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Saturday, July 18, 2026
Saturday's News Links
[AP] The US and Iran have blown past red lines as they lurch back toward all-out war
[AP] Iran says it is suspending commitments to interim deal with US as they exchange attacks
[Reuters] Iran hits Gulf states and Jordan after seventh night of US strikes
[Axios] AI race splits in two as China wages open-weight insurgency
[Axios] Kimi K3 shocked the world. These other AI models could be next
[Reuters] US data center protests go national as backlash grows
[WP] How data centers became a symbol of Americans’ rage
[Reuters] US regional banks brush off war jitters with lending surge, fee boost
[Politico] Trump’s threats to revoke TV licenses get serious
[Reuters] Canada prepares to evacuate Ontario community as wildfire smoke chokes US
[Bloomberg] Iran Ramps Up Retaliatory Kuwait Attack After US Escalation
[NYT] Iran War Live Updates: Fighting Intensifies With Strikes on Critical Infrastructure
[WSJ] What to Know About the Chinese AI Models Rattling U.S. Stocks
[WSJ] See How Trump’s Truth Social Posts Move Stocks
[WSJ] Conflict in the Gulf Has Become Much More Deadly for Commercial Sailors
[WSJ] Why Canada’s Wildfires Are So Hard to Put Out
[FT] Iran strikes Saudi Arabia for first time in months
[FT] Donald Trump threatens Canada with tariffs over ‘invasion’ of wildfire smoke
[FT] Big Law braces for second fight with Donald Trump over capitulation deals
Friday, July 17, 2026
Weekly Commentary: Sloppy
A sloppy end to a sloppy week. Bubbles faltering. South Korea’s KOSPI Index was closed Friday, limiting the week’s losses to 6.5% (down 6.4% in Thursday trading). For the week, SK Hynix sank 16.9% and Samsung Electronics fell 11.5%. SK Hynix ended the week down 38% from its June 22nd closing high, with Samsung Electronics 30% lower from a June 18th record close.
Friday losses included Taiwan’s TAIEX down 6.5%, Japan’s Nikkei 225 4.0%, and Hong Kong’s Hang Seng 1.8%. For the week, Japan’s Nikkei sank 6.4%, and Taiwan’s TAIEX fell 5.9%. Curiously, Chinese stocks were under heavy selling pressure. China’s Shanghai Composite slumped 5.8% this week, the worst weekly decline since February 2024. China’s growth-oriented ChiNext Index sank 10.8%, the steepest weekly drubbing since February 2021. The Shenzhen Composite was slammed 9.0%. The Shanghai Composite ended the week at an 11-month low.
US technology stocks and indices ended a worrisome week under more moderate selling pressure. The Semiconductor Index traded 1.6% lower in Friday trading, boosting the week’s losses to a notable 10.0%. Micron dropped 13.3% this week. Other notable losses included Intel (13.5%), Applied Materials (12.1%), and ARM Holdings (17.4%). The NASDAQ100 dropped 4.1% this week. Nvidia slumped 3.9%, Meta Platforms 3.5%, Netflix 6.0%, and Tesla 6.6%.
The world has changed in a month. After going public on June 11th at $135 a share, SpaceEX traded to a record high of $225.64 on June 16th, before ending that session at a record $201.80 close. SpaceEX sank 14.7% this week to end Friday at $123.99. It must be the most fleeting creation and disappearance of a Trillion dollars of perceived wealth. The episode is surely also one of the most dramatic wealth transfers ever.
July 16 – Axios (Madison Mills): “Chinese AI startup Moonshot AI stunned developers on Thursday with a massive new model that may rival the best American systems at a fraction of the cost. Kimi K3’s early performance is fueling awe across the AI world — and alarm in Silicon Valley and Washington — as China appears to be rapidly erasing America’s lead in advanced AI. Moonshot says Kimi K3 contains 2.8 trillion total parameters, making it one of the largest open-weight AI models ever released… In blind testing by AI evaluator Arena, developers preferred Kimi over every leading U.S. model for front-end coding — including Anthropic’s Fable 5 and OpenAI’s GPT-5.6 Sol.”
The bullish AI narrative is under attack from all directions.
July 17 – Bloomberg (Tasos Vossos and Ronan Martin): “The bonds sold by hyperscalers to fuel their artificial intelligence ambitions have become a drag on investor portfolios from London to Tokyo. From falling prices and wider spreads to negative total returns, the debt is underperforming on almost every metric. The bonds are in the red on average…, and rank among the worst performers in indexes this year. As firms such as Meta Platforms Inc., Alphabet Inc., and Amazon.com Inc. ramp up borrowing to fund data centers and other AI infrastructure, they have tapped pools of capital worldwide. The wave of issuance has become a test of credit market depth, while growing unease over the scale of AI spending is hammering the shares of chipmakers and cloud-computing giants.”
Oracle bond (5.7%, 2036) yields traded to 6.59% intraday Wednesday, before ending the week 10 bps higher at 6.53%. This yield has surged 47 bps since June 16th. Oracle CDS jumped 11 this week to198 bps, up 43 bps from June 16th to a record close. CoreWeave (8.5%, 2032) yields surged 60 bps this week to a record 9.87% - up 164 bps since June 16th. Meta Platforms (6.3%, 2056) yields traded to a record high of 6.73% in Monday trading – up 50 bps from the June 16th close – before ending the week at 6.61%. Meta’s 10-year yield traded this week to 5.68% (closed week at 5.54%) – up 40 bps since June 16th. Even Apple (4.65%, 2046) yields traded to a record 5.74% on Tuesday (closed week at 5.66%), up 17 bps from the June 16th close.
It’s fundamental to Bubble theory that Bubbles financed by risky “junk” debt have minimal risk of becoming deeply systemic. Issue enough junk debt, and investors will turn nervous – “Too much risk! No more junk!” Bubbles fueled by perceived safe and liquid stores of (nominal) value - “money-like” debt instruments - are so much more dangerous. Insatiable demand for “money” promotes (as we’ve witnessed) protracted affairs, which ensure deep structural financial and economic maladjustment.
The global government finance Bubble has been fueled by tens of Trillions of government debt and central bank Credit (“money”). This unprecedented government debt inflation has been instrumental in inflating system incomes and earnings, no more so than with the big tech oligarchy (today’s “hyperscalers”). A unique dynamic took hold. Massive cash holdings afforded the big tech companies the wherewithal for hundreds of billions of arms race AI capital spending, along with fortress balance sheets with the capacity to borrow hundreds of billions more.
But financial excess is no free lunch. Monetary inflation always comes home to roost. Historic AI arms race spending has dramatically inflated the cost of semiconductors and servers, AI-related talent, power and cooling infrastructure, electricity, electricians, copper, steel, and virtually all things data center construction.
Meanwhile, arms race dynamics ensure intense competition, certainly including the enterprising Chinese AI operators. There are already indications that corporate managements are pushing back against rapidly inflating AI-related expenditures. For general use, AI could evolve into a highly price-competitive commodity business.
The past few months of manic excess have solidified the problematic dynamic of a spectacular inflationary cost spiral in the face of rapidly deteriorating hyperscaler AI earnings prospects. And this is where Bubble dynamics turn really fascinating.
The hyperscalers, committed to Trillions of AI investment, have begun to see their liabilities lose “moneyness.” At the “periphery,” the marketplace has turned on Oracle and CoreWeave bonds. Even Alphabet/Google yields (5.65%, 2056) - trading at 5.50% before the war and 5.73% on June 16th - traded to 6.09% in Wednesday trading. Microsoft (3.45%, 2036) yields traded to 5.08% Tuesday, up from 4.36% before the start of the war. It’s been one historic boom, but financing the AI arms race turns much more challenging going forward. Peak Wall Street?
July 14 – Wall Street Journal (Gina Heeb and Ben Glickman): “A Wall Street boom fueled by red-hot stock-market debuts and volatility that kept trading floors bustling is leading to surging profits at the nation’s biggest banks. JPMorgan Chase, Goldman Sachs, Bank of America, Citigroup and Wells Fargo collectively earned more than $49 billion, a 39% jump from a year ago and above analyst estimates. Their combined revenues rose by more than a fifth. The results were also strong across consumer businesses, showing the U.S. economy continues to benefit from resilient households and optimistic boardrooms.”
July 14 – CNBC (High Son): “American megabanks on Tuesday gave evidence that the global artificial intelligence boom isn’t just benefiting tech giants and chip makers. Goldman Sachs and JPMorgan Chase each posted record quarterly revenue hauls, fueled by massive gains in equities trading and investment banking. Behind the surge in activity — Goldman revenue jumped 39% to $20.3 billion, while JPMorgan saw it rise 27% to $58 billion — is the fact that AI is ‘everywhere in financial markets,’ JPMorgan CFO Jeremy Barnum told reporters. ‘These are booming environments with a ton of activity, big IPOs, big index rebalancing, a lot of activity in Asia,” Barnum said... ‘A lot of it is downstream of the AI theme, writ large on a global basis. It’s just a very, very, very active environment.’”
Eight times a year Bubble analysis is on the receiving end of major data deluges. There are four quarterly Fed Z.1 reports and four quarterly earnings reporting periods for the major financial institutions. This week’s Q2 earnings reports certainly confirmed the historic nature of this boom.
JPMorgan Q2 earnings rose 41% y-o-y to a record $21.2 billion. Net Revenues were up 15% y-o-y to $58.0 billion. Corporate & Investment Bank revenues were up 27% y-o-y to $24.9 billion. Total Trading Revenue rose to record $12.1 billion, with Equities Sales & Trading a record $6.03 billion (up 86% y-o-y). Investment Banking Fees were 30% higher y-o-y to $3.28 billion. Total Assets expanded another $115 billion, or 9.3% annualized, to a record $5.015 TN, with y-o-y growth of $463 billion (10.2%). Net Loans expanded at a 10.5% pace to $1.516 TN (up 9.3% y-o-y).
Goldman Sachs reported earnings of $6.63 billion, up 78% y-o-y. Net revenues were 39% higher to a record $20.3 billion – 24% ahead of estimates. The Global Banking & Markets division achieved record revenues of $15.5 billion. Asset Management revenues rose 20% y-o-y to $4.6 billion. Total Assets expanded $67.8 billion, or 13% annualized, during the quarter to a record $2.128 TN - and surged $343 billion, or 19.2%, y-o-y. Total Loans rose $28 billion, or 24% annualized, during Q2 to a record $493 billion, with one year growth of $89.8 billion, or 19%.
Citigroup reported Q2 Net Income of $5.8 billion, up 45% y-o-y. Net Revenues expanded 14% y-o-y to $24.8 billion. Markets revenues were 17% higher to $7.01 billion, with Equities Trading surging 45% to a record $2.3 billion. Banking revenue jumped 34% to $1.92 billion, with Investment Banking up 44%. Total Assets expanded $117 billion, or 16.8% annualized, to a record $2.895 TN, with one-year growth of $272 billion, or 10.4%. Total Loans rose $23.6 billion, or 11% annualized, to $877 billion, with one-year growth of $87.6 billion, or 11.1%.
Bank of America earnings surged 27% y-o-y to $9.1 billion, with net revenues rising 15% to $31.6 billion. Sales & Trading revenues rose 33% to $7.2 billion, with Equities Trading surging to a record $3.62 billion. Investment Banking revenues jumped 50% y-o-y to $2.14 billion. Total Assets were marginally higher at a record $3.499 TN, with Total Loans expanding at a 3% pace to a record $1.224 TN (up $71.7bn, or 6.2%, y-o-y).
July 15 – Bloomberg (Hannah Levitt): “Morgan Stanley’s stock traders set another quarterly record, with $6.3 billion from equity trading, a 69% jump from its previous all-time high. The firm pulled in $148.1 billion in net new assets in its wealth-management business, with over half related to IPOs, and net revenue at the wealth business was $8.86 billion. Equity underwriting fees were $851 million, up 70% from a year earlier, and total investment-banking fees were $2.44 billion, with mergers-and-acquisitions bankers and debt underwriters generating $798 million and $788 million, respectively.”
July 15 – Bloomberg (Silla Brush): “BlackRock Inc. pulled in $192 billion of net client cash in the second quarter, with investors pouring money into exchange-traded funds and pushing total assets above $15 trillion for the first time. Investors added $53 billion to actively managed funds on a net basis and revenue rose 31% from a year earlier to $7.1 billion… BlackRock pulled in record net inflows of $321 billion for the first half of the year… Net flows to long-term investment funds were $199 billion… BlackRock’s ETF business took in $178 billion, accounting for the vast majority of new money flowing into the firm, while cash and money-market funds lost $7 billion in net money.”
July 14 – Bloomberg (Paul J. Davies): “US banking is on a roll in pretty much every department, but it’s hard to look past stock trading for the kind of exuberance that should trouble almost anyone. Given the amount of borrowed money that hedge funds and retail investors are using to bet on shares right now, there is good reason to worry about how unstable markets could become if, or when, a correction begins. Each of the four big investment banks reporting earnings on Tuesday smashed revenue expectations on their equities desks. For a sense of how surprising the numbers were, take the example of Goldman Sachs Group Inc. The debate before the results was about whether it could produce more than $5 billion in stock trading revenue for a second time this year, after a record first quarter. That was more than any US bank had ever made. Well, the last three months’ revenue was $7.4 billion, up 72% from the same period last year.”
Financial conditions have been ridiculously loose, while inflation has been above target for over five years.
July 14 – Associated Press (Christopher Rugaber): “Federal Reserve Chair Kevin Warsh said… the Fed will make high inflation ‘a thing of the past,’ yet he provided no signal about the central bank’s next steps. Fed policymakers ‘have no tolerance for persistently elevated inflation,’ Warsh said... ‘And we share a resolute commitment to restoring price stability.’ Still, Warsh heads a sharply divided rate-setting committee, with about half of the 19 policymakers penciling in higher interest rates by the end of the year in forecasts released last month.”
Chair Warsh’s first Congressional testimonies went off without a hitch. He’s certainly a smooth talker.
Warsh: “Now, at the Fed, our number one objective is getting monetary policy right. That’s our clear and constant aim, the star we steer by. And if we get policy right, and I can assure you we will, the inflation surge of the last five years will be a thing of the past.”
“We have the commitment, the power and the responsibility to deliver on the mandate that this committee gave us, and we will. We’ve got full ability to do it, so you will not hear me blaming anyone else.”
“Our number one objective is getting policy right, and if we get policy right, we can deliver lower prices.”
“Our number one objective is to get policy right.”
“But inflation’s a choice. We monetary policymakers need to choose lower prices. And that’s the commitment my colleagues have made.”
“My broader definition of price stability is a change in prices, such that households and businesses don’t have to worry about it, don’t have to think about it.”
“And the longer that prices have been above the inflation target, it’s usually a bit harder to dislodge them and get them lower. Our job, my commitment to you, is to take sticky prices and to unstick them.”
“A bit harder to dislodge them and get them lower?” History argues quite hard. And the issue I and others have quickly developed with Warsh is that he has nothing to share about how he plans to rein in now well-entrenched inflation. If his commitment to return to price stability is sincere, he should begin preparing the markets and American population for the unfolding challenge.
The U.S. and world are at peak Bubble. Chair Warsh speaks repeatedly about the “right” policy. There is no right policy that miraculously stabilizes either Bubble excess or consumer prices. The term “trapped” refers to the Fed’s predicament that reining in inflation would require a significant tightening of financial conditions. But tightening would begin the highly destabilizing process of bursting Bubbles. The Fed and Treasury are determined to hold Bubble collapse at bay, which only accommodates ongoing Bubble inflation.
It’s interesting that Warsh is determined to change the Fed’s communication strategy. I share his aversion to “forward guidance.” Stability would be well served if markets could stand on their own.
Warsh: “I can be more broadly than that, we do not want to be in the bailout business, full stop.”
But I guess the forward guidance moratorium doesn’t apply to signaling to the markets that the Warsh Fed will be ready to aggressively respond to market crisis. It appears many changes will be forthcoming for our central bank. The Fed “put,” so fundamental to market speculation and leverage excesses, is safe, secure, and off limits. Warsh’s first major mistake was failing to signal a much-needed rethink of Federal Reserve crisis policy dynamics.
Warsh: “In periods of crisis, when markets aren’t clearing, I am willing to be quite aggressive in what the Fed does with its balance sheet, the assets that we buy as necessary in unusual and exigent circumstances.”
“So, I like interest rates as the dominant ways to make monetary policy, and I’d prefer all the things being equal to use balance sheets when the crises are real.”
Representative Ritchie Torres: “Quantitative easing. Do you believe quantitative easing is inherently inflationary? Yes or no, and then...”
Warsh: “That question I can answer simply. I don’t think it’s inherently inflationary, especially if we adopt quantitative easing in the depths of a crisis. It can often provide liquidity to markets that need it.”
Noland follow-up: “How about when it’s early in the crisis and the forces of inflation are in full force?”
Warsh: “If you’ve seen one financial crisis, you’ve seen one financial crisis. So, I’m careful about extrapolating. More generally, I would say the response to the 2020 pandemic had some very similar areas with respect to monetary policy. That is, the central bankers in 2020 took some of the toolkit that we innovated on in 2008 or 2009, and they provided overwhelming liquidity. That’s in our remit in crises, not in more normal times.”
“But we have to be prepared for shocks that are unanticipated. We have to be open-minded to things that might happen. So, while it might not be common for the economics profession, we have to show a lot of imagination. My general view, again, coming out of the 2008 crisis, is we need to think ex ante about what we might do when the shocks happen.”
I am reminded of the “Bagehot Rule.” In his 1873 classic Lombard Street, Walter Bagehot argued that a central bank (Bank of England) facing a financial panic “should lend freely, at a high interest rate, against good collateral, to stop a crisis without encouraging future recklessness.”
There’s a fundamental and catastrophic flaw in contemporary “QE” crisis management. Instead of lending at a high punitive rate, the Fed and global central bank community offer unlimited liquidity at basically no cost. There is nothing to discourage aggressive speculation and leveraging. Moreover, the greater the degree of Bubble excess, the more confident market operators become of an immediate and powerful liquidity response.
The current system promotes self-reinforcing speculative excess. This is today’s greatest issue in central banking. It’s a very sensitive, incredibly tough issue. The “Fed put” is fundamental to precarious asset inflation and Bubble dynamics. If Chair Warsh is content to ignore this issue, he lacks the courage so desperately needed today at the Federal Reserve.
July 14 – Bloomberg (Max Abelson and Hannah Levitt): “At the top of JPMorgan..., weather metaphors are out and geology is in. ‘Several risks are shifting below the surface like tectonic plates, including geopolitical tensions and wars, sticky inflation, large global fiscal deficits and elevated asset prices,’ Chief Executive Officer Jamie Dimon said… as his bank reported yet another record profit. ‘They may remain manageable, but they could also cause meaningful disruptions when they shift or collide.’”
Friday losses included Taiwan’s TAIEX down 6.5%, Japan’s Nikkei 225 4.0%, and Hong Kong’s Hang Seng 1.8%. For the week, Japan’s Nikkei sank 6.4%, and Taiwan’s TAIEX fell 5.9%. Curiously, Chinese stocks were under heavy selling pressure. China’s Shanghai Composite slumped 5.8% this week, the worst weekly decline since February 2024. China’s growth-oriented ChiNext Index sank 10.8%, the steepest weekly drubbing since February 2021. The Shenzhen Composite was slammed 9.0%. The Shanghai Composite ended the week at an 11-month low.
US technology stocks and indices ended a worrisome week under more moderate selling pressure. The Semiconductor Index traded 1.6% lower in Friday trading, boosting the week’s losses to a notable 10.0%. Micron dropped 13.3% this week. Other notable losses included Intel (13.5%), Applied Materials (12.1%), and ARM Holdings (17.4%). The NASDAQ100 dropped 4.1% this week. Nvidia slumped 3.9%, Meta Platforms 3.5%, Netflix 6.0%, and Tesla 6.6%.
The world has changed in a month. After going public on June 11th at $135 a share, SpaceEX traded to a record high of $225.64 on June 16th, before ending that session at a record $201.80 close. SpaceEX sank 14.7% this week to end Friday at $123.99. It must be the most fleeting creation and disappearance of a Trillion dollars of perceived wealth. The episode is surely also one of the most dramatic wealth transfers ever.
July 16 – Axios (Madison Mills): “Chinese AI startup Moonshot AI stunned developers on Thursday with a massive new model that may rival the best American systems at a fraction of the cost. Kimi K3’s early performance is fueling awe across the AI world — and alarm in Silicon Valley and Washington — as China appears to be rapidly erasing America’s lead in advanced AI. Moonshot says Kimi K3 contains 2.8 trillion total parameters, making it one of the largest open-weight AI models ever released… In blind testing by AI evaluator Arena, developers preferred Kimi over every leading U.S. model for front-end coding — including Anthropic’s Fable 5 and OpenAI’s GPT-5.6 Sol.”
The bullish AI narrative is under attack from all directions.
July 17 – Bloomberg (Tasos Vossos and Ronan Martin): “The bonds sold by hyperscalers to fuel their artificial intelligence ambitions have become a drag on investor portfolios from London to Tokyo. From falling prices and wider spreads to negative total returns, the debt is underperforming on almost every metric. The bonds are in the red on average…, and rank among the worst performers in indexes this year. As firms such as Meta Platforms Inc., Alphabet Inc., and Amazon.com Inc. ramp up borrowing to fund data centers and other AI infrastructure, they have tapped pools of capital worldwide. The wave of issuance has become a test of credit market depth, while growing unease over the scale of AI spending is hammering the shares of chipmakers and cloud-computing giants.”
Oracle bond (5.7%, 2036) yields traded to 6.59% intraday Wednesday, before ending the week 10 bps higher at 6.53%. This yield has surged 47 bps since June 16th. Oracle CDS jumped 11 this week to198 bps, up 43 bps from June 16th to a record close. CoreWeave (8.5%, 2032) yields surged 60 bps this week to a record 9.87% - up 164 bps since June 16th. Meta Platforms (6.3%, 2056) yields traded to a record high of 6.73% in Monday trading – up 50 bps from the June 16th close – before ending the week at 6.61%. Meta’s 10-year yield traded this week to 5.68% (closed week at 5.54%) – up 40 bps since June 16th. Even Apple (4.65%, 2046) yields traded to a record 5.74% on Tuesday (closed week at 5.66%), up 17 bps from the June 16th close.
It’s fundamental to Bubble theory that Bubbles financed by risky “junk” debt have minimal risk of becoming deeply systemic. Issue enough junk debt, and investors will turn nervous – “Too much risk! No more junk!” Bubbles fueled by perceived safe and liquid stores of (nominal) value - “money-like” debt instruments - are so much more dangerous. Insatiable demand for “money” promotes (as we’ve witnessed) protracted affairs, which ensure deep structural financial and economic maladjustment.
The global government finance Bubble has been fueled by tens of Trillions of government debt and central bank Credit (“money”). This unprecedented government debt inflation has been instrumental in inflating system incomes and earnings, no more so than with the big tech oligarchy (today’s “hyperscalers”). A unique dynamic took hold. Massive cash holdings afforded the big tech companies the wherewithal for hundreds of billions of arms race AI capital spending, along with fortress balance sheets with the capacity to borrow hundreds of billions more.
But financial excess is no free lunch. Monetary inflation always comes home to roost. Historic AI arms race spending has dramatically inflated the cost of semiconductors and servers, AI-related talent, power and cooling infrastructure, electricity, electricians, copper, steel, and virtually all things data center construction.
Meanwhile, arms race dynamics ensure intense competition, certainly including the enterprising Chinese AI operators. There are already indications that corporate managements are pushing back against rapidly inflating AI-related expenditures. For general use, AI could evolve into a highly price-competitive commodity business.
The past few months of manic excess have solidified the problematic dynamic of a spectacular inflationary cost spiral in the face of rapidly deteriorating hyperscaler AI earnings prospects. And this is where Bubble dynamics turn really fascinating.
The hyperscalers, committed to Trillions of AI investment, have begun to see their liabilities lose “moneyness.” At the “periphery,” the marketplace has turned on Oracle and CoreWeave bonds. Even Alphabet/Google yields (5.65%, 2056) - trading at 5.50% before the war and 5.73% on June 16th - traded to 6.09% in Wednesday trading. Microsoft (3.45%, 2036) yields traded to 5.08% Tuesday, up from 4.36% before the start of the war. It’s been one historic boom, but financing the AI arms race turns much more challenging going forward. Peak Wall Street?
July 14 – Wall Street Journal (Gina Heeb and Ben Glickman): “A Wall Street boom fueled by red-hot stock-market debuts and volatility that kept trading floors bustling is leading to surging profits at the nation’s biggest banks. JPMorgan Chase, Goldman Sachs, Bank of America, Citigroup and Wells Fargo collectively earned more than $49 billion, a 39% jump from a year ago and above analyst estimates. Their combined revenues rose by more than a fifth. The results were also strong across consumer businesses, showing the U.S. economy continues to benefit from resilient households and optimistic boardrooms.”
July 14 – CNBC (High Son): “American megabanks on Tuesday gave evidence that the global artificial intelligence boom isn’t just benefiting tech giants and chip makers. Goldman Sachs and JPMorgan Chase each posted record quarterly revenue hauls, fueled by massive gains in equities trading and investment banking. Behind the surge in activity — Goldman revenue jumped 39% to $20.3 billion, while JPMorgan saw it rise 27% to $58 billion — is the fact that AI is ‘everywhere in financial markets,’ JPMorgan CFO Jeremy Barnum told reporters. ‘These are booming environments with a ton of activity, big IPOs, big index rebalancing, a lot of activity in Asia,” Barnum said... ‘A lot of it is downstream of the AI theme, writ large on a global basis. It’s just a very, very, very active environment.’”
Eight times a year Bubble analysis is on the receiving end of major data deluges. There are four quarterly Fed Z.1 reports and four quarterly earnings reporting periods for the major financial institutions. This week’s Q2 earnings reports certainly confirmed the historic nature of this boom.
JPMorgan Q2 earnings rose 41% y-o-y to a record $21.2 billion. Net Revenues were up 15% y-o-y to $58.0 billion. Corporate & Investment Bank revenues were up 27% y-o-y to $24.9 billion. Total Trading Revenue rose to record $12.1 billion, with Equities Sales & Trading a record $6.03 billion (up 86% y-o-y). Investment Banking Fees were 30% higher y-o-y to $3.28 billion. Total Assets expanded another $115 billion, or 9.3% annualized, to a record $5.015 TN, with y-o-y growth of $463 billion (10.2%). Net Loans expanded at a 10.5% pace to $1.516 TN (up 9.3% y-o-y).
Goldman Sachs reported earnings of $6.63 billion, up 78% y-o-y. Net revenues were 39% higher to a record $20.3 billion – 24% ahead of estimates. The Global Banking & Markets division achieved record revenues of $15.5 billion. Asset Management revenues rose 20% y-o-y to $4.6 billion. Total Assets expanded $67.8 billion, or 13% annualized, during the quarter to a record $2.128 TN - and surged $343 billion, or 19.2%, y-o-y. Total Loans rose $28 billion, or 24% annualized, during Q2 to a record $493 billion, with one year growth of $89.8 billion, or 19%.
Citigroup reported Q2 Net Income of $5.8 billion, up 45% y-o-y. Net Revenues expanded 14% y-o-y to $24.8 billion. Markets revenues were 17% higher to $7.01 billion, with Equities Trading surging 45% to a record $2.3 billion. Banking revenue jumped 34% to $1.92 billion, with Investment Banking up 44%. Total Assets expanded $117 billion, or 16.8% annualized, to a record $2.895 TN, with one-year growth of $272 billion, or 10.4%. Total Loans rose $23.6 billion, or 11% annualized, to $877 billion, with one-year growth of $87.6 billion, or 11.1%.
Bank of America earnings surged 27% y-o-y to $9.1 billion, with net revenues rising 15% to $31.6 billion. Sales & Trading revenues rose 33% to $7.2 billion, with Equities Trading surging to a record $3.62 billion. Investment Banking revenues jumped 50% y-o-y to $2.14 billion. Total Assets were marginally higher at a record $3.499 TN, with Total Loans expanding at a 3% pace to a record $1.224 TN (up $71.7bn, or 6.2%, y-o-y).
July 15 – Bloomberg (Hannah Levitt): “Morgan Stanley’s stock traders set another quarterly record, with $6.3 billion from equity trading, a 69% jump from its previous all-time high. The firm pulled in $148.1 billion in net new assets in its wealth-management business, with over half related to IPOs, and net revenue at the wealth business was $8.86 billion. Equity underwriting fees were $851 million, up 70% from a year earlier, and total investment-banking fees were $2.44 billion, with mergers-and-acquisitions bankers and debt underwriters generating $798 million and $788 million, respectively.”
July 15 – Bloomberg (Silla Brush): “BlackRock Inc. pulled in $192 billion of net client cash in the second quarter, with investors pouring money into exchange-traded funds and pushing total assets above $15 trillion for the first time. Investors added $53 billion to actively managed funds on a net basis and revenue rose 31% from a year earlier to $7.1 billion… BlackRock pulled in record net inflows of $321 billion for the first half of the year… Net flows to long-term investment funds were $199 billion… BlackRock’s ETF business took in $178 billion, accounting for the vast majority of new money flowing into the firm, while cash and money-market funds lost $7 billion in net money.”
July 14 – Bloomberg (Paul J. Davies): “US banking is on a roll in pretty much every department, but it’s hard to look past stock trading for the kind of exuberance that should trouble almost anyone. Given the amount of borrowed money that hedge funds and retail investors are using to bet on shares right now, there is good reason to worry about how unstable markets could become if, or when, a correction begins. Each of the four big investment banks reporting earnings on Tuesday smashed revenue expectations on their equities desks. For a sense of how surprising the numbers were, take the example of Goldman Sachs Group Inc. The debate before the results was about whether it could produce more than $5 billion in stock trading revenue for a second time this year, after a record first quarter. That was more than any US bank had ever made. Well, the last three months’ revenue was $7.4 billion, up 72% from the same period last year.”
Financial conditions have been ridiculously loose, while inflation has been above target for over five years.
July 14 – Associated Press (Christopher Rugaber): “Federal Reserve Chair Kevin Warsh said… the Fed will make high inflation ‘a thing of the past,’ yet he provided no signal about the central bank’s next steps. Fed policymakers ‘have no tolerance for persistently elevated inflation,’ Warsh said... ‘And we share a resolute commitment to restoring price stability.’ Still, Warsh heads a sharply divided rate-setting committee, with about half of the 19 policymakers penciling in higher interest rates by the end of the year in forecasts released last month.”
Chair Warsh’s first Congressional testimonies went off without a hitch. He’s certainly a smooth talker.
Warsh: “Now, at the Fed, our number one objective is getting monetary policy right. That’s our clear and constant aim, the star we steer by. And if we get policy right, and I can assure you we will, the inflation surge of the last five years will be a thing of the past.”
“We have the commitment, the power and the responsibility to deliver on the mandate that this committee gave us, and we will. We’ve got full ability to do it, so you will not hear me blaming anyone else.”
“Our number one objective is getting policy right, and if we get policy right, we can deliver lower prices.”
“Our number one objective is to get policy right.”
“But inflation’s a choice. We monetary policymakers need to choose lower prices. And that’s the commitment my colleagues have made.”
“My broader definition of price stability is a change in prices, such that households and businesses don’t have to worry about it, don’t have to think about it.”
“And the longer that prices have been above the inflation target, it’s usually a bit harder to dislodge them and get them lower. Our job, my commitment to you, is to take sticky prices and to unstick them.”
“A bit harder to dislodge them and get them lower?” History argues quite hard. And the issue I and others have quickly developed with Warsh is that he has nothing to share about how he plans to rein in now well-entrenched inflation. If his commitment to return to price stability is sincere, he should begin preparing the markets and American population for the unfolding challenge.
The U.S. and world are at peak Bubble. Chair Warsh speaks repeatedly about the “right” policy. There is no right policy that miraculously stabilizes either Bubble excess or consumer prices. The term “trapped” refers to the Fed’s predicament that reining in inflation would require a significant tightening of financial conditions. But tightening would begin the highly destabilizing process of bursting Bubbles. The Fed and Treasury are determined to hold Bubble collapse at bay, which only accommodates ongoing Bubble inflation.
It’s interesting that Warsh is determined to change the Fed’s communication strategy. I share his aversion to “forward guidance.” Stability would be well served if markets could stand on their own.
Warsh: “I can be more broadly than that, we do not want to be in the bailout business, full stop.”
But I guess the forward guidance moratorium doesn’t apply to signaling to the markets that the Warsh Fed will be ready to aggressively respond to market crisis. It appears many changes will be forthcoming for our central bank. The Fed “put,” so fundamental to market speculation and leverage excesses, is safe, secure, and off limits. Warsh’s first major mistake was failing to signal a much-needed rethink of Federal Reserve crisis policy dynamics.
Warsh: “In periods of crisis, when markets aren’t clearing, I am willing to be quite aggressive in what the Fed does with its balance sheet, the assets that we buy as necessary in unusual and exigent circumstances.”
“So, I like interest rates as the dominant ways to make monetary policy, and I’d prefer all the things being equal to use balance sheets when the crises are real.”
Representative Ritchie Torres: “Quantitative easing. Do you believe quantitative easing is inherently inflationary? Yes or no, and then...”
Warsh: “That question I can answer simply. I don’t think it’s inherently inflationary, especially if we adopt quantitative easing in the depths of a crisis. It can often provide liquidity to markets that need it.”
Noland follow-up: “How about when it’s early in the crisis and the forces of inflation are in full force?”
Warsh: “If you’ve seen one financial crisis, you’ve seen one financial crisis. So, I’m careful about extrapolating. More generally, I would say the response to the 2020 pandemic had some very similar areas with respect to monetary policy. That is, the central bankers in 2020 took some of the toolkit that we innovated on in 2008 or 2009, and they provided overwhelming liquidity. That’s in our remit in crises, not in more normal times.”
“But we have to be prepared for shocks that are unanticipated. We have to be open-minded to things that might happen. So, while it might not be common for the economics profession, we have to show a lot of imagination. My general view, again, coming out of the 2008 crisis, is we need to think ex ante about what we might do when the shocks happen.”
I am reminded of the “Bagehot Rule.” In his 1873 classic Lombard Street, Walter Bagehot argued that a central bank (Bank of England) facing a financial panic “should lend freely, at a high interest rate, against good collateral, to stop a crisis without encouraging future recklessness.”
There’s a fundamental and catastrophic flaw in contemporary “QE” crisis management. Instead of lending at a high punitive rate, the Fed and global central bank community offer unlimited liquidity at basically no cost. There is nothing to discourage aggressive speculation and leveraging. Moreover, the greater the degree of Bubble excess, the more confident market operators become of an immediate and powerful liquidity response.
The current system promotes self-reinforcing speculative excess. This is today’s greatest issue in central banking. It’s a very sensitive, incredibly tough issue. The “Fed put” is fundamental to precarious asset inflation and Bubble dynamics. If Chair Warsh is content to ignore this issue, he lacks the courage so desperately needed today at the Federal Reserve.
July 14 – Bloomberg (Max Abelson and Hannah Levitt): “At the top of JPMorgan..., weather metaphors are out and geology is in. ‘Several risks are shifting below the surface like tectonic plates, including geopolitical tensions and wars, sticky inflation, large global fiscal deficits and elevated asset prices,’ Chief Executive Officer Jamie Dimon said… as his bank reported yet another record profit. ‘They may remain manageable, but they could also cause meaningful disruptions when they shift or collide.’”
For the Week:
The S&P500 fell 1.6% (up 8.9% y-t-d), and the Dow declined 0.9% (up 8.5%). The Utilities slipped 0.2% (up 6.5%). The Banks added 0.9% (up 15.0%), while the Broker/Dealers reversed 2.8% lower (up 11.9%). The Transports advanced 2.5% (up 30.9%). The S&P 400 Midcaps were little changed (up 14.2%), while the small cap Russell 2000 dipped 0.5% (up 19.4%). The Nasdaq100 slumped 4.1% (up 13.2%). The Semiconductors sank 10.0% (up 64.8%). The Biotechs slipped 0.4% (up 20.9%). With bullion down $103, the HUI gold index dropped 6.8% (down 15.6%).
Three-month Treasury bill rates ended the week at 3.7057%. Two-year government yields declined three bps to 4.18% (up 70bps y-t-d). Five-year T-note yields dipped three bps to 4.28% (up 55bps). Ten-year Treasury yields slipped one basis point to 4.55% (up 38bps). Long bond yields added a basis point to 5.07% (up 23bps). Benchmark Fannie Mae MBS yields slipped one basis point to 5.52% (up 48bps).
Italian 10-year yields surged 14 bps to 3.95% (up 39bps y-t-d). Greek 10-year yields rose 13 bps to 3.84% (up 34bps). Spain's 10-year yields gained eight bps to 3.59% (up 30bps). German bund yields increased six bps to 3.13% (up 27bps). French yields jumped 10 bps to 3.93% (up 36bps). The French to German 10-year bond spread widened four to 80 bps. U.K. 10-year gilt yields rose eight bps to 4.95% (up 47bps). U.K.’s FTSE equities index rallied 1.0% (up 6.6% y-t-d).
Japan’s Nikkei 225 Equities Index sank 6.4% (up 27.4% y-t-d). Japan’s 10-year “JGB” yields declined four bps to 2.70% (up 63bps y-t-d). France’s CAC40 was unchanged (up 2.3%). The German DAX equities index declined 0.9% (up 1.4%). Spain’s IBEX 35 equities index dipped 0.9% (up 11.0%). Italy’s FTSE MIB index fell 1.4% (up 15.4%). EM equities were mostly lower. Brazil’s Bovespa index fell 2.3% (up 7.8%), while Mexico’s Bolsa index added 0.2% (up 3.5%). South Korea’s Kospi sank 8.8% (up 61.8%). India’s Sensex equities index recovered 0.8% (down 8.3%). China’s Shanghai Exchange Index dropped 5.8% (down 5.2%). Turkey’s Borsa Istanbul National 100 index fell 2.4% (up 24.1%).
Federal Reserve Credit rose $10.6 billion last week to $6.696 TN, with a 31-week expansion of $206 billion. Fed Credit was down $2.193 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.970 TN, or 80%. Fed Credit inflated $3.885 TN, or 138%, since November 7, 2012 (714 weeks). Elsewhere, NY Fed holdings for foreign owners of Treasury, Agency Debt sank another $28.7 billion last week to $2.874 TN - the low back to August 2010. “Custody holdings” were down an extraordinary $357 billion y-o-y, or 11.1%.
Total money market fund assets (MMFA) dropped $59.9 billion to $7.893 TN. MMFA were up $828 billion, or 11.7%, y-o-y - having ballooned a historic $3.309 TN, or 72%, since October 26, 2022.
Total Commercial Paper declined $6.6 billion to $1.389 TN. CP declined $16 billion, or 1.1%, y-o-y.
Freddie Mac 30-year fixed mortgage rates rose six bps to 6.55% (down 20bps y-o-y). Fifteen-year rates jumped 11 bps to 5.93% (up 1bp). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate up four bps to 6.66% (down 20bps).
Currency Watch:
For the week, the U.S. Dollar Index slipped 0.2% to 100.765 (up 2.5% y-t-d). On the upside, the New Zealand dollar increased 1.4%, the Norwegian krone 1.4%, the Canadian dollar 0.9%, the South Korean won 0.8%, the Australian dollar 0.4%, the British pound 0.4%, the Swedish krona 0.2%, the euro 0.2%, and the Swiss franc 0.2%. On the downside, the South African rand declined 1.3%, the Japanese yen 0.4%, the Mexican peso 0.3%, and the Brazilian real 0.1%. China's (onshore) renminbi slipped 0.02% versus the dollar (up 3.13% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index rose 3.6% (up 19.8% y-t-d). Spot Gold fell 2.5% to $4,017 (down 7.0%). Silver sank 6.6% to $55.9115 (down 22.0%). WTI Crude surged $11.08, or 15.5%, to $82.49 (up 44%). Gasoline jumped 13.7% (up 98%), while Natural Gas declined 1.0% to $2.911 (down 21%). Copper slipped 0.3% (up 10%). Wheat surged 8.0% (up 35%), and Corn gained 1.0% (up 1%). Bitcoin was little changed at $63,900 (down 27%).
Market Instability Watch:
July 14 – Bloomberg (Davide Barbuscia): “The race to build infrastructure for artificial intelligence is on track to surpass previous technological booms that ended up in severe market disruptions, the Bank for International Settlements said. Borrowing and financial ties between hyperscalers and AI developers increase the risk of broader financial turmoil, if productivity gains fail to justify the massive investment, the bank warned… ‘The more capacity the sector builds, the higher the productivity bar it must clear to sustain the boom, so a larger boom is both more likely to disappoint and more damaging when it does,’ wrote Phurichai Rungcharoenkitkul, an economist at the… institution.”
July 14 – Bloomberg (Soo-hyang Choi and Sangmi Cha): “South Korean President Lee Jae Myung said the nation’s stock market surged in a short period and would need time to stabilize, after his administration faced criticism for the extreme volatility blamed by some on leveraged products. ‘Our domestic stock market is quite unstable,’ Lee said at a policy meeting with top government officials… ‘In fact, since it experienced a historically unprecedented massive surge in such a short period that it would require time and fluctuation to stabilize.’”
July 15 – Bloomberg (Heesu Lee): “South Korea’s central bank raised interest rates for the first time in more than three years and flagged the possibility of further increases as an artificial intelligence-driven chip boom helps fuel sticky inflation and faster-than-expected economic growth. The Bank of Korea increased the seven-day repurchase rate… by a quarter point to 2.75% in a unanimous decision, in line with the expectations…”
U.S. Credit Trouble Watch:
July 16 – Bloomberg (Lakshmi Babureddy and Gabriella Robinson): “Multifamily property borrowers are under mounting pressure as a more hawkish Fed and a looming debt maturity wall deepen signs of distress. Uneven loan performance and elevated credit risk are making commercial mortgage-backed security investors cautious, with spreads suggesting a flight to quality. The multifamily delinquency rate remains elevated at 5%, while loans on watchlists have reached $128 billion so far in 2026, compared with $96 billion in 2020 and $260 billion last year… Some loans are carrying interest rates as high as 16%.”
Global Credit Bubble and Boom Watch:
July 14 – Bloomberg (Laura Benitez): “When Broadcom Inc. and Anthropic PBC needed vast sums of money to fund their AI ambitions this spring, one lender offered the chipmaker $35 billion of debt and clinched the agreement within weeks — a feat few banks could pull off. But this was no bank. Fueled by the billions flowing into its annuities business and unshackled by banking regulations, Apollo Global Management Inc. landed the biggest private credit deal on record. It was the latest sign that the buyout shop-turned-blue chip lender is muscling in on the turf of Wall Street stalwarts… Apollo maintains it’s not just cutting massive checks. It’s bringing the complexity that once marked its own leveraged bets to a new arena, finding novel ways to fund companies without burdening their balance sheets, including Broadcom and Anthropic in the costly artificial intelligence race.”
July 16 – Bloomberg (Davide Barbuscia): “Oracle Corp.’s ambitions to dominate the artificial intelligence buildout are running into a key hurdle: funding a spending spree without further damaging its credit standing. The tech giant is burning cash faster than it can generate revenue as it’s in the midst of a $250 billion data-center expansion. That’s led S&P Global Ratings to cut the company’s credit ratings to BBB-, just one step above junk status. Moody’s Ratings has a negative outlook…”
July 15 – Bloomberg (Alexandre Rajbhandari): “A growing share of global insurers want to increase their allocation to private credit despite concerns about the asset class. About 57% of global insurers plan to invest more in private credit instruments over the next 12 to 24 months, according to a survey… by Marsh & Mclennan Cos. Among US insurers, that figure jumps to 65%. That’s a significant increase from Marsh’s last survey, in 2024, when only 32% of global respondents said they intended to allocate more to the asset class.”
July 15 – Bloomberg (Aaron Weinman, Rachel Graf and Gowri Gurumurthy): “Wall Street banks, scouring every corner of the capital markets to finance the artificial intelligence buildout, have landed on a new pool of funds: US leveraged loans, which are clamoring for the transactions amid a dearth of buyout deals. The push led QTS Realty Trust LLC, a unit of Blackstone Inc., to more than triple the size of a proposed loan to $3.25 billion, and nix plans for a $1 billion bond sale… For some on the buyside, loans are a logical next step in the AI construction boom.”
July 16 – Bloomberg (Srinivasan Sivabalan): “Bond investors are demanding the most compensation since October 2022 to fund Middle Eastern governments as fighting flares again between the US and Iran. In the week since US President Donald Trump warned a ceasefire may be ‘over,’ the average sovereign risk premium in the region has increased by about 20 bps to 402 bps over Treasury yields, JPMorgan… indexes show. That’s the widest spread in almost four years…”
July 15 – Bloomberg (Rachel Graf and Amedeo Goria): “Credit-rating firms are preparing sweeping changes to how they assess CLOs, putting hundreds of deals and tens of billions worth of bonds in line for upgrades, while reviving fears that structured credit is once again being made to look safer than it really is. The revamp started with Fitch Ratings. On June 1, the firm said its new way of evaluating collateralized loan obligations — bundles of leveraged loans carved into slices of varying risk and return — could lead to upgrades for as much as 15% of the securities it rates. Four days later, Moody’s Ratings raised the stakes, proposing its own changes that would lift roughly a third of the tranches it rates.”
July 14 – Bloomberg (Esteban Duarte): “Klarna is seeking to offload credit risk tied to a portfolio of ‘buy now, pay later loans’, in a deal aimed at freeing up capital as it looks to accelerate its international expansion plans. The Stockholm-based lender is working on an SRT tied to around 5 billion kroner ($516 million) of loans originated by its Swedish unit...”
July 13 – Bloomberg (Charles Williams): “Robinhood Markets Inc. is gauging investor interest in a bond backed by bills for its branded consumer credit cards, in what would be the firm's first offering of its kind. The company is looking to sell at least $400 million of asset backed securities in four parts, according to a person familiar… The fundraising effort comes as Robinhood expands further into the credit card business, pushing beyond the retail brokerage platform it's best known for.”
Leveraged Speculation Watch:
July 16 – Wall Street Journal (Kwanwoo Jun): “South Korea’s top financial regulator unveiled measures to curb risks from single-stock leveraged exchange-traded funds, seeking to stabilize a local stock market that has seen wild swings, as individual investors use debt to chase profits amid artificial-intelligence-related jitters. The Financial Services Commission said… it would suspend new listings of single-stock leveraged ETFs, ban securities firms and asset managers from advertising or marketing such products, and triple the minimum cash deposit for new investments to 30 million won, equivalent to around $20,000. The measures are aimed at curbing speculative trading and reducing risks tied to highly leveraged investment products following recent bouts of market volatility.”
July 13 – Bloomberg (Charlotte Yang): “A new breed of leveraged products tracking major South Korean chip stocks are tumbling in value, threatening steep losses for the country’s retail investors who favor the tools to pursue amplified returns. Prices for more than a dozen leveraged exchange-traded funds tracking Samsung Electronics Co. and SK Hynix Inc. have nearly halved since their listings in late May… The SAMSUNG KODEX SK Hynix Single Stock Leverage, the largest among them with $3.4 billion in assets under management, has fallen about 45% since its debut and is down over 60% from its June peak.”
July 15 – Bloomberg (Katherine Burton): “King Street Capital Management told clients it’s significantly restricting withdrawals from its main hedge fund, moving investors who want to exit to a separate vehicle that will sell off the assets over time. The 31-year-old fund has struggled with lackluster performance, fleeing clients and an exodus of long-tenured staff. It now manages less than $8 billion, down from $20 billion a little more than a decade ago.”
Iran War Watch:
July 17 – Associated Press (Annika Hammerschlag): “Iranian strikes on Friday hit a power and water desalination plant in Kuwait, damaging one of the key sources of drinking water in the small desert nation. It’s the latest attack on essential infrastructure across the Middle East that have exposed extreme vulnerabilities in one of the world’s driest regions, which relies almost exclusively on technology to produce freshwater… Kuwaiti authorities said the strikes damaged a large number of power generation units and sparked a fire… In Kuwait, about 90% of drinking water comes from desalination, along with roughly 86% in Oman and about 70% in Saudi Arabia.”
July 17 – Associated Press (Jon Gambrell): “The United States expanded its airstrike campaign against Iran early Friday by hitting more bridges, energy sites and collapsing a tower at a key Iranian port, backing up U.S. President Donald Trump’s threats to start striking infrastructure to pressure Tehran to ease its chokehold on the Strait of Hormuz. Iran launched missile attacks against U.S.-allied nations in the Middle East, including Qatar, a mediator in the war, and Kuwait, where a power and water desalination plant — vital infrastructure in the desert nation — was damaged.”
July 15 – Associated Press (Jon Gambrell): “The U.S. reimposed a naval blockade on Iran and intensified its airstrike campaign Wednesday in retaliation for Tehran’s attacks on ships trying to pass through the Strait of Hormuz. The American strikes hit an Iranian army barracks, killed at least seven troops and wounded hundreds of people across the country, Iranian officials said… The U.S. first imposed a blockade in April and lifted it last month after signing the interim deal that paused the fighting and set a 60-day period for negotiations over issues such as Iran’s nuclear program… Iran’s parliament speaker and lead negotiator, Mohammad Bagher Qalibaf, said Iran was prepared for a fuller military confrontation if the U.S. does not live up to the terms of the interim deal, and Iran’s paramilitary Revolutionary Guard threatened to halt all energy exports from the Middle East over the blockade. ‘The export of oil and gas from the region will be either for everyone or for no one,’ the Guard said.”
July 15 – Reuters (Enas Alashray, Tala Ramadan and Yomna Ehab): “The U.S. struck Iran’s coastal defenses and missile sites… after reimposing a naval blockade of its ports, while Iran threatened to shut off more regional energy exports, saying it was engaged in an ‘existential war’ with America… After the first wave, which Iran said hit a location on its Hengam Island in the strait, Tehran’s top negotiator Mohammad Baqer Qalibaf issued a statement declaring that Iranian security depended on maintaining what he called ‘Iranian arrangements’ in the strait. ‘We are in an essential and existential war with America,’ Qalibaf said.”
July 13 – Bloomberg (Veena Ali-Khan): “The Iran-backed Houthi group in Yemen fired ballistic missiles and drones on Saudi Arabia, the worst attack in several years that threatens to draw the rebels into the wider regional conflict between Tehran and Washington. The Houthis claimed they targeted Abha Airport in Saudi Arabia’s southwestern region Monday and warned aviation companies to avoid Saudi airspace until what they called a Saudi siege of the Yemeni capital, Sanaa, is lifted.”
July 16 – Reuters (Parisa Hafezi, Samia Nakhoul and Jonathan Saul): “Iran has asked Yemen’s Houthi movement to stand ready to close the Red Sea oil route if the United States strikes Iranian power infrastructure, three sources told Reuters…, posing a potent new threat to global energy supplies. The idea has been discussed within the Islamic Republic’s leadership, and the message has been conveyed to Iran’s Houthi allies, two senior Iranian sources and a regional source familiar with the matter said…”
July 15 – Bloomberg (Alaric Nightingale and Julian Lee): “The recent spate in attacks on commercial shipping during the Iran war has increasingly involved supertankers, highlighting the challenges of reviving the region’s oil flows to the global market. Since a now-shelved peace pact was announced in June, five out of nine attacks on commercial ships were on so-called very large crude carriers…”
July 17 – New York Times (Jenny Gross): “Renewed hostilities between the United States and Iran have caused shipping traffic in the Strait of Hormuz to slow to nearly a halt, with just eight ships navigating the artery on Thursday, the second full day of the reinstated U.S. naval blockade of Iran.”
July 11 – Axios (Barak Ravid): “Iranian Supreme Leader Mojtaba Khamenei announced on Saturday that revenge for his father’s assassination ‘will most certainly be carried out.’ The statement was published after the burial ceremony for his father, former Supreme Leader Ali Khamenei. Throughout the weeklong funeral procession, there were massive public calls for the death of President Trump. Mojtaba Khamenei, who didn’t appear in public during the funeral ceremonies, didn’t specifically mention Trump. But earlier this week, Israel gave the U.S. information that suggested Iranian officials recently discussed the idea of assassinating Trump, U.S. and Israeli officials said.”
July 16 – Bloomberg (Patrick Sykes and Golnar Motevalli): “Iran’s lead negotiator defended diplomatic efforts to end the war, pushing back against hardliners urging him to abandon a tentative peace deal and avenge the country’s slain supreme leader. Negotiation ‘is not tantamount to compromise’ and, alongside military strength, is ‘part of the strategy of resistance and the safeguarding of national interests,’ Parliament Speaker Mohammad Bagher Ghalibaf said… on state TV… ‘We must be able to create a synergy between the military and diplomatic approaches,’ he said, adding that ‘to isolate and select one of these two methods as the sole solution is a strategic error.’”
Iran War Ramifications Watch:
July 15 – Bloomberg (Stephen Carroll, Caroline Hepker and Alaric Nightingale): “The International Maritime Organization said the Strait of Hormuz remains too dangerous for commercial vessels to transit, the most significant warning to the shipping industry about navigational safety since an interim peace deal between Washington and Tehran unraveled.”
July 15 – Reuters (Jonathan Saul and Renee Maltezou): “Shipping companies are avoiding using a U.S. military-guided transit scheme through the Strait of Hormuz after a wave of Iranian attacks on vessels sparked safety concerns, seven maritime security and shipping industry sources said. For decades ships sailed into and out of the Gulf using a safe set of lanes down the middle of the strait established by the U.N.’s shipping agency in 1968 dubbed the Traffic Separation Scheme. Since the Iran war began on February 28, Iranian forces have mined this area, forcing vessels to use one of two makeshift routes close to either the Iranian or Omani coast.”
July 16 – Bloomberg (Joe Carroll and David Gura): “The global economy faces a renewed challenge if the conflict that’s choked the Strait of Hormuz isn’t resolved in a matter of weeks, said International Energy Agency Executive Director Fatih Birol. ‘Markets are nervous’ and grappling with ‘big uncertainty’ due to an escalation of attacks from both sides that threatens to disrupt shipments of oil, fertilizer, natural gas and other cargoes through the key waterway, Birol said…”
July 15 – Financial Times (Verity Ratcliffe and Steff Chávez): “Oil traders have warned the latest flare-up of tensions in the Strait of Hormuz threatens a fresh crude supply crunch without the stockpiles that helped avert a wider economic crisis earlier in the US-Iran war… The International Energy Agency on Friday said its member countries had released almost three-quarters of the planned 400mn-barrel emergency stock release that was announced in March, meaning there are only a few more weeks to go before those supplies to the market dry up. ‘We’ve burned through all of the buffers we had. Everything,’ said one trader. ‘All of that’s now gone.’”
July 13 – Wall Street Journal (Benoît Morenne): “The U.S. is tapping in to its national stocks of crude with abandon. The withdrawals are taking a toll on the strategic reserve system. Just in the past four years, the Biden and Trump administrations have ordered the largest releases from the Strategic Petroleum Reserve while seeking to tamp down soaring oil prices—a total of 352 million barrels, or nearly half the capacity of the stocks. Now, frequent drawdowns, wear-and-tear and a lack of investments are straining the reserve… The 60 Gulf Coast salt caverns that make up the stocks can’t be drawn from or refilled at the rate at which they were designed, federal researchers found. Equipment failures have bedeviled the reserve’s managers. At one point, a well broke and caused the loss of hundreds of thousands of barrels of crude.”
July 15 – Wall Street Journal (Giulia Petroni): “Europe’s race to refill natural-gas stockpiles has become increasingly challenging as the Iran war drives up prices… The conflict has severely disrupted flows through the Strait of Hormuz, which used to carry around 20% of global liquefied natural gas flows, while Iranian attacks have wiped out 17% of Qatar’s LNG export capacity. European gas prices have jumped more than 70% since the war started. Gas storage sites across the European Union are now about 52% full, while injection rates are running below last year’s pace and the 10-year summer average… ‘Europe is on track to enter winter with its lowest gas storage buffer since the 2022 energy crisis,’ said Natasha Fielding, head of gas and LNG pricing at Argus.”
July 15 – Reuters (Rajesh Kumar Singh): “United Airlines said… it expected nearly $6 billion in additional fuel expense this year compared with what it estimated at the start of 2026, as a renewed surge in oil prices weighed on its third-quarter and full-year profit outlooks. Still, the… carrier raised the low end of its full-year profit forecast, betting strong travel demand, higher fares and capacity cuts will help it absorb the fuel shock.”
July 15 – Bloomberg (Rakesh Sharma and Weilun Soon): “India has directed ship owners, ship managers and recruitment agencies to stop deploying the country’s seafarers on vessels going through the Strait of Hormuz following an upsurge in attacks. Among precautions, there should be no deployment of Indian crew members on vessels undertaking voyages through the waterway ‘until further orders,’ the Directorate General of Shipping said…”
Trump Administration Watch:
July 14 – New York Times (Peter Baker): “On the 136th day of his war against Iran, President Trump came up with a new plan. He would impose tolls on ships traversing the Strait of Hormuz in exchange for protecting them from Iranian forces. But that was then. On Day 137, he had another new plan. No tolls after all. Mr. Trump’s 180-degree reversal this week in the face of protests from his Arab allies who were not so excited about paying tolls reflected how adrift he seems to be in prosecuting his war against Iran. What was supposed to be a clean four-to-six-week operation is now in its messy 20th week. Improvisation and impulse are not working. A president who has made flexing his power on the world stage a hallmark of his second term has found in Iran an opponent that so far will not bend to his will and a geopolitical conflict that cannot be won through nasty social media posts or tariff threats.”
July 14 – Axios (Barak Ravid): “President Trump held a Situation Room meeting Tuesday to discuss a massive offensive in Iran that will be wider in scope than the current strikes around the Strait of Hormuz… Trump appears willing to escalate the war to cause enough damage that the Iranian regime will open the Strait of Hormuz and accept Trump's nuclear demands.”
July 15 – Bloomberg (Fiona MacDonald and Zainab Fattah): “President Donald Trump said he would intensify the US’s bombardment against Iran until it stops attacking ships in the Strait of Hormuz and agrees to open the waterway… ‘We’re going to hit them very hard tomorrow night,’ he told Fox News... ‘We’re going to hit them very hard the night after. And then next week it gets really bad for them because next week comes the power plants. We’re going to knock out all of their bridges unless they get to the table and negotiate.’”
July 16 – Bloomberg (Catherine Lucey and Courtney Subramanian): “President Donald Trump devoted a prime-time address to reviving unsubstantiated claims that the 2020 election was stolen and stoking doubts about the security of the upcoming midterms, turning his attention to a years-long grievance at a perilous moment for his presidency. Speaking Thursday from the East Room of the White House, Trump said he was detailing findings from newly released declassified intelligence reports with claims about vulnerabilities to voting systems, China’s efforts to acquire US voter data, Michigan voter registration fraud and what he said were more than 200,000 noncitizens on state voter rolls.”
July 15 – CNBC (Kevin Breuninger): “National Economic Council Director Kevin Hassett said… he sees no argument for hiking interest rates in light of the latest data on the U.S. economy, including an ‘amazing’ inflation report. ‘There’s not really an excuse for raising rates right now,’ Hassett said… He said that he expects the Federal Reserve will ‘be thinking the other way,’ meaning lowering interest rates, if the data trends continue. Hassett added that the White House is expecting Fed Chair Kevin Warsh, President Donald Trump’s pick who started the job in late May, will ‘drive the committee to the right answer.’”
July 16 – Wall Street Journal (Dean Sea and David Uberti): “President Trump broke with tradition by posting near-constant policy decisions and market-moving news on his social-media platform. Now his media company wants traders and investors to pay for instant access to his Truth Social posts, the latest example of the first family mixing its business interests and White House affairs. Trump Media & Technology Group said Thursday it plans to launch a data feed that gives real-time access to posts from the highest-ranking accounts on its Truth Social platform.”
July 16 – Financial Times (Amy Mackinnon): “Leftwing political violence is a ‘fatal cancer to civilisation’, Stephen Miller, White House deputy chief of staff, told an international summit on far-left terrorism convened by the US state department… If left unchecked, political violence from the left ‘always becomes a Gulag’, Miller told the gathering, which was attended by senior officials from more than 60 countries in Europe and Latin America. ‘It always becomes the mass imprisonment of political enemies, the stripping of their rights and freedoms, inflicting immense pain, humiliation, suffering, in order to establish complete and total control, control through psychological and physical and actual terror,’ Miller said.”
July 15 – Wall Street Journal (Marianne LeVine and Maggie Severns): “Presidents have always raised money from private donors—to run for office, throw inaugural balls and build presidential libraries. But Donald Trump has turned his second term into an unprecedented fundraising blitz, raising well over half a billion dollars from wealthy donors and stashing it in a sprawling network of nonprofits, cultural institutions and committees that he and his allies control. Companies seeking lucrative contracts or favorable policies from the administration have poured millions of dollars into these funds, which have become a key tool for Trump to pursue his political and personal priorities. He has used them to oust his political opponents, change the cultural face of the nation’s capital and boost his postpresidency legacy. In many cases, details about where the cash is coming from or how it is being spent are shrouded in secrecy…”
July 16 – Axios (Nathan Bomey): “Federal regulators are investigating whether a White House teleprompter operator capitalized on his knowledge of President Trump’s prepared speech text by making trades on the prediction market Kalshi, according to two sources familiar... The speeches the person allegedly traded on included the State of the Union in February… Gabriel Perez, the teleprompter operator, is under investigation… Perez won more than $100,000 on such trades, the sources said.”
July 13 – Bloomberg (Fabiola Zerpa): “Venezuela’s monthly inflation more than doubled in June, deepening the hardship for families already reeling from the devastation caused by the twin earthquakes of June 24. Inflation reached 13.8% after slowing to 6.3% in May… The acceleration complicates interim President Delcy RodrÃguez’s reconstruction efforts and marks a setback for her government’s strategy of containing inflation by stabilizing the local currency. Consumer prices have risen 129.8% so far this year.”
Trade War Watch:
July 13 – Reuters (Joe Cash and Yukun Zhang): “China’s exports surged in June, buoyed by orders for chips to fuel the global AI boom and automobiles… The stronger-than-expected trade performance keeps China on track to post a surplus topping $1 trillion for a second straight year… Exports climbed 27% from a year earlier in U.S. dollar value terms…, outpacing the 19.4% gain in May and an 18.2% rise forecast by economists. Imports jumped 36%, compared with a 27.4% gain the month before, a five-year high.”
July 13 – Reuters (Shivangi Acharya, Manoj Kumar and Trevor Hunnicutt): “India and the U.S. did not reach a consensus on a trade agreement in recent talks, with New Delhi holding out for a better deal as Prime Minister Narendra Modi draws confidence from new trading partners, eased economic risks and political gains at home… India’s trade minister, Piyush Goyal, said… both countries remain ‘fully engaged’ in their commitment to an agreement which is balanced and beneficial to both economies.”
Deficit Watch:
July 17 – Wall Street Journal (Maya Davis, Yoko Kubota and Olivia Beavers): “House Republicans are plunging ahead with a plan to approve extra military spending more than four months into the Iran war, but the package is much smaller than the broader boost President Trump has been seeking—and its passage remains uncertain due to divides in the party. The GOP is trying to lock down tens of billions of dollars before the midterm elections to help cover ballooning military costs. On Thursday, the House Budget Committee advanced a framework for a $95 billion package that would provide as much as $73 billion in defense and intelligence funding and $12 billion for farm assistance. An additional $10 billion would be allocated toward measures to tighten voting rules in states, attempting to partially address a key demand of Trump’s.”
July 13 – Bloomberg (Chris Anstey and Daniel Flatley): “A large wave of refund payments for tariff increases declared illegal by the Supreme Court caused the first widening in the US federal budget deficit since the start of this fiscal year. The gap for the first nine months of fiscal 2026 came to $1.37 trillion… That marks a 2% widening in the gap compared with 2025. For the month of June, the total deficit was $120 billion.”
July 16 – Associated Press (Paul Wiseman): “The U.S. Treasury last year swelled with revenue from President Donald Trump’s double-digit taxes on imports from almost every country on earth. But the money dried up after the Supreme Court struck down the biggest and boldest of Trump’s tariffs in February. The question now is: Can the president’s trade team make good on its promise to replace the lost revenue? A deadline is approaching rapidly. After the Supreme Court setback, the president turned first to Section 122 of the Trade Act of 1974 to impose 10% tariffs globally. But Section 122 only authorizes tariffs for 150 days. Trump’s expire on July 24. Congress would have to extend those tariffs — something lawmakers are unlikely to do as the Nov. 3 midterm elections approach…”
Constitution Watch:
July 14 – Associated Press (Jocelyn Noveck): “Dangerous. Brazen. Unprecedented. Uncharted territory. Reaction in the media world has been swift and severe to the issue of subpoenas to five New York Times journalists who reported on security questions involving the new Qatari-gifted Air Force One — a legal maneuver seen as a troubling escalation of the Trump administration’s campaign to control and intimidate independent media outlets. ‘The subpoenas are an extraordinary escalation in President Trump’s efforts to threaten and intimidate independent news organizations and have a chilling effect on the work of journalists across the country,’ said Jodie Ginsberg, CEO of the Committee to Protect Journalists. Media advocates and analysts expressed dismay at the tactic…”
July 17 – Axios (Sara Fischer): “President Trump threatened again to revoke the broadcast licenses of ABC and NBC on Thursday, after those networks decided not to preempt their regularly scheduled programming to cover his address on election integrity live.”
July 12 – Financial Times (Ella Lee): “Justice Amy Coney Barrett has compared sitting on the US Supreme Court to ‘being in an arranged marriage with no option of divorce’. After a politically fraught term marred by infighting, its nine members may need couples therapy. Over the course of a term dominated by President Donald Trump’s controversial second-term agenda — from his immigration crackdown to his bureaucratic takeover — the knives have come out at the nation’s top court. In pointed remarks and fiery written opinions, its justices have traded barbs in a manner typically kept out of the public eye. The hardening of ideological lines at the once collegial top court could have profound consequences for public support of the nation’s third branch of government.”
New World Order Watch:
July 15 – Bloomberg: “More people around the world view China more positively than the US for the first time since at least 2023, according to a survey by Pew Research Center, with sentiment shifting even among some of Washington’s allies as the two powers compete for influence globally. Public opinion of the US has worsened to the extent that China is now seen more favorably in most of the 36 countries surveyed this year. Those include Canada, Australia, France and Germany — US allies where the ‘favorability gap’ with Beijing has reversed in recent years.”
July 12 – Financial Times (Peter Foster): “Europe and the US would need to invest an extra $23.6tn over the next 25 years to end their reliance on China in critical industries such as manufacturing and technology, an economic analysis suggests. Consultancy EY-Parthenon calculated that replicating the infrastructure, research, software, manufacturing and supply chains currently reliant on China would cost the US $13.7tn, the Eurozone $9.1tn and the UK $800bn by 2050. At $550bn a year, the annual investment required from the US government and American companies to decouple from China is roughly equivalent to the $600bn invested by big US technology groups in data centres in 2025.”
U.S./Russia/China/Europe/Iran Watch:
July 17 – South China Morning Post (Dewey SimandKhushboo Razdan): “US President Donald Trump launched a sharp attack on China…, accusing Beijing of interfering in US elections in a move that has strained a fragile thaw in ties and cast doubt on future high-level engagements. In a prime-time address…, Trump accused China of orchestrating ‘what is believed to be the largest compromise of election data in history’… China’s foreign ministry dismissed Trump’s allegations as having “no factual ground”, saying Beijing adhered to the principle of non-intervention in other states’ internal affairs and had no interest in interfering in US elections. Ministry spokesman Lin Jian urged Washington to reflect on its actions, stop its ‘unfounded smears’ against China and ‘do more to benefit China-US relations’.”
Ukraine War Watch:
July 16 – Financial Times (Alice Hancock, Susannah Savage and Polina Ivanova): “Ukraine is struggling to ship grain via the Black Sea as Moscow steps up strikes on commercial vessels in retaliation for a week of heavy attacks by Ukraine on Russian shipping. Russian drone attacks on the port of Odesa, Ukraine’s biggest seaport, have caused storage capacity to drop by a third…, while shipowners are refusing to send ships into the area for fear of being struck. Some traders have paused buying in Odesa…”
July 13 – Bloomberg: “A wave of Ukrainian attacks has pushed Russian refining runs to the lowest in more than 21 years, deepening a domestic fuel crunch and further squeezing the global market. Crude-processing rates have averaged 3.91 million barrels a day so far this month, the lowest level since March 2005…”
AI Bubble/Arms Race Watch:
July 14 – Reuters (Saeed Azhar and Nupur Anand): “A rush by technology companies to fund AI infrastructure is boosting dealmaking and financing activity for Wall Street, bankers said on Tuesday, generating lucrative fees from capital raising and loans… ‘The build-out of AI infrastructure remains in its early stages, and we believe this multi-year investment cycle will continue to drive elevated levels of strategic activity, financing, and capital formation across markets,’ Goldman Sachs CEO David Solomon said… Solomon added that the industry ‘is in the middle of an AI capex super cycle’ where there are demands to utilize every single financing instrument.”
July 12 – Wall Street Journal (Sam Goldfarb): “Wall Street is sending a message to tech companies engaged in a historic borrowing spree to fund investments in artificial-intelligence infrastructure: for pity’s sake, please slow down. Over the past several weeks, the investment-grade corporate bond market has struggled to absorb a combined $75 billion of bond issuance from Nvidia SpaceX and Amazon.com. That marks a shift from earlier in the year, when investors were generally happy to hand money to so-called AI hyperscalers by any possible means. While Nvidia and SpaceX were able to borrow at reasonably low interest rates, their newly issued bonds quickly slumped in the secondary market, disappointing investors who often like to flip such bonds. Amazon, meanwhile, had to pay unusually steep rates by its standards to complete its debt sale, reflecting investors’ newfound caution.”
July 13 – Bloomberg (Paul J. Davies): “The data-center building boom has sparked an explosion of debt funding even though it has barely begun. But the investors financing this engine of the artificial-intelligence revolution aren’t paying enough attention to the terms of their lending. Some of the deals being underwritten offer proper protections against construction delays or problem tenants; others, much less so. Bondholders need to get a grip on the detail in the documents before things start to go awry. The five hyperscalers – Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and Oracle Corp. – are expected to invest $5.8 trillion in the computing capacity they need to run AI by 2030, according to… Goldman Sachs…”
July 13 – Bloomberg (Riley Griffin): “Meta Platforms Inc. has committed to spending an additional $40 billion on its sprawling data center campus in Louisiana, pushing its total expected investment beyond $250 billion for the site as it continues to grow its artificial intelligence computing footprint. Meta announced Monday that it will expand the project in rural Louisiana to at least 5 gigawatts of computing power at a cost of $50 billion.”
July 12 – Financial Times (Jamie John and George Hammond): “Companies from Silicon Valley to Europe are turning to Chinese AI models as they try to cut the cost of using the technology and reduce their dependence on US frontier labs. DoorDash, Siemens and Airbnb are among the groups that have adopted AI tools built in China, drawn by models that are cheaper, increasingly capable and, in some cases, easier to run on their own infrastructure. Chinese AI models from groups such as DeepSeek and Z.ai have rapidly overtaken US rivals in token consumption this year, according to OpenRouter, a platform that tracks… data processed by large language models. The shift has been driven largely by cost, as companies try to curb ballooning AI bills.”
July 16 – Axios (Courtenay Brown): “Businesses across America are telling similar stories about the effects of AI: The buildout is increasing the competition for certain kinds of workers, driving up the price of memory chips and reshaping how companies hire. They are describing a scramble for workers and resources from electricians and skilled technicians to transformers and memory chips as companies race to build AI infrastructure. This was one prominent theme in the Federal Reserve’s latest Beige Book… A shortage of electricians has delayed data center projects in the Philadelphia Fed’s district, while Dallas contacts said oilfield services companies are losing skilled workers to power generation and AI infrastructure projects.”
July 11 – Reuters (Heekyong Yang and Kenneth Li): “SK Hynix Chief Executive Kwak Noh-jung said the global memory industry is heading for its worst-ever supply shortage in 2027, forecasting that demand for memory will continue to exceed the company’s ability to produce it well into the next decade despite aggressive capacity expansion. ‘We forecast that next year will be the worst year in the industry's history from the supply perspective,’ Kwak told Reuters…”
July 10 – Axios (Megan Morrone): “Apple is suing OpenAI for trade secret theft, alleging the AI giant deliberately and systematically solicited and stole confidential information from the iPhone maker's current and former employees. Apple has lost significant talent to OpenAI as the frontier lab prepares to unveil its first hardware device this year. ‘Recently, significant evidence has emerged suggesting individuals employed by OpenAI wrongfully took Apple’s secret and confidential information regarding our unreleased technologies, processes, and products,’ Apple said…”
July 14 – Financial Times (Martha Muir): “New York is set to become the first US state to impose a one-year ban on construction of new data centres, as backlash swells over the infrastructure needed to power the AI boom. The Empire State will ban data centres of more than 50 megawatts for a period of one year… In a video posted to X, Governor Kathy Hochul said that the ‘scale and speed of development has put unprecedented demand on energy and water resources and threatens to drive up utility costs. Before it goes any further I need safeguards in place to protect New Yorkers.’”
Bubble Watch:
July 14 – Reuters (Harshita Mary Varghese and Rashika Singh): “IBM said it had ‘faltered’ in keeping pace with a shift in corporate spending from software to data-center infrastructure and would take a big earnings hit in the second quarter, in the clearest sign yet of AI’s growing toll on the sector. IBM’s shares tanked 25% on Tuesday, putting the stock on track for an even steeper single-day decline than it suffered during the 1987 ‘Black Monday’ crash… The warning shows that businesses racing to secure access to supply-constrained servers, chips and networking gear are diverting spending away from other technologies, adding to concerns about a software industry already rocked by the rise of AI tools that can write computer code and automate tasks.”
July 1 – Bloomberg (Michael Msika): “US executives are selling shares at the second-fastest pace in more than 20 years, a classic red flag to some investors because it suggests people with the most corporate knowledge are wary about markets. Corporate insiders sold $77.6 billion of stock during the first half of 2026, a 20% increase from a year ago, according to EPFR... The only time the selling spree was more intense was back in 2021, when markets were flush with pandemic-driven stimulus cash.”
July 15 – Reuters (Niket Nishant, Johann M Cherian and Akash Sriram): “SpaceX shares dropped below their initial public offering price for the first time on Wednesday before closing just above that level, just over a month after the rockets-to-AI firm completed the biggest IPO ever and made Elon Musk the world’s first trillionaire.”
July 14 – Bloomberg (Charlotte Plaskwa): “The five major US banks that posted second quarter results on Tuesday said they set aside less money to cover bad loans, a sign of growing optimism about the outlook for borrower defaults. Goldman Sachs... saw the biggest drop among peers in its reported credit provisions on Tuesday, falling to about $102 million, about a 73% decline from the same period last year. The fall was driven in part by the bank’s pullback from credit card lending… Bank of America Corp. and JPMorgan… lowered provisions by 14.2% and 11.7%, respectively. For Citigroup Inc., the figure fell about 12%.”
Crypto Bubble Watch:
July 13 – Reuters (Shivangi Acharya, Manoj Kumar and Trevor Hunnicutt): “A move by Michael Saylor’s bitcoin stockpiling company Strategy to authorize more bitcoin sales has once again shone a spotlight on a clutch of public crypto hoarding companies, which have been buffeted by falling token prices… The sales have again raised questions about the viability of dozens of copycat ‘digital asset treasury’ companies, or DATs, which boomed last year thanks to market exuberance over U.S. President Trump's crypto-friendly policies.”
Inflation Watch:
July 13 – Associated Press (Christopher Rugaber): “American consumers — and the Federal Reserve — are being hit with another high-cost headache. The gusher of investment in data centers — likely topping $700 billion this year — to power artificial intelligence has made memory chips, computer processors and other equipment, as well as electricity, more expensive. Economists expect it will continue to push up inflation at least through the end of this year. While it won’t be as large a spike as occurred in 2021-2023, when inflation peaked at 9.1%, massive AI spending is likely to keep prices rising more quickly than the Federal Reserve would like.”
July 14 – CNBC (Jeff Cox): “Consumer prices posted their biggest decline in more than six years during June as a sharp swoon in energy prices provided at least temporary relief from this year’s inflation surge… The consumer price index… was lower than expected across the board. The CPI fell a seasonally adjusted 0.4% for the month, bringing the annual inflation rate down to 3.5%. Economists… had been looking for a drop of 0.2% and an inflation rate of 3.8%, following the 4.2% reading in May… Core inflation, which excludes food and energy, was flat on the month, putting the 12-month rate at 2.6%.”
July 15 – Associated Press (Paul Wiseman): “U.S. wholesale inflation fell from May to June on plunging energy prices, but intensifying hostilities with Iran are clouding the outlook. The… producer price index… dropped 0.3% from May, biggest decline since April 2025 and a reversal from a 0.6% uptick the month before. Compared to a year earlier, wholesale prices were up 5.5% in June, decelerating from a 6% increase the month before. Gasoline prices plunged 12% in June but are still up nearly 43% from June 2025, pushed higher by the Iran war. Food prices also dipped in June. Excluding volatile food and energy prices, so-called core wholesale prices were up 4.7% from June 2025 and 0.2% from May.”
July 1 – Reuters (Lucia Mutikani): “U.S. import prices unexpectedly rose in June as declines in the costs of food and energy products were more than offset by higher prices for capital and consumer goods, leading to the largest annual increase in imported inflation in nearly four years. Import prices increased 0.3% last month after a downwardly revised 1.7% advance in May… In the 12 months through June, import prices surged 7.1%. That was the biggest advance since August 2022… Prices of imported fuel fell 0.4% last month after rising 12.6% in May. They jumped 44.1% year-on-year in June.”
July 16 – Los Angeles Times (Melody Petersen): “Employers are bracing for what could be the highest rise in health insurance premiums in 16 years in 2027, driving up the average cost of family coverage in California to more than $30,000… Health insurance companies expect the cost of medical services and prescription drugs to soar by 9% in 2027, according to a new survey by PwC, the highest rise the researchers have found since 2011. Insurers use those expected medical costs to calculate the price of premiums in the coming year.”
July 14 – Bloomberg (John Ainger and Mark Chediak): “Power-hungry data centers have increased supply costs for the largest US electric grid by more than 60%, the system watchdog said. PJM Interconnection LLC, which serves 13 states and Washington, DC, said Tuesday that its auction to procure power for the year starting June 2028 tied a $16.4 billion record set in late 2025. Data centers accounted for roughly $6.3 billion of that total, said Joseph Bowring, president of Monitoring Analytics, the grid’s independent market monitor. That data-center burden on PJM ratepayers amounts to almost $30 billion when figures from three previous auctions are included, he said…”
July 13 – Bloomberg (Emily Forgash): “The cost of power from natural gas-fired plants in the US hit the highest level in at least 17 years, and is poised to climb even higher as demand surges from new data centers. That’s according to George Bilicic, global head of power, energy and infrastructure at Lazard Inc., which tracks the so-called levelized cost of energy. That’s the long-term electricity price a power-plant must get to break even. For combined cycle gas plants, that rose to $90 a megawatt-hour in 2026… That’s up from $78 a year earlier and the highest since 2009, the earliest year in the data…”
July 11 – Reuters (David Shepardson): “The cash-strapped U.S. Postal Service will raise the price of stamps for mailing a first-class letter to 82 cents from 78 cents, effective Sunday. USPS, which has warned it could run out of cash early next year, announced in April it would raise mailing costs by 4.8%.”
Federal Reserve Watch:
July 14 – New York Times (Colby Smith): “Kevin M. Warsh reiterated his commitment to bringing down inflation at his first congressional hearing since becoming chairman of the Federal Reserve. However, he has yet to indicate whether he supports higher interest rates to achieve that goal. Mr. Warsh told lawmakers on the House Financial Services Committee… the central bank would set policy ‘right’ such that ‘the inflation surge of the last five years will be a thing of the past.’ A pledge to deliver price stability was established last month at Mr. Warsh’s first policy meeting in the top job, at which officials voted unanimously to hold rates steady at a range of 3.5% to 3.75%. ‘The members of our committee have no tolerance for persistently elevated inflation,’ Mr. Warsh told lawmakers... ‘And we share a resolute commitment to restoring price stability.’”
July 15 – Associated Press (Christopher Rugaber): “Federal Reserve Chair Kevin Warsh on Wednesday navigated a series of thorny questions from senators on issues such as the impact of AI on inflation, what contacts he has had with President Donald Trump, and how the central bank will determine the persistence of inflation, without providing many specifics… ‘I don’t view a one-time change in prices as necessarily being inflationary, because I think there’s a supply response,’ he said in answer to a question on the impact of massive investment in AI infrastructure. ‘Will it increase measured prices over the course of the next 12 months? I suspect it will be. Whether that’s inflationary or not, that’s up to the Federal Reserve, and we’re going to have something to say about that.’”
July 13 – Bloomberg (Alex Harris and Michael MacKenzie): “Wall Street strategists expect a group of senior academics and former policymakers assembled by Chairman Kevin Warsh to review the Federal Reserve’s $6.7 trillion balance sheet will face a difficult balancing act: shrinking the central bank’s holdings without destabilizing funding markets. While the group’s academic heft lends credibility to the process, the lack of market experts among its members could result in solutions that are good in theory but difficult to implement, some of them warned.”
July 16 – CNBC (Jeff Cox): “Dallas Federal Reserve President Lorie Logan, asserting that this week’s good inflation news wasn’t good enough, called… for ‘modestly’ higher interest rates to win a battle the central bank has been losing for the past five years… ‘I currently believe modestly higher interest rates would better balance the outlook and risks for the FOMC’s dual mandate goals,’ Logan said... ‘Every month of above-target inflation has compounded the strain on Americans’ budgets.’”
July 16 – Bloomberg (Enda Curran): “Federal Reserve Bank of Kansas City President Jeff Schmid said inflation is his biggest worry given the risk of a further acceleration in the months ahead... ‘My primary concern is inflation, which is too hot and has been above target for too long,’ Schmid said… ‘As such, my focus remains on inflation in setting the correct course for policy.’”
July 15 – CNBC (Jeff Cox): “New York Federal Reserve President John Williams said… he sees multiple signs that inflation has peaked, allowing the central bank to hold interest rates in place despite market expectations for a hike in coming months… Williams cited five reasons why he expects the latest price surge has run its course. ‘There are encouraging reasons to expect that inflation has peaked and should edge down in coming quarters,’ he said. ‘I expect overall inflation to decline to around [3.25%] percent by year-end, then continue on a glide path toward our 2% goal in 2027 and land on target in 2028,’ he later added.”
U.S. Economic Bubble Watch:
July 14 – Wall Street Journal (Jessica Coacci): “Confidence among U.S. small businesses improved in June as lower fuel costs provided some relief for businesses. The National Federation of Independent Business said… its small-business optimism index rose 2.1 points in June to 97.4. Economists… expected a lower reading of 95.7... ‘Lower fuel costs provide welcome relief for businesses as well as consumers, with firms anticipating improved operating conditions over the next six months,’ said NFIB Chief Economist Bill Dunkelberg.”
July 16 – Associated Press (Matt Ott): “Filings for unemployment benefits fell last week to the lowest level in 10 weeks as U.S. layoffs remain historically low. The number of Americans applying for jobless aid in the week ending July 11 dropped by 8,000 to 208,000… The total number of Americans filing for unemployment benefits for the previous week ending July 4 fell by 16,000 to 1.81 million, also a historically healthy figure.”
July 16 – Associated Press (Anne D’Innocenzio): “Shoppers slowed their spending in June from May, as they spent less to fill their gas tank because of falling gas prices. But the report… showed consumers’ continued resilience despite ongoing economic uncertainty as they bought cars and took advantage of summer sales events. Retail sales rose 0.2% in June, after being up a revised 1% in May… Outside of gas stations, retail sales rose a solid 0.7%... Business at gas stations fell 5.3% last month.”
July 15 – Bloomberg (Josyana Joshua): “A pile of credit-card reward points can take you business class to Bali or cover a few days’ stay in a London boutique hotel. These days, as inflation strains American budgets, more people say they’re using points for daily essentials, from gasoline to cat litter. In a survey of more than 1,000 people, over 35% said they redeem reward points for ‘everyday expenses,’ according to USAA Federal Savings Bank. Statement credits also are popular, with 79% of respondents saying they’ve used points that way at least once in the past six months.”
July 15 – Bloomberg (Maria Eloisa Capurro and Maya Prakash): “US economic activity increased at a slight to moderate pace in recent weeks as most regions experienced little to no change in employment levels, the Federal Reserve said. Prices increased moderately overall, according to the US central bank’s Beige Book survey of regional business contacts... ‘Some contacts tied these cost increases to the conflict in the Middle East; others mentioned tariffs. Consumer prices continued to rise, and a few districts said contacts saw greater price sensitivity among their customers,’ the Fed said.”
July 14 – Wall Street Journal (Oyin Adedoyin and Elyse Goncalves): “Americans have been falling behind on their credit card bills at the highest rate in 15 years. You wouldn’t know it from the big banks’ earnings... Some 13% of credit card balances were 90 days or more delinquent in the first three months of the year, according to data released in May by the Federal Reserve Bank of New York. JPMorgan…, Bank of America and Wells Fargo all said that their 90-day-plus delinquencies were in the low single-digits and down from a year earlier in the second quarter. The banks cited consumers’ resilient financial picture in reporting strong earnings on Tuesday. Part of the disconnect is that banks have been focusing their businesses on prime and super-prime consumers.”
July 15 – CNBC (Diana Olick): “Mortgage rates rose last week to the highest level since August 2025, and that caused homebuyer demand for loans to pull back. Refinance demand, however, moved higher… Applications for a mortgage to purchase a home fell 7% from the previous week and were 2% lower than the same week one year ago. Buyers are still contending with high home prices as well as lean supply of affordable homes for sale.”
China Watch:
July 16 – Financial Times (Thomas Hale and Joe Leahy): “Xi Jinping has set out China’s ambitions to rival the US as a global leader in AI, a day after almost 30 countries joined a coalition that stands to hand Beijing more control over the development of the technology. China’s president called for ‘extensive international co-operation’ as he warned over AI’s risks, and said China would offer training to developing countries and help them build capacity… Xi said that the more AI developed at a ‘staggering speed’, the more there was a need for a ‘positive direction’. ‘[We must] more precisely grasp the scale of oversight and governance, and more promptly refine measures to forestall loss of control,’ he said.”
July 15 – Bloomberg: “China’s credit expansion missed forecasts in June, as weaker government bond issuance and subdued demand for borrowing outweighed the usual pickup in quarter-end lending. Aggregate financing, a broad measure of credit, increased about 3.4 trillion yuan ($497bn)… That compares with a median forecast of 3.7 trillion yuan… and an expansion of 4.2 trillion yuan recorded a year ago. Financial institutions extended 1.6 trillion yuan of new loans in the month. The median forecast was an increase of 2 trillion yuan. Credit extension usually picks up in June because banks push for more lending to achieve their quarterly targets. But borrowing demand is showing little sign of emerging from a years-long funk caused by weak domestic consumer spending and investment.”
July 14 – Associated Press (Chan Ho-Him): “China’s economy slowed sharply to a 4.3% annualized pace of growth in the April-June quarter…, the weakest in over three years. The official data fell short of forecasts and was far below the economy’s strong 5% pace of growth in January-March, despite a surge in exports driven partly by the boom in artificial intelligence, and by robust global demand for Chinese electric vehicles… ‘This was the slowest growth in any quarter since the lockdown-impacted fourth quarter of 2022,’ said Lynn Song, chief economist for Greater China at ING Bank in a note.”
July 14 – Bloomberg (Julia Zhong and Shulun Huang): “China’s government bond issuance is on track for a record-breaking third quarter…, a surge that may prompt the central bank to ramp up cash injections to support demand for the debt. Net bond issuance from central and local governments may rise to between 4.2 trillion yuan and 4.4 trillion yuan ($619bn-$649bn) this quarter, according to… Huachuang Securities, Huafu Securities and CIB Research. That’s higher than the record high of 3.8 trillion yuan for the same period last year.”
July 15 – Reuters: “The People’s Bank of China has repeatedly urged commercial banks to step up lending, but the banks have balked, instead tightening lending standards to protect themselves from additional bad debt. Short-term household loans contracted 7% year-on-year last month…, in the latest evidence of an anaemic market… The conundrum is that, for the most part, only those with bad credit are looking to borrow. ‘More creditworthy customers are reducing credit card usage,’ said Nicholas Zhu, a banking analyst at Moody’s. ‘Less creditworthy consumers remain active borrowers, leading to higher asset risks for lenders.’ The total stock of households’ non-performing loans (NPLs) swelled by more than a fifth last year to an unprecedented 2.22 trillion yuan ($324.50bn), according to Gavekal Dragonomics.”
July 15 – Bloomberg: “A major Chinese bond regulator is taking fresh steps to curb debt sales by the nation’s municipal borrowers, according to people familiar…, adding pressure on weaker issuers looking to refinance notes. The National Association of Financial Market Institutional Investors, which oversees the interbank market, told some Chinese bankers this week that local government financing vehicles should suspend ongoing bond sales and avoid new offerings if they have more outstanding notes now than they did on March 31, 2023…”
Central Banker Watch:
July 14 – Bloomberg (Tom Rees): “Bank of England Governor Andrew Bailey warned that the fallout from an artificial intelligence stocks bubble bursting would reach the UK economy and could prompt a response in interest rates. Bailey said… Britain’s economic growth would be hit by a market downturn despite none of the major AI stocks being listed in London. ‘Even if there was a bursting of a bubble, which is primarily not located in the UK, the market effect is so large now that it clearly would wash over,’ he told lawmakers on Parliament’s Treasury Committee. ‘You might expect some adjustment in interest rates to reflect that.’”
July 14 – Reuters (David Milliken): “Bank of England Governor Andrew Bailey warned against calls for broad deregulation in a speech at an annual dinner for Britain’s banking elite where a year earlier finance minister Rachel Reeves likened red tape to a ‘boot on the neck’ of businesses. Bailey told the annual Mansion House dinner… that well-designed regulation was vital for supporting economic growth. ‘To simply argue for less regulation is unhelpfully reductive,’ Bailey said…”
July 17 – Reuters (David Milliken): “Bank of England Deputy Governor Sarah Breeden said ‘doing nothing is not an option’ for regulating the British government bond repo market, due to the continued risk that it causes bond trading to dry up in a financial crisis. Net borrowing in the gilt repo market — where traders seek to profit from moves in interest rates, and investors turn bond holdings into temporary cash — totals around £200 billion ($270bn) according to BoE data, £85 billion of which is by hedge funds.”
Europe/UK Watch:
July 13 – Bloomberg (Jana Randow): “Europe’s sovereign-debt dynamics are in danger of going badly awry if the region doesn’t get a grip on its public finances, the International Monetary Fund said. A piecemeal approach in many nations is running out of road amid increasing challenges including population aging, the energy transition and rearmament, economists including Luc Eyraud, Mahika Gandhi and Andrew Hodge wrote… ‘If long-term spending pressures are left unaddressed, debt dynamics could be placed on an explosive path in many European countries,’ the IMF analysts said. ‘Tinkering at the margin is likely to be insufficient given the scale of the necessary adjustment while potentially causing reform fatigue.’”
July 13 – Bloomberg (Rachel Graham): “Water levels at a key waypoint on the Rhine River have fallen to the lowest for the time of year in decades as Europe struggles with intense heat waves, limiting fuel flows into southern Germany and Switzerland. Levels this month at the closely watched Kaub chokepoint that’s west of Frankfurt have slid below those in 2022, when drought disrupted commercial navigation on rivers across Europe. The barge clearance level there is at its lowest for this time of year since at least 1990…”
July 12 – Reuters (Kate Abnett): “European countries reported more than 10,000 excess deaths during the record-breaking heatwave that engulfed the west of the continent in late June, official data showed. The vast majority — more than 9,000 — were among people aged 65 and above, according to data published by EuroMOMO…”
Japan Watch:
July 15 – Bloomberg (Toru Fujioka): “Inflation expectations among Japan’s households climbed to the highest level in data back to 2006, supporting Bank of Japan’s stance to keep raising interest rates. Households see annual inflation averaging 10.8% over the next five years, according to the central bank’s quarterly survey... The median expectation was unchanged at 5%. The result backs the case for the BOJ to keep increasing its policy rate…”
July 15 – Reuters (Leika Kihara): “The Bank of Japan’s shock introduction of negative rates in 2016 drew intense criticism from within the board with some blasting it as half-baked and a risky move that could trigger a currency war with Europe, policy meeting minutes showed on Wednesday. The decision, which was approved by a 5-4 vote, highlighted the resistance former BOJ chief Haruhiko Kuroda faced in pushing the limits of monetary policy and the fragmentation that emerged in the board in battling economic headwinds.”
Social, Political, Environmental, Cybersecurity Instability Watch:
July 16 – Bloomberg (Eric Roston): “Human-induced changes to the global climate have ‘a direct and well-understood impact’ on extreme heat and rainfall, according to a landmark new US National Academies report. The assessment comes as weather disasters dominate the headlines and as the public and private sectors pour resources into trying to understand what’s coming next. This week alone, the eastern US grappled with intense heat and wildfire smoke; forecasters warned of dangerous flooding in Texas; and fire risk in Northern California prompted power shutoffs. The report is a step up in seriousness and authority — and potentially influence — for attribution science, a field that’s blossomed in plain view and relatively quickly.”
July 15 – Bloomberg (Brian K Sullivan): “Extremes have pinned the corners of the North American weather map, from wildfires in Canada and floods in Texas to smoke in New York and heat in California. Across the continent, people are choking on pollution, wilting under high temperatures and fleeing rising waters and advancing flames. Dozens of fires continue to rage out of control in the forests of northern Ontario… About 180 active fires were burning across the northeast and northwest regions of Ontario as of late Wednesday.”
July 15 – Reuters (Rebecca Noble and Andrew Hay): “In Arizona, dead fish lie in the dry bed of a reservoir. To the north, a small Utah town could run out of water in months. And in Colorado, a rancher has sold a fifth of her herd as stock ponds stand empty. The communities are linked by the Colorado River system, which supplies water to about 40 million people across seven Western states and Mexico and irrigates millions of acres of farmland. Decades of drought, compounded by this year's record-low winter snowpack and the hottest March on record, have deepened shortages across the basin. The drought is pitting farmers against residents of cities and suburbs as well as industrial users including data centers, solar projects and semiconductor plants.”
The S&P500 fell 1.6% (up 8.9% y-t-d), and the Dow declined 0.9% (up 8.5%). The Utilities slipped 0.2% (up 6.5%). The Banks added 0.9% (up 15.0%), while the Broker/Dealers reversed 2.8% lower (up 11.9%). The Transports advanced 2.5% (up 30.9%). The S&P 400 Midcaps were little changed (up 14.2%), while the small cap Russell 2000 dipped 0.5% (up 19.4%). The Nasdaq100 slumped 4.1% (up 13.2%). The Semiconductors sank 10.0% (up 64.8%). The Biotechs slipped 0.4% (up 20.9%). With bullion down $103, the HUI gold index dropped 6.8% (down 15.6%).
Three-month Treasury bill rates ended the week at 3.7057%. Two-year government yields declined three bps to 4.18% (up 70bps y-t-d). Five-year T-note yields dipped three bps to 4.28% (up 55bps). Ten-year Treasury yields slipped one basis point to 4.55% (up 38bps). Long bond yields added a basis point to 5.07% (up 23bps). Benchmark Fannie Mae MBS yields slipped one basis point to 5.52% (up 48bps).
Italian 10-year yields surged 14 bps to 3.95% (up 39bps y-t-d). Greek 10-year yields rose 13 bps to 3.84% (up 34bps). Spain's 10-year yields gained eight bps to 3.59% (up 30bps). German bund yields increased six bps to 3.13% (up 27bps). French yields jumped 10 bps to 3.93% (up 36bps). The French to German 10-year bond spread widened four to 80 bps. U.K. 10-year gilt yields rose eight bps to 4.95% (up 47bps). U.K.’s FTSE equities index rallied 1.0% (up 6.6% y-t-d).
Japan’s Nikkei 225 Equities Index sank 6.4% (up 27.4% y-t-d). Japan’s 10-year “JGB” yields declined four bps to 2.70% (up 63bps y-t-d). France’s CAC40 was unchanged (up 2.3%). The German DAX equities index declined 0.9% (up 1.4%). Spain’s IBEX 35 equities index dipped 0.9% (up 11.0%). Italy’s FTSE MIB index fell 1.4% (up 15.4%). EM equities were mostly lower. Brazil’s Bovespa index fell 2.3% (up 7.8%), while Mexico’s Bolsa index added 0.2% (up 3.5%). South Korea’s Kospi sank 8.8% (up 61.8%). India’s Sensex equities index recovered 0.8% (down 8.3%). China’s Shanghai Exchange Index dropped 5.8% (down 5.2%). Turkey’s Borsa Istanbul National 100 index fell 2.4% (up 24.1%).
Federal Reserve Credit rose $10.6 billion last week to $6.696 TN, with a 31-week expansion of $206 billion. Fed Credit was down $2.193 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.970 TN, or 80%. Fed Credit inflated $3.885 TN, or 138%, since November 7, 2012 (714 weeks). Elsewhere, NY Fed holdings for foreign owners of Treasury, Agency Debt sank another $28.7 billion last week to $2.874 TN - the low back to August 2010. “Custody holdings” were down an extraordinary $357 billion y-o-y, or 11.1%.
Total money market fund assets (MMFA) dropped $59.9 billion to $7.893 TN. MMFA were up $828 billion, or 11.7%, y-o-y - having ballooned a historic $3.309 TN, or 72%, since October 26, 2022.
Total Commercial Paper declined $6.6 billion to $1.389 TN. CP declined $16 billion, or 1.1%, y-o-y.
Freddie Mac 30-year fixed mortgage rates rose six bps to 6.55% (down 20bps y-o-y). Fifteen-year rates jumped 11 bps to 5.93% (up 1bp). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate up four bps to 6.66% (down 20bps).
Currency Watch:
For the week, the U.S. Dollar Index slipped 0.2% to 100.765 (up 2.5% y-t-d). On the upside, the New Zealand dollar increased 1.4%, the Norwegian krone 1.4%, the Canadian dollar 0.9%, the South Korean won 0.8%, the Australian dollar 0.4%, the British pound 0.4%, the Swedish krona 0.2%, the euro 0.2%, and the Swiss franc 0.2%. On the downside, the South African rand declined 1.3%, the Japanese yen 0.4%, the Mexican peso 0.3%, and the Brazilian real 0.1%. China's (onshore) renminbi slipped 0.02% versus the dollar (up 3.13% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index rose 3.6% (up 19.8% y-t-d). Spot Gold fell 2.5% to $4,017 (down 7.0%). Silver sank 6.6% to $55.9115 (down 22.0%). WTI Crude surged $11.08, or 15.5%, to $82.49 (up 44%). Gasoline jumped 13.7% (up 98%), while Natural Gas declined 1.0% to $2.911 (down 21%). Copper slipped 0.3% (up 10%). Wheat surged 8.0% (up 35%), and Corn gained 1.0% (up 1%). Bitcoin was little changed at $63,900 (down 27%).
Market Instability Watch:
July 14 – Bloomberg (Davide Barbuscia): “The race to build infrastructure for artificial intelligence is on track to surpass previous technological booms that ended up in severe market disruptions, the Bank for International Settlements said. Borrowing and financial ties between hyperscalers and AI developers increase the risk of broader financial turmoil, if productivity gains fail to justify the massive investment, the bank warned… ‘The more capacity the sector builds, the higher the productivity bar it must clear to sustain the boom, so a larger boom is both more likely to disappoint and more damaging when it does,’ wrote Phurichai Rungcharoenkitkul, an economist at the… institution.”
July 14 – Bloomberg (Soo-hyang Choi and Sangmi Cha): “South Korean President Lee Jae Myung said the nation’s stock market surged in a short period and would need time to stabilize, after his administration faced criticism for the extreme volatility blamed by some on leveraged products. ‘Our domestic stock market is quite unstable,’ Lee said at a policy meeting with top government officials… ‘In fact, since it experienced a historically unprecedented massive surge in such a short period that it would require time and fluctuation to stabilize.’”
July 15 – Bloomberg (Heesu Lee): “South Korea’s central bank raised interest rates for the first time in more than three years and flagged the possibility of further increases as an artificial intelligence-driven chip boom helps fuel sticky inflation and faster-than-expected economic growth. The Bank of Korea increased the seven-day repurchase rate… by a quarter point to 2.75% in a unanimous decision, in line with the expectations…”
U.S. Credit Trouble Watch:
July 16 – Bloomberg (Lakshmi Babureddy and Gabriella Robinson): “Multifamily property borrowers are under mounting pressure as a more hawkish Fed and a looming debt maturity wall deepen signs of distress. Uneven loan performance and elevated credit risk are making commercial mortgage-backed security investors cautious, with spreads suggesting a flight to quality. The multifamily delinquency rate remains elevated at 5%, while loans on watchlists have reached $128 billion so far in 2026, compared with $96 billion in 2020 and $260 billion last year… Some loans are carrying interest rates as high as 16%.”
Global Credit Bubble and Boom Watch:
July 14 – Bloomberg (Laura Benitez): “When Broadcom Inc. and Anthropic PBC needed vast sums of money to fund their AI ambitions this spring, one lender offered the chipmaker $35 billion of debt and clinched the agreement within weeks — a feat few banks could pull off. But this was no bank. Fueled by the billions flowing into its annuities business and unshackled by banking regulations, Apollo Global Management Inc. landed the biggest private credit deal on record. It was the latest sign that the buyout shop-turned-blue chip lender is muscling in on the turf of Wall Street stalwarts… Apollo maintains it’s not just cutting massive checks. It’s bringing the complexity that once marked its own leveraged bets to a new arena, finding novel ways to fund companies without burdening their balance sheets, including Broadcom and Anthropic in the costly artificial intelligence race.”
July 16 – Bloomberg (Davide Barbuscia): “Oracle Corp.’s ambitions to dominate the artificial intelligence buildout are running into a key hurdle: funding a spending spree without further damaging its credit standing. The tech giant is burning cash faster than it can generate revenue as it’s in the midst of a $250 billion data-center expansion. That’s led S&P Global Ratings to cut the company’s credit ratings to BBB-, just one step above junk status. Moody’s Ratings has a negative outlook…”
July 15 – Bloomberg (Alexandre Rajbhandari): “A growing share of global insurers want to increase their allocation to private credit despite concerns about the asset class. About 57% of global insurers plan to invest more in private credit instruments over the next 12 to 24 months, according to a survey… by Marsh & Mclennan Cos. Among US insurers, that figure jumps to 65%. That’s a significant increase from Marsh’s last survey, in 2024, when only 32% of global respondents said they intended to allocate more to the asset class.”
July 15 – Bloomberg (Aaron Weinman, Rachel Graf and Gowri Gurumurthy): “Wall Street banks, scouring every corner of the capital markets to finance the artificial intelligence buildout, have landed on a new pool of funds: US leveraged loans, which are clamoring for the transactions amid a dearth of buyout deals. The push led QTS Realty Trust LLC, a unit of Blackstone Inc., to more than triple the size of a proposed loan to $3.25 billion, and nix plans for a $1 billion bond sale… For some on the buyside, loans are a logical next step in the AI construction boom.”
July 16 – Bloomberg (Srinivasan Sivabalan): “Bond investors are demanding the most compensation since October 2022 to fund Middle Eastern governments as fighting flares again between the US and Iran. In the week since US President Donald Trump warned a ceasefire may be ‘over,’ the average sovereign risk premium in the region has increased by about 20 bps to 402 bps over Treasury yields, JPMorgan… indexes show. That’s the widest spread in almost four years…”
July 15 – Bloomberg (Rachel Graf and Amedeo Goria): “Credit-rating firms are preparing sweeping changes to how they assess CLOs, putting hundreds of deals and tens of billions worth of bonds in line for upgrades, while reviving fears that structured credit is once again being made to look safer than it really is. The revamp started with Fitch Ratings. On June 1, the firm said its new way of evaluating collateralized loan obligations — bundles of leveraged loans carved into slices of varying risk and return — could lead to upgrades for as much as 15% of the securities it rates. Four days later, Moody’s Ratings raised the stakes, proposing its own changes that would lift roughly a third of the tranches it rates.”
July 14 – Bloomberg (Esteban Duarte): “Klarna is seeking to offload credit risk tied to a portfolio of ‘buy now, pay later loans’, in a deal aimed at freeing up capital as it looks to accelerate its international expansion plans. The Stockholm-based lender is working on an SRT tied to around 5 billion kroner ($516 million) of loans originated by its Swedish unit...”
July 13 – Bloomberg (Charles Williams): “Robinhood Markets Inc. is gauging investor interest in a bond backed by bills for its branded consumer credit cards, in what would be the firm's first offering of its kind. The company is looking to sell at least $400 million of asset backed securities in four parts, according to a person familiar… The fundraising effort comes as Robinhood expands further into the credit card business, pushing beyond the retail brokerage platform it's best known for.”
Leveraged Speculation Watch:
July 16 – Wall Street Journal (Kwanwoo Jun): “South Korea’s top financial regulator unveiled measures to curb risks from single-stock leveraged exchange-traded funds, seeking to stabilize a local stock market that has seen wild swings, as individual investors use debt to chase profits amid artificial-intelligence-related jitters. The Financial Services Commission said… it would suspend new listings of single-stock leveraged ETFs, ban securities firms and asset managers from advertising or marketing such products, and triple the minimum cash deposit for new investments to 30 million won, equivalent to around $20,000. The measures are aimed at curbing speculative trading and reducing risks tied to highly leveraged investment products following recent bouts of market volatility.”
July 13 – Bloomberg (Charlotte Yang): “A new breed of leveraged products tracking major South Korean chip stocks are tumbling in value, threatening steep losses for the country’s retail investors who favor the tools to pursue amplified returns. Prices for more than a dozen leveraged exchange-traded funds tracking Samsung Electronics Co. and SK Hynix Inc. have nearly halved since their listings in late May… The SAMSUNG KODEX SK Hynix Single Stock Leverage, the largest among them with $3.4 billion in assets under management, has fallen about 45% since its debut and is down over 60% from its June peak.”
July 15 – Bloomberg (Katherine Burton): “King Street Capital Management told clients it’s significantly restricting withdrawals from its main hedge fund, moving investors who want to exit to a separate vehicle that will sell off the assets over time. The 31-year-old fund has struggled with lackluster performance, fleeing clients and an exodus of long-tenured staff. It now manages less than $8 billion, down from $20 billion a little more than a decade ago.”
Iran War Watch:
July 17 – Associated Press (Annika Hammerschlag): “Iranian strikes on Friday hit a power and water desalination plant in Kuwait, damaging one of the key sources of drinking water in the small desert nation. It’s the latest attack on essential infrastructure across the Middle East that have exposed extreme vulnerabilities in one of the world’s driest regions, which relies almost exclusively on technology to produce freshwater… Kuwaiti authorities said the strikes damaged a large number of power generation units and sparked a fire… In Kuwait, about 90% of drinking water comes from desalination, along with roughly 86% in Oman and about 70% in Saudi Arabia.”
July 17 – Associated Press (Jon Gambrell): “The United States expanded its airstrike campaign against Iran early Friday by hitting more bridges, energy sites and collapsing a tower at a key Iranian port, backing up U.S. President Donald Trump’s threats to start striking infrastructure to pressure Tehran to ease its chokehold on the Strait of Hormuz. Iran launched missile attacks against U.S.-allied nations in the Middle East, including Qatar, a mediator in the war, and Kuwait, where a power and water desalination plant — vital infrastructure in the desert nation — was damaged.”
July 15 – Associated Press (Jon Gambrell): “The U.S. reimposed a naval blockade on Iran and intensified its airstrike campaign Wednesday in retaliation for Tehran’s attacks on ships trying to pass through the Strait of Hormuz. The American strikes hit an Iranian army barracks, killed at least seven troops and wounded hundreds of people across the country, Iranian officials said… The U.S. first imposed a blockade in April and lifted it last month after signing the interim deal that paused the fighting and set a 60-day period for negotiations over issues such as Iran’s nuclear program… Iran’s parliament speaker and lead negotiator, Mohammad Bagher Qalibaf, said Iran was prepared for a fuller military confrontation if the U.S. does not live up to the terms of the interim deal, and Iran’s paramilitary Revolutionary Guard threatened to halt all energy exports from the Middle East over the blockade. ‘The export of oil and gas from the region will be either for everyone or for no one,’ the Guard said.”
July 15 – Reuters (Enas Alashray, Tala Ramadan and Yomna Ehab): “The U.S. struck Iran’s coastal defenses and missile sites… after reimposing a naval blockade of its ports, while Iran threatened to shut off more regional energy exports, saying it was engaged in an ‘existential war’ with America… After the first wave, which Iran said hit a location on its Hengam Island in the strait, Tehran’s top negotiator Mohammad Baqer Qalibaf issued a statement declaring that Iranian security depended on maintaining what he called ‘Iranian arrangements’ in the strait. ‘We are in an essential and existential war with America,’ Qalibaf said.”
July 13 – Bloomberg (Veena Ali-Khan): “The Iran-backed Houthi group in Yemen fired ballistic missiles and drones on Saudi Arabia, the worst attack in several years that threatens to draw the rebels into the wider regional conflict between Tehran and Washington. The Houthis claimed they targeted Abha Airport in Saudi Arabia’s southwestern region Monday and warned aviation companies to avoid Saudi airspace until what they called a Saudi siege of the Yemeni capital, Sanaa, is lifted.”
July 16 – Reuters (Parisa Hafezi, Samia Nakhoul and Jonathan Saul): “Iran has asked Yemen’s Houthi movement to stand ready to close the Red Sea oil route if the United States strikes Iranian power infrastructure, three sources told Reuters…, posing a potent new threat to global energy supplies. The idea has been discussed within the Islamic Republic’s leadership, and the message has been conveyed to Iran’s Houthi allies, two senior Iranian sources and a regional source familiar with the matter said…”
July 15 – Bloomberg (Alaric Nightingale and Julian Lee): “The recent spate in attacks on commercial shipping during the Iran war has increasingly involved supertankers, highlighting the challenges of reviving the region’s oil flows to the global market. Since a now-shelved peace pact was announced in June, five out of nine attacks on commercial ships were on so-called very large crude carriers…”
July 17 – New York Times (Jenny Gross): “Renewed hostilities between the United States and Iran have caused shipping traffic in the Strait of Hormuz to slow to nearly a halt, with just eight ships navigating the artery on Thursday, the second full day of the reinstated U.S. naval blockade of Iran.”
July 11 – Axios (Barak Ravid): “Iranian Supreme Leader Mojtaba Khamenei announced on Saturday that revenge for his father’s assassination ‘will most certainly be carried out.’ The statement was published after the burial ceremony for his father, former Supreme Leader Ali Khamenei. Throughout the weeklong funeral procession, there were massive public calls for the death of President Trump. Mojtaba Khamenei, who didn’t appear in public during the funeral ceremonies, didn’t specifically mention Trump. But earlier this week, Israel gave the U.S. information that suggested Iranian officials recently discussed the idea of assassinating Trump, U.S. and Israeli officials said.”
July 16 – Bloomberg (Patrick Sykes and Golnar Motevalli): “Iran’s lead negotiator defended diplomatic efforts to end the war, pushing back against hardliners urging him to abandon a tentative peace deal and avenge the country’s slain supreme leader. Negotiation ‘is not tantamount to compromise’ and, alongside military strength, is ‘part of the strategy of resistance and the safeguarding of national interests,’ Parliament Speaker Mohammad Bagher Ghalibaf said… on state TV… ‘We must be able to create a synergy between the military and diplomatic approaches,’ he said, adding that ‘to isolate and select one of these two methods as the sole solution is a strategic error.’”
Iran War Ramifications Watch:
July 15 – Bloomberg (Stephen Carroll, Caroline Hepker and Alaric Nightingale): “The International Maritime Organization said the Strait of Hormuz remains too dangerous for commercial vessels to transit, the most significant warning to the shipping industry about navigational safety since an interim peace deal between Washington and Tehran unraveled.”
July 15 – Reuters (Jonathan Saul and Renee Maltezou): “Shipping companies are avoiding using a U.S. military-guided transit scheme through the Strait of Hormuz after a wave of Iranian attacks on vessels sparked safety concerns, seven maritime security and shipping industry sources said. For decades ships sailed into and out of the Gulf using a safe set of lanes down the middle of the strait established by the U.N.’s shipping agency in 1968 dubbed the Traffic Separation Scheme. Since the Iran war began on February 28, Iranian forces have mined this area, forcing vessels to use one of two makeshift routes close to either the Iranian or Omani coast.”
July 16 – Bloomberg (Joe Carroll and David Gura): “The global economy faces a renewed challenge if the conflict that’s choked the Strait of Hormuz isn’t resolved in a matter of weeks, said International Energy Agency Executive Director Fatih Birol. ‘Markets are nervous’ and grappling with ‘big uncertainty’ due to an escalation of attacks from both sides that threatens to disrupt shipments of oil, fertilizer, natural gas and other cargoes through the key waterway, Birol said…”
July 15 – Financial Times (Verity Ratcliffe and Steff Chávez): “Oil traders have warned the latest flare-up of tensions in the Strait of Hormuz threatens a fresh crude supply crunch without the stockpiles that helped avert a wider economic crisis earlier in the US-Iran war… The International Energy Agency on Friday said its member countries had released almost three-quarters of the planned 400mn-barrel emergency stock release that was announced in March, meaning there are only a few more weeks to go before those supplies to the market dry up. ‘We’ve burned through all of the buffers we had. Everything,’ said one trader. ‘All of that’s now gone.’”
July 13 – Wall Street Journal (Benoît Morenne): “The U.S. is tapping in to its national stocks of crude with abandon. The withdrawals are taking a toll on the strategic reserve system. Just in the past four years, the Biden and Trump administrations have ordered the largest releases from the Strategic Petroleum Reserve while seeking to tamp down soaring oil prices—a total of 352 million barrels, or nearly half the capacity of the stocks. Now, frequent drawdowns, wear-and-tear and a lack of investments are straining the reserve… The 60 Gulf Coast salt caverns that make up the stocks can’t be drawn from or refilled at the rate at which they were designed, federal researchers found. Equipment failures have bedeviled the reserve’s managers. At one point, a well broke and caused the loss of hundreds of thousands of barrels of crude.”
July 15 – Wall Street Journal (Giulia Petroni): “Europe’s race to refill natural-gas stockpiles has become increasingly challenging as the Iran war drives up prices… The conflict has severely disrupted flows through the Strait of Hormuz, which used to carry around 20% of global liquefied natural gas flows, while Iranian attacks have wiped out 17% of Qatar’s LNG export capacity. European gas prices have jumped more than 70% since the war started. Gas storage sites across the European Union are now about 52% full, while injection rates are running below last year’s pace and the 10-year summer average… ‘Europe is on track to enter winter with its lowest gas storage buffer since the 2022 energy crisis,’ said Natasha Fielding, head of gas and LNG pricing at Argus.”
July 15 – Reuters (Rajesh Kumar Singh): “United Airlines said… it expected nearly $6 billion in additional fuel expense this year compared with what it estimated at the start of 2026, as a renewed surge in oil prices weighed on its third-quarter and full-year profit outlooks. Still, the… carrier raised the low end of its full-year profit forecast, betting strong travel demand, higher fares and capacity cuts will help it absorb the fuel shock.”
July 15 – Bloomberg (Rakesh Sharma and Weilun Soon): “India has directed ship owners, ship managers and recruitment agencies to stop deploying the country’s seafarers on vessels going through the Strait of Hormuz following an upsurge in attacks. Among precautions, there should be no deployment of Indian crew members on vessels undertaking voyages through the waterway ‘until further orders,’ the Directorate General of Shipping said…”
Trump Administration Watch:
July 14 – New York Times (Peter Baker): “On the 136th day of his war against Iran, President Trump came up with a new plan. He would impose tolls on ships traversing the Strait of Hormuz in exchange for protecting them from Iranian forces. But that was then. On Day 137, he had another new plan. No tolls after all. Mr. Trump’s 180-degree reversal this week in the face of protests from his Arab allies who were not so excited about paying tolls reflected how adrift he seems to be in prosecuting his war against Iran. What was supposed to be a clean four-to-six-week operation is now in its messy 20th week. Improvisation and impulse are not working. A president who has made flexing his power on the world stage a hallmark of his second term has found in Iran an opponent that so far will not bend to his will and a geopolitical conflict that cannot be won through nasty social media posts or tariff threats.”
July 14 – Axios (Barak Ravid): “President Trump held a Situation Room meeting Tuesday to discuss a massive offensive in Iran that will be wider in scope than the current strikes around the Strait of Hormuz… Trump appears willing to escalate the war to cause enough damage that the Iranian regime will open the Strait of Hormuz and accept Trump's nuclear demands.”
July 15 – Bloomberg (Fiona MacDonald and Zainab Fattah): “President Donald Trump said he would intensify the US’s bombardment against Iran until it stops attacking ships in the Strait of Hormuz and agrees to open the waterway… ‘We’re going to hit them very hard tomorrow night,’ he told Fox News... ‘We’re going to hit them very hard the night after. And then next week it gets really bad for them because next week comes the power plants. We’re going to knock out all of their bridges unless they get to the table and negotiate.’”
July 16 – Bloomberg (Catherine Lucey and Courtney Subramanian): “President Donald Trump devoted a prime-time address to reviving unsubstantiated claims that the 2020 election was stolen and stoking doubts about the security of the upcoming midterms, turning his attention to a years-long grievance at a perilous moment for his presidency. Speaking Thursday from the East Room of the White House, Trump said he was detailing findings from newly released declassified intelligence reports with claims about vulnerabilities to voting systems, China’s efforts to acquire US voter data, Michigan voter registration fraud and what he said were more than 200,000 noncitizens on state voter rolls.”
July 15 – CNBC (Kevin Breuninger): “National Economic Council Director Kevin Hassett said… he sees no argument for hiking interest rates in light of the latest data on the U.S. economy, including an ‘amazing’ inflation report. ‘There’s not really an excuse for raising rates right now,’ Hassett said… He said that he expects the Federal Reserve will ‘be thinking the other way,’ meaning lowering interest rates, if the data trends continue. Hassett added that the White House is expecting Fed Chair Kevin Warsh, President Donald Trump’s pick who started the job in late May, will ‘drive the committee to the right answer.’”
July 16 – Wall Street Journal (Dean Sea and David Uberti): “President Trump broke with tradition by posting near-constant policy decisions and market-moving news on his social-media platform. Now his media company wants traders and investors to pay for instant access to his Truth Social posts, the latest example of the first family mixing its business interests and White House affairs. Trump Media & Technology Group said Thursday it plans to launch a data feed that gives real-time access to posts from the highest-ranking accounts on its Truth Social platform.”
July 16 – Financial Times (Amy Mackinnon): “Leftwing political violence is a ‘fatal cancer to civilisation’, Stephen Miller, White House deputy chief of staff, told an international summit on far-left terrorism convened by the US state department… If left unchecked, political violence from the left ‘always becomes a Gulag’, Miller told the gathering, which was attended by senior officials from more than 60 countries in Europe and Latin America. ‘It always becomes the mass imprisonment of political enemies, the stripping of their rights and freedoms, inflicting immense pain, humiliation, suffering, in order to establish complete and total control, control through psychological and physical and actual terror,’ Miller said.”
July 15 – Wall Street Journal (Marianne LeVine and Maggie Severns): “Presidents have always raised money from private donors—to run for office, throw inaugural balls and build presidential libraries. But Donald Trump has turned his second term into an unprecedented fundraising blitz, raising well over half a billion dollars from wealthy donors and stashing it in a sprawling network of nonprofits, cultural institutions and committees that he and his allies control. Companies seeking lucrative contracts or favorable policies from the administration have poured millions of dollars into these funds, which have become a key tool for Trump to pursue his political and personal priorities. He has used them to oust his political opponents, change the cultural face of the nation’s capital and boost his postpresidency legacy. In many cases, details about where the cash is coming from or how it is being spent are shrouded in secrecy…”
July 16 – Axios (Nathan Bomey): “Federal regulators are investigating whether a White House teleprompter operator capitalized on his knowledge of President Trump’s prepared speech text by making trades on the prediction market Kalshi, according to two sources familiar... The speeches the person allegedly traded on included the State of the Union in February… Gabriel Perez, the teleprompter operator, is under investigation… Perez won more than $100,000 on such trades, the sources said.”
July 13 – Bloomberg (Fabiola Zerpa): “Venezuela’s monthly inflation more than doubled in June, deepening the hardship for families already reeling from the devastation caused by the twin earthquakes of June 24. Inflation reached 13.8% after slowing to 6.3% in May… The acceleration complicates interim President Delcy RodrÃguez’s reconstruction efforts and marks a setback for her government’s strategy of containing inflation by stabilizing the local currency. Consumer prices have risen 129.8% so far this year.”
Trade War Watch:
July 13 – Reuters (Joe Cash and Yukun Zhang): “China’s exports surged in June, buoyed by orders for chips to fuel the global AI boom and automobiles… The stronger-than-expected trade performance keeps China on track to post a surplus topping $1 trillion for a second straight year… Exports climbed 27% from a year earlier in U.S. dollar value terms…, outpacing the 19.4% gain in May and an 18.2% rise forecast by economists. Imports jumped 36%, compared with a 27.4% gain the month before, a five-year high.”
July 13 – Reuters (Shivangi Acharya, Manoj Kumar and Trevor Hunnicutt): “India and the U.S. did not reach a consensus on a trade agreement in recent talks, with New Delhi holding out for a better deal as Prime Minister Narendra Modi draws confidence from new trading partners, eased economic risks and political gains at home… India’s trade minister, Piyush Goyal, said… both countries remain ‘fully engaged’ in their commitment to an agreement which is balanced and beneficial to both economies.”
Deficit Watch:
July 17 – Wall Street Journal (Maya Davis, Yoko Kubota and Olivia Beavers): “House Republicans are plunging ahead with a plan to approve extra military spending more than four months into the Iran war, but the package is much smaller than the broader boost President Trump has been seeking—and its passage remains uncertain due to divides in the party. The GOP is trying to lock down tens of billions of dollars before the midterm elections to help cover ballooning military costs. On Thursday, the House Budget Committee advanced a framework for a $95 billion package that would provide as much as $73 billion in defense and intelligence funding and $12 billion for farm assistance. An additional $10 billion would be allocated toward measures to tighten voting rules in states, attempting to partially address a key demand of Trump’s.”
July 13 – Bloomberg (Chris Anstey and Daniel Flatley): “A large wave of refund payments for tariff increases declared illegal by the Supreme Court caused the first widening in the US federal budget deficit since the start of this fiscal year. The gap for the first nine months of fiscal 2026 came to $1.37 trillion… That marks a 2% widening in the gap compared with 2025. For the month of June, the total deficit was $120 billion.”
July 16 – Associated Press (Paul Wiseman): “The U.S. Treasury last year swelled with revenue from President Donald Trump’s double-digit taxes on imports from almost every country on earth. But the money dried up after the Supreme Court struck down the biggest and boldest of Trump’s tariffs in February. The question now is: Can the president’s trade team make good on its promise to replace the lost revenue? A deadline is approaching rapidly. After the Supreme Court setback, the president turned first to Section 122 of the Trade Act of 1974 to impose 10% tariffs globally. But Section 122 only authorizes tariffs for 150 days. Trump’s expire on July 24. Congress would have to extend those tariffs — something lawmakers are unlikely to do as the Nov. 3 midterm elections approach…”
Constitution Watch:
July 14 – Associated Press (Jocelyn Noveck): “Dangerous. Brazen. Unprecedented. Uncharted territory. Reaction in the media world has been swift and severe to the issue of subpoenas to five New York Times journalists who reported on security questions involving the new Qatari-gifted Air Force One — a legal maneuver seen as a troubling escalation of the Trump administration’s campaign to control and intimidate independent media outlets. ‘The subpoenas are an extraordinary escalation in President Trump’s efforts to threaten and intimidate independent news organizations and have a chilling effect on the work of journalists across the country,’ said Jodie Ginsberg, CEO of the Committee to Protect Journalists. Media advocates and analysts expressed dismay at the tactic…”
July 17 – Axios (Sara Fischer): “President Trump threatened again to revoke the broadcast licenses of ABC and NBC on Thursday, after those networks decided not to preempt their regularly scheduled programming to cover his address on election integrity live.”
July 12 – Financial Times (Ella Lee): “Justice Amy Coney Barrett has compared sitting on the US Supreme Court to ‘being in an arranged marriage with no option of divorce’. After a politically fraught term marred by infighting, its nine members may need couples therapy. Over the course of a term dominated by President Donald Trump’s controversial second-term agenda — from his immigration crackdown to his bureaucratic takeover — the knives have come out at the nation’s top court. In pointed remarks and fiery written opinions, its justices have traded barbs in a manner typically kept out of the public eye. The hardening of ideological lines at the once collegial top court could have profound consequences for public support of the nation’s third branch of government.”
New World Order Watch:
July 15 – Bloomberg: “More people around the world view China more positively than the US for the first time since at least 2023, according to a survey by Pew Research Center, with sentiment shifting even among some of Washington’s allies as the two powers compete for influence globally. Public opinion of the US has worsened to the extent that China is now seen more favorably in most of the 36 countries surveyed this year. Those include Canada, Australia, France and Germany — US allies where the ‘favorability gap’ with Beijing has reversed in recent years.”
July 12 – Financial Times (Peter Foster): “Europe and the US would need to invest an extra $23.6tn over the next 25 years to end their reliance on China in critical industries such as manufacturing and technology, an economic analysis suggests. Consultancy EY-Parthenon calculated that replicating the infrastructure, research, software, manufacturing and supply chains currently reliant on China would cost the US $13.7tn, the Eurozone $9.1tn and the UK $800bn by 2050. At $550bn a year, the annual investment required from the US government and American companies to decouple from China is roughly equivalent to the $600bn invested by big US technology groups in data centres in 2025.”
U.S./Russia/China/Europe/Iran Watch:
July 17 – South China Morning Post (Dewey SimandKhushboo Razdan): “US President Donald Trump launched a sharp attack on China…, accusing Beijing of interfering in US elections in a move that has strained a fragile thaw in ties and cast doubt on future high-level engagements. In a prime-time address…, Trump accused China of orchestrating ‘what is believed to be the largest compromise of election data in history’… China’s foreign ministry dismissed Trump’s allegations as having “no factual ground”, saying Beijing adhered to the principle of non-intervention in other states’ internal affairs and had no interest in interfering in US elections. Ministry spokesman Lin Jian urged Washington to reflect on its actions, stop its ‘unfounded smears’ against China and ‘do more to benefit China-US relations’.”
Ukraine War Watch:
July 16 – Financial Times (Alice Hancock, Susannah Savage and Polina Ivanova): “Ukraine is struggling to ship grain via the Black Sea as Moscow steps up strikes on commercial vessels in retaliation for a week of heavy attacks by Ukraine on Russian shipping. Russian drone attacks on the port of Odesa, Ukraine’s biggest seaport, have caused storage capacity to drop by a third…, while shipowners are refusing to send ships into the area for fear of being struck. Some traders have paused buying in Odesa…”
July 13 – Bloomberg: “A wave of Ukrainian attacks has pushed Russian refining runs to the lowest in more than 21 years, deepening a domestic fuel crunch and further squeezing the global market. Crude-processing rates have averaged 3.91 million barrels a day so far this month, the lowest level since March 2005…”
AI Bubble/Arms Race Watch:
July 14 – Reuters (Saeed Azhar and Nupur Anand): “A rush by technology companies to fund AI infrastructure is boosting dealmaking and financing activity for Wall Street, bankers said on Tuesday, generating lucrative fees from capital raising and loans… ‘The build-out of AI infrastructure remains in its early stages, and we believe this multi-year investment cycle will continue to drive elevated levels of strategic activity, financing, and capital formation across markets,’ Goldman Sachs CEO David Solomon said… Solomon added that the industry ‘is in the middle of an AI capex super cycle’ where there are demands to utilize every single financing instrument.”
July 12 – Wall Street Journal (Sam Goldfarb): “Wall Street is sending a message to tech companies engaged in a historic borrowing spree to fund investments in artificial-intelligence infrastructure: for pity’s sake, please slow down. Over the past several weeks, the investment-grade corporate bond market has struggled to absorb a combined $75 billion of bond issuance from Nvidia SpaceX and Amazon.com. That marks a shift from earlier in the year, when investors were generally happy to hand money to so-called AI hyperscalers by any possible means. While Nvidia and SpaceX were able to borrow at reasonably low interest rates, their newly issued bonds quickly slumped in the secondary market, disappointing investors who often like to flip such bonds. Amazon, meanwhile, had to pay unusually steep rates by its standards to complete its debt sale, reflecting investors’ newfound caution.”
July 13 – Bloomberg (Paul J. Davies): “The data-center building boom has sparked an explosion of debt funding even though it has barely begun. But the investors financing this engine of the artificial-intelligence revolution aren’t paying enough attention to the terms of their lending. Some of the deals being underwritten offer proper protections against construction delays or problem tenants; others, much less so. Bondholders need to get a grip on the detail in the documents before things start to go awry. The five hyperscalers – Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and Oracle Corp. – are expected to invest $5.8 trillion in the computing capacity they need to run AI by 2030, according to… Goldman Sachs…”
July 13 – Bloomberg (Riley Griffin): “Meta Platforms Inc. has committed to spending an additional $40 billion on its sprawling data center campus in Louisiana, pushing its total expected investment beyond $250 billion for the site as it continues to grow its artificial intelligence computing footprint. Meta announced Monday that it will expand the project in rural Louisiana to at least 5 gigawatts of computing power at a cost of $50 billion.”
July 12 – Financial Times (Jamie John and George Hammond): “Companies from Silicon Valley to Europe are turning to Chinese AI models as they try to cut the cost of using the technology and reduce their dependence on US frontier labs. DoorDash, Siemens and Airbnb are among the groups that have adopted AI tools built in China, drawn by models that are cheaper, increasingly capable and, in some cases, easier to run on their own infrastructure. Chinese AI models from groups such as DeepSeek and Z.ai have rapidly overtaken US rivals in token consumption this year, according to OpenRouter, a platform that tracks… data processed by large language models. The shift has been driven largely by cost, as companies try to curb ballooning AI bills.”
July 16 – Axios (Courtenay Brown): “Businesses across America are telling similar stories about the effects of AI: The buildout is increasing the competition for certain kinds of workers, driving up the price of memory chips and reshaping how companies hire. They are describing a scramble for workers and resources from electricians and skilled technicians to transformers and memory chips as companies race to build AI infrastructure. This was one prominent theme in the Federal Reserve’s latest Beige Book… A shortage of electricians has delayed data center projects in the Philadelphia Fed’s district, while Dallas contacts said oilfield services companies are losing skilled workers to power generation and AI infrastructure projects.”
July 11 – Reuters (Heekyong Yang and Kenneth Li): “SK Hynix Chief Executive Kwak Noh-jung said the global memory industry is heading for its worst-ever supply shortage in 2027, forecasting that demand for memory will continue to exceed the company’s ability to produce it well into the next decade despite aggressive capacity expansion. ‘We forecast that next year will be the worst year in the industry's history from the supply perspective,’ Kwak told Reuters…”
July 10 – Axios (Megan Morrone): “Apple is suing OpenAI for trade secret theft, alleging the AI giant deliberately and systematically solicited and stole confidential information from the iPhone maker's current and former employees. Apple has lost significant talent to OpenAI as the frontier lab prepares to unveil its first hardware device this year. ‘Recently, significant evidence has emerged suggesting individuals employed by OpenAI wrongfully took Apple’s secret and confidential information regarding our unreleased technologies, processes, and products,’ Apple said…”
July 14 – Financial Times (Martha Muir): “New York is set to become the first US state to impose a one-year ban on construction of new data centres, as backlash swells over the infrastructure needed to power the AI boom. The Empire State will ban data centres of more than 50 megawatts for a period of one year… In a video posted to X, Governor Kathy Hochul said that the ‘scale and speed of development has put unprecedented demand on energy and water resources and threatens to drive up utility costs. Before it goes any further I need safeguards in place to protect New Yorkers.’”
Bubble Watch:
July 14 – Reuters (Harshita Mary Varghese and Rashika Singh): “IBM said it had ‘faltered’ in keeping pace with a shift in corporate spending from software to data-center infrastructure and would take a big earnings hit in the second quarter, in the clearest sign yet of AI’s growing toll on the sector. IBM’s shares tanked 25% on Tuesday, putting the stock on track for an even steeper single-day decline than it suffered during the 1987 ‘Black Monday’ crash… The warning shows that businesses racing to secure access to supply-constrained servers, chips and networking gear are diverting spending away from other technologies, adding to concerns about a software industry already rocked by the rise of AI tools that can write computer code and automate tasks.”
July 1 – Bloomberg (Michael Msika): “US executives are selling shares at the second-fastest pace in more than 20 years, a classic red flag to some investors because it suggests people with the most corporate knowledge are wary about markets. Corporate insiders sold $77.6 billion of stock during the first half of 2026, a 20% increase from a year ago, according to EPFR... The only time the selling spree was more intense was back in 2021, when markets were flush with pandemic-driven stimulus cash.”
July 15 – Reuters (Niket Nishant, Johann M Cherian and Akash Sriram): “SpaceX shares dropped below their initial public offering price for the first time on Wednesday before closing just above that level, just over a month after the rockets-to-AI firm completed the biggest IPO ever and made Elon Musk the world’s first trillionaire.”
July 14 – Bloomberg (Charlotte Plaskwa): “The five major US banks that posted second quarter results on Tuesday said they set aside less money to cover bad loans, a sign of growing optimism about the outlook for borrower defaults. Goldman Sachs... saw the biggest drop among peers in its reported credit provisions on Tuesday, falling to about $102 million, about a 73% decline from the same period last year. The fall was driven in part by the bank’s pullback from credit card lending… Bank of America Corp. and JPMorgan… lowered provisions by 14.2% and 11.7%, respectively. For Citigroup Inc., the figure fell about 12%.”
Crypto Bubble Watch:
July 13 – Reuters (Shivangi Acharya, Manoj Kumar and Trevor Hunnicutt): “A move by Michael Saylor’s bitcoin stockpiling company Strategy to authorize more bitcoin sales has once again shone a spotlight on a clutch of public crypto hoarding companies, which have been buffeted by falling token prices… The sales have again raised questions about the viability of dozens of copycat ‘digital asset treasury’ companies, or DATs, which boomed last year thanks to market exuberance over U.S. President Trump's crypto-friendly policies.”
Inflation Watch:
July 13 – Associated Press (Christopher Rugaber): “American consumers — and the Federal Reserve — are being hit with another high-cost headache. The gusher of investment in data centers — likely topping $700 billion this year — to power artificial intelligence has made memory chips, computer processors and other equipment, as well as electricity, more expensive. Economists expect it will continue to push up inflation at least through the end of this year. While it won’t be as large a spike as occurred in 2021-2023, when inflation peaked at 9.1%, massive AI spending is likely to keep prices rising more quickly than the Federal Reserve would like.”
July 14 – CNBC (Jeff Cox): “Consumer prices posted their biggest decline in more than six years during June as a sharp swoon in energy prices provided at least temporary relief from this year’s inflation surge… The consumer price index… was lower than expected across the board. The CPI fell a seasonally adjusted 0.4% for the month, bringing the annual inflation rate down to 3.5%. Economists… had been looking for a drop of 0.2% and an inflation rate of 3.8%, following the 4.2% reading in May… Core inflation, which excludes food and energy, was flat on the month, putting the 12-month rate at 2.6%.”
July 15 – Associated Press (Paul Wiseman): “U.S. wholesale inflation fell from May to June on plunging energy prices, but intensifying hostilities with Iran are clouding the outlook. The… producer price index… dropped 0.3% from May, biggest decline since April 2025 and a reversal from a 0.6% uptick the month before. Compared to a year earlier, wholesale prices were up 5.5% in June, decelerating from a 6% increase the month before. Gasoline prices plunged 12% in June but are still up nearly 43% from June 2025, pushed higher by the Iran war. Food prices also dipped in June. Excluding volatile food and energy prices, so-called core wholesale prices were up 4.7% from June 2025 and 0.2% from May.”
July 1 – Reuters (Lucia Mutikani): “U.S. import prices unexpectedly rose in June as declines in the costs of food and energy products were more than offset by higher prices for capital and consumer goods, leading to the largest annual increase in imported inflation in nearly four years. Import prices increased 0.3% last month after a downwardly revised 1.7% advance in May… In the 12 months through June, import prices surged 7.1%. That was the biggest advance since August 2022… Prices of imported fuel fell 0.4% last month after rising 12.6% in May. They jumped 44.1% year-on-year in June.”
July 16 – Los Angeles Times (Melody Petersen): “Employers are bracing for what could be the highest rise in health insurance premiums in 16 years in 2027, driving up the average cost of family coverage in California to more than $30,000… Health insurance companies expect the cost of medical services and prescription drugs to soar by 9% in 2027, according to a new survey by PwC, the highest rise the researchers have found since 2011. Insurers use those expected medical costs to calculate the price of premiums in the coming year.”
July 14 – Bloomberg (John Ainger and Mark Chediak): “Power-hungry data centers have increased supply costs for the largest US electric grid by more than 60%, the system watchdog said. PJM Interconnection LLC, which serves 13 states and Washington, DC, said Tuesday that its auction to procure power for the year starting June 2028 tied a $16.4 billion record set in late 2025. Data centers accounted for roughly $6.3 billion of that total, said Joseph Bowring, president of Monitoring Analytics, the grid’s independent market monitor. That data-center burden on PJM ratepayers amounts to almost $30 billion when figures from three previous auctions are included, he said…”
July 13 – Bloomberg (Emily Forgash): “The cost of power from natural gas-fired plants in the US hit the highest level in at least 17 years, and is poised to climb even higher as demand surges from new data centers. That’s according to George Bilicic, global head of power, energy and infrastructure at Lazard Inc., which tracks the so-called levelized cost of energy. That’s the long-term electricity price a power-plant must get to break even. For combined cycle gas plants, that rose to $90 a megawatt-hour in 2026… That’s up from $78 a year earlier and the highest since 2009, the earliest year in the data…”
July 11 – Reuters (David Shepardson): “The cash-strapped U.S. Postal Service will raise the price of stamps for mailing a first-class letter to 82 cents from 78 cents, effective Sunday. USPS, which has warned it could run out of cash early next year, announced in April it would raise mailing costs by 4.8%.”
Federal Reserve Watch:
July 14 – New York Times (Colby Smith): “Kevin M. Warsh reiterated his commitment to bringing down inflation at his first congressional hearing since becoming chairman of the Federal Reserve. However, he has yet to indicate whether he supports higher interest rates to achieve that goal. Mr. Warsh told lawmakers on the House Financial Services Committee… the central bank would set policy ‘right’ such that ‘the inflation surge of the last five years will be a thing of the past.’ A pledge to deliver price stability was established last month at Mr. Warsh’s first policy meeting in the top job, at which officials voted unanimously to hold rates steady at a range of 3.5% to 3.75%. ‘The members of our committee have no tolerance for persistently elevated inflation,’ Mr. Warsh told lawmakers... ‘And we share a resolute commitment to restoring price stability.’”
July 15 – Associated Press (Christopher Rugaber): “Federal Reserve Chair Kevin Warsh on Wednesday navigated a series of thorny questions from senators on issues such as the impact of AI on inflation, what contacts he has had with President Donald Trump, and how the central bank will determine the persistence of inflation, without providing many specifics… ‘I don’t view a one-time change in prices as necessarily being inflationary, because I think there’s a supply response,’ he said in answer to a question on the impact of massive investment in AI infrastructure. ‘Will it increase measured prices over the course of the next 12 months? I suspect it will be. Whether that’s inflationary or not, that’s up to the Federal Reserve, and we’re going to have something to say about that.’”
July 13 – Bloomberg (Alex Harris and Michael MacKenzie): “Wall Street strategists expect a group of senior academics and former policymakers assembled by Chairman Kevin Warsh to review the Federal Reserve’s $6.7 trillion balance sheet will face a difficult balancing act: shrinking the central bank’s holdings without destabilizing funding markets. While the group’s academic heft lends credibility to the process, the lack of market experts among its members could result in solutions that are good in theory but difficult to implement, some of them warned.”
July 16 – CNBC (Jeff Cox): “Dallas Federal Reserve President Lorie Logan, asserting that this week’s good inflation news wasn’t good enough, called… for ‘modestly’ higher interest rates to win a battle the central bank has been losing for the past five years… ‘I currently believe modestly higher interest rates would better balance the outlook and risks for the FOMC’s dual mandate goals,’ Logan said... ‘Every month of above-target inflation has compounded the strain on Americans’ budgets.’”
July 16 – Bloomberg (Enda Curran): “Federal Reserve Bank of Kansas City President Jeff Schmid said inflation is his biggest worry given the risk of a further acceleration in the months ahead... ‘My primary concern is inflation, which is too hot and has been above target for too long,’ Schmid said… ‘As such, my focus remains on inflation in setting the correct course for policy.’”
July 15 – CNBC (Jeff Cox): “New York Federal Reserve President John Williams said… he sees multiple signs that inflation has peaked, allowing the central bank to hold interest rates in place despite market expectations for a hike in coming months… Williams cited five reasons why he expects the latest price surge has run its course. ‘There are encouraging reasons to expect that inflation has peaked and should edge down in coming quarters,’ he said. ‘I expect overall inflation to decline to around [3.25%] percent by year-end, then continue on a glide path toward our 2% goal in 2027 and land on target in 2028,’ he later added.”
U.S. Economic Bubble Watch:
July 14 – Wall Street Journal (Jessica Coacci): “Confidence among U.S. small businesses improved in June as lower fuel costs provided some relief for businesses. The National Federation of Independent Business said… its small-business optimism index rose 2.1 points in June to 97.4. Economists… expected a lower reading of 95.7... ‘Lower fuel costs provide welcome relief for businesses as well as consumers, with firms anticipating improved operating conditions over the next six months,’ said NFIB Chief Economist Bill Dunkelberg.”
July 16 – Associated Press (Matt Ott): “Filings for unemployment benefits fell last week to the lowest level in 10 weeks as U.S. layoffs remain historically low. The number of Americans applying for jobless aid in the week ending July 11 dropped by 8,000 to 208,000… The total number of Americans filing for unemployment benefits for the previous week ending July 4 fell by 16,000 to 1.81 million, also a historically healthy figure.”
July 16 – Associated Press (Anne D’Innocenzio): “Shoppers slowed their spending in June from May, as they spent less to fill their gas tank because of falling gas prices. But the report… showed consumers’ continued resilience despite ongoing economic uncertainty as they bought cars and took advantage of summer sales events. Retail sales rose 0.2% in June, after being up a revised 1% in May… Outside of gas stations, retail sales rose a solid 0.7%... Business at gas stations fell 5.3% last month.”
July 15 – Bloomberg (Josyana Joshua): “A pile of credit-card reward points can take you business class to Bali or cover a few days’ stay in a London boutique hotel. These days, as inflation strains American budgets, more people say they’re using points for daily essentials, from gasoline to cat litter. In a survey of more than 1,000 people, over 35% said they redeem reward points for ‘everyday expenses,’ according to USAA Federal Savings Bank. Statement credits also are popular, with 79% of respondents saying they’ve used points that way at least once in the past six months.”
July 15 – Bloomberg (Maria Eloisa Capurro and Maya Prakash): “US economic activity increased at a slight to moderate pace in recent weeks as most regions experienced little to no change in employment levels, the Federal Reserve said. Prices increased moderately overall, according to the US central bank’s Beige Book survey of regional business contacts... ‘Some contacts tied these cost increases to the conflict in the Middle East; others mentioned tariffs. Consumer prices continued to rise, and a few districts said contacts saw greater price sensitivity among their customers,’ the Fed said.”
July 14 – Wall Street Journal (Oyin Adedoyin and Elyse Goncalves): “Americans have been falling behind on their credit card bills at the highest rate in 15 years. You wouldn’t know it from the big banks’ earnings... Some 13% of credit card balances were 90 days or more delinquent in the first three months of the year, according to data released in May by the Federal Reserve Bank of New York. JPMorgan…, Bank of America and Wells Fargo all said that their 90-day-plus delinquencies were in the low single-digits and down from a year earlier in the second quarter. The banks cited consumers’ resilient financial picture in reporting strong earnings on Tuesday. Part of the disconnect is that banks have been focusing their businesses on prime and super-prime consumers.”
July 15 – CNBC (Diana Olick): “Mortgage rates rose last week to the highest level since August 2025, and that caused homebuyer demand for loans to pull back. Refinance demand, however, moved higher… Applications for a mortgage to purchase a home fell 7% from the previous week and were 2% lower than the same week one year ago. Buyers are still contending with high home prices as well as lean supply of affordable homes for sale.”
China Watch:
July 16 – Financial Times (Thomas Hale and Joe Leahy): “Xi Jinping has set out China’s ambitions to rival the US as a global leader in AI, a day after almost 30 countries joined a coalition that stands to hand Beijing more control over the development of the technology. China’s president called for ‘extensive international co-operation’ as he warned over AI’s risks, and said China would offer training to developing countries and help them build capacity… Xi said that the more AI developed at a ‘staggering speed’, the more there was a need for a ‘positive direction’. ‘[We must] more precisely grasp the scale of oversight and governance, and more promptly refine measures to forestall loss of control,’ he said.”
July 15 – Bloomberg: “China’s credit expansion missed forecasts in June, as weaker government bond issuance and subdued demand for borrowing outweighed the usual pickup in quarter-end lending. Aggregate financing, a broad measure of credit, increased about 3.4 trillion yuan ($497bn)… That compares with a median forecast of 3.7 trillion yuan… and an expansion of 4.2 trillion yuan recorded a year ago. Financial institutions extended 1.6 trillion yuan of new loans in the month. The median forecast was an increase of 2 trillion yuan. Credit extension usually picks up in June because banks push for more lending to achieve their quarterly targets. But borrowing demand is showing little sign of emerging from a years-long funk caused by weak domestic consumer spending and investment.”
July 14 – Associated Press (Chan Ho-Him): “China’s economy slowed sharply to a 4.3% annualized pace of growth in the April-June quarter…, the weakest in over three years. The official data fell short of forecasts and was far below the economy’s strong 5% pace of growth in January-March, despite a surge in exports driven partly by the boom in artificial intelligence, and by robust global demand for Chinese electric vehicles… ‘This was the slowest growth in any quarter since the lockdown-impacted fourth quarter of 2022,’ said Lynn Song, chief economist for Greater China at ING Bank in a note.”
July 14 – Bloomberg (Julia Zhong and Shulun Huang): “China’s government bond issuance is on track for a record-breaking third quarter…, a surge that may prompt the central bank to ramp up cash injections to support demand for the debt. Net bond issuance from central and local governments may rise to between 4.2 trillion yuan and 4.4 trillion yuan ($619bn-$649bn) this quarter, according to… Huachuang Securities, Huafu Securities and CIB Research. That’s higher than the record high of 3.8 trillion yuan for the same period last year.”
July 15 – Reuters: “The People’s Bank of China has repeatedly urged commercial banks to step up lending, but the banks have balked, instead tightening lending standards to protect themselves from additional bad debt. Short-term household loans contracted 7% year-on-year last month…, in the latest evidence of an anaemic market… The conundrum is that, for the most part, only those with bad credit are looking to borrow. ‘More creditworthy customers are reducing credit card usage,’ said Nicholas Zhu, a banking analyst at Moody’s. ‘Less creditworthy consumers remain active borrowers, leading to higher asset risks for lenders.’ The total stock of households’ non-performing loans (NPLs) swelled by more than a fifth last year to an unprecedented 2.22 trillion yuan ($324.50bn), according to Gavekal Dragonomics.”
July 15 – Bloomberg: “A major Chinese bond regulator is taking fresh steps to curb debt sales by the nation’s municipal borrowers, according to people familiar…, adding pressure on weaker issuers looking to refinance notes. The National Association of Financial Market Institutional Investors, which oversees the interbank market, told some Chinese bankers this week that local government financing vehicles should suspend ongoing bond sales and avoid new offerings if they have more outstanding notes now than they did on March 31, 2023…”
Central Banker Watch:
July 14 – Bloomberg (Tom Rees): “Bank of England Governor Andrew Bailey warned that the fallout from an artificial intelligence stocks bubble bursting would reach the UK economy and could prompt a response in interest rates. Bailey said… Britain’s economic growth would be hit by a market downturn despite none of the major AI stocks being listed in London. ‘Even if there was a bursting of a bubble, which is primarily not located in the UK, the market effect is so large now that it clearly would wash over,’ he told lawmakers on Parliament’s Treasury Committee. ‘You might expect some adjustment in interest rates to reflect that.’”
July 14 – Reuters (David Milliken): “Bank of England Governor Andrew Bailey warned against calls for broad deregulation in a speech at an annual dinner for Britain’s banking elite where a year earlier finance minister Rachel Reeves likened red tape to a ‘boot on the neck’ of businesses. Bailey told the annual Mansion House dinner… that well-designed regulation was vital for supporting economic growth. ‘To simply argue for less regulation is unhelpfully reductive,’ Bailey said…”
July 17 – Reuters (David Milliken): “Bank of England Deputy Governor Sarah Breeden said ‘doing nothing is not an option’ for regulating the British government bond repo market, due to the continued risk that it causes bond trading to dry up in a financial crisis. Net borrowing in the gilt repo market — where traders seek to profit from moves in interest rates, and investors turn bond holdings into temporary cash — totals around £200 billion ($270bn) according to BoE data, £85 billion of which is by hedge funds.”
Europe/UK Watch:
July 13 – Bloomberg (Jana Randow): “Europe’s sovereign-debt dynamics are in danger of going badly awry if the region doesn’t get a grip on its public finances, the International Monetary Fund said. A piecemeal approach in many nations is running out of road amid increasing challenges including population aging, the energy transition and rearmament, economists including Luc Eyraud, Mahika Gandhi and Andrew Hodge wrote… ‘If long-term spending pressures are left unaddressed, debt dynamics could be placed on an explosive path in many European countries,’ the IMF analysts said. ‘Tinkering at the margin is likely to be insufficient given the scale of the necessary adjustment while potentially causing reform fatigue.’”
July 13 – Bloomberg (Rachel Graham): “Water levels at a key waypoint on the Rhine River have fallen to the lowest for the time of year in decades as Europe struggles with intense heat waves, limiting fuel flows into southern Germany and Switzerland. Levels this month at the closely watched Kaub chokepoint that’s west of Frankfurt have slid below those in 2022, when drought disrupted commercial navigation on rivers across Europe. The barge clearance level there is at its lowest for this time of year since at least 1990…”
July 12 – Reuters (Kate Abnett): “European countries reported more than 10,000 excess deaths during the record-breaking heatwave that engulfed the west of the continent in late June, official data showed. The vast majority — more than 9,000 — were among people aged 65 and above, according to data published by EuroMOMO…”
Japan Watch:
July 15 – Bloomberg (Toru Fujioka): “Inflation expectations among Japan’s households climbed to the highest level in data back to 2006, supporting Bank of Japan’s stance to keep raising interest rates. Households see annual inflation averaging 10.8% over the next five years, according to the central bank’s quarterly survey... The median expectation was unchanged at 5%. The result backs the case for the BOJ to keep increasing its policy rate…”
July 15 – Reuters (Leika Kihara): “The Bank of Japan’s shock introduction of negative rates in 2016 drew intense criticism from within the board with some blasting it as half-baked and a risky move that could trigger a currency war with Europe, policy meeting minutes showed on Wednesday. The decision, which was approved by a 5-4 vote, highlighted the resistance former BOJ chief Haruhiko Kuroda faced in pushing the limits of monetary policy and the fragmentation that emerged in the board in battling economic headwinds.”
Social, Political, Environmental, Cybersecurity Instability Watch:
July 16 – Bloomberg (Eric Roston): “Human-induced changes to the global climate have ‘a direct and well-understood impact’ on extreme heat and rainfall, according to a landmark new US National Academies report. The assessment comes as weather disasters dominate the headlines and as the public and private sectors pour resources into trying to understand what’s coming next. This week alone, the eastern US grappled with intense heat and wildfire smoke; forecasters warned of dangerous flooding in Texas; and fire risk in Northern California prompted power shutoffs. The report is a step up in seriousness and authority — and potentially influence — for attribution science, a field that’s blossomed in plain view and relatively quickly.”
July 15 – Bloomberg (Brian K Sullivan): “Extremes have pinned the corners of the North American weather map, from wildfires in Canada and floods in Texas to smoke in New York and heat in California. Across the continent, people are choking on pollution, wilting under high temperatures and fleeing rising waters and advancing flames. Dozens of fires continue to rage out of control in the forests of northern Ontario… About 180 active fires were burning across the northeast and northwest regions of Ontario as of late Wednesday.”
July 15 – Reuters (Rebecca Noble and Andrew Hay): “In Arizona, dead fish lie in the dry bed of a reservoir. To the north, a small Utah town could run out of water in months. And in Colorado, a rancher has sold a fifth of her herd as stock ponds stand empty. The communities are linked by the Colorado River system, which supplies water to about 40 million people across seven Western states and Mexico and irrigates millions of acres of farmland. Decades of drought, compounded by this year's record-low winter snowpack and the hottest March on record, have deepened shortages across the basin. The drought is pitting farmers against residents of cities and suburbs as well as industrial users including data centers, solar projects and semiconductor plants.”
Thursday, July 16, 2026
Friday's News Links
[CNBC] S&P 500 and Nasdaq drop as chipmaker sell-off intensifies; Netflix slides 11%: Live updates
[Reuters] Global stocks drop on growing semiconductor rout; oil set for weekly gain
[CNBC] Oil prices rise after Kuwait says Iran attacked water desalination and power plant
[AP] US strikes bridges and collapses a tower at a key port as its Iran campaign expands
[AP] Iranian strike damages a Kuwait desalination plant, exposing water vulnerability in dry Mideast
[Reuters] US, Iran each attack infrastructure in risky escalation
[Axios] Trump alleges vast conspiracy to commit and cover up election fraud
[Yahoo/Bloomberg] Trump Stokes Doubts on US Election Security in Combative Speech
[Reuters] Trump accuses China of 2020 election interference, contradicting U.S. intel
[Axios] China's open-weight Kimi model stuns AI world with frontier-level results
[Axios] China just erased America's AI lead
[Yahoo/WSJ] AI Is Becoming a Commodity, and That’s a Problem for OpenAI and Anthropic
[Reuters] US import prices unexpectedly rise in June
[Yahoo/Reuters] US single-family housing starts, building permits fall in June
[CNBC] Homebuyer affordability slipped for fifth straight month, real estate index shows
[Yahoo/Reuters] US Corporate Insiders Are Selling Stocks at a Near Record Pace
[Axios] Summer is smoke season now
[Reuters] Bank of England says action needed on gilt repo market regulation
[Reuters] China's top airlines warn of heavy losses ahead of uncertain summer
[Reuters] Fuel crisis, attacks in Azov Sea tighten squeeze on Russian farmers
[Bloomberg] Iran Attacks Kuwait Water and Power Plants as Hostilities Worsen
[Bloomberg] China’s Powerful New AI Surprises Investors, Fueling Tech Rout
[Bloomberg] Hyperscalers Are Dragging Down Bond Gauges Across Global Markets
[Bloomberg] Japan’s ‘Decisive Action’ Threat Does Little to Scare Yen Bears
[Bloomberg] DeepSeek Champions China’s Bid to Flood the World With Cheap AI
[Bloomberg] China Warns of Severe Flood Risks, Heat Waves Through Mid-August
[NYT] Shipping in the Persian Gulf Nears a Halt and Oil Prices Rise
[NYT] A.I. Is Running on Borrowed Money
[WSJ] GOP Package to Fund Iran War Runs Into Republican Doubts
[WSJ] How Sky-high Deficits Threaten the Bond Market
[WSJ] AI’s Wider Availability Is Good for China, Not Great for OpenAI and Anthropic
[WSJ] Trump’s 25-Minute Speech Opens Can of Worms on Elections
[WSJ] China’s Moonshot AI Releases Model to Challenge Top U.S. Systems
[FT] Global tech stocks fall as AI trade goes into reverse
[FT] South Korean market’s extreme volatility alarms regulators
[FT] Why Iran is returning to war
[FT] How far will Iran go for the Strait of Hormuz?
[FT] Xi Jinping lays out China’s global AI leadership ambitions
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