I don’t recall a period when financial conditions indicators and risk premiums were so generally detached from underlying market, financial, economic and geopolitical risks.
Talk now is of triple “puts” – the “Trump,” “Bessent,” and “Fed Puts.” “Bessent Put vs. Fed Independence: Two Forces Fighting Over Treasury Yields.” “Investors Skeptical on Bessent Put, Morgan Stanley’s Sheets Says.”
Skepticism may be apparent in government bond markets, while equities, corporate Credit and CDS seem rather comfortable. At least for now, risk markets trade as if “the fix is in” until the midterms. Significant developments and mounting stress are disregarded. UK debt crisis – been there, done that.
Reminiscent of 2022 gilt deleveraging, UK yields surged to 5.29% in Wednesday trading – at that point up a notable 23 bps in three sessions (closed the day at 5.23%). The spike pushed 10-year yields to the highest level since July 2007 – and within 26 bps of the high back to February 2000. Meanwhile, 30-year yields jumped to a 28-year (March 1998) high of 5.91%.
“Burnham Risks Truss Moment, Warn Bond Traders.” “City Warns Burnham of Borrowing Shock Unless He Slashes Spending.” “This Bond Market Crisis Means Burnham May Need to Cut, Not Spend.” “Andy Burnham Can’t Beat the Bond Market.” “Andy Burnham Tries to Calm Bond Markets as Public Spending Fears Mount.” “Warnings of Interest Rate Rises as PM Seeks to Calm Markets.” “‘City Warns Burnham’ and ‘One in the Eye.’”
Gilts are not an only problem child. French 10-year yields traded up to 4.28% Wednesday – the high since October 2008. This compares to a 3.78% high during the 2011 European debt crisis. Thirty-year French yields surpassed 5.0% for the first time since pre-crisis 2008. German yields traded to 3.40% Wednesday – the high since August 2011 (vs. 3.49% European debt crisis high). Italian yields rose to 4.24% and Greek yields to 4.09% - both three-year highs.
Elsewhere, Australian yields touched 5.25% Tuesday (closed week at 5.17%) – the high back to July 2011. New Zealand yields jumped to 4.84% - not far from a three-year high. South Korean yields traded up to 4.42%, near the high since the 2022 gilt crisis spike.
There is little of the 2022 global instability that accompanied gilt deleveraging. For example, investment-grade CDS (50 Friday close) surged from 74 on August 12th, 2022, to 114 bps intraday on September 30th. High yield CDS (301 Friday close) jumped from 420 on (August 19th ’22), to an intraday high of 640 bps (September 30th). European Bank (subordinated) CDS (86 Friday close) traded from 179 on August 19th to 289 bps on September 30th. EM CDS (137 Friday close) traded at 331 bps on September 30th, 2022. Indicative of U.S. bank CDS generally, Bank of America CDS (53 Friday close) traded as high as 119 bps on September 30, 2022.
It’s worth noting that Treasury yields spiked from 2.83% on August 5th to a high of 4.22% on October 21st, 2022. There was a “doom loop” fear of spiking yields, deleveraging, and forced Treasury sales by EM central bankers to bolster their faltering currencies. Importantly, this dynamic has not been an issue. If anything, global “carry trade” leveraging remains as hot as ever. But there are cracks.
September 4 – Bloomberg (David Finnerty and Ruth Carson): “A rush to unwind yen-funded carry trades helped send the currency to a one-month high against the dollar as traders ramped up bets on further Bank of Japan interest-rate hikes… ‘We’re seeing unwinds of yen-funded carry trades and significant interest to own the yen over other G10 currencies in the medium term,’ said Sagar Sambrani, a senior foreign-exchange options trader at Nomura… ‘The broad consensus seems to be that the easy carry trade is behind us and that the size of cross-border flows from Japan to the US could have changed materially.’”
September 3 – Bloomberg (John Cheng): “A further unwind of sizable short positions could accelerate the yen’s gains if it strengthens past 155 per dollar, according to JPMorgan… strategists. ‘Recent price action appears to corroborate our view that a relatively large JPY short position may still be outstanding,’ strategists including Junya Tanase wrote... If dollar-yen breaks below 155, ‘the risk cannot be ruled out that selling could beget further selling and drive a larger-than-expected yen appreciation.’ JPMorgan estimates ¥16 trillion ($102.6bn) to ¥17 trillion of bearish yen positions remain outstanding and says a complete unwind could theoretically push dollar-yen into a 142-146 range.”
During the gilt deleveraging period, Mexico yields spiked from 4.68% (August 12th) to 6.73% (October 20th), with Brazil’s yields jumping from 5.52% to 6.83%; Indonesia (local) 6.94% to 7.60%; Hungary 7.40% to 10.66%; and Poland’s 5.45% to 8.69%. Mexico peso yields surged from 8.40% to 9.93%. EM yields have been rising, but it has remained orderly.
White House reporter (Friday, September 4): “… A rate hike could reassure the bond market…”
President Trump: “To me, it doesn’t reassure the bond market. To me, you do a rate cut, because we should be at one percent or a half a percent. We should not be at 4%. As I’ve explained, we could do tremendous good for ourselves by just not trading with countries. We lose with the European Union $200 billion a year. If I didn’t trade with them, we’d lose nothing. Just one swipe of the pen. We lose with Mexico $195 billion a year. If I don’t trade with Mexico – they have nothing that we have to have. I mean, hot tamales, tomatoes, a couple of things. But basically, they have nothing that we need. We have oil, we have everything. I don’t want to do that because we get along very well with the president – we like the president and respect her a lot… If we didn’t want to trade with Canada – we would save from $60 to $90 billion a year, by just not trading with Canada. Now Canada would be in a heap of trouble. I don’t think they would exist. Because, again, they do 95% of their business with us. So, if I say we’re not going to trade, that means 95% if their business gets wiped out. I don’t know what they would do. So, we should have the lowest interest rate, as we used to 25 or 30 years ago when we were smart.”
The Fed policy rates began 2001 at 6.50%, before the Fed responded to a bursting tech Bubble with 475 bps of cuts over the following year. As for 30 years ago, the Fed raised rates 300 bps over 12 months beginning in 1994, and held rates at 6.00% until July 1995. Rates were at 5.25% in September 1996. For comparison, the ECB policy rate was 3.0% in September 1996.
“We have countries that are considered elite financially, like Switzerland, like others. But if we didn’t trade with them, they would be bankrupt countries. They’re considered elite because we have massive deficits with them. We have the right not to trade. We have the right to put tariffs on them.”
“We should have the LOWEST RATE of any country in the World, like ‘the old days.’ Without the United States agreeing to allow them their big surpluses, and we could stop that immediately, they would no longer be considered financially ELITE! LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT, which the U.S. Supreme Court, in its ridiculous and very costly Tariff decision, strongly acknowledged ‘the President’ has an absolute right to do. ITS BETTER THAN TARIFFS! The Fed Board, with its great new leader, must get smart - BE PATRIOTS for a change. High interest rates put the U.S.A. at a very unfair disadvantage, and I won’t allow that to happen! President DONALD J. TRUMP.”
“How crazy is this? We just got GREAT Numbers on Jobs, the Market should go UP, because our Credit and Economy are better but, as always, for the past 25 years, the Stock Market goes DOWN, because we’re living under False Reality that if things are good, you’ve got to ‘KILL IT’ because of a ‘fear’ of Inflation. It should be the opposite, and always was until 25 years ago. If we stay with this Theory, we will never be able to have the True Economic Greatness for our Country that it deserves, because every time we do well, the stupid people want to immediately stop this Great Upward Momentum. GROWTH DOES NOT CAUSE INFLATION! I knew this morning as soon as I looked at these fantastic Job Numbers that the Market would go down when it should be going UP like a Rocketship. We should be doing GDP of 15 and 20%, not 2, 3, and 4%, and America should become Far Greater Financially than it is right now. Our Debt would be paid off, and all of these other things would happen. Remember, every point in the Interest Rate costs the U.S. 650 Billion Dollars a year. We should pay the Lowest Interest Rates in the World because we make everything run, and give otherwise failed countries Great Economic Wealth! Thank you for your attention to this matter. President DONALD J. TRUMP.”
I’ve highlighted the President’s Friday comments and two Truth Social posts. There was also Thursday’s “We believe that the Fed should be lowering interest rates” pressure from the vice president. The Trump administration, certainly including Secretary Bessent, is playing with fire.
September 4 – Reuters (Iain Withers and Tommy Reggiori Wilkes): “The manager of Norway’s $2.3 trillion sovereign wealth fund has proposed significantly cutting its exposure to U.S. Treasuries as part of a wider shake-up of its bond investments to improve returns, according to a letter published this week. Norges Bank Investment Management has recommended reducing its weighting to government bonds within its benchmark bond index to 50% from 70%, with U.S. Treasuries, the biggest holding, getting the biggest cut, according to the letter. The changes would mean cutting nearly $80 billion from the fund's current holdings of about $215 billion of U.S. Treasuries as of the end of June, according to Reuters calculations.”
September 2 – Bloomberg (Patrick Van Oosterom and Jack Ryan): “The Dutch Central Bank has shifted gold reserves worth about $12 billion from New York and Ottawa to London, citing concerns about increasing global geopolitical unrest… ‘With this relocation, we have improved the tradability of our gold reserves,’ Dutch Central Bank Governor Olaf Sleijpen said… ‘We expect that we will never need to use them, but we do need to strengthen our resilience and preparedness.’”
At this point, Washington is making the short-timer Liz Truss government appear the epitome of fiscal responsibility. And this is certainly not the market environment for the President to spew utter nonsense. Our President has a dangerous obsession of wielding the tariff threat, including against our Canadian friends and other allies. But to threaten the Fed with the consequences of tariffs and trade wars if they don’t slash rates is both ludicrous and reckless.
The rates market dropped the probability of a September rate cut from 65% to 50% on dovish comments from Fed governor Waller:
September 3 – CNBC (Jeff Cox): “In remarks that seem to contrast with statements last week from Chairman Kevin Warsh, Waller expressed confidence in the current inflation trends, saying that tariff impacts likely have been muted and higher energy prices haven’t had a substantial impact on other parts of the economy. While he conceded that inflation is ‘meaningfully above’ the Fed’s 2% target, he noted that recent trends ‘suggest we are finally seeing some signs of disinflation.’ ‘If this continues in the data due over the next two weeks, I would be inclined to support holding the target for the federal funds rate at its current setting… I’m going to paraphrase John Lennon here: Give disinflation a chance. We can wait one meeting. What’s the cost of waiting one meeting? Hiking 25 bps, one meeting right now, is not going to bring the CPI down to 2%.’”
Five years of inflation above target. Why not six or seven? Heck, the stock market has performed spectacularly with elevated inflation. Economic growth has remained solid. But signs of disinflation?
Thursday’s ISM Services report had the Prices Paid component at a stronger-than-expected 72.6 – a three-year high. Tuesday’s ISM Manufacturing Prices Paid was a stronger-than-expected 71.1.
September 4 – Bloomberg (Eleanor Thornber): “Global food prices rose in August to the highest since the end of 2022… The United Nations’ index of food-commodity prices climbed 1.9% from July, led by grains, sugar and dairy, according to a report from the Food and Agriculture Organization… The FAO index tracks internationally traded food commodities, meaning it can take time for price changes to reach supermarket shelves. All the staples tracked in the index rose in August, led by an 11.9% jump in sugar and a 2.6% gain in wheat, which stands 15% above its year-earlier level. The Bloomberg Agriculture Spot Index, which tracks 10 major products, rose more than 13% in August, its steepest gain since July 2012. Wheat and corn futures have climbed to multi-year highs.”
WTI crude prices surged $8.08 (9.7%) this week to $91.48 – with gasoline futures up another 5.4%. Diesel prices surged to a record $5.85 a gallon this week, up 67% y-t-d. There will be FOMC officials skeptical of imminent disinflation at the September 16th meeting.
September 4 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Cleveland President Beth Hammack said it’s time for the US central bank to act to cool inflation. ‘Right now, what I’m hearing is that it’s time to act,’ Hammack said Friday in a LinkedIn post. Hammack, one of three policymakers to dissent from the Fed’s decision to hold interest rates steady in July, said both data and anecdotes from her district are telling her that monetary policy is not sufficiently weighing on the economy right now. In her post she described a conversation with a manufacturer in Northeast Ohio who told her the Fed should raise interest rates because he’s seeing double-digit inflation in many of his input prices.”
With a 4.1% unemployment rate and much stronger-than-expected August job growth (162k vs. 55k), even favorable CPI and PPI data next week should not preclude a rate increase on the 16th. If the Fed holds, Warsh’s inflation tough talk shtick will ring hollow.
Ten-year Treasury yields rose another six bps this week to 4.78%, with Wednesday 4.82% intraday yield the high since October 2023 – and within 11 bps of October ‘23’s multiyear high (back to November 2007). It’s worth noting that the shallow yield pullback on Waller lasted only minutes.
This took years longer than expected, but has the Treasury market finally reached the point where it begins to demand tighter monetary policy? At the minimum, Federal Reserve officials will now at least have to contemplate a negative bond market reaction to dovish policy.
Meanwhile, President Trump and his administration are on a collision course with the bond market. And, sure, Bessent can issue more T-bills to repurchase longer duration Treasuries. Fannie and Freddie might up their purchases of longer-dated MBS and bonds. Better yet, the administration could employ some coercion and pressure to keep things going. The hedge funds could always boost “basis trade” leverage. It would not be surprising to see the administration press the banks to further inflate Treasury holdings. Similarly, the big Wall Street firms might be directed to lever more Treasury securities.
They’re on a perilous path. And my analysis is not political. This is about a rapidly deteriorating global bond market environment, with a U.S. President/administration champing at the bit to overstep every boundary, to disregard all constraints, and to defy every limit. Unhinged Friday got us one full step closer to a crisis of confidence.
It’s fascinating. Most financial conditions indicators point to confidence that the fix is in through the midterms. A new degree of complacency. And with elections now only two months away, markets can begin to ponder the post-midterm landscape. I suspect we are these days seeing the President and administration’s best behavior. Risks are rising that he goes completely off the rails.
I’m reminded of James Carvill’s famous quote from the early nineties. “…I want to come back as the bond market. You can intimidate everybody.” The President scoffs, believing he’s the king of intimidation, the untouchable bully for the ages. “Andy Burnham Can’t Beat the Bond Market.” Bet on Donald Trump? Well, expect the bond market to force a reckoning – and quite a reckoning indeed. An incredulous world is watching.
September 4 – Bloomberg (Tom Rees): “Central banks face a ‘serious challenge’ from the rise of populist forces, Bank of England Governor Andrew Bailey warned… Bailey said the UK central bank must not take its ‘legitimacy for granted’ and ‘demonstrate how our actions serve the public good’… ‘Any institution seen to get in the way becomes an unrepresentative elite standing between the people and their will, and thus an obstacle to popular sovereignty,’ Bailey said… ‘This is a serious challenge. We have developed systems of government (in the broadest sense of this term) in which legitimacy rests in the plurality of society, not in the preferences of any single group within it.’”
September 3 – Bloomberg (Tom Rees): “The biggest threat to central banks’ independence comes from governments pushing them to finance huge fiscal deficits, according to the Bank of England’s chief economist. Huw Pill… said… that how central banks tackle such risks is the ‘defining challenge they currently face.’ Slow growth and a series of supply shocks have led to bigger deficits and higher levels of public debt globally, Pill said… Financing those deficits through central banks could bring into question their independence, he warned… ‘Were governments in any country to seek financing from the central bank to cover their deficits, this could bring into question the independence of central banks – something essential to the credibility of monetary policymakers’ pursuit of price stability,’ he said. ‘How central banks meet such threats to independence in an uncertain and difficult economic environment is the defining challenge they currently face.’”
For the Week:
The S&P500 was little changed (up 12.8% y-t-d), while the Dow dipped 0.3% (up 11.1%). The Utilities increased 0.9% (up 2.1%). The Banks gained 1.3% (up 15.5%), and the Broker/Dealers rose 1.5% (up 24.1%). The Transports fell 1.7% (up 21.1%). The S&P 400 Midcaps were about unchanged (up 14.5%), and the small cap Russell 2000 was little changed (up 19.9%). The Nasdaq100 increased 0.4% (up 17.0%). The Semiconductors advanced 2.3% (up 65.7%). The Biotechs gained 1.4% (up 31.9%). With bullion dipping $25, the HUI gold index declined 0.9% (up 18.6%).
Three-month Treasury bill rates ended the week at 3.7578%. Two-year government yields added two bps to 4.37% (up 89bps y-t-d). Five-year T-note yields rose six bps to 4.54% (up 82bps). Ten-year Treasury yields gained six bps to 4.78% (up 62bps). Long bond yields added four bps to 5.24% (up 40bps). Benchmark Fannie Mae MBS yields gained five bps to 5.77% (up 73bps).
Italian 10-year yields increased five bps to 4.15% (up 60bps y-t-d). Greek 10-year yields added five bps to 4.00% (up 56bps). Spain's 10-year yields increased four bps to 3.77% (up 48bps). German bund yields gained six bps to 3.34% (up 48bps). French yields rose another seven bps to 4.20% (up 63bps). The French to German 10-year bond spread widened a basis point to 86 bps. U.K. 10-year gilt yields jumped seven bps to 5.13% (up 65bps). U.K.’s FTSE equities index was little changed (up 9.0% y-t-d).
Japan’s Nikkei 225 Equities Index fell 2.1% (up 29.2% y-t-d). Japan’s 10-year “JGB” yields slipped a basis point to 2.92% (up 85bps y-t-d). France’s CAC40 declined 1.5% (up 1.6%). The German DAX equities index lost 2.0% (up 6.4%). Spain’s IBEX 35 equities index was unchanged (up 15.8%). Italy’s FTSE MIB index declined 1.0% (up 15.9%). EM equities were mostly lower. Brazil’s Bovespa index rallied 5.4% (up 14.9%), while Mexico’s Bolsa index declined 1.0% (up 0.8%). South Korea’s Kospi fell 1.5% (up 58.7%). India’s Sensex equities index declined 1.0% (down 10.2%). China’s Shanghai Exchange Index slipped 0.6% (down 1.0%). Turkey’s Borsa Istanbul National 100 index dropped 4.3% (up 24.4%).
Federal Reserve Credit declined $7.2 billion last week to $6.687 TN, with a 38-week expansion of $197 billion. Fed Credit was down $2.195 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.968 TN, or 80%. Fed Credit inflated $3.877 TN, or 138%, since November 7, 2012 (721 weeks). Elsewhere, NY Fed holdings for foreign owners of Treasury, Agency Debt recovered $6.9 billion last week to $2.885 TN - further off the low back to August 2010. “Custody holdings” were down $281 billion y-o-y, or 8.9%.
Total money market fund assets (MMFA) jumped $44.8 billion last week to a record $7.979 TN. MMFA were up $720 billion, or 9.9%, y-o-y - having ballooned a historic $3.395 TN, or 74%, since October 26, 2022.
Total Commercial Paper dipped $5.9 billion (from a 13-month high) to $1.441 TN. CP increased $38 billion, or 2.7%, y-o-y.
Freddie Mac 30-year fixed mortgage rates rose five bps to a 13-month high 6.71% (up 21bps y-o-y). Fifteen-year rates gained six bps to 6.04% (up 44bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate up six bps to 6.82% (up 18bps).
Currency Watch:
August 31 – Reuters (Leika Kihara): “When the U.S. joined Japan’s efforts to shore up the yen, it wasn’t for nothing. This week, U.S. Treasury Secretary Scott Bessent spelt out the terms: get busy on interest rate hikes and end outdated ideas about big economic stimulus. A month after a rare joint U.S.-Japan intervention to prop up the yen, Bessent showed little appetite for another market foray by telling Reuters recent yen moves were not disorderly. Instead, he expressed hope Bank of Japan Governor Kazuo Ueda would ‘do the right thing’ on monetary policy to combat a weak yen. While the BOJ was already widely expected to lift rates in September as inflation pressures grew, Bessent’s comments effectively lock the bank into doing so and put pressure on it to step up hikes going forward. ‘The July joint intervention was a message from Bessent for Japan to get its act together on inflation,’ said Izuru Kato, chief economist at Totan Research… ‘Japan faces a currency crisis that's becoming hard to control without help from the United States. For such a country, even a rate hike of once every three months may be too slow.’”
August 31 – Bloomberg (Toru Fujioka): “Japan’s Finance Minister Satsuki Katayama said that she and Treasury Secretary Scott Bessent share the view that their recent joint intervention in the currency market was beneficial, while playing down reports that he has been pushing for the Bank of Japan to raise its policy rate. ‘Secretary Bessent and I confirmed that orderly movements in the yen are essential to maintaining stability in global financial markets, including US markets, and that continued, coordinated efforts by Japan and the United States will help achieve this shared objective,’ Katayama told reporters…”
For the week, the U.S. Dollar Index declined 0.5% to 99.157 (up 0.8% y-t-d). On the upside, the Japanese yen increased 2.5%, the South Korean won 1.8%, the South African rand 1.3%, the Brazilian real 1.3%, the Mexican peso 0.9%, the Norwegian krone 0.7%, the Singapore dollar 0.6%, the Australian dollar 0.5%, the Canadian dollar 0.5%, the Swedish krona 0.4%, and the euro 0.3%. On the downside, the New Zealand dollar declined 0.6%, the British pound 0.1%, and the Swiss franc 0.1%. China's (onshore) renminbi gained 0.28% versus the dollar (up 4.12% y-t-d).
Commodities Watch:
September 1 – Bloomberg: “Almost two months of nonstop attacks by Russia and Ukraine on each other’s commercial ships and ports in the Black Sea and Sea of Azov have cut into grain exports from both countries. That’s sent wheat futures to the highest level in three years and threatened global food supplies. Russia and Ukraine together account for more than a quarter of the world’s wheat exports and also produce large amounts of barley, corn and sunflower oil. The recent disruption is reminiscent of 2022…”
The Bloomberg Commodities Index gained 1.9% (up 30.2% y-t-d). Spot Gold slipped 0.6% to $4,430 (up 2.6%). Silver dipped 0.3% to $66.2092 (down 7.6%). WTI Crude surged $8.08, or 9.7%, to $91.48 (up 59%). Gasoline rose 5.4% (up 87%), and Natural Gas gained 3.0% to $2.975 (down 19%). Copper added 0.4% (up 18%). Wheat dropped 6.6% (up 41%), while Corn was unchanged (up 16%). Bitcoin jumped $2,370, or 3.1%, to $79,830 (down 8.9%).
Market Instability Watch:
August 31 – Yahoo Finance (Brian Sozzi): “The ugly US debt picture seems to get uglier by the day. Case in point: rising interest payments on some $40 trillion in debt, in part powered by a recent climb in Treasury yields. US annual interest expense is up to a record 18.5% of federal government revenue… This is now officially above the previous record of 18.4% set in 1991. ‘The US debt crisis is in uncharted territory,’ strategists at the Kobeissi Letter wrote… Consider this: The aforementioned percentage has more than quadrupled over the past four years. The US annual interest expense now stands at a record $1.25 trillion, more than four times the level seen in 1991.”
August 29 – Financial Times (Toby Nangle, Ramsay Hodgson and Adam Shaw): “The increase in global bond yields since the US war with Iran began in February has driven up the cost of borrowing for the world’s biggest developed economies by tens of billions of dollars, according to FT research. G7 nations have locked in an additional $16bn of sovereign debt financing costs due to the rise in bond yields since the war began… If the rise in yields persists then they could pay an estimated additional $34bn in extra financing costs by the end of the first quarter of next year… The US is paying the lion’s share of the increase in costs to date — an estimated $10.6bn — as it is by far the largest G7 economy and the biggest sovereign bond market in the world. It is set to pay a further $21.7bn in additional interest costs if the rise in yields persists until the end of the first quarter of 2027.”
September 2 – Reuters (Rocky Swift and Harry Robertson): “With benchmark Japanese bond yields breaking through a three-decade-old barrier, higher returns are starting to tease capital home, reversing what was once a dependable flow of funds into global bond markets. The 3% threshold is significant not just for funding costs in Tokyo, but for turning around an investment flow that has made Japan the biggest owner of U.S. Treasuries and one of the most reliable buyers of sovereign debt worldwide… While there’s no sign of Japan dumping its $2.4 trillion hoard in overseas debt just yet, global fund managers and a growing body of data is showing a steadier drawdown is underway.”
August 30 – Wall Street Journal (Gregory Zuckerman and Gunjan Banerji): “Wall Street’s hottest trade has gone ice cold. For years, it paid off to buy stocks that were rising in price—and bet against struggling shares. The momentum trade was especially profitable this year, as investors piled into hot stocks including Micron Technology, Nvidia, Advanced Micro Devices and other artificial-intelligence darlings while wagering against those likely to be hurt by the embrace of AI. The S&P 500 Momentum Index soared 44% in the second quarter, its best quarterly performance on record, and it surged 133% over the past five years, nearly double the broad market’s performance. Mega funds and rookie investors alike piled into the trade, some using leverage and options contracts in an effort to amplify their returns, propelling the underlying shares higher… Suddenly, the trade is a loser. The momentum index has tumbled more than 9% since July 1, lagging behind the S&P 500’s 2.8% gain.”
U.S. Credit Trouble Watch:
September 2 – Bloomberg (Weihua Li and Sridhar Natarajan): “As insurers controlled by billionaire sports mogul Mark Walter loaned more than $20 billion to other parts of his empire, they increasingly leaned on a source of low-interest financing set up to help US homebuyers. Walter’s two biggest insurers — part of a unit dubbed Group 1001 — owed more than $6 billion to the Federal Home Loan Bank of Indianapolis at the end of June… That’s a 36% jump from six months earlier and roughly double the outstanding balance at the start of 2025. Congress created the FHLB system to keep mortgage lending alive through the depths of the Great Depression… But in recent decades, it has become a magnet for financial ingenuity, attracting a long line of borrowers eager to tap that money for purposes that may have little to do with offering new home loans. It’s now well known that insurers are jumping on that trend, especially as investment firms take them over and look to boost returns.”
September 1 – Bloomberg (Tasos Vossos): “As government bond yields across the world erupt, corporate credit has rarely looked calmer. Yet even in that market, about $1 trillion of bonds are telling a much different story. That’s the amount of company bonds trading at spreads that are unusually wide relative to their credit rating, based on a Bloomberg News analysis of non-financial high-grade securities with more than three years left to maturity. The tally includes about $580 billion of US bonds and almost $400 billion in Europe, when examining non-financial high-grade securities. The divergence is striking because it comes as the broader investment-grade market has barely moved.”
September 3 – Financial Times (Eric Platt): “Blackstone’s flagship private credit vehicle fielded another quarter of double-digit redemption requests, in a sign of the persistent pressure on funds over their lending to highly leveraged software companies. The $43bn Blackstone Private Credit Fund, the largest vehicle of its kind pitched at retail investors, said redemption requests remained at 10% of the fund’s value in the third quarter. That was in line with the level of requests it received in the previous quarter… Blackstone said it would continue to curb outflows at 5% of the fund’s value…”
September 3 – Bloomberg (Olivia Fishlow): “Cliffwater LLC’s flagship private credit fund again capped redemptions at 5% in the third quarter, after investors sought to pull about 16% of shares. The $31 billion Cliffwater Corporate Lending Fund told shareholders… they’d get back about one-third of their requests…”
September 2 – Reuters (Patturaja Murugaboopathy and Gaurav Dogra): “U.S. private-credit portfolio values showed signs of stabilising in the second quarter after a broad deterioration early in the year… Private credit has come under sharper scrutiny this year as investors questioned opaque valuations, redemption pressure emerged at some non-traded funds and concerns grew over software exposure and weakening borrower performance. A Reuters analysis of regulatory filings from 44 U.S. business development companies, which lend mainly to small- and medium-sized firms, showed portfolio values moved further below reported cost in the first half of 2026 as market spreads widened and stress emerged among some borrowers, particularly in the software sector.”
Global Credit Bubble and Boom Watch:
August 31 – Politico (Michael Stratford): “Scott Bessent designed this week’s G20 finance meeting to showcase President Donald Trump’s economic agenda and present it as the formula for accelerating growth worldwide. Instead, he’s likely to spend much of the gathering trying to ease fears over the global impact of crushing U.S. debt and cajoling other countries to join in an effort to further economically isolate Iran… ‘The biggest private conversations won’t be around sanctions. It’ll be about the bond market,’ said Josh Lipsky, vice president and chair of international economics at the Atlantic Council. ‘These countries around the table, privately, want to hear directly from him what he’s intending’ with his increasingly interventionist approach in the Treasury and foreign currency markets.”
September 2 – Axios (Emily Peck): “Investor fervor for the AI boom is so strong that companies are able to borrow billions of dollars right now essentially for free. The record surge in zero-coupon convertible bonds — which don’t pay regular interest — is surprising given that we’re in a higher rate environment. Typically, that would mean companies would pay higher borrowing costs. The overall market for these ‘converts’ is booming. As of Sept. 1, companies issued $186.8 billion globally in convertible bonds across 362 deals — that’s already more than last year, per data that Dealogic shared with Axios. 60% of these bonds are related to the AI boom: hyperscalers, neoclouds, semiconductors and energy companies benefiting from data center construction among them, says Venu Krishna, head of U.S. equity strategy at Barclays. Zero-coupon issuance made up about 43% of the overall total, close to $80 billion — that is the largest amount of any full year going back to 1995, per Dealogic. Just this week, Nvidia invested $3.5 billion in a $3.9 billion zero-coupon bond issued by MediaTek, a Taiwan-based chipmaker.”
September 1 – Bloomberg: “JP Morgan led underwriting of US high-yield bonds so far this year as the value of deals rose 21% year-to-date compared with the same period last year. Issuers sold $256.7 billion of bonds through August vs. $212.8 billion a year ago”
September 1 – Bloomberg: “BofA Securities led underwriting of US municipal bonds so far this year as the value of deals rose 6.3% year-to-date compared with the same period last year. State and local governments sold $404 billion of munis through August vs. $380.1 billion a year ago…”
August 31 – Bloomberg (Aileen Chuang): “The billions of dollars being borrowed to fund data centers in Asia are pushing banks to their limits and making them more selective about which projects to finance, according to senior bankers at Barclays Plc. Andrew Ashman, whose department helps companies secure loans, said… that Asia-Pacific lenders ‘are reporting to be heavily exposed to the data center sector.’”
August 30 – Financial Times (Verity Ratcliffe): “Soaring demand for natural gas among energy majors and investors has pushed dealmaking to its highest level in more than a decade, with buyers competing over the limited number of global assets available. More than $32bn was spent on buying gas production projects in the first six months of the year, the highest level in over a decade, according to… Wood Mackenzie.”
August 31 – Yahoo Finance (Stella Qiu): “Australian home prices fell for a fifth month in August as the housing downturn spread to more cities and regional areas… Figures from property consultant Cotality showed national home prices fell 0.9% in August from July when they dropped by a downwardly revised 1.2%. That left values 3.6% below their peak, but still 2.7% higher than a year ago. Sydney and Melbourne again led the monthly decline with falls of 1.4% and 1.1%. Nearly all capital cities recorded a fall…”
August 31 – Bloomberg (Sharon Klyne, Low De Wei, and Richard Henderson): “Australian private credit funds are trying to contain panic among investors, after the collapse of property developer Bathla Group sparked fears that the industry’s big bet on the property sector is going south. Bathla’s failure has raised the specter that more builders heavily indebted to private lenders could run into trouble as the industry struggles with falling home prices and higher construction costs.”
Leveraged Speculation Watch:
September 3 – Bloomberg: “The Chinese yuan’s appeal may grow as an alternative to the yen for carry trades if the Bank of Japan makes further interest-rate hikes as widely expected, according to BBVA SA. ‘I believe it’s worth watching the risk of the offshore yuan replacing the yen as the main Asian funding currency for carry trades,’ Dariusz Kowalczyk, head of cross-asset strategy for Asia… For decades, Japan’s negative or ultra-low interest rates made the yen a favorite currency for carry trades, a strategy in which an investor borrows in a currency with a relatively low interest rate and invests the proceeds in another offering a higher return. While the BOJ has hiked rates three times since the beginning of 2025, the People’s Bank of China has kept borrowing low to support its economy.”
September 2 – Financial Times (Joshua Franklin, Jill R Shah and Michelle Chan): “JPMorgan… scaled back the financing it extended to Jane Street as the trading firm’s push into the bond market put it in direct competition with the Wall Street bank. The biggest US bank significantly curbed the lending it provided to Jane Street for its bond trading last year, according to people familiar with the decision… The reduction reflected roughly 5% of Jane Street’s total fixed-income financing across banks and had no material impact on its revenues in 2025, one of the people added.”
Iran War Watch:
September 1 – Axios (Barak Ravid): “The U.S. military attacked two Iranian government tankers as part of the round of strikes that took place on Tuesday, U.S. officials said. This is the first time the U.S. military has struck Iranian tankers in retaliation for Iranian attacks on ships in the Strait of Hormuz — rather than to prevent them from violating the naval blockade. A U.S. official said the move was part of a new ‘tanker for tanker’ policy approved by President Trump to further deter Iranian attacks on tankers that move through the strait. U.S. officials said around 100 targets were attacked during Tuesday's strikes.”
September 1 – Bloomberg (Patrick Sykes): “A week into the US campaign to make Iran an economic outcast, the Islamic Republic is meeting world leaders and touting ways to boost trade. Iranian President Masoud Pezeshkian spent Monday and Tuesday with fellow leaders at the Shanghai Cooperation Organisation in Kyrgyzstan, in the latest sign that US warnings against engaging with Tehran — and calls to cut business ties with the country — are falling on deaf ears even among some of Washington’s allies. India’s Prime Minister Narendra Modi told Pezeshkian he wanted to strengthen relations ‘across diverse sectors,’ and Pakistan’s premier, Shehbaz Sharif, made similar comments. Azerbaijan’s President Ilham Aliyev sought greater cooperation ‘in various trade and economic fields,’ while Kyrgyzstan’s leader, Sadyr Japarov, proposed that Tehran invests in an oil refinery in the central Asian nation.”
September 1 – Bloomberg (Grant Smith, Weilun Soon and Anthony Di Paola): “Two oil supertankers were struck by unknown projectiles in quick succession while transiting the Persian Gulf's Strait of Hormuz chokepoint, maritime security consultant Marisks said. The very large crude carrier Sidr, run by Saudi Arabia’s Bahri shipping company, was hit while sailing northeast of Khasab, Oman, the consultant said. The Senegal Prosperity, operated by Sinokor, was struck by three projectiles while traveling east of the same country…”
September 2 – Reuters (Nayera Abdallah and Jana Choukeir): “Saudi Arabia, the world’s biggest crude exporter, said… that an Iranian attack on an oil tanker owned by its national shipping company had killed two Filipino seafarers. Sidr, owned by Bahri, was one of two supertankers carrying Saudi oil reported to have been hit late on Monday while transiting the Strait of Hormuz. Tehran has threatened tankers attempting to sail through the narrow waterway without authorization…”
Iran War Ramifications Watch:
September 1 – New York Times (David Pierson): “The Chinese leader Xi Jinping arrived in Central Asia this week with a message for a world increasingly unsettled by President Trump: China has friends and influence, and is prepared to help shape what comes next. The scene unfolded at a security summit in Bishkek, the capital of Kyrgyzstan, where Mr. Xi gathered with the leaders of Russia and Iran. He presented Beijing as a source of stability and a champion of an ‘orderly multipolar world’ that would replace the current U.S.-dominated order. If the Bishkek summit was designed to project solidarity, a meeting of the world’s most powerful countries in the mountains of Asheville, N.C., offered an image of fracture.”
August 31 – Reuters (Timothy Gardner, Arathy Somasekhar and Anushree Mukherjee): “Six months into the U.S.-Israeli war with Iran, Washington may find it harder to calm jittery oil markets after U.S. presidents drained the aging Strategic Petroleum Reserve over the last five years. The SPR, which Washington created after the oil crises of the 1970s, holds crude in a series of 60 underground salt caverns along the coasts of Texas and Louisiana. After years of releases by former President Joe Biden and President Donald Trump, the reserve is at its lowest level since 1982, holding just 289.7 million barrels. The level will drop to about 243 million if Trump releases a final batch of 39 million barrels from a March agreement with the International Energy Agency.”
August 28 – Wall Street Journal (Shelby Holliday, Michael R. Gordon, and Lara Seligman): “The U.S. has rushed so many munitions to the Middle East to fight Iran that military planners are concerned the loss of firepower is diminishing America’s ability to defend against potential threats from China and Russia, said U.S. officials. The cuts have been so deep that the U.S. inventories in Europe of PAC-3 Patriot air defense interceptors and Atacms surface-to-surface missiles are deemed to be ‘beyond critical,’ some of the officials said… In addition to Patriot interceptors, other European-based weapons have been drawn down to extremely low levels, including precision-strike missiles and guided rockets, officials added. Thaad antimissile interceptors and Merops counterdrone systems have also been sent from Europe to the Middle East, further diminishing supplies…”
September 1 – New York Times (Simon Ducroquet and John Ismay): “The Navy has about 20 ships in the Middle East, carrying roughly 20,000 sailors and Marines. The logistical challenges are immense: The ships need enough food for more than 420,000 meals and about eight million gallons of fuel each week. The Navy has operated there for decades and built supply depots throughout the region. But Iran destroyed a critical Navy logistics base in Bahrain on… the first day of the war, and other ports in the region that can accommodate an aircraft carrier or a supply ship are also within range of Iranian missiles and drones, making them inaccessible. Navy supply ships in the region now have to travel 2,200 miles to a tiny island in the Indian Ocean called Diego Garcia to bring food, fuel and other goods to the warships in the Gulf of Oman and the Arabian Sea. The next option is to go to Singapore, 3,700 miles away — which requires the ships to pass through the Strait of Malacca, a busy commercial corridor.”
Trump Administration Watch:
August 31 – CNBC (Kevin Breuninger): “Treasury Secretary Scott Bessent… defended the Trump administration’s recent intervention in the bond market, pushing back on an eyebrow-raising critique from his investing mentor, billionaire Stanley Druckenmiller… ‘Stan’s a great investor. He changes his mind a lot, and he doesn’t like losing money,’ Bessent said. ‘I think he lost money the day he sent in the editorial.’”
August 31 – Wall Street Journal (Amrith Ramkumar and Marianne LeVine): “President Trump warned… that communities that don’t embrace data centers will ‘end up being backwards and poor,’ putting himself at odds with most Americans who say they don’t want the facilities that power AI to be built near them. ‘The only reason that communities throughout the U.S.A. should not want Data Centers is if they want to end up being backwards and poor,’ Trump wrote... ‘If they want to be successful and rich, with far lower taxes and jobs all over the place, let Data Reign.’”
August 31 – Axios (Josephine Walker): “President Trump has personally asked Apple to rename Lake Ontario ‘Lake America’ on Apple Maps, Interior Secretary Doug Burgum said… The request comes after Google changed the lake’s name on mobile and desktop for U.S. users on Saturday.”
September 2 – Axios (Avery Lotz): “President Trump’s order renaming Lake Ontario to ‘Lake America’ isn’t floating with Americans, with a majority opposing the name change and his new tariffs on Washington’s northern neighbor… With the midterm elections creeping closer, polling suggests Americans aren’t sold on the fight. Reuters-Ipsos polling from late August found that more than 6 in 10 (63%) of Americans oppose Trump’s executive order directing Interior Secretary Doug Burgum to rename the lake, which straddles the U.S.–Canada border. Even among Republicans, more opposed (43%) than supported (33%) the order. A vast majority of Democrats (84%) and independents and other parties (65%) opposed the name change.”
September 1 – Financial Times (Stephanie Findlay, Claire Jones and Jamie Smyth): “Donald Trump has summoned oil groups to the White House… as high petrol and diesel prices, triggered by his war in Iran, push up inflation across the US ahead of midterm elections. Marathon Petroleum, Phillips 66, Chevron, Delek US Holdings, PBF Energy and Valero Energy are among the companies called to the meeting to discuss refining capacity and prices… With less than three months until November’s midterm legislative elections, the US president is under increasing political pressure over an affordability crunch, with a recent FT poll showing voters now believe they are worse off under Trump.”
August 31 – Wall Street Journal (Matt Grossman and Paul Vieira): “Treasury Secretary Scott Bessent blamed Canadian Prime Minister Mark Carney for the collapse of trade talks this month aimed at averting steep U.S. tariffs on Canadian goods, and brushed off concerns about a trade war with America’s second-largest trading partner. ‘I don’t think you can be in a tit-for-tat [trade war] with someone who’s 13 times larger than you are,’ Bessent said… ‘I think this is very unfortunate that Prime Minister Carney has turned this into a political shouting match,’ he added.”
August 30 – Associated Press (Ben Finley): “The U.S. Treasury Department is preventing certain journalists from covering a finance meeting among the world’s most powerful countries, the latest example of how President Donald Trump’s administration has restricted media access. Individual reporters from The New York Times, The Wall Street Journal and Bloomberg News were not granted credentials to the Group of 20 finance ministers’ meeting in Asheville, North Carolina...”
August 31 – New York Times (Edward WongRebecca F. Elliott and Anatoly Kurmanaev): “As the U.S. government faced shortcomings in the country’s weapons manufacturing, the Pentagon set up a new office that would make investments to help boost defense industrial production. That effort, which began in 2022 during the Biden administration, is now taking a sharp turn with the Pentagon’s involvement in an oil production deal between the United States and Venezuela… The Pentagon’s little-known Office of Strategic Capital, which reports to the deputy defense secretary, is the leading U.S. government entity in forming a partnership with a private oil producer whose founder, Alejandro Betancourt López, is a powerful and polarizing figure in international commerce.”
September 1 – Financial Times (Steff Chávez and James Politi): “US Army secretary Dan Driscoll handed his resignation to Donald Trump… with a blunt message about Pete Hegseth’s interference with the largest branch of America’s military. The departure of the army’s top civilian official was the culmination of months of tension with the defence secretary about the force’s technological transformation and senior military appointments, as well as intractable personal tensions between the two men. Driscoll, a close friend of vice-president JD Vance, believed Hegseth was causing ‘generational damage’ to the largest branch of the US military, according to a person familiar...”
September 3 – New York Times (Alan Rappeport): “Treasury Secretary Scott Bessent named a new culprit this week for the high energy prices that are weighing on the world economy: Ukraine… ‘We are going through an energy shock right now due to both the war in Ukraine — because Ukraine has decided that they want to blow up Russian energy assets and refine products, so that is creating upward price pressure on a global basis,’ Mr. Bessent said on Fox News... ‘And then the conflict in Iran. And the conflict in Iran will end.’”
September 3 – Financial Times (Geoff Dyer and Joe Daniels): “Venezuelan opposition leader MarÃa Corina Machado said the country’s people were feeling ‘sadness, anger and unease’ at a new energy agreement between Washington and Caracas but stopped short of directly criticising Donald Trump’s administration. Machado, a Nobel Peace Prize winner living in exile, broke her silence over the agreement reached last week — under which the Pentagon will take a 35% stake in a Venezuelan oil company — to say it had caused ‘deep concern’ and had still not been properly explained.”
September 3 – Associated Press (Regina Garcia Cano): “Nothing has shaped what it means to be Venezuelan today more than oil. For more than 100 years, in good times and bad, Venezuelans’ identity has been built around the belief that their country’s bountiful oil resources belong to the people, not a government or a company. This belief, and a troubled nation’s pride, took a bruising last week when acting President Delcy RodrÃguez agreed to give the United States control of roughly one-fifth of Venezuela’s oil reserves – the largest in the world. While the deal could eventually generate billions of dollars for an oil industry and economy wrecked by years of mismanagement, many Venezuelans see it as a surrender.”
Trade War Watch:
September 3 – Wall Street Journal (Paul Vieira): “Any trade pact Canada strikes with the U.S. must ensure that agreed-upon tariff levels on certain goods would not be subject to change, Prime Minister Mark Carney said. Those assurances weren’t provided in talks last month, Carney said…’There needs to be some stability and credibility’ in any future trade pact, Carney told reporters… He said Canada sought assurances that agreed-upon tariffs on steel, aluminum and automobiles wouldn’t be subject to change. The U.S. and Canada had tentatively agreed upon sharp reductions on existing tariffs covering specific sectors… ‘There were a few instances in the negotiations where those protections were not going to be given, and in fact, the opposite was going to be inserted, which is unacceptable,’ Carney said.”
U.S./Russia/China/Europe/Iran Watch:
September 2 – Wall Street Journal (Bertrand Benoit and Daniel Michaels): “Germany accused Russia of being behind a plot to send explosive drones to a German airport last month and pledged to retaliate against Moscow, a rare public attribution of blame in the widening campaign of incursions and sabotage across NATO territory. ‘We do not consider ourselves at war but we are the daily target of hybrid warfare,’ said German Interior Minister Alexander Dobrindt, announcing the findings Tuesday from an investigation into the incident at Germany’s Leipzig airport last month, for which he said Russia was responsible.”
September 2 – Associated Press (Kirsten Grieshaber and Claudia Ciobanu): “Authorities said… two incidents that disrupted power distribution systems in eastern and western Germany were being investigated as possible acts of sabotage, with one also being examined for possible links to terrorism. Multiple explosive devices were found Tuesday morning at a substation near the Jänschwalde coal-fired power plant in Brandenburg in northeastern Germany. Hours later, a short circuit knocked power lines out of service at the Bergheim power substation near Cologne in western Germany…”
August 30 – Reuters (David Lawder): “U.S. Treasury Secretary Scott Bessent said… he will encourage G20 members to re-examine terms of trade with China to shrink global imbalances and press Beijing to rebalance its economy away from exports and toward domestic consumption. Bessent said… the current flood of exports from China was unsustainable, even though the U.S. direct trade position with China was ‘rapidly improving.’ ‘The world cannot have a China with a $1.2 trillion trade surplus,’ Bessent said. ‘In China, the economy is quite weak, and they are trying to export their way out of it, and they need to rebalance their economy.’”
September 2 – Wall Street Journal (Jon Emont): “American concerns about China’s manufacturing and export juggernaut have gone global. A Group of 20 statement implicitly criticizing Beijing for its overreliance on exports for growth marks a new stage in international pressure… Countries across Europe and Asia worry domestic industries in areas such as autos, electronics and heavy machinery won’t survive China’s push to export its way out of domestic economic troubles. ‘The G-20 has rarely spoken with this degree of consensus on nonmarket distortions and overcapacity,” said Han Lin, China managing director for the Asia Group... ‘It signals growing convergence among major economies that Chinese industrial policy is creating spillovers they increasingly feel compelled to address.’”
September 3 – Financial Times (Joe Leahy): “China has warned that US accusations that Beijing scuppered a joint G20 finance ministers’ communiqué this week threaten to sour relations ahead of a series of high-profile summits. US Treasury secretary Scott Bessent’s statement that Beijing refused to sign the communiqué because the document called for eliminating ‘non-market policies’ undermined ‘the broader multilateral agenda this year’, said a Chinese state media outlet. The spat comes just weeks before Donald Trump is expected to receive his Chinese counterpart Xi Jinping in Washington for a state visit in late September…”
New World Order Watch:
August 31 – Wall Street Journal (Paul Hannon): “New artificial-intelligence models pose a growing threat to the stability of the global financial system and measures to ensure their safe release should be a priority, the head of the G20’s Financial Stability Board wrote… The letter from Andrew Bailey follows a series of incidents over recent months in which new models from companies including OpenAI, Anthropic and Meta Platforms have used the internet to hack other organizations. Regulators worry that new models could find previously unidentified gaps in the cybersecurity systems of financial institutions, and quickly adapt to circumvent new fixes.”
August 31 – Associated Press (Yuras Karmanau): “The leaders of China, Russia and India gathered with other heads of state in Kyrgyzstan on Monday for the summit of the Shanghai Cooperation Organization, a group billed as a counterweight to U.S. global influence. Chinese President Xi Jinping, Russian President Vladimir Putin and Indian Prime Minister Narendra Modi are attending the events in Bishkek, the capital of the Central Asian nation. Putin met separately with Xi and Modi in two of the many bilateral sessions on the sidelines of the summit. Putin affirmed to Xi Moscow’s readiness to make the visa-free regime with China permanent, and he said Russia’s relationship with India is strengthening.”
August 31 – New York Times (Paul Sonne and David Pierson): “As the leaders of China, Russia, India, Iran and other nations converged on Central Asia for a two-day summit beginning on Monday, one thing was clear from the outset. Even as President Trump tries to bend the world to revolve around Washington, Xi Jinping of China has his own powerful orbit. The Chinese leader’s arrival in Bishkek, the capital of Kyrgyzstan, for a meeting of the 10-nation political and security grouping known as the Shanghai Cooperation Organization underscored Mr. Xi’s broad ability to sustain Washington’s foes, both in peacetime and in war.”
August 31 – Politico (Michael Stratford and Ramus Buchsteiner): “The Trump administration’s decision to bring Russia back into the fold at a gathering of the world’s leading economic officials is stirring fresh tensions with European allies who want to continue isolating Moscow over its war in Ukraine. Russian Finance Minister Anton Siluanov was in the room Monday for the first day of the U.S.-hosted G20 talks. Treasury Secretary Scott Bessent also held a one-on-one meeting with Siluanov on the sidelines of the summit. Siluanov’s attendance, however, was opposed by European officials in Asheville…”
September 1 – Bloomberg (Jana Randow, Mark Schroers and Kamil Kowalcze): “Bundesbank President Joachim Nagel criticized the US for selling euros in a recent effort to support the Japanese yen, without consulting European partners. ‘Of course, it would have been desirable — and this was also the customary practice in the past — to coordinate and consult in advance regarding such interventions,’ Nagel said…”
Ukraine War Watch:
September 3 – New York Times (Kim Barker, Oleksandra Mykolyshyn and Ivan Nechepurenko): “They are both torching warehouses filled with food or online-shopping orders near major cities. They are blasting ports and ships carrying vital exports of grain. And they are smashing energy networks that keep the lights on and vehicles fueled. Russia and Ukraine, in cities far from the front line, are waging an intensifying tit-for-tat air war that is bringing more pain to the populations of both countries than at any other point since the early months of the… war... With the front largely frozen, each side is using growing arsenals of missiles and drones to exact vengeance and to try to pummel the other into submission.”
August 30 – Politico (Victor Goury-Laffont): “Russian military is preparing for a significant offensive against Ukrainian energy infrastructure, according to the defense ministry on Sunday, just days after launching a devastating attack on a warehouse near Kyiv. In a post on Telegram, the ministry said Russian forces had ‘begun preparations to launch massive strikes against Ukraine’s energy facilities,’ describing the move as retribution for Kyiv’s targeting of Russian energy infrastructure.”
August 31 – Wall Street Journal (Alistair MacDonald and Oksana Pyrozhok): “Ukraine’s growing ability to strike deep inside Russia is thanks to long-range drones such as the Mammoth, which can fly 1,500 miles. In a secret warehouse in Ukraine, Oleg Krot stood among 600 of the black, delta-winged machines, fully armed and waiting for collection by Ukraine’s military. By next year, their range will double to 3,000 miles, predicted Krot, chief executive and founder of the Mammoth’s manufacturer, Culver Aerospace. Ukrainian defense-technology companies are rapidly improving the range, speed and payload of long-distance drones, bringing more of Russia within reach and allowing Ukraine to hit back at its invaders.”
AI Bubble/Arms Race Watch:
September 3 – Reuters (Helen Coster and Dawn Kopecki): “Less than a year ago, Texas Governor Greg Abbott hailed Texas as the ‘epicenter of AI development.’ Now, in his bid for re-election, he is calling for sweeping new restrictions on data centers. And he’s hardly alone. Across the country, as Democrats ride a wave of local opposition to data centers ahead of the November elections, Republicans are increasingly breaking from U.S. President Donald Trump’s pro-AI agenda.”
September 3 – New York Times (Kalley Huang, Lauren Hirsch and Kate Conger): “Nvidia said… it is buying Hugging Face, a library of open artificial intelligence models, for $12.9 billion, as the chipmaker extends a spending spree in the escalating global race to dominate the technology. The deal marries Nvidia’s chip and data center infrastructure with Hugging Face’s millions of open-source A.I. models that can be freely downloaded and modified. And it puts Nvidia’s deep pockets firmly on one side of a debate over how A.I. systems should be built.”
September 2 – Associated Press (Alex Veiga): “Here’s another place the AI frenzy is making itself felt: the market for luxury homes. High-income earners, many of them employees at AI companies, are snapping up multimillion-dollar houses in the San Francisco Bay Area… Bay Area buying spree is the clearest manifestation of a nationwide trend of sales of upper-end properties largely holding up better than sales of less expensive homes. Metro areas such as San Diego, Miami, Detroit, Nashville and Tampa, Florida, are also seeing upper-market homes sell at a faster pace… In the San Francisco metro area, sales of luxury homes soared 39.3% in the first half of this year compared to a year earlier, while middle-market home sales surged 15.1%. And across the bay in Oakland, sales of upper-market homes jumped 13.3%, while sales of middle-market properties rose 3.9%.”
Bubble Watch:
August 30 – Financial Times (Ramsay Hodgson and Emily Herbert): “Big tech giants booked a more than $160bn windfall last quarter from investments in other AI companies, flattering their earnings and raising concerns that paper gains are overstating the strength of the AI boom. Alphabet, Amazon, Nvidia and Microsoft all reported substantial boosts to their pre-tax profits in their most recent results from the ‘other income’ line in their accounts, which largely comes from valuation gains on equity stakes in other leading AI companies. These one-off valuation boosts, derived in large part from enthusiasm around AI, risk distorting the financial picture at a time when investors are closely scrutinising tech earnings to gauge the health of the AI ecosystem.”
September 2 – Bloomberg (Sarah Foster and Michelle Amponsah): “Retirement feels more elusive than ever for many Americans, but 401(k) millionaires are proliferating after years of steady investing and a strong run in the stock market. The number of millionaire 401(k) accounts at Fidelity Investments rose 19% to a record 769,000 between the first and second quarter… It was the largest quarterly increase since the fourth quarter of 2023…”
Inflation Watch:
September 2 – Bloomberg (Jake Lloyd-Smith): “US diesel advanced to the highest price since hitting a peak in April during the initial phase of the US-Iran war, highlighting the inflationary pressures menacing the global economy as the conflict drags on. The nationwide average retail price reached $5.688 a gallon… That’s just a fraction below the April high, which was the costliest since mid-2022. Diesel is the lifeblood of the global economy, powering trucks, agriculture and construction, and spikes at the retail level affect industries as well as consumers. The fuel has been boosted this year by the conflict in the Middle East, as well as the Russia-Ukraine war. Moscow — typically a major supplier — has curbed exports following waves of attacks on its refineries.”
August 30 – Associated Press (Eleanor Thornber and Ben Westcott): “Crop prices capped their biggest monthly jump in more than a decade as wars and extreme weather disrupt supplies, raising concerns about food inflation. The Bloomberg Agriculture Spot Index, which tracks 10 major products, rose more than 13% in August, the steepest gain since July 2012. Wheat has been one of the biggest drivers, with prices recently reaching a three-year high as Black Sea port attacks slash shipments from a major growing region. Sugar and cocoa were up more than 20% as a strengthening El Niño fuels weather worries. While it can take time for pricier crops to feed through to supermarket shelves, the gains come on top of rising energy and transport bills driven by the war in Iran.”
September 2 – New York Times (Reed Abelson): “Large and small employers are bracing for what looks to be the sharpest increase in health care costs in more than two decades. The cost per worker is projected to go up an average of 11% next year, or somewhat lower if workers’ insurance benefits are reduced, according to a U.S. survey… The employers’ final costs, after they make changes to health plans, are still expected to increase about 8% next year, the steepest since 2003, according to Marsh, the benefits consultant... More than a third of the 1,800 employers surveyed said they anticipated that costs would rise at least 10% after making cuts.”
September 3 – Bloomberg (Tomoko Yamazaki): “Food inflation can be added to rising oil prices as key drivers of higher global sovereign yields. The Bloomberg Agriculture Spot Index, which tracks 10 major products, in August had its biggest monthly gain for more than a decade, as conflicts in the Middle East as well as the Ukraine war, coupled with El Nino impact, drive prices higher.”
Federal Reserve Watch:
September 3 – CNBC (Kevin Breuninger): “The Federal Reserve should cut interest rates to make homes more affordable, Vice President JD Vance said…, adding to the pressure President Donald Trump has placed on the central bank… ‘Obviously the president cares a lot about interest rates… One of the main reasons he cares a lot about interest rates is because he wants Americans to be able to afford a home… When interest rates go higher, that means that borrowing costs are higher… ‘We believe that the Fed should be lowering interest rates,’ he said, calling it the ‘proper and responsible’ response to recent U.S. inflation data… ‘We’re doing a lot of things to try to keep those interest rates down, but it would be nice to have some help from the Federal Reserve.’”
August 31 – Reuters (David Lawder): “U.S. Federal Reserve Chairman Kevin Warsh… told G20 finance leaders that the world is seeing a global investment surge that is helping to power growth, reversing past savings gluts that kept capital in low-yielding instruments amid a shortage of investment opportunities… The Fed chief said that during past G20 meetings, even before the 2008 global financial crisis, and in years since, participants would have been discussing ‘a global savings glut,’ but the situation has reversed. ‘If I were to try to characterize this moment, it would be one of a global investment surge,’ Warsh said… The notion of secular stagnation, the idea that growth will be much slower because of a lack of innovation, no longer applies in the current economy, he said.”
September 3 – Axios (Neil Irwin): “After Federal Reserve chairman Kevin Warsh’s speech in Jackson Hole, the markets penciled in an interest rate hike for the central bank’s mid-September meeting. Comments from two influential officials now throw those expectations into question… A meaningful contingent of Fed leadership is eager to raise interest rates to address stubbornly high inflation, while another, as Fed governor Christopher Waller put it…, channeling John Lennon, is willing to ‘give disinflation a chance.’ It’s a close enough call that Warsh will likely be able to steer a decision whichever way he prefers… Waller noted two consecutive months of improving inflation data. If it continues in August reports over the coming days, he said, ‘I would be inclined to support’ holding rates steady… New York Fed president John Williams told CNBC that ‘I think we have to wait and see’ whether an interest rate increase is needed.”
September 1 – Reuters (Michael S. Derby): “Federal Reserve Governor Michael Barr said… that if inflation does not cool quickly, it will be time for the U.S. central bank to increase interest rates. ‘Inflation remains too high — and has been for over five years,’ Barr said… Flagging the Fed’s September 15-16 monetary policy meeting… Barr said, ‘If inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates.’”
U.S. Economic Bubble Watch:
September 3 – Bloomberg (Mark Niquette): “The US trade deficit widened sharply in July to the largest since early 2025, reflecting a surge in imports of computers and other technology equipment. The gap in goods and services trade grew 24.4% from the prior month to $88.6 billion… The value of imports increased 2.8% and exports fell 2.1%. The report showed an 11.4% surge in imports of capital goods — a category that includes computers and accessories, semiconductors and telecommunications equipment but excludes autos — the largest advance since 1993… Imports of computer accessories increased $6.6 billion, the most on record, while inbound shipments of computers, semiconductors and telecommunications equipment all rose. Meanwhile, the value of outbound US shipments of industrial supplies such as oil and petroleum products declined.”
September 4 – Associated Press (Paul Wiseman): “The U.S. job market rebounded in August as employers added a surprising 162,000 jobs. The unemployment rate stayed at a low 4.1%... Hiring far exceeded the 65,000 forecasters had expected… Employers created 21,000 jobs in July; the Labor Department had originally reported that they’d cut 23,000. Restaurants and bars added 59,000 jobs last month, construction companies 22,000 and manufacturers 16,000. Factory jobs are up by 58,000 since hitting a recent low in December… Average hourly wages rose 3.1% last month from a year earlier, the weakest year-over-year increase since May 2021.”
September 3 – Associated Press (Paul Wiseman): “More Americans filed for unemployment benefits last week, but layoffs are still rare and jobless claims remain at historically low levels… Filings for benefits ticked up to 206,000 last week from a revised 204,000 the week before… The number of people collecting unemployment benefits rose slightly to 1.78 million the week that ended Aug. 22, up by 8,000 from the week before.”
September 3 – Reuters (Lucia Mutikani): “The number of Americans filing claims for unemployment benefits rose marginally last week amid low layoffs, pointing to stable labor market conditions that give the Federal Reserve room to focus on inflation stemming from the Middle East conflict. The inflation headache was underscored by an Institute for Supply Management survey… showing a measure of prices paid by services businesses for inputs jumped to a three-year high in August, which economists said suggested that recent inflation was not confined to the goods sector.”
September 1 – Associated Press (Paul Wiseman): “Employers posted slightly more job openings in July but the American labor market remained sturdy in the face of higher costs that are squeezing household budgets. U.S. job openings ticked up to 7.27 million in July from a revised 7.18 million in June… The… Job Openings and Labor Turnover Survey (JOLTS) also showed that layoffs fell. But so did the number of people quitting their jobs — a sign of confidence in their prospects. The report showed that gross hiring — before subtracting those who lost or quit their jobs — dipped to 5.1 million in July from 5.3 million in June.”
September 3 – Bloomberg (Julia Fanzeres): “Planned US job cuts fell in the first eight months of 2026 to the lowest level in four years… Companies announced 529,914 job cuts so far this year, the lowest year-to-date total since 2022 when post-pandemic labor demand was still intense, according to… Challenger, Gray & Christmas Inc. Meanwhile, hiring plans in the eight months through August were at the highest since 2023. ‘What we’d like to see with low layoffs is an increase in hiring activity,’ said Andy Challenger... ‘While companies are making plans to hire more workers than last year, according to our numbers, it doesn’t appear those positions are being filled quickly.’”
September 2 – CNBC (Jeff Cox): “Private U.S. companies added jobs at a slightly slower-than-expected pace in August, with gains concentrated heavily in healthcare and a few other industries, ADP reported… The payrolls processing firm said firms added 38,000 workers, fewer than the upwardly revised 46,000 in July… Though job creation held positive, August was the smallest gain since January and reflective of a broader slowdown in the labor market. Moreover, most of the jobs came from three sectors, with multiple others showing declines. Education and health services added 45,000 to lead all categories…”
September 1 – Reuters (Lucia Mutikani): “The Institute for Supply Management said its manufacturing PMI fell to a still-elevated 54.6 last month from 55.6 in July, which was the highest reading since May 2022… The ISM survey’s new orders measure slipped to 53.7 last month from 56.7 in July. The pullback in orders did not ease the pressure on supply chains. The survey's supplier deliveries index increased to 59.3 from 58.9 in July… The survey’s gauge of prices paid for inputs was unchanged at 71.1…”
September 2 – Bloomberg (Catarina Saraiva): “US economic activity increased modestly in the past two months with demand from data centers, in particular, driving growth, the Federal Reserve said. The outlook for the economy was ‘positive,’ according to the US central bank’s Beige Book survey of regional business contacts…, though sentiment was mixed across sectors amid uncertainty about energy prices and geopolitics. While spending on high-end purchases was solid, the report also noted increased price sensitivity. Manufacturing activity grew across most of the Fed’s districts on the back of demand for defense and data-center orders. Employment rose slightly across the country.”
September 2 – Reuters (Lucia Mutikani): “New orders for U.S. factory goods increased more than expected in July amid a rebound in demand for aircraft. Factory orders rose 0.9% after a revised 0.2% drop in June… Economists… had forecast orders would rebound 0.6%... Orders advanced 6.5% on a year-over-year basis in July. Manufacturing, which accounts for 9.4% of the economy, is getting a tailwind from the artificial intelligence buildout…”
September 3 – Bloomberg (Julia Fanzeres): “A recent plunge in US labor force participation has sparked competing theories about whether persistent drivers — like aging and immigration — or more temporary seasonal shifts are to blame… The decline in the share of Americans who are working or looking for work over the last six months has been among the fastest recorded in nearly eight decades of data. That’s helped pull the unemployment rate down as well: At 4.1% in July, it was the lowest in more than a year.”
China Watch:
September 2 – Reuters (Ellen Zhang and Ryan Woo): “China’s services activity expanded at a faster pace in August, a private-sector survey showed…, with stronger domestic demand helping firms add staff for a fourth consecutive month. The RatingDog China General Services PMI rose to 51.4 in August from 50.4 in July… However, it was still the second-lowest reading in 14 months.”
August 31 – Bloomberg: “China’s factory activity expanded more than forecast in August after three straight months of slowdown, according to a private survey, showing resilience among the country’s export-oriented firms despite a broader slowdown in the economy. The RatingDog China manufacturing purchasing managers index rose to 51.5 from 50.9 in July…, exceeding the forecasts of most economists…”
September 2 – Reuters: “Generous credit ratings are baking risks into China’s booming bond market as Beijing attracts foreign issuers, S&P Global Ratings’ Asia-Pacific ratings chief said... ‘Too many issuers are concentrated in the upper layer of the rating scale,’ Christopher Lee, regional practice lead for Asia-Pacific at S&P Global Ratings, told a capital market forum in Shanghai. If a foreign issuer is rated 'B' globally, but ‘AAA’ when it sells so-called panda bonds in China’s onshore market, it means ‘risk is being introduced into the domestic market,’ he said.”
Central Banker Watch:
September 1 – Financial Times (Olaf Storbeck): “The European Central Bank must prepare for an extended ‘conflict of attrition’ in the Middle East that could keep inflation elevated in the Eurozone, one of its top policymakers warned… The remarks by Finnish central bank governor Olli Rehn will reinforce market expectations that the ECB will announce another quarter-point increase in its benchmark deposit rate to 2.5% when it next sets rates on September 10. ‘We must show no complacency in the face of these inflationary pressures,’ Rehn told the FT…, referring to energy prices that have been pushed up by the conflict and the near closure of the Strait of Hormuz shipping channel. ‘We cannot afford any affordability crisis in Europe,’ he said.”
September 1 – Wall Street Journal (James Glynn): “The Reserve Bank of New Zealand raised interest rates…, warning that risks for higher inflation remain in play for the economy. The central bank raised the official cash rate by 25 basis points to 2.75%, in line with market expectations. ‘Recent elevated inflation is expected to continue to impact price setting, keeping inflation more persistent than otherwise,’ the RBNZ’s policy-setting committee said…”
Europe/UK Watch:
September 1 – Reuters (Balazs Koranyi): “Euro zone inflation rose back above 3% in August on higher energy costs, cementing an already solid case for another European Central Bank interest rate hike this month as the Iran war keeps putting upward pressure on prices. Inflation in the 21 nations sharing the euro accelerated to 3.3% in August from 2.9% in July, driven almost entirely by higher energy costs as crude oil and natural gas prices both rose, and refiners bumped up their margins…”
September 1 – Reuters (Miranda Murray): “Germany’s manufacturing sector accelerated in August, as a jump in new orders drove the strongest production growth since January 2022, a business survey showed… The S&P Global final Purchasing Managers’ Index for German manufacturing rose to 54.3 in August from 52.2 in July, slightly above a preliminary reading of 54.1.”
August 31 – Politico (Milena Walde and Paul Ronzheimer): “German defense entrepreneur Stefan Thumann argued sabotage operations carried out by Moscow against his country are an ‘act of war … controlled and coordinated here by the Russian armed forces.’ Speaking exclusively with Paul Ronzheimer of the Axel Springer Global Reporters Network in a podcast episode released Tuesday, Thumann rejected the ‘hybrid war’ label used by EU leaders to describe the Kremlin’s campaign in Europe. ‘Germany and Russia are at war,’ he insisted.”
Japan Watch:
September 3 – Reuters (Makiko Yamazaki and Takaya Yamaguchi): “Japan’s budget requests for the next fiscal year have ballooned to a size similar to during the pandemic era, as Prime Minister Sanae Takaichi's expansionary fiscal agenda pushes government borrowing costs to three-decade highs. Budget requests from government agencies totalled 143.1 trillion yen ($917.78bn)…, after the government adopted a budgeting framework that integrates initial and supplementary budget spending.”
September 2 – Bloomberg (Yoshiaki Nohara and Toru Fujioka): “Bank of Japan Governor Kazuo Ueda faces unusually acute risks of financial-market turbulence as he approaches this month’s policy decision in the wake of a public pressure campaign by US Treasury Secretary Scott Bessent. Any failure to follow Bessent’s barely camouflaged calls to raise interest rates would now not only surprise traders who fully expect a move, but also send the yen tumbling. That in turn would boost the outlook for inflation, which is already seen heading toward 3% later this year.”
September 2 – Bloomberg (Toru Fujioka): “Bank of Japan Governor Kazuo Ueda hinted that a rate hike is likely when the board convenes for a meeting later this month, saying that officials will decide on policy with upside price risks in mind. The central bank will have a thorough debate on policy when it gathers on Sept. 17-18, as it does at every meeting, Ueda told reporters… ‘From the perspective of conducting policy with a risk-management approach as the underlying inflation rate approaches 2%, we have come to believe that we need to pay greater attention than before to upside risks in our policy conduct,’ Ueda said.”
September 2 – Reuters (Kaori Kaneko): “Japan’s services sector expanded at its fastest pace in five months in August, as stronger domestic demand lifted business activity and new work, a private survey showed… The S&P Global final Japan Services Purchasing Managers' Index (PMI) rose to 52.5 in August from 51.2 in July, a survey by S&P Global showed.”
August 31 – Reuters (Satoshi Sugiyama): “Japan’s manufacturing sector picked up in August as new business grew at the fastest pace since January 2018 on solid demand for semiconductors and AI-related products, a business survey showed… The S&P Global Japan Manufacturing Purchasing Managers' Index (PMI) rose to 54.9 in August from 54.5 in July, its highest since April.”
Social, Political, Environmental, Cybersecurity Instability Watch:
September 2 – Reuters (Emma Farge): “The El Niño weather phenomenon is set to intensify further into 2027 and could be the strongest ever, raising risks of extreme weather into next year, the World Meteorological Organization said… The U.N. weather agency said its forecasts showed a near 100% likelihood that El Niño would persist through February 2027, fuelled by exceptionally warm Pacific Ocean temperatures. This is the first time it has expressed such a degree of certainty... ‘If this trajectory continues, it may be stronger than anything since our monitoring began. So literally off the charts,’ WMO Secretary-General Celeste Saulo told a Geneva press conference.”
August 31 – Financial Times (Lee Harris in London and Eva Xiao): “Natural catastrophes are expected to cost the world $450bn in a typical year…, with less than half of those losses covered by insurance. As much as 62% of global losses from natural disasters are uninsured, according to new research from risk-modelling firm Verisk, leaving homes, businesses and governments facing about $279bn in uninsured losses in an average year, and far more in the most disastrous years. The growing price tag reflects the mounting toll of climate change and urban expansion, which has put more property at risk, as well as the rising price of residential construction, which in the US has outpaced inflation. The insurance industry also faces rising losses from catastrophe risk, although it is covering a shrinking share of total estimated damages.”
September 3 – Bloomberg (Brian K Sullivan): “Weather-driven energy demand in the US broke an August record as relentless heat kept air conditioners humming, and September is on track to set a record of its own. August’s population-weighted cooling degree days reached 376, the highest in records going back 76 years, according to Commodity Weather Group President Matt Rogers. June through August was the seventh-warmest such period. ‘Now September is on track for the hottest on record replacing 2019,’ Rogers said. ‘We are expecting a very warm to record warm autumn.’”
September 1 – Bloomberg (Eric Roston): “Since countries signed onto the 2015 Paris Agreement, the United Nations has regularly reported on the world’s progress at limiting global warming to 1.5C above pre-industrial levels. A landmark UN report… brings an end to that era — and the beginning of a new one. The world will likely surpass 1.5C in the next few years, it says, and warming will peak at around 1.8C in the best-case scenario. Without changes to current policies, warming could reach roughly 2.6C… Since exceeding the 1.5C threshold is virtually guaranteed, the goal must now become ‘overshoot, peak and decline’ — that is, putting climate change in reverse, ideally by the end of this century.”
The S&P500 was little changed (up 12.8% y-t-d), while the Dow dipped 0.3% (up 11.1%). The Utilities increased 0.9% (up 2.1%). The Banks gained 1.3% (up 15.5%), and the Broker/Dealers rose 1.5% (up 24.1%). The Transports fell 1.7% (up 21.1%). The S&P 400 Midcaps were about unchanged (up 14.5%), and the small cap Russell 2000 was little changed (up 19.9%). The Nasdaq100 increased 0.4% (up 17.0%). The Semiconductors advanced 2.3% (up 65.7%). The Biotechs gained 1.4% (up 31.9%). With bullion dipping $25, the HUI gold index declined 0.9% (up 18.6%).
Three-month Treasury bill rates ended the week at 3.7578%. Two-year government yields added two bps to 4.37% (up 89bps y-t-d). Five-year T-note yields rose six bps to 4.54% (up 82bps). Ten-year Treasury yields gained six bps to 4.78% (up 62bps). Long bond yields added four bps to 5.24% (up 40bps). Benchmark Fannie Mae MBS yields gained five bps to 5.77% (up 73bps).
Italian 10-year yields increased five bps to 4.15% (up 60bps y-t-d). Greek 10-year yields added five bps to 4.00% (up 56bps). Spain's 10-year yields increased four bps to 3.77% (up 48bps). German bund yields gained six bps to 3.34% (up 48bps). French yields rose another seven bps to 4.20% (up 63bps). The French to German 10-year bond spread widened a basis point to 86 bps. U.K. 10-year gilt yields jumped seven bps to 5.13% (up 65bps). U.K.’s FTSE equities index was little changed (up 9.0% y-t-d).
Japan’s Nikkei 225 Equities Index fell 2.1% (up 29.2% y-t-d). Japan’s 10-year “JGB” yields slipped a basis point to 2.92% (up 85bps y-t-d). France’s CAC40 declined 1.5% (up 1.6%). The German DAX equities index lost 2.0% (up 6.4%). Spain’s IBEX 35 equities index was unchanged (up 15.8%). Italy’s FTSE MIB index declined 1.0% (up 15.9%). EM equities were mostly lower. Brazil’s Bovespa index rallied 5.4% (up 14.9%), while Mexico’s Bolsa index declined 1.0% (up 0.8%). South Korea’s Kospi fell 1.5% (up 58.7%). India’s Sensex equities index declined 1.0% (down 10.2%). China’s Shanghai Exchange Index slipped 0.6% (down 1.0%). Turkey’s Borsa Istanbul National 100 index dropped 4.3% (up 24.4%).
Federal Reserve Credit declined $7.2 billion last week to $6.687 TN, with a 38-week expansion of $197 billion. Fed Credit was down $2.195 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.968 TN, or 80%. Fed Credit inflated $3.877 TN, or 138%, since November 7, 2012 (721 weeks). Elsewhere, NY Fed holdings for foreign owners of Treasury, Agency Debt recovered $6.9 billion last week to $2.885 TN - further off the low back to August 2010. “Custody holdings” were down $281 billion y-o-y, or 8.9%.
Total money market fund assets (MMFA) jumped $44.8 billion last week to a record $7.979 TN. MMFA were up $720 billion, or 9.9%, y-o-y - having ballooned a historic $3.395 TN, or 74%, since October 26, 2022.
Total Commercial Paper dipped $5.9 billion (from a 13-month high) to $1.441 TN. CP increased $38 billion, or 2.7%, y-o-y.
Freddie Mac 30-year fixed mortgage rates rose five bps to a 13-month high 6.71% (up 21bps y-o-y). Fifteen-year rates gained six bps to 6.04% (up 44bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate up six bps to 6.82% (up 18bps).
Currency Watch:
August 31 – Reuters (Leika Kihara): “When the U.S. joined Japan’s efforts to shore up the yen, it wasn’t for nothing. This week, U.S. Treasury Secretary Scott Bessent spelt out the terms: get busy on interest rate hikes and end outdated ideas about big economic stimulus. A month after a rare joint U.S.-Japan intervention to prop up the yen, Bessent showed little appetite for another market foray by telling Reuters recent yen moves were not disorderly. Instead, he expressed hope Bank of Japan Governor Kazuo Ueda would ‘do the right thing’ on monetary policy to combat a weak yen. While the BOJ was already widely expected to lift rates in September as inflation pressures grew, Bessent’s comments effectively lock the bank into doing so and put pressure on it to step up hikes going forward. ‘The July joint intervention was a message from Bessent for Japan to get its act together on inflation,’ said Izuru Kato, chief economist at Totan Research… ‘Japan faces a currency crisis that's becoming hard to control without help from the United States. For such a country, even a rate hike of once every three months may be too slow.’”
August 31 – Bloomberg (Toru Fujioka): “Japan’s Finance Minister Satsuki Katayama said that she and Treasury Secretary Scott Bessent share the view that their recent joint intervention in the currency market was beneficial, while playing down reports that he has been pushing for the Bank of Japan to raise its policy rate. ‘Secretary Bessent and I confirmed that orderly movements in the yen are essential to maintaining stability in global financial markets, including US markets, and that continued, coordinated efforts by Japan and the United States will help achieve this shared objective,’ Katayama told reporters…”
For the week, the U.S. Dollar Index declined 0.5% to 99.157 (up 0.8% y-t-d). On the upside, the Japanese yen increased 2.5%, the South Korean won 1.8%, the South African rand 1.3%, the Brazilian real 1.3%, the Mexican peso 0.9%, the Norwegian krone 0.7%, the Singapore dollar 0.6%, the Australian dollar 0.5%, the Canadian dollar 0.5%, the Swedish krona 0.4%, and the euro 0.3%. On the downside, the New Zealand dollar declined 0.6%, the British pound 0.1%, and the Swiss franc 0.1%. China's (onshore) renminbi gained 0.28% versus the dollar (up 4.12% y-t-d).
Commodities Watch:
September 1 – Bloomberg: “Almost two months of nonstop attacks by Russia and Ukraine on each other’s commercial ships and ports in the Black Sea and Sea of Azov have cut into grain exports from both countries. That’s sent wheat futures to the highest level in three years and threatened global food supplies. Russia and Ukraine together account for more than a quarter of the world’s wheat exports and also produce large amounts of barley, corn and sunflower oil. The recent disruption is reminiscent of 2022…”
The Bloomberg Commodities Index gained 1.9% (up 30.2% y-t-d). Spot Gold slipped 0.6% to $4,430 (up 2.6%). Silver dipped 0.3% to $66.2092 (down 7.6%). WTI Crude surged $8.08, or 9.7%, to $91.48 (up 59%). Gasoline rose 5.4% (up 87%), and Natural Gas gained 3.0% to $2.975 (down 19%). Copper added 0.4% (up 18%). Wheat dropped 6.6% (up 41%), while Corn was unchanged (up 16%). Bitcoin jumped $2,370, or 3.1%, to $79,830 (down 8.9%).
Market Instability Watch:
August 31 – Yahoo Finance (Brian Sozzi): “The ugly US debt picture seems to get uglier by the day. Case in point: rising interest payments on some $40 trillion in debt, in part powered by a recent climb in Treasury yields. US annual interest expense is up to a record 18.5% of federal government revenue… This is now officially above the previous record of 18.4% set in 1991. ‘The US debt crisis is in uncharted territory,’ strategists at the Kobeissi Letter wrote… Consider this: The aforementioned percentage has more than quadrupled over the past four years. The US annual interest expense now stands at a record $1.25 trillion, more than four times the level seen in 1991.”
August 29 – Financial Times (Toby Nangle, Ramsay Hodgson and Adam Shaw): “The increase in global bond yields since the US war with Iran began in February has driven up the cost of borrowing for the world’s biggest developed economies by tens of billions of dollars, according to FT research. G7 nations have locked in an additional $16bn of sovereign debt financing costs due to the rise in bond yields since the war began… If the rise in yields persists then they could pay an estimated additional $34bn in extra financing costs by the end of the first quarter of next year… The US is paying the lion’s share of the increase in costs to date — an estimated $10.6bn — as it is by far the largest G7 economy and the biggest sovereign bond market in the world. It is set to pay a further $21.7bn in additional interest costs if the rise in yields persists until the end of the first quarter of 2027.”
September 2 – Reuters (Rocky Swift and Harry Robertson): “With benchmark Japanese bond yields breaking through a three-decade-old barrier, higher returns are starting to tease capital home, reversing what was once a dependable flow of funds into global bond markets. The 3% threshold is significant not just for funding costs in Tokyo, but for turning around an investment flow that has made Japan the biggest owner of U.S. Treasuries and one of the most reliable buyers of sovereign debt worldwide… While there’s no sign of Japan dumping its $2.4 trillion hoard in overseas debt just yet, global fund managers and a growing body of data is showing a steadier drawdown is underway.”
August 30 – Wall Street Journal (Gregory Zuckerman and Gunjan Banerji): “Wall Street’s hottest trade has gone ice cold. For years, it paid off to buy stocks that were rising in price—and bet against struggling shares. The momentum trade was especially profitable this year, as investors piled into hot stocks including Micron Technology, Nvidia, Advanced Micro Devices and other artificial-intelligence darlings while wagering against those likely to be hurt by the embrace of AI. The S&P 500 Momentum Index soared 44% in the second quarter, its best quarterly performance on record, and it surged 133% over the past five years, nearly double the broad market’s performance. Mega funds and rookie investors alike piled into the trade, some using leverage and options contracts in an effort to amplify their returns, propelling the underlying shares higher… Suddenly, the trade is a loser. The momentum index has tumbled more than 9% since July 1, lagging behind the S&P 500’s 2.8% gain.”
U.S. Credit Trouble Watch:
September 2 – Bloomberg (Weihua Li and Sridhar Natarajan): “As insurers controlled by billionaire sports mogul Mark Walter loaned more than $20 billion to other parts of his empire, they increasingly leaned on a source of low-interest financing set up to help US homebuyers. Walter’s two biggest insurers — part of a unit dubbed Group 1001 — owed more than $6 billion to the Federal Home Loan Bank of Indianapolis at the end of June… That’s a 36% jump from six months earlier and roughly double the outstanding balance at the start of 2025. Congress created the FHLB system to keep mortgage lending alive through the depths of the Great Depression… But in recent decades, it has become a magnet for financial ingenuity, attracting a long line of borrowers eager to tap that money for purposes that may have little to do with offering new home loans. It’s now well known that insurers are jumping on that trend, especially as investment firms take them over and look to boost returns.”
September 1 – Bloomberg (Tasos Vossos): “As government bond yields across the world erupt, corporate credit has rarely looked calmer. Yet even in that market, about $1 trillion of bonds are telling a much different story. That’s the amount of company bonds trading at spreads that are unusually wide relative to their credit rating, based on a Bloomberg News analysis of non-financial high-grade securities with more than three years left to maturity. The tally includes about $580 billion of US bonds and almost $400 billion in Europe, when examining non-financial high-grade securities. The divergence is striking because it comes as the broader investment-grade market has barely moved.”
September 3 – Financial Times (Eric Platt): “Blackstone’s flagship private credit vehicle fielded another quarter of double-digit redemption requests, in a sign of the persistent pressure on funds over their lending to highly leveraged software companies. The $43bn Blackstone Private Credit Fund, the largest vehicle of its kind pitched at retail investors, said redemption requests remained at 10% of the fund’s value in the third quarter. That was in line with the level of requests it received in the previous quarter… Blackstone said it would continue to curb outflows at 5% of the fund’s value…”
September 3 – Bloomberg (Olivia Fishlow): “Cliffwater LLC’s flagship private credit fund again capped redemptions at 5% in the third quarter, after investors sought to pull about 16% of shares. The $31 billion Cliffwater Corporate Lending Fund told shareholders… they’d get back about one-third of their requests…”
September 2 – Reuters (Patturaja Murugaboopathy and Gaurav Dogra): “U.S. private-credit portfolio values showed signs of stabilising in the second quarter after a broad deterioration early in the year… Private credit has come under sharper scrutiny this year as investors questioned opaque valuations, redemption pressure emerged at some non-traded funds and concerns grew over software exposure and weakening borrower performance. A Reuters analysis of regulatory filings from 44 U.S. business development companies, which lend mainly to small- and medium-sized firms, showed portfolio values moved further below reported cost in the first half of 2026 as market spreads widened and stress emerged among some borrowers, particularly in the software sector.”
Global Credit Bubble and Boom Watch:
August 31 – Politico (Michael Stratford): “Scott Bessent designed this week’s G20 finance meeting to showcase President Donald Trump’s economic agenda and present it as the formula for accelerating growth worldwide. Instead, he’s likely to spend much of the gathering trying to ease fears over the global impact of crushing U.S. debt and cajoling other countries to join in an effort to further economically isolate Iran… ‘The biggest private conversations won’t be around sanctions. It’ll be about the bond market,’ said Josh Lipsky, vice president and chair of international economics at the Atlantic Council. ‘These countries around the table, privately, want to hear directly from him what he’s intending’ with his increasingly interventionist approach in the Treasury and foreign currency markets.”
September 2 – Axios (Emily Peck): “Investor fervor for the AI boom is so strong that companies are able to borrow billions of dollars right now essentially for free. The record surge in zero-coupon convertible bonds — which don’t pay regular interest — is surprising given that we’re in a higher rate environment. Typically, that would mean companies would pay higher borrowing costs. The overall market for these ‘converts’ is booming. As of Sept. 1, companies issued $186.8 billion globally in convertible bonds across 362 deals — that’s already more than last year, per data that Dealogic shared with Axios. 60% of these bonds are related to the AI boom: hyperscalers, neoclouds, semiconductors and energy companies benefiting from data center construction among them, says Venu Krishna, head of U.S. equity strategy at Barclays. Zero-coupon issuance made up about 43% of the overall total, close to $80 billion — that is the largest amount of any full year going back to 1995, per Dealogic. Just this week, Nvidia invested $3.5 billion in a $3.9 billion zero-coupon bond issued by MediaTek, a Taiwan-based chipmaker.”
September 1 – Bloomberg: “JP Morgan led underwriting of US high-yield bonds so far this year as the value of deals rose 21% year-to-date compared with the same period last year. Issuers sold $256.7 billion of bonds through August vs. $212.8 billion a year ago”
September 1 – Bloomberg: “BofA Securities led underwriting of US municipal bonds so far this year as the value of deals rose 6.3% year-to-date compared with the same period last year. State and local governments sold $404 billion of munis through August vs. $380.1 billion a year ago…”
August 31 – Bloomberg (Aileen Chuang): “The billions of dollars being borrowed to fund data centers in Asia are pushing banks to their limits and making them more selective about which projects to finance, according to senior bankers at Barclays Plc. Andrew Ashman, whose department helps companies secure loans, said… that Asia-Pacific lenders ‘are reporting to be heavily exposed to the data center sector.’”
August 30 – Financial Times (Verity Ratcliffe): “Soaring demand for natural gas among energy majors and investors has pushed dealmaking to its highest level in more than a decade, with buyers competing over the limited number of global assets available. More than $32bn was spent on buying gas production projects in the first six months of the year, the highest level in over a decade, according to… Wood Mackenzie.”
August 31 – Yahoo Finance (Stella Qiu): “Australian home prices fell for a fifth month in August as the housing downturn spread to more cities and regional areas… Figures from property consultant Cotality showed national home prices fell 0.9% in August from July when they dropped by a downwardly revised 1.2%. That left values 3.6% below their peak, but still 2.7% higher than a year ago. Sydney and Melbourne again led the monthly decline with falls of 1.4% and 1.1%. Nearly all capital cities recorded a fall…”
August 31 – Bloomberg (Sharon Klyne, Low De Wei, and Richard Henderson): “Australian private credit funds are trying to contain panic among investors, after the collapse of property developer Bathla Group sparked fears that the industry’s big bet on the property sector is going south. Bathla’s failure has raised the specter that more builders heavily indebted to private lenders could run into trouble as the industry struggles with falling home prices and higher construction costs.”
Leveraged Speculation Watch:
September 3 – Bloomberg: “The Chinese yuan’s appeal may grow as an alternative to the yen for carry trades if the Bank of Japan makes further interest-rate hikes as widely expected, according to BBVA SA. ‘I believe it’s worth watching the risk of the offshore yuan replacing the yen as the main Asian funding currency for carry trades,’ Dariusz Kowalczyk, head of cross-asset strategy for Asia… For decades, Japan’s negative or ultra-low interest rates made the yen a favorite currency for carry trades, a strategy in which an investor borrows in a currency with a relatively low interest rate and invests the proceeds in another offering a higher return. While the BOJ has hiked rates three times since the beginning of 2025, the People’s Bank of China has kept borrowing low to support its economy.”
September 2 – Financial Times (Joshua Franklin, Jill R Shah and Michelle Chan): “JPMorgan… scaled back the financing it extended to Jane Street as the trading firm’s push into the bond market put it in direct competition with the Wall Street bank. The biggest US bank significantly curbed the lending it provided to Jane Street for its bond trading last year, according to people familiar with the decision… The reduction reflected roughly 5% of Jane Street’s total fixed-income financing across banks and had no material impact on its revenues in 2025, one of the people added.”
Iran War Watch:
September 1 – Axios (Barak Ravid): “The U.S. military attacked two Iranian government tankers as part of the round of strikes that took place on Tuesday, U.S. officials said. This is the first time the U.S. military has struck Iranian tankers in retaliation for Iranian attacks on ships in the Strait of Hormuz — rather than to prevent them from violating the naval blockade. A U.S. official said the move was part of a new ‘tanker for tanker’ policy approved by President Trump to further deter Iranian attacks on tankers that move through the strait. U.S. officials said around 100 targets were attacked during Tuesday's strikes.”
September 1 – Bloomberg (Patrick Sykes): “A week into the US campaign to make Iran an economic outcast, the Islamic Republic is meeting world leaders and touting ways to boost trade. Iranian President Masoud Pezeshkian spent Monday and Tuesday with fellow leaders at the Shanghai Cooperation Organisation in Kyrgyzstan, in the latest sign that US warnings against engaging with Tehran — and calls to cut business ties with the country — are falling on deaf ears even among some of Washington’s allies. India’s Prime Minister Narendra Modi told Pezeshkian he wanted to strengthen relations ‘across diverse sectors,’ and Pakistan’s premier, Shehbaz Sharif, made similar comments. Azerbaijan’s President Ilham Aliyev sought greater cooperation ‘in various trade and economic fields,’ while Kyrgyzstan’s leader, Sadyr Japarov, proposed that Tehran invests in an oil refinery in the central Asian nation.”
September 1 – Bloomberg (Grant Smith, Weilun Soon and Anthony Di Paola): “Two oil supertankers were struck by unknown projectiles in quick succession while transiting the Persian Gulf's Strait of Hormuz chokepoint, maritime security consultant Marisks said. The very large crude carrier Sidr, run by Saudi Arabia’s Bahri shipping company, was hit while sailing northeast of Khasab, Oman, the consultant said. The Senegal Prosperity, operated by Sinokor, was struck by three projectiles while traveling east of the same country…”
September 2 – Reuters (Nayera Abdallah and Jana Choukeir): “Saudi Arabia, the world’s biggest crude exporter, said… that an Iranian attack on an oil tanker owned by its national shipping company had killed two Filipino seafarers. Sidr, owned by Bahri, was one of two supertankers carrying Saudi oil reported to have been hit late on Monday while transiting the Strait of Hormuz. Tehran has threatened tankers attempting to sail through the narrow waterway without authorization…”
Iran War Ramifications Watch:
September 1 – New York Times (David Pierson): “The Chinese leader Xi Jinping arrived in Central Asia this week with a message for a world increasingly unsettled by President Trump: China has friends and influence, and is prepared to help shape what comes next. The scene unfolded at a security summit in Bishkek, the capital of Kyrgyzstan, where Mr. Xi gathered with the leaders of Russia and Iran. He presented Beijing as a source of stability and a champion of an ‘orderly multipolar world’ that would replace the current U.S.-dominated order. If the Bishkek summit was designed to project solidarity, a meeting of the world’s most powerful countries in the mountains of Asheville, N.C., offered an image of fracture.”
August 31 – Reuters (Timothy Gardner, Arathy Somasekhar and Anushree Mukherjee): “Six months into the U.S.-Israeli war with Iran, Washington may find it harder to calm jittery oil markets after U.S. presidents drained the aging Strategic Petroleum Reserve over the last five years. The SPR, which Washington created after the oil crises of the 1970s, holds crude in a series of 60 underground salt caverns along the coasts of Texas and Louisiana. After years of releases by former President Joe Biden and President Donald Trump, the reserve is at its lowest level since 1982, holding just 289.7 million barrels. The level will drop to about 243 million if Trump releases a final batch of 39 million barrels from a March agreement with the International Energy Agency.”
August 28 – Wall Street Journal (Shelby Holliday, Michael R. Gordon, and Lara Seligman): “The U.S. has rushed so many munitions to the Middle East to fight Iran that military planners are concerned the loss of firepower is diminishing America’s ability to defend against potential threats from China and Russia, said U.S. officials. The cuts have been so deep that the U.S. inventories in Europe of PAC-3 Patriot air defense interceptors and Atacms surface-to-surface missiles are deemed to be ‘beyond critical,’ some of the officials said… In addition to Patriot interceptors, other European-based weapons have been drawn down to extremely low levels, including precision-strike missiles and guided rockets, officials added. Thaad antimissile interceptors and Merops counterdrone systems have also been sent from Europe to the Middle East, further diminishing supplies…”
September 1 – New York Times (Simon Ducroquet and John Ismay): “The Navy has about 20 ships in the Middle East, carrying roughly 20,000 sailors and Marines. The logistical challenges are immense: The ships need enough food for more than 420,000 meals and about eight million gallons of fuel each week. The Navy has operated there for decades and built supply depots throughout the region. But Iran destroyed a critical Navy logistics base in Bahrain on… the first day of the war, and other ports in the region that can accommodate an aircraft carrier or a supply ship are also within range of Iranian missiles and drones, making them inaccessible. Navy supply ships in the region now have to travel 2,200 miles to a tiny island in the Indian Ocean called Diego Garcia to bring food, fuel and other goods to the warships in the Gulf of Oman and the Arabian Sea. The next option is to go to Singapore, 3,700 miles away — which requires the ships to pass through the Strait of Malacca, a busy commercial corridor.”
Trump Administration Watch:
August 31 – CNBC (Kevin Breuninger): “Treasury Secretary Scott Bessent… defended the Trump administration’s recent intervention in the bond market, pushing back on an eyebrow-raising critique from his investing mentor, billionaire Stanley Druckenmiller… ‘Stan’s a great investor. He changes his mind a lot, and he doesn’t like losing money,’ Bessent said. ‘I think he lost money the day he sent in the editorial.’”
August 31 – Wall Street Journal (Amrith Ramkumar and Marianne LeVine): “President Trump warned… that communities that don’t embrace data centers will ‘end up being backwards and poor,’ putting himself at odds with most Americans who say they don’t want the facilities that power AI to be built near them. ‘The only reason that communities throughout the U.S.A. should not want Data Centers is if they want to end up being backwards and poor,’ Trump wrote... ‘If they want to be successful and rich, with far lower taxes and jobs all over the place, let Data Reign.’”
August 31 – Axios (Josephine Walker): “President Trump has personally asked Apple to rename Lake Ontario ‘Lake America’ on Apple Maps, Interior Secretary Doug Burgum said… The request comes after Google changed the lake’s name on mobile and desktop for U.S. users on Saturday.”
September 2 – Axios (Avery Lotz): “President Trump’s order renaming Lake Ontario to ‘Lake America’ isn’t floating with Americans, with a majority opposing the name change and his new tariffs on Washington’s northern neighbor… With the midterm elections creeping closer, polling suggests Americans aren’t sold on the fight. Reuters-Ipsos polling from late August found that more than 6 in 10 (63%) of Americans oppose Trump’s executive order directing Interior Secretary Doug Burgum to rename the lake, which straddles the U.S.–Canada border. Even among Republicans, more opposed (43%) than supported (33%) the order. A vast majority of Democrats (84%) and independents and other parties (65%) opposed the name change.”
September 1 – Financial Times (Stephanie Findlay, Claire Jones and Jamie Smyth): “Donald Trump has summoned oil groups to the White House… as high petrol and diesel prices, triggered by his war in Iran, push up inflation across the US ahead of midterm elections. Marathon Petroleum, Phillips 66, Chevron, Delek US Holdings, PBF Energy and Valero Energy are among the companies called to the meeting to discuss refining capacity and prices… With less than three months until November’s midterm legislative elections, the US president is under increasing political pressure over an affordability crunch, with a recent FT poll showing voters now believe they are worse off under Trump.”
August 31 – Wall Street Journal (Matt Grossman and Paul Vieira): “Treasury Secretary Scott Bessent blamed Canadian Prime Minister Mark Carney for the collapse of trade talks this month aimed at averting steep U.S. tariffs on Canadian goods, and brushed off concerns about a trade war with America’s second-largest trading partner. ‘I don’t think you can be in a tit-for-tat [trade war] with someone who’s 13 times larger than you are,’ Bessent said… ‘I think this is very unfortunate that Prime Minister Carney has turned this into a political shouting match,’ he added.”
August 30 – Associated Press (Ben Finley): “The U.S. Treasury Department is preventing certain journalists from covering a finance meeting among the world’s most powerful countries, the latest example of how President Donald Trump’s administration has restricted media access. Individual reporters from The New York Times, The Wall Street Journal and Bloomberg News were not granted credentials to the Group of 20 finance ministers’ meeting in Asheville, North Carolina...”
August 31 – New York Times (Edward WongRebecca F. Elliott and Anatoly Kurmanaev): “As the U.S. government faced shortcomings in the country’s weapons manufacturing, the Pentagon set up a new office that would make investments to help boost defense industrial production. That effort, which began in 2022 during the Biden administration, is now taking a sharp turn with the Pentagon’s involvement in an oil production deal between the United States and Venezuela… The Pentagon’s little-known Office of Strategic Capital, which reports to the deputy defense secretary, is the leading U.S. government entity in forming a partnership with a private oil producer whose founder, Alejandro Betancourt López, is a powerful and polarizing figure in international commerce.”
September 1 – Financial Times (Steff Chávez and James Politi): “US Army secretary Dan Driscoll handed his resignation to Donald Trump… with a blunt message about Pete Hegseth’s interference with the largest branch of America’s military. The departure of the army’s top civilian official was the culmination of months of tension with the defence secretary about the force’s technological transformation and senior military appointments, as well as intractable personal tensions between the two men. Driscoll, a close friend of vice-president JD Vance, believed Hegseth was causing ‘generational damage’ to the largest branch of the US military, according to a person familiar...”
September 3 – New York Times (Alan Rappeport): “Treasury Secretary Scott Bessent named a new culprit this week for the high energy prices that are weighing on the world economy: Ukraine… ‘We are going through an energy shock right now due to both the war in Ukraine — because Ukraine has decided that they want to blow up Russian energy assets and refine products, so that is creating upward price pressure on a global basis,’ Mr. Bessent said on Fox News... ‘And then the conflict in Iran. And the conflict in Iran will end.’”
September 3 – Financial Times (Geoff Dyer and Joe Daniels): “Venezuelan opposition leader MarÃa Corina Machado said the country’s people were feeling ‘sadness, anger and unease’ at a new energy agreement between Washington and Caracas but stopped short of directly criticising Donald Trump’s administration. Machado, a Nobel Peace Prize winner living in exile, broke her silence over the agreement reached last week — under which the Pentagon will take a 35% stake in a Venezuelan oil company — to say it had caused ‘deep concern’ and had still not been properly explained.”
September 3 – Associated Press (Regina Garcia Cano): “Nothing has shaped what it means to be Venezuelan today more than oil. For more than 100 years, in good times and bad, Venezuelans’ identity has been built around the belief that their country’s bountiful oil resources belong to the people, not a government or a company. This belief, and a troubled nation’s pride, took a bruising last week when acting President Delcy RodrÃguez agreed to give the United States control of roughly one-fifth of Venezuela’s oil reserves – the largest in the world. While the deal could eventually generate billions of dollars for an oil industry and economy wrecked by years of mismanagement, many Venezuelans see it as a surrender.”
Trade War Watch:
September 3 – Wall Street Journal (Paul Vieira): “Any trade pact Canada strikes with the U.S. must ensure that agreed-upon tariff levels on certain goods would not be subject to change, Prime Minister Mark Carney said. Those assurances weren’t provided in talks last month, Carney said…’There needs to be some stability and credibility’ in any future trade pact, Carney told reporters… He said Canada sought assurances that agreed-upon tariffs on steel, aluminum and automobiles wouldn’t be subject to change. The U.S. and Canada had tentatively agreed upon sharp reductions on existing tariffs covering specific sectors… ‘There were a few instances in the negotiations where those protections were not going to be given, and in fact, the opposite was going to be inserted, which is unacceptable,’ Carney said.”
U.S./Russia/China/Europe/Iran Watch:
September 2 – Wall Street Journal (Bertrand Benoit and Daniel Michaels): “Germany accused Russia of being behind a plot to send explosive drones to a German airport last month and pledged to retaliate against Moscow, a rare public attribution of blame in the widening campaign of incursions and sabotage across NATO territory. ‘We do not consider ourselves at war but we are the daily target of hybrid warfare,’ said German Interior Minister Alexander Dobrindt, announcing the findings Tuesday from an investigation into the incident at Germany’s Leipzig airport last month, for which he said Russia was responsible.”
September 2 – Associated Press (Kirsten Grieshaber and Claudia Ciobanu): “Authorities said… two incidents that disrupted power distribution systems in eastern and western Germany were being investigated as possible acts of sabotage, with one also being examined for possible links to terrorism. Multiple explosive devices were found Tuesday morning at a substation near the Jänschwalde coal-fired power plant in Brandenburg in northeastern Germany. Hours later, a short circuit knocked power lines out of service at the Bergheim power substation near Cologne in western Germany…”
August 30 – Reuters (David Lawder): “U.S. Treasury Secretary Scott Bessent said… he will encourage G20 members to re-examine terms of trade with China to shrink global imbalances and press Beijing to rebalance its economy away from exports and toward domestic consumption. Bessent said… the current flood of exports from China was unsustainable, even though the U.S. direct trade position with China was ‘rapidly improving.’ ‘The world cannot have a China with a $1.2 trillion trade surplus,’ Bessent said. ‘In China, the economy is quite weak, and they are trying to export their way out of it, and they need to rebalance their economy.’”
September 2 – Wall Street Journal (Jon Emont): “American concerns about China’s manufacturing and export juggernaut have gone global. A Group of 20 statement implicitly criticizing Beijing for its overreliance on exports for growth marks a new stage in international pressure… Countries across Europe and Asia worry domestic industries in areas such as autos, electronics and heavy machinery won’t survive China’s push to export its way out of domestic economic troubles. ‘The G-20 has rarely spoken with this degree of consensus on nonmarket distortions and overcapacity,” said Han Lin, China managing director for the Asia Group... ‘It signals growing convergence among major economies that Chinese industrial policy is creating spillovers they increasingly feel compelled to address.’”
September 3 – Financial Times (Joe Leahy): “China has warned that US accusations that Beijing scuppered a joint G20 finance ministers’ communiqué this week threaten to sour relations ahead of a series of high-profile summits. US Treasury secretary Scott Bessent’s statement that Beijing refused to sign the communiqué because the document called for eliminating ‘non-market policies’ undermined ‘the broader multilateral agenda this year’, said a Chinese state media outlet. The spat comes just weeks before Donald Trump is expected to receive his Chinese counterpart Xi Jinping in Washington for a state visit in late September…”
New World Order Watch:
August 31 – Wall Street Journal (Paul Hannon): “New artificial-intelligence models pose a growing threat to the stability of the global financial system and measures to ensure their safe release should be a priority, the head of the G20’s Financial Stability Board wrote… The letter from Andrew Bailey follows a series of incidents over recent months in which new models from companies including OpenAI, Anthropic and Meta Platforms have used the internet to hack other organizations. Regulators worry that new models could find previously unidentified gaps in the cybersecurity systems of financial institutions, and quickly adapt to circumvent new fixes.”
August 31 – Associated Press (Yuras Karmanau): “The leaders of China, Russia and India gathered with other heads of state in Kyrgyzstan on Monday for the summit of the Shanghai Cooperation Organization, a group billed as a counterweight to U.S. global influence. Chinese President Xi Jinping, Russian President Vladimir Putin and Indian Prime Minister Narendra Modi are attending the events in Bishkek, the capital of the Central Asian nation. Putin met separately with Xi and Modi in two of the many bilateral sessions on the sidelines of the summit. Putin affirmed to Xi Moscow’s readiness to make the visa-free regime with China permanent, and he said Russia’s relationship with India is strengthening.”
August 31 – New York Times (Paul Sonne and David Pierson): “As the leaders of China, Russia, India, Iran and other nations converged on Central Asia for a two-day summit beginning on Monday, one thing was clear from the outset. Even as President Trump tries to bend the world to revolve around Washington, Xi Jinping of China has his own powerful orbit. The Chinese leader’s arrival in Bishkek, the capital of Kyrgyzstan, for a meeting of the 10-nation political and security grouping known as the Shanghai Cooperation Organization underscored Mr. Xi’s broad ability to sustain Washington’s foes, both in peacetime and in war.”
August 31 – Politico (Michael Stratford and Ramus Buchsteiner): “The Trump administration’s decision to bring Russia back into the fold at a gathering of the world’s leading economic officials is stirring fresh tensions with European allies who want to continue isolating Moscow over its war in Ukraine. Russian Finance Minister Anton Siluanov was in the room Monday for the first day of the U.S.-hosted G20 talks. Treasury Secretary Scott Bessent also held a one-on-one meeting with Siluanov on the sidelines of the summit. Siluanov’s attendance, however, was opposed by European officials in Asheville…”
September 1 – Bloomberg (Jana Randow, Mark Schroers and Kamil Kowalcze): “Bundesbank President Joachim Nagel criticized the US for selling euros in a recent effort to support the Japanese yen, without consulting European partners. ‘Of course, it would have been desirable — and this was also the customary practice in the past — to coordinate and consult in advance regarding such interventions,’ Nagel said…”
Ukraine War Watch:
September 3 – New York Times (Kim Barker, Oleksandra Mykolyshyn and Ivan Nechepurenko): “They are both torching warehouses filled with food or online-shopping orders near major cities. They are blasting ports and ships carrying vital exports of grain. And they are smashing energy networks that keep the lights on and vehicles fueled. Russia and Ukraine, in cities far from the front line, are waging an intensifying tit-for-tat air war that is bringing more pain to the populations of both countries than at any other point since the early months of the… war... With the front largely frozen, each side is using growing arsenals of missiles and drones to exact vengeance and to try to pummel the other into submission.”
August 30 – Politico (Victor Goury-Laffont): “Russian military is preparing for a significant offensive against Ukrainian energy infrastructure, according to the defense ministry on Sunday, just days after launching a devastating attack on a warehouse near Kyiv. In a post on Telegram, the ministry said Russian forces had ‘begun preparations to launch massive strikes against Ukraine’s energy facilities,’ describing the move as retribution for Kyiv’s targeting of Russian energy infrastructure.”
August 31 – Wall Street Journal (Alistair MacDonald and Oksana Pyrozhok): “Ukraine’s growing ability to strike deep inside Russia is thanks to long-range drones such as the Mammoth, which can fly 1,500 miles. In a secret warehouse in Ukraine, Oleg Krot stood among 600 of the black, delta-winged machines, fully armed and waiting for collection by Ukraine’s military. By next year, their range will double to 3,000 miles, predicted Krot, chief executive and founder of the Mammoth’s manufacturer, Culver Aerospace. Ukrainian defense-technology companies are rapidly improving the range, speed and payload of long-distance drones, bringing more of Russia within reach and allowing Ukraine to hit back at its invaders.”
AI Bubble/Arms Race Watch:
September 3 – Reuters (Helen Coster and Dawn Kopecki): “Less than a year ago, Texas Governor Greg Abbott hailed Texas as the ‘epicenter of AI development.’ Now, in his bid for re-election, he is calling for sweeping new restrictions on data centers. And he’s hardly alone. Across the country, as Democrats ride a wave of local opposition to data centers ahead of the November elections, Republicans are increasingly breaking from U.S. President Donald Trump’s pro-AI agenda.”
September 3 – New York Times (Kalley Huang, Lauren Hirsch and Kate Conger): “Nvidia said… it is buying Hugging Face, a library of open artificial intelligence models, for $12.9 billion, as the chipmaker extends a spending spree in the escalating global race to dominate the technology. The deal marries Nvidia’s chip and data center infrastructure with Hugging Face’s millions of open-source A.I. models that can be freely downloaded and modified. And it puts Nvidia’s deep pockets firmly on one side of a debate over how A.I. systems should be built.”
September 2 – Associated Press (Alex Veiga): “Here’s another place the AI frenzy is making itself felt: the market for luxury homes. High-income earners, many of them employees at AI companies, are snapping up multimillion-dollar houses in the San Francisco Bay Area… Bay Area buying spree is the clearest manifestation of a nationwide trend of sales of upper-end properties largely holding up better than sales of less expensive homes. Metro areas such as San Diego, Miami, Detroit, Nashville and Tampa, Florida, are also seeing upper-market homes sell at a faster pace… In the San Francisco metro area, sales of luxury homes soared 39.3% in the first half of this year compared to a year earlier, while middle-market home sales surged 15.1%. And across the bay in Oakland, sales of upper-market homes jumped 13.3%, while sales of middle-market properties rose 3.9%.”
Bubble Watch:
August 30 – Financial Times (Ramsay Hodgson and Emily Herbert): “Big tech giants booked a more than $160bn windfall last quarter from investments in other AI companies, flattering their earnings and raising concerns that paper gains are overstating the strength of the AI boom. Alphabet, Amazon, Nvidia and Microsoft all reported substantial boosts to their pre-tax profits in their most recent results from the ‘other income’ line in their accounts, which largely comes from valuation gains on equity stakes in other leading AI companies. These one-off valuation boosts, derived in large part from enthusiasm around AI, risk distorting the financial picture at a time when investors are closely scrutinising tech earnings to gauge the health of the AI ecosystem.”
September 2 – Bloomberg (Sarah Foster and Michelle Amponsah): “Retirement feels more elusive than ever for many Americans, but 401(k) millionaires are proliferating after years of steady investing and a strong run in the stock market. The number of millionaire 401(k) accounts at Fidelity Investments rose 19% to a record 769,000 between the first and second quarter… It was the largest quarterly increase since the fourth quarter of 2023…”
Inflation Watch:
September 2 – Bloomberg (Jake Lloyd-Smith): “US diesel advanced to the highest price since hitting a peak in April during the initial phase of the US-Iran war, highlighting the inflationary pressures menacing the global economy as the conflict drags on. The nationwide average retail price reached $5.688 a gallon… That’s just a fraction below the April high, which was the costliest since mid-2022. Diesel is the lifeblood of the global economy, powering trucks, agriculture and construction, and spikes at the retail level affect industries as well as consumers. The fuel has been boosted this year by the conflict in the Middle East, as well as the Russia-Ukraine war. Moscow — typically a major supplier — has curbed exports following waves of attacks on its refineries.”
August 30 – Associated Press (Eleanor Thornber and Ben Westcott): “Crop prices capped their biggest monthly jump in more than a decade as wars and extreme weather disrupt supplies, raising concerns about food inflation. The Bloomberg Agriculture Spot Index, which tracks 10 major products, rose more than 13% in August, the steepest gain since July 2012. Wheat has been one of the biggest drivers, with prices recently reaching a three-year high as Black Sea port attacks slash shipments from a major growing region. Sugar and cocoa were up more than 20% as a strengthening El Niño fuels weather worries. While it can take time for pricier crops to feed through to supermarket shelves, the gains come on top of rising energy and transport bills driven by the war in Iran.”
September 2 – New York Times (Reed Abelson): “Large and small employers are bracing for what looks to be the sharpest increase in health care costs in more than two decades. The cost per worker is projected to go up an average of 11% next year, or somewhat lower if workers’ insurance benefits are reduced, according to a U.S. survey… The employers’ final costs, after they make changes to health plans, are still expected to increase about 8% next year, the steepest since 2003, according to Marsh, the benefits consultant... More than a third of the 1,800 employers surveyed said they anticipated that costs would rise at least 10% after making cuts.”
September 3 – Bloomberg (Tomoko Yamazaki): “Food inflation can be added to rising oil prices as key drivers of higher global sovereign yields. The Bloomberg Agriculture Spot Index, which tracks 10 major products, in August had its biggest monthly gain for more than a decade, as conflicts in the Middle East as well as the Ukraine war, coupled with El Nino impact, drive prices higher.”
Federal Reserve Watch:
September 3 – CNBC (Kevin Breuninger): “The Federal Reserve should cut interest rates to make homes more affordable, Vice President JD Vance said…, adding to the pressure President Donald Trump has placed on the central bank… ‘Obviously the president cares a lot about interest rates… One of the main reasons he cares a lot about interest rates is because he wants Americans to be able to afford a home… When interest rates go higher, that means that borrowing costs are higher… ‘We believe that the Fed should be lowering interest rates,’ he said, calling it the ‘proper and responsible’ response to recent U.S. inflation data… ‘We’re doing a lot of things to try to keep those interest rates down, but it would be nice to have some help from the Federal Reserve.’”
August 31 – Reuters (David Lawder): “U.S. Federal Reserve Chairman Kevin Warsh… told G20 finance leaders that the world is seeing a global investment surge that is helping to power growth, reversing past savings gluts that kept capital in low-yielding instruments amid a shortage of investment opportunities… The Fed chief said that during past G20 meetings, even before the 2008 global financial crisis, and in years since, participants would have been discussing ‘a global savings glut,’ but the situation has reversed. ‘If I were to try to characterize this moment, it would be one of a global investment surge,’ Warsh said… The notion of secular stagnation, the idea that growth will be much slower because of a lack of innovation, no longer applies in the current economy, he said.”
September 3 – Axios (Neil Irwin): “After Federal Reserve chairman Kevin Warsh’s speech in Jackson Hole, the markets penciled in an interest rate hike for the central bank’s mid-September meeting. Comments from two influential officials now throw those expectations into question… A meaningful contingent of Fed leadership is eager to raise interest rates to address stubbornly high inflation, while another, as Fed governor Christopher Waller put it…, channeling John Lennon, is willing to ‘give disinflation a chance.’ It’s a close enough call that Warsh will likely be able to steer a decision whichever way he prefers… Waller noted two consecutive months of improving inflation data. If it continues in August reports over the coming days, he said, ‘I would be inclined to support’ holding rates steady… New York Fed president John Williams told CNBC that ‘I think we have to wait and see’ whether an interest rate increase is needed.”
September 1 – Reuters (Michael S. Derby): “Federal Reserve Governor Michael Barr said… that if inflation does not cool quickly, it will be time for the U.S. central bank to increase interest rates. ‘Inflation remains too high — and has been for over five years,’ Barr said… Flagging the Fed’s September 15-16 monetary policy meeting… Barr said, ‘If inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates.’”
U.S. Economic Bubble Watch:
September 3 – Bloomberg (Mark Niquette): “The US trade deficit widened sharply in July to the largest since early 2025, reflecting a surge in imports of computers and other technology equipment. The gap in goods and services trade grew 24.4% from the prior month to $88.6 billion… The value of imports increased 2.8% and exports fell 2.1%. The report showed an 11.4% surge in imports of capital goods — a category that includes computers and accessories, semiconductors and telecommunications equipment but excludes autos — the largest advance since 1993… Imports of computer accessories increased $6.6 billion, the most on record, while inbound shipments of computers, semiconductors and telecommunications equipment all rose. Meanwhile, the value of outbound US shipments of industrial supplies such as oil and petroleum products declined.”
September 4 – Associated Press (Paul Wiseman): “The U.S. job market rebounded in August as employers added a surprising 162,000 jobs. The unemployment rate stayed at a low 4.1%... Hiring far exceeded the 65,000 forecasters had expected… Employers created 21,000 jobs in July; the Labor Department had originally reported that they’d cut 23,000. Restaurants and bars added 59,000 jobs last month, construction companies 22,000 and manufacturers 16,000. Factory jobs are up by 58,000 since hitting a recent low in December… Average hourly wages rose 3.1% last month from a year earlier, the weakest year-over-year increase since May 2021.”
September 3 – Associated Press (Paul Wiseman): “More Americans filed for unemployment benefits last week, but layoffs are still rare and jobless claims remain at historically low levels… Filings for benefits ticked up to 206,000 last week from a revised 204,000 the week before… The number of people collecting unemployment benefits rose slightly to 1.78 million the week that ended Aug. 22, up by 8,000 from the week before.”
September 3 – Reuters (Lucia Mutikani): “The number of Americans filing claims for unemployment benefits rose marginally last week amid low layoffs, pointing to stable labor market conditions that give the Federal Reserve room to focus on inflation stemming from the Middle East conflict. The inflation headache was underscored by an Institute for Supply Management survey… showing a measure of prices paid by services businesses for inputs jumped to a three-year high in August, which economists said suggested that recent inflation was not confined to the goods sector.”
September 1 – Associated Press (Paul Wiseman): “Employers posted slightly more job openings in July but the American labor market remained sturdy in the face of higher costs that are squeezing household budgets. U.S. job openings ticked up to 7.27 million in July from a revised 7.18 million in June… The… Job Openings and Labor Turnover Survey (JOLTS) also showed that layoffs fell. But so did the number of people quitting their jobs — a sign of confidence in their prospects. The report showed that gross hiring — before subtracting those who lost or quit their jobs — dipped to 5.1 million in July from 5.3 million in June.”
September 3 – Bloomberg (Julia Fanzeres): “Planned US job cuts fell in the first eight months of 2026 to the lowest level in four years… Companies announced 529,914 job cuts so far this year, the lowest year-to-date total since 2022 when post-pandemic labor demand was still intense, according to… Challenger, Gray & Christmas Inc. Meanwhile, hiring plans in the eight months through August were at the highest since 2023. ‘What we’d like to see with low layoffs is an increase in hiring activity,’ said Andy Challenger... ‘While companies are making plans to hire more workers than last year, according to our numbers, it doesn’t appear those positions are being filled quickly.’”
September 2 – CNBC (Jeff Cox): “Private U.S. companies added jobs at a slightly slower-than-expected pace in August, with gains concentrated heavily in healthcare and a few other industries, ADP reported… The payrolls processing firm said firms added 38,000 workers, fewer than the upwardly revised 46,000 in July… Though job creation held positive, August was the smallest gain since January and reflective of a broader slowdown in the labor market. Moreover, most of the jobs came from three sectors, with multiple others showing declines. Education and health services added 45,000 to lead all categories…”
September 1 – Reuters (Lucia Mutikani): “The Institute for Supply Management said its manufacturing PMI fell to a still-elevated 54.6 last month from 55.6 in July, which was the highest reading since May 2022… The ISM survey’s new orders measure slipped to 53.7 last month from 56.7 in July. The pullback in orders did not ease the pressure on supply chains. The survey's supplier deliveries index increased to 59.3 from 58.9 in July… The survey’s gauge of prices paid for inputs was unchanged at 71.1…”
September 2 – Bloomberg (Catarina Saraiva): “US economic activity increased modestly in the past two months with demand from data centers, in particular, driving growth, the Federal Reserve said. The outlook for the economy was ‘positive,’ according to the US central bank’s Beige Book survey of regional business contacts…, though sentiment was mixed across sectors amid uncertainty about energy prices and geopolitics. While spending on high-end purchases was solid, the report also noted increased price sensitivity. Manufacturing activity grew across most of the Fed’s districts on the back of demand for defense and data-center orders. Employment rose slightly across the country.”
September 2 – Reuters (Lucia Mutikani): “New orders for U.S. factory goods increased more than expected in July amid a rebound in demand for aircraft. Factory orders rose 0.9% after a revised 0.2% drop in June… Economists… had forecast orders would rebound 0.6%... Orders advanced 6.5% on a year-over-year basis in July. Manufacturing, which accounts for 9.4% of the economy, is getting a tailwind from the artificial intelligence buildout…”
September 3 – Bloomberg (Julia Fanzeres): “A recent plunge in US labor force participation has sparked competing theories about whether persistent drivers — like aging and immigration — or more temporary seasonal shifts are to blame… The decline in the share of Americans who are working or looking for work over the last six months has been among the fastest recorded in nearly eight decades of data. That’s helped pull the unemployment rate down as well: At 4.1% in July, it was the lowest in more than a year.”
China Watch:
September 2 – Reuters (Ellen Zhang and Ryan Woo): “China’s services activity expanded at a faster pace in August, a private-sector survey showed…, with stronger domestic demand helping firms add staff for a fourth consecutive month. The RatingDog China General Services PMI rose to 51.4 in August from 50.4 in July… However, it was still the second-lowest reading in 14 months.”
August 31 – Bloomberg: “China’s factory activity expanded more than forecast in August after three straight months of slowdown, according to a private survey, showing resilience among the country’s export-oriented firms despite a broader slowdown in the economy. The RatingDog China manufacturing purchasing managers index rose to 51.5 from 50.9 in July…, exceeding the forecasts of most economists…”
September 2 – Reuters: “Generous credit ratings are baking risks into China’s booming bond market as Beijing attracts foreign issuers, S&P Global Ratings’ Asia-Pacific ratings chief said... ‘Too many issuers are concentrated in the upper layer of the rating scale,’ Christopher Lee, regional practice lead for Asia-Pacific at S&P Global Ratings, told a capital market forum in Shanghai. If a foreign issuer is rated 'B' globally, but ‘AAA’ when it sells so-called panda bonds in China’s onshore market, it means ‘risk is being introduced into the domestic market,’ he said.”
Central Banker Watch:
September 1 – Financial Times (Olaf Storbeck): “The European Central Bank must prepare for an extended ‘conflict of attrition’ in the Middle East that could keep inflation elevated in the Eurozone, one of its top policymakers warned… The remarks by Finnish central bank governor Olli Rehn will reinforce market expectations that the ECB will announce another quarter-point increase in its benchmark deposit rate to 2.5% when it next sets rates on September 10. ‘We must show no complacency in the face of these inflationary pressures,’ Rehn told the FT…, referring to energy prices that have been pushed up by the conflict and the near closure of the Strait of Hormuz shipping channel. ‘We cannot afford any affordability crisis in Europe,’ he said.”
September 1 – Wall Street Journal (James Glynn): “The Reserve Bank of New Zealand raised interest rates…, warning that risks for higher inflation remain in play for the economy. The central bank raised the official cash rate by 25 basis points to 2.75%, in line with market expectations. ‘Recent elevated inflation is expected to continue to impact price setting, keeping inflation more persistent than otherwise,’ the RBNZ’s policy-setting committee said…”
Europe/UK Watch:
September 1 – Reuters (Balazs Koranyi): “Euro zone inflation rose back above 3% in August on higher energy costs, cementing an already solid case for another European Central Bank interest rate hike this month as the Iran war keeps putting upward pressure on prices. Inflation in the 21 nations sharing the euro accelerated to 3.3% in August from 2.9% in July, driven almost entirely by higher energy costs as crude oil and natural gas prices both rose, and refiners bumped up their margins…”
September 1 – Reuters (Miranda Murray): “Germany’s manufacturing sector accelerated in August, as a jump in new orders drove the strongest production growth since January 2022, a business survey showed… The S&P Global final Purchasing Managers’ Index for German manufacturing rose to 54.3 in August from 52.2 in July, slightly above a preliminary reading of 54.1.”
August 31 – Politico (Milena Walde and Paul Ronzheimer): “German defense entrepreneur Stefan Thumann argued sabotage operations carried out by Moscow against his country are an ‘act of war … controlled and coordinated here by the Russian armed forces.’ Speaking exclusively with Paul Ronzheimer of the Axel Springer Global Reporters Network in a podcast episode released Tuesday, Thumann rejected the ‘hybrid war’ label used by EU leaders to describe the Kremlin’s campaign in Europe. ‘Germany and Russia are at war,’ he insisted.”
Japan Watch:
September 3 – Reuters (Makiko Yamazaki and Takaya Yamaguchi): “Japan’s budget requests for the next fiscal year have ballooned to a size similar to during the pandemic era, as Prime Minister Sanae Takaichi's expansionary fiscal agenda pushes government borrowing costs to three-decade highs. Budget requests from government agencies totalled 143.1 trillion yen ($917.78bn)…, after the government adopted a budgeting framework that integrates initial and supplementary budget spending.”
September 2 – Bloomberg (Yoshiaki Nohara and Toru Fujioka): “Bank of Japan Governor Kazuo Ueda faces unusually acute risks of financial-market turbulence as he approaches this month’s policy decision in the wake of a public pressure campaign by US Treasury Secretary Scott Bessent. Any failure to follow Bessent’s barely camouflaged calls to raise interest rates would now not only surprise traders who fully expect a move, but also send the yen tumbling. That in turn would boost the outlook for inflation, which is already seen heading toward 3% later this year.”
September 2 – Bloomberg (Toru Fujioka): “Bank of Japan Governor Kazuo Ueda hinted that a rate hike is likely when the board convenes for a meeting later this month, saying that officials will decide on policy with upside price risks in mind. The central bank will have a thorough debate on policy when it gathers on Sept. 17-18, as it does at every meeting, Ueda told reporters… ‘From the perspective of conducting policy with a risk-management approach as the underlying inflation rate approaches 2%, we have come to believe that we need to pay greater attention than before to upside risks in our policy conduct,’ Ueda said.”
September 2 – Reuters (Kaori Kaneko): “Japan’s services sector expanded at its fastest pace in five months in August, as stronger domestic demand lifted business activity and new work, a private survey showed… The S&P Global final Japan Services Purchasing Managers' Index (PMI) rose to 52.5 in August from 51.2 in July, a survey by S&P Global showed.”
August 31 – Reuters (Satoshi Sugiyama): “Japan’s manufacturing sector picked up in August as new business grew at the fastest pace since January 2018 on solid demand for semiconductors and AI-related products, a business survey showed… The S&P Global Japan Manufacturing Purchasing Managers' Index (PMI) rose to 54.9 in August from 54.5 in July, its highest since April.”
Social, Political, Environmental, Cybersecurity Instability Watch:
September 2 – Reuters (Emma Farge): “The El Niño weather phenomenon is set to intensify further into 2027 and could be the strongest ever, raising risks of extreme weather into next year, the World Meteorological Organization said… The U.N. weather agency said its forecasts showed a near 100% likelihood that El Niño would persist through February 2027, fuelled by exceptionally warm Pacific Ocean temperatures. This is the first time it has expressed such a degree of certainty... ‘If this trajectory continues, it may be stronger than anything since our monitoring began. So literally off the charts,’ WMO Secretary-General Celeste Saulo told a Geneva press conference.”
August 31 – Financial Times (Lee Harris in London and Eva Xiao): “Natural catastrophes are expected to cost the world $450bn in a typical year…, with less than half of those losses covered by insurance. As much as 62% of global losses from natural disasters are uninsured, according to new research from risk-modelling firm Verisk, leaving homes, businesses and governments facing about $279bn in uninsured losses in an average year, and far more in the most disastrous years. The growing price tag reflects the mounting toll of climate change and urban expansion, which has put more property at risk, as well as the rising price of residential construction, which in the US has outpaced inflation. The insurance industry also faces rising losses from catastrophe risk, although it is covering a shrinking share of total estimated damages.”
September 3 – Bloomberg (Brian K Sullivan): “Weather-driven energy demand in the US broke an August record as relentless heat kept air conditioners humming, and September is on track to set a record of its own. August’s population-weighted cooling degree days reached 376, the highest in records going back 76 years, according to Commodity Weather Group President Matt Rogers. June through August was the seventh-warmest such period. ‘Now September is on track for the hottest on record replacing 2019,’ Rogers said. ‘We are expecting a very warm to record warm autumn.’”
September 1 – Bloomberg (Eric Roston): “Since countries signed onto the 2015 Paris Agreement, the United Nations has regularly reported on the world’s progress at limiting global warming to 1.5C above pre-industrial levels. A landmark UN report… brings an end to that era — and the beginning of a new one. The world will likely surpass 1.5C in the next few years, it says, and warming will peak at around 1.8C in the best-case scenario. Without changes to current policies, warming could reach roughly 2.6C… Since exceeding the 1.5C threshold is virtually guaranteed, the goal must now become ‘overshoot, peak and decline’ — that is, putting climate change in reverse, ideally by the end of this century.”
