry leader in terms of powertrain technology and costs, as evidenced by powertrain efficiency compared to vehicle price,” the note continues, making the case that the company remains at the front of innovating in both “cost and capabilities”. 

Goldman also has optimistic hopes for the next drivetrain that the company will eventually manufacture as it looks toward 2025:

On powertrain specifically, Tesla believes its next drive unit will be even more scalable with a roughly 75% reduction in silicon carbide, while also reducing the rare earth materials required to zero. We believe that this program is a priority for Tesla, and we believe the company is targeting a ramp in 2025 based on company commentary

Finally, Goldman takes note of Tesla’s major win in charging, having Ford, GM and Rivian recently adopt its charging standard. Delaney predicts $1 to $3 billion of incremental revenue from opening up the network:

Recall that Tesla has already been in the process of opening up select chargers in the US and Europe. In Europe, owners have been able to acquire a membership (for about €12.99 or $14 USD per month) or pay a higher rate per charge. We believe that Tesla has not opened up the most highly utilized chargers to preserve a better experience for Tesla drivers.

As we wrote in our 6/29/22 report, The case for Tesla to open the Supercharging network, we sized the potential for Tesla opening its network more widely in the next few years (i.e. more than just the 12K chargers in North America) at $1-$3 bn of incremental revenue (although Tesla wouldn’t necessarily capture all of this).

Recall, late last week the other major sell side bank that covers Tesla, Morgan Stanley, also downgraded the name to equal weight despite raising their price target from $200 to $250 per share. 

As we noted last week, Morgan Stanley’s Adam Jonas’ bull case remains at $450 and his bear case remains at $90 for shares, to wit:

We raise our Tesla price target to $250 from $200, Bear Case valuation to $90 from $70,and Bull Case valuation to $450 from $390. Following these changes, we change our rating to Equal-weight from Overweight given a relatively full valuation and a more balanced risk reward and highlight key drivers and investor debates for the stock at this level.

Even Morgan Stanley didn’t sound convinced of its downgrade last week, with Jonas admitting 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.

Recall, we have been documenting how Tesla’s charging standard is now quickly becoming the EV industry’s charging standard. 

To Jonas the fly in the ointment was that the stock’s price has moved significantly higher, stating “Some investors may feel inclined to play the positive momentum from here, but we believe the current price, at over 100x our FY23 US GAAP EPS forecast, discounts significantly more than Tesla as just a dominant EV company.”

Right now sentiment is starting to feel like after a couple more of these downgrades, shares could soon blow through $300…

Both full notes available to pro subscribers in the usual place.

For the fifth straight month, the Dallas Fed’s Texas Manufacturing Outlook survey disappointed expectations, printing -23.2 vs -21.8 exp) and is negative for .

Source: Bloomberg

Texas factory activity declined in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell three points to -4.2, a reading indicative of a slight contraction in output.

Labor market measures suggest weaker employment growth and declining work hours. Price pressures evaporated, while wage pressures remained elevated…

But it is the comments from respondents that highlight reality best…

Food manufacturing

Stagflation. Political incompetence is creating an unstable business environment.

Computer and electronic product manufacturing

We are starting to see a major shift in industrial production and a lack of confidence.

Machinery manufacturing

We are living hand to mouth. The surge in orders could easily stop as quickly as it started. We’re month to month.

Plastics and rubber products manufacturing

We service retailers. They are tentative; we are wary.

Primary metal manufacturing

Incoming orders are off substantially, especially in the residential building and construction markets we produce raw material for.

But we are looking foirward to hearing President Biden on Wednesday to explain how successful Bidenomics has been…

Markets are starting the week trying to work out what to make of the volatile situation in Russia that saw a remarkable turn late Friday and into Saturday. As DB’s Jim Reid speculates, the mutiny and then truce – all within 24-36 hours – means more political instability longer-term than shorter-term although for now there has been virtually no market impact. That said, at one point on Saturday when the Wagner group’s Prigozhin had his troops march towards Moscow, it felt that there was a lot of potential global market event risk over the next few days. That has perhaps died down but this whole episode probably increases both the positive and negative tail risks a bit. It could increase the risk of escalation by Putin to reinstate an air of authority, or it could leave him vulnerable which could be seen as positive or negative for Europe, Ukraine and wider markets. It’s just impossible to tell at this stage.

Looking forward now, the US PCE (Friday) and Eurozone CPI releases (Wednesday to Friday) are the obvious focal points this week. Also up there in order of importance, the ECB annual forum in Sintra (Mon-Weds) will feature plenty of speakers, including the heads of the Fed, the ECB, the BoJ and the BoE on a panel together on Wednesday.

Elsewhere German IFO (which disappointed earlier today), US new home sales and durable goods (tomorrow), results of US bank stress tests (Wednesday), US jobless claims (Thursday), China PMI (Friday), and Tokyo CPI (Friday) are also important with US claims possibly the one to watch most given the recent increase. This increase hasn’t filtered through into continuing claims yet so that is the current shield to worrying about a deteriorating US labour market.

Going through some of the top tier events in a little more detail, let’s start with US PCE on Friday which comes as part of the personal income and consumption report. DB expect the core PCE deflator to soften a tenth on both the monthly (0.3% MoM vs 0.4% last month) and YoY (4.6% YoY from 4.7% last month) readings. Economists point out that to meet the Fed’s forecast of 3.9% YoY core PCE this year we would need around 27bps of monthly prints into YE. DB actually expects 3.6%. All else equal, these prints could be the swing factor between 1-2 Fed hikes out to YE in their own dot plots.

Something that could be interesting is the results of the annual US bank stress tests on Wednesday. Those will be closely watched following the regional banking turmoil this spring that resulted in several bank failures as well as lingering concerns over risks to the banking system tied to deposit dynamics and interest rates. For the first time, the stress test will include an “exploratory market shock component”, for the largest banks. The “severely adverse scenario” will focus on the effects of “a severe global recession” coupled with turmoil in real estate markets, both commercial and residential, and corporate debt markets. These stress tests are always a double edge sword. Too onerous and they can create their own turmoil, but too loose and they lack some credibility. So an interesting one to watch.

Later in the week, Italy will kick off European CPI releases on Wednesday, followed by Germany on Thursday with France and the Eurozone on Friday. DB’s European economists’ inflation chartbook looks at the latest trends and developments here. The team’s forecast for the June Eurozone print due on Friday is 5.8% YoY for headline (vs 6.1% in May) and 5.7% for core (vs 5.3% in May). It will be the last set of inflation readings ahead of the July 27th ECB meeting. See the day-by-day calendar at the end as usual for the full week’s docket.

Here is a day-by-day calendar of events

Monday June 26

• Data: US June Dallas Fed manufacturing activity, Japan May PPI services, Germany June ifo survey
• Central banks: BoJ June meeting summary of opinions, ECB forum on central banking in Sintra, ECB’s Villeroy speaks, BoE’s Dhingra speaks
• Earnings: Carnival

Tuesday June 27

• Data: US May new home sales, durable goods orders, June Conference Board consumer confidence index, Richmond Fed manufacturing index, business conditions, Dallas Fed services activity, April FHFA house price index, Italy June manufacturing confidence, economic sentiment, consumer confidence index, Canada May CPI
• Central banks: ECB’s Lagarde speaks, BoE’s Tenreyro speaks
• Earnings: Prosus, Walgreens Boots Alliance

Wednesday June 28

• Data: US May wholesale and retail inventories, advance goods trade balance, China May industrial profits, Italy June CPI, May PPI, April industrial sales, Germany July GfK consumer confidence, France June consumer confidence, Eurozone May M3
• Central banks: Fed’s Powell, ECB’s Lagarde, BoJ’s Ueda and BoE’s Bailey speak, ECB’s Villeroy speaks, BoE’s Pill speaks
• Earnings: Micron, General Mills

Thursday June 29

• Data: US May pending home sales, initial jobless claims, UK May mortgage approvals, net consumer credit, M4, Japan June consumer confidence index, May retail sales, Germany June CPI, Eurozone June services, industrial, economic confidence
• Central banks: Fed’s Powell and Bostic speak, BoE’s Tenreyro speaks
• Earnings: H&M, Nike

Friday June 30

• Data: US May personal spending, income, PCE deflator, June MNI Chicago PMI, UK June Lloyds business barometer, China June PMIs, Japan June Tokyo CPI, May job-to-applicant ratio, jobless rate, industrial production, housing starts, Italy May unemployment rate, Germany May import price index, retail sales, June unemployment claims rate, France June CPI, May PPI, consumer spending, Eurozone June CPI, May unemployment rate, Canada April GDP
• Central banks: BoC Q2 business outlook survey
• Earnings: Constellation Brands

* * *

Finally, focusing on just the US, the key economic data releases this week are the durable goods report on Tuesday and the Chicago PMI report on Friday. There are a few speaking engagements from Fed officials this week, including public appearances by Chair Powell on Wednesday and Thursday.

Monday, June 26

• 10:30 AM Dallas Fed manufacturing index, June (consensus -20.0, last -29.1)

Tuesday, June 27

• 08:30 AM Durable goods orders, May preliminary (GS -1.0%, consensus -0.9%, last +1.1%); Durable goods orders ex-transportation, May preliminary (GS flat, consensus flat, last -0.3%); Core capital goods orders, May preliminary (GS +0.2%, consensus +0.2%, last +1.3%); Core capital goods shipments, May preliminary (GS +0.2%, consensus +0.2%, last +0.5%): We estimate that durable goods orders fell 1.0% in the preliminary May report, reflecting a pullback in defense orders and mixed commercial aircraft orders. We forecast a small gain in core capital goods orders (+0.2%) and shipments (+0.2%), reflecting a modest pickup in global industrial activity and a continued drag from tighter credit.
• 09:00 AM FHFA house price index, April (consensus +0.5%, last +0.6%)
• 09:00 AM S&P Case-Shiller 20-city home price index, April (GS +0.4%, consensus +0.35%, last +0.45%)
• 10:00 AM Richmond Fed manufacturing index, June (consensus -12, last -15)
• 10:00 AM New home sales, May (GS -0.5%, consensus -1.2%, last +4.1%)
• 10:00 AM Conference Board consumer confidence, June (GS 104.5, consensus 104.0, last 102.3); We estimate that the Conference Board consumer confidence index increased to 104.5 in June.

Wednesday, June 28

• 08:30 AM Advance goods trade balance, May (GS -$94.0bn, consensus -$93.4bn, last -$96.8bn): We estimate that the goods trade deficit narrowed by $2.8bn to $94.0bn in May compared to the final April report.
• 08:30 AM Wholesale inventories, May preliminary (consensus -0.1%, last -0.1%)
• 09:30 AM Fed Chair Powell speaks: Fed Chair Jerome Powell will take part in a panel discussion with Bank of England Governor Andrew Bailey, ECB Governor Christine Lagarde, and Bank of Japan Governor Kazuo Ueda in Sintra, Portugal. In his testimony before the House Financial Services Committee on June 21st, Chair Powell echoed the message sent by the FOMC at its June meeting, noting that “given how far [the FOMC has] come [in raising interest rates], it may make sense to move rates higher but to do so at a more moderate pace.” Chair Powell also said that “the process of getting inflation back down to 2% has a long way to go,” and emphasized that while “we have been seeing the effects of our policy tightening on demand in the most interest-rate-sensitive sectors of the economy, it will take some time … for the full effects of monetary restraint to be realized, especially on inflation.”

Thursday, June 29

• 02:30 AM Fed Chair Powell speaks: Fed Chair Jerome Powell will take part in a discussion hosted by the Bank of Spain in Madrid. Moderated Q&A is expected.
• 06:00 AM Atlanta Fed President Bostic (FOMC non-voter) speaks: Atlanta Fed President Raphael Bostic will deliver a speech on the US economic outlook at the Irish Association of Investment Managers’ Annual Dinner. Q&A with reporters is expected. On June 23rd, President Bostic noted that he would be “comfortable, with the information I have today, staying right where we are [on the federal funds rate] and just staying here through the rest of this year and long into next year.”
• 08:30 AM GDP (third), Q1 (GS +1.3%, consensus +1.4%, last +1.3%): Personal consumption, Q1 (GS +3.8%, consensus +3.8%, last +3.8%):  We estimate no revision on net in the third vintage of the Q1 GDP report (previously reported at +1.3% qoq ar).
• 08:30 AM Initial jobless claims, week ended June 24 (GS 260k, consensus 265k, last 264k); Continuing jobless claims, week ended June 17 (consensus 1,779k, last 1,759k)
• 10:00 AM Pending home sales, May (GS -0.5%, consensus -0.5%, last flat)

Friday, June 30

• 08:30 AM Personal income, May (GS +0.5%, consensus +0.4%, last +0.4%); Personal spending, May (GS +0.2%, consensus +0.2%, last +0.8%); PCE price index, May (GS +0.13%, consensus +0.1%, last +0.4%); Core PCE price index, May (GS +0.32%, consensus +0.4%, last +0.4%): Based on details in the PPI, CPI, and import price reports, we forecast that the core PCE price index rose by 0.32% month-over-month in May, corresponding to a 4.64% increase from a year earlier. Additionally, we expect that the headline PCE price index increased by 0.13% in May, corresponding to a 3.87% increase from a year earlier. We expect that personal income increased by 0.5% and personal spending increased by 0.2% in May.
• 09:45 AM Chicago PMI, June (GS 42.4, consensus 44.0, last 40.4): We estimate that the Chicago PMI rebounded by 2pt to 42.4 in June, reflecting the lackluster rebound in global manufacturing activity.
• 10:00 AM University of Michigan consumer sentiment, June final (GS 64.5, consensus 63.9, last 63.9); University of Michigan 5–10-year inflation expectations, June preliminary (GS 3.0%, consensus NA, last 3.0%): We expect the University of Michigan consumer sentiment index to increase by 0.6pt to 64.5 in the final June reading. We expect the report’s measure of inflation expectations to remain unchanged at 3.0%.

Source: Deutsche Bank, Goldman, BofA

Authored by Simon White, Bloomberg macro strategist,

Geopolitical risks rarely have a persistent impact on equity-market volatility. China remains a bigger influence on the health of the US stock market.

If ever it was thought Kremlinology was a dying art, all it takes is a crisis in Russia to mint a few thousand more instant Kremlinologists to put any fears to bed. After developments in the country this weekend, we have a phalanx of competing theories about what it all means, and what happens next.

In truth, all we can really be sure of is this means more uncertainty. But, as always the crux of the issue for investors is, what does this mean for markets?

With a depressed VIX, the index might seem poised for a rapid and persistent move higher (it’s up one point so far today). That might happen of course, but it’s not a shoo-in. The chart below shows the correlation between the Global Geopolitical Uncertainty Index and the VIX. As can be seen, most of the time the correlation is between plus and minus 30%, i.e. essentially uncorrelated.

There have been only a few periods, marked on the chart, where it has spent much time outside the low correlation zones. Two of the times it’s fairly obvious why, and the time in 2014 is around when Russia annexed Crimea, but it’s not clear if that was the catalyst (or one of them).

Nonetheless, it illustrates the point that stock markets are rarely persistently affected by geopolitical uncertainty.

More impactful today (unless, of course, there is a rapid escalation in the situation in Russia) for US stocks and volatility is China. The economy seems unable to bounce back from the pandemic, with another sign of the malaise in weaker-than-expected spending over the recent holiday.

The yuan has weakened to a seven-month low versus the dollar, as well as weakening against several other Asian currencies. Inflation has remained stubbornly low, but policy makers in China do not have infinite patience and are likely to keep incrementally easing fiscal and monetary policy.

There is a strong US and global disinflationary trend at the moment, allowing the Fed to ease back, stocks to rally and the VIX to remain low. But when China eases further, it starts the timer for that favorable wind coming to an end.