UK 30-year gilt yields jumped to 5.75% in Monday trading – the high back to June 9, 1998 – before reversing 24 bps lower to close the week to 5.51%. After jumping to 4.52% - the high since June 11, 2009 – French 30-year yields closed the week at 4.37%. Italy’s 30-year yields traded Wednesday to 4.68% - within two bps of a 30-month high - then closed at 4.51%. Japanese 30-year yields rose to a multi-decade high of 3.30% Wednesday (ended week 3.24%). Australia long yields trade up to 5.19% Wednesday, the highest since November 1, 2023 (ended week 5.08%).
Wild global bond volatility didn’t garner much attention here at home. Early in the week, it appeared global long-bond yields were breaking decisively to the upside. Even 30-year Treasury yields hit 5.0% early Wednesday morning, within only 11 bps of the October 2023 spike to the highest yield since July 2007. Long-bond yields ended the week down 17 bps to 4.76%. After trading to 4.30% early Wednesday, 10-year Treasury yields closed the week 15 bps lower at 4.07%.
Treasury and global yields reversed on Wednesday’s weaker-than-expected job openings (JOLTS) data. Buying only intensified on Friday’s weak (22k) August Non-Farm Payrolls report, surely fueled by a short squeeze and reversal of hedges. The rates market is now pricing 69 bps of cuts by yearend, eight bps more on Friday’s session and 13 for the week.
September 3 – Bloomberg (Maria Eloisa Capurro): “Federal Reserve Governor Christopher Waller said the US central bank should begin lowering interest rates this month and make multiple cuts in the coming months, adding that officials could debate the precise pace of reductions. ‘We need to start cutting rates at the next meeting, and then we don’t have to go in a locked sequence of steps,’ Waller said… ‘We can kind of see where things are going, because people are still worried about tariff inflation. I’m not, but everybody else is… We kind of know we want to get toward neutral… We know roughly how much you might want to cut — say 100, 150 bps. But how fast we get there is going to depend on the data that comes in.’”
The Fed is about to commence another round of rate cuts, with financial conditions even looser than when they initiated round one. Gold’s $139 weekly gain (4.0%) to a record $3,587 pushed y-t-d gains to 36.7%. Silver’s 3.2% rise boosted 2025 gains to 41.9%. Platinum’s 0.6% increase raised y-t-d gains to 52%. The S&P500 and Nasdaq Composite traded at record highs Friday.
September 3 – Bloomberg (Josyana Joshua, Ethan M Steinberg and Ronan Martin): “Borrowers from across the globe are rushing into the bond market, with more than $128 billion of sales so far this week, and investors are lapping up the new debt. In the US, 13 issuers offered high-grade bonds on Wednesday… That’s a day after 27 issuers sold $43.3 billion of debt altogether, the third largest amount in volume ever. In the high-yield market, seven new deals are being sold Wednesday, making 10 so far for the week. In Europe, a day after record debt sales of more than €49.6 billion ($57.9bn) across sectors…”
August 30 – Wall Street Journal (Matt Wirz and Vicky Ge Huang): “So much for the dog days of summer. Companies with low credit ratings are feverishly issuing new bonds and loans to capitalize on the appetite for risk that is driving stocks to record highs… Issuance of junk-rated bonds and loans hit a monthly record of $240 billion in July, according to… JPMorgan... This month is also expected to be the busiest August ever, with total issuance set to exceed $100 billion. That brings the amount companies have raised from junk bonds and loans so far this year to $930 billion, just shy of the $1 trillion issued during the same period in 2024, despite the credit freeze this spring.”
Job growth has weakened. Our highly imbalanced “Bubble economy” is demonstrating pockets of weakness - along with strength. But are we to believe the broader economy is faltering? The Atlanta Fed GDPNow Forecast has the economy expanding at a 3.0% pace. If recessionary forces are gaining momentum, it would be news to the exuberant junk bond market. Junk bond yields closed the week at 6.66%, the low since April 22, 2022. Investment grade yields ended the week at 4.78%, the low since October 3, 2024. The iShares High Yield Corporate Bond ETF (HYG) has returned 6.85% y-t-d, with the iShares Investment Grade ETF (LQD) returning 7.24%. The Bloomberg Leveraged Loan Index has returned 4.04% y-t-d. In short, corporate Credit is certainly not signaling an impending recession.
September 5 - Washington Post (Marianne LeVine and Lauren Kaori Gurley): “Federal law enforcement agents this week raided a Hyundai factory in Bryan County, Georgia, arresting hundreds of immigrant workers in the largest worksite raid in President Donald Trump’s second term. A total of 475 people were arrested in the operation, which took place Thursday, authorities said at a news conference on Friday. Steven Schrank, special agent in charge of Homeland Security Investigations in Atlanta, called it the ‘largest single-site enforcement operation’ in the agency’s history.”
Like about everything these days, analyzing labor market dynamics is anything but straightforward. To what extent ICE operations and deportations impact job growth is unclear. A couple weeks back, “Homeland Security Secretary Kristi Noem said… the number of unauthorized immigrants living in the U.S. has declined by 1.6 million since President Trump began his immigration crackdown (CBS).” It’s possible that a sharp slowdown in job creation will not translate into typical easing of wages and compensation. Both August ADP and Non-Farm Payrolls data indicated resilient wage pressures.
When financial conditions are this loose, I’ll err on the side of anticipating above-consensus economic growth. However, I’m mindful that this dynamic won’t last forever. And we’re now in uncharted waters regarding the scope and duration of “Terminal Phase Excess.” This super Bubble is on borrowed time. Ominously, today’s extraordinarily loose conditions are clearly having a greater effect stoking Credit excess, speculation, and asset Bubbles than on promoting sound investment.
Treasury Secretary Scott Bessent, Wall Street Journal (“The Fed’s ‘Gain of Function’ Monetary Policy), September 5, 2025: “Overuse of nonstandard policies, mission creep and institutional bloat threaten the central bank’s independence. The Fed must change course. Its standard tool kit has become too complex to manage, with uncertain theoretical underpinnings. Simple and measurable tools, aimed at a narrow mandate, are the clearest way to deliver better outcomes and safeguard central-bank independence over time.”
“Successive interventions during and after the financial crisis of 2008 created what amounted to a de facto backstop for asset owners. This harmful cycle concentrated national wealth among those who already owned assets. Within the corporate sector, large firms thrived by locking in cheap debt, while smaller firms reliant on floating-rate loans were squeezed as rates rose. Homeowners saw their property values soar, largely insulated by fixed-rate mortgages. Meanwhile, younger and less affluent households, shut out of ownership and hit hardest by inflation, missed out on appreciation. By failing to deliver on its inflation mandate, the Fed allowed class and generational disparities to widen. Its pursuit of a wealth effect to stimulate growth backfired.”
“The Fed's growing footprint has profound implications for independence. By extending its remit into areas traditionally reserved for fiscal authorities, the Fed has blurred the lines between monetary and fiscal policy. The central bank's balance-sheet policies directly influence which sectors receive capital, intervening in what should be the domain of markets and elected officials. Entanglement with Treasury debt management creates the perception that monetary policy is being used to accommodate fiscal needs. Expanded powers have fostered a culture in Washington that relies on the Fed to bail out the government after poor fiscal choices. Instead of accountability, presidents and Congress have expected intervention when their policies falter. This ‘only game in town’ dynamic has created perverse incentives for irresponsibility.”
“At the heart of independence lies credibility and political legitimacy. Both have been jeopardized by the Fed’s expansion beyond its mandate. Heavy intervention has produced severe distributional outcomes, undermined credibility and threatened independence. Looking ahead, the Fed must scale back the distortions it causes in the economy. Unconventional policies such as quantitative easing should be used only in true emergencies, in coordination with the rest of the federal government. The U.S. faces short- and medium-term economic challenges, along with the long-term consequences of a central bank that has placed its own independence in jeopardy.”
It’s difficult to take issue with much of what Bessent writes. But he somehow neglects the absolutely critical.
To be sure, it’s easy - and justified - to fault the Fed. The Fed has made such a monumental mess of things. But we should not disregard their critical co-conspirators, including the federal government, Wall Street, and the leveraged speculating community. And how ironic that an ultra-wealthy hedge fund operator (for decades) is today’s leading critic and mastermind behind what could become the most significant Federal Reserve revamp since its inception.
The Treasury Secretary writes, “Overuse of nonstandard policies, mission creep and institutional bloat threaten the central bank’s independence.” Okay, but the pressing threat to independence operates out of the White House.
“The Fed must change course. Its standard tool kit has become too complex to manage, with uncertain theoretical underpinnings…” “There must also be an honest, independent, nonpartisan review of the entire institution…”
I’m all for honest and independent. And as much as I appreciate the sound analysis of much written, Secretary Bessent’s op-ed is disingenuous. Having worked under George Soros for years, and then as an independent hedge fund manager, Bessent has mastered “reflexivity” and Bubble analysis like few others. We share a similar focus on the crucial importance of financial conditions. He has for years provided adept Bubble analysis, in particular blaming asset Bubbles on loose Federal Reserve policies.
From his January 2024 Key Square Capital Management letter: “We believe that this inappropriately easy policy inflated the dot-com equity bubble…” “Our base case is that a re-elected Donald Trump will want to create an economic lollapalooza and engineer what he will likely call ‘the greatest four years in American history’… In this scenario, the greatest risk factor, in our opinion, would be a sudden rise in long-end rates.”
From a year ago: August 20, 2024 - Bloomberg (Katherine Burton): “Scott Bessent, who runs macro hedge fund Key Square Capital Management, said he expects a jump in volatility and a decline in US markets because the economy is more fragile than most investors realize. ‘Right now we view the US economy as being in a precarious, emerging market-style equilibrium,’ Bessent told clients… The government’s large deficit and debt issuance using shorter-term instruments have fueled asset bubbles in stocks and real estate, he wrote, adding that ‘every emerging market exhibiting these characteristics, especially during an election cycle, has experienced a downside economic shock.’ While the jump in equities and real estate prices have benefited wealthier individuals, stagnating wages and higher prices for food, shelter and other necessities have walloped lower-income groups, he wrote. That’s led to both more borrowing and rising delinquencies on consumer loans, a state he predicts will extend to people earning higher incomes when the asset bubbles deflate.”
International Economy, Winter 2024: “The Federal Reserve’s persistent, loose monetary policy since the Great Financial Crisis has allowed corporate zombies to continue in existence and has caused a broader misallocation of capital. Financial engineering gives an illusory wealth effect. Only productive investment can drive a nation’s standard of living over the long run.”
Additional pertinent comments from an April interview with Tucker Carlson: “Go back and look at the financial crisis in ’07–’08. The economy looked great right up until it didn’t. Look at the end of the dot-com bubble, then the whole credit problem, the fraud at WorldCom, Enron—some other companies. The economy looked great... until it didn’t. And I think one of the things we won’t get credit for—but that this administration will have done—is avoiding a financial calamity. Think about it: there’s an analysis that one of the reasons 9/11 happened was because the airlines didn’t want to pay for reinforced cockpit doors. They kept pushing back, FAA didn’t push hard enough. Well, now we’ve got the reinforced doors. So, I look at it this way: We’re putting on the reinforced doors before the crash.”
Seems instead that doors are being unlocked and cracked opened. With no “Bubble” mention or related analysis, Bessent’s Fed piece is little more than sophisticated subterfuge. MarketWatch: “Why Bessent’s Essay Against the Fed is a Bid for ‘Control’ Over the Central Bank.”
The Treasury Secretary can espouse needed reform. His boss, meanwhile, demands significantly lower interest rates. There’s no mention of Bubbles or loose financial conditions. Sustaining the boom and winning the midterms take absolute precedence over whatever ails finance and the U.S. economy. Bessent, an outspoken critic of the Yellen Treasury’s heavy T-bill issuance, now orchestrates the same. He’ll argue “simple and measurable tools, aimed at a narrow mandate,” until the administration demands the Fed pull out all the stops to hold deleveraging and crisis dynamics at bay.
The Fed is today trapped by Bubble dynamics. They have been held hostage for years. Having taught economic history at Yale, specifically “Twentieth Century Financial Booms and Busts”, the 2007-2009 financial crisis, and hedge fund history and practice, Bessent has acute awareness.
Lamenting “mission creep,” he is intimately aware of the role speculative leverage and associated fragilities played in the “Fed’s growing footprint,” “expanded powers,” and “extending its remit.” The Fed’s ever-expanding role has been a direct consequence of a cycle of ever-more destabilizing speculative deleveraging and bursting Bubbles. I share Bessent’s concern that “the central bank’s balance-sheet policies directly influence which sectors receive capital…” He and scores of hedge fund and Wall Street operators have reaped billions, at the expense of social cohesion and stability, and trust in our institutions, including the Fed.
Today’s critical issue is not a rogue Federal Reserve as much as it is untenable market structure. But not a peep out of the administration to address speculative leverage, a culture of speculation, egregious financial excess, problematic derivative strategies, and high-risk lending. Indeed, this is the most pro-speculation, pro-Bubble U.S. government imaginable.
The Law of Bubbles: If You Find Yourself in a Bubble, Stop Inflating. The Trump administration is breaking laws.
Global bond market instability, booming equities, AI and crypto manias, surging precious metals prices, acute economic uncertainties – are all manifestations of monetary disorder. The consequences of inflationism and monetary disorder have been fundamental to the rapidly shifting geopolitical landscape. Indeed, it was as if the notion of a “new world order” became an indisputable reality this week.
September 3 – AFP: “North Korean leader Kim Jong Un and Russia’s Vladimir Putin flanked Xi Jinping at a massive parade of military might in Beijing…, capping a week of diplomatic grandstanding by the Chinese president and his allies against the West. In unprecedented scenes, Xi shook both their hands and chatted with the pair as they walked down a red carpet by Tiananmen Square, with Putin to Xi's right and Kim to his left. The event, ostensibly to mark 80 years since the end of World War II, was a chance for Xi to put on an extravaganza to showcase China's military prowess and bring together friendly leaders to send a message to the rest of the world. Kicking off the parade, President Xi warned the world was still ‘faced with a choice of peace or war’, but said China was ‘unstoppable’. China’s enormous new intercontinental ballistic missile DF-5C, with a range of 20,000 kilometres, counted prominently among the tonnes of hardware on display.”
September 1 – Financial Times (Joe Leahy and Kathrin Hille): “Xi Jinping has called on Russia, India and other countries in the region to join China in leveraging their economic influence to challenge the west at a time of rising geopolitical and trade tensions. The Chinese president… told more than 20 leaders that with the world undergoing ‘turbulence and change’, they needed to uphold an ‘orderly multi-polar world’. This included championing free trade and ‘a more just and reasonable global governance system’, Xi said in a clear challenge to the current US-led system. ‘We should expand the scope of co-operation, make the most of each country’s unique strengths, and shoulder together the shared responsibility of promoting regional peace, stability and prosperity,’ Xi told world leaders…”
The message was as clear as it was ominous. China has solidified a formidable anti-U.S. alliance to counter U.S. global power and influence. There will be no backing down. Trump “bullying” will be met with an iron fist.
They sure know how to do a military parade. Quite a spectacle, including Kim Jong Un, with his nukes and hostility for the U.S., suddenly elevated to Xi and Putin’s inner circle. China is “unstoppable” and the world faces “a choice of peace or war.” Whether it’s military or economic, Xi means business. If the U.S. is intent on resisting China’s absorption of Taiwan, be prepared to face three conjoined nuclear adversaries. If the Trump administration intensifies trade wars and sanctions, say against China, Russia, India, or Brazil, there’s a united front ready to fight back.
President Trump has been fond of saying “trade wars are good and easy to win.” Bessent seemed to enjoy talking smack: “They’re playing with a pair of twos. What do we lose by the Chinese raising tariffs on us? We export one-fifth to them of what they export to us, so that is a losing hand for them.”
An overconfident administration was misguided, if not delusional. They seem to go out the way to antagonize allies and fracture traditional alliances, while goading our adversaries into resolute anti-American coalitions. It’s a powerplay strategy incongruous with an increasingly fractured and hostile world.
President Trump does not today enjoy the power he anticipated on the global stage – that he so relishes. This defiant “new world order” will not sit well. Especially of late, he doesn’t seem in the mood to let things go. Bullying seems to be working domestically, while posing heightened geopolitical risk.
For the Week:
The S&P500 added 0.3% (up 10.2% y-t-d), while the Dow slipped 0.3% (up 6.7%). The Utilities declined 1.1% (up 9.5%). The Banks lost 1.6% (up 16.5%), and the Broker/Dealers fell 1.8% (up 27.6%). The Transports retreated 1.1% (down 1.1%). The S&P 400 Midcaps advanced 1.3% (up 5.6%), and the small cap Russell 2000 rose 1.0% (up 7.2%). The Nasdaq100 gained 1.0% (up 12.6%). The Semiconductors rose 1.6% (up 15.7%). The Biotechs were 3.8% higher (up 7.9%). With bullion surging $139, the HUI gold index jumped 4.3% (up 95.0%).
Three-month Treasury bill rates ended the week at 3.91%. Two-year government yields dropped 11 bps to 3.51% (down 73bps y-t-d). Five-year T-note yields fell 11 bps to 3.58% (down 80bps). Ten-year Treasury yields dropped 15 bps to 4.07% (down 49bps). Long bond yields sank 17 bps to 4.76% (down 2bps). Benchmark Fannie Mae MBS yields reversed 19 bps lower to 5.14% (down 70bps).
Italian 10-year yields fell eight bps to 3.50% (down 2bps y-t-d). Greek 10-year yields dropped seven bps to 3.34% (up 13bps). Spain's 10-year yields fell eight bps to 3.25% (up 19bps). German bund yields declined six bps to 2.66% (up 30bps). French yields fell six bps to 3.45% (up 25bps). The French to German 10-year bond spread was unchanged at 79 bps. U.K. 10-year gilt yields dropped eight bps to 4.65% (up 8bps). U.K.'s FTSE equities index added 0.2% (up 12.7% y-t-d).
Japan's Nikkei 225 Equities Index increased 0.7% (up 7.8% y-t-d). Japanese 10-year "JGB" yields dipped two bps to 1.58% (up 48bps y-t-d). France's CAC40 slipped 0.4% (up 4.0%). The German DAX equities index fell 1.3% (up 18.5%). Spain's IBEX 35 equities index declined 0.6% (up 28.1%). Italy's FTSE MIB index declined 1.4% (up 21.7%). EM equities were mixed. Brazil's Bovespa index increased 0.9% (up 18.6%), and Mexico's Bolsa index jumped 3.1% (up 22.2%). South Korea's Kospi added 0.6% (up 33.6%). India's Sensex equities index gained 1.1% (up 2.8%). China's Shanghai Exchange Index reversed 1.2% lower (up 13.7%). Turkey's Borsa Istanbul National 100 index sank 4.9% (up 9.1%).
Federal Reserve Credit declined $8.7 billion last week to $6.557 TN. Fed Credit was down $2.333 TN from the June 22, 2022, peak. Over the past 312 weeks, Fed Credit expanded $2.832 TN, or 75%. Fed Credit inflated $3.746 TN, or 133%, over the past 669 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dipped $0.4 billion last week at $3.165 TN - the low back to February 2017. "Custody holdings" were down $143 billion y-o-y, or 4.3%.
Total money market fund assets (MMFA) surged $52.4 billion to a record $7.259 TN. MMFA were up $965 billion, or 15.5%, y-o-y - and have ballooned a historic $2.675 TN, or 58%, since October 26, 2022.
Total Commercial Paper slipped $1.8 billion to $1.403 TN. CP has expanded $315 billion y-t-d and $157 billion, or 12.6%, y-o-y.
Freddie Mac 30-year fixed mortgage rates declined six bps to a 10-month low of 6.50% (up 15bps y-o-y). Fifteen-year rates fell nine bps to 5.60% (up 13bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down four bps to a one-year low of 6.64% (down 19bps).
Currency Watch:
For the week, the U.S. Dollar Index was little changed at 97.768 (down 9.9% y-t-d). For the week on the upside, the Swedish krona increased 0.7%, the South African rand 0.4%, the Brazilian real 0.3%, the Swiss franc 0.3%, the euro 0.3%, the Australian dollar 0.3%, the South Korean won 0.2%, and the Norwegian krone 0.2%. On the downside, the Canadian dollar declined 0.6%, the Mexican peso 0.3%, the Japanese yen 0.3%, and the Singapore dollar 0.1%. The Chinese (onshore) renminbi slipped 0.03% versus the dollar (up 2.33% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index slipped 0.4% (up 3.7% y-t-d). Spot Gold surged 4.0% to a record $3,587 (up 36.7%). Silver rose 3.2% to $41.0042 (up 41.9%). WTI crude dropped $2.14, or 3.3%, to $61.87 (down 14%). Gasoline dipped 0.2% (down 3%), while Natural Gas recovered 1.7% to $3.048 (down 16%). Copper declined 0.9% (up 13%). Wheat sank 6.2% (down 9%), and Corn fell 5.1% (down 13%). Bitcoin rallied $2,300, or 2.1%, to $110,600 (up 18.0%).
Market Instability Watch:
September 3 – Bloomberg (Chris Anstey): “Former Treasury Secretary Lawrence Summers warned that while financial markets have so far shown limited concern with regard to the Federal Reserve’s independence, the situation ‘could turn very quickly.’ ‘We’re on the foothills of a credibility crisis’ with regard the Fed, Summers said… ‘We are in completely unprecedented territory.’ Summers cited President Donald Trump’s demands that the Fed cut interest rates by some three percentage points — ‘which no economist anywhere has endorsed’ — along with his ‘harsh rhetoric’ criticizing central bank Chair Jerome Powell. He also highlighted Trump’s efforts to remove Governor Lisa Cook ‘with no kind of due process’ and reporting on a scenario where Trump appointees attempt to revamp leadership of Fed district banks. ‘This is an attack on the governance of the institution,’ said Summers… As for an outright crisis of credibility, ‘we’re not there yet because people believe that, ultimately, US institutions endure and succeed.’”
September 4 – Bloomberg (Greg Ritchie): “The Bank of England unveiled proposals designed to improve the resilience of the UK bond market during periods of stress, as officials look to avoid a repeat of the 2022 gilt crisis. The central bank… released a discussion paper on reforming the nation’s repurchase agreements market, which is used by investors to borrow against gilts and leverage up trades. Proposals include greater central clearing of these repos, as well as minimum haircuts on non-cleared repos. It’s the latest effort by the BOE to tame market risks after a spike in yields in 2022 triggered fire-sale dynamics across pension strategies investing in UK bonds.”
Global Credit and Financial Bubble Watch:
September 1 – Bloomberg (Masaki Kondo, Ruth Carson, and Alice Gledhill): “Longer-maturity bonds may be in for a treacherous September, if history is any guide. Over the last decade, government bonds globally with maturities of over 10 years posted a median loss of 2% in September… That’s the worst monthly performance of the year.”
September 2 – Wall Street Journal (Miriam Mukuru): “As the cost of government debt spirals amid concerns over fiscal spending, the changing profile of bond investors looks set to further increase the likelihood of yield spikes going forward, according to analysts. High inflation, increased government spending and elevated debt levels in major developed economies have pushed yields on 30-year government bonds in the U.S., Japan, Germany and the U.K. to multiyear highs in recent months. On Tuesday, U.K. 30-year government-bond yields hit their highest level since 1998, German 30-year yields reached their highest level since 2011 and French 30-year yields rose to their highest since 2009… What is particularly concerning, analysts say, is that demand is dwindling from the players who have traditionally been big buyers of longer-dated bonds, such as central banks, pension funds, and life insurance firms.”
September 3 – Bloomberg (Scott Carpenter and Rachel Graf): “Debt fund managers are raising money cheaply now in the hopes of finding bargain leveraged loans to pounce on in the future. Investment firms sold more than $320 billion of bonds backed by loans this year through mid-August, a record volume... Sales of the securities, known as collateralized loan obligations, kept coming later in the month even as most other debt offerings slowed to a crawl. All the new CLO creation is translating into nearly bottomless demand for leveraged loans, a type of debt that private equity firms and other buyers often use for buyouts and mergers… ‘The CLO market is running at full steam,’ said Dan Sherry, a portfolio manager at PineBridge and author of a recent blog post on the blistering pace of new deals.”
August 30 – Financial Times (Eric Platt, Emma Dunkley and Alexandra Heal): “Private credit funds are drawing in record sums of capital from everyday investors, offsetting a slowdown from large institutions as wealthy individuals are lured in by the higher returns on offer. Affluent individual investors in the US have pumped $48bn into private credit funds in the first half of this year, already surpassing the entire haul in 2023 and on pace to eclipse the high-water mark of $83.4bn set in 2024, according to… RA Stanger. European investors are also diving in, with assets in so-called evergreen private debt funds across the continent more than doubling from a year ago to €24bn at the end of June… The inflows underscore the growing importance major private investment groups are now placing on individuals, with analysts at rating agency Moody’s calling it ‘one of the biggest new growth frontiers in the industry’.”
August 30 – Bloomberg (Ethan M Steinberg and Josyana Joshua): “US companies are poised to boost their debt levels to help fund a $1 trillion wave of acquisitions, a reversal after years of scaling back their borrowings… Companies have broadly been lifting their debt loads relative to earnings, with that leverage ratio in the second quarter close to its highest level since 2021. Corporations’ willingness to lever up represents a shift in their thinking.”
September 2 – Bloomberg (Alexandra Harris and Ethan M Steinberg): “Once a $2 trillion cornerstone of global finance, the US commercial paper market was left in disarray following the 2008 crisis. Now, after years in the shadows, it’s staging an unexpected comeback. Uber Technologies Inc. rolled out a $2 billion commercial paper plan in June… That followed Netflix Inc.’s $3 billion facility a month earlier. Coca-Cola Co., PepsiCo Inc., Philip Morris International Inc. and Honeywell International Inc. have all tapped the market in recent months, selling billions worth of the short-term IOUs, which typically range in maturity from 30 to 90 days. The renewed embrace of commercial paper is fueling the biggest expansion in the market since 2006, and underscores just how dramatically corporate America has been shifting its funding mix.”
Trump Administration Watch:
September 3 – Axios (Dave Lawler): “The tectonic plates of global power are shifting ever faster thanks to President Trump, and images beamed from China around the world this week provide one vision of where they will settle. The leaders of China, Russia and North Korea strode out together overnight in Beijing to attend a massive military parade — and to send a message to Washington. For the first time ever, these three nuclear-armed strongmen — long resentful of America’s alliances, sanctions and ‘rules-based order’ — are gathering together in a show of solidarity. Trump was watching from afar, and offered a message to Xi Jinping: ‘Please give my warmest regards to Vladimir Putin and Kim Jong-un as you conspire against the United States of America.’”
September 3 – Bloomberg: “President Donald Trump took aim at Chinese leader Xi Jinping as he hosted foreign leaders at a major military parade in Beijing, a reminder of the lingering tensions between the two sides over trade, tech and other issues… Trump said… Xi should have credited the US in his speech for ‘helping China to gain its freedom’ during World War II. The Asian nation’s top leader did not directly mention the US, though he offered his gratitude toward unspecified nations that helped Beijing. ‘I watched the speech last night. President Xi is a friend of mine, but I thought that the United States should have been mentioned last night during that speech, because we helped China very, very much,’ Trump said.”
September 1 – Financial Times (Gideon Rachman): “‘Mr President I invite you to see your big beautiful face on a banner in front of the Department of Labor.’ That was the US Labour secretary, Lori Chavez-DeRemer, speaking to Donald Trump during a marathon, televised cabinet meeting last week. Trump’s appetite for praise is insatiable. His officials have demeaned themselves, one by one. Steve Witkoff… told the president that he was ‘the single finest candidate’ ever for the Nobel Peace Prize. Scott Bessent, Treasury secretary, gushed: ‘You have saved this country.’ The insistence on absurd and public flattery for the leader is a hallmark of authoritarianism. Nicolae Ceaușescu, the former dictator of Romania, was referred to in the official media as ‘the Genius of the Carpathians’. Stalin’s henchmen were fond of paying tribute to his ‘guiding genius.’ This kind of enforced sycophancy is not just ridiculous — it is dangerous. It signals that a megalomaniac is in charge and that nobody feels able to stand up to him. In such a climate, Trump’s every whim will be indulged.”
September 4 – Bloomberg (Josh Wingrove, Chris Strohm and Erik Larson): “The US Justice Department opened a criminal investigation into whether Federal Reserve Governor Lisa Cook committed mortgage fraud — ratcheting up pressure in President Donald Trump’s bid to oust her from the central bank. Federal prosecutors have issued subpoenas seeking information related to allegations that Cook misrepresented information on mortgage applications…”
September 4 – ProPublica (Robert Faturechi, Justin Elliott and Alex Mierjeski): “The Trump administration has vowed to go after anyone who got lower mortgage rates by claiming more than one primary residence on their loan papers. President Donald Trump has used it as a justification to target political foes, including a governor on the Federal Reserve Board, a Democratic U.S. senator and a state attorney general. Real estate experts say claiming primary residences on different mortgages at the same time is often legal and rarely prosecuted. But if administration officials continue the campaign, mortgage records show there’s another place they could look: Trump’s own Cabinet. Underscoring how common the practice is, ProPublica found that at least three of Trump’s Cabinet members call multiple homes their primary residences on mortgages… Labor Secretary Lori Chavez-DeRemer entered into two primary-residence mortgages in quick succession, including for a second home near a country club in Arizona, where she’s known to vacation. Transportation Secretary Sean Duffy has primary-residence mortgages in New Jersey and Washington, D.C. Lee Zeldin, the Environmental Protection Agency administrator, has one primary-residence mortgage in Long Island and another in Washington, D.C…”
September 4 – Associated Press (Josh Boak): “Stephen Miran, President Donald Trump’s pick to join the Federal Reserve Board, said… he would remain a White House employee even if the Senate confirms him to fill an unexpired term at the central bank. Miran… made the disclosure at a hearing before the Senate Banking, Housing and Urban Affairs Committee. He said that on the advice of his lawyers he would take an ‘unpaid leave of absence’ as chair of the White House Council of Economic Advisers… His answer instantly triggered alarm bells about the Fed’s independence, suggesting that the central bank could ultimately become subservient to Trump’s whims instead of its congressional mandates to keep prices stable and maximize employment.”
September 4 – Associated Press (Lindsay Whitehurst): “The Trump administration took the fight over tariffs to the Supreme Court on Wednesday, asking the justices to rule quickly that the president has the power to impose sweeping import taxes under federal law. The government called on the court to reverse an appeals court ruling that found most of President Donald Trump’s tariffs are an illegal use of an emergency powers law.”
August 31 – Axios (Ben Berkowitz): “It would be ‘the end of the United States’ if President Trump's sweeping global tariffs are ultimately struck down by the Supreme Court, White House trade adviser Peter Navarro said… The administration is putting maximum pressure on the high court — and the court of public opinion — in an attempt to frame the future of Trump’s trade regime in existential terms.”
August 30 – Bloomberg (Erik Larson and Laura Curtis): “The legal fight over President Donald Trump’s global tariffs is deepening after a federal appeals court ruled the levies were issued illegally under an emergency law, extending the chaos in global trade…. ‘Our trading partners must be dazed and confused,’ Wendy Cutler, a senior vice president at the Asia Society Policy Institute and veteran US trade negotiator, wrote… ‘Many of them entered into framework deals with us and some are still negotiating.’”
September 1 – Bloomberg (Skylar Woodhouse): “Treasury Secretary Scott Bessent said the Trump administration may declare a national housing emergency this fall as the White House looks to highlight key issues for midterm campaign voters. ‘We’re trying to figure out what we can do, and we don’t want to step into the business of states, counties, and municipal governments,’ Bessent told the Washington Examiner. ‘We may declare a national housing emergency in the fall.’ Bessent said housing affordability would be a critical leg of Republicans’ 2026 midterm election platform.”
September 3 – Axios (April Rubin): “Russell Vought, the director of the Office of Management and Budget, said… he doesn’t believe the Government Accountability Office (GAO) should exist. The GAO has released several reports this year that said the Trump administration is in violation of federal law — including at least one one that singled Vought out. ‘We’re not big fans of GAO,’ Vought said… ‘They are a quasi-legislative independent entity and something that shouldn’t exist.’ Republican lawmakers and the White House have targeted the GAO after it opened investigations into the spending of congressionally approved funds…”
September 4 – Axios (Tal Axelrod and Zachary Basu): “MAGA is seizing on President Trump’s trade war with India to mount a broader crusade against Indian immigration, influence and culture. The sudden hostility from Trump's base has stunned Indian officials at a time when New Delhi already was reeling from the president's 50% tariffs… The escalation threatens to unravel Washington’s years-long bet that India can serve as a regional counterweight to China — a strategy that Trump himself championed in his first term.”
September 1 – Wall Street Journal (Angus Berwick): “The Trump family notched as much as $5 billion in paper wealth on Monday after its flagship crypto venture opened trading of a new digital currency. The launch is akin to an initial public offering, in which the cryptocurrency, called WLFI, can now be bought and sold on the open market… The trading debut was most likely the biggest financial success for the president’s family since the inauguration. The Trump family, including President Trump himself, holds just under a quarter of all WLFI tokens in existence. Trump’s three sons are co-founders of World Liberty, while it names the president a ‘Co-Founder Emeritus’.”
China Trade War Watch:
September 3 – Financial Times (Editorial Board): “China’s President Xi Jinping has had a tremendous week. He hosted a well-attended international security summit and presided over a lavish military parade that showcased cutting-edge kit ranging from hypersonic missiles to shipborne laser weapons. The Shanghai Cooperation Organisation meeting and commemoration of the 1945 defeat of Japan are together unmistakable, and unignorable, demonstrations of China’s growing power — and of its ambition to remake the global order. Speaking from the Gate of Heavenly Peace, where in 1949 Mao Zedong announced the founding of the People’s Republic, Xi declared China’s rejuvenation ‘unstoppable’. He insisted his nation was unafraid of threats of violence, and warned that humanity once again faced a critical choice of ‘peace or war’.”
September 4 – New York Times (Keith Bradsher): “China has rare earth metals. The United States and Brazil have soybeans. For all the chokeholds China maintains on global supply chains, it is overwhelmingly dependent on soybeans from other parts of the world. China imports three-fifths of all the soybeans traded on international markets. Now with China and the United States locked in a tense standoff over tariffs, soybeans have emerged as a central dispute between the trading partners. China has been boycotting purchases of U.S. soybeans since late May to show displeasure with President Trump’s imposition of tariffs on imports from China. The pain is being felt in Midwest states, especially Illinois, Iowa, Minnesota and Indiana.”
Trade War Watch:
September 1 – New York Times (Alex Travelli and Hari Kumar): “President Trump’s 50% tariffs landed like a declaration of economic war on India, undercutting enormous investments made by American companies to hedge their dependency on China. India’s hard work to present itself to the world as the best alternative to Chinese factories… has been left in tatters. Now, less than a week since the tariffs took full effect, officials and business leaders in New Delhi, and their American partners, are still trying to make sense of the suddenly altered landscape. Just how much things have changed was evident from Prime Minister Narendra Modi’s visit to China over the weekend to meet with Xi Jinping, China’s top leader.”
September 1 – CNBC (Lim Hui Jie): “U.S. President Donald Trump… doubled down on his criticism of India, calling trade ties with the country ‘a totally one sided disaster!’ after Indian Prime Minister Narendra Modi visited China to attend the Shanghai Cooperation Organization summit… Trump reiterated that India was buying oil and arms from Russia, and accused New Delhi of selling the U.S. ‘massive amounts of goods,’ but imposing high tariffs on U.S. exports to India. ‘The reason is that India has charged us, until now, such high Tariffs, the most of any country, that our businesses are unable to sell into India. It has been a totally one sided disaster!’ he wrote.”
September 2 – Bloomberg (Julian Lee): “Russia’s crude shipments rebounded, with China picking up the slack after US President Donald Trump’s punitive tariffs on India choked exports to the south Asian nation. Trump’s doubling of US import tariffs on goods from India to 50%, imposed as punishment for its persistent buying of Russian oil, appears to be hitting the flow of Moscow’s crude to the nation…”
September 1 – Politico (Camille Gus, Max Griera and Oliver Noyan): “The next obstacle to the trade deal between the European Union and the United States won’t come from the Oval Office — but rather from the second-biggest party in the European Parliament. The European Socialists have come out against the accord that Commission President Ursula von der Leyen struck with U.S. President Donald Trump in July. That will make her job of building the majority she needs to enact the tariff truce a tough one — and failure to do so could plunge the transatlantic trade relationship back into turmoil. ‘We firmly oppose the agreement,’ Iratxe García Pérez, president of the Socialists and Democrats (S&D) parliamentary group, told POLITICO.”
September 4 – Reuters: “Mexican President Claudia Sheinbaum said… her government is considering imposing tariffs on imports from countries that do not have trade agreements with Mexico, including China. The tariffs would be part of ‘Plan Mexico’, an initiative to boost domestic industry amid tariffs imposed by U.S. President Donald Trump on some imports from Mexico.”
Constitution Watch:
September 2 – Wall Street Journal (Jess Bravin and Natalie Andrews): “A federal judge… ruled that the Trump administration’s deployment of troops to Los Angeles in response to protests over immigration policies violated a 19th-century law prohibiting the use of federal forces for domestic law enforcement. In a withering opinion taking aim at President Trump’s enthusiasm for military deployments at home, Judge Charles Breyer in San Francisco found that the administration didn’t comply with the Posse Comitatus Act, an 1878 statute that restricts the use of U.S. armed forces on America’s streets. ‘There were indeed protests in Los Angeles, and some individuals engaged in violence,’ Breyer wrote. ‘Yet there was no rebellion, nor was civilian law enforcement unable to respond to the protests and enforce the law.’”
September 2 – Associated Press (Aamer Madhani, Konstantin Toropin and Regina Garcia Cano): “President Donald Trump said… the U.S. has carried out a strike in the southern Caribbean against a drug-carrying vessel that departed from Venezuela and was operated by the Tren de Aragua gang. The president said in a social media posting that 11 people were killed in the rare U.S. military operation in the Americas, a dramatic escalation in the Republican administration’s effort to stem the flow of narcotics from Latin America.”
U.S./Russia/China/Europe/Iran Watch:
September 3 – Axios (Rebecca Falconer): “China’s leader Xi Jinping hosted Russia's Vladimir Putin, North Korea’s Kim Jong-un and dozens of other leaders at the country’s biggest-ever military parade… President Trump in D.C. suggested the trio may be conspiring against the U.S. during the event marking 80 years since Japan's formal surrender that ended World War II. Iran’s Masoud Pezeshkian was also expected to join the trio and 22 other leaders at the massive display that’s notable for its absence of Western leaders. The four allies have in recent months sought to forge a military, economic and political cooperation in an alliance foreign policy analysts are calling the ‘axis of upheaval’… Xi told the huge crowd that the world is ‘faced with the choice of peace or war, dialogue or confrontation,’ but China is ‘unstoppable’…”
September 4 – Financial Times (Joe Leahy and Christian Davies): “Chinese leader Xi Jinping and North Korean dictator Kim Jong Un have held in-person talks for the first time in six years, underlining their improving ties a day after they posed with Russia’s Vladimir Putin at a grand military parade in Beijing. Kim’s meeting with Xi… will add to concern among many in Europe and the US about what Brussels this week termed an emerging ‘autocratic alliance’ involving the three countries. China and North Korea ‘should strengthen strategic co-ordination in international and regional affairs to safeguard common interests’, Xi told Kim…”
September 2 – Bloomberg: “President Xi Jinping used a mix of bonhomie and economic allure this week to send Donald Trump a clear message: Beijing has too much global clout to be dictated by the US. Cameras captured the Chinese leader in a rare, unscripted huddle on Monday with Vladimir Putin and Narendra Modi — his most powerful partners in resisting America on the world stage — at a summit in the Chinese port city of Tianjin. At one point, Xi held the hand of his Indian counterpart, as the three men laughed casually, a striking scene given just months earlier New Delhi and Beijing were seen as rivals.”
September 3 – Bloomberg (Gerry Doyle): “China revealed the scope of its nuclear weapon ambitions to the world this week when it rolled two new gigantic intercontinental ballistic missile designs through the streets of Beijing during the World War II anniversary parade. In the extensive parade line-up, which showed off a variety of air-launched, sea-launched and ground-based nuclear weapons, the DF-5C and DF-61 stood out not just for their size but for what they say about China’s plans to build its nuclear arsenal, which the Pentagon estimated last year would reach 1,000 warheads by 2030.”
September 4 – Bloomberg (Ellen Milligan): “NATO Secretary General Mark Rutte warned that Russia and China are preparing their defense industries for ‘long-term confrontation,’ after Presidents Xi Jinping and Vladimir Putin led a parade of Beijing’s new military hardware. ‘We face serious and lasting threats: Russia and China are investing heavily to build up and modernize their militaries,’ Rutte said… ‘Their defense industries are producing weapons and heavy military equipment at a remarkable, staggering, rate.’”
September 1 – Wall Street Journal (Editorial Board): “Chinese President Xi Jinping put on a show of solidarity Monday with Russia and India at a summit in China that shows what President Trump is up against as he tries to end the Ukraine war. Russia’s biggest benefactor is in Beijing. China doesn’t want Russia to lose in Ukraine because it wants U.S. attention divided between Europe and Asia. That’s what Foreign Minister Wang Yi told Europe’s top diplomat last month… That would explain why China does so much to fuel Vladimir Putin’s war machine.”
September 1 – Financial Times (Henry Foy): “A suspected Russian interference attack targeting Ursula von der Leyen disabled GPS navigation services at a Bulgarian airport and forced the European Commission president’s plane to land using paper maps. A jet carrying von der Leyen to Plovdiv on Sunday afternoon was deprived of electronic navigational aids while on approach to the city’s airport, in what three officials briefed on the incident said was being treated as a Russian interference operation.”
New World Order Watch:
September 3 – Bloomberg: “President Xi Jinping hosted the leaders of North Korea and Russia in Beijing for the first time this week, marking a historic show of united defiance against the US-led world order. China’s commander-in-chief was flanked by Vladimir Putin and Kim Jong Un as he approached Beijing’s Tiananmen Gate at a vast military parade…, in his first-ever appearance with both men. Not since the Cold War have leaders from all three nations stepped out together, with the last time being a 1959 march in Beijing when Mao Zedong welcomed Kim Il Sung and Nikita Khrushchev. Images of Putin and Kim — whose countries are subject to US sanctions — center stage were beamed around the world as Beijing rolled out missiles capable of reaching American shores. Xi’s tight embrace of both nations will likely worry many Western nations, whose leaders were largely absent from the parade, and have voiced concern over China’s military ambitions toward Taiwan.”
September 3 – Wall Street Journal (Editorial Board): “You don’t need a degree in international affairs to understand the message Xi Jinping sent… as he paraded tanks, hypersonic missiles and other weapons through Beijing, putatively to honor the end of World War II. Mr. Xi and his allies aspire to dethrone the U.S. as the world’s premier power. What will President Trump do about it? Mr. Xi’s friendly photo-op with Vladimir Putin and Kim Jong Un was an ominous image for the free world. An axis of U.S. adversaries is alive and well, and Mr. Trump’s return to power didn’t dent their expanding cooperation. Some of Mr. Trump’s advisers are preoccupied with peeling apart Messrs. Xi and Putin, in a spin on Richard Nixon’s opening to China in 1972. But Nixon exploited a split with the Soviets that already existed, and this week’s camaraderie is a reminder there’s no such rift now… The axis of adversaries wants to tell a new story of the world since 1945, diminishing the singular U.S. role in ending that war and building the order that followed. The revisionist history is part of a larger ambition to rearrange the global balance of power.”
September 1 – Politico (Ketrin Jochecova): “Chinese President Xi Jinping criticized other countries’ ‘bullying practices’ at a major summit attended by Russia's Vladimir Putin… ‘We should uphold fairness and justice,’ Xi said at the Shanghai Cooperation Organization summit… Xi’s China has emerged as a major ally of Putin during the course of Russia’s full-scale invasion of Ukraine. In comments viewed widely as aimed at U.S. President Donald Trump and his global trade war, Xi said those gathered must ‘oppose the Cold War mentality, bloc confrontation and bullying practices.’”
September 3 – Financial Times (Kathrin Hille): “As 45 troop formations marched past Tiananmen Square, the new weapons on show at China’s giant military parade were a focus of domestic and international attention. China’s leader Xi Jinping sought to project the People’s Liberation Army as a force the country could rely on. The parade’s display of nuclear capabilities reiterated Beijing’s determination to deter the US. It included missiles that publicly demonstrated for the first time Beijing’s capacity to launch nuclear warheads from the land, sea and air. Hypersonic, supersonic and autonomous weapons were also in evidence while displays of new drone and anti-drone gear highlighted technologies that could be vital in any future war over Taiwan. Since Xi’s last parade in 2019, Beijing’s relations with Washington have gone from bad to worse, and tension over Taiwan, which China claims and aims to get under control, has soared.”
September 2 – Bloomberg (Hal Brands): “‘A lot of people are saying, ‘Maybe we would like a dictator,’’ President Donald Trump recently mused, while hastening to add, of course, that he isn’t one… What’s undebatable is that Trump is part of a 21st-century cohort of strongmen aggressively reshaping their countries and the globe. The rise of these strongmen — leaders who dominate their countries’ politics, shatter old norms and institutions, and rely on quasi-autocratic (or purely autocratic) methods and cults of personality — isn’t a new story. Over the past decade, that trend has been amply lamented by those who rightfully rue autocracy’s advance and democracy’s retreat. But increasingly, the real issue is less about politics than geopolitics. We’re seeing the emergence of a ‘strongman system’ — a new international order in which highly empowered, illiberal leaders control many of the world’s mightiest, most energetic nations, and use concentrated domestic authority to seek historic changes abroad.”
September 1 – Reuters (Anton Kolodyazhnyy and Sakshi Dayal): “India’s Narendra Modi told Vladimir Putin… that India and Russia stood side by side even in difficult times after the Kremlin chief called the Indian prime minister his ‘dear friend’ and gave him a lift in his armoured limousine… On the sidelines of the Shanghai Cooperation Organisation (SCO) meeting in China's port city of Tianjin, Modi held Putin's hand as they walked towards Chinese President Xi Jinping. All three smiled as they spoke… Later, Modi posted a picture on X of him and Putin inside the armoured Aurus limousine used by the Russian leader… ‘Had an excellent meeting with President Putin,’ Modi said…, adding that they had discussed cooperating ‘in all sectors, including trade, fertilisers, space, security and culture.’”
Ukraine Watch:
September 3 – Financial Times (Amy Mackinnon and Raphael Minder): “Donald Trump has said he plans to call Russian President Vladimir Putin in the coming days as his efforts to broker an end to the war in Ukraine appear to have reached an impasse. ‘I’ll be speaking to him over the next few days,’ Trump said…, adding he was ‘not happy’ with the continued loss of life in the war… ‘He knows where I stand,’ he said. ‘Whatever his decision is, we’ll either be happy about it or unhappy. And if we’re unhappy about it, you’ll see things happen.’”
September 4 – Associated Press (Illia Novikov and Samuel Petrequin): “French President Emmanuel Macron said… 26 of Ukraine’s allies have pledged to deploy troops as a ‘reassurance force’ for the war-torn country once fighting ends in the conflict with Russia. Macron spoke after a meeting in Paris of the so-called ‘coalition of the willing,’ a group of 35 countries who support Ukraine. He said that 26 of the countries had committed to deploying troops in Ukraine — or to maintaining a presence on land, at sea, or in the air — to help guarantee the country’s security the day after a ceasefire or peace is achieved.”
August 30 – Bloomberg (Daryna Krasnolutska): “Ukraine struck two oil refineries in Russia with drones overnight as it continued to target energy infrastructure while attempting to repel another missile and drone barrage from Kremlin forces. A refinery in the Krasnodar region and the Syzran refinery in the Samara region were attacked as part of efforts to curb the supply of fuel to Russia’s army…”
August 31 – Bloomberg (Jenni Thier): “German Chancellor Friedrich Merz said he hasn’t given up hope that a ceasefire can be secured in Ukraine, but he’s ‘not under any illusions either.’ ‘I am preparing myself inwardly for the possibility that this war could go on for a long time,’ Merz said in an interview… Now in its fourth year, Russia’s full-scale invasion of Ukraine is the longest war in Europe since World War II.”
Taiwan Watch:
September 2 – Financial Times (Joe Leahy, Ryan McMorrow, Kathrin Hille and Christian Davies): “Xi Jinping has capped a week of frenetic diplomacy by presiding over one of China’s biggest military parades, projecting his nation’s growing power in a show of solidarity with fellow strongmen Vladimir Putin and Kim Jong Un. A procession of China’s newest tanks, drones and missiles rolled past Tiananmen Square… to mark the 80th anniversary of the second world war victory over Japan. The People’s Liberation Army showed off its latest weapons, including hypersonic missiles, with Xi hailing troops as a ‘heroic force’ that should develop into a ‘world-class military’ — implying a full equal to the US’s armed forces. The Chinese president said the PLA would ‘resolutely safeguard national sovereignty, unity and territorial integrity’ — code for Beijing’s goal of gaining control over Taiwan.”
AI Bubble Watch:
September 1 – Politico (Jennifer Hiller): “Data centers are desperate to connect to the U.S. electric grid. What remains fuzzy is how many will ultimately be built and how much electricity they will require. U.S. utilities are reporting a sharp upswing in interconnection requests from prospective data centers that will need an extraordinary amount of electricity to power America’s artificial-intelligence race. In some cases, the collective requests equal or surpass—by multiples—the existing electricity demand in a utility’s entire service region. Take American Electric Power, a big utility that serves 11 states, and Sempra’s Texas utility Oncor. Combined, they have received requests to connect projects, many of them data centers, to the grid requiring almost 400 gigawatts of electricity. That is an astronomical amount that represents more than half the peak electricity demand in the Lower 48 states on two hot days in July.”
September 2 – Bloomberg (Shirin Ghaffary): “Anthropic has closed a deal to raise $13 billion from investors in a new funding round that nearly triplesits valuation to $183 billion, including dollars raised — a larger-than-expected haul that makes the artificial intelligence company one of the most valuable startups in the world.”
September 1 – Axios (Erica Pandey): “There’s a flip side to the drumbeat of AI breakthroughs that lead to billion-dollar spending sprees and a promised future of abundance where robots do everything for us: the robots might kill us before we get there. AI models have been documented lying to human users, trying to blackmail them, calling the police and telling teens to take their own lives or kill their parents. Our robot future will be a balancing act between the extraordinary promise of what these models can achieve and the profound dangers they present. Lying, cheating, and manipulating are glitches, but they can be unavoidable because of the way AI works. As the tech improves, so will its ability to employ those skills. ‘I’m not sure it’s solvable, and to the degree that it is, it’s extremely difficult,’ says Anthony Aguirre, co-founder of the Future of Life Institute…The problem is very fundamental. It’s not something that there’s gonna be a quick fix to.’”
Bubble and Mania Watch:
September 2 – Bloomberg (Katherine Doherty): “A slew of results from America’s largest market-making firms staked a new marker in how quickly Wall Street’s lucrative trading business is being reshaped. Jane Street generated $10.1 billion of trading revenue in the second quarter, vaulting it past JPMorgan’s… tally in the period. Hudson River Trading more than doubled its haul to $2.6 billion in the three months through June, while Ken Griffin’s Citadel Securities racked up a record first half with $5.8 billion. Altogether, the three market-making firms collected almost $30 billion of trading revenue in the first six months, helped by volatility in the wake of President Donald Trump’s tariff wars.”
September 2 – Financial Times (Eric Platt and Jill Shah): “Jane Street’s trading revenues rose more than 150% in the second quarter to $10.1bn, blowing past the largest banks on Wall Street as it directs an ever-increasing share of trading across financial markets. The results topped the trading revenue of JPMorgan… and Goldman Sachs in the quarter to the end of June, and was the first time the group exceeded $10bn in a single three-month period… Profits at Jane Street also surged, more than doubling to $6.9bn from $2.4bn a year earlier, one of the people added. The company paid a large share of that out to its employees, reporting remuneration expenses of $1.9bn in the quarter, compared with $849mn last year… ‘While Jane Street Group continues to generate impressive earnings and growth of capital through retained earnings, its growth focus has increased risk at an even faster pace recently,’ Robert Hoban, an analyst with S&P, said in July.”
September 2 – Reuters (Manya Saini and Pritam Biswas): “A slew of companies across sectors ranging from crypto to consumer launched U.S. IPO roadshows on Tuesday, kicking off the post-Labor Day fall window as investor anxiety over U.S. President Donald Trump's tariffs started to recede. Analysts say the window through mid-October will be crucial, with several high-profile names lining up to gauge whether confidence in equities can withstand political and economic uncertainty… Strong first-day performances this year from high-growth tech and crypto firms including stablecoin issuer Circle, space startup Firefly Aerospace and crypto exchange Bullish have reinforced optimism that the IPO market is stabilizing.”
August 31 – Financial Times (Mari Novik and Nikou Asgari): “A growing number of private jet and ultra-luxury cruise operators are taking cryptocurrency payments amid booming demand from travellers made rich by soaring bitcoin prices. ‘Tremendous’ demand from young, wealthy customers has prompted Flexjet-owned FXAIR to accept crypto payments, Flexjet chair Kenn Ricci told the Financial Times. FXAIR charges about $80,000 for a trip from Farnborough airport, near London, to New York City. Ricci said Flexjet has had a ‘significant’ rise in bookings in recent months from ‘young entrepreneurs in the bitcoin space [who] fly farther and want larger planes. We save them time… And time is the most precious luxury’.”
Inflation Watch:
September 1 – Associated Press (Paul Wiseman and Tom Murphy): “Trump has promised to impose hefty import taxes on pharmaceuticals, a category of products he’s largely spared in his trade war. For decades, in fact, imported medicine has mostly been allowed to enter the United States duty free. That’s starting to change. U.S. and European leaders recently detailed a trade deal that includes a 15% tariff rate on some European goods brought into the United States, including pharmaceuticals. Trump is threatening duties of 200% more on drugs made elsewhere.”
September 4 – New York Times (Reed Abelson): “Employees of large and small companies are likely to face higher health care costs, with increases in premiums, bigger deductibles or co-pays, and will possibly lose some benefits next year, according to a large survey of companies nationwide… The survey of 1,700 companies, conducted by Mercer, a benefits consultant, indicated that employers are anticipating the sharpest increases in medical costs in about 15 years. Higher drug costs, rising hospital prices and greater demand for care are all contributing factors, experts said. With the projected increases, this is the fourth consecutive year in which employers — and their workers — have faced significantly higher costs for health insurance, with next year representing the biggest jump since 2010.”
Federal Reserve Watch:
September 2 – Bloomberg (Zoe Tillman and Erik Larson): “Federal Reserve Governor Lisa Cook’s lawyers blasted President Donald Trump’s move to oust her as based on nothing more than a pack of ‘cut-and-paste’ allegations related to mortgage fraud. In a flurry of court filings…, Cook’s lawyers emphasized arguments that Trump lacked valid grounds to fire Cook ‘for cause’… They said that social media posts by Federal Housing Finance Agency Director Bill Pulte, and a criminal referral to the Justice Department, didn’t give her an opportunity to respond before she was fired. Pulte’s ‘equivocal language makes clear that the charges against Governor Cook were nothing more than a set of cherry-picked, cut-and-paste allegations to try to give the President political cover to remove a Board member with whom he has policy disagreements’ Cook’s lawyers… said… Pulte made similar allegations against California Senator Adam Schiff and New York Attorney General Letitia James.”
September 2 – Bloomberg (Jonnelle Marte): “Prominent economists are rallying behind Federal Reserve Governor Lisa Cook after President Donald Trump moved to fire her based on allegations that she committed mortgage fraud. Nearly 600 economists have signed an open letter backing Cook, saying there is a high bar for removing Fed governors and that elected officials should refrain from actions and rhetoric that erode the central bank’s independence. The letter… included signatures from Nobel laureates Claudia Goldin and Paul Romer. It was also signed by Christina Romer… and Trevon Logan, an Ohio State University professor who has co-authored papers with Cook.”
September 3 – Reuters (Howard Schneider): “High inflation remains the U.S. Federal Reserve's main risk, though evidence of a weaker labor market still likely warrants a single quarter-point rate cut this year, Atlanta Fed President Raphael Bostic said… After four years with inflation above the Fed's 2% target, ‘price stability remains the primary concern,’ Bostic said. ‘The full implications of trade policy remain unclear. It’s not known how proposed federal deregulation and tax changes will manifest, nor the extent to which those shifts offset one another.’ Bostic said firms may not be able to avoid raising prices because of higher import tariffs much longer, with the full impact possibly taking months to materialize. While hiring has slowed, so has growth in the labor supply, leaving the U.S. still close to full employment, Bostic said.”
September 4 – Reuters (Michael S. Derby): “Federal Reserve Bank of New York President John Williams said… a gradual lowering in short-term borrowing costs is likely to happen over time if the economy meets his current forecast of modest gains in unemployment and a softening of inflation trends next year. The current setting of monetary policy is at ‘modestly restrictive’ levels that are ‘appropriate’ given the current state of the economy, Williams told a gathering… But looking forward, ‘if progress on our dual-mandate goals continues as in my baseline forecast, I anticipate it will become appropriate to move interest rates toward a more neutral stance over time,’ Williams said…”
September 3 – Reuters (Jennifer Schonberger): “St. Louis Federal Reserve president Alberto Musalem said… he expects the job market to cool gradually and downplayed long-term concerns about inflation, an evolving stance that could open the door for support for rate cuts this fall. ‘With the pace of hiring low, any increase in layoffs could produce a more substantial labor market weakening than would occur in a more active market,’ Musalem said… ‘While I am not hearing from businesses about an imminent increase in layoffs, real GDP growth that is somewhat below potential and profit margin pressures related to tariffs could contribute to such an outcome,’ he said.”
U.S. Economic Bubble Watch:
September 4 – Reuters (Lucia Mutikani): “The U.S. trade deficit widened sharply in July as record inflows of capital and other goods boosted imports, a trend that if sustained could see trade subtracting from gross domestic product in the third quarter. The trade gap ballooned 32.5% to $78.3 billion…”
September 4 – Wall Street Journal (Alex Harring): “U.S. private sector hiring rose less than expected in August… Private payrolls increased by just 54,000 in August, according to… ADP... That’s below the consensus forecast of 75,000… Jobs tied to trade, transportation and utilities saw particular weakness in August, with the group losing 17,000 roles on net... Education and health services followed, recording a decline of 12,000 jobs. But those losses were offset in part by a boom in the leisure and hospitality industry, which added 50,000 jobs in the month. Wage growth maintained the same pace in August. Those staying in their roles saw their pay rise 4.4% year-over-year, while job changes recorded a 7.1% increase over the same period.”
September 3 – Reuters (Lucia Mutikani): “U.S. job openings fell to a 10-month low in July and there were more unemployed people than positions available for the first time since the COVID-19 pandemic… Despite cooling demand for workers, layoffs remained relatively low… Fewer workers are also engaging in job-hopping. There were 0.99 job openings for every unemployed person, down from 1.05 in June and the first drop below the 1.0 mark since April 2021… Job openings… had dropped 176,000 to 7.181 million by the last day of July… That was the lowest level since September 2024.”
September 1 – Associated Press (Corey Williams): “More than 1.2 million immigrants disappeared from the labor force from January through the end of July, according to preliminary Census Bureau data… That includes people who are in the country illegally as well as legal residents. Immigrants make up almost 20% of the U.S. workforce and that data shows 45% of workers in farming, fishing and forestry are immigrants, according to Pew senior researcher Stephanie Kramer. About 30% of all construction workers are immigrants and 24% of service workers are immigrants, she added.”
September 1 – CNBC (Kate Rogers): “From citrus farms in the Central Valley to construction sites where homes and businesses are being rebuilt after devastating wildfires in Pacific Palisades, California relies heavily on immigrant workers and entrepreneurs. As the Trump administration continues to ramp up immigration enforcement, industries key to the state’s $4 trillion economy like agriculture, construction and hospitality could be among those hardest hit by the loss of California’s immigrant workforce… Approximately one-fifth of the state’s 10.6 million immigrants are undocumented, according to a June study from the nonpartisan Bay Area Economic Institute and the University of California, Merced.”
September 4 – Bloomberg (Nazmul Ahasan): “Activity at US service providers expanded in August at the fastest pace in six months on the sharpest acceleration in orders in nearly a year. The Institute for Supply Management’s index of services rose 1.9 points last month to 52… The new orders index jumped 5.7 points, the most since September, to 56. The business activity index… climbed to a five-month high of 55. The solid advance in those demand indicators suggests the largest part of the economy is gaining some traction after five straight months of sluggishness. At the same time, a measure of materials costs showed service providers continue to battle a stiff inflationary headwind.”
September 3 – Reuters (Ann Saphir): “U.S. economic activity and employment were mostly little changed or unchanged in recent weeks while prices rose moderately or modestly, the Federal Reserve said… ‘Contacts frequently cited economic uncertainty and tariffs as negative factors,’ according to the Fed’s ‘Beige Book’ report... ‘Overall, sentiment was mixed among the (Fed) districts. Most firms either reported little to no change in optimism or expressed differing expectations about the direction of change from their contacts.’ Indeed, even in districts where economic activity was reported to have expanded, businesses worried about a reversal. ‘Outlooks improved but there was widespread trepidation regarding shifting trade policy, high interest rates, and more restrictive immigration policy,’ the Dallas Fed reported…”
September 3 – CNBC (Diana Olick): “Mortgage rates fell again last week, but not enough to pull overall demand out of the rut it’s been in for the past month… Applications for a mortgage to purchase a home dropped 3% for the week and were 17% higher than the same week one year ago. Potential buyers today have a lot more to choose from than they did at this time last year, but prices are also higher than they were, at least on a national level. Affordability is the main barrier standing in the way of stronger sales.”
September 2 – Reuters (Lucia Mutikani): “U.S. construction spending fell in July as high mortgage rates continued to constrain the housing market… Construction spending slipped 0.1% after an unrevised 0.4% drop in June… Spending dropped 2.8% on a year-over-year basis in July. Spending on private construction projects fell 0.2%. Investment in residential construction gained 0.1%, with outlays on new single-family housing projects nudging up 0.1%.”
September 3 – Reuters (Nupur Anand): “U.S. workers are becoming more stressed about their rising personal debts and financial health, a Bank of America survey showed. Of the respondents polled by BofA, 47% of employed people said they had a sense of financial well-being, dropping from 52% at the start of the year. Nearly 85% of consumers carried some type of personal debt, while 26% of the workforce was seeking help in areas such as emergency savings, paying down debt, and overall financial wellness, compared with 13% in 2023, according to the May survey of more than 1,000 people working full-time.”
China Watch:
August 31 – Bloomberg: “China’s mega banks are under pressure from rising allowances for loan losses and a continued margin erosion in their mission to support the world’s second largest economy. The lenders, led by Industrial & Commercial Bank of China Ltd., on Friday reported falling or weak earnings for the first half of 2025 as they continued to pump out new loans to China’s struggling consumers. Overall, the five biggest banks set aside allowances for losses on loans of 3.51 trillion yuan ($492bn), in the first half, up almost 6% from the end of last year. Their finances are coming under increasing strain due to their duties to help lift the economy with cheap lending and loan subsidies. The sector’s overall margin contracted further to a record low of 1.42% as of June, below the 1.8% threshold regarded as necessary for maintaining reasonable profitability… The combined non-performing consumer loans at the five banks jumped almost 20% from end-2024, while soured credit card loans rose more than 9%...”
August 31 – Bloomberg: “China’s home sales extended their slump in August even as prices declined and the country’s two biggest cities rolled out additional stimulus measures. The value of new home sales from the 100 largest property companies stood at 207 billion yuan ($29bn)… That’s a 17.6% drop from a year earlier, and followed a 24% slump in July. Sales have fallen for six straight months. China’s housing slump has dragged on for more than four years, with sales falling further since the second quarter.”
September 2 – Wall Street Journal: “A private gauge of China’s services sector showed activity grew at the fastest pace in more than a year in August…The RatingDog general services purchasing managers index compiled by S&P Global rose to 53.0 last month from July’s 52.6. That marked the strongest reading since May 2024… The private gauge echoes official data released last week. China’s official subindex tracking service activity increased to 50.5 in August from 50.0 in July.”
September 1 – Bloomberg: “Chinese investors are borrowing a record amount of cash to buy local stocks, further fueling a months-long rally that has largely been driven by liquidity. The outstanding amount of margin trades in China’s onshore equities market climbed to 2.28 trillion yuan ($320bn) Monday, surpassing the previous record of 2.27 trillion yuan in 2015. Traders added such leveraged positions for all but three days in August.”
September 3 – Financial Times (Edward White, Wang Xueqiao and Cheng Leng): “China has ordered the solar sector to rein in overcapacity and cut-throat pricing as the biggest manufacturers suffer billions of dollars in losses. Six of the largest Chinese cell and panel makers saw their combined first-half losses double to Rmb20.2bn ($2.8bn) from a year earlier, with all but one reporting widening losses… The losses compare with record profits in 2022 and 2023. Solar is one of the industries at the heart of Beijing’s concerns about ‘involution’, which refers to excess production fuelling a race to the bottom in prices.”
Central Banker Watch:
September 1 – Reuters (Dominique Vidalon): “If U.S. President Donald Trump removed Federal Reserve Chairman Jerome Powell or Fed governor Lisa Cook, then this would represent a ‘very serious danger for the U.S. economy and the world economy’, the European Central Bank President Christine Lagarde said… Lagarde said: ‘If U.S. monetary policy were no longer independent and instead dependent on the dictates of this or that person, then I believe that the effect on the balance of the American economy could, as a result of the effects this would have around the world, be very worrying, because it is the largest economy in the world.’”
September 3 – Reuters (Francesco Canepa and Balazs Koranyi): “The European Central Bank and its peers around the world should pool their reserves for U.S. dollar liquidity as Federal Reserve help cannot be guaranteed given President Donald Trump's attacks, the head of an influential think tank said. Adam Posen of the Peterson Institute for International Economics told an ECB conference on Wednesday it should not be taken for granted that a politicised Fed would lend dollars to foreign central banks in a crisis, as it did a few times since the 2007-2008 financial meltdown.”
September 3 – Reuters (David Milliken): “Bank of England Governor Andrew Bailey said… he was ‘very concerned’ about threats to the U.S. Federal Reserve's independence, describing it as a ‘very serious’ issue… ‘This is a very serious situation, I am very concerned,’ Bailey told the committee. ‘The Federal Reserve ... has built up a very strong reputation for independence and for its decision making.’ Bailey said he took any threats to central bank independence ‘very seriously’ and that trading that independence against other government decisions would be a ‘very dangerous road to go down’.”
September 3 – Wall Street Journal (Paul Hannon): “The Bank of England is likely to continue to lower its key interest rate, but the timing of future moves is now more uncertain, Gov. Andrew Bailey said… Bailey said that while the key interest rate remains on a downward path, policymakers may not stick to their previous pace. ‘There is now considerably more doubt about exactly when and how quickly we can make those further steps,’ he said.”
France/Europe Watch:
September 4 – Financial Times (Editorial Board): “Defeat looks inevitable for French Prime Minister François Bayrou in a confidence vote he has called for Monday. His move looks less like a gamble to mobilise parliamentary support for his minority government and deficit-cutting budget than an act of political suicide given the gulf with the opposition parties. The predictability of Bayrou’s demise should not detract from the seriousness of France’s twin crises. Its fiscal and political troubles are feeding each other. Government paralysis and France’s inability to rein in public borrowing are sapping business and consumer confidence, eroding the country’s standing in the EU and destroying what is left of President Emmanuel Macron’s political legacy.”
September 3 – Politico (Clea Caulcutt): “French politics are so paralyzed that the resignation of President Emmanuel Macron — an idea once only whispered in the corridors of power — is now being openly debated. But while Macron’s departure would be an earthquake on the European diplomatic stage, there’s increasing doubt it would fix the gridlock stalling the Fifth Republic. France’s problems appear to be deeper. Macron is already scouting around for his fifth prime minister in less than two years, in the expectation that François Bayrou will be ousted on Monday over his unpopular measures to slash the country’s eye-watering budget deficit. But would a new prime ministerial nominee from Macron be able to force through the billions of euros in budget tightening that the country needs to avoid a debt crisis? And would a new snap election create a workable majority? Neither outcome seems likely. And even if Macron were to resign, his successor would almost certainly face the same obstacles.”
September 1 – Politico (Marion Solletty): “If Prime Minister François Bayrou had hoped far-right leader Marine Le Pen would avoid bringing down France’s government because she is banned from running for political office, he sorely miscalculated. In fact, Le Pen and her National Rally party, which tops the polls in France, look set to play a decisive role in ejecting Bayrou in a no-confidence vote on Sept. 8. They are adamant they want to seize on the deepening political crisis to press for a parliamentary election, and the resignation of President Emmanuel Macron. Seeking to enact a highly unpopular €43.8 billion budget squeeze, Bayrou and Macron had effectively wagered that Le Pen — who controls the single largest opposition party in the National Assembly — would play along, when they called a no-confidence vote last week.”
September 1 – Bloomberg (Alexander Weber): “Euro-area inflation accelerated beyond the European Central Bank’s target, cementing expectations that officials will keep interest rates steady when they meet next week. Consumer prices rose 2.1% from a year ago in August, edging up from 2% the previous month… A core measure that strips out volatile components like energy and food held at 2.3%. Closely watched gains in services prices eased to 3.1%.”
Japan Watch:
September 2 – Bloomberg (Mia Glass and John Cheng): “Japan’s longer-maturity debt slumped, sending yields to multi-decade highs, following a global selloff in bonds and political uncertainty in the nation. Yields on the 30-year maturity jumped 8.5 bps to 3.285%, the highest since debut, while the 40-year yield surged 9 bps to 3.535%. Yields on 20-year government bonds also rose to levels last seen in 1999.”
September 3 – Bloomberg (Yoshiaki Nohara): “Japanese ministries and agencies made a record request for ¥122.4 trillion ($822bn) in spending in the budget for next fiscal year as debt-servicing costs rise while the nation also eyes more outlays for defense. The government’s initial budget request for the year starting in April tops the ¥117.6 trillion request a year ago… The total includes a record ¥8.8 trillion request by the Defense Ministry as Japan aims to raise its military budget to around 2% of gross domestic product by 2027. Also pushing up the sum is ¥32.4 trillion for debt financing needs, the highest on record, reflecting the impact of rising bond yields.”
EM Watch:
August 31 – Financial Times (Diana Mariska): “Crowds in Indonesia have broken into and looted the home of finance minister Sri Mulyani Indrawati as protests spread across the country amid a deepening political crisis… A number of people entered Sri Mulyani’s residence near Jakarta and looted belongings including chairs and paintings… On Saturday, crowds raided the homes of three members of parliament… The demonstrations became heated when a motorbike taxi driver was killed after being run over by a police vehicle during a rally in Jakarta on Thursday. Chaos has since erupted in several cities, including Makassar…”
Social, Political, Environmental, Cybersecurity Instability Watch:
September 1 – Financial Times (James Fontanella-Khan): “Hedge fund billionaire Ray Dalio has warned Donald Trump’s America is drifting into 1930s-style autocratic politics — and said other investors are too scared of the president to speak up. The Bridgewater Associates founder told the Financial Times that ‘gaps in wealth’, ‘gaps in values’ and a collapse in trust were driving ‘more extreme’ policies in the US. ‘I think that what is happening now politically and socially is analogous to what happened around the world in the 1930-40 period,’ Dalio said. State intervention in the private sector, such as Trump’s decision to take a 10% stake in chipmaker Intel, was the sort of ‘strong autocratic leadership that sprang out of the desire to take control of the financial and economic situation’, Dalio said… ‘I am just describing the cause and effect relationships that are driving what is happening,’ he said. ‘And by the way, during such times most people are silent because they are afraid of retaliation if they criticise.’”
August 30 – Axios (Dave Lawler): “Centuries' worth of experience walked out of key government agencies this summer, including high-level departures from the CDC, Pentagon and intelligence community just in the past week. President Trump and his allies believe the ‘Deep State,’ scientific establishment and federal bureaucracy were overdue for a purge. They’re ushering in a government in which the officials maintaining nuclear weapons, monitoring medical trials or guarding state secrets have shorter resumes and smaller staffs — likely for many years to come. Three of the CDC's top scientists resigned this week after director Susan Monarez was fired… Demetre Daskalakis, who resigned as the CDC’s vaccine chief, claimed Secretary Robert F. Kennedy Jr. and his team were manipulating data ‘to achieve a political end.’ He also warned that the hollowing out of agencies like his would leave the U.S. ill prepared for future public health emergencies… ‘We really are losing the people who know how to do this’.”
September 2 – Axios (Ben Geman): “Dozens of climate scientists… released a detailed rebuttal of the Energy Department's contrarian climate report, alleging ‘pervasive problems’ with the work. DOE’s July report informs EPA’s planned repeal of the ‘endangerment finding’ — the legal underpinning of federal emissions regulations. The response could easily find its way into litigation over EPA’s plan. Texas A&M's Andrew Dessler and Rutgers' Robert Kopp organized the response. DOE’s report ‘does not meet standards of quality, utility, objectivity and integrity appropriate for use in supporting policy making,’ the two write.”
September 2 – Axios (Josephine Walker): “Almost 70% of U.S. adults said the American dream, or the idea that hard work pays off, doesn't hold true anymore or never did, according to a new WSJ-NORC poll. That’s the highest percentage in almost 15 years of surveys, up almost 3% from 2024… Only 25% of Americans believe they have a good chance of improving their standard of living, a record low in surveys dating back to 1987. The economic pessimism spanned across demographics, with men and women, older and younger adults, and those making more and less than $100,000 in household income all feeling the pain.”
August 31 – Associated Press (David Bauder): “Coping with a sudden loss in federal funding, PBS affiliate KSPS in Spokane, Washington, faced a surprise extra hurdle. Many of its contributing members — at one point almost half — lived in Canada, and they were withdrawing support out of anger at President Donald Trump’s desire to make the country the 51st member of the United States. When Congress decided this summer to eliminate $1.1 billion allocated to public broadcasting, it left some 330 PBS and 246 NPR stations, each with unique issues related to their communities and history, to figure out what that means.”
The S&P500 added 0.3% (up 10.2% y-t-d), while the Dow slipped 0.3% (up 6.7%). The Utilities declined 1.1% (up 9.5%). The Banks lost 1.6% (up 16.5%), and the Broker/Dealers fell 1.8% (up 27.6%). The Transports retreated 1.1% (down 1.1%). The S&P 400 Midcaps advanced 1.3% (up 5.6%), and the small cap Russell 2000 rose 1.0% (up 7.2%). The Nasdaq100 gained 1.0% (up 12.6%). The Semiconductors rose 1.6% (up 15.7%). The Biotechs were 3.8% higher (up 7.9%). With bullion surging $139, the HUI gold index jumped 4.3% (up 95.0%).
Three-month Treasury bill rates ended the week at 3.91%. Two-year government yields dropped 11 bps to 3.51% (down 73bps y-t-d). Five-year T-note yields fell 11 bps to 3.58% (down 80bps). Ten-year Treasury yields dropped 15 bps to 4.07% (down 49bps). Long bond yields sank 17 bps to 4.76% (down 2bps). Benchmark Fannie Mae MBS yields reversed 19 bps lower to 5.14% (down 70bps).
Italian 10-year yields fell eight bps to 3.50% (down 2bps y-t-d). Greek 10-year yields dropped seven bps to 3.34% (up 13bps). Spain's 10-year yields fell eight bps to 3.25% (up 19bps). German bund yields declined six bps to 2.66% (up 30bps). French yields fell six bps to 3.45% (up 25bps). The French to German 10-year bond spread was unchanged at 79 bps. U.K. 10-year gilt yields dropped eight bps to 4.65% (up 8bps). U.K.'s FTSE equities index added 0.2% (up 12.7% y-t-d).
Japan's Nikkei 225 Equities Index increased 0.7% (up 7.8% y-t-d). Japanese 10-year "JGB" yields dipped two bps to 1.58% (up 48bps y-t-d). France's CAC40 slipped 0.4% (up 4.0%). The German DAX equities index fell 1.3% (up 18.5%). Spain's IBEX 35 equities index declined 0.6% (up 28.1%). Italy's FTSE MIB index declined 1.4% (up 21.7%). EM equities were mixed. Brazil's Bovespa index increased 0.9% (up 18.6%), and Mexico's Bolsa index jumped 3.1% (up 22.2%). South Korea's Kospi added 0.6% (up 33.6%). India's Sensex equities index gained 1.1% (up 2.8%). China's Shanghai Exchange Index reversed 1.2% lower (up 13.7%). Turkey's Borsa Istanbul National 100 index sank 4.9% (up 9.1%).
Federal Reserve Credit declined $8.7 billion last week to $6.557 TN. Fed Credit was down $2.333 TN from the June 22, 2022, peak. Over the past 312 weeks, Fed Credit expanded $2.832 TN, or 75%. Fed Credit inflated $3.746 TN, or 133%, over the past 669 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dipped $0.4 billion last week at $3.165 TN - the low back to February 2017. "Custody holdings" were down $143 billion y-o-y, or 4.3%.
Total money market fund assets (MMFA) surged $52.4 billion to a record $7.259 TN. MMFA were up $965 billion, or 15.5%, y-o-y - and have ballooned a historic $2.675 TN, or 58%, since October 26, 2022.
Total Commercial Paper slipped $1.8 billion to $1.403 TN. CP has expanded $315 billion y-t-d and $157 billion, or 12.6%, y-o-y.
Freddie Mac 30-year fixed mortgage rates declined six bps to a 10-month low of 6.50% (up 15bps y-o-y). Fifteen-year rates fell nine bps to 5.60% (up 13bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down four bps to a one-year low of 6.64% (down 19bps).
Currency Watch:
For the week, the U.S. Dollar Index was little changed at 97.768 (down 9.9% y-t-d). For the week on the upside, the Swedish krona increased 0.7%, the South African rand 0.4%, the Brazilian real 0.3%, the Swiss franc 0.3%, the euro 0.3%, the Australian dollar 0.3%, the South Korean won 0.2%, and the Norwegian krone 0.2%. On the downside, the Canadian dollar declined 0.6%, the Mexican peso 0.3%, the Japanese yen 0.3%, and the Singapore dollar 0.1%. The Chinese (onshore) renminbi slipped 0.03% versus the dollar (up 2.33% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index slipped 0.4% (up 3.7% y-t-d). Spot Gold surged 4.0% to a record $3,587 (up 36.7%). Silver rose 3.2% to $41.0042 (up 41.9%). WTI crude dropped $2.14, or 3.3%, to $61.87 (down 14%). Gasoline dipped 0.2% (down 3%), while Natural Gas recovered 1.7% to $3.048 (down 16%). Copper declined 0.9% (up 13%). Wheat sank 6.2% (down 9%), and Corn fell 5.1% (down 13%). Bitcoin rallied $2,300, or 2.1%, to $110,600 (up 18.0%).
Market Instability Watch:
September 3 – Bloomberg (Chris Anstey): “Former Treasury Secretary Lawrence Summers warned that while financial markets have so far shown limited concern with regard to the Federal Reserve’s independence, the situation ‘could turn very quickly.’ ‘We’re on the foothills of a credibility crisis’ with regard the Fed, Summers said… ‘We are in completely unprecedented territory.’ Summers cited President Donald Trump’s demands that the Fed cut interest rates by some three percentage points — ‘which no economist anywhere has endorsed’ — along with his ‘harsh rhetoric’ criticizing central bank Chair Jerome Powell. He also highlighted Trump’s efforts to remove Governor Lisa Cook ‘with no kind of due process’ and reporting on a scenario where Trump appointees attempt to revamp leadership of Fed district banks. ‘This is an attack on the governance of the institution,’ said Summers… As for an outright crisis of credibility, ‘we’re not there yet because people believe that, ultimately, US institutions endure and succeed.’”
September 4 – Bloomberg (Greg Ritchie): “The Bank of England unveiled proposals designed to improve the resilience of the UK bond market during periods of stress, as officials look to avoid a repeat of the 2022 gilt crisis. The central bank… released a discussion paper on reforming the nation’s repurchase agreements market, which is used by investors to borrow against gilts and leverage up trades. Proposals include greater central clearing of these repos, as well as minimum haircuts on non-cleared repos. It’s the latest effort by the BOE to tame market risks after a spike in yields in 2022 triggered fire-sale dynamics across pension strategies investing in UK bonds.”
Global Credit and Financial Bubble Watch:
September 1 – Bloomberg (Masaki Kondo, Ruth Carson, and Alice Gledhill): “Longer-maturity bonds may be in for a treacherous September, if history is any guide. Over the last decade, government bonds globally with maturities of over 10 years posted a median loss of 2% in September… That’s the worst monthly performance of the year.”
September 2 – Wall Street Journal (Miriam Mukuru): “As the cost of government debt spirals amid concerns over fiscal spending, the changing profile of bond investors looks set to further increase the likelihood of yield spikes going forward, according to analysts. High inflation, increased government spending and elevated debt levels in major developed economies have pushed yields on 30-year government bonds in the U.S., Japan, Germany and the U.K. to multiyear highs in recent months. On Tuesday, U.K. 30-year government-bond yields hit their highest level since 1998, German 30-year yields reached their highest level since 2011 and French 30-year yields rose to their highest since 2009… What is particularly concerning, analysts say, is that demand is dwindling from the players who have traditionally been big buyers of longer-dated bonds, such as central banks, pension funds, and life insurance firms.”
September 3 – Bloomberg (Scott Carpenter and Rachel Graf): “Debt fund managers are raising money cheaply now in the hopes of finding bargain leveraged loans to pounce on in the future. Investment firms sold more than $320 billion of bonds backed by loans this year through mid-August, a record volume... Sales of the securities, known as collateralized loan obligations, kept coming later in the month even as most other debt offerings slowed to a crawl. All the new CLO creation is translating into nearly bottomless demand for leveraged loans, a type of debt that private equity firms and other buyers often use for buyouts and mergers… ‘The CLO market is running at full steam,’ said Dan Sherry, a portfolio manager at PineBridge and author of a recent blog post on the blistering pace of new deals.”
August 30 – Financial Times (Eric Platt, Emma Dunkley and Alexandra Heal): “Private credit funds are drawing in record sums of capital from everyday investors, offsetting a slowdown from large institutions as wealthy individuals are lured in by the higher returns on offer. Affluent individual investors in the US have pumped $48bn into private credit funds in the first half of this year, already surpassing the entire haul in 2023 and on pace to eclipse the high-water mark of $83.4bn set in 2024, according to… RA Stanger. European investors are also diving in, with assets in so-called evergreen private debt funds across the continent more than doubling from a year ago to €24bn at the end of June… The inflows underscore the growing importance major private investment groups are now placing on individuals, with analysts at rating agency Moody’s calling it ‘one of the biggest new growth frontiers in the industry’.”
August 30 – Bloomberg (Ethan M Steinberg and Josyana Joshua): “US companies are poised to boost their debt levels to help fund a $1 trillion wave of acquisitions, a reversal after years of scaling back their borrowings… Companies have broadly been lifting their debt loads relative to earnings, with that leverage ratio in the second quarter close to its highest level since 2021. Corporations’ willingness to lever up represents a shift in their thinking.”
September 2 – Bloomberg (Alexandra Harris and Ethan M Steinberg): “Once a $2 trillion cornerstone of global finance, the US commercial paper market was left in disarray following the 2008 crisis. Now, after years in the shadows, it’s staging an unexpected comeback. Uber Technologies Inc. rolled out a $2 billion commercial paper plan in June… That followed Netflix Inc.’s $3 billion facility a month earlier. Coca-Cola Co., PepsiCo Inc., Philip Morris International Inc. and Honeywell International Inc. have all tapped the market in recent months, selling billions worth of the short-term IOUs, which typically range in maturity from 30 to 90 days. The renewed embrace of commercial paper is fueling the biggest expansion in the market since 2006, and underscores just how dramatically corporate America has been shifting its funding mix.”
Trump Administration Watch:
September 3 – Axios (Dave Lawler): “The tectonic plates of global power are shifting ever faster thanks to President Trump, and images beamed from China around the world this week provide one vision of where they will settle. The leaders of China, Russia and North Korea strode out together overnight in Beijing to attend a massive military parade — and to send a message to Washington. For the first time ever, these three nuclear-armed strongmen — long resentful of America’s alliances, sanctions and ‘rules-based order’ — are gathering together in a show of solidarity. Trump was watching from afar, and offered a message to Xi Jinping: ‘Please give my warmest regards to Vladimir Putin and Kim Jong-un as you conspire against the United States of America.’”
September 3 – Bloomberg: “President Donald Trump took aim at Chinese leader Xi Jinping as he hosted foreign leaders at a major military parade in Beijing, a reminder of the lingering tensions between the two sides over trade, tech and other issues… Trump said… Xi should have credited the US in his speech for ‘helping China to gain its freedom’ during World War II. The Asian nation’s top leader did not directly mention the US, though he offered his gratitude toward unspecified nations that helped Beijing. ‘I watched the speech last night. President Xi is a friend of mine, but I thought that the United States should have been mentioned last night during that speech, because we helped China very, very much,’ Trump said.”
September 1 – Financial Times (Gideon Rachman): “‘Mr President I invite you to see your big beautiful face on a banner in front of the Department of Labor.’ That was the US Labour secretary, Lori Chavez-DeRemer, speaking to Donald Trump during a marathon, televised cabinet meeting last week. Trump’s appetite for praise is insatiable. His officials have demeaned themselves, one by one. Steve Witkoff… told the president that he was ‘the single finest candidate’ ever for the Nobel Peace Prize. Scott Bessent, Treasury secretary, gushed: ‘You have saved this country.’ The insistence on absurd and public flattery for the leader is a hallmark of authoritarianism. Nicolae Ceaușescu, the former dictator of Romania, was referred to in the official media as ‘the Genius of the Carpathians’. Stalin’s henchmen were fond of paying tribute to his ‘guiding genius.’ This kind of enforced sycophancy is not just ridiculous — it is dangerous. It signals that a megalomaniac is in charge and that nobody feels able to stand up to him. In such a climate, Trump’s every whim will be indulged.”
September 4 – Bloomberg (Josh Wingrove, Chris Strohm and Erik Larson): “The US Justice Department opened a criminal investigation into whether Federal Reserve Governor Lisa Cook committed mortgage fraud — ratcheting up pressure in President Donald Trump’s bid to oust her from the central bank. Federal prosecutors have issued subpoenas seeking information related to allegations that Cook misrepresented information on mortgage applications…”
September 4 – ProPublica (Robert Faturechi, Justin Elliott and Alex Mierjeski): “The Trump administration has vowed to go after anyone who got lower mortgage rates by claiming more than one primary residence on their loan papers. President Donald Trump has used it as a justification to target political foes, including a governor on the Federal Reserve Board, a Democratic U.S. senator and a state attorney general. Real estate experts say claiming primary residences on different mortgages at the same time is often legal and rarely prosecuted. But if administration officials continue the campaign, mortgage records show there’s another place they could look: Trump’s own Cabinet. Underscoring how common the practice is, ProPublica found that at least three of Trump’s Cabinet members call multiple homes their primary residences on mortgages… Labor Secretary Lori Chavez-DeRemer entered into two primary-residence mortgages in quick succession, including for a second home near a country club in Arizona, where she’s known to vacation. Transportation Secretary Sean Duffy has primary-residence mortgages in New Jersey and Washington, D.C. Lee Zeldin, the Environmental Protection Agency administrator, has one primary-residence mortgage in Long Island and another in Washington, D.C…”
September 4 – Associated Press (Josh Boak): “Stephen Miran, President Donald Trump’s pick to join the Federal Reserve Board, said… he would remain a White House employee even if the Senate confirms him to fill an unexpired term at the central bank. Miran… made the disclosure at a hearing before the Senate Banking, Housing and Urban Affairs Committee. He said that on the advice of his lawyers he would take an ‘unpaid leave of absence’ as chair of the White House Council of Economic Advisers… His answer instantly triggered alarm bells about the Fed’s independence, suggesting that the central bank could ultimately become subservient to Trump’s whims instead of its congressional mandates to keep prices stable and maximize employment.”
September 4 – Associated Press (Lindsay Whitehurst): “The Trump administration took the fight over tariffs to the Supreme Court on Wednesday, asking the justices to rule quickly that the president has the power to impose sweeping import taxes under federal law. The government called on the court to reverse an appeals court ruling that found most of President Donald Trump’s tariffs are an illegal use of an emergency powers law.”
August 31 – Axios (Ben Berkowitz): “It would be ‘the end of the United States’ if President Trump's sweeping global tariffs are ultimately struck down by the Supreme Court, White House trade adviser Peter Navarro said… The administration is putting maximum pressure on the high court — and the court of public opinion — in an attempt to frame the future of Trump’s trade regime in existential terms.”
August 30 – Bloomberg (Erik Larson and Laura Curtis): “The legal fight over President Donald Trump’s global tariffs is deepening after a federal appeals court ruled the levies were issued illegally under an emergency law, extending the chaos in global trade…. ‘Our trading partners must be dazed and confused,’ Wendy Cutler, a senior vice president at the Asia Society Policy Institute and veteran US trade negotiator, wrote… ‘Many of them entered into framework deals with us and some are still negotiating.’”
September 1 – Bloomberg (Skylar Woodhouse): “Treasury Secretary Scott Bessent said the Trump administration may declare a national housing emergency this fall as the White House looks to highlight key issues for midterm campaign voters. ‘We’re trying to figure out what we can do, and we don’t want to step into the business of states, counties, and municipal governments,’ Bessent told the Washington Examiner. ‘We may declare a national housing emergency in the fall.’ Bessent said housing affordability would be a critical leg of Republicans’ 2026 midterm election platform.”
September 3 – Axios (April Rubin): “Russell Vought, the director of the Office of Management and Budget, said… he doesn’t believe the Government Accountability Office (GAO) should exist. The GAO has released several reports this year that said the Trump administration is in violation of federal law — including at least one one that singled Vought out. ‘We’re not big fans of GAO,’ Vought said… ‘They are a quasi-legislative independent entity and something that shouldn’t exist.’ Republican lawmakers and the White House have targeted the GAO after it opened investigations into the spending of congressionally approved funds…”
September 4 – Axios (Tal Axelrod and Zachary Basu): “MAGA is seizing on President Trump’s trade war with India to mount a broader crusade against Indian immigration, influence and culture. The sudden hostility from Trump's base has stunned Indian officials at a time when New Delhi already was reeling from the president's 50% tariffs… The escalation threatens to unravel Washington’s years-long bet that India can serve as a regional counterweight to China — a strategy that Trump himself championed in his first term.”
September 1 – Wall Street Journal (Angus Berwick): “The Trump family notched as much as $5 billion in paper wealth on Monday after its flagship crypto venture opened trading of a new digital currency. The launch is akin to an initial public offering, in which the cryptocurrency, called WLFI, can now be bought and sold on the open market… The trading debut was most likely the biggest financial success for the president’s family since the inauguration. The Trump family, including President Trump himself, holds just under a quarter of all WLFI tokens in existence. Trump’s three sons are co-founders of World Liberty, while it names the president a ‘Co-Founder Emeritus’.”
China Trade War Watch:
September 3 – Financial Times (Editorial Board): “China’s President Xi Jinping has had a tremendous week. He hosted a well-attended international security summit and presided over a lavish military parade that showcased cutting-edge kit ranging from hypersonic missiles to shipborne laser weapons. The Shanghai Cooperation Organisation meeting and commemoration of the 1945 defeat of Japan are together unmistakable, and unignorable, demonstrations of China’s growing power — and of its ambition to remake the global order. Speaking from the Gate of Heavenly Peace, where in 1949 Mao Zedong announced the founding of the People’s Republic, Xi declared China’s rejuvenation ‘unstoppable’. He insisted his nation was unafraid of threats of violence, and warned that humanity once again faced a critical choice of ‘peace or war’.”
September 4 – New York Times (Keith Bradsher): “China has rare earth metals. The United States and Brazil have soybeans. For all the chokeholds China maintains on global supply chains, it is overwhelmingly dependent on soybeans from other parts of the world. China imports three-fifths of all the soybeans traded on international markets. Now with China and the United States locked in a tense standoff over tariffs, soybeans have emerged as a central dispute between the trading partners. China has been boycotting purchases of U.S. soybeans since late May to show displeasure with President Trump’s imposition of tariffs on imports from China. The pain is being felt in Midwest states, especially Illinois, Iowa, Minnesota and Indiana.”
Trade War Watch:
September 1 – New York Times (Alex Travelli and Hari Kumar): “President Trump’s 50% tariffs landed like a declaration of economic war on India, undercutting enormous investments made by American companies to hedge their dependency on China. India’s hard work to present itself to the world as the best alternative to Chinese factories… has been left in tatters. Now, less than a week since the tariffs took full effect, officials and business leaders in New Delhi, and their American partners, are still trying to make sense of the suddenly altered landscape. Just how much things have changed was evident from Prime Minister Narendra Modi’s visit to China over the weekend to meet with Xi Jinping, China’s top leader.”
September 1 – CNBC (Lim Hui Jie): “U.S. President Donald Trump… doubled down on his criticism of India, calling trade ties with the country ‘a totally one sided disaster!’ after Indian Prime Minister Narendra Modi visited China to attend the Shanghai Cooperation Organization summit… Trump reiterated that India was buying oil and arms from Russia, and accused New Delhi of selling the U.S. ‘massive amounts of goods,’ but imposing high tariffs on U.S. exports to India. ‘The reason is that India has charged us, until now, such high Tariffs, the most of any country, that our businesses are unable to sell into India. It has been a totally one sided disaster!’ he wrote.”
September 2 – Bloomberg (Julian Lee): “Russia’s crude shipments rebounded, with China picking up the slack after US President Donald Trump’s punitive tariffs on India choked exports to the south Asian nation. Trump’s doubling of US import tariffs on goods from India to 50%, imposed as punishment for its persistent buying of Russian oil, appears to be hitting the flow of Moscow’s crude to the nation…”
September 1 – Politico (Camille Gus, Max Griera and Oliver Noyan): “The next obstacle to the trade deal between the European Union and the United States won’t come from the Oval Office — but rather from the second-biggest party in the European Parliament. The European Socialists have come out against the accord that Commission President Ursula von der Leyen struck with U.S. President Donald Trump in July. That will make her job of building the majority she needs to enact the tariff truce a tough one — and failure to do so could plunge the transatlantic trade relationship back into turmoil. ‘We firmly oppose the agreement,’ Iratxe García Pérez, president of the Socialists and Democrats (S&D) parliamentary group, told POLITICO.”
September 4 – Reuters: “Mexican President Claudia Sheinbaum said… her government is considering imposing tariffs on imports from countries that do not have trade agreements with Mexico, including China. The tariffs would be part of ‘Plan Mexico’, an initiative to boost domestic industry amid tariffs imposed by U.S. President Donald Trump on some imports from Mexico.”
Constitution Watch:
September 2 – Wall Street Journal (Jess Bravin and Natalie Andrews): “A federal judge… ruled that the Trump administration’s deployment of troops to Los Angeles in response to protests over immigration policies violated a 19th-century law prohibiting the use of federal forces for domestic law enforcement. In a withering opinion taking aim at President Trump’s enthusiasm for military deployments at home, Judge Charles Breyer in San Francisco found that the administration didn’t comply with the Posse Comitatus Act, an 1878 statute that restricts the use of U.S. armed forces on America’s streets. ‘There were indeed protests in Los Angeles, and some individuals engaged in violence,’ Breyer wrote. ‘Yet there was no rebellion, nor was civilian law enforcement unable to respond to the protests and enforce the law.’”
September 2 – Associated Press (Aamer Madhani, Konstantin Toropin and Regina Garcia Cano): “President Donald Trump said… the U.S. has carried out a strike in the southern Caribbean against a drug-carrying vessel that departed from Venezuela and was operated by the Tren de Aragua gang. The president said in a social media posting that 11 people were killed in the rare U.S. military operation in the Americas, a dramatic escalation in the Republican administration’s effort to stem the flow of narcotics from Latin America.”
U.S./Russia/China/Europe/Iran Watch:
September 3 – Axios (Rebecca Falconer): “China’s leader Xi Jinping hosted Russia's Vladimir Putin, North Korea’s Kim Jong-un and dozens of other leaders at the country’s biggest-ever military parade… President Trump in D.C. suggested the trio may be conspiring against the U.S. during the event marking 80 years since Japan's formal surrender that ended World War II. Iran’s Masoud Pezeshkian was also expected to join the trio and 22 other leaders at the massive display that’s notable for its absence of Western leaders. The four allies have in recent months sought to forge a military, economic and political cooperation in an alliance foreign policy analysts are calling the ‘axis of upheaval’… Xi told the huge crowd that the world is ‘faced with the choice of peace or war, dialogue or confrontation,’ but China is ‘unstoppable’…”
September 4 – Financial Times (Joe Leahy and Christian Davies): “Chinese leader Xi Jinping and North Korean dictator Kim Jong Un have held in-person talks for the first time in six years, underlining their improving ties a day after they posed with Russia’s Vladimir Putin at a grand military parade in Beijing. Kim’s meeting with Xi… will add to concern among many in Europe and the US about what Brussels this week termed an emerging ‘autocratic alliance’ involving the three countries. China and North Korea ‘should strengthen strategic co-ordination in international and regional affairs to safeguard common interests’, Xi told Kim…”
September 2 – Bloomberg: “President Xi Jinping used a mix of bonhomie and economic allure this week to send Donald Trump a clear message: Beijing has too much global clout to be dictated by the US. Cameras captured the Chinese leader in a rare, unscripted huddle on Monday with Vladimir Putin and Narendra Modi — his most powerful partners in resisting America on the world stage — at a summit in the Chinese port city of Tianjin. At one point, Xi held the hand of his Indian counterpart, as the three men laughed casually, a striking scene given just months earlier New Delhi and Beijing were seen as rivals.”
September 3 – Bloomberg (Gerry Doyle): “China revealed the scope of its nuclear weapon ambitions to the world this week when it rolled two new gigantic intercontinental ballistic missile designs through the streets of Beijing during the World War II anniversary parade. In the extensive parade line-up, which showed off a variety of air-launched, sea-launched and ground-based nuclear weapons, the DF-5C and DF-61 stood out not just for their size but for what they say about China’s plans to build its nuclear arsenal, which the Pentagon estimated last year would reach 1,000 warheads by 2030.”
September 4 – Bloomberg (Ellen Milligan): “NATO Secretary General Mark Rutte warned that Russia and China are preparing their defense industries for ‘long-term confrontation,’ after Presidents Xi Jinping and Vladimir Putin led a parade of Beijing’s new military hardware. ‘We face serious and lasting threats: Russia and China are investing heavily to build up and modernize their militaries,’ Rutte said… ‘Their defense industries are producing weapons and heavy military equipment at a remarkable, staggering, rate.’”
September 1 – Wall Street Journal (Editorial Board): “Chinese President Xi Jinping put on a show of solidarity Monday with Russia and India at a summit in China that shows what President Trump is up against as he tries to end the Ukraine war. Russia’s biggest benefactor is in Beijing. China doesn’t want Russia to lose in Ukraine because it wants U.S. attention divided between Europe and Asia. That’s what Foreign Minister Wang Yi told Europe’s top diplomat last month… That would explain why China does so much to fuel Vladimir Putin’s war machine.”
September 1 – Financial Times (Henry Foy): “A suspected Russian interference attack targeting Ursula von der Leyen disabled GPS navigation services at a Bulgarian airport and forced the European Commission president’s plane to land using paper maps. A jet carrying von der Leyen to Plovdiv on Sunday afternoon was deprived of electronic navigational aids while on approach to the city’s airport, in what three officials briefed on the incident said was being treated as a Russian interference operation.”
New World Order Watch:
September 3 – Bloomberg: “President Xi Jinping hosted the leaders of North Korea and Russia in Beijing for the first time this week, marking a historic show of united defiance against the US-led world order. China’s commander-in-chief was flanked by Vladimir Putin and Kim Jong Un as he approached Beijing’s Tiananmen Gate at a vast military parade…, in his first-ever appearance with both men. Not since the Cold War have leaders from all three nations stepped out together, with the last time being a 1959 march in Beijing when Mao Zedong welcomed Kim Il Sung and Nikita Khrushchev. Images of Putin and Kim — whose countries are subject to US sanctions — center stage were beamed around the world as Beijing rolled out missiles capable of reaching American shores. Xi’s tight embrace of both nations will likely worry many Western nations, whose leaders were largely absent from the parade, and have voiced concern over China’s military ambitions toward Taiwan.”
September 3 – Wall Street Journal (Editorial Board): “You don’t need a degree in international affairs to understand the message Xi Jinping sent… as he paraded tanks, hypersonic missiles and other weapons through Beijing, putatively to honor the end of World War II. Mr. Xi and his allies aspire to dethrone the U.S. as the world’s premier power. What will President Trump do about it? Mr. Xi’s friendly photo-op with Vladimir Putin and Kim Jong Un was an ominous image for the free world. An axis of U.S. adversaries is alive and well, and Mr. Trump’s return to power didn’t dent their expanding cooperation. Some of Mr. Trump’s advisers are preoccupied with peeling apart Messrs. Xi and Putin, in a spin on Richard Nixon’s opening to China in 1972. But Nixon exploited a split with the Soviets that already existed, and this week’s camaraderie is a reminder there’s no such rift now… The axis of adversaries wants to tell a new story of the world since 1945, diminishing the singular U.S. role in ending that war and building the order that followed. The revisionist history is part of a larger ambition to rearrange the global balance of power.”
September 1 – Politico (Ketrin Jochecova): “Chinese President Xi Jinping criticized other countries’ ‘bullying practices’ at a major summit attended by Russia's Vladimir Putin… ‘We should uphold fairness and justice,’ Xi said at the Shanghai Cooperation Organization summit… Xi’s China has emerged as a major ally of Putin during the course of Russia’s full-scale invasion of Ukraine. In comments viewed widely as aimed at U.S. President Donald Trump and his global trade war, Xi said those gathered must ‘oppose the Cold War mentality, bloc confrontation and bullying practices.’”
September 3 – Financial Times (Kathrin Hille): “As 45 troop formations marched past Tiananmen Square, the new weapons on show at China’s giant military parade were a focus of domestic and international attention. China’s leader Xi Jinping sought to project the People’s Liberation Army as a force the country could rely on. The parade’s display of nuclear capabilities reiterated Beijing’s determination to deter the US. It included missiles that publicly demonstrated for the first time Beijing’s capacity to launch nuclear warheads from the land, sea and air. Hypersonic, supersonic and autonomous weapons were also in evidence while displays of new drone and anti-drone gear highlighted technologies that could be vital in any future war over Taiwan. Since Xi’s last parade in 2019, Beijing’s relations with Washington have gone from bad to worse, and tension over Taiwan, which China claims and aims to get under control, has soared.”
September 2 – Bloomberg (Hal Brands): “‘A lot of people are saying, ‘Maybe we would like a dictator,’’ President Donald Trump recently mused, while hastening to add, of course, that he isn’t one… What’s undebatable is that Trump is part of a 21st-century cohort of strongmen aggressively reshaping their countries and the globe. The rise of these strongmen — leaders who dominate their countries’ politics, shatter old norms and institutions, and rely on quasi-autocratic (or purely autocratic) methods and cults of personality — isn’t a new story. Over the past decade, that trend has been amply lamented by those who rightfully rue autocracy’s advance and democracy’s retreat. But increasingly, the real issue is less about politics than geopolitics. We’re seeing the emergence of a ‘strongman system’ — a new international order in which highly empowered, illiberal leaders control many of the world’s mightiest, most energetic nations, and use concentrated domestic authority to seek historic changes abroad.”
September 1 – Reuters (Anton Kolodyazhnyy and Sakshi Dayal): “India’s Narendra Modi told Vladimir Putin… that India and Russia stood side by side even in difficult times after the Kremlin chief called the Indian prime minister his ‘dear friend’ and gave him a lift in his armoured limousine… On the sidelines of the Shanghai Cooperation Organisation (SCO) meeting in China's port city of Tianjin, Modi held Putin's hand as they walked towards Chinese President Xi Jinping. All three smiled as they spoke… Later, Modi posted a picture on X of him and Putin inside the armoured Aurus limousine used by the Russian leader… ‘Had an excellent meeting with President Putin,’ Modi said…, adding that they had discussed cooperating ‘in all sectors, including trade, fertilisers, space, security and culture.’”
Ukraine Watch:
September 3 – Financial Times (Amy Mackinnon and Raphael Minder): “Donald Trump has said he plans to call Russian President Vladimir Putin in the coming days as his efforts to broker an end to the war in Ukraine appear to have reached an impasse. ‘I’ll be speaking to him over the next few days,’ Trump said…, adding he was ‘not happy’ with the continued loss of life in the war… ‘He knows where I stand,’ he said. ‘Whatever his decision is, we’ll either be happy about it or unhappy. And if we’re unhappy about it, you’ll see things happen.’”
September 4 – Associated Press (Illia Novikov and Samuel Petrequin): “French President Emmanuel Macron said… 26 of Ukraine’s allies have pledged to deploy troops as a ‘reassurance force’ for the war-torn country once fighting ends in the conflict with Russia. Macron spoke after a meeting in Paris of the so-called ‘coalition of the willing,’ a group of 35 countries who support Ukraine. He said that 26 of the countries had committed to deploying troops in Ukraine — or to maintaining a presence on land, at sea, or in the air — to help guarantee the country’s security the day after a ceasefire or peace is achieved.”
August 30 – Bloomberg (Daryna Krasnolutska): “Ukraine struck two oil refineries in Russia with drones overnight as it continued to target energy infrastructure while attempting to repel another missile and drone barrage from Kremlin forces. A refinery in the Krasnodar region and the Syzran refinery in the Samara region were attacked as part of efforts to curb the supply of fuel to Russia’s army…”
August 31 – Bloomberg (Jenni Thier): “German Chancellor Friedrich Merz said he hasn’t given up hope that a ceasefire can be secured in Ukraine, but he’s ‘not under any illusions either.’ ‘I am preparing myself inwardly for the possibility that this war could go on for a long time,’ Merz said in an interview… Now in its fourth year, Russia’s full-scale invasion of Ukraine is the longest war in Europe since World War II.”
Taiwan Watch:
September 2 – Financial Times (Joe Leahy, Ryan McMorrow, Kathrin Hille and Christian Davies): “Xi Jinping has capped a week of frenetic diplomacy by presiding over one of China’s biggest military parades, projecting his nation’s growing power in a show of solidarity with fellow strongmen Vladimir Putin and Kim Jong Un. A procession of China’s newest tanks, drones and missiles rolled past Tiananmen Square… to mark the 80th anniversary of the second world war victory over Japan. The People’s Liberation Army showed off its latest weapons, including hypersonic missiles, with Xi hailing troops as a ‘heroic force’ that should develop into a ‘world-class military’ — implying a full equal to the US’s armed forces. The Chinese president said the PLA would ‘resolutely safeguard national sovereignty, unity and territorial integrity’ — code for Beijing’s goal of gaining control over Taiwan.”
AI Bubble Watch:
September 1 – Politico (Jennifer Hiller): “Data centers are desperate to connect to the U.S. electric grid. What remains fuzzy is how many will ultimately be built and how much electricity they will require. U.S. utilities are reporting a sharp upswing in interconnection requests from prospective data centers that will need an extraordinary amount of electricity to power America’s artificial-intelligence race. In some cases, the collective requests equal or surpass—by multiples—the existing electricity demand in a utility’s entire service region. Take American Electric Power, a big utility that serves 11 states, and Sempra’s Texas utility Oncor. Combined, they have received requests to connect projects, many of them data centers, to the grid requiring almost 400 gigawatts of electricity. That is an astronomical amount that represents more than half the peak electricity demand in the Lower 48 states on two hot days in July.”
September 2 – Bloomberg (Shirin Ghaffary): “Anthropic has closed a deal to raise $13 billion from investors in a new funding round that nearly triplesits valuation to $183 billion, including dollars raised — a larger-than-expected haul that makes the artificial intelligence company one of the most valuable startups in the world.”
September 1 – Axios (Erica Pandey): “There’s a flip side to the drumbeat of AI breakthroughs that lead to billion-dollar spending sprees and a promised future of abundance where robots do everything for us: the robots might kill us before we get there. AI models have been documented lying to human users, trying to blackmail them, calling the police and telling teens to take their own lives or kill their parents. Our robot future will be a balancing act between the extraordinary promise of what these models can achieve and the profound dangers they present. Lying, cheating, and manipulating are glitches, but they can be unavoidable because of the way AI works. As the tech improves, so will its ability to employ those skills. ‘I’m not sure it’s solvable, and to the degree that it is, it’s extremely difficult,’ says Anthony Aguirre, co-founder of the Future of Life Institute…The problem is very fundamental. It’s not something that there’s gonna be a quick fix to.’”
Bubble and Mania Watch:
September 2 – Bloomberg (Katherine Doherty): “A slew of results from America’s largest market-making firms staked a new marker in how quickly Wall Street’s lucrative trading business is being reshaped. Jane Street generated $10.1 billion of trading revenue in the second quarter, vaulting it past JPMorgan’s… tally in the period. Hudson River Trading more than doubled its haul to $2.6 billion in the three months through June, while Ken Griffin’s Citadel Securities racked up a record first half with $5.8 billion. Altogether, the three market-making firms collected almost $30 billion of trading revenue in the first six months, helped by volatility in the wake of President Donald Trump’s tariff wars.”
September 2 – Financial Times (Eric Platt and Jill Shah): “Jane Street’s trading revenues rose more than 150% in the second quarter to $10.1bn, blowing past the largest banks on Wall Street as it directs an ever-increasing share of trading across financial markets. The results topped the trading revenue of JPMorgan… and Goldman Sachs in the quarter to the end of June, and was the first time the group exceeded $10bn in a single three-month period… Profits at Jane Street also surged, more than doubling to $6.9bn from $2.4bn a year earlier, one of the people added. The company paid a large share of that out to its employees, reporting remuneration expenses of $1.9bn in the quarter, compared with $849mn last year… ‘While Jane Street Group continues to generate impressive earnings and growth of capital through retained earnings, its growth focus has increased risk at an even faster pace recently,’ Robert Hoban, an analyst with S&P, said in July.”
September 2 – Reuters (Manya Saini and Pritam Biswas): “A slew of companies across sectors ranging from crypto to consumer launched U.S. IPO roadshows on Tuesday, kicking off the post-Labor Day fall window as investor anxiety over U.S. President Donald Trump's tariffs started to recede. Analysts say the window through mid-October will be crucial, with several high-profile names lining up to gauge whether confidence in equities can withstand political and economic uncertainty… Strong first-day performances this year from high-growth tech and crypto firms including stablecoin issuer Circle, space startup Firefly Aerospace and crypto exchange Bullish have reinforced optimism that the IPO market is stabilizing.”
August 31 – Financial Times (Mari Novik and Nikou Asgari): “A growing number of private jet and ultra-luxury cruise operators are taking cryptocurrency payments amid booming demand from travellers made rich by soaring bitcoin prices. ‘Tremendous’ demand from young, wealthy customers has prompted Flexjet-owned FXAIR to accept crypto payments, Flexjet chair Kenn Ricci told the Financial Times. FXAIR charges about $80,000 for a trip from Farnborough airport, near London, to New York City. Ricci said Flexjet has had a ‘significant’ rise in bookings in recent months from ‘young entrepreneurs in the bitcoin space [who] fly farther and want larger planes. We save them time… And time is the most precious luxury’.”
Inflation Watch:
September 1 – Associated Press (Paul Wiseman and Tom Murphy): “Trump has promised to impose hefty import taxes on pharmaceuticals, a category of products he’s largely spared in his trade war. For decades, in fact, imported medicine has mostly been allowed to enter the United States duty free. That’s starting to change. U.S. and European leaders recently detailed a trade deal that includes a 15% tariff rate on some European goods brought into the United States, including pharmaceuticals. Trump is threatening duties of 200% more on drugs made elsewhere.”
September 4 – New York Times (Reed Abelson): “Employees of large and small companies are likely to face higher health care costs, with increases in premiums, bigger deductibles or co-pays, and will possibly lose some benefits next year, according to a large survey of companies nationwide… The survey of 1,700 companies, conducted by Mercer, a benefits consultant, indicated that employers are anticipating the sharpest increases in medical costs in about 15 years. Higher drug costs, rising hospital prices and greater demand for care are all contributing factors, experts said. With the projected increases, this is the fourth consecutive year in which employers — and their workers — have faced significantly higher costs for health insurance, with next year representing the biggest jump since 2010.”
Federal Reserve Watch:
September 2 – Bloomberg (Zoe Tillman and Erik Larson): “Federal Reserve Governor Lisa Cook’s lawyers blasted President Donald Trump’s move to oust her as based on nothing more than a pack of ‘cut-and-paste’ allegations related to mortgage fraud. In a flurry of court filings…, Cook’s lawyers emphasized arguments that Trump lacked valid grounds to fire Cook ‘for cause’… They said that social media posts by Federal Housing Finance Agency Director Bill Pulte, and a criminal referral to the Justice Department, didn’t give her an opportunity to respond before she was fired. Pulte’s ‘equivocal language makes clear that the charges against Governor Cook were nothing more than a set of cherry-picked, cut-and-paste allegations to try to give the President political cover to remove a Board member with whom he has policy disagreements’ Cook’s lawyers… said… Pulte made similar allegations against California Senator Adam Schiff and New York Attorney General Letitia James.”
September 2 – Bloomberg (Jonnelle Marte): “Prominent economists are rallying behind Federal Reserve Governor Lisa Cook after President Donald Trump moved to fire her based on allegations that she committed mortgage fraud. Nearly 600 economists have signed an open letter backing Cook, saying there is a high bar for removing Fed governors and that elected officials should refrain from actions and rhetoric that erode the central bank’s independence. The letter… included signatures from Nobel laureates Claudia Goldin and Paul Romer. It was also signed by Christina Romer… and Trevon Logan, an Ohio State University professor who has co-authored papers with Cook.”
September 3 – Reuters (Howard Schneider): “High inflation remains the U.S. Federal Reserve's main risk, though evidence of a weaker labor market still likely warrants a single quarter-point rate cut this year, Atlanta Fed President Raphael Bostic said… After four years with inflation above the Fed's 2% target, ‘price stability remains the primary concern,’ Bostic said. ‘The full implications of trade policy remain unclear. It’s not known how proposed federal deregulation and tax changes will manifest, nor the extent to which those shifts offset one another.’ Bostic said firms may not be able to avoid raising prices because of higher import tariffs much longer, with the full impact possibly taking months to materialize. While hiring has slowed, so has growth in the labor supply, leaving the U.S. still close to full employment, Bostic said.”
September 4 – Reuters (Michael S. Derby): “Federal Reserve Bank of New York President John Williams said… a gradual lowering in short-term borrowing costs is likely to happen over time if the economy meets his current forecast of modest gains in unemployment and a softening of inflation trends next year. The current setting of monetary policy is at ‘modestly restrictive’ levels that are ‘appropriate’ given the current state of the economy, Williams told a gathering… But looking forward, ‘if progress on our dual-mandate goals continues as in my baseline forecast, I anticipate it will become appropriate to move interest rates toward a more neutral stance over time,’ Williams said…”
September 3 – Reuters (Jennifer Schonberger): “St. Louis Federal Reserve president Alberto Musalem said… he expects the job market to cool gradually and downplayed long-term concerns about inflation, an evolving stance that could open the door for support for rate cuts this fall. ‘With the pace of hiring low, any increase in layoffs could produce a more substantial labor market weakening than would occur in a more active market,’ Musalem said… ‘While I am not hearing from businesses about an imminent increase in layoffs, real GDP growth that is somewhat below potential and profit margin pressures related to tariffs could contribute to such an outcome,’ he said.”
U.S. Economic Bubble Watch:
September 4 – Reuters (Lucia Mutikani): “The U.S. trade deficit widened sharply in July as record inflows of capital and other goods boosted imports, a trend that if sustained could see trade subtracting from gross domestic product in the third quarter. The trade gap ballooned 32.5% to $78.3 billion…”
September 4 – Wall Street Journal (Alex Harring): “U.S. private sector hiring rose less than expected in August… Private payrolls increased by just 54,000 in August, according to… ADP... That’s below the consensus forecast of 75,000… Jobs tied to trade, transportation and utilities saw particular weakness in August, with the group losing 17,000 roles on net... Education and health services followed, recording a decline of 12,000 jobs. But those losses were offset in part by a boom in the leisure and hospitality industry, which added 50,000 jobs in the month. Wage growth maintained the same pace in August. Those staying in their roles saw their pay rise 4.4% year-over-year, while job changes recorded a 7.1% increase over the same period.”
September 3 – Reuters (Lucia Mutikani): “U.S. job openings fell to a 10-month low in July and there were more unemployed people than positions available for the first time since the COVID-19 pandemic… Despite cooling demand for workers, layoffs remained relatively low… Fewer workers are also engaging in job-hopping. There were 0.99 job openings for every unemployed person, down from 1.05 in June and the first drop below the 1.0 mark since April 2021… Job openings… had dropped 176,000 to 7.181 million by the last day of July… That was the lowest level since September 2024.”
September 1 – Associated Press (Corey Williams): “More than 1.2 million immigrants disappeared from the labor force from January through the end of July, according to preliminary Census Bureau data… That includes people who are in the country illegally as well as legal residents. Immigrants make up almost 20% of the U.S. workforce and that data shows 45% of workers in farming, fishing and forestry are immigrants, according to Pew senior researcher Stephanie Kramer. About 30% of all construction workers are immigrants and 24% of service workers are immigrants, she added.”
September 1 – CNBC (Kate Rogers): “From citrus farms in the Central Valley to construction sites where homes and businesses are being rebuilt after devastating wildfires in Pacific Palisades, California relies heavily on immigrant workers and entrepreneurs. As the Trump administration continues to ramp up immigration enforcement, industries key to the state’s $4 trillion economy like agriculture, construction and hospitality could be among those hardest hit by the loss of California’s immigrant workforce… Approximately one-fifth of the state’s 10.6 million immigrants are undocumented, according to a June study from the nonpartisan Bay Area Economic Institute and the University of California, Merced.”
September 4 – Bloomberg (Nazmul Ahasan): “Activity at US service providers expanded in August at the fastest pace in six months on the sharpest acceleration in orders in nearly a year. The Institute for Supply Management’s index of services rose 1.9 points last month to 52… The new orders index jumped 5.7 points, the most since September, to 56. The business activity index… climbed to a five-month high of 55. The solid advance in those demand indicators suggests the largest part of the economy is gaining some traction after five straight months of sluggishness. At the same time, a measure of materials costs showed service providers continue to battle a stiff inflationary headwind.”
September 3 – Reuters (Ann Saphir): “U.S. economic activity and employment were mostly little changed or unchanged in recent weeks while prices rose moderately or modestly, the Federal Reserve said… ‘Contacts frequently cited economic uncertainty and tariffs as negative factors,’ according to the Fed’s ‘Beige Book’ report... ‘Overall, sentiment was mixed among the (Fed) districts. Most firms either reported little to no change in optimism or expressed differing expectations about the direction of change from their contacts.’ Indeed, even in districts where economic activity was reported to have expanded, businesses worried about a reversal. ‘Outlooks improved but there was widespread trepidation regarding shifting trade policy, high interest rates, and more restrictive immigration policy,’ the Dallas Fed reported…”
September 3 – CNBC (Diana Olick): “Mortgage rates fell again last week, but not enough to pull overall demand out of the rut it’s been in for the past month… Applications for a mortgage to purchase a home dropped 3% for the week and were 17% higher than the same week one year ago. Potential buyers today have a lot more to choose from than they did at this time last year, but prices are also higher than they were, at least on a national level. Affordability is the main barrier standing in the way of stronger sales.”
September 2 – Reuters (Lucia Mutikani): “U.S. construction spending fell in July as high mortgage rates continued to constrain the housing market… Construction spending slipped 0.1% after an unrevised 0.4% drop in June… Spending dropped 2.8% on a year-over-year basis in July. Spending on private construction projects fell 0.2%. Investment in residential construction gained 0.1%, with outlays on new single-family housing projects nudging up 0.1%.”
September 3 – Reuters (Nupur Anand): “U.S. workers are becoming more stressed about their rising personal debts and financial health, a Bank of America survey showed. Of the respondents polled by BofA, 47% of employed people said they had a sense of financial well-being, dropping from 52% at the start of the year. Nearly 85% of consumers carried some type of personal debt, while 26% of the workforce was seeking help in areas such as emergency savings, paying down debt, and overall financial wellness, compared with 13% in 2023, according to the May survey of more than 1,000 people working full-time.”
China Watch:
August 31 – Bloomberg: “China’s mega banks are under pressure from rising allowances for loan losses and a continued margin erosion in their mission to support the world’s second largest economy. The lenders, led by Industrial & Commercial Bank of China Ltd., on Friday reported falling or weak earnings for the first half of 2025 as they continued to pump out new loans to China’s struggling consumers. Overall, the five biggest banks set aside allowances for losses on loans of 3.51 trillion yuan ($492bn), in the first half, up almost 6% from the end of last year. Their finances are coming under increasing strain due to their duties to help lift the economy with cheap lending and loan subsidies. The sector’s overall margin contracted further to a record low of 1.42% as of June, below the 1.8% threshold regarded as necessary for maintaining reasonable profitability… The combined non-performing consumer loans at the five banks jumped almost 20% from end-2024, while soured credit card loans rose more than 9%...”
August 31 – Bloomberg: “China’s home sales extended their slump in August even as prices declined and the country’s two biggest cities rolled out additional stimulus measures. The value of new home sales from the 100 largest property companies stood at 207 billion yuan ($29bn)… That’s a 17.6% drop from a year earlier, and followed a 24% slump in July. Sales have fallen for six straight months. China’s housing slump has dragged on for more than four years, with sales falling further since the second quarter.”
September 2 – Wall Street Journal: “A private gauge of China’s services sector showed activity grew at the fastest pace in more than a year in August…The RatingDog general services purchasing managers index compiled by S&P Global rose to 53.0 last month from July’s 52.6. That marked the strongest reading since May 2024… The private gauge echoes official data released last week. China’s official subindex tracking service activity increased to 50.5 in August from 50.0 in July.”
September 1 – Bloomberg: “Chinese investors are borrowing a record amount of cash to buy local stocks, further fueling a months-long rally that has largely been driven by liquidity. The outstanding amount of margin trades in China’s onshore equities market climbed to 2.28 trillion yuan ($320bn) Monday, surpassing the previous record of 2.27 trillion yuan in 2015. Traders added such leveraged positions for all but three days in August.”
September 3 – Financial Times (Edward White, Wang Xueqiao and Cheng Leng): “China has ordered the solar sector to rein in overcapacity and cut-throat pricing as the biggest manufacturers suffer billions of dollars in losses. Six of the largest Chinese cell and panel makers saw their combined first-half losses double to Rmb20.2bn ($2.8bn) from a year earlier, with all but one reporting widening losses… The losses compare with record profits in 2022 and 2023. Solar is one of the industries at the heart of Beijing’s concerns about ‘involution’, which refers to excess production fuelling a race to the bottom in prices.”
Central Banker Watch:
September 1 – Reuters (Dominique Vidalon): “If U.S. President Donald Trump removed Federal Reserve Chairman Jerome Powell or Fed governor Lisa Cook, then this would represent a ‘very serious danger for the U.S. economy and the world economy’, the European Central Bank President Christine Lagarde said… Lagarde said: ‘If U.S. monetary policy were no longer independent and instead dependent on the dictates of this or that person, then I believe that the effect on the balance of the American economy could, as a result of the effects this would have around the world, be very worrying, because it is the largest economy in the world.’”
September 3 – Reuters (Francesco Canepa and Balazs Koranyi): “The European Central Bank and its peers around the world should pool their reserves for U.S. dollar liquidity as Federal Reserve help cannot be guaranteed given President Donald Trump's attacks, the head of an influential think tank said. Adam Posen of the Peterson Institute for International Economics told an ECB conference on Wednesday it should not be taken for granted that a politicised Fed would lend dollars to foreign central banks in a crisis, as it did a few times since the 2007-2008 financial meltdown.”
September 3 – Reuters (David Milliken): “Bank of England Governor Andrew Bailey said… he was ‘very concerned’ about threats to the U.S. Federal Reserve's independence, describing it as a ‘very serious’ issue… ‘This is a very serious situation, I am very concerned,’ Bailey told the committee. ‘The Federal Reserve ... has built up a very strong reputation for independence and for its decision making.’ Bailey said he took any threats to central bank independence ‘very seriously’ and that trading that independence against other government decisions would be a ‘very dangerous road to go down’.”
September 3 – Wall Street Journal (Paul Hannon): “The Bank of England is likely to continue to lower its key interest rate, but the timing of future moves is now more uncertain, Gov. Andrew Bailey said… Bailey said that while the key interest rate remains on a downward path, policymakers may not stick to their previous pace. ‘There is now considerably more doubt about exactly when and how quickly we can make those further steps,’ he said.”
France/Europe Watch:
September 4 – Financial Times (Editorial Board): “Defeat looks inevitable for French Prime Minister François Bayrou in a confidence vote he has called for Monday. His move looks less like a gamble to mobilise parliamentary support for his minority government and deficit-cutting budget than an act of political suicide given the gulf with the opposition parties. The predictability of Bayrou’s demise should not detract from the seriousness of France’s twin crises. Its fiscal and political troubles are feeding each other. Government paralysis and France’s inability to rein in public borrowing are sapping business and consumer confidence, eroding the country’s standing in the EU and destroying what is left of President Emmanuel Macron’s political legacy.”
September 3 – Politico (Clea Caulcutt): “French politics are so paralyzed that the resignation of President Emmanuel Macron — an idea once only whispered in the corridors of power — is now being openly debated. But while Macron’s departure would be an earthquake on the European diplomatic stage, there’s increasing doubt it would fix the gridlock stalling the Fifth Republic. France’s problems appear to be deeper. Macron is already scouting around for his fifth prime minister in less than two years, in the expectation that François Bayrou will be ousted on Monday over his unpopular measures to slash the country’s eye-watering budget deficit. But would a new prime ministerial nominee from Macron be able to force through the billions of euros in budget tightening that the country needs to avoid a debt crisis? And would a new snap election create a workable majority? Neither outcome seems likely. And even if Macron were to resign, his successor would almost certainly face the same obstacles.”
September 1 – Politico (Marion Solletty): “If Prime Minister François Bayrou had hoped far-right leader Marine Le Pen would avoid bringing down France’s government because she is banned from running for political office, he sorely miscalculated. In fact, Le Pen and her National Rally party, which tops the polls in France, look set to play a decisive role in ejecting Bayrou in a no-confidence vote on Sept. 8. They are adamant they want to seize on the deepening political crisis to press for a parliamentary election, and the resignation of President Emmanuel Macron. Seeking to enact a highly unpopular €43.8 billion budget squeeze, Bayrou and Macron had effectively wagered that Le Pen — who controls the single largest opposition party in the National Assembly — would play along, when they called a no-confidence vote last week.”
September 1 – Bloomberg (Alexander Weber): “Euro-area inflation accelerated beyond the European Central Bank’s target, cementing expectations that officials will keep interest rates steady when they meet next week. Consumer prices rose 2.1% from a year ago in August, edging up from 2% the previous month… A core measure that strips out volatile components like energy and food held at 2.3%. Closely watched gains in services prices eased to 3.1%.”
Japan Watch:
September 2 – Bloomberg (Mia Glass and John Cheng): “Japan’s longer-maturity debt slumped, sending yields to multi-decade highs, following a global selloff in bonds and political uncertainty in the nation. Yields on the 30-year maturity jumped 8.5 bps to 3.285%, the highest since debut, while the 40-year yield surged 9 bps to 3.535%. Yields on 20-year government bonds also rose to levels last seen in 1999.”
September 3 – Bloomberg (Yoshiaki Nohara): “Japanese ministries and agencies made a record request for ¥122.4 trillion ($822bn) in spending in the budget for next fiscal year as debt-servicing costs rise while the nation also eyes more outlays for defense. The government’s initial budget request for the year starting in April tops the ¥117.6 trillion request a year ago… The total includes a record ¥8.8 trillion request by the Defense Ministry as Japan aims to raise its military budget to around 2% of gross domestic product by 2027. Also pushing up the sum is ¥32.4 trillion for debt financing needs, the highest on record, reflecting the impact of rising bond yields.”
EM Watch:
August 31 – Financial Times (Diana Mariska): “Crowds in Indonesia have broken into and looted the home of finance minister Sri Mulyani Indrawati as protests spread across the country amid a deepening political crisis… A number of people entered Sri Mulyani’s residence near Jakarta and looted belongings including chairs and paintings… On Saturday, crowds raided the homes of three members of parliament… The demonstrations became heated when a motorbike taxi driver was killed after being run over by a police vehicle during a rally in Jakarta on Thursday. Chaos has since erupted in several cities, including Makassar…”
Social, Political, Environmental, Cybersecurity Instability Watch:
September 1 – Financial Times (James Fontanella-Khan): “Hedge fund billionaire Ray Dalio has warned Donald Trump’s America is drifting into 1930s-style autocratic politics — and said other investors are too scared of the president to speak up. The Bridgewater Associates founder told the Financial Times that ‘gaps in wealth’, ‘gaps in values’ and a collapse in trust were driving ‘more extreme’ policies in the US. ‘I think that what is happening now politically and socially is analogous to what happened around the world in the 1930-40 period,’ Dalio said. State intervention in the private sector, such as Trump’s decision to take a 10% stake in chipmaker Intel, was the sort of ‘strong autocratic leadership that sprang out of the desire to take control of the financial and economic situation’, Dalio said… ‘I am just describing the cause and effect relationships that are driving what is happening,’ he said. ‘And by the way, during such times most people are silent because they are afraid of retaliation if they criticise.’”
August 30 – Axios (Dave Lawler): “Centuries' worth of experience walked out of key government agencies this summer, including high-level departures from the CDC, Pentagon and intelligence community just in the past week. President Trump and his allies believe the ‘Deep State,’ scientific establishment and federal bureaucracy were overdue for a purge. They’re ushering in a government in which the officials maintaining nuclear weapons, monitoring medical trials or guarding state secrets have shorter resumes and smaller staffs — likely for many years to come. Three of the CDC's top scientists resigned this week after director Susan Monarez was fired… Demetre Daskalakis, who resigned as the CDC’s vaccine chief, claimed Secretary Robert F. Kennedy Jr. and his team were manipulating data ‘to achieve a political end.’ He also warned that the hollowing out of agencies like his would leave the U.S. ill prepared for future public health emergencies… ‘We really are losing the people who know how to do this’.”
September 2 – Axios (Ben Geman): “Dozens of climate scientists… released a detailed rebuttal of the Energy Department's contrarian climate report, alleging ‘pervasive problems’ with the work. DOE’s July report informs EPA’s planned repeal of the ‘endangerment finding’ — the legal underpinning of federal emissions regulations. The response could easily find its way into litigation over EPA’s plan. Texas A&M's Andrew Dessler and Rutgers' Robert Kopp organized the response. DOE’s report ‘does not meet standards of quality, utility, objectivity and integrity appropriate for use in supporting policy making,’ the two write.”
September 2 – Axios (Josephine Walker): “Almost 70% of U.S. adults said the American dream, or the idea that hard work pays off, doesn't hold true anymore or never did, according to a new WSJ-NORC poll. That’s the highest percentage in almost 15 years of surveys, up almost 3% from 2024… Only 25% of Americans believe they have a good chance of improving their standard of living, a record low in surveys dating back to 1987. The economic pessimism spanned across demographics, with men and women, older and younger adults, and those making more and less than $100,000 in household income all feeling the pain.”
August 31 – Associated Press (David Bauder): “Coping with a sudden loss in federal funding, PBS affiliate KSPS in Spokane, Washington, faced a surprise extra hurdle. Many of its contributing members — at one point almost half — lived in Canada, and they were withdrawing support out of anger at President Donald Trump’s desire to make the country the 51st member of the United States. When Congress decided this summer to eliminate $1.1 billion allocated to public broadcasting, it left some 330 PBS and 246 NPR stations, each with unique issues related to their communities and history, to figure out what that means.”