Rarely, if ever, had a period so beckoned for market discipline. It took a fateful pass. I found myself this week pondering a fundamental Bubble Maxim: Bubbles must be quashed in their infancy, before becoming deeply entrenched by powerful self-sustaining dynamics and broad-based (universal?) policymaker, financial industry, business community, and public support. I was reminded again that unsound “money” is the bane of Capitalism; how the scourge of inflationism devastates societies.
July 1 – New York Times (Andrew Duehren): “Washington has not exactly won a reputation for fiscal discipline over the last few decades, as both Republicans and Democrats passed bills that have, bit by bit, degraded the nation’s finances. But the legislation that Republicans passed through the Senate on Tuesday stands apart in its harm to the budget, analysts say. Not only did an initial analysis show it adding at least $3.3 trillion to the nation’s debt over the next 10 years — making it among the most expensive bills in a generation — but it would also reduce the amount of tax revenue the country collects for decades. Such a shortfall could begin a seismic shift in the nation’s fiscal trajectory and raise the risk of a debt crisis.”July 2 – Bloomberg (Alexandra Semenova): “Wall Street speculators have returned in full force: US stocks have snapped back from the throes of April’s tariff selloff, hovering near record highs, the pipeline of new SPACs is rebounding and Cathie Wood’s flagship fund is on a historic tear. That’s sparked a swift jump in a Barclays Plc measure of the market’s ‘irrational exuberance’ — a phrase coined by former Federal Reserve Chair Alan Greenspan for when prices exceed assets’ fundamental values. The one-month average on the proprietary gauge has swung back into the double-digits for the first time since February — reaching levels that have signaled extreme frothiness in the past.”It is both stunning and unsurprising. The vigilantes choose a curious juncture to set up camp at the Everything’s O.K. Saloon for a moonshine bender. At this point, President Trump and Secretary Bessent have the leveraged speculating community in their back pockets. That won’t last. There were already this week noteworthy cracks suggesting a semblance of functioning global bond markets may be ready to reassert itself.
July 2 – Financial Times (George Parker, David Sheppard, Ian Smith and Jim Pickard): “Sir Keir Starmer has said Rachel Reeves will be chancellor for ‘a very long time to come’ as the prime minister moved to stem speculation over her future. UK government bonds and the pound fell sharply… after Starmer declined to back a tearful Reeves in the House of Commons… Gilts slumped as investors grew nervous, pushing the 10-year yield up 0.16 percentage points to 4.61%, the biggest one-day rise since the global bond market rout in April and, at one point, the sharpest sell-off since then Conservative prime minister Liz Truss’s ill-fated 2022 ‘mini’ Budget.” July 4 – Bloomberg (Alex Wickham, Philip Aldrick, and Greg Ritchie): “UK Prime Minister Keir Starmer is caught between a political rebellion and a jittery bond market. On one side is a big faction of his Labour Party that revolted in Parliament against his proposed welfare-spending cuts, derailing Chancellor of the Exchequer Rachel Reeves’ push to steady the government’s finances. On the other, a cohort of fast-money global investors who are worried about rising government debt loads around the world and wield the power to send borrowing costs surging if their confidence is rattled. Those tensions burst into view on Wednesday, when Reeves’ emotional appearance in the House of Commons fanned speculation that Starmer might replace her with someone more likely to cave in to pressure to increase spending. Bonds, stocks and the pound all tumbled as investors quickly unloaded UK assets.”UK gilt yields quickly stabilized, but not before the delivery of a harsh vigilantes’ wake-up call. It’s not unreasonable logic that something similar might be in the offing for Treasuries.
Financial conditions have loosened dramatically since April’s market tumult. After spiking to 453 bps, junk bond spreads sank 24 bps this week (4 sessions!) to 268 bps, the narrowest since February 20th. Investment-grade spreads narrowed eight to 77 bps, matching the low back to December 18th – and closed Thursday only three bps above multi-decade lows. Leveraged loan prices closed the week at highs since February 27th. Bank CDS prices have dropped back to March levels – at home and abroad. JPMorgan CDS traded back down to 41.5 bps (April 9th high 71), the low since March 10th. At 99.25 bps, European (subordinated debt) Bank CDS are down from an April 7th 169 bps high - to the lowest level since March 5th.
July 4 – Bloomberg (Gowri Gurumurthy): “US junk bonds racked up gains for the 10th straight session as investors poured cash into the asset class… Yields hit a nine-month low of 6.99%… US high-yield funds took a cash haul of $3.5b for week ended June 25, the largest weekly inflow in 18 months. It was the ninth consecutive week of cash flows into these funds… The market has already priced $6.6b in just three sessions this week after a flurry of issuance in June made it the busiest month since September 2021.”July 1 – Financial Times (Euan Healy): “Sales of risky European corporate debt surged to their highest ever level in June, as lowly rated companies take advantage of a capital flight out of US markets… Issuance by high-yield, or junk-rated, companies — many of which have previously struggled to access the market — rose to about €23bn in June, according to JPMorgan... That beats the previous monthly record, set in June 2021, by roughly €5bn. June also saw the greatest number of deals on record at 44… ‘The market is drowning in new deals,’ said an investor at a European credit hedge fund.”The dramatic loosening of financial conditions foreshadows upside surprises in economic activity and pricing pressures. At Tuesday’s intraday low, the rates market was pricing a 3.64% policy rate (69 bps reduction) for the Fed’s December 10th meeting, down a notable 21 bps from the June 19th 3.85% level. Stronger-than-expected June Non-Farm Payrolls data threw cold water on the weakening economy view. The economy added another 147,000 jobs for the month, versus expectations of a gain of 106,000. Expected higher at 4.3%, the Unemployment Rate instead ticked down a tenth to 4.1%, matching the low back to January. This followed Tuesday’s 7.769 million job openings (JOLTS) data – a notable 469,000 ahead of forecast to the strongest level since November. Weekly Initial Jobless Claims slipped to a historically low 233,000, a six-week low.
A reasonably tight labor market now faces deportation-related challenges. A Thursday Bloomberg headline (Ellen M Gilmer, Alicia A. Caldwell, and Hadriana Lowenkron): “US Immigration Crackdown to Intensify With $150 Billion Infusion.” “Coming on top of the agencies’ existing budgets, it’s an unprecedented funding surge that will supercharge efforts to build new detention centers, hire thousands of immigration agents and expand border wall construction.”
July 3 – Yahoo Finance (Jennifer Schonberger): “President Trump said Jerome Powell ‘should resign immediately’ in a Truth Social post…, increasing a White House pressure campaign on the Federal Reserve chairman that has been intensifying this week. Trump started the week by publicly criticizing the Fed and Powell for not lowering rates. He posted a note he sent to Powell telling the Fed chair, ‘Jerome—You are, as usual, ‘Too Late,’’ and arguing that he has ‘cost the USA a fortune’… Treasury Secretary Scott Bessent… compared the Fed to an old person who is afraid of falling after having stumbled once and said, ‘I guess this tariff derangement syndrome happens even over at the Fed’…”July 3 – Financial Times (James Politi and Lauren Fedor): “Donald Trump took a victory lap at the Iowa state fairgrounds for the so-called ‘big beautiful bill’ that has consolidated his political power just as Americans prepare to celebrate independence day. Just over five months since he was sworn in for a second term, Trump is riding high on a string of political victories… ‘I think I have more power now, I do,’ Trump said in response to a question…”We know the President has cemented extraordinary power, we do. He dominates the Executive Branch like no other. He completely controls the Republican-controlled Congress. He seemingly wields extraordinary influence over the Supreme Court. He did not hesitate to brandish American power upon Iran’s regime. Moreover, the President is intent on dictating the global economy (Secretary Lutnick: “Let Donald Trump run the global economy. He knows what he’s doing.”).
Surely there is no one in the world that could convince the President that he doesn’t possess the greatest instincts of any leader in human history. He’s always right. Teflon. Everything he touches turns to gold (including crypto). Yet it’s not enough, and he’s just not going to rest. A daily obsession, perhaps approaching torment. He’s running roughshod, a single-minded crusade to impose unprecedented power and influence.
But there’s that damn oasis of independence just down the block at The Marriner S. Eccles Building. And the (“stupid”) people running around down there have over the decades accumulated monumental power – over rates and unfettered “money” printing that are fundamental to power over a now colossal Treasury market, financial and asset markets more generally, and the U.S. and global economy.
In the President’s mind, it must be intolerable to not swiftly wrest power away from the Fed. After all, it’s now the lone unachieved objective of his historic power blitzkrieg. I’ll assume he has a team working tirelessly on a strategy, perhaps taking a few hours break for a White House barbecue, complete with B2-bomber flyovers, a beautiful bill signing, and an utterly beautiful day capped off by a dazzling evening fireworks display at the National Mall.
July 2 – Politico (Declan Harty and Victoria Guida): “Washington’s top housing regulator is escalating his fight against Federal Reserve Chair Jerome Powell, calling on Congress to investigate the central banking chief. Federal Housing Finance Agency Director Bill Pulte, who has increasingly complained that high borrowing costs are damaging the housing market, pressed lawmakers… to probe Powell’s alleged ‘political bias’ as well as his recent Senate testimony about the renovation of the Fed’s headquarters. Pulte claimed… Powell lied to lawmakers last week in his characterization of upgrades at the nearly century-old headquarters, which Powell said was in need of ‘serious renovation’… ‘This is nothing short of malfeasance and is worthy of ‘for cause’ removal, Pulte said… ‘Chairman Powell needs to be investigated by Congress immediately.’ Pulte’s attacks have echoed President Donald Trump’s own criticism of the Fed chair…”
FHFA Director Pulte’s attack on Chair Powell is hideous – and I fear indicative of the administration’s decision to tighten the noose around the head of our independent central bank. This is serious stuff. Never has it been more critical to insulate monetary policy from a power-obsessed Executive Branch. Our nation’s fiscal standing is rapidly deteriorating. Pricing pressures are already elevated, with tariffs, mass deportations, and another shot of fiscal stimulus exacerbating inflation risks. Flight out of the dollar risks turning disorderly. In short, it’s a trajectory of One Big, Ugly Crisis of Confidence.
The system is back in precarious excess mode: financial conditions are again excessively loose and markets ridiculously speculative. Super-Cycle Terminal Phase Excess Tenacity. It’s not only terribly misguided to publicly administer such foolish pressure on the Fed, but also the President’s framework for the appropriate level of interest rates is deeply flawed. This is all clear as day to interested parties around the world. Little wonder gold advanced $63 this week to $3,337, putting first-half (plus a few sessions) gains at $713, or 27.2%. Silver is up 27.9% y-t-d, Copper 26% and Platinum 54%.
It's paramount to safeguard Federal Reserve independence. We can hopefully can count on an enlightened Supreme Court. But, candidly, I’d feel more comfortable if the Vigilantes could sober up and get to work. You gave the President his big, beautiful bill. Time now to draw the line.
On a final note, today’s precarious excess mode is a global phenomenon. The Great U.S. Bubble has at this point fully exported key financial structures, strategies, institutions and speculative impulses (and worse) to the world at large. I’ll assume the liquidity overabundance inflating securities markets worldwide has, as it does here at home, its roots in egregious speculative leverage. A noteworthy development today for a key U.S. Bubble operator on the other side of the globe in India.
July 4 – Financial Times (Robin Wigglesworth): “The big news this morning is that India’s financial regulator has banned Jane Street from the country’s markets for a ‘sinister scheme’ to manipulate Indian stocks and derivatives. The Securities and Exchange Board of India allege that the US trading firm made $550mn of illegal gains from these strategies, which it is now wants back before the ban will be lifted. The Securities and Exchange Board of India said its decision to limit Jane Street’s access to India’s securities markets stemmed from a months-long investigation. ‘JS Group was undertaking an intentional, well planned, and sinister scheme and artifice to manipulate cash & futures markets and hence manipulate the BANKNIFTY [Indian bank stocks] index level, to entice small investors to trade at unfavourable and misleading prices, and to the advantage of the JS Group,’ the regulator said…”
For the Week:
The S&P500 gained 1.7% (up 6.8% y-t-d), and the Dow rose 2.3% (up 5.4%). The Utilities increased 0.9% (up 8.3%). The Banks surged 4.8% (up 14.1%), and the Broker/Dealers jumped 3.9% (up 25.6%). The Transports advanced 3.6% (up 1.0%). The S&P 400 Midcaps jumped 2.9% (up 2.3%), and the small cap Russell 2000 surged 3.5% (up 0.8%). The Nasdaq100 gained 1.5% (up 8.8%). The Semiconductors added 1.8% (up 13.4%). The Biotechs recovered 2.1% (down 0.7%). With bullion jumping $63, the HUI gold index rallied 4.9% (up 54.9%).
Three-month Treasury bill rates ended the week at 4.19%. Two-year government yields jumped 13 bps to 3.88% (down 36bps y-t-d). Five-year T-note yields rose 11 bps to 3.94% (down 45bps). Ten-year Treasury yields increased seven bps to 4.35% (down 22bps). Long bond yields added three bps to 4.86% (up 8bps). Benchmark Fannie Mae MBS yields increased five bps to 5.57% (down 27bps).
Italian 10-year yields slipped three bps to 3.44% (down 8bps y-t-d). Greek 10-year yields added a basis point to 3.28% (up 7bps). Spain's 10-year yields were unchanged at 3.22% (up 16bps). German bund yields increased two bps to 2.61% (up 24bps). French yields added one basis point to 3.28% (up 8bps). The French to German 10-year bond spread narrowed one to 67 bps. U.K. 10-year gilt yields rose five bps to 4.55% (down 1bp). U.K.'s FTSE equities index added 0.3% (up 8.0% y-t-d).
Japan's Nikkei 225 Equities Index declined 0.8% (down 0.2% y-t-d). Japanese 10-year "JGB" yields were unchanged at 1.44% (up 34bps y-t-d). France's CAC40 was little changed (up 4.3%). The German DAX equities index fell 1.0% (up 19.5%). Spain's IBEX 35 equities index was little changed (up 20.5%). Italy's FTSE MIB index dipped 0.3% (up 15.9%). EM equities were mostly higher. Brazil's Bovespa index rallied 3.2% (up 17.4%), and Mexico's Bolsa index gained 1.0% (up 17.1%). South Korea's Kospi was little changed (up 27.3%). India's Sensex equities index declined 0.7% (up 6.3%). China's Shanghai Exchange Index rose 1.4% (up 3.6%). Turkey's Borsa Istanbul National 100 index surged 9.3% (up 4.5%).
Federal Reserve Credit declined $13.3 billion last week to $6.615 TN. Fed Credit was down $2.274 TN from the June 22, 2022, peak. Over the past 303 weeks, Fed Credit expanded $2.900 TN, or 77%. Fed Credit inflated $3.804 TN, or 135%, over the past 660 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt recovered $13 billion last week to $3.232 TN. "Custody holdings" were down $86 billion y-o-y, or 2.6%.
Total money market fund assets jumped $55.6 billion to a record $7.078 TN. Money funds were up $975 billion, or 16.0%, y-o-y.
Total Commercial Paper dropped $29.6 billion to $1.439 TN. CP has expanded $351 billion y-t-d and $151 billion, or 11.7%, y-o-y.
Freddie Mac 30-year fixed mortgage rates dropped 10 bps to 6.67% (down 28bps y-o-y). Fifteen-year rates fell nine bps to 5.80% (down 45bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down six bps to 6.87% (down 52bps).
Currency Watch:
June 30 – Financial Times (Ian Smith): “The US dollar had its worst start to the year since 1973, as Donald Trump’s trade and economic policies prompt global investors to rethink their exposure to the world’s dominant currency. The dollar index… tumbled 10.8% in the first six months of 2025, the worst start to the year since the end of the gold-backed Bretton Woods system. ‘The dollar has become the whipping boy of Trump 2.0’s erratic policies,’ said Francesco Pesole, an FX strategist at ING.”
For the week, the U.S. Dollar Index slipped 0.2% to 97.18 (down 10.4% y-t-d). For the week on the upside, the South African rand increased 1.4%, the Brazilian real 1.2%, the Mexican peso 1.1%, the Canadian dollar 0.7%, the Swiss franc 0.6%, the euro 0.5%, the Australian dollar 0.4%, the Singapore dollar 0.1%, the Japanese yen 0.1%, and the New Zealand dollar 0.1%. On the downside, the Swedish krona declined 0.8%, the British pound 0.5%, the South Korean won 0.1%, and the Norwegian krone 0.1%. The Chinese (onshore) renminbi increased 0.1% versus the dollar (up 1.87% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index increased 0.5% (up 4.7% y-t-d). Spot Gold rallied 1.9% to $3,337 (up 27.2%). Silver jumped 2.7% to $36.969 (up 27.9%). WTI crude recovered $1.48, or 2.3%, to $67.00 (down 7%). Gasoline gained 1.4% (up 5%), while Natural Gas sank 9.4% to $3.387 (up 6%). Copper dipped 1.2% (up 26%). Wheat recovered 4.4% (down 1%), and Corn jumped 3.4% (down 6%). Bitcoin added $930, or 0.9%, to $108,100 (up 15.4%).
Market Instability Watch:
June 29 – Financial Times (Claire Jones and Eva Xiao): “Donald Trump’s ‘breathtaking fiscal policy excess’ and attacks on the Federal Reserve’s independence risk diminishing the US’s status as the ultimate haven for foreign investors, economists polled by the Financial Times have warned. The poll, conducted by the Kent A Clark Center for Global Markets at the University of Chicago Booth School of Business, found that more than 90% of economists surveyed were either somewhat or very concerned about the haven role of US dollar-denominated assets over the next five to 10 years. The White House insisted this week that Trump’s economic policies will help cut US debt as it made a final pitch to win over fiscal hawks in the Senate and get the president’s flagship tax bill over the line.”
July 1 – Bloomberg (Alex Harris): “Rates in the US funding market surged at the end of the quarter in a sign of potentially further dislocations in money markets as Congress lifts the debt ceiling. Volatility intensified on Monday beyond the typical spikes seen at the end of months and quarters. That’s fueled concern among some market participants about dysfunctions in the plumbing of the US financial system and the ability of the market to absorb the deluge of bills once the debt ceiling is resolved. Now, with the president’s tax bill making its way through Congress, that test seems all the more imminent, with some predicting the onslaught of issuance will begin as early as this month.”
July 3 – Bloomberg (Aya Wagatsuma): “Renewed concerns about fiscal spending globally pulled Japanese bond yields higher even after a 30-year government bond auction drew a level of demand that shows policymakers are having some success in quelling debt-market volatility… ‘The sharp rise in long-term interest rates in the UK due to concerns over fiscal expansion is likely contributing to anxiety over Japan’s own fiscal outlook,’ said Kazuya Fujiwara, a bond strategist at Mitsubishi UFJ Morgan Stanley Securities Co.”
June 30 – Bloomberg (Chien-Hua Wan and Masaki Kondo): “Taiwan’s life insurers were caught flat-footed when the local dollar surged in May, with the latest data suggesting that elevated hedging costs have hampered efforts to mitigate currency risks. Major Taiwanese life insurers’ hedging against foreign-currency volatility stood at 47.2% of their overseas asset holdings in the first quarter, the lowest level since mid-2024…”
July 1 – Reuters (Michael S. Derby): “Federal Reserve Chair Jerome Powell said… the U.S. central bank has no plans to change how it offers dollar liquidity to other official entities. Speaking on the matter of the Fed's dollar swap lines system, Powell told a gathering held by the European Central Bank that ‘we still have the same authorities, and we’re still prepared to use them in situations where it’s within our legal authorities and where we think it makes sense.’ He added the dollar swap lines have made ‘a big contribution’ to global financial stability. Fed dollar swap lines offer collateralized loans to eligible central banks to ensure dollar liquidity is not an issue for the global financial system.”
Global Credit and Financial Bubble Watch:
June 29 – Financial Times (Amelia Pollard, Eric Platt and Harriet Agnew): “Big hedge funds are pushing into private credit as they seek to establish themselves as diversified financial institutions, with Millennium Management, Point72 and Third Point all looking to launch new funds and strategies. Third Point, a $20bn firm with a history as an activist investor, plans to launch a publicly traded private credit fund next month called Third Point Private Capital Partners, which will lend directly to businesses. Millennium, which manages more than $75bn in assets, has been weighing whether to launch a separate fund to invest in less liquid assets, including private credit, its first new fund in more than three decades. Steve Cohen’s Point72 earlier this year hired Todd Hirsch, formerly a senior managing director at Blackstone, to lead its private credit strategy.”
Trump Administration Watch:
July 4 – Bloomberg (Mario Parker): “Donald Trump’s second presidency is turning into a white-knuckle ride — the kind that gets to its destination in double-quick time, provided there’s no accident on the way. When a sleep-deprived Congress approved Trump’s budget megabill on Thursday, it set the capstone on five furious months back in the White House. In that time the president has thrown up a tariff wall, slammed shut the southern US border, and upended everything from foreign policy to higher education — much as he’d promised to do. Trump’s self-titled ‘One Big Beautiful Bill,’ the centerpiece of his second-term agenda, extends tax breaks from his earlier presidency that were set to expire. It delivers on key campaign pledges too, such as no taxes on tips and overtime, and allocates upwards of $150 billion for Trump’s crackdown on immigration… The $3.4 trillion bill will further mushroom the national debt and widen America’s income and wealth gaps, most economists reckon. Social safety nets, crucial to the working-class voters who Trump drew to the Republican Party, face the biggest cuts in decades.”
July 3 – Associated Press (Lisa Mascaro, Mary Clare Jalonick, Leah Askarinam, Matt Brown, Kevin Freking and Joey Cappelletti): “House Republicans propelled President Donald Trump’s big multitrillion-dollar tax breaks and spending cuts bill to final passage Thursday in Congress, overcoming multiple setbacks to approve his signature second-term policy package before a Fourth of July deadline. The tight roll call, 218-214, came at a potentially high political cost, with two Republicans joining all Democrats opposed. GOP leaders worked overnight and the president himself leaned on a handful of skeptics to drop their opposition. Democratic leader Hakeem Jeffries… delayed voting for more than eight hours by seizing control of the floor with a record-breaking speech against the bill. ‘This is going to be a great bill for the country,’ Trump said afterward…”
June 30 – Axios (Courtenay Brown): “President Trump sent a letter to Federal Reserve chair Jerome Powell urging the central bank to lower interest rates ‘by a lot,’ the White House said… The administration has stepped up public pressure on the Fed, with top officials floating the possibility of announcing Powell’s replacement months before his term expires. ‘Jerome ‘Too Late’ Powell, and his entire Board, should be ashamed of themselves for allowing this to happen to the United States,’ Trump posted… ‘You have cost the U.S.A. a fortune — and continue to do so,’ the letter, which was written on a document that lists foreign nations’ interest rate levels, says. ‘You should lower the rate by a lot!’”
July 3 – Reuters (Andrea Shalal): “The Trump administration will focus on finding a replacement for Federal Reserve Chairman Jerome Powell this fall, U.S. Treasury Secretary Scott Bessent told CNBC…, adding that officials had ‘a lot of good candidates.’ Bessent said it was up to the Fed to decide interest rates, although he added that if the U.S. central bank did not cut interest rates soon, any potential rate cut in September could be higher.”
July 3 – Bloomberg (Stephanie Lai): “Treasury Secretary Scott Bessent said that President… Trump will make the call on any extension of talks with trading partners past the July 9 deadline for higher tariff rates to kick back in. ‘We’re going to do what the president wants, and he’ll be the one to determine whether they’re negotiating in good faith,’ Bessent said… when asked whether the deadline might be lengthened. ‘I’m not going to give people a 10% extension on national TV when they should try to get it across the finish line.’”
June 30 – Bloomberg (Daniel Flatley and Sonali Basak): “Treasury Secretary Scott Bessent indicated it wouldn’t make sense for the government to ramp up sales of longer-term securities given where yields are today, though he held out hope that interest rates across maturities will be falling as inflation slows. ‘Why would we do that?’ Bessent said… when asked about increasing the share of longer-term securities in Treasury debt issuance. ‘The time to have done that would have been in 2021, 2022.’ Bessent last year repeatedly criticized then-Treasury Secretary Janet Yellen for relying more on short-term Treasuries in issuance…”
July 1 – Axios (Andrew Childers): “Elon Musk again blasted President Trump’s signature spending bill Monday as the Senate worked through a marathon amendment session to send the measure to the Oval Office by July 4. The latest: Hours after Musk threatened to form a new political party if the ‘big, beautiful bill’ passed, Trump claimed… the Tesla CEO ‘may get more subsidy than any human being in history’ and suggested he may have DOGE… take a ‘good, hard, look’ at the billionaire’s companies… ‘It is obvious with the insane spending of this bill, which increases the debt ceiling by a record FIVE TRILLION DOLLARS that we live in a one-party country – the PORKY PIG PARTY!!’ Musk wrote... ‘Time for a new political party that actually cares about the people’… In a separate post, Musk doubled down on his rhetoric, saying every member of Congress who votes to pass the bill should ‘hang their head in shame.’ ‘[T]hey will lose their primary next year if it is the last thing I do on this Earth,’ Musk said… ‘If this insane spending bill passes, the America Party will be formed the next day.’”
China Trade War Watch:
July 4 – Bloomberg (Mackenzie Hawkins): “President Donald Trump’s administration plans to restrict shipments of AI chips from the likes of Nvidia Corp. to Malaysia and Thailand, part of an effort to crack down on suspected semiconductor smuggling into China… The rule is not yet finalized and could still change, said the people… Officials plan to pair the Malaysia and Thailand controls with a formal rescission of global curbs from the so-called AI diffusion rule…”
July 3 – Bloomberg (Claire Jiao, Philip J. Heijmans and Katia Dmitrieva): “President Donald Trump’s two-tiered trade deal with Vietnam aims squarely at practices China has long used to skirt US tariffs: The widespread legal shifting of production to Southeast Asian factories and the murkier and illegal ‘origin washing’ of exports through their ports. The agreement slaps a 20% tariff on Vietnamese exports to the US and a 40% levy on goods deemed to be transshipped through the country. With details still scarce, economists said much will hinge on the framework Washington establishes to determine what it sees as ‘Made in Vietnam’ and what it sees as transshipments. Complicating matters is the fact that Chinese businesses have rushed to set up shop across Southeast Asia… The lion’s share of Vietnam’s exports to the US are goods like Airpods, phones or other products assembled with Chinese components in a factory in Vietnam and then shipped to America.”
July 3 – Bloomberg: “China said it was examining a trade deal that the US and Vietnam clinched and would retaliate if its interests were hurt — a sign that tensions between Beijing and Washington risk worsening as more of the pacts are finalized. ‘We are happy to see all parties resolve trade conflicts with the US through equal negotiations but firmly oppose any party striking a deal at the expense of China’s interests,’ He Yongqian, a spokeswoman for the Ministry of Commerce, said… ‘If such a situation arises, China will firmly strike back to protect its own legitimate rights and interests,’ she added…”
July 3 – Associated Press (Mackenzie Hawkins): “President Donald Trump’s administration has lifted recent export license requirements for chip design software sales in China, as Washington and Beijing implement a trade deal for both countries to ease some restrictions on critical technologies. The US Commerce Department informed the world’s three leading semiconductor design software providers — Synopsys Inc., Cadence Design Systems Inc. and Germany’s Siemens AG — that requirements to seek government licenses for business in China are no longer in place…”
June 29 – Financial Times (Edward White): “China’s export controls are spilling over into products beyond the rare earths and magnets officially identified by Beijing, threatening broader supply chain disruption and undermining US claims that a new trade deal had resolved delays to shipments… On June 10, the US said it had agreed with China that rare earth shipments should be expedited, reviving a 90-day trade truce on their tariff war reached the previous month in Geneva. But China’s commerce ministry and customs officials have started to demand additional inspections and third-party chemical testing and analysis of products that are not included in the original control list…”
July 4 – Bloomberg: “The US and China need to pick up the pace of preparations if a leaders’ summit is to take place in the fall, according to an adviser to the Foreign Ministry in Beijing… ‘If we are going to make this happen, we need to make preparations as soon as possible, and time is running out,’ Wu Xinbo, director at Fudan University’s Center for American Studies…, said…”
July 1 – Bloomberg (Akayla Gardner): “Treasury Secretary Scott Bessent said the US is hopeful China will do more to ease the export of rare earth magnets after last month’s deal between the two countries, saying flows had still not returned to levels seen in early April. ‘We are hoping that they will flow at a faster rate,’ Bessent said…, when asked if China was giving the US access to the critical exports. Beijing’s curtailing of the shipments had spurred friction between the world’s two largest economies. ‘Rare earth magnets are flowing. They are not flowing as they did before April 4, but we are confident that the Chinese will live up to their side of the deal,’ Bessent added.”
July 3 – Bloomberg (Lucia Kassai): “China avoided purchasing US crude for the third straight month — the longest stretch since 2018 — delivering a fresh blow to shale drillers already facing lower oil prices. The world’s biggest oil importer bought no American crude in May…, following zero purchases in both March and April as a trade dispute between the largest global economies roiled markets. The absence of Chinese buying sent US overseas oil sales tumbling to the lowest in two years.”
Trade War Watch:
July 4 – Bloomberg (Akayla Gardner and Stephanie Lai): “US President Donald Trump said his administration will probably start notifying trading partners Friday of the new US tariff on their exports effective Aug. 1, while reiterating a preference for simplicity over complicated negotiations five days before his deadline for deals. Trump told reporters that about ‘10 or 12’ letters would go out Friday, with additional letters coming ‘over the next few days.’ ‘By the ninth they’ll be fully covered,’ Trump added, referring to a July 9 deadline he initially set for countries to reach deals with the US to avoid higher import duties he has threatened. ‘They’ll range in value from maybe 60 or 70% tariffs to 10 and 20% tariffs,’ he added.”
July 3 – Bloomberg: “President Donald Trump’s new trade deal with Vietnam sends a clear signal about where US tariffs on Chinese goods might ultimately land, as talks between Washington and Beijing continue following their recent truce. Chinese goods currently face tariffs of around 55%, a level expected to remain through August. But under the latest Vietnam agreement, the US will slap a 20% tariff on Vietnamese exports to the US and a steeper 40% levy on goods deemed to be transshipped — the latter targeting a well-worn backdoor used by Chinese exporters since the first China-US trade war to dodge American tariffs.”
June 29 – CNBC (Lim Hui Jie): “Canada has walked back on its digital services tax ‘in anticipation’ of a mutually beneficial comprehensive trade arrangement with the United States, Ottawa announced… The move comes after U.S. President Donald Trump announced over the weekend that he will be ‘terminating ALL discussions on Trade with Canada’ in response to Ottawa’s decision to impose a digital services tax on American tech firms. ‘Today’s announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month’s G7 Leaders’ Summit in Kananaskis,’ Canadian Prime Minister Mark Carney said…”
July 1 – Financial Times (Andy Bounds): “European capitals have hardened their position in trade talks with Donald Trump, insisting the US reduces its tariffs on the EU immediately as part of any framework deal before the looming deadline on July 9. Trade commissioner Maroš Šefčovič has been instructed to take a tougher line on a trip to Washington this week as Brussels tries to remove or at least substantially cut Trump’s levies in the long term. Washington has indicated to Brussels that the most likely first-stage agreement is a UK-style phased deal that leaves some tariffs in place while talks continue, according to EU officials.”
July 2 – Bloomberg (Yoshiaki Nohara, Alice French and Alastair Gale): “US President Donald Trump threatened Japan with tariffs of up to 35% as he ramped up tensions for a third straight day, fueling fears of a worst-case scenario among market players and raising doubts over Tokyo’s tactics in trade talks. Japan should be forced to ‘pay 30%, 35% or whatever the number is that we determine, because we also have a very big trade deficit with Japan,’ Trump said, again flagging the possibility that across-the-board tariffs could go much higher than the 24% initially penciled in for July 9. ‘I’m not sure we’re going to make a deal. I doubt it with Japan, they’re very tough. You have to understand, they’re very spoiled.’”
July 1 – Wall Street Journal (Aime Williams and Leo Lewis): “Donald Trump has threatened to increase levies on Japan and cast doubt that the US will reach a deal with its Asian ally, as he escalated his trade rhetoric days before his pause on some steep tariffs is set to expire. The US president said he would impose new levies on countries that failed to agree a trade deal by July 9, when the ‘reciprocal’ tariffs unleashed in April are set to resume. He also singled out Tokyo, a crucial trading partner that had been among the first countries to seek a deal… ‘We’ve dealt with Japan. I’m not sure we’re going to make a deal. I doubt it,’ Trump said. ‘I’ll write them a letter to say ‘we thank you very much, and we know you can’t do the kind of things that we need, and therefore you pay a 30%, 35%’ or whatever the number is that we determined,’ he said. ‘Because we also have a very big trade deficit.’”
July 2 – Wall Street Journal (Gavin Bade and Brian Schwartz): “After failing to cut a trade deal with Japan following weeks of talks, Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer decided to turn up the pressure. When Japanese officials arrived in Washington in late May, Lutnick and Greer warned them that if the two sides couldn’t work out an agreement soon, the conversations might start shifting from easing the tariffs President Trump had recently imposed toward additional punitive measures… The Americans said they might demand a cap on the number of vehicles Japan could export to the U.S.—a policy known as a voluntary export restriction. But the Japanese officials stood their ground. From the start, they had told the Americans they wouldn’t agree to any deal that preserves Trump’s 25% automotive tariff... That impasse continues.”
June 30 – Financial Times (Leo Lewis): “Japan has said it will not sacrifice its farmers to secure tariff exemptions from the US, as Tokyo and Washington hardened their positions in a rice diplomacy stand-off and hopes of an imminent trade deal between the allies faded. The comments from Japan’s chief cabinet secretary Yoshimasa Hayashi on Tuesday came as Donald Trump cast Japan, among other countries, as ‘spoiled’ and the latest round of trade negotiations in Washington ended without clear progress. ‘We are not thinking about doing anything that would sacrifice the farm sector,’ Hayashi said.”
July 2 – Bloomberg (Soo-Hyang Choi and Hyonhee Shin): “South Korean President Lee Jae Myung said it remains unclear if trade talks between Seoul and Washington can result in a deal before next week’s deadline to avert sweeping tariffs from President Donald Trump. ‘We are doing our best,’ Lee said... ‘It’s still not clear to each side what the other side wants,’ he said, adding that the negotiations have not been easy so far.”
Budget Watch:
June 30 – Axios (Neil Irwin): “It was a busy weekend for the U.S. Senate, which narrowly advanced signature tax and spending legislation. The people most worried about the risks from U.S. fiscal deficits do not like what Republican senators came up with. The Senate version widens the budget deficit over the coming decade by half a trillion dollars more than the version of the One Big, Beautiful Bill Act that passed the House… The Congressional Budget Office… projected the Senate version will reduce federal revenues by $4.5 trillion over the next decade, while reducing spending by $1.2 trillion. That makes for a net deficit widening of $3.3 trillion, compared to $2.8 trillion in the House version. The Committee for a Responsible Federal Budget estimates that the legislation would also result in higher borrowing costs for the federal government, adding another $690 billion to the cost.”
July 3 – Wall Street Journal (Sam Goldfarb and Justin Lahart): “U.S. budget deficits were already approaching $2 trillion when Republican lawmakers set out to extend and expand tax cuts this year. Interest rates were high and the bond market was jumpy, producing worrying spikes in borrowing costs. Republicans forged ahead anyway, defying warnings from Wall Street to Washington that they were pushing the country further down a dangerous fiscal path. On Thursday, the House voted in favor of the sprawling tax-and-spending bill that was passed on Tuesday by the Senate.”
July 1 – Associated Press (Lisa Mascaro, Mary Clare Jalonick and Matt Brown): “Senate Republicans hauled President Donald Trump’s big tax breaks and spending cuts bill to passage Tuesday by the narrowest of margins, pushing past opposition from Democrats and their own GOP ranks after a turbulent overnight session. The outcome capped an unusually tense weekend of work at the Capitol, the president’s signature legislative priority teetering on the edge of approval or collapse. In the end that tally was 50-50, with Vice President JD Vance casting the tie-breaking vote. Three Republican senators — Thom Tillis of North Carolina, Susan Collins of Maine and Rand Paul of Kentucky — joined all Democrats in voting against it.”
July 3 – Financial Times (Alan Smith and Jonathan Vincent): “US tariff revenues surged almost fourfold from a year earlier to a record $24.2bn in May, the first full month in which President Donald Trump’s 10% global tariff was in effect. The figure represented a rise of more than 25% from the month earlier, while the total value of US goods imports remained broadly unchanged from April.”
July 1 – Wall Street Journal (William A. Galston): “Today’s political din makes it difficult for genuine warning calls to break through, but the Social Security system’s trustees in late June sent a signal so alarming that America can’t ignore it: Unless lawmakers do something, the system’s trust fund will be exhausted in the first quarter of 2033—sooner than earlier reports predicted. This crisis will trigger large cuts in benefits to current and new beneficiaries. To preserve Social Security, Congress will need to address the coming insolvency crisis no later than the next president’s first term. Time isn’t on our side.”
Constitution Watch:
July 4 – Washington Post (Daniel Wu): “Around 200 Marines are heading to Florida to support Immigration and Customs Enforcement authorities, U.S. Northern Command said Thursday, noting that it was the ‘first wave’ of the organization's planned support for ICE operations in several states.”
July 1 – Axios (Avery Lotz): “President Trump said… DOGE could investigate Elon Musk, the latest indicator that his patience with the Tesla CEO is running thin. The two men have engaged in a war of words in the past 24 hours, with Musk taking to X to vent his objections to the president’s ‘big, beautiful bill’ and the estimated trillions of dollars it would add to the national debt. Trump posted to Truth Social overnight that DOGE may need to take a ‘good, hard look’ at Musk’s companies, and he doubled down on the notion when he spoke to reporters… ‘We might have to put DOGE on Elon. You know what DOGE is? DOGE is the monster that might have to go back and eat Elon,’ he said… When asked if he would consider deporting Musk, Trump said he didn’t know. ‘We’ll have to take a look,’ he said.”
U.S./Russia/China/Europe/Iran Watch:
July 4 – Wall Street Journal (Marson and Jane Lytvynenko): “As President Trump is pulling back in Ukraine, Russian President Vladimir Putin is pushing forward. Moscow is ramping up its ground offensives and bombing campaigns against cities across Ukraine... At the same time, the U.S. decision this week to stop delivery of some weapons to the Ukrainians hands Putin a significant boost to his efforts to weaken Western support that is central to sustaining Kyiv’s resistance. Putin, in a Thursday call with Trump, signaled that he had no intention of heeding the U.S. president’s calls to end the war. Instead, he reiterated that his goals remained the same as when he invaded: to reassert Russian dominance over Ukraine and force the West to withdraw its support for Kyiv. ‘Our president said that Russia will achieve its goals, that is, the elimination of the well-known root causes that led to the current state of affairs,’ said Yuri Ushakov, a close adviser to the Russian leader… ‘Russia will not back down from these goals.’”
Ukraine War Watch:
July 4 – Associated Press (Hanna Arhirova): “Waves of drone and missile attacks targeted Kyiv overnight into Friday in the largest aerial assault since Russia’s invasion of Ukraine began more than three years ago, officials said, amid a renewed Russian push to capture more of its neighbor’s land.”
Middle East Watch:
July 1 – Bloomberg (Jonathan Tirone): “Iran is said to be cutting off communication with key United Nations watchdog officials, deepening uncertainty over the status of its nuclear program and introducing additional ambiguity to the diplomatic showdown with Washington. After formally ending inspections by the International Atomic Energy Agency last week, Iranian nuclear-safety regulators have stopped taking calls from the Vienna-based agency, according to two officials…”
July 4 – Wall Street Journal (Laurence Norman): “The United Nations atomic agency is pulling its inspectors out of Iran over safety concerns, severing the link between the agency and Tehran, which earlier this week suspended cooperation with the international monitor… The International Atomic Energy Agency’s team of inspectors were driven by road out of Iran on Friday despite international departures from Iran’s main airports resuming normal operations in the wake of a 12-day conflict with Israel, two of the people said.”
July 1 – Reuters (Gram Slattery and Phil Stewart): “The Iranian military loaded naval mines onto vessels in the Persian Gulf last month, a move that intensified concerns in Washington that Tehran was gearing up to blockade the Strait of Hormuz following Israel's strikes on sites across Iran, according to two U.S. officials.”
AI Bubble Watch:
July 4 – Bloomberg (Parmy Olson): “Something troubling is happening to our brains as artificial intelligence platforms become more popular. Studies are showing that professional workers who use ChatGPT to carry out tasks might lose critical thinking skills and motivation. People are forming strong emotional bonds with chatbots, sometimes exacerbating feelings of loneliness. And others are having psychotic episodes after talking to chatbots for hours each day. The mental health impact of generative AI is difficult to quantify in part because it is used so privately, but anecdotal evidence is growing to suggest a broader cost that deserves more attention from both lawmakers and tech companies who design the underlying models.”
June 29 – Financial Times (Martha Muir): “US energy companies are pouring record sums into building power plants and transmission lines to meet electricity demand from data centres, raising concerns that the costs may be passed on to consumers. According to Jefferies…, utility capital expenditure is expected to hit $212.1bn in 2025, a 22.3% rise year-on-year and a 129% increase compared with a decade ago. Investment is forecast to reach a record high in 2027 of $228.1bn. ‘Companies are investing in generation and transmission to reindustrialise the economy,’ said Julien Dumoulin-Smith, power utilities and clean energy analyst at Jefferies. ‘Over the last couple of decades, we’ve seen a relative paucity of new investment… we’re now seeing a very meaningful shift, and should see a sharp uptick as data centre deployment accelerates.’”
June 30 – Bloomberg (Kurt Wagner): “Meta… CEO Mark Zuckerberg announced a major restructuring of the company’s artificial intelligence group, including a commitment to developing AI ‘superintelligence,’ or systems that can complete tasks as well as or even better than humans… Meta will spend ‘hundreds of billions’ on AI projects and research in the years to come, Zuckerberg has said, though the Facebook founder also expects that many firms will likely overspend on AI in an effort to avoid missing the wave. ‘There’s a meaningful chance that a lot of the companies are overbuilding now,’ he said last summer. ‘But on the flip side, I actually think all the companies that are investing are making a rational decision, because the downside of being behind is that you’re out of position for, like, the most important technology for the next 10 to 15 years.’”
July 1 – Wall Street Journal (Liza Lin, Josh Chin and Raffaele Huang): “Chinese artificial-intelligence companies are loosening the U.S.’s global stranglehold on AI, challenging American superiority and setting the stage for a global arms race in the technology. In Europe, the Middle East, Africa and Asia, users ranging from multinational banks to public universities are turning to large language models from Chinese companies such as startup DeepSeek and e-commerce giant Alibaba as alternatives to American offerings…. HSBC and Standard Chartered have begun testing DeepSeek’s models internally… Saudi Aramco, the world’s largest oil company, recently installed DeepSeek in its main data center. Even major American cloud service providers such as Amazon Web Services, Microsoft and Google offer DeepSeek to customers…”
Bubble and Mania Watch:
July 3 – Bloomberg (Olga Kharif): “A silent transfer of control is reshaping the $2.1 trillion Bitcoin market. A steady stream of sales by long-time whales — miners, offshore funds and anonymous wallets — is being met almost one-for-one by demand from institutional players like ETFs, corporates and asset managers… Underneath the surface, long-dormant whales have been trimming positions just as institutions ramp up their buying… Over the past year, large holders, or Bitcoin whales, have offloaded more than 500,000 Bitcoin — worth over $50 billion at current prices — according to… 10x Research.”
July 1 – Wall Street Journal (Deborah Acosta): “They came in droves via Zoom. Thousands found an inexpensive slice of paradise in Cape Coral, a city with more canals than anywhere else in the world. Househunters were so taken with this boating community on Florida’s west coast that many purchased homes sight unseen during the early years of the pandemic. The median home price soared nearly 75% to $419,000 in three years, transforming the character of this middle-income community… Now, three years later, ‘For Sale’ signs line every other block. Open houses are deserted for hours. Foreclosures are ticking up. Home builders are listing half-built shells at discounts as they abandon projects to cut losses. Locals say the lack of traffic has led to an increase in vehicles speeding through empty residential streets. ‘Cape Coral is the worst housing market in America right now,’ said José Echevarria, a Realtor. ‘I don’t think we’re at the bottom yet.’”
June 29 – CNBC (David Wethe and Joe Lovinger): “President Donald Trump is championing a revival of American fossil fuels with calls to ‘drill baby drill.’ But in the US energy capital, a pullback in the industry has already left its mark. Houston office buildings once packed with oil executives, engineers and energy traders are now marked by darkened floors and fewer desks. A wave of consolidation — with more than $450 billion of oil and natural gas deals since the start of 2023 — has led companies to cut jobs and abandon corporate campuses. The Houston market’s office vacancy rate reached 27.9% in the first quarter, trailing only San Francisco as the worst among major US metropolitan areas, according to… Colliers.”
July 1 – Bloomberg (Biz Carson): “Jeff Bezos sold 3.3 million Amazon.com Inc. shares in recent days, netting $736.7 million. The sale, which coincided with his star-studded wedding to Lauren Sanchez in Venice, is part of a 10b5-1 trading plan Bezos adopted in March for up to 25 million shares.”
Inflation Watch:
June 30 – Wall Street Journal (Kirk Maltais): “Grilling this July Fourth? That burger is going to cost you more. Americans hosting cookouts this week will have to pay more than ever to buy ground beef for hamburger patties because of several issues that continue to disrupt a historically low cattle supply, according to… the American Farm Bureau Federation. Consumers’ appetite for beef hasn’t waned—in fact both demand and prices have surged—since the Covid-19 pandemic. The AFBF estimates that the retail price for 2 pounds of ground beef has risen to $13.33, or $6.67 a pound. It is the highest price recorded by the survey since it began in 2013. ‘Consumer demand for quality beef is not declining,’ said Samantha Ayoub, author of the survey and an associate economist with the AFBF.”
Federal Reserve Watch:
July 3 – Bloomberg (Saleha Mohsin, Joshua Green, and Amara Omeokwe): “As President Donald Trump and his advisers begin weighing replacements for Federal Reserve Chair Jerome Powell, they’re running into one significant complication: It’s not clear that Powell will leave the US central bank next year. The Fed chief has repeatedly declined to say whether he will step down when his four-year term as chair expires in May, or remain on the Fed board — something he could technically do until his tenure as a governor expires in January 2028. The prospect of Powell remaining at the central bank has prompted administration officials to begin planning for multiple scenarios for his replacement, as Trump seeks a chair who will support his economic agenda.”
July 1 – Associated Press (Christopher Rugaber): “Federal Reserve Chair Jerome Powell… stuck to his position that the central bank will keep its key rate on hold while it waits to see how President Donald Trump’s tariffs effect the economy, despite the steady stream of criticism from the White House… Powell, speaking… at a conference hosted by the European Central Bank, also said that U.S. inflation is likely to pick up later this summer, though he acknowledged that the timing and magnitude of any price increase from the duties is uncertain. But he said the Fed will keep rates on hold while it evaluates the impact of tariffs on the U.S. economy. ‘As long as the economy is in solid shape, we think the prudent thing to do is to wait and see what those effects might be,’ Powell said, referring to the sweeping duties Trump has imposed this year.”
July 2 – Bloomberg (Jonnelle Marte): “Federal Reserve Bank of Richmond President Tom Barkin said there’s no urgency for officials to lower rates with data showing the US economy remains strong. ‘The numbers on the economy are very solid,’ Barkin says… ‘We haven’t had the urgency of saying we’ve got an economy going the wrong way.’ ‘So long as there’s no urgency from the bigger environment, I think that one does what one does when you drive through fog, which is go slowly.’”
June 30 – Reuters (Ann Saphir): “Chicago Federal Reserve Bank President Austan Goolsbee… said that with unemployment near 4% and inflation around 2.5% and falling, he sees no possibility that tariffs or another supply-side shock could in the near term cause actual 1970s-style stagflation… ‘But there's definitely the possibility of both things getting worse at the same time,’ Goolsbee said…, referring to unemployment and inflation. ‘And there you usually say, well, how long is each side's discrepancy going to last? Do you think it's temporary or do you think it's permanent? And how big is each side...that's the way I think about it.’”
July 2 – New York Times (Colby Smith and Ben Casselman): “Officials at the Federal Reserve, under pressure from President Trump to restart interest rate cuts after an extended pause, say they are prepared to lower borrowing costs if the labor market weakens. But Mr. Trump’s own immigration policies risk making it much harder for those policymakers to know whether that is happening, putting a divided central bank in an even more fraught position as it debates when and by what magnitude to lower borrowing costs. The Trump administration in recent months has moved to revoke the legal status of hundreds of thousands of immigrants and has conducted high-profile immigration raids at work sites in Los Angeles and other cities. It has stepped up security at the U.S.-Mexican border and has publicly threatened to deport as many as a million workers a year. The full effect of those policies is not yet clear.”
U.S. Economic Bubble Watch:
July 3 – Associated Press (Paul Wiseman): “The U.S. labor market delivered another upside surprise last month, churning out a surprisingly strong 147,000 jobs… June hiring was up modestly from May’s 144,000 increase in payrolls and beat the 118,000 jobs economists had forecast... The unemployment rate slipped to 4.1% from 4.2% in May as the ranks of the unemployed fell by 222,000… Average hourly wages came in cooler than forecasters expected, rising 0.2% from May and 3.7% from a year earlier… Healthcare jobs increased by 39,000. State governments added 47,000 workers and local governments 33,000.”
July 1 – Bloomberg (Jarrell Dillard and Mark Niquette): “US job openings unexpectedly rose in May to the highest level since November, largely fueled by leisure and hospitality, and layoffs declined, pointing to a stable labor market despite economic uncertainty. Available positions increased by 374,000 to 7.77 million… That exceeded all estimates... Vacancies in the hospitality sector accounted for three quarters of May openings. The finance, transportation and warehousing industries as well health care also saw more moderate gains.”
July 3 – Associated Press (Matt Ott): “Fewer Americans applied for unemployment benefits last week as layoffs in the U.S. remain low despite uncertainty about how tariffs will impact the economy… Jobless claims for the week ending June 28 fell by 4,000 to 233,000, less than the 241,000 that analysts forecast… The total number of Americans collecting unemployment benefits the week of June 21 held steady at 1.97 million.”
July 2 – Wall Street Journal (James Freeman): “Among small firms, the good-but-not great job market continues, but at least June brought reports of a few more companies handing out raises. That’s according to the latest monthly employer survey from the National Federation of Independent Business… NFIB’s June Small Business Economic Trends survey found that 36% of all owners reported job openings they could not fill in the current period, up 2 points from May. Thirty percent have openings for skilled workers (unchanged), and 13% have openings for unskilled labor (unchanged for the fifth consecutive month). Job openings were the highest in the construction, manufacturing, and transportation industries, and the lowest in finance and agriculture… Seasonally adjusted, a net 33% reported raising compensation, up 7 points from May and the largest monthly increase since January 2020.”
July 1 – Reuters (Lucia Mutikani): “U.S. manufacturing remained sluggish in June, with new orders subdued and prices paid for inputs creeping higher, suggesting that the Trump administration's tariffs on imported goods continued to hamper businesses’ ability to plan ahead. The Institute for Supply Management (ISM) said… its manufacturing PMI nudged up to 49.0 last month from a six-month low of 48.5 in May… Its gauge of prices paid by factories for inputs ticked up to 69.7 from 69.4 in the prior month.”
July 1 – Bloomberg (Keith Naughton, Jade Thomas and Chester Dawson): “US auto sales are losing momentum after a springtime surge fueled by shoppers racing to buy cars before President Donald Trump’s auto tariffs drove up prices… The annual automotive selling rate likely fell to 15 million in June — the slowest pace in the last 12 months — from 17.6 million in April… With already high car prices expected to rise further as automakers manage billions of dollars in tariff costs, it may only get worse from here. ‘The party is over,’ Jonathan Smoke, chief economist for researcher Cox Automotive Inc., said…”
July 1 – Bloomberg (Michael Sasso): “A buildup of unsold houses sitting on the market for weeks is becoming a new reality in once-booming housing areas across the Sun Belt. Real estate agents in the South and Southwest say they’re seeing more people list homes… In Florida, homeowners are fleeing soaring insurance costs, and in Colorado, investors are culling rental properties. The result is a rise in supply, something real estate agents who were getting multiple offers on even ho-hum houses not so long ago are not accustomed to. In Florida, houses now take a median 73 days to sell, up from 55 days two years ago and twice as long as in New Jersey and Virginia, according to Realtor.com… ‘Inventories have been climbing, but they’ve been climbing out of a hole,’ said Charlie Dougherty, a senior economist at Wells Fargo & Co.”
July 1 – Bloomberg (Jennifer Epstein): “Manhattan home sales in the second quarter were stronger than they’ve been in almost two years, boosted by cash buyers… A little more than 3,000 co-op and condo purchases closed during the quarter, a 17% jump from a year earlier, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman. The median price of those transactions was $1.2 million, up 1.6%.”
China Watch:
June 29 – Bloomberg (Alan Wong): “One of Hong Kong’s last remaining pro-democracy parties has shut down, marking another blow to a decades-long movement for greater freedoms that has largely collapsed under Beijing’s crackdown on dissent. The League of Social Democrats announced its disbandment Sunday…, citing ‘immense political pressure.’ ‘We leave with heavy hearts, and with an ache in our conscience, knowing we will not be the last to fall... Even as we step aside, we stand with those still struggling in the shadows,’ it added. The decision follows a similar move by the Democratic Party, which earlier this year began a process to dissolve, citing the ‘political situation’ without elaborating. Another major group, Civic Party, officially folded last year.”
June 30 – Bloomberg: “China’s home sales extended their slump in June, putting further strain on the economy and underscoring the impetus for fresh support measures. The value of new-home sales from the 100 largest property companies stood at 339 billion yuan ($47.3bn)… That represents a 23% fall from a year ago… June’s sales follows an 8.6% decline in May. On a monthly basis, however, the latest sales were up 14.7% from May, CRIC said. China’s housing downturn has dragged on for four years…”
July 4 – Bloomberg: “Country Garden Holdings Co.’s sales slid again in June, with the developer faring worse than peers… Monthly contracted sales at the… company dropped 35% from a year earlier to 2.81 billion yuan ($392 million)… The decline was from an already low base, and was steeper than the 23% drop in new home sales for China’s top 100 developers.”
June 30 – Reuters (Ellen Zhang and Ryan Woo): “China’s factory activity returned to expansion in June, supported by an increase in new orders that lifted production, a private-sector survey showed… The Caixin/S&P Global manufacturing PMI rose to 50.4 in June from 48.3 in May, surpassing analysts’ expectations… The 50-mark separates growth from contraction. The reading contrasts with China's official PMI… that showed factory activity shrank for a third straight month. But new export orders in both surveys remained in negative terrain in June, suggesting potential challenges for exports in the second half of the year.”
Central Banker Watch:
June 30 – Financial Times (Olaf Storbeck): “Keeping inflation in check will become harder as trade tensions and other ‘structural shifts’ make the world more volatile, the European Central Bank has warned… ‘Structural shifts such as geopolitical and economic fragmentation and increasing use of artificial intelligence make the inflation environment more uncertain,’ the ECB warned in a monetary policy strategy statement…”
Europe Watch:
July 4 – Bloomberg (Alexander Weber and Mark Schroers): “The link between heat and key economic indicators such as inflation and gross domestic product is too important to ignore, according to European Central Bank Executive Board member Frank Elderson. ‘We have progressed in understanding that accounting for the climate and nature crises is relevant,’ Elderson said... ‘If you think about the exceptionally hot summer of 2022, food-price inflation was up between 0.4 and 0.9 percentage points’ and ‘there was quite a measurable hit on German GDP.’ ‘So these things are relevant,’ he said.”
July 4 – Bloomberg (Nick Heubeck): “Germany will carry out emergency repairs on its autobahn this weekend after extreme heat in recent days blew up large chunks of concrete along key stretches of the highway. Temperatures of up to 39C (102F) caused the material to expand and crack open roads in various parts of the country, leading to hours-long traffic jams.”
Japan Watch:
July 1 – Wall Street Journal (Paul Hannon): “The Bank of Japan’s key interest rate is below the level at which it neither stimulates nor restricts growth, while underlying inflation is set to rise slowly, Gov. Kazuo Ueda said… ‘The current rate is below neutral,’ Ueda said… Ueda said a number of forces are working on inflation, including the impact of rising wages on prices and the potential effect of higher U.S. tariffs on economic growth. A third influence is the rapid rise in food prices, which he said is set to subside toward the end of this year. ‘The first and second will produce a slow increase [in] underlying inflation by the end of 2026,’ he said.”
July 2 – Wall Street Journal (Megumi Fujikawa): “The Bank of Japan should be ready to resume policy tightening if U.S. trade talks progress, policy board member Hajime Takata said... ‘I believe that the bank is currently only pausing its policy interest rate hike cycle and should continue to make a gear shift after a certain period of ‘wait-and-see,’’ Takata said… ‘Given that uncertainties regarding various U.S. policies remain high, I believe that the bank is required to conduct monetary policy in a more flexible manner without being too pessimistic,’ he said…”
EM Watch:
July 2 – Reuters (Libby George and Federico Maccioni): “Emerging market debt sales boomed in the first half of the year, defying tariff tantrums, missile attacks and gyrating oil prices, on track for another year of records - and with nascent signs of a shift away from the dollar… Cash-rich investors keen for margins… hardly paused their buying spree even during U.S. President Donald Trump's ‘Liberation Day’ sweep of tariff announcements or Israel’s attacks on Iran… ‘What is astonishing this year is how markets… were still active, if not very active, in the toughest moments of the globe,’ said Alexis Taffin de Tilques, global head of emerging markets sovereigns… with BNP Paribas. ‘The volumes of issuance have been incredible.’ Stefan Weiler, head of debt capital markets for CEEMEA at JPMorgan, said debt sales in the group of regions surpassed $190 billion in the first half of the year, on course to beat last year's all-time record of $285 billion.”
Leveraged Speculation Watch:
July 3 – Bloomberg (Justina Lee and Nishant Kumar): “From Treasury market reversals to trade threats, the first half of 2025 was dominated by policy upheaval and Wall Street angst. The dollar famously fell, while commodities and risky assets were whipsawed. But inside the markets where the world’s biggest quants operate, a funny thing happened: Time-honored trading patterns prevailed. Markets rewarded the strong over the weak, widening the gap between winners and losers… Strong performers included Marshall Wace’s TOPS, Renaissance Institutional Equities Fund and AQR Delphi Long-Short Equity, which all climbed about 11%, beating broader hedge-fund performance. Voleon Composite, a machine-learning hedge fund, gained 12.8%, while Two Sigma Spectrum was up 7.6%.”
July 1 – Bloomberg (Nishant Kumar and Katherine Burton): “The biggest hedge funds added to their gains in June… Schonfeld’s Fundamental Equity fund rose 2.5% last month, while the firm’s flagship multistrat hedge fund Strategic Partners advanced 1.1%... Balyasny gained 2.4%, while Marshall Wace’s $26 billion Eureka hedge fund soared 6% in June through last Friday… Dymon’s multistrategy money pool gained 2%, cementing its position as one of the best-performing hedge funds during the first half. Citadel’s flagship Wellington fund added 1.7% in June.”
July 1 – Financial Times (Costas Mourselas): “Hedge fund groups Citadel and Millennium have been outshone by smaller rivals so far this year, as the firms were stung by the market volatility… Citadel’s flagship Wellington fund gained 2.5% in the first half of 2025 while Millennium gained 2.2%... Balyasny and ExodusPoint were up 7.3% and 9.3% respectively… Ken Griffin’s Citadel and Izzy Englander’s Millennium, which manage about $66bn and $75bn respectively, are the dominant players among so-called multi-manager funds, a sector that has sucked in billions of dollars from the world’s largest investors. Multi-manager firms, which also include $25bn Balyasny and $11bn ExodusPoint, have legions of trading teams known as ‘pods’, which trade a variety of strategies in asset classes including equities, fixed income and commodities. They borrow large sums from banks to juice returns and adhere to strict risk management to control losses, making them attractive to big investors such as pension funds that desire stable returns.”
Social, Political, Environmental, Cybersecurity Instability Watch:
July 1 – Axios (Sam Sabin): “Iranian state-backed hackers are borrowing from the Russian cyber playbook and sharing tools with ideologically aligned hacktivist groups in the wake of a series of military strikes, experts tell Axios. Leaning on these hackers allows Iran to amplify its reach while maintaining plausible deniability and staying below the threshold of what’s considered war. Iran-linked hackers threatened last night to publish emails purportedly stolen from Trump allies, including White House chief of staff Susie Wiles, lawyer Lindsey Halligan and adviser Roger Stone. CISA and the FBI released an advisory yesterday warning U.S. critical infrastructure, and particularly defense contractors, are at increased risk for potential Iran-linked cyberattacks. Experts at cybersecurity firm Armis say they’ve observed Iranian nation-state actors providing tools and resources to pro-Iran hacktivist groups since Israel launched military strikes on June 13.”
July 2 – Bloomberg (Eliyahu Kamisher): “California, gripped by a housing shortage that is forcing families from the state, wants to build 2.5 million homes. But it’s running out of safe places to put them. Much of the land best suited for new housing — wind-swept, grassy hills surrounding the state’s major cities — now faces an extreme threat of wildfire, brutally illustrated by the Los Angeles-area blazes in January that killed 30 people and destroyed more than 16,000 structures. Fires have also leveled entire towns in the Sierra Nevada foothills, often considered an affordable place to buy a home. With California’s peak fire season on the way, the state’s main firefighting agency recently updated its maps showing the places at risk, and the danger zone now encompasses an area the size of Georgia. The California coast, meanwhile, confronts the long-term threat of rising seas.”
July 4 – Washington Post (Ben Noll and Chico Harlan): “The most extreme heat event on the planet right now is happening not on land but at sea. A prolonged, record-smashing marine heat wave is scorching the Mediterranean, where water temperatures have hit levels unprecedented for the early summer. The Mediterranean’s average temperature is currently 26 degrees Celsius (78.8 deg F), compared with a long-term average of 23 degrees Celsius (73.4 deg F) at this time of year… In certain parts of the sea, particularly the western basin around Spain, France and Italy, temperatures are more than 7 degrees Celsius (12.6 deg F) above the average. ‘For large water bodies that’s ludicrous,’ Jeff Berardelli, a U.S. meteorologist, said…”
