This is an acutely precarious market backdrop. As we’ve witnessed repeatedly, fledgling “risk off” market pullbacks foreshadow abrupt market reversals, short squeezes, the unwind of bearish hedges, “buy the dip,” FOMO, liquidity overabundance, and intensifying market melt-ups. Market dynamics have dramatically favored risk-taking and speculative leveraging. For a while, disregarding risk has been systematically rewarded.
All that said, we’ve quickly returned to an environment where risk should be taken seriously. Some of the same dynamics that fueled a historic market speculative blowoff could now trigger downside market instability, illiquidity, panic, and dislocation. In recent years, I’ve increasingly drawn parallels between the current Bubble backdrop and the “Roaring Twenties.” It’s worth noting that the 1929 crash lacked a clear catalyst. The fateful final bout of blowoff excess reversed abruptly, completely blindsiding everyone.
Before delving into the markets and my thinking of why this could be a critical market juncture, I have to respect exceptionally loose financial conditions. While the VIX Index popped a notable six points Friday (and for the week) to the highest close in two months (21.51), and high yield CDS rose seven (12 on the week) to 312 bps, there is little in my universe of financial conditions indicators that suggests imminent trouble.
High yield CDS closed Friday at an only two-week high. The MOVE (bond volatility) Index gained five to a two-week high 75. While up eight bps from Tuesday’s three-month low, junk bond spreads (to Treasuries) also closed at only two-week wide levels. Investment-grade CDS rose a couple off Tuesday’s multi-month lows to a two-week high of 52.5 bps, for an indicator that spiked to 68 in late-March. Dollar swap spreads were little changed, as were bank CDS prices, which ended the week barely off four-month lows. European bank CDS ended only a few bps above 2026 lows.
The Semiconductor Index traded to all-time highs Wednesday, and closed Thursday trading up 6.1% week-to-date and 92.3% y-t-d. Similar for the Nasdaq100, a record intraday high on Wednesday and a positive w-t-d at Thursday’s close.
Markets have been so awash in liquidity, powered by a manic “risk on” and surely enormous speculative leveraging. The amount of derivative-related leverage associated with the historic “big tech” melt-up must be enormous. It’s worth noting that Money Market Fund Assets (MMFA) surged another $109 billion last week to a record $7.894 TN. This boosted y-o-y MMFA growth to a blistering $878 billion, or 12.5%. We can assume that securities finance – the “repo” market in particular – has been booming of late.
This period is certainly reminiscent of Q1 2000. The Nasdaq100 surged 35% in seven weeks for a record close on March 27th, 2000 – a rally fueled by a final short squeeze and derivative-related melt-up into Q1 options expiration. We’re now two weeks away from a huge quarterly options expiration. At Monday’s close, the Goldman Sachs short index had rallied 43% from March 31st lows. From May 19th lows to Monday’s highs (10 sessions), the Goldman short index surged 20%. When analyzing the potential for a major top, many boxes can be checked, including a massive short squeeze, derivatives-related melt-up, and manic trading.
At this point, complacency is deeply embedded in the pricing of most financial conditions indicators. With SpaceX, Anthropic and OpenAI poised to be the IPO Trifecta for the Ages, only the crazies would think it possible that the market might buckle before Wall Street books its huge payday. In short, in the current manic backdrop, I’m not leaning on the financial indicators as an early warning mechanism. But if big tech doesn’t muster a quick rally, I would expect the indicators to begin a major adjustment.
Friday was bloody. The Semiconductor (SOX) Index was hammered 10.3%. Micron was slammed 13.3%, ARM Holdings 12.8%, Intel 11.3%, Qualcomm 11.0%, AMD 10.9%, Applied Materials 9.7%, and Nvidia 6.2%. The Nasdaq100 dropped 4.8%, with the S&P500 down 2.6%. Selling was broad-based. The small cap Russell 2000 slumped 3.5%. In line with the financial conditions indicators, financial stocks generally outperformed (NYSE Financial Index down 0.2%).
The RPAR Risk Parity ETF dropped 2.1% Friday. That was the fund’s largest one-day decline since March 20th, a session where stocks and Treasuries were under war-related selling pressure. Not many places to hide this Friday, another one of those sessions that reinforced that Treasuries can no longer be counted on as a reliable hedge against stocks and risk assets. Ten-year Treasury yields jumped six bps Friday to 4.53%, following much stronger-than-expected May Non-Farm Payrolls.
Overheating risk was readily apparent in the week’s data.
May’s 172k gain in Non-farm Payrolls was double estimates (88k). Moreover, April’s gain was revised up to 179k from 115k. According to Bloomberg, “the figures marked the strongest three-month advance in more than two years.” Leisure and hospitality added 70k, and government jobs gained 52k.
ADP highlighted May employment gains of 122k, the strongest reading since January 2025. “Hiring was more broad-based in May than we’ve seen in the last few years. The labor market continues to show sustained momentum going into the summer hiring season.” ADP chief economist Nela Richardson.
April job openings (JOLTS) were reported at a near two-year high 7.618 million, up more than 700k from March and a similar amount above estimates.
The highly relevant ISM Services Index added about a point to a solid (three-month high) 54.5. Prices Paid was up slightly to an elevated 71.3 – the high since August 2022. New Orders surged almost four points to 57.3. Business Activity gained about two to a strong 57.7. Employment was down slightly to 47.9.
The May ISM Manufacturing Index rose to a stronger-than-expected 54 – a three-year high and up from December’s 47.9 reading. Prices Paid remains at a highly elevated 82. New Orders increased more than two points to 56.8, just below January’s three-year high (57.1). Employment gained more than two points to 48.6
April Construction Spending, Factory Orders and Vehicle Sales were reported ahead of estimates. “US Consumer Borrowing Posts Biggest Back-to-Back Gain Since 2022.” April’s stronger-than-expected $20.7 billion jump in Consumer Credit followed March’s more than two-year high $22.2 billion. Over the past two months, consumer borrowing has been about equally split between revolving and non-revolving.
After Friday’s strong jobs number, the rates market priced a full 25 bps Fed hike this year. The 3.88% rate forecast for the Fed’s December 9th meeting is up a full 85 bps since the start of the war. Out a year to June 2027, the market is pricing a 4.05% policy rate – 115 bps higher than anticipated before the war.
Oddly, the five-year Treasury inflation “breakeven rate” declined six bps this week to a three-month low of 2.48%. Still, markets are increasingly accepting that inflation is a serious issue that will force the Fed’s hand. There is also understandable concern for the ongoing massive supply of debt securities, including Treasuries and AI-related bonds. This flood of supply turns problematic in a deleveraging scenario.
Various markets are adjusting to an environment of persistently higher global policy rates and bond yields.
Bitcoin below $60,000. Down a brutal $13,900, or 18.9%, this week, bitcoin has now lost half its value since October highs (down 32% y-t-d). Ethereum sank 25% this week, XRP 20%, and Solana 26%. Losses are mounting, deleveraging is in full swing, and a crisis of confidence in the asset class is unfolding.
Elsewhere, the iShares Emerging Markets ETF (EEM) sank 6.52% Friday, the largest daily loss since March 18, 2020 (near peak pandemic panic). It was the equities and currencies double-whammy. South Korea’s KOSPI index sank 5.5% Friday, and Indonesia’s Jakarta Composite dropped 4.2%. For the week, major equities indices were down 8.7% in Indonesia, 7.3% in Peru, 4.8% in Chile, 3.7% in South Korea, 3.6% in Mexico, and 2.7% in Brazil.
Friday currency losses included Brazil’s real 2.0%, Chile’s peso 1.9%, Peru’s peso 1.8%, and South Korea’s won 1.8%. For the week, the Russian ruble dropped 3.6%, the South Korean won 3.6%, the Chilean peso 2.6%, the Brazilian real 2.6%, the Argentine peso 2.2%, the South African rand 2.0%, the Malaysian ringgit 1.6%, the Peruvian sol 1.6%, and the Hungarian forint 1.6%.
South Korean won losses pushed it to the low vs. the dollar back to March 2009. Despite the moonshot of the KOSPI index, the won has depreciated 7.68% versus the dollar so far in 2026. The Indonesian rupiah has declined 7.38% y-t-d, the Indian rupee 5.34%, the Philippine peso 4.32%, and the Thai baht 3.43%.
Brazilian local currency bond yields surged 29 bps Friday to a one-year high of 14.84%, with yields up 24 bps in Peru (6.23%), 18 bps in South Africa (8.86%), and nine bps in Mexico (9.17%).
Metals markets were also under intense liquidation. Gold was down 3.3% in Friday trading, with Silver hit 8.2% and Platinum down 6.2%. For the week, Gold lost 4.7%, Silver 9.9%, and Platinum 7.4%, with the NYSE Gold Bugs equities Index (HUI) losing 11.7%.
It was an abrupt reality check for an exuberant retail investor community. But a day like Friday has my attention again focused on the global leveraged speculating community. It doesn’t take long for significant losses across asset classes (i.e., crypto, semis and tech, EM, metals, and Treasuries/sovereign debt) to force deleveraging. Friday trading had the look of the start of something important.
Beyond overheating, inflation and rate hike worries, I’ll touch on a few issues that could also weigh on market sentiment. Probabilities for an Iran war stalemate scenario have risen. With President Trump clearly averse to resuming full military operations, the Iranians could be emboldened to dig in and wait this out. They demonstrated this week that they are ready and willing to respond aggressively to hostilities. They maintain the capacity to keep the Strait of Hormuz effectively closed.
Timely resolution to the Strait of Hormuz and the buried nuclear material issues appears unlikely. This could drag on for months, at the cost of elevated energy prices, myriad supply chain issues, and accelerating global inflation.
June 5 – Wall Street Journal (Brian Schwartz): “President Trump said he wants Bill Pulte, his incoming acting director of national intelligence, to begin firing a large number of employees as part of a shake-up of the U.S. intelligence community… Trump said he has privately told Pulte that he believes the Office of the Director of National Intelligence, or ODNI, which oversees 18 federal intelligence agencies and units, was ‘unnecessary and/or too big.’ ‘I’d like to see it smaller. I think there are a lot of people in there that shouldn’t be there,’ Trump said, pointing to holdovers from the Biden and Obama administrations. Asked whether he is calling on Pulte to fire people, Trump said he wants him to ‘start the process’… Trump stunned many of his own advisers when he said earlier this week that he was appointing Pulte, the director of the Federal Housing Finance Agency, as his intelligence chief. The move was met with skepticism from some Republicans on Capitol Hill, who raised concerns about Pulte’s lack of national-security experience.”
“Pressed on Pulte’s role, Trump Says the Quiet Part Loud, Emphasizes ‘Rigged Elections.’”
To have Bill Pulte as one of our nation’s top intelligence officials is reminiscent of Trump’s nomination of Matt Gaetz as his pick for Attorney General. The President appears increasingly defiant, unpredictable, and unhinged. Expectations had been for Trump to be relatively “well-behaved” through the midterms. But his demeanor is shifting. He appears trapped in his war, has suffered various legislative and judicial losses, and has seen his immense power wane on multiple fronts. He’s wounded, of questionable health, and erratic. It is not a backdrop that inspires confidence in the “Trump put.”
Markets need a relatively swift resolution to the war, or at least the opening of the Strait of Hormuz. Absent that, de-risking/deleveraging has a clear opening.
For the Week:
The S&P500 dropped 2.6% (up 7.9% y-t-d), and the Dow slipped 0.3% (up 5.8%). The Utilities declined 0.5% (up 3.9%). The Banks jumped 2.6% (up 5.9%), while the Broker/Dealers dipped 0.6% (up 3.8%). The Transports rose 2.4% (up 26.3%). The S&P 400 Midcaps declined 0.8% (up 14.2%), and the small cap Russell 2000 dropped 2.9% (up 14.2%). The Nasdaq100 slumped 4.5% (up 14.7%). The Semiconductors sank 4.7% (up 72.5%). The Biotechs were about unchanged (up 8.4%). With bullion down $212, the HUI gold index sank 11.7% (down 3.9%).
Three-month Treasury bill rates ended the week at 3.6228%. Two-year government yields jumped 14 bps to 4.15% (up 67bps y-t-d). Five-year T-note yields rose 13 bps to 4.27% (up 54bps). Ten-year Treasury yields gained nine bps to 4.53% (up 36bps). Long bond yields added two bps to 5.00% (up 15bps). Benchmark Fannie Mae MBS yields jumped 14 bps to 5.52% (up 48bps).
Italian 10-year yields surged 15 bps to 3.80% (up 25bps y-t-d). Greek 10-year yields rose 15 bps to 3.74% (up 30bps). Spain's 10-year yields gained 12 bps to 3.48% (up 19bps). German bund yields rose 10 bps to 3.04% (up 18bps). French yields jumped 14 bps to 3.69% (up 13bps). The French to German 10-year bond spread widened four to 65 bps. U.K. 10-year gilt yields rose nine bps to 4.90% (up 42bps). U.K.’s FTSE equities index slipped 0.4% (up 4.3% y-t-d).
Japan’s Nikkei 225 Equities Index increased 0.4% (up 32.3% y-t-d). Japan’s 10-year “JGB” yields added a basis point to 2.67% (up 61bps y-t-d). France’s CAC40 increased 0.4% (up 0.8%). The German DAX equities index declined 1.4% (up 1.1%). Spain’s IBEX 35 equities index was little changed (up 6.0%). Italy’s FTSE MIB index slipped 0.3% (up 11.0%). EM equities were under pressure. Brazil’s Bovespa index dropped 2.7% (up 4.9%), and the Mexico’s Bolsa index sank 3.6% (up 2.8%). South Korea’s Kospi reversed 3.7% lower (up 93.6%). India’s Sensex equities index declined 0.7% (down 12.9%). China’s Shanghai Exchange Index fell 1.0% (up 1.5%). Turkey’s Borsa Istanbul National 100 index was about unchanged (up 21.6%).
Federal Reserve Credit dipped $2.5 billion last week to $6.665 TN, with a 25-week expansion of $174 billion. Fed Credit was down $2.225 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.938 TN, or 79%. Fed Credit inflated $3.854 TN, or 137%, since November 7, 2012 (708 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped another $20.9 billion last week to $2.951 TN - the low back to October 2010. “Custody holdings” were down $299 billion y-o-y, or 9.2%.
Total money market fund assets (MMFA) surged $109 billion last week to a record $7.894 TN. MMFA were up $878 billion, or 12.5%, y-o-y - having ballooned a historic $3.310 TN, or 72%, since October 26, 2022.
Total Commercial Paper recovered $10.7 billion to $1.402 TN. CP declined $68 billion, or 4.6%, y-o-y.
Freddie Mac 30-year fixed mortgage rates declined five bps to 6.48% (down 37bps y-o-y). Fifteen-year rates fell eight bps to 5.79% (down 20bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate down four bps to 6.71% (down 25bps).
Currency Watch:
For the week, the U.S. Dollar Index rallied 1.1% to 100.071 (up 1.8% y-t-d). On the downside, the South Korean won declined 3.6%, the New Zealand dollar 3.2%, the Brazilian real 2.6%, the Swedish krona 2.2%, the Norwegian krone 2.1%, the South African rand 2.0%, the Australian dollar 1.9%, the Swiss franc 1.9%, the euro 1.2%, the Singapore dollar 1.1%, the Canadian dollar 1.0%, the British pound 0.9%, the Mexican peso 0.7%, and the Japanese yen 0.6%. China's (onshore) renminbi declined 0.32% versus the dollar (up 2.94% y-t-d).
Commodities Watch:
June 2 – Financial Times (Olaf Storbeck and Leslie Hook): “Gold has overtaken US government bonds as the world’s top reserve asset following years of relentless buying by central banks and a historic rally that has seen prices nearly double over the past two years. Bullion accounted for 27% of all global central bank reserve assets at the end of 2025, up from 20% a year earlier, according to… the European Central Bank. US Treasuries fell to 22% from 25% over the same period. The share of euro-denominated reserve assets was unchanged at 15%. The shifting composition of reserve assets — highly liquid holdings that central banks use to support their currencies, meet international payment obligations and provide liquidity in times of financial turmoil — reflects an attempt by many countries to seek alternatives to the US dollar…”
The Bloomberg Commodities Index fell 1.8% (up 20.9% y-t-d). Spot Gold slumped 4.7% to $4,328 (up 0.2%). Silver sank 9.9% to $67.833 (down 5.3%). WTI Crude rallied $3.18, or 3.6%, to $90.54 (up 58%). Gasoline declined 2.6% (up 78%), and Natural Gas fell 1.9% to $3.229 (down 12%). Copper declined 1.6% (up 11%). Wheat dropped 5.0% (up 14%), and Corn slumped 6.5% (down 5%). Bitcoin sank $13,900, or 18.9%, to $59,500 (down 32.1%).
Market Instability Watch:
June 3 – Reuters (Karen Brettell): “The artificial-intelligence boom already has fueled a record stock-market surge. Now it’s driving up long-term Treasury yields too. Meta Platforms, Oracle and other technology companies have raised $250 billion in debt markets globally this year, according to Morgan Stanley, borrowing at a scale that would have been hard to imagine only a few years ago. The recent surge in AI-related infrastructure investment is partly behind the May rout that pushed 30-year Treasury yields to their highest level since 2007, analysts say… ‘We’re talking $750 billion, $850 billion of capex spending on an annualized basis, and it’s expected to ramp up to close to a trillion next year,’ said Thomas Urano of Sage Advisory... ‘It’s kind of like thinking about a federal stimulus package or some kind of infrastructure spend at a federal level.’”
June 4 – Bloomberg (Ye Xie): “At the height of the US bond-market selloff last month, Vishal Khanduja detected something unusual. As yields on the longest-dated Treasuries surged toward a 19-year high, large waves of futures sales hit the market right when mortgage-backed securities were being pummeled particularly hard. To Khanduja, a portfolio manager at Morgan Stanley Investment Management…, it was a clear sign that others, like him, were racing to protect against the risk of a deeper drop in their housing bonds by entering trades that would pay off if Treasuries slumped further — a strategy known as convexity hedging. ‘It’s a big deal,’ he said. ‘We didn’t talk about it for a long period of time.’ The nascent revival of the tactic is threatening to inject another source of volatility into the $31 trillion Treasury market…”
June 3 – Reuters (Lewis Krauskopf): “The charge higher in U.S. technology stocks has made broader indexes as reliant as ever on the group -- and more vulnerable should those market leaders trip up. With stunning gains over the past two months, the S&P 500 technology sector now accounts for more than 39% of the market capitalization of the overall benchmark index, its highest on record and above the level it reached during the 2000 Internet bubble.”
June 3 – CNBC (Deena Zaidi): “Assets in leveraged ETF nearly doubled over two months, as investors scrambled for maximum exposure to the artificial intelligence trend. ‘Investors increasingly use leveraged instruments linked to the ‘AI-trade’ – assets in leveraged ETFs linked to AI and Tech themes have surged, with exposures in the US and Korea/Taiwan rising sharply- more than doubling in recent months,’ wrote Goldman’s Christian Mueller-Glissmann... Goldman cited data from EPFR tracking 573 leveraged U.S. equity ETFs, 52 ETFs on South Korea and 11 on Taiwan. The total net assets for leveraged equity ETFs on U.S. equities doubled in just two months, climbing to $84 billion end of May this year from $39 billion in April.”
June 3 – Reuters (Suzanne McGee): “The Vanguard S&P 500 ETF, the index investing pioneer's flagship exchange-traded product, became the first in the history of ETFs to reach and exceed $1 trillion in assets…”
June 3 – Axios (Pete Gannon): “Alarm bells are going off around bitcoin, with most of the headlines focusing on the biggest bitcoin treasury company’s very big decision to sell a small amount of bitcoin. A bitcoin sale by Michael Saylor’s Strategy has drawn outsize attention, but geopolitical uncertainty and competition from stocks are posing bigger near-term risks to the cryptocurrency’s price. Some $2.8 billion left U.S.-listed spot-bitcoin ETFs in nine-straight sessions through May 28 — the longest stretch of withdrawals in the funds’ two-year history… Since hitting an all-time high of $126,080 in October, the price of bitcoin fell over 40% through last week.”
June 4 – Bloomberg (Erica Yokoyama and Toru Fujioka): “Japan likely drew on its holdings of foreign securities, including US Treasuries, to finance its record currency market intervention over the past month, a move that may draw attention from Washington. Tokyo’s holdings of foreign securities at the end of May dropped by $75.6 billion from April, according to Finance Ministry reserve data... That scale matches the size of Japan’s recent entry into the currency market to prop up the yen.”
U.S. Credit Trouble Watch:
June 4 – Bloomberg (Olivia Fishlow): “Blackstone Inc. limited redemptions from its flagship private credit fund for the first time after investors sought to pull 10% of the shares, the latest firm to cap withdrawals amid a continued investor exodus. The $79 billion Blackstone Private Credit Fund told shareholders that it would allow redemptions of only 5%... That’s in contrast to the previous quarter, when BCRED, the biggest fund of its kind, went to unusual lengths to allow investors to pull all of the 7.9% of shares requested... Across the $1.8 trillion private credit market, redemption requests are expected to increase this quarter as investors redouble efforts to claw back money after being restricted.”
June 2 – Financial Times (Eric Platt): “Cliffwater’s flagship private credit fund aimed at retail clients limited withdrawals after redemption requests hit 17% in the second quarter, underscoring the mounting exodus from the sector. Cliffwater said it had restricted withdrawals from its $31bn marquee corporate lending fund in the second quarter to 5% of its outstanding shares… The withdrawal requests, worth more than $5bn, swelled from the first quarter when investors sought to redeem 14% of the fund.”
June 5 – Reuters (Patturaja Murugaboopathy): “Private credit’s rapid expansion is losing momentum, with U.S.-focused direct lending issuance slowing in recent months and fundraising still below its recent peak… PitchBook data indicates new loan issuance by private credit lenders fell to $44.76 billion in the three months ended May 2026, down about 40% from $74.56 billion in the first quarter. Issuance to private equity-backed borrowers dropped nearly 37% over the same period to $28.5 billion, while direct lending volume tied to leveraged buyouts fell about 34% to $15.15 billion.”
June 4 – Wall Street Journal (AnnaMaria Andriotis): “The era of anything goes in private-credit underwriting is coming to an end. Private-credit firms are tightening their lending standards, increasing interest rates and other fees they charge on new loans, restraining how much debt they give borrowers and closing loopholes that allow financing to be taken out against borrowers’ assets. Executives and lawyers say standards began shifting around March and have intensified since then. Fund managers say they are seeing more risk of loan losses in the market. They are also dealing with the repercussions of increased scrutiny from their investors, which have reduced the amount of money private-credit firms have to put to work.”
May 29 – Bloomberg (Olivia Fishlow): “More private credit funds are at risk of losing the investment-grade ratings on their debt as they continue to face elevated redemption requests, according to research published by Bank of America Corp. Three of the largest private business development companies are two quarters or less away from a potential downgrade to their unsecured bonds, if they continue to face quarterly net redemptions of 5%, analysts led by Neha Kohda wrote… The median non-traded BDC has roughly one year of runway before a potential downgrade…”
June 2 – Wall Street Journal (Gina Heeb): “Private-credit firms have had investors and regulators on edge. Now, their insurers are worried, too. Insurers that provide coverage to executives and boards are bracing for a wave of lawsuits and regulatory actions in the private-credit industry. Some are starting to raise premiums, with several insurance executives estimating that there could soon be double-digit increases from a year earlier. Insurers are also tightening coverage terms for renewing or opening new policies, the executives said.”
June 4 – Bloomberg (Neil Callanan): “The first sustained default cycle in credit in many years has already started and the market will see higher losses than it’s grown used to, Pacific Investment Management Co.’s chief investment officer warned. ‘There’s a lot going on beneath the surface’ despite spreads being close to their tightest on record, Daniel Ivascyn said… Holly Kim, founding partner at Glendon Capital Management, told the Bloomberg Global Credit Forum… that trouble will emerge from the leveraged buyouts of 2021 and 2022 that were financed with cheap borrowings. The huge volumes of capital being invested in AI-related infrastructure is also creating some risks, Ivascyn wrote.”
June 3 – Bloomberg (Katanga Johnson): “US banks’ loan portfolios saw a modest rise in delinquencies last year, a Federal Reserve report showed. ‘While loan growth remained steady, loan delinquency rates increased slightly across several loan categories in 2025,’ the Fed said…, pointing to consumer, commercial and residential real estate loans, among others… Regulatory data showed limited delinquencies in the nonbank sector but several high-profile nonbanks defaults have led to concern about the private credit sector, the agency said… The Fed added that some banks are revisiting collateral management practices for related exposures to private markets.”
Global Credit Bubble Watch:
June 1 – Reuters (Yoruk Bahceli): “From Europe to Japan and Switzerland, huge bond issues by Big Tech companies are proving that smaller markets, often overshadowed by the U.S., can punch above their weight in the $40 trillion world of corporate debt. Google-parent Alphabet is already one of the biggest outstanding borrowers in the euro, sterling, Swiss franc and yen corporate bond markets. Amazon raised 14.5 billion euros ($16.88bn) in March from an eight-part deal, the largest ever in the euro corporate bond market...”
June 4 – Bloomberg (Bruce Douglas and Jonathan Ferro): “Investment-grade debt sales will outpace net issuance of US Treasuries this year, Apollo Global Management Inc.’s President Jim Zelter said, as the Magnificent Seven tech companies and others seek massive amounts of funding to fuel their expansion. The prospect of a handful of mega-IPOs on the horizon… highlights the breadth of US capital markets, Zelter added… ‘The scale of what you need to be relevant is much higher than it ever was before,’ he said. ‘These numbers are unprecedented, but it shows you the scale of the marketplace.’ US investment grade bond sales hit the $1 trillion mark earlier this week, the quickest they’ve reached that milestone since 2020, on the back of a spending surge on artificial intelligence.”
June 1 – Financial Times (Ramsay Hodgson, Euan Healy and Michelle Chan): “US convertible bond issuance is on course for a record year as AI-related companies take advantage of the investor frenzy driving their share prices to new highs to issue low-cost debt. Companies have issued $57bn of such bonds so far this year, the highest level on record for comparable periods, according to Barclays... The current pace of deals means 2026 is set to outstrip last year’s record level of $120bn ‘meaningfully’, said Venu Krishna, the bank’s head of US equity strategy. Convertible bonds typically offer lower coupons than regular debt, but give investors the option of converting their holdings into a pre-determined number of the company’s shares — in effect giving them a call option, or right to buy, the stock.”
June 1 – Bloomberg (Gowri Gurumurthy and Michelle Cheng): “A data center tied to CoreWeave Inc. is set to get funding from a $850 million junk-bond sale by Elk Grove Village Property LLC, which joins a wave of high-yield issuers tapping debt markets to fund artificial intelligence infrastructure.”
June 4 – Bloomberg (Esteban Duarte): “Banks had offloaded credit risk tied to more than €905 billion ($1 trillion) in loans as of the end of last year, up 26% from a year earlier, via the rapidly-growing market for significant risk transfers. Lenders, mostly in Europe and North America, issued €30 billion in new SRT deals linked to €378 billion in underlying loans in 2025… The asset class has expanded quickly over the past few years, helped by surging appetite from buyers including large asset managers and insurance firms. SRTs allow banks to pass the credit risks of a pool of assets to investors, who effectively insure the loans against default. That lowers the amount of regulatory capital the bank is required to hold, freeing up its balance sheet, while investors get returns that are frequently in the low double-digits.”
June 4 – Bloomberg (Nicholas Comfort and Francine Lacqua): “European insurers that want to ride the private credit boom need to grasp the risks they face, according to the region’s top watchdog for the industry. The region has ‘a multitude’ of insurers of varying size, some of which don’t yet have the necessary capabilities, Petra Hielkema, chair of the European Insurance and Occupational Pensions Authority, said… ‘If you want to enter into this business that, to a certain extent, used to be bank business, then you need to get your expertise up and running,’ she said. ‘What you tend to see is if things get fancy, people might say, ‘Oh, let’s also do a bit of this’. But then, do you know what you get into?’”
Leveraged Speculation Watch:
June 1 – Bloomberg (Jan-Patrick Barnert): “Hedge funds purchased US equities at the fastest pace in six months last week…, according to Goldman Sachs Group Inc.’s prime brokerage desk. Trading flows were driven by long buys and short covering in a combination of index and exchange-traded fund products…”
June 3 – Financial Times (Amelia Pollard): “Hedge fund DE Shaw is prolonging the amount of time it will take for investors to pull out their money as the industry moves towards greater control over redemptions. The more-than $90bn multi-strategy hedge fund told investors this week that it was extending the redemption period to retrieve money from its flagship multi-strategy Composite fund to four years and its macro-focused Oculus fund to three years, according to people familiar with the matter. DE Shaw is following in the steps of rivals including Millennium Management and Citadel… Top hedge funds have been able to make such demands in part because they have had relatively high annualised returns, giving them leverage to ask investors for more stringent terms.”
June 3 – Financial Times (Joshua Franklin, Jill R Shah and Kate Duguid): “Trading firms including Jane Street and Citadel Securities generated combined revenues of $114bn last year, signalling their growing power on Wall Street as they compete against traditional banks. Industry revenues of non-bank trading companies jumped 45% from 2024, according to… Crisil Coalition Greenwich. The boom in revenues highlights how trading companies have become Wall Street powerhouses in recent years as regulations put in place after the 2008 financial crisis pushed banks away from some types of dealing. Trading firms made the biggest gains last year from proprietary trading…”
June 4 – Bloomberg (Ryan Weeks, Katherine Doherty, David Pan, and Dina Bass): “Jane Street Group plans to build and finance its own data center as the trading giant scales its operations to keep up with the demand for computing power. The market-making firm has been talking to firms in the technology, crypto and finance industries about the prospect of building a new facility on top of its other investments in AI power…”
Iran War Watch:
June 5 – Bloomberg (Arsalan Shahla and Sherif Tarek): “The US and Iran have made little progress in talks over an interim peace deal this week, with the sides seeing their worst clashes since an April ceasefire began and fighting continuing in Lebanon. Skirmishes continued overnight between Hezbollah and Israel in southern Lebanon after the Iran-backed group rejected a US-brokered proposal aimed at securing a broader truce… US President Donald Trump on Thursday said negotiations are in the ‘final’ stages without elaborating. Iran’s Foreign Minister Abbas Araghchi earlier said there had been ‘no tangible progress’ even though the two sides continued to exchange messages via mediators.”
June 4 – Wall Street Journal (Stephen Kalin): “Kuwait had just reopened its war-damaged international airport when a drone smashed into Terminal 1 on Wednesday, an attack that demonstrated Iran’s willingness to ratchet up the escalation ladder to counter a crippling U.S. economic blockade. The strike came after the U.S. military had disabled a ship it said was heading to an Iranian port… It was the third time that Kuwait… has come under fire in about a week despite a ceasefire that ended major combat between the U.S. and Iran… The attack echoed Iran’s tactics during the war, when it struck airports and other relatively vulnerable economic infrastructure around the region to put pressure on the U.S. and Israel to end their air campaign. Hitting Kuwait signaled a willingness to escalate but without hitting more sensitive sites in the Gulf’s more powerful states that have previously struck back against Iran.”
June 2 – CNBC (Spencer Kimball): “Secretary of State Marco Rubio said… Iran has mined ‘large segments’ of the Strait of Hormuz, indicating that explosives in the strategic sea lane are more widespread than previoulsy acknowledged. ‘They’re firing on commercial ships and they’ve mined large segments of Hormuz — international waters,’ Rubio told the Senate Foreign Relations Committee… Iran must agree in any deal with the U.S. that it will not charge a toll to transit Hormuz, will not fire on commercial ships and will help remove any mines it has laid in the strait, the Secretary of State said. ‘What they’re doing is unlawful and illegal,’ Rubio told the Senate.”
June 3 – Bloomberg (Skylar Woodhouse): “President Donald Trump downplayed the threat posed by Iranian sea mines in the Strait of Hormuz to commercial shipping, even as other US officials have warned of their dangers. Speaking to reporters…, Trump said American forces had ‘swept mines and we’ve gotten most of them, we think.’ He also said the strait would open ‘immediately’ upon Iran signing a memorandum of understanding to cease armed hostilities ‘subject to a couple of areas being cleaned out, also of mines.’”
June 2 – Axios (Barak Ravid and Marc Caputo): “President Trump lashed out at Israeli Prime Minister Benjamin Netanyahu over Israel’s escalation in Lebanon in an expletive-laden call on Monday… Earlier on Monday, Iran threatened to abandon the negotiations with the U.S. over Israel’s actions in Lebanon. On the call, Trump called Netanyahu ‘crazy’ and accused him of ingratitude, according to two of the sources. He also put the brakes on Israel’s plan to strike Beirut. One U.S. official said Trump told Netanyahu that following through on his threats to bomb the Lebanese capital would further isolate Israel around the world. Two of the sources said Trump claimed he’d helped keep Netanyahu out of jail… Summarizing Trump’s remarks to Netanyahu, the U.S. official said: ‘You’re fucking crazy. You’d be in prison if it weren’t for me. I’m saving your ass. Everybody hates you now. Everybody hates Israel because of this.’”
June 1 – Associated Press (Jon Gambrell): “The United States said Monday that it bombed radar and drone sites in Iran after Tehran shot down an American drone over the weekend. Iran then said it targeted American soldiers in Kuwait with missiles, which the U.S. says it shot down.”
June 1 – CNBC (Kevin Breuninger): “Iranian negotiators will stop exchanging messages with the U.S. through intermediaries, and Tehran will move to fully close the Strait of Hormuz, in retaliation for ongoing ceasefire violations, Iran’s state-affiliated news outlet Tasnim said Monday. The report… homed in on Israel’s military operations in Lebanon against the Iran-backed militia Hezbollah. ‘No dialogue will take place’ until Israel fully withdraws from occupied areas in Lebanon and stops all attacks in both Lebanon and Gaza, per Tasnim. ‘Also, the resistance front and Iran have resolved to completely block the Strait of Hormuz and activate other fronts including the Bab al-Mandeb Strait, in order to punish the Zionists and their supporters,’ the report said.”
May 31 – Wall Street Journal (Stephen Kalin): “As President Trump worked in recent days toward a deal to end his war with Iran, he threw a curveball: Arab states as well as Pakistan and Turkey should consider it mandatory to welcome the agreement by establishing diplomatic relations with Israel under the president’s Abraham Accords. For much of the Gulf, the proposal only added insult to injury. U.S. relations with the region have been shaken by the war, which created major costs and inflamed U.S. allies’ security concerns. Analysts said Arab leaders are increasingly distrustful of both the U.S. and Israel and fear that normalization would further antagonize Iran… Arab populations, meanwhile, are even less disposed than they were a few years ago to accept deeper ties with Israel after its campaign in Gaza. Many consider it a rogue state destabilizing the region at least as much as Iran.”
June 2 – New York Times (Jenny Gross): “A ship owned by Mediterranean Shipping Company, the world’s largest container shipping firm, was struck by two projectiles in an Iraqi port, the Geneva-based company said. The cargo ship, the Sariska V, was hit as it left the Port of Umm Qasr in Iraq on Monday. All crew members were safe and unharmed… The Islamic Revolutionary Guards Corps claimed responsibility for the attack, saying it acted in response to U.S. strikes on an Iranian vessel in the Gulf of Oman…”
June 4 – Financial Times (Raya Jalabi and James Shotter): “Hizbollah’s leader has rejected the latest ceasefire agreement between Israel and Lebanon’s governments, as Israel pressed ahead with military operations against the militant group in southern and eastern Lebanon. The US-brokered agreement was announced in a joint statement on Wednesday after Israeli forces made their deepest incursion into Lebanon in decades… Hizbollah’s leader Naim Qassem said his group demanded a complete Israeli withdrawal from Lebanon and vowed that Hizbollah would not stop attacking Israel ‘as long as our villages are not safe and are being bombed and destroyed and our people are killed’. ‘We are concerned only with a comprehensive cessation of aggression through a ceasefire and Israel’s withdrawal,’ he said. ‘We did not make any commitment to any party to stop resisting as long as there is occupation.’”
Iran War Ramifications Watch:
June 3 – Wall Street Journal (Georgi Kantchev and Julia Nasser): “For decades, the Persian Gulf’s energy map converged on a single chokepoint: the Strait of Hormuz. Now, spurred by the Iran war, the region’s petrostates are rushing to draw new lines to circumvent it. Across the Gulf, governments are pouring billions into new oil pipelines, rail corridors and energy storage hubs to bypass the waterway in what is set to become one of the most durable outcomes of the conflict. The new energy links are part of a broader redrawing of the region’s logistics map, shifting trade toward trucking, rail and new ports. ‘The legacy of the crisis will result in the construction of infrastructure to bypass the Strait of Hormuz,’ said Hamad Hussain, commodities economist at… Capital Economics. ‘The genie is out of the bottle given that the longstanding threat of Iran effectively closing the strait has now materialized.’”
June 3 – Financial Times (Sam Fleming): “Failure to resolve the energy crisis in the Middle East would plunge the world into a ‘dark scenario’ of tumbling growth and sharply higher interest rates, the OECD has warned. The Paris-based organisation said a ‘prolonged disruption’ to energy flows that lasts into the second half of 2027 would cut global growth to 2.1% this year and just 1.8% next year.”
May 29 – Bloomberg (Hallie Gu and Cao Ban): “Asian rice prices posted their biggest monthly jump in nearly two decades in May, and could rally further as weather risks and war-driven surges in energy and fertilizer costs threaten production. Thailand white rice, an Asian benchmark, rallied 20% in May, the most in a month in data going back to 2008. Rice futures on the Chicago Board of Trade also jumped 15% this month.”
June 1 – Bloomberg (Heesu Lee): “South Korea’s consumer inflation accelerated to the fastest pace in more than two years, reinforcing the central bank’s tilt toward higher interest rates as the impact from the Middle East conflict ripples across the economy. Consumer prices rose 3.1% in May from a year earlier, the biggest gain since March 2024…”
Trump Administration Watch:
June 4 – Bloomberg (Erik Wasson and Roxana Tiron): “The Republican-led House voted to halt the US war with Iran, breaking with President Donald Trump on an unpopular foreign conflict that is taking an escalating economic toll on Americans. The 215-208 vote Wednesday showed worries over the war spreading in the president’s own party five months before congressional elections. Last month, a Senate resolution to end the war also advanced past a procedural hurdle for the first time, though that legislation hasn’t yet come to a formal vote.”
June 4 – Associated Press (Aamer Madhani and Matthew Lee): “President Donald Trump is facing warnings from foes and allies alike that he’s getting boxed in on the Iran war, a conflict he sold as a brief military incursion but that has since settled into a holding pattern. It’s been nearly a week since U.S. and Iranian negotiators reached a tentative agreement to extend the ceasefire in the conflict by 60 days and start a new round of talks on Iran’s nuclear program that required Trump’s signoff. But Trump has called for unspecified changes to the agreement and Iranian officials — perhaps calculating that the Republican president is reluctant to restart the bombardment after burning through key weapons systems — are showing no signs they’ll give in to new demands.”
June 2 – New York Times (Michael Crowley): “In mid-February, shortly before President Trump launched the war on Iran, the country’s Islamic Revolutionary Guards Corps conducted live-fire drills in its coastal waters. Iranian state media publicized the exercise, whose official name made its purpose clear: ‘Smart Control of the Strait of Hormuz.’ The exercise amounted to a flashing red warning light to the Trump administration — one that, for reasons that are still not fully clear, went largely unheeded. Within days of the war’s start, Iran’s military exerted control over the strait, menacing commercial tankers with boats, missiles and drones. Shipping ground to a halt. Energy prices soared. And Mr. Trump was backed into a strategic corner. Three months later, Iran’s control of the strait has become its most powerful weapon, a source of huge leverage in negotiations with Mr. Trump over the country’s nuclear program.”
June 3 – Wall Street Journal (Alexander Ward, Laurence Norman and Robbie Gramer): “President Trump has told aides privately that he would consider ending the ceasefire with Iran if Tehran kills American troops…, insisting that the weekslong pause in airstrikes remains intact despite a steady stream of violent skirmishes. The president’s reluctance to reignite the war suggests he might be willing to withstand smaller flare-ups for weeks—or even months—to avoid a broader conflict in the Middle East. The U.S. and Iran this week engaged in some of the most intense fighting yet since a ceasefire went into effect in early April, with Iran firing missiles and drones on regional U.S. bases and Kuwait’s international airport. The attacks left one person dead.”
June 1 – Reuters (Nandita Bose, Steve Holland, Dan Rosenzweig-Ziff and Richard Cowan): “President Donald Trump’s nearly $1.8 billion fund to compensate victims of alleged government ‘weaponization’ has been put on hold after the White House faced fierce opposition from Republicans in Congress… The rare rebuke of Trump demonstrated some Republicans’ increased willingness to flex their political power against the president, particularly after his endorsement of Texas Attorney General Ken Paxton over incumbent Senator John Cornyn ahead of a crucial midterm election.”
June 4 – Axios (Mike Zapler): “Just when President Trump removed one thumb from the eye of Senate Republicans — scrapping his $1.8 billion ‘anti-weaponization fund’ — he put another right back in with his choice of Bill Pulte as director of national intelligence. This time, the stakes are even higher: Democrats are threatening to let the government’s spy powers lapse next week unless Trump yanks the appointment. Democratic outrage over Trump’s latest moves usually doesn’t amount to much. But Republicans need at least eight Democratic votes in the Senate to prevent the Foreign Intelligence Surveillance Act Section 702 from lapsing on June 12… The warning lights started flashing… when Sen. Mark Warner (D-Va.) teed off on the appointment. ‘I thought I had gotten to the stage where I could no longer be shocked by Donald Trump’s choices,’ he told MS NOW, ‘but this may be the most outrageous of all.’ As vice chair of the Senate Intelligence Committee, Warner is a key player in the Section 702 renewal debate.”
June 3 – Financial Times (James Politi and Myles McCormick): “Donald Trump is facing a widening revolt in Congress to his appointment of Bill Pulte as acting director of national intelligence, jeopardising the passage of legislation to extend the US government’s surveillance powers. The president’s decision this week to tap Pulte, a housing finance regulator with no known experience in intelligence, stoked bipartisan backlash on Capitol Hill as lawmakers worried that loyalty to Trump was being placed ahead of competence in overseeing the nation’s spy agencies. Thom Tillis… lambasted Pulte… for having ‘no experience in intelligence… no geopolitical experience, no international connections’ who did not ‘have a prayer’ of being confirmed to the post on a permanent basis.”
June 3 – Financial Times (Myles McCormick): “US Treasury secretary Scott Bessent has insisted the surge in inflation triggered by the Iran war will be a ‘short-term blip’, as Donald Trump’s administration attempts to contain mounting frustrations over the conflict. Bessent told a congressional committee hearing on Wednesday that the burst of higher prices would be transitory as he defended the president’s handling of the economy. ‘Except for inflation, which is, I believe, going to be a short-term blip, the economic data is very strong,’ he said… ‘I think we have all the makings for a very strong economy. I think that we have temporary elevated prices that will come back down.’”
June 2 – Financial Times (Joe Miller): “Donald Trump has signed a long-awaited executive order that creates a ‘voluntary framework’ for the US to gain early access to cutting-edge AI models, after officials raised concerns about the security risks they posed. The order is a watered-down version of an earlier draft, which was due to be signed last month but Trump pulled over concerns that federal oversight of frontier AI models might hamper the growth of leading labs including OpenAI, Google and Anthropic.”
June 3 – Axios (Avery Lotz): “Greenland remains part of Denmark ‘for now,’ Secretary of State Marco Rubio said during a Wednesday House hearing — a nod to President Trump’s repeated threats to take over the allied island. Rubio’s comment comes after Trump renewed his favored jab at Canada as the ‘51st State.’ Those musings reflect the Trump administration’s broader assertion of global power that’s antagonized friends and foes alike. At a House hearing Wednesday, Rubio was pressed on Trump’s assertion that the U.S. needs to control Greenland — a self governing territory that is part of Denmark — in order to properly defend the island. Trump’s ‘view is that it's a lot easier to defend it when you have control and complete control of it,’ Rubio told Democratic Rep. Sarah McBride.”
June 2 – Bloomberg (Derek Wallbank and Michael Hirtzer): “The White House announced it will reduce tariffs on imported farm and construction equipment such as harvesters and forklifts, an effort to boost the industrial economy and provide relief for American farmers. Under a proclamation issued late Monday, those duties would drop to 15% from 25%.”
May 31 – New York Times (Eileen Sullivan and Andrea Fuller): “President Trump’s upheaval of the federal government has led to an exodus of more than 10,000 lawyers since the beginning of 2025… Roughly one in five lawyers who worked in the government at the end of 2024 had left by March of this year… Along with the usual retirements and turnover in the federal work force, the last year saw deep staffing cuts and the resignations of some staff members who objected to Mr. Trump’s policies.”
Trade War Watch:
June 3 – New York Times (Ana Swanson): “Since the Supreme Court struck down President Trump’s global tariffs in February, his administration has been busily working to reconstruct them, exploring legal options that would allow them to build back the tariff wall between the U.S. economy and the rest of the world. Late Tuesday night, the Trump administration unveiled part of its Plan B: a tariff of 10% to 12.5% on 59 countries and the 27-member European Union. The levies were intended to pressure governments that the United States says have not enacted or enforced laws against trading goods made with forced labor. Those tariffs could go into effect as soon as July, and they are unlikely to be the last ones. The administration is working on another slate of tariffs related to countries’ manufacturing practices that will presumably be added to the forced labor ones.”
June 3 – Politico (Camille Gus): “The European Commission criticized U.S. plans to impose a new 10% tariff on the EU… after the Trump administration found that Brussels had failed to ban the import of goods made with forced labor. ‘The Commission will carefully analyse the preliminary findings of the investigation and will continue engaging with the U.S. Administration… The EU considers tariffs imposed on these grounds to be unjustified,’ Deputy Chief Spokesperson Olof Gill said…”
June 2 – Bloomberg (Barbara Nascimento and Beatriz Reis): “The US is proposing a new 25% tariff on Brazilian goods after an investigation found the South American country engages in unfair trade practices. The announcement… exempts a vast list of products including coffee, beef, some fruits and aircraft parts.”
June 3 – Bloomberg (Brian Platt, Thomas Seal and Josh Wingrove): “Canada made new and detailed proposals on trade to the US based on negotiating progress in recent weeks, said Canadian cabinet minister Dominic LeBlanc. ‘A strong, prosperous Canadian economy is good for North America, and we discussed how we can work together on a number of issues that strengthen the competitiveness of the North American economy, he said… Discussions with US policymakers will continue in the coming days — but he also warned that talks could still take a negative turn and that ‘turbulence’ is to be expected.”
Constitution Watch:
June 3 – Politico (Dasha Burns, Myah Ward, Aaron Pellish and Josh Gerstein): “President Donald Trump is expected to nominate Todd Blanche to be attorney general, the position he’s held on an acting basis since April, administration officials said… The president could nominate Blanche as soon as Wednesday night, two officials, who were granted anonymity to discuss private conversations, told POLITICO… Blanche has enjoyed an unusually close relationship with the president, forged by his role as Trump’s lead defense attorney as Trump battled four criminal cases in the lead-up to the 2024 election.”
New World Order Watch:
June 3 – Financial Times (John Plender): “Is the US finally about to fall victim to imperial overstretch? Despite years of speculation, the country’s position as global military, economic and financial hegemon has to date remained intact. But Washington’s status may be about to be hit by fast-changing geopolitics and geoeconomics — and the habit, picked up by the US this century, of borrowing from tomorrow to pay for wars today. The conflict in Iran has been costing an estimated $2bn a day in short-term direct costs. The ratio of US public debt to GDP is set to breach its historic post-second world war high. And President Donald Trump has submitted to Congress a national defence budget request for 2027 of an astonishing $1.5tn, double the figure for 2020. That number includes nothing for Trump’s latest war of choice. Suddenly the risk of overstretch looks very real — both to the US’s friends and to its foes.”
May 31 – Bloomberg (Gonzalo Soto): “Mexican President Claudia Sheinbaum launched her strongest criticism to date against what she says are blunt US attempts to interfere in Mexican domestic politics. What had been a recurring theme in her recent speeches became on Sunday a rallying cry to stir up her supporters at a rally in Mexico City, where she claimed that since the deaths of two CIA agents on April 19, efforts by US authorities and far-right groups to destabilize her government have intensified… ‘An incident of this magnitude is unprecedented in our bilateral relation… Is this really a legitimate, genuine interest in helping Mexico? Or are we perhaps seeing sectors of the US far right positioning themselves ahead of their 2026 elections?’”
May 30 – Bloomberg (Alastair Gale): “Japan rejected China’s accusation that it’s pursuing ‘new militarism,’ a sharp rebuke against Beijing as tensions between the two countries continue to simmer. Without explicitly naming China, Japan’s defense minister said… Tokyo was being unfairly called out for its moves to increase spending on long-range missiles and other weapons. ‘There is a country that has a huge arsenal of nuclear weapons and strategic bombers,’ Defense Minister Shinjiro Koizumi said… ‘Japan has neither of such weapons, and yet Japan is labeled new militarism. Isn’t it strange?’”
U.S./Russia/China/Europe/Iran Watch:
June 4 – Politico (Milena Walde): “U.S. Secretary of State Marco Rubio acknowledged Wednesday that Greenland is part of Denmark ‘for now,’ while signaling that Washington remains deeply engaged in discussions over the Arctic island’s future role in Western security. Testifying before the House Foreign Affairs Committee, Rubio sidestepped a question about whether Washington needed to own territory within NATO to defend it, instead pointing to ongoing talks with Denmark and Greenland over the island’s role in collective defense. ‘We are actually involved in conversations with Greenland and Denmark on the use of Greenland for collective defense for all of us,’ Rubio said. Calling the island a key element of missile defense, he added: ‘I think we’re in a good place on it now’ and he predicted ‘pretty good news’ could emerge from the talks.”
Ukraine War Watch:
June 3 – Reuters (Guy Faulconbridge and Andrew Osborn): “Ukrainian drones hit an oil terminal in St Petersburg and a warship in dry-dock at a nearby naval base, hours before Vladimir Putin’s showcase economic forum got under way in the city, in a clear attempt to embarrass the Kremlin chief. The attack on Putin’s home city, location of his own ‘Davos’ - a glitzy annual economic forum designed to attract foreign investment - comes as both sides dial up strikes against each other in their more than four-year-old war with no imminent end in sight.”
June 2 – Associated Press (Samya Kullab and Vasilisa Stepanenko): “Russia launched hundreds of drones and dozens of missiles against Kyiv and other Ukrainian cities overnight, killing at least 22 civilians and wounding 138 others, authorities said... Russian President Vladimir Putin has escalated Moscow’s aerial campaign in recent weeks in an apparent bid to take advantage of Ukraine’s shortage of U.S.-made air defense systems and persuade an increasingly pessimistic audience at home that Moscow is prevailing in the 4-year-old war.”
Taiwan Watch:
May 30 – Bloomberg (Dave Sebastian and Miaojung Lin): “Taiwan has condemned the expulsion of a New York Times journalist from China over an interview the US-based newspaper conducted with the self-ruled island’s leader, saying it is common for a president of a democratic country to explain its position. ‘Taiwan will not be silenced because of oppression,’ Taiwan Presidential Office spokesperson Karen Kuo said…”
AI Bubble/Arms Race Watch:
June 3 – Wall Street Journal (Katherine Blunt): “Tech companies are earmarking unprecedented sums of money to finance the build-out of massive data centers, with a planned $85 billion equity-raise by Google parent Alphabet being the latest example. But even as the piles of capital secured have grown ever larger, the ability to deploy it in the artificial-intelligence race has become less certain. Supply-chain backlogs, permitting fights and availability of power supplies are among the issues that have caused the construction of data centers to fall behind targeted timelines, with the gap growing wider in recent months: A JPMorgan analysis last month found that more than 60% of data-center capacity planned for completion in 2027 isn’t yet under construction, and another 7% is delayed. It is a seeming paradox: If hyperscalers can’t break ground on many of the projects they have already announced, what difference can hundreds of billions of dollars more make—however eager Wall Street may be to supply it?”
June 1 – Wall Street Journal (Kate Clark and Corrie Driebusch): “Anthropic, the artificial intelligence lab recently valued at nearly $1 trillion, said… it has filed confidentially for an initial public offering, setting up a blockbuster year for IPOs. The filing could put the company behind the Claude AI model on a path to go public this fall. Elon Musk’s SpaceX is preparing to stage what is likely to be the largest IPO ever next week. The Wall Street Journal reported last month that Anthropic’s chief rival, OpenAI, was preparing to submit its own IPO filing imminently.”
June 3 – Associated Press (Debby Wu): “Taiwan Semiconductor Manufacturing Co.’s global chip supply will fall short of AI-fueled demand for years to come, chief executive officer C.C. Wei said, suggesting production capacity remains a key bottleneck in the buildout of global computing infrastructure. TSMC won’t be able to fulfill demand led by American customers even as more manufacturing capacity comes online in the US over the next few years, Wei told shareholders… Still, Taiwan’s largest company — which makes the majority of the world’s advanced semiconductors for AI — will refrain from initiating the sort of abrupt price hikes that shook up the memory chip sector, Wei added… ‘It will be a long time before we can meet customer demand,’ Wei said.”
June 2 – Bloomberg (Debby Wu): “SK Hynix Inc. plans to double its memory chip capacity over the coming half-decade, a major expansion that should help ease a global shortage of an essential component of AI. The company is responding to an endemic deficit of storage chips that could last till 2030, Chairman Chey Tae-won told reporters…”
May 31 – Wall Street Journal (Kate Clark): “Silicon Valley venture-capital firms are desperate for bets that can survive—and thrive in—the AI reckoning. Investors known for early investments in software, internet services and social-media companies like Snap and Uber have begun venturing far outside of their comfort zones into investments in physical technologies and materials tied to the artificial-intelligence boom. They are making new wagers on AI infrastructure like chips, power and manufacturing, as well as a far-ranging category called physical AI, or autonomous machines that can understand and perform complex real-world tasks.”
May 31 – Bloomberg (Heather Landy): “Cost savings from automation are broadly falling short of projections, according to a new Bain & Co. global survey of large companies. The missed targets ‘should be making executives uncomfortable,’ especially since many of them are approving increased spending for artificial intelligence on the basis of expected savings, the consulting firm said… ‘Self-funding the next wave from past returns sounds like discipline. In reality, it is a circular bet with a structural leak,’ the report said.”
June 4 – Axios (Ashley Gold): “AI development is moving so rapidly that soon it will be able to advance itself without human involvement, per a new blog post from Anthropic. ‘Recursive self-improvement,’ a process in which AI systems build, test and improve themselves, is a phenomenon which may come sooner than expected, Anthropic says… Anthropic warns that AI is no longer just changing how people work, it’s also beginning to change how AI itself gets built. New data from the company suggests that frontier models have accelerated coding, debugging and research. That is likely to create a feedback loop in which AI systems create even more sophisticated successors. ‘We've always found that the best thing to do is to socialize the concept and basically give people a sense of what's coming,’ Anthropic’s Jack Clark said…”
May 31 – Financial Times (Jamie John): “Young people were promised that artificial intelligence would make them more productive, more creative and more employable. Many now worry it might make them less valuable instead. From software developers who fear being replaced to students who feel AI is hollowing out learning and creativity, a growing number of young adults say the technology is reshaping their lives in unsettling ways. In the US, roughly half of Gen Z — those born between 1997 and 2012 — reported using generative AI at least once a week. Yet 31% said it made them feel angry, up from 22% last year, according to a recent Gallup poll.”
June 4 – Financial Times (Joe Miller): “Americans are far more likely to oppose the construction of AI data centres than citizens of other big economies, as a grassroots backlash against the rollout of the technology gains momentum across the country. A poll conducted by Public First found that voters in the US… had the lowest appetite for building computing power among 15 large countries, including Japan, Canada, Brazil and the UK. Just 26% of Americans supported increased construction of data centres, while roughly 30% of Britons, Germans and French backed such projects.”
Bubble Watch:
June 4 – New York Times (Lauren Hirsch): “At Goldman Sachs’s Manhattan headquarters, rocket ships have taken over the lobby. Not to be outdone, Bank of America is planning to light up the spire atop its Midtown offices on Thursday night to resemble a rocket taking off. A few blocks away on Thursday, JPMorgan Chase hosted a SpaceX sales pitch to thousands of clients at its Park Avenue headquarters. It broadcast to 90 bank branches and offices across 26 states, some of which closed early for the event. The bank’s chief executive, Jamie Dimon, was there to sell the deal to the crowd himself. There has never been a larger initial public offering than that of SpaceX, Elon Musk’s rocket maker and artificial intelligence company, and people involved in the sales effort who were not allowed to speak publicly said Wall Street’s efforts to sell the I.P.O. had been just as extraordinary.”
June 5 – Wall Street Journal (Corrie Driebusch): “To support the $1.77 trillion valuation Elon Musk’s SpaceX is targeting in its initial public offering, bankers are telling investors to look to the future. SpaceX’s revenue could reach $3.4 trillion in 2040, according to a Morgan Stanley analysis shared with top investors… Morgan Stanley told investors the rocket maker’s adjusted earnings before interest, taxes, depreciation and amortization in 2040 could top $2.7 trillion, the people said. SpaceX posted revenue of $18.7 billion in 2025 and a loss of $4.9 billion.”
June 4 – Bloomberg (Bailey Lipschultz): “Research analysts across Wall Street are telling would-be SpaceX IPO buyers that they’re modeling for the company’s artificial intelligence division to see 100 times revenue growth at the end of the decade, to help justify a targeted $1.8 trillion valuation. Evercore ISI research analysts expect SpaceX’s AI division to deliver $755 billion of sales by 2031, up from $3.2 billion last year… The research team sees total revenue for the company topping $1 trillion that year after posting $18.7 billion in 2025…”
June 2 – Bloomberg (Todd Gillespie): “A boom in equity markets is being driven by an appetite for profit that’s outweighing fears about economic disruption and inflation risks, said Goldman Sachs Group Inc. Chief Executive Officer David Solomon. ‘We are definitely in a moment where there’s more greed than there is fear,’ Solomon said… ‘The capital is available.’”
Crypto Bubble Watch:
June 4 – Financial Times (Jill R Shah): “Bitcoin is heading for its largest weekly loss since November 2022 after the cryptocurrency’s biggest corporate cheerleader sold a portion of its giant holdings for the first time in more than three years. The price fell as much as 5.5% on Thursday to $61,344 before recovering slightly, leaving its losses this week at almost 14%. The sell-off came after Michael Saylor’s bitcoin-hoarding venture Strategy said it had sold 32 bitcoin last week for a total of $2.5mn, only its second sale since it began buying the tokens in August 2020.”
June 4 – Bloomberg (Suvashree Ghosh): “Bitcoin’s slide this week is adding fresh pressure to one of the most ambitious financial experiments to emerge from the recent crypto boom: publicly traded companies created to accumulate digital assets on behalf of investors. Shares of dozens of these digital-asset treasury companies have continued to sink alongside the broader market downturn, extending losses that in many cases far exceed those of the cryptocurrencies they were built to own. The combined market value of fully diluted Bitcoin treasury company stocks has fallen to about $72 billion from nearly $134 billion at its most recent peak in early October, according to Artemis data, erasing $62 billion and underscoring how a once-hot crypto trade continues to unravel.”
Inflation Watch:
June 3 – Yahoo Finance (Jennifer Schonberger): “Higher-income households are weathering higher inflation better than middle- and lower-income Americans, underscoring the prevalence of the so-called K-shaped economy, according to the Federal Reserve’s Beige Book... ‘Higher-income households remained resilient and less sensitive to price increase, while middle-income households were described as ‘squeezing more life out of every dollar before deciding to spend it,’ and low-income consumers showed greater financial strain,’ the report read.”
June 3 – Reuters (Kanishka Ajmera and Aditya Soni): “Soaring memory chip prices driven by massive AI demand risk stoking ‘chipflation,’ Morgan Stanley analysts cautioned, as makers of devices from smartphones to PCs are forced to choose between raising prices and settling for thinner margins. The brokerage said… memory chip prices have spiked six-fold in the past year, as manufacturers have struggled to keep up with Big Tech’s AI infrastructure spending spree and prioritized higher-margin data center chips over those used in everyday devices. ‘What began as an AI infrastructure bottleneck is now spreading into hardware margins, device affordability, cloud costs, inflation and policy,’ Morgan Stanley said in a 66-page note, adding the crunch has ‘become a macroeconomic concern.’”
June 3 – Bloomberg (Erin Ailworth and Michael Hirtzer): “While US farmers brace for higher fertilizer and chemical bills tied to turmoil in the Middle East, another expense is already taking a bite out of razor-thin margins: diesel fuel. Prices for the fuel that powers tractors, combines and grain trucks have surged as the war in Iran disrupted global oil flows, catching many producers who expected lower energy costs this year off guard. In Illinois, the top US soybean-producing state, farm diesel averaged a record $5.41 a gallon at the start of May, nearly double the price a year earlier.”
June 3 – Financial Times (Jamie Smyth): “Donald Trump’s Iran war has driven US oil stocks to their lowest level in two decades as his administration drains stockpiles to contain surging prices and exporters capitalise on the drop in Middle Eastern supply. US government data… showed total stocks of crude and petroleum products such as petrol fell by 10.6mn barrels last week to 1.57bn barrels — the lowest level since 2004. The sharp fall triggered new warnings from industry analysts that oil prices are poised to move sharply higher again within weeks.”
June 2 – Bloomberg (Jonathan Ferro, Lisa Abramowicz, and Annmarie Hordern): “Diesel stocks in the US risk reaching a critical threshold of 20 days of supply by August if commercial inventories keep declining at the recent pace amid the near-complete closure of the Strait of Hormuz, according to Goldman Sachs… co-head of global commodities research. ‘If you look at the last eight weeks, it’s the largest draws in US oil stocks in history,’ Goldman’s Daan Struyven said… ‘Diesel stocks in the US are at the lowest level since 2003.’”
June 4 – Wall Street Journal (Jennifer Hiller): “A new style of architecture is rising in the sprawling suburbs of the Sonoran Desert: windowless data centers that hum 24 hours a day and guzzle as much electricity as a midsize city. As Microsoft and other tech giants expand their footprints in one of the nation’s largest data-center markets, a high-stakes battle is unfolding over how to pay for the massive power-grid upgrades needed to drive the AI revolution. Arizona Public Service, the state’s largest utility, sits at the center of the firestorm. APS is proposing a 45% electricity-rate increase for ‘extra-large energy users,’ primarily data centers, and a roughly 14.5% increase for residential customers.”
Federal Reserve Watch:
June 2 – CNBC (Matt Peterson): “Federal Reserve Chair Kevin Warsh has hired two conservative economic policy researchers to work with him at the central bank... The two researchers are Paul Winfree, the author of the chapter on the Federal Reserve in the conservative policy blueprint ‘Project 2025,’ and Daniel Heil, a fellow at Stanford’s Hoover Institution think tank, where Warsh held a position before joining the Fed. The two are ‘working as temporary contractors to support Warsh in his policy analysis and planning on special projects in the areas in which they have worked with him over time,’ the person said.”
June 2 – Reuters (Howard Schneider): “Federal Reserve Chairman Kevin Warsh pledged to follow ‘the best of the Fed's traditions’ in an opening note to the central bank’s more than 20,000 employees as he starts his four-year term, while also promising a broad look at what might be done differently. The memo is an early window on Warsh’s efforts to pursue what he has described as an extensive reform agenda… while also mending fences with colleagues and staff whose work he has criticized. ‘Our highest priority will be to get policy right in service to our remit and the national interest. We will ensure an environment that supports our people in doing their life’s best work… We won’t rely on past practices when we find better alternatives… In the coming quarters, I expect that together we will have open, clear-eyed discussions of Fed strategies, policies, and operations.’”
June 3 – Financial Times (Robin Harding): “When Kevin Warsh was first nominated as a governor of the US Federal Reserve in 2006, at just 35 years old, a senator dispatched him for a particularly intimidating job interview — with Paul Volcker, the renowned Fed chair who resisted political pressure and fought inflation from 1979 to 1987. Volcker, in Warsh’s telling, gave him two pieces of advice. ‘He said, ‘Kevin, there’s something I need to tell you. This job you’re signing up for really is quite simple. It really only requires two things,’’ Warsh told the How Leaders Lead podcast in 2023. ‘And he said: ‘The first thing is, you have to get interest rates about right.’’Warsh noted down this profound lesson from the master. ‘And he said: ‘The second thing is probably more important than the first. When you’re a governor of the Federal Reserve, probably the most important thing is to make sure you look like you know what you’re doing.’’”
June 3 – Reuters (Ann Saphir): “Federal Reserve Bank of Dallas President Lorie Logan… said she feels monetary policy is currently ‘neutral or perhaps even a bit loose,’ in contrast with what she feels the economy needs in light of inflation that’s too high. Inflation is heading toward 2.5%, she said, but the Fed aims to get it down to 2%. ‘In order to do that, we need at least mildly restrictive policy to finish the job,’ Logan said, in remarks which underscore her view that the Fed may need to raise interest rates.”
June 4 – Axios (Courtenay Brown): “With a steady labor market and still-high inflation, two Federal Reserve officials are on the record this week noting that the next rate move might be up… Dallas Fed president Lorie Logan said that consumer spending remains robust, corporate earnings are ‘going gangbusters’ and the AI investment was continuing to boom. ‘These conditions indicate that monetary policy is not restraining the economy,’ she said. ‘I am increasingly concerned that higher interest rates could be necessary later this year to fully restore price stability and appropriately balance both sides of the Fed's dual mandate.’”
June 2 – Wall Street Journal (Jessica Coacci): “Cleveland Fed President Beth Hammack said monetary policy may not be sufficiently restrictive to bring inflation down to 2%... Hammack, who votes on monetary policy this year, said if the central bank waits for definitive evidence that high inflation has become embedded in the economy, it may require larger adjustments, at a greater cost. ‘It’s reasonable to keep rates steady given the uncertainties around the economic outlook. But if recent trends continue, it may soon be appropriate to act,’ she said.”
May 31 – Financial Times (Claire Jones): “Jay Powell has said the US Federal Reserve is in the throes of a ‘stress test’ that threatens the strength and stability of the world’s largest economy, claiming Donald Trump’s attempts to fire central bankers undermine the rule of law. Powell… said… on Sunday that the Fed was ‘like many other [US] institutions… undergoing a stress test’. ‘If any administration finds a way to remove Fed officials over policy differences, then future administrations will do so as well,’ Powell added, in a speech as he accepted this year’s John F Kennedy Profile in Courage Award.”
June 1 – Bloomberg (Jonathan Ferro, Lisa Abramowicz and Annmarie Hordern): “The build-out for artificial intelligence will be inflationary in the early going, preventing new Federal Reserve Chair Kevin Warsh from cutting interest rates as quickly as he has suggested should be possible, according to Torsten Slok of Apollo Global Management Inc. ‘We’ll probably have to wait a little while for that because initially the AI boom will certainly be inflationary,’ Slok, Apollo’s chief economist, said… ‘The risk of price pressure is ‘very clear when you look at semiconductor prices, when you look at energy prices, when you look at labor.’”
U.S. Economic Bubble Watch:
June 3 – CNBC (Jeff Cox): “Private hiring expanded at a brisk pace in May, providing further indication of a stable labor market, ADP reported… The payrolls processing firm said companies added 122,000 workers for the month, up from 105,000 in April and better than the… consensus estimate for 110,000. May marked the strongest month since January 2025… Unlike prior months, where job growth was concentrated in healthcare and a few other sectors, gains were more broad-based. Eight of the 10 sectors ADP tracks saw gains, and hiring was spread evenly both by company size and geography. Education and health services again led with 57,000 hires, but trade, transportation and utilities added 36,000, professional and business services contributed 11,000, and construction and leisure and hospitality both rose by 8,000.”
June 4 – Associated Press (Matt Ott): “The number of Americans filing for jobless aid hit their highest level in four months last week, but layoffs remain historically low… U.S. applications for unemployment benefits for the week ending May 30 increased by 13,000 to 225,000… The total number of Americans filing for unemployment benefits for the previous week ending May 23 fell by 8,000 to 1.78 million…”
June 2 – CNBC (Jeff Cox): “Job openings hit their highest level in nearly two years during April while hiring fell sharply… Available employment hit 7.6 million for the month, a surge of 731,000 from the prior month and the highest level since May 2024. Economists… had been looking for 6.8 million openings from the BLS’ Job Openings and Labor Turnover Survey. The jump in openings put the available jobs above the total of unemployed workers… By industry, nearly all of the openings came from the professional and business services category, which added 668,000 positions…”
June 3 – Bloomberg (Maria Eloisa Capurro): “Employment remained stable in recent weeks as inflation continued to rise across much of the country, driven primarily by the impact of war in the Middle East on energy prices, the Federal Reserve said. Overall economic activity increased at a slight to moderate pace in 10 of 12 Fed districts, according to the US central bank’s Beige Book survey of regional business contacts… ‘Districts noted that energy-related costs tied to the conflict in the Middle East were the primary driver of inflationary pressures, with spillovers into shipping, packaging, groceries and fertilizer,’ the Fed said. ‘Consumer uncertainty and concerns about fuel prices impacting households were noted by several districts.’”
June 1 – Bloomberg (Matthew Boesler): “Spending on data-center construction in the US eclipsed $50 billion in April for the first time, according to Census Bureau figures… Data centers now account for 2.3% of all US construction spending… Private-sector outlays for data centers also outpaced public spending on transportation-related structures — a category that includes airport facilities, marine terminals and mass transit — for the first time.”
June 5 – Bloomberg (Augusta Saraiva): “US consumer borrowing posted another strong increase in April, in the biggest back-to-back gain since the end of 2022. Total credit outstanding rose by $20.7 billion after a revised $22.2 billion advance in March... The median estimate in a Bloomberg survey of economists called for a $17.7 billion advance. Non-revolving credit, such as loans for vehicle purchases and school tuition, was up $9.1 billion in April. Credit-card and other revolving debt outstanding rose by $11.6 billion. The report doesn’t include mortgages.”
June 4 – Bloomberg (Mark Niquette): “The share of US small businesses saying they’re planning new hires or are having trouble filling jobs fell in May to a six-year low, according to the National Federation of Independent Business. A seasonally adjusted 9% of owners plan to create new jobs in the next three months, down 4 percentage points from April, and the share reporting they had job openings they couldn’t fill fell by 5 percentage points to 29%... Both measures were the lowest since May 2020.”
June 3 – CNBC (Diana Olick): “Mortgage rates finally eased a bit last week, but it was not enough to light a fire under demand… Applications for a mortgage to purchase a home declined 3% for the week to the slowest pace since April. Demand was 7% higher than the same week one year ago, when mortgage rates were 35 bps higher.”
June 3 – CNBC (Diana Olick): “More frustrated home sellers were giving up, right in the midst of the all-important spring market… Nationwide, 5.8% of all home listings were pulled off the market in April, according to Redfin… That ties with December for the highest share of homes delisted since March 2020… The increase comes as higher mortgage rates, elevated gas prices and weaker consumer confidence take their toll on housing demand. Sellers are no longer in the driver’s seat and aren’t getting the prices they want. Atlanta saw the highest share of homes come off the market in April, with 1 in 10 delisted. San Jose, California, followed with roughly 9% pulled, then Los Angeles (7.8%), Dallas (7.8%) and Seattle (7.7%).”
China Watch:
June 2 – Reuters (Liangping Gao and Ryan Woo): “China’s services activity expanded at the fastest pace in three months in May, helped by stronger growth in new business and a rebound in overseas demand, though rising cost pressures weighed on firms, a private-sector survey showed… The RatingDog China General Services Purchasing Managers’ Index… rose to 54.4 in May from 52.6 in April…”
Central Banker Watch:
May 30 – Bloomberg (Zoe Schneeweiss): “The European Central Bank shouldn’t hesitate to act, given elevated consumer-price pressures, according to Governing Council member Alvaro Santos Pereira. ‘I think it’s better to act sooner rather than later so that we don’t have much greater second-order effects later on… When there are potential inflationary spirals, I prefer that we act more quickly and decisively.’”
June 2 – Wall Street Journal (Paul Hannon): “The case for raising the Bank of England’s key interest rate grows stronger the longer the conflict in the Middle East continues, and action may be needed within the next few weeks, a member of the Monetary Policy Committee said… Megan Greene said the MPC can’t rely on markets to do its job, and yields will likely fall back if the BOE doesn’t raise the key rate. ‘I think the case for hiking rates grows as the conflict wears on and believe a tightening in monetary policy over the next few weeks or months may be necessary,’ she said…”
Europe Watch:
June 2 – Financial Times (Olaf Storbeck and Ian Smith): “Eurozone inflation rose to 3.2% in May, bolstering the case for the European Central Bank to raise interest rates for the first time in nearly three years as it seeks to contain price pressures unleashed by the conflict in the Middle East. Tuesday’s estimate… was up from 3% in April and marked the highest annual inflation rate since September 2023. Energy was 10.9% more expensive than a year before, a slight increase from April’s 10.8% rise.”
Japan Watch:
June 4 – Reuters (Leika Kihara): “Bank of Japan Governor Kazuo Ueda has all but cemented a June rate hike in a clear narrative pivot toward inflation fighting as the Iran war-driven energy shock sharpens price risks and opens the door to more frequent increases in borrowing costs. In his speech on Wednesday, Ueda shed his dovish image and stressed the BOJ’s readiness to act against mounting inflation that could harm the economy if left unchecked… ‘Even if the situation surrounding the Middle East remains unclear, we must discuss the pros and cons of raising the policy rate if we judge that upside risks to prices outweigh downside risks to economic activity,’ Ueda said, language that reinforced dominant market bets of a rate hike at the June 15-16 meeting.”
June 3 – Bloomberg (Toru Fujioka): “Bank of Japan Governor Kazuo Ueda indicated a good chance of an interest rate hike this month if the risk of hotter-than-expected inflation looks bigger than the potential hit to the economy from the Middle East crisis. ‘Even if the situation remains unclear, should it be judged that upside risks to prices outweigh downside risks to economic activity, it will be necessary to thoroughly discuss the pros and cons of raising the policy interest rate,’ Ueda said…”
June 2 – Bloomberg (Erica Yokoyama): “Japan’s cabinet approved a $19.4 billion extra budget to fund measures meant to cushion households from inflation tied to Middle East turbulence, putting fiscal policy back in the spotlight for bond investors. Prime Minister Sanae Takaichi’s cabinet endorsed a ¥3.1 trillion ($19.4bn) package that includes a newly created ¥2.5 trillion reserve fund to respond to rising prices for commodities by providing subsidies.”
Emerging Market Watch:
June 1 – Bloomberg (Sangmi Cha): “South Korea’s equity market has overtaken India’s as the world’s sixth largest, driven by a relentless surge in chip heavyweights powering the global artificial intelligence buildout. The total market capitalization of Korea-listed companies has soared 86% this year to $5 trillion, while India’s has declined to $4.8 trillion…”
June 5 – Bloomberg (Ruth Carson, Abhishek Vishnoi, and Matthew Burgess): “Global investors are rapidly losing confidence in Indonesia as the nation’s stocks tumble at the fastest pace worldwide and its currency sinks to all-time lows. Just five months after hitting a record high, the benchmark stock index has tumbled 38% to become the worst performer this year among more than 90 global gauges tracked by Bloomberg. The rupiah has weakened about 7.5%, while foreign investors have pulled billions of dollars from Indonesian bonds. It marks a dramatic turn for a commodities-rich country that had been a staple allocation in many emerging-market portfolios.”
June 1 – Reuters (Shubham Batra): “India’s fiscal deficit stood at 4.4% of the gross domestic product for the year ended March 31, 2026…, in line with government's revised estimates.”
Social, Political, Environmental, Cybersecurity Instability Watch:
June 2 – Politico (Zia Weise): “The world must prepare for a surge in weather extremes and heat waves as a potentially exceptional El Niño emerges, the United Nations’ World Meteorological Organization has warned. The WMO said… there’s an 80% chance of an El Niño — the warm phase of a natural climate cycle in the Pacific Ocean — developing between June and August, and a 90% chance the event will arrive by November. El Niño’s return heralds a temporary upsurge in global temperatures on top of the warming effect of human-caused climate change. The event also disrupts rainfall patterns around the world, usually producing intense downpours and floods in some regions while bringing drought to others.”
June 2 – Bloomberg (Olivia Raimonde): “Extreme weather will likely spur more than $20 trillion in global spending over the next decade, boosting sales and earnings for reinsurers and companies involved in energy efficiency and climate security, according to… Bloomberg Intelligence. Returns for a group of 275 companies focused on environmental adaptation and mitigation beat the broader market by almost 32 percentage points in the year through April 19, Bloomberg Intelligence analysts Andrew John Stevenson and Eric Kane wrote… Spending on climate adaptation has helped drive gains for companies including BWX Technologies Inc., RenaissanceRe Holdings Ltd., Woodward Inc. and Dycom Industries Inc., they wrote.”
June 4 – Axios (Ben Berkowitz): “A deadly cattle pest called New World screwworm has been found in Texas, 60 years after it was effectively eradicated in the United States. The U.S. beef herd is already the smallest it’s been in 75 years, and retail prices for the staple protein are at record highs. The U.S. Department of Agriculture confirmed the case in Zavala County, Texas… The industry long feared an infestation in the United States after the pest — actually the burrowing larvae of a fly — was found moving north in Mexico.”
The S&P500 dropped 2.6% (up 7.9% y-t-d), and the Dow slipped 0.3% (up 5.8%). The Utilities declined 0.5% (up 3.9%). The Banks jumped 2.6% (up 5.9%), while the Broker/Dealers dipped 0.6% (up 3.8%). The Transports rose 2.4% (up 26.3%). The S&P 400 Midcaps declined 0.8% (up 14.2%), and the small cap Russell 2000 dropped 2.9% (up 14.2%). The Nasdaq100 slumped 4.5% (up 14.7%). The Semiconductors sank 4.7% (up 72.5%). The Biotechs were about unchanged (up 8.4%). With bullion down $212, the HUI gold index sank 11.7% (down 3.9%).
Three-month Treasury bill rates ended the week at 3.6228%. Two-year government yields jumped 14 bps to 4.15% (up 67bps y-t-d). Five-year T-note yields rose 13 bps to 4.27% (up 54bps). Ten-year Treasury yields gained nine bps to 4.53% (up 36bps). Long bond yields added two bps to 5.00% (up 15bps). Benchmark Fannie Mae MBS yields jumped 14 bps to 5.52% (up 48bps).
Italian 10-year yields surged 15 bps to 3.80% (up 25bps y-t-d). Greek 10-year yields rose 15 bps to 3.74% (up 30bps). Spain's 10-year yields gained 12 bps to 3.48% (up 19bps). German bund yields rose 10 bps to 3.04% (up 18bps). French yields jumped 14 bps to 3.69% (up 13bps). The French to German 10-year bond spread widened four to 65 bps. U.K. 10-year gilt yields rose nine bps to 4.90% (up 42bps). U.K.’s FTSE equities index slipped 0.4% (up 4.3% y-t-d).
Japan’s Nikkei 225 Equities Index increased 0.4% (up 32.3% y-t-d). Japan’s 10-year “JGB” yields added a basis point to 2.67% (up 61bps y-t-d). France’s CAC40 increased 0.4% (up 0.8%). The German DAX equities index declined 1.4% (up 1.1%). Spain’s IBEX 35 equities index was little changed (up 6.0%). Italy’s FTSE MIB index slipped 0.3% (up 11.0%). EM equities were under pressure. Brazil’s Bovespa index dropped 2.7% (up 4.9%), and the Mexico’s Bolsa index sank 3.6% (up 2.8%). South Korea’s Kospi reversed 3.7% lower (up 93.6%). India’s Sensex equities index declined 0.7% (down 12.9%). China’s Shanghai Exchange Index fell 1.0% (up 1.5%). Turkey’s Borsa Istanbul National 100 index was about unchanged (up 21.6%).
Federal Reserve Credit dipped $2.5 billion last week to $6.665 TN, with a 25-week expansion of $174 billion. Fed Credit was down $2.225 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.938 TN, or 79%. Fed Credit inflated $3.854 TN, or 137%, since November 7, 2012 (708 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped another $20.9 billion last week to $2.951 TN - the low back to October 2010. “Custody holdings” were down $299 billion y-o-y, or 9.2%.
Total money market fund assets (MMFA) surged $109 billion last week to a record $7.894 TN. MMFA were up $878 billion, or 12.5%, y-o-y - having ballooned a historic $3.310 TN, or 72%, since October 26, 2022.
Total Commercial Paper recovered $10.7 billion to $1.402 TN. CP declined $68 billion, or 4.6%, y-o-y.
Freddie Mac 30-year fixed mortgage rates declined five bps to 6.48% (down 37bps y-o-y). Fifteen-year rates fell eight bps to 5.79% (down 20bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate down four bps to 6.71% (down 25bps).
Currency Watch:
For the week, the U.S. Dollar Index rallied 1.1% to 100.071 (up 1.8% y-t-d). On the downside, the South Korean won declined 3.6%, the New Zealand dollar 3.2%, the Brazilian real 2.6%, the Swedish krona 2.2%, the Norwegian krone 2.1%, the South African rand 2.0%, the Australian dollar 1.9%, the Swiss franc 1.9%, the euro 1.2%, the Singapore dollar 1.1%, the Canadian dollar 1.0%, the British pound 0.9%, the Mexican peso 0.7%, and the Japanese yen 0.6%. China's (onshore) renminbi declined 0.32% versus the dollar (up 2.94% y-t-d).
Commodities Watch:
June 2 – Financial Times (Olaf Storbeck and Leslie Hook): “Gold has overtaken US government bonds as the world’s top reserve asset following years of relentless buying by central banks and a historic rally that has seen prices nearly double over the past two years. Bullion accounted for 27% of all global central bank reserve assets at the end of 2025, up from 20% a year earlier, according to… the European Central Bank. US Treasuries fell to 22% from 25% over the same period. The share of euro-denominated reserve assets was unchanged at 15%. The shifting composition of reserve assets — highly liquid holdings that central banks use to support their currencies, meet international payment obligations and provide liquidity in times of financial turmoil — reflects an attempt by many countries to seek alternatives to the US dollar…”
The Bloomberg Commodities Index fell 1.8% (up 20.9% y-t-d). Spot Gold slumped 4.7% to $4,328 (up 0.2%). Silver sank 9.9% to $67.833 (down 5.3%). WTI Crude rallied $3.18, or 3.6%, to $90.54 (up 58%). Gasoline declined 2.6% (up 78%), and Natural Gas fell 1.9% to $3.229 (down 12%). Copper declined 1.6% (up 11%). Wheat dropped 5.0% (up 14%), and Corn slumped 6.5% (down 5%). Bitcoin sank $13,900, or 18.9%, to $59,500 (down 32.1%).
Market Instability Watch:
June 3 – Reuters (Karen Brettell): “The artificial-intelligence boom already has fueled a record stock-market surge. Now it’s driving up long-term Treasury yields too. Meta Platforms, Oracle and other technology companies have raised $250 billion in debt markets globally this year, according to Morgan Stanley, borrowing at a scale that would have been hard to imagine only a few years ago. The recent surge in AI-related infrastructure investment is partly behind the May rout that pushed 30-year Treasury yields to their highest level since 2007, analysts say… ‘We’re talking $750 billion, $850 billion of capex spending on an annualized basis, and it’s expected to ramp up to close to a trillion next year,’ said Thomas Urano of Sage Advisory... ‘It’s kind of like thinking about a federal stimulus package or some kind of infrastructure spend at a federal level.’”
June 4 – Bloomberg (Ye Xie): “At the height of the US bond-market selloff last month, Vishal Khanduja detected something unusual. As yields on the longest-dated Treasuries surged toward a 19-year high, large waves of futures sales hit the market right when mortgage-backed securities were being pummeled particularly hard. To Khanduja, a portfolio manager at Morgan Stanley Investment Management…, it was a clear sign that others, like him, were racing to protect against the risk of a deeper drop in their housing bonds by entering trades that would pay off if Treasuries slumped further — a strategy known as convexity hedging. ‘It’s a big deal,’ he said. ‘We didn’t talk about it for a long period of time.’ The nascent revival of the tactic is threatening to inject another source of volatility into the $31 trillion Treasury market…”
June 3 – Reuters (Lewis Krauskopf): “The charge higher in U.S. technology stocks has made broader indexes as reliant as ever on the group -- and more vulnerable should those market leaders trip up. With stunning gains over the past two months, the S&P 500 technology sector now accounts for more than 39% of the market capitalization of the overall benchmark index, its highest on record and above the level it reached during the 2000 Internet bubble.”
June 3 – CNBC (Deena Zaidi): “Assets in leveraged ETF nearly doubled over two months, as investors scrambled for maximum exposure to the artificial intelligence trend. ‘Investors increasingly use leveraged instruments linked to the ‘AI-trade’ – assets in leveraged ETFs linked to AI and Tech themes have surged, with exposures in the US and Korea/Taiwan rising sharply- more than doubling in recent months,’ wrote Goldman’s Christian Mueller-Glissmann... Goldman cited data from EPFR tracking 573 leveraged U.S. equity ETFs, 52 ETFs on South Korea and 11 on Taiwan. The total net assets for leveraged equity ETFs on U.S. equities doubled in just two months, climbing to $84 billion end of May this year from $39 billion in April.”
June 3 – Reuters (Suzanne McGee): “The Vanguard S&P 500 ETF, the index investing pioneer's flagship exchange-traded product, became the first in the history of ETFs to reach and exceed $1 trillion in assets…”
June 3 – Axios (Pete Gannon): “Alarm bells are going off around bitcoin, with most of the headlines focusing on the biggest bitcoin treasury company’s very big decision to sell a small amount of bitcoin. A bitcoin sale by Michael Saylor’s Strategy has drawn outsize attention, but geopolitical uncertainty and competition from stocks are posing bigger near-term risks to the cryptocurrency’s price. Some $2.8 billion left U.S.-listed spot-bitcoin ETFs in nine-straight sessions through May 28 — the longest stretch of withdrawals in the funds’ two-year history… Since hitting an all-time high of $126,080 in October, the price of bitcoin fell over 40% through last week.”
June 4 – Bloomberg (Erica Yokoyama and Toru Fujioka): “Japan likely drew on its holdings of foreign securities, including US Treasuries, to finance its record currency market intervention over the past month, a move that may draw attention from Washington. Tokyo’s holdings of foreign securities at the end of May dropped by $75.6 billion from April, according to Finance Ministry reserve data... That scale matches the size of Japan’s recent entry into the currency market to prop up the yen.”
U.S. Credit Trouble Watch:
June 4 – Bloomberg (Olivia Fishlow): “Blackstone Inc. limited redemptions from its flagship private credit fund for the first time after investors sought to pull 10% of the shares, the latest firm to cap withdrawals amid a continued investor exodus. The $79 billion Blackstone Private Credit Fund told shareholders that it would allow redemptions of only 5%... That’s in contrast to the previous quarter, when BCRED, the biggest fund of its kind, went to unusual lengths to allow investors to pull all of the 7.9% of shares requested... Across the $1.8 trillion private credit market, redemption requests are expected to increase this quarter as investors redouble efforts to claw back money after being restricted.”
June 2 – Financial Times (Eric Platt): “Cliffwater’s flagship private credit fund aimed at retail clients limited withdrawals after redemption requests hit 17% in the second quarter, underscoring the mounting exodus from the sector. Cliffwater said it had restricted withdrawals from its $31bn marquee corporate lending fund in the second quarter to 5% of its outstanding shares… The withdrawal requests, worth more than $5bn, swelled from the first quarter when investors sought to redeem 14% of the fund.”
June 5 – Reuters (Patturaja Murugaboopathy): “Private credit’s rapid expansion is losing momentum, with U.S.-focused direct lending issuance slowing in recent months and fundraising still below its recent peak… PitchBook data indicates new loan issuance by private credit lenders fell to $44.76 billion in the three months ended May 2026, down about 40% from $74.56 billion in the first quarter. Issuance to private equity-backed borrowers dropped nearly 37% over the same period to $28.5 billion, while direct lending volume tied to leveraged buyouts fell about 34% to $15.15 billion.”
June 4 – Wall Street Journal (AnnaMaria Andriotis): “The era of anything goes in private-credit underwriting is coming to an end. Private-credit firms are tightening their lending standards, increasing interest rates and other fees they charge on new loans, restraining how much debt they give borrowers and closing loopholes that allow financing to be taken out against borrowers’ assets. Executives and lawyers say standards began shifting around March and have intensified since then. Fund managers say they are seeing more risk of loan losses in the market. They are also dealing with the repercussions of increased scrutiny from their investors, which have reduced the amount of money private-credit firms have to put to work.”
May 29 – Bloomberg (Olivia Fishlow): “More private credit funds are at risk of losing the investment-grade ratings on their debt as they continue to face elevated redemption requests, according to research published by Bank of America Corp. Three of the largest private business development companies are two quarters or less away from a potential downgrade to their unsecured bonds, if they continue to face quarterly net redemptions of 5%, analysts led by Neha Kohda wrote… The median non-traded BDC has roughly one year of runway before a potential downgrade…”
June 2 – Wall Street Journal (Gina Heeb): “Private-credit firms have had investors and regulators on edge. Now, their insurers are worried, too. Insurers that provide coverage to executives and boards are bracing for a wave of lawsuits and regulatory actions in the private-credit industry. Some are starting to raise premiums, with several insurance executives estimating that there could soon be double-digit increases from a year earlier. Insurers are also tightening coverage terms for renewing or opening new policies, the executives said.”
June 4 – Bloomberg (Neil Callanan): “The first sustained default cycle in credit in many years has already started and the market will see higher losses than it’s grown used to, Pacific Investment Management Co.’s chief investment officer warned. ‘There’s a lot going on beneath the surface’ despite spreads being close to their tightest on record, Daniel Ivascyn said… Holly Kim, founding partner at Glendon Capital Management, told the Bloomberg Global Credit Forum… that trouble will emerge from the leveraged buyouts of 2021 and 2022 that were financed with cheap borrowings. The huge volumes of capital being invested in AI-related infrastructure is also creating some risks, Ivascyn wrote.”
June 3 – Bloomberg (Katanga Johnson): “US banks’ loan portfolios saw a modest rise in delinquencies last year, a Federal Reserve report showed. ‘While loan growth remained steady, loan delinquency rates increased slightly across several loan categories in 2025,’ the Fed said…, pointing to consumer, commercial and residential real estate loans, among others… Regulatory data showed limited delinquencies in the nonbank sector but several high-profile nonbanks defaults have led to concern about the private credit sector, the agency said… The Fed added that some banks are revisiting collateral management practices for related exposures to private markets.”
Global Credit Bubble Watch:
June 1 – Reuters (Yoruk Bahceli): “From Europe to Japan and Switzerland, huge bond issues by Big Tech companies are proving that smaller markets, often overshadowed by the U.S., can punch above their weight in the $40 trillion world of corporate debt. Google-parent Alphabet is already one of the biggest outstanding borrowers in the euro, sterling, Swiss franc and yen corporate bond markets. Amazon raised 14.5 billion euros ($16.88bn) in March from an eight-part deal, the largest ever in the euro corporate bond market...”
June 4 – Bloomberg (Bruce Douglas and Jonathan Ferro): “Investment-grade debt sales will outpace net issuance of US Treasuries this year, Apollo Global Management Inc.’s President Jim Zelter said, as the Magnificent Seven tech companies and others seek massive amounts of funding to fuel their expansion. The prospect of a handful of mega-IPOs on the horizon… highlights the breadth of US capital markets, Zelter added… ‘The scale of what you need to be relevant is much higher than it ever was before,’ he said. ‘These numbers are unprecedented, but it shows you the scale of the marketplace.’ US investment grade bond sales hit the $1 trillion mark earlier this week, the quickest they’ve reached that milestone since 2020, on the back of a spending surge on artificial intelligence.”
June 1 – Financial Times (Ramsay Hodgson, Euan Healy and Michelle Chan): “US convertible bond issuance is on course for a record year as AI-related companies take advantage of the investor frenzy driving their share prices to new highs to issue low-cost debt. Companies have issued $57bn of such bonds so far this year, the highest level on record for comparable periods, according to Barclays... The current pace of deals means 2026 is set to outstrip last year’s record level of $120bn ‘meaningfully’, said Venu Krishna, the bank’s head of US equity strategy. Convertible bonds typically offer lower coupons than regular debt, but give investors the option of converting their holdings into a pre-determined number of the company’s shares — in effect giving them a call option, or right to buy, the stock.”
June 1 – Bloomberg (Gowri Gurumurthy and Michelle Cheng): “A data center tied to CoreWeave Inc. is set to get funding from a $850 million junk-bond sale by Elk Grove Village Property LLC, which joins a wave of high-yield issuers tapping debt markets to fund artificial intelligence infrastructure.”
June 4 – Bloomberg (Esteban Duarte): “Banks had offloaded credit risk tied to more than €905 billion ($1 trillion) in loans as of the end of last year, up 26% from a year earlier, via the rapidly-growing market for significant risk transfers. Lenders, mostly in Europe and North America, issued €30 billion in new SRT deals linked to €378 billion in underlying loans in 2025… The asset class has expanded quickly over the past few years, helped by surging appetite from buyers including large asset managers and insurance firms. SRTs allow banks to pass the credit risks of a pool of assets to investors, who effectively insure the loans against default. That lowers the amount of regulatory capital the bank is required to hold, freeing up its balance sheet, while investors get returns that are frequently in the low double-digits.”
June 4 – Bloomberg (Nicholas Comfort and Francine Lacqua): “European insurers that want to ride the private credit boom need to grasp the risks they face, according to the region’s top watchdog for the industry. The region has ‘a multitude’ of insurers of varying size, some of which don’t yet have the necessary capabilities, Petra Hielkema, chair of the European Insurance and Occupational Pensions Authority, said… ‘If you want to enter into this business that, to a certain extent, used to be bank business, then you need to get your expertise up and running,’ she said. ‘What you tend to see is if things get fancy, people might say, ‘Oh, let’s also do a bit of this’. But then, do you know what you get into?’”
Leveraged Speculation Watch:
June 1 – Bloomberg (Jan-Patrick Barnert): “Hedge funds purchased US equities at the fastest pace in six months last week…, according to Goldman Sachs Group Inc.’s prime brokerage desk. Trading flows were driven by long buys and short covering in a combination of index and exchange-traded fund products…”
June 3 – Financial Times (Amelia Pollard): “Hedge fund DE Shaw is prolonging the amount of time it will take for investors to pull out their money as the industry moves towards greater control over redemptions. The more-than $90bn multi-strategy hedge fund told investors this week that it was extending the redemption period to retrieve money from its flagship multi-strategy Composite fund to four years and its macro-focused Oculus fund to three years, according to people familiar with the matter. DE Shaw is following in the steps of rivals including Millennium Management and Citadel… Top hedge funds have been able to make such demands in part because they have had relatively high annualised returns, giving them leverage to ask investors for more stringent terms.”
June 3 – Financial Times (Joshua Franklin, Jill R Shah and Kate Duguid): “Trading firms including Jane Street and Citadel Securities generated combined revenues of $114bn last year, signalling their growing power on Wall Street as they compete against traditional banks. Industry revenues of non-bank trading companies jumped 45% from 2024, according to… Crisil Coalition Greenwich. The boom in revenues highlights how trading companies have become Wall Street powerhouses in recent years as regulations put in place after the 2008 financial crisis pushed banks away from some types of dealing. Trading firms made the biggest gains last year from proprietary trading…”
June 4 – Bloomberg (Ryan Weeks, Katherine Doherty, David Pan, and Dina Bass): “Jane Street Group plans to build and finance its own data center as the trading giant scales its operations to keep up with the demand for computing power. The market-making firm has been talking to firms in the technology, crypto and finance industries about the prospect of building a new facility on top of its other investments in AI power…”
Iran War Watch:
June 5 – Bloomberg (Arsalan Shahla and Sherif Tarek): “The US and Iran have made little progress in talks over an interim peace deal this week, with the sides seeing their worst clashes since an April ceasefire began and fighting continuing in Lebanon. Skirmishes continued overnight between Hezbollah and Israel in southern Lebanon after the Iran-backed group rejected a US-brokered proposal aimed at securing a broader truce… US President Donald Trump on Thursday said negotiations are in the ‘final’ stages without elaborating. Iran’s Foreign Minister Abbas Araghchi earlier said there had been ‘no tangible progress’ even though the two sides continued to exchange messages via mediators.”
June 4 – Wall Street Journal (Stephen Kalin): “Kuwait had just reopened its war-damaged international airport when a drone smashed into Terminal 1 on Wednesday, an attack that demonstrated Iran’s willingness to ratchet up the escalation ladder to counter a crippling U.S. economic blockade. The strike came after the U.S. military had disabled a ship it said was heading to an Iranian port… It was the third time that Kuwait… has come under fire in about a week despite a ceasefire that ended major combat between the U.S. and Iran… The attack echoed Iran’s tactics during the war, when it struck airports and other relatively vulnerable economic infrastructure around the region to put pressure on the U.S. and Israel to end their air campaign. Hitting Kuwait signaled a willingness to escalate but without hitting more sensitive sites in the Gulf’s more powerful states that have previously struck back against Iran.”
June 2 – CNBC (Spencer Kimball): “Secretary of State Marco Rubio said… Iran has mined ‘large segments’ of the Strait of Hormuz, indicating that explosives in the strategic sea lane are more widespread than previoulsy acknowledged. ‘They’re firing on commercial ships and they’ve mined large segments of Hormuz — international waters,’ Rubio told the Senate Foreign Relations Committee… Iran must agree in any deal with the U.S. that it will not charge a toll to transit Hormuz, will not fire on commercial ships and will help remove any mines it has laid in the strait, the Secretary of State said. ‘What they’re doing is unlawful and illegal,’ Rubio told the Senate.”
June 3 – Bloomberg (Skylar Woodhouse): “President Donald Trump downplayed the threat posed by Iranian sea mines in the Strait of Hormuz to commercial shipping, even as other US officials have warned of their dangers. Speaking to reporters…, Trump said American forces had ‘swept mines and we’ve gotten most of them, we think.’ He also said the strait would open ‘immediately’ upon Iran signing a memorandum of understanding to cease armed hostilities ‘subject to a couple of areas being cleaned out, also of mines.’”
June 2 – Axios (Barak Ravid and Marc Caputo): “President Trump lashed out at Israeli Prime Minister Benjamin Netanyahu over Israel’s escalation in Lebanon in an expletive-laden call on Monday… Earlier on Monday, Iran threatened to abandon the negotiations with the U.S. over Israel’s actions in Lebanon. On the call, Trump called Netanyahu ‘crazy’ and accused him of ingratitude, according to two of the sources. He also put the brakes on Israel’s plan to strike Beirut. One U.S. official said Trump told Netanyahu that following through on his threats to bomb the Lebanese capital would further isolate Israel around the world. Two of the sources said Trump claimed he’d helped keep Netanyahu out of jail… Summarizing Trump’s remarks to Netanyahu, the U.S. official said: ‘You’re fucking crazy. You’d be in prison if it weren’t for me. I’m saving your ass. Everybody hates you now. Everybody hates Israel because of this.’”
June 1 – Associated Press (Jon Gambrell): “The United States said Monday that it bombed radar and drone sites in Iran after Tehran shot down an American drone over the weekend. Iran then said it targeted American soldiers in Kuwait with missiles, which the U.S. says it shot down.”
June 1 – CNBC (Kevin Breuninger): “Iranian negotiators will stop exchanging messages with the U.S. through intermediaries, and Tehran will move to fully close the Strait of Hormuz, in retaliation for ongoing ceasefire violations, Iran’s state-affiliated news outlet Tasnim said Monday. The report… homed in on Israel’s military operations in Lebanon against the Iran-backed militia Hezbollah. ‘No dialogue will take place’ until Israel fully withdraws from occupied areas in Lebanon and stops all attacks in both Lebanon and Gaza, per Tasnim. ‘Also, the resistance front and Iran have resolved to completely block the Strait of Hormuz and activate other fronts including the Bab al-Mandeb Strait, in order to punish the Zionists and their supporters,’ the report said.”
May 31 – Wall Street Journal (Stephen Kalin): “As President Trump worked in recent days toward a deal to end his war with Iran, he threw a curveball: Arab states as well as Pakistan and Turkey should consider it mandatory to welcome the agreement by establishing diplomatic relations with Israel under the president’s Abraham Accords. For much of the Gulf, the proposal only added insult to injury. U.S. relations with the region have been shaken by the war, which created major costs and inflamed U.S. allies’ security concerns. Analysts said Arab leaders are increasingly distrustful of both the U.S. and Israel and fear that normalization would further antagonize Iran… Arab populations, meanwhile, are even less disposed than they were a few years ago to accept deeper ties with Israel after its campaign in Gaza. Many consider it a rogue state destabilizing the region at least as much as Iran.”
June 2 – New York Times (Jenny Gross): “A ship owned by Mediterranean Shipping Company, the world’s largest container shipping firm, was struck by two projectiles in an Iraqi port, the Geneva-based company said. The cargo ship, the Sariska V, was hit as it left the Port of Umm Qasr in Iraq on Monday. All crew members were safe and unharmed… The Islamic Revolutionary Guards Corps claimed responsibility for the attack, saying it acted in response to U.S. strikes on an Iranian vessel in the Gulf of Oman…”
June 4 – Financial Times (Raya Jalabi and James Shotter): “Hizbollah’s leader has rejected the latest ceasefire agreement between Israel and Lebanon’s governments, as Israel pressed ahead with military operations against the militant group in southern and eastern Lebanon. The US-brokered agreement was announced in a joint statement on Wednesday after Israeli forces made their deepest incursion into Lebanon in decades… Hizbollah’s leader Naim Qassem said his group demanded a complete Israeli withdrawal from Lebanon and vowed that Hizbollah would not stop attacking Israel ‘as long as our villages are not safe and are being bombed and destroyed and our people are killed’. ‘We are concerned only with a comprehensive cessation of aggression through a ceasefire and Israel’s withdrawal,’ he said. ‘We did not make any commitment to any party to stop resisting as long as there is occupation.’”
Iran War Ramifications Watch:
June 3 – Wall Street Journal (Georgi Kantchev and Julia Nasser): “For decades, the Persian Gulf’s energy map converged on a single chokepoint: the Strait of Hormuz. Now, spurred by the Iran war, the region’s petrostates are rushing to draw new lines to circumvent it. Across the Gulf, governments are pouring billions into new oil pipelines, rail corridors and energy storage hubs to bypass the waterway in what is set to become one of the most durable outcomes of the conflict. The new energy links are part of a broader redrawing of the region’s logistics map, shifting trade toward trucking, rail and new ports. ‘The legacy of the crisis will result in the construction of infrastructure to bypass the Strait of Hormuz,’ said Hamad Hussain, commodities economist at… Capital Economics. ‘The genie is out of the bottle given that the longstanding threat of Iran effectively closing the strait has now materialized.’”
June 3 – Financial Times (Sam Fleming): “Failure to resolve the energy crisis in the Middle East would plunge the world into a ‘dark scenario’ of tumbling growth and sharply higher interest rates, the OECD has warned. The Paris-based organisation said a ‘prolonged disruption’ to energy flows that lasts into the second half of 2027 would cut global growth to 2.1% this year and just 1.8% next year.”
May 29 – Bloomberg (Hallie Gu and Cao Ban): “Asian rice prices posted their biggest monthly jump in nearly two decades in May, and could rally further as weather risks and war-driven surges in energy and fertilizer costs threaten production. Thailand white rice, an Asian benchmark, rallied 20% in May, the most in a month in data going back to 2008. Rice futures on the Chicago Board of Trade also jumped 15% this month.”
June 1 – Bloomberg (Heesu Lee): “South Korea’s consumer inflation accelerated to the fastest pace in more than two years, reinforcing the central bank’s tilt toward higher interest rates as the impact from the Middle East conflict ripples across the economy. Consumer prices rose 3.1% in May from a year earlier, the biggest gain since March 2024…”
Trump Administration Watch:
June 4 – Bloomberg (Erik Wasson and Roxana Tiron): “The Republican-led House voted to halt the US war with Iran, breaking with President Donald Trump on an unpopular foreign conflict that is taking an escalating economic toll on Americans. The 215-208 vote Wednesday showed worries over the war spreading in the president’s own party five months before congressional elections. Last month, a Senate resolution to end the war also advanced past a procedural hurdle for the first time, though that legislation hasn’t yet come to a formal vote.”
June 4 – Associated Press (Aamer Madhani and Matthew Lee): “President Donald Trump is facing warnings from foes and allies alike that he’s getting boxed in on the Iran war, a conflict he sold as a brief military incursion but that has since settled into a holding pattern. It’s been nearly a week since U.S. and Iranian negotiators reached a tentative agreement to extend the ceasefire in the conflict by 60 days and start a new round of talks on Iran’s nuclear program that required Trump’s signoff. But Trump has called for unspecified changes to the agreement and Iranian officials — perhaps calculating that the Republican president is reluctant to restart the bombardment after burning through key weapons systems — are showing no signs they’ll give in to new demands.”
June 2 – New York Times (Michael Crowley): “In mid-February, shortly before President Trump launched the war on Iran, the country’s Islamic Revolutionary Guards Corps conducted live-fire drills in its coastal waters. Iranian state media publicized the exercise, whose official name made its purpose clear: ‘Smart Control of the Strait of Hormuz.’ The exercise amounted to a flashing red warning light to the Trump administration — one that, for reasons that are still not fully clear, went largely unheeded. Within days of the war’s start, Iran’s military exerted control over the strait, menacing commercial tankers with boats, missiles and drones. Shipping ground to a halt. Energy prices soared. And Mr. Trump was backed into a strategic corner. Three months later, Iran’s control of the strait has become its most powerful weapon, a source of huge leverage in negotiations with Mr. Trump over the country’s nuclear program.”
June 3 – Wall Street Journal (Alexander Ward, Laurence Norman and Robbie Gramer): “President Trump has told aides privately that he would consider ending the ceasefire with Iran if Tehran kills American troops…, insisting that the weekslong pause in airstrikes remains intact despite a steady stream of violent skirmishes. The president’s reluctance to reignite the war suggests he might be willing to withstand smaller flare-ups for weeks—or even months—to avoid a broader conflict in the Middle East. The U.S. and Iran this week engaged in some of the most intense fighting yet since a ceasefire went into effect in early April, with Iran firing missiles and drones on regional U.S. bases and Kuwait’s international airport. The attacks left one person dead.”
June 1 – Reuters (Nandita Bose, Steve Holland, Dan Rosenzweig-Ziff and Richard Cowan): “President Donald Trump’s nearly $1.8 billion fund to compensate victims of alleged government ‘weaponization’ has been put on hold after the White House faced fierce opposition from Republicans in Congress… The rare rebuke of Trump demonstrated some Republicans’ increased willingness to flex their political power against the president, particularly after his endorsement of Texas Attorney General Ken Paxton over incumbent Senator John Cornyn ahead of a crucial midterm election.”
June 4 – Axios (Mike Zapler): “Just when President Trump removed one thumb from the eye of Senate Republicans — scrapping his $1.8 billion ‘anti-weaponization fund’ — he put another right back in with his choice of Bill Pulte as director of national intelligence. This time, the stakes are even higher: Democrats are threatening to let the government’s spy powers lapse next week unless Trump yanks the appointment. Democratic outrage over Trump’s latest moves usually doesn’t amount to much. But Republicans need at least eight Democratic votes in the Senate to prevent the Foreign Intelligence Surveillance Act Section 702 from lapsing on June 12… The warning lights started flashing… when Sen. Mark Warner (D-Va.) teed off on the appointment. ‘I thought I had gotten to the stage where I could no longer be shocked by Donald Trump’s choices,’ he told MS NOW, ‘but this may be the most outrageous of all.’ As vice chair of the Senate Intelligence Committee, Warner is a key player in the Section 702 renewal debate.”
June 3 – Financial Times (James Politi and Myles McCormick): “Donald Trump is facing a widening revolt in Congress to his appointment of Bill Pulte as acting director of national intelligence, jeopardising the passage of legislation to extend the US government’s surveillance powers. The president’s decision this week to tap Pulte, a housing finance regulator with no known experience in intelligence, stoked bipartisan backlash on Capitol Hill as lawmakers worried that loyalty to Trump was being placed ahead of competence in overseeing the nation’s spy agencies. Thom Tillis… lambasted Pulte… for having ‘no experience in intelligence… no geopolitical experience, no international connections’ who did not ‘have a prayer’ of being confirmed to the post on a permanent basis.”
June 3 – Financial Times (Myles McCormick): “US Treasury secretary Scott Bessent has insisted the surge in inflation triggered by the Iran war will be a ‘short-term blip’, as Donald Trump’s administration attempts to contain mounting frustrations over the conflict. Bessent told a congressional committee hearing on Wednesday that the burst of higher prices would be transitory as he defended the president’s handling of the economy. ‘Except for inflation, which is, I believe, going to be a short-term blip, the economic data is very strong,’ he said… ‘I think we have all the makings for a very strong economy. I think that we have temporary elevated prices that will come back down.’”
June 2 – Financial Times (Joe Miller): “Donald Trump has signed a long-awaited executive order that creates a ‘voluntary framework’ for the US to gain early access to cutting-edge AI models, after officials raised concerns about the security risks they posed. The order is a watered-down version of an earlier draft, which was due to be signed last month but Trump pulled over concerns that federal oversight of frontier AI models might hamper the growth of leading labs including OpenAI, Google and Anthropic.”
June 3 – Axios (Avery Lotz): “Greenland remains part of Denmark ‘for now,’ Secretary of State Marco Rubio said during a Wednesday House hearing — a nod to President Trump’s repeated threats to take over the allied island. Rubio’s comment comes after Trump renewed his favored jab at Canada as the ‘51st State.’ Those musings reflect the Trump administration’s broader assertion of global power that’s antagonized friends and foes alike. At a House hearing Wednesday, Rubio was pressed on Trump’s assertion that the U.S. needs to control Greenland — a self governing territory that is part of Denmark — in order to properly defend the island. Trump’s ‘view is that it's a lot easier to defend it when you have control and complete control of it,’ Rubio told Democratic Rep. Sarah McBride.”
June 2 – Bloomberg (Derek Wallbank and Michael Hirtzer): “The White House announced it will reduce tariffs on imported farm and construction equipment such as harvesters and forklifts, an effort to boost the industrial economy and provide relief for American farmers. Under a proclamation issued late Monday, those duties would drop to 15% from 25%.”
May 31 – New York Times (Eileen Sullivan and Andrea Fuller): “President Trump’s upheaval of the federal government has led to an exodus of more than 10,000 lawyers since the beginning of 2025… Roughly one in five lawyers who worked in the government at the end of 2024 had left by March of this year… Along with the usual retirements and turnover in the federal work force, the last year saw deep staffing cuts and the resignations of some staff members who objected to Mr. Trump’s policies.”
Trade War Watch:
June 3 – New York Times (Ana Swanson): “Since the Supreme Court struck down President Trump’s global tariffs in February, his administration has been busily working to reconstruct them, exploring legal options that would allow them to build back the tariff wall between the U.S. economy and the rest of the world. Late Tuesday night, the Trump administration unveiled part of its Plan B: a tariff of 10% to 12.5% on 59 countries and the 27-member European Union. The levies were intended to pressure governments that the United States says have not enacted or enforced laws against trading goods made with forced labor. Those tariffs could go into effect as soon as July, and they are unlikely to be the last ones. The administration is working on another slate of tariffs related to countries’ manufacturing practices that will presumably be added to the forced labor ones.”
June 3 – Politico (Camille Gus): “The European Commission criticized U.S. plans to impose a new 10% tariff on the EU… after the Trump administration found that Brussels had failed to ban the import of goods made with forced labor. ‘The Commission will carefully analyse the preliminary findings of the investigation and will continue engaging with the U.S. Administration… The EU considers tariffs imposed on these grounds to be unjustified,’ Deputy Chief Spokesperson Olof Gill said…”
June 2 – Bloomberg (Barbara Nascimento and Beatriz Reis): “The US is proposing a new 25% tariff on Brazilian goods after an investigation found the South American country engages in unfair trade practices. The announcement… exempts a vast list of products including coffee, beef, some fruits and aircraft parts.”
June 3 – Bloomberg (Brian Platt, Thomas Seal and Josh Wingrove): “Canada made new and detailed proposals on trade to the US based on negotiating progress in recent weeks, said Canadian cabinet minister Dominic LeBlanc. ‘A strong, prosperous Canadian economy is good for North America, and we discussed how we can work together on a number of issues that strengthen the competitiveness of the North American economy, he said… Discussions with US policymakers will continue in the coming days — but he also warned that talks could still take a negative turn and that ‘turbulence’ is to be expected.”
Constitution Watch:
June 3 – Politico (Dasha Burns, Myah Ward, Aaron Pellish and Josh Gerstein): “President Donald Trump is expected to nominate Todd Blanche to be attorney general, the position he’s held on an acting basis since April, administration officials said… The president could nominate Blanche as soon as Wednesday night, two officials, who were granted anonymity to discuss private conversations, told POLITICO… Blanche has enjoyed an unusually close relationship with the president, forged by his role as Trump’s lead defense attorney as Trump battled four criminal cases in the lead-up to the 2024 election.”
New World Order Watch:
June 3 – Financial Times (John Plender): “Is the US finally about to fall victim to imperial overstretch? Despite years of speculation, the country’s position as global military, economic and financial hegemon has to date remained intact. But Washington’s status may be about to be hit by fast-changing geopolitics and geoeconomics — and the habit, picked up by the US this century, of borrowing from tomorrow to pay for wars today. The conflict in Iran has been costing an estimated $2bn a day in short-term direct costs. The ratio of US public debt to GDP is set to breach its historic post-second world war high. And President Donald Trump has submitted to Congress a national defence budget request for 2027 of an astonishing $1.5tn, double the figure for 2020. That number includes nothing for Trump’s latest war of choice. Suddenly the risk of overstretch looks very real — both to the US’s friends and to its foes.”
May 31 – Bloomberg (Gonzalo Soto): “Mexican President Claudia Sheinbaum launched her strongest criticism to date against what she says are blunt US attempts to interfere in Mexican domestic politics. What had been a recurring theme in her recent speeches became on Sunday a rallying cry to stir up her supporters at a rally in Mexico City, where she claimed that since the deaths of two CIA agents on April 19, efforts by US authorities and far-right groups to destabilize her government have intensified… ‘An incident of this magnitude is unprecedented in our bilateral relation… Is this really a legitimate, genuine interest in helping Mexico? Or are we perhaps seeing sectors of the US far right positioning themselves ahead of their 2026 elections?’”
May 30 – Bloomberg (Alastair Gale): “Japan rejected China’s accusation that it’s pursuing ‘new militarism,’ a sharp rebuke against Beijing as tensions between the two countries continue to simmer. Without explicitly naming China, Japan’s defense minister said… Tokyo was being unfairly called out for its moves to increase spending on long-range missiles and other weapons. ‘There is a country that has a huge arsenal of nuclear weapons and strategic bombers,’ Defense Minister Shinjiro Koizumi said… ‘Japan has neither of such weapons, and yet Japan is labeled new militarism. Isn’t it strange?’”
U.S./Russia/China/Europe/Iran Watch:
June 4 – Politico (Milena Walde): “U.S. Secretary of State Marco Rubio acknowledged Wednesday that Greenland is part of Denmark ‘for now,’ while signaling that Washington remains deeply engaged in discussions over the Arctic island’s future role in Western security. Testifying before the House Foreign Affairs Committee, Rubio sidestepped a question about whether Washington needed to own territory within NATO to defend it, instead pointing to ongoing talks with Denmark and Greenland over the island’s role in collective defense. ‘We are actually involved in conversations with Greenland and Denmark on the use of Greenland for collective defense for all of us,’ Rubio said. Calling the island a key element of missile defense, he added: ‘I think we’re in a good place on it now’ and he predicted ‘pretty good news’ could emerge from the talks.”
Ukraine War Watch:
June 3 – Reuters (Guy Faulconbridge and Andrew Osborn): “Ukrainian drones hit an oil terminal in St Petersburg and a warship in dry-dock at a nearby naval base, hours before Vladimir Putin’s showcase economic forum got under way in the city, in a clear attempt to embarrass the Kremlin chief. The attack on Putin’s home city, location of his own ‘Davos’ - a glitzy annual economic forum designed to attract foreign investment - comes as both sides dial up strikes against each other in their more than four-year-old war with no imminent end in sight.”
June 2 – Associated Press (Samya Kullab and Vasilisa Stepanenko): “Russia launched hundreds of drones and dozens of missiles against Kyiv and other Ukrainian cities overnight, killing at least 22 civilians and wounding 138 others, authorities said... Russian President Vladimir Putin has escalated Moscow’s aerial campaign in recent weeks in an apparent bid to take advantage of Ukraine’s shortage of U.S.-made air defense systems and persuade an increasingly pessimistic audience at home that Moscow is prevailing in the 4-year-old war.”
Taiwan Watch:
May 30 – Bloomberg (Dave Sebastian and Miaojung Lin): “Taiwan has condemned the expulsion of a New York Times journalist from China over an interview the US-based newspaper conducted with the self-ruled island’s leader, saying it is common for a president of a democratic country to explain its position. ‘Taiwan will not be silenced because of oppression,’ Taiwan Presidential Office spokesperson Karen Kuo said…”
AI Bubble/Arms Race Watch:
June 3 – Wall Street Journal (Katherine Blunt): “Tech companies are earmarking unprecedented sums of money to finance the build-out of massive data centers, with a planned $85 billion equity-raise by Google parent Alphabet being the latest example. But even as the piles of capital secured have grown ever larger, the ability to deploy it in the artificial-intelligence race has become less certain. Supply-chain backlogs, permitting fights and availability of power supplies are among the issues that have caused the construction of data centers to fall behind targeted timelines, with the gap growing wider in recent months: A JPMorgan analysis last month found that more than 60% of data-center capacity planned for completion in 2027 isn’t yet under construction, and another 7% is delayed. It is a seeming paradox: If hyperscalers can’t break ground on many of the projects they have already announced, what difference can hundreds of billions of dollars more make—however eager Wall Street may be to supply it?”
June 1 – Wall Street Journal (Kate Clark and Corrie Driebusch): “Anthropic, the artificial intelligence lab recently valued at nearly $1 trillion, said… it has filed confidentially for an initial public offering, setting up a blockbuster year for IPOs. The filing could put the company behind the Claude AI model on a path to go public this fall. Elon Musk’s SpaceX is preparing to stage what is likely to be the largest IPO ever next week. The Wall Street Journal reported last month that Anthropic’s chief rival, OpenAI, was preparing to submit its own IPO filing imminently.”
June 3 – Associated Press (Debby Wu): “Taiwan Semiconductor Manufacturing Co.’s global chip supply will fall short of AI-fueled demand for years to come, chief executive officer C.C. Wei said, suggesting production capacity remains a key bottleneck in the buildout of global computing infrastructure. TSMC won’t be able to fulfill demand led by American customers even as more manufacturing capacity comes online in the US over the next few years, Wei told shareholders… Still, Taiwan’s largest company — which makes the majority of the world’s advanced semiconductors for AI — will refrain from initiating the sort of abrupt price hikes that shook up the memory chip sector, Wei added… ‘It will be a long time before we can meet customer demand,’ Wei said.”
June 2 – Bloomberg (Debby Wu): “SK Hynix Inc. plans to double its memory chip capacity over the coming half-decade, a major expansion that should help ease a global shortage of an essential component of AI. The company is responding to an endemic deficit of storage chips that could last till 2030, Chairman Chey Tae-won told reporters…”
May 31 – Wall Street Journal (Kate Clark): “Silicon Valley venture-capital firms are desperate for bets that can survive—and thrive in—the AI reckoning. Investors known for early investments in software, internet services and social-media companies like Snap and Uber have begun venturing far outside of their comfort zones into investments in physical technologies and materials tied to the artificial-intelligence boom. They are making new wagers on AI infrastructure like chips, power and manufacturing, as well as a far-ranging category called physical AI, or autonomous machines that can understand and perform complex real-world tasks.”
May 31 – Bloomberg (Heather Landy): “Cost savings from automation are broadly falling short of projections, according to a new Bain & Co. global survey of large companies. The missed targets ‘should be making executives uncomfortable,’ especially since many of them are approving increased spending for artificial intelligence on the basis of expected savings, the consulting firm said… ‘Self-funding the next wave from past returns sounds like discipline. In reality, it is a circular bet with a structural leak,’ the report said.”
June 4 – Axios (Ashley Gold): “AI development is moving so rapidly that soon it will be able to advance itself without human involvement, per a new blog post from Anthropic. ‘Recursive self-improvement,’ a process in which AI systems build, test and improve themselves, is a phenomenon which may come sooner than expected, Anthropic says… Anthropic warns that AI is no longer just changing how people work, it’s also beginning to change how AI itself gets built. New data from the company suggests that frontier models have accelerated coding, debugging and research. That is likely to create a feedback loop in which AI systems create even more sophisticated successors. ‘We've always found that the best thing to do is to socialize the concept and basically give people a sense of what's coming,’ Anthropic’s Jack Clark said…”
May 31 – Financial Times (Jamie John): “Young people were promised that artificial intelligence would make them more productive, more creative and more employable. Many now worry it might make them less valuable instead. From software developers who fear being replaced to students who feel AI is hollowing out learning and creativity, a growing number of young adults say the technology is reshaping their lives in unsettling ways. In the US, roughly half of Gen Z — those born between 1997 and 2012 — reported using generative AI at least once a week. Yet 31% said it made them feel angry, up from 22% last year, according to a recent Gallup poll.”
June 4 – Financial Times (Joe Miller): “Americans are far more likely to oppose the construction of AI data centres than citizens of other big economies, as a grassroots backlash against the rollout of the technology gains momentum across the country. A poll conducted by Public First found that voters in the US… had the lowest appetite for building computing power among 15 large countries, including Japan, Canada, Brazil and the UK. Just 26% of Americans supported increased construction of data centres, while roughly 30% of Britons, Germans and French backed such projects.”
Bubble Watch:
June 4 – New York Times (Lauren Hirsch): “At Goldman Sachs’s Manhattan headquarters, rocket ships have taken over the lobby. Not to be outdone, Bank of America is planning to light up the spire atop its Midtown offices on Thursday night to resemble a rocket taking off. A few blocks away on Thursday, JPMorgan Chase hosted a SpaceX sales pitch to thousands of clients at its Park Avenue headquarters. It broadcast to 90 bank branches and offices across 26 states, some of which closed early for the event. The bank’s chief executive, Jamie Dimon, was there to sell the deal to the crowd himself. There has never been a larger initial public offering than that of SpaceX, Elon Musk’s rocket maker and artificial intelligence company, and people involved in the sales effort who were not allowed to speak publicly said Wall Street’s efforts to sell the I.P.O. had been just as extraordinary.”
June 5 – Wall Street Journal (Corrie Driebusch): “To support the $1.77 trillion valuation Elon Musk’s SpaceX is targeting in its initial public offering, bankers are telling investors to look to the future. SpaceX’s revenue could reach $3.4 trillion in 2040, according to a Morgan Stanley analysis shared with top investors… Morgan Stanley told investors the rocket maker’s adjusted earnings before interest, taxes, depreciation and amortization in 2040 could top $2.7 trillion, the people said. SpaceX posted revenue of $18.7 billion in 2025 and a loss of $4.9 billion.”
June 4 – Bloomberg (Bailey Lipschultz): “Research analysts across Wall Street are telling would-be SpaceX IPO buyers that they’re modeling for the company’s artificial intelligence division to see 100 times revenue growth at the end of the decade, to help justify a targeted $1.8 trillion valuation. Evercore ISI research analysts expect SpaceX’s AI division to deliver $755 billion of sales by 2031, up from $3.2 billion last year… The research team sees total revenue for the company topping $1 trillion that year after posting $18.7 billion in 2025…”
June 2 – Bloomberg (Todd Gillespie): “A boom in equity markets is being driven by an appetite for profit that’s outweighing fears about economic disruption and inflation risks, said Goldman Sachs Group Inc. Chief Executive Officer David Solomon. ‘We are definitely in a moment where there’s more greed than there is fear,’ Solomon said… ‘The capital is available.’”
Crypto Bubble Watch:
June 4 – Financial Times (Jill R Shah): “Bitcoin is heading for its largest weekly loss since November 2022 after the cryptocurrency’s biggest corporate cheerleader sold a portion of its giant holdings for the first time in more than three years. The price fell as much as 5.5% on Thursday to $61,344 before recovering slightly, leaving its losses this week at almost 14%. The sell-off came after Michael Saylor’s bitcoin-hoarding venture Strategy said it had sold 32 bitcoin last week for a total of $2.5mn, only its second sale since it began buying the tokens in August 2020.”
June 4 – Bloomberg (Suvashree Ghosh): “Bitcoin’s slide this week is adding fresh pressure to one of the most ambitious financial experiments to emerge from the recent crypto boom: publicly traded companies created to accumulate digital assets on behalf of investors. Shares of dozens of these digital-asset treasury companies have continued to sink alongside the broader market downturn, extending losses that in many cases far exceed those of the cryptocurrencies they were built to own. The combined market value of fully diluted Bitcoin treasury company stocks has fallen to about $72 billion from nearly $134 billion at its most recent peak in early October, according to Artemis data, erasing $62 billion and underscoring how a once-hot crypto trade continues to unravel.”
Inflation Watch:
June 3 – Yahoo Finance (Jennifer Schonberger): “Higher-income households are weathering higher inflation better than middle- and lower-income Americans, underscoring the prevalence of the so-called K-shaped economy, according to the Federal Reserve’s Beige Book... ‘Higher-income households remained resilient and less sensitive to price increase, while middle-income households were described as ‘squeezing more life out of every dollar before deciding to spend it,’ and low-income consumers showed greater financial strain,’ the report read.”
June 3 – Reuters (Kanishka Ajmera and Aditya Soni): “Soaring memory chip prices driven by massive AI demand risk stoking ‘chipflation,’ Morgan Stanley analysts cautioned, as makers of devices from smartphones to PCs are forced to choose between raising prices and settling for thinner margins. The brokerage said… memory chip prices have spiked six-fold in the past year, as manufacturers have struggled to keep up with Big Tech’s AI infrastructure spending spree and prioritized higher-margin data center chips over those used in everyday devices. ‘What began as an AI infrastructure bottleneck is now spreading into hardware margins, device affordability, cloud costs, inflation and policy,’ Morgan Stanley said in a 66-page note, adding the crunch has ‘become a macroeconomic concern.’”
June 3 – Bloomberg (Erin Ailworth and Michael Hirtzer): “While US farmers brace for higher fertilizer and chemical bills tied to turmoil in the Middle East, another expense is already taking a bite out of razor-thin margins: diesel fuel. Prices for the fuel that powers tractors, combines and grain trucks have surged as the war in Iran disrupted global oil flows, catching many producers who expected lower energy costs this year off guard. In Illinois, the top US soybean-producing state, farm diesel averaged a record $5.41 a gallon at the start of May, nearly double the price a year earlier.”
June 3 – Financial Times (Jamie Smyth): “Donald Trump’s Iran war has driven US oil stocks to their lowest level in two decades as his administration drains stockpiles to contain surging prices and exporters capitalise on the drop in Middle Eastern supply. US government data… showed total stocks of crude and petroleum products such as petrol fell by 10.6mn barrels last week to 1.57bn barrels — the lowest level since 2004. The sharp fall triggered new warnings from industry analysts that oil prices are poised to move sharply higher again within weeks.”
June 2 – Bloomberg (Jonathan Ferro, Lisa Abramowicz, and Annmarie Hordern): “Diesel stocks in the US risk reaching a critical threshold of 20 days of supply by August if commercial inventories keep declining at the recent pace amid the near-complete closure of the Strait of Hormuz, according to Goldman Sachs… co-head of global commodities research. ‘If you look at the last eight weeks, it’s the largest draws in US oil stocks in history,’ Goldman’s Daan Struyven said… ‘Diesel stocks in the US are at the lowest level since 2003.’”
June 4 – Wall Street Journal (Jennifer Hiller): “A new style of architecture is rising in the sprawling suburbs of the Sonoran Desert: windowless data centers that hum 24 hours a day and guzzle as much electricity as a midsize city. As Microsoft and other tech giants expand their footprints in one of the nation’s largest data-center markets, a high-stakes battle is unfolding over how to pay for the massive power-grid upgrades needed to drive the AI revolution. Arizona Public Service, the state’s largest utility, sits at the center of the firestorm. APS is proposing a 45% electricity-rate increase for ‘extra-large energy users,’ primarily data centers, and a roughly 14.5% increase for residential customers.”
Federal Reserve Watch:
June 2 – CNBC (Matt Peterson): “Federal Reserve Chair Kevin Warsh has hired two conservative economic policy researchers to work with him at the central bank... The two researchers are Paul Winfree, the author of the chapter on the Federal Reserve in the conservative policy blueprint ‘Project 2025,’ and Daniel Heil, a fellow at Stanford’s Hoover Institution think tank, where Warsh held a position before joining the Fed. The two are ‘working as temporary contractors to support Warsh in his policy analysis and planning on special projects in the areas in which they have worked with him over time,’ the person said.”
June 2 – Reuters (Howard Schneider): “Federal Reserve Chairman Kevin Warsh pledged to follow ‘the best of the Fed's traditions’ in an opening note to the central bank’s more than 20,000 employees as he starts his four-year term, while also promising a broad look at what might be done differently. The memo is an early window on Warsh’s efforts to pursue what he has described as an extensive reform agenda… while also mending fences with colleagues and staff whose work he has criticized. ‘Our highest priority will be to get policy right in service to our remit and the national interest. We will ensure an environment that supports our people in doing their life’s best work… We won’t rely on past practices when we find better alternatives… In the coming quarters, I expect that together we will have open, clear-eyed discussions of Fed strategies, policies, and operations.’”
June 3 – Financial Times (Robin Harding): “When Kevin Warsh was first nominated as a governor of the US Federal Reserve in 2006, at just 35 years old, a senator dispatched him for a particularly intimidating job interview — with Paul Volcker, the renowned Fed chair who resisted political pressure and fought inflation from 1979 to 1987. Volcker, in Warsh’s telling, gave him two pieces of advice. ‘He said, ‘Kevin, there’s something I need to tell you. This job you’re signing up for really is quite simple. It really only requires two things,’’ Warsh told the How Leaders Lead podcast in 2023. ‘And he said: ‘The first thing is, you have to get interest rates about right.’’Warsh noted down this profound lesson from the master. ‘And he said: ‘The second thing is probably more important than the first. When you’re a governor of the Federal Reserve, probably the most important thing is to make sure you look like you know what you’re doing.’’”
June 3 – Reuters (Ann Saphir): “Federal Reserve Bank of Dallas President Lorie Logan… said she feels monetary policy is currently ‘neutral or perhaps even a bit loose,’ in contrast with what she feels the economy needs in light of inflation that’s too high. Inflation is heading toward 2.5%, she said, but the Fed aims to get it down to 2%. ‘In order to do that, we need at least mildly restrictive policy to finish the job,’ Logan said, in remarks which underscore her view that the Fed may need to raise interest rates.”
June 4 – Axios (Courtenay Brown): “With a steady labor market and still-high inflation, two Federal Reserve officials are on the record this week noting that the next rate move might be up… Dallas Fed president Lorie Logan said that consumer spending remains robust, corporate earnings are ‘going gangbusters’ and the AI investment was continuing to boom. ‘These conditions indicate that monetary policy is not restraining the economy,’ she said. ‘I am increasingly concerned that higher interest rates could be necessary later this year to fully restore price stability and appropriately balance both sides of the Fed's dual mandate.’”
June 2 – Wall Street Journal (Jessica Coacci): “Cleveland Fed President Beth Hammack said monetary policy may not be sufficiently restrictive to bring inflation down to 2%... Hammack, who votes on monetary policy this year, said if the central bank waits for definitive evidence that high inflation has become embedded in the economy, it may require larger adjustments, at a greater cost. ‘It’s reasonable to keep rates steady given the uncertainties around the economic outlook. But if recent trends continue, it may soon be appropriate to act,’ she said.”
May 31 – Financial Times (Claire Jones): “Jay Powell has said the US Federal Reserve is in the throes of a ‘stress test’ that threatens the strength and stability of the world’s largest economy, claiming Donald Trump’s attempts to fire central bankers undermine the rule of law. Powell… said… on Sunday that the Fed was ‘like many other [US] institutions… undergoing a stress test’. ‘If any administration finds a way to remove Fed officials over policy differences, then future administrations will do so as well,’ Powell added, in a speech as he accepted this year’s John F Kennedy Profile in Courage Award.”
June 1 – Bloomberg (Jonathan Ferro, Lisa Abramowicz and Annmarie Hordern): “The build-out for artificial intelligence will be inflationary in the early going, preventing new Federal Reserve Chair Kevin Warsh from cutting interest rates as quickly as he has suggested should be possible, according to Torsten Slok of Apollo Global Management Inc. ‘We’ll probably have to wait a little while for that because initially the AI boom will certainly be inflationary,’ Slok, Apollo’s chief economist, said… ‘The risk of price pressure is ‘very clear when you look at semiconductor prices, when you look at energy prices, when you look at labor.’”
U.S. Economic Bubble Watch:
June 3 – CNBC (Jeff Cox): “Private hiring expanded at a brisk pace in May, providing further indication of a stable labor market, ADP reported… The payrolls processing firm said companies added 122,000 workers for the month, up from 105,000 in April and better than the… consensus estimate for 110,000. May marked the strongest month since January 2025… Unlike prior months, where job growth was concentrated in healthcare and a few other sectors, gains were more broad-based. Eight of the 10 sectors ADP tracks saw gains, and hiring was spread evenly both by company size and geography. Education and health services again led with 57,000 hires, but trade, transportation and utilities added 36,000, professional and business services contributed 11,000, and construction and leisure and hospitality both rose by 8,000.”
June 4 – Associated Press (Matt Ott): “The number of Americans filing for jobless aid hit their highest level in four months last week, but layoffs remain historically low… U.S. applications for unemployment benefits for the week ending May 30 increased by 13,000 to 225,000… The total number of Americans filing for unemployment benefits for the previous week ending May 23 fell by 8,000 to 1.78 million…”
June 2 – CNBC (Jeff Cox): “Job openings hit their highest level in nearly two years during April while hiring fell sharply… Available employment hit 7.6 million for the month, a surge of 731,000 from the prior month and the highest level since May 2024. Economists… had been looking for 6.8 million openings from the BLS’ Job Openings and Labor Turnover Survey. The jump in openings put the available jobs above the total of unemployed workers… By industry, nearly all of the openings came from the professional and business services category, which added 668,000 positions…”
June 3 – Bloomberg (Maria Eloisa Capurro): “Employment remained stable in recent weeks as inflation continued to rise across much of the country, driven primarily by the impact of war in the Middle East on energy prices, the Federal Reserve said. Overall economic activity increased at a slight to moderate pace in 10 of 12 Fed districts, according to the US central bank’s Beige Book survey of regional business contacts… ‘Districts noted that energy-related costs tied to the conflict in the Middle East were the primary driver of inflationary pressures, with spillovers into shipping, packaging, groceries and fertilizer,’ the Fed said. ‘Consumer uncertainty and concerns about fuel prices impacting households were noted by several districts.’”
June 1 – Bloomberg (Matthew Boesler): “Spending on data-center construction in the US eclipsed $50 billion in April for the first time, according to Census Bureau figures… Data centers now account for 2.3% of all US construction spending… Private-sector outlays for data centers also outpaced public spending on transportation-related structures — a category that includes airport facilities, marine terminals and mass transit — for the first time.”
June 5 – Bloomberg (Augusta Saraiva): “US consumer borrowing posted another strong increase in April, in the biggest back-to-back gain since the end of 2022. Total credit outstanding rose by $20.7 billion after a revised $22.2 billion advance in March... The median estimate in a Bloomberg survey of economists called for a $17.7 billion advance. Non-revolving credit, such as loans for vehicle purchases and school tuition, was up $9.1 billion in April. Credit-card and other revolving debt outstanding rose by $11.6 billion. The report doesn’t include mortgages.”
June 4 – Bloomberg (Mark Niquette): “The share of US small businesses saying they’re planning new hires or are having trouble filling jobs fell in May to a six-year low, according to the National Federation of Independent Business. A seasonally adjusted 9% of owners plan to create new jobs in the next three months, down 4 percentage points from April, and the share reporting they had job openings they couldn’t fill fell by 5 percentage points to 29%... Both measures were the lowest since May 2020.”
June 3 – CNBC (Diana Olick): “Mortgage rates finally eased a bit last week, but it was not enough to light a fire under demand… Applications for a mortgage to purchase a home declined 3% for the week to the slowest pace since April. Demand was 7% higher than the same week one year ago, when mortgage rates were 35 bps higher.”
June 3 – CNBC (Diana Olick): “More frustrated home sellers were giving up, right in the midst of the all-important spring market… Nationwide, 5.8% of all home listings were pulled off the market in April, according to Redfin… That ties with December for the highest share of homes delisted since March 2020… The increase comes as higher mortgage rates, elevated gas prices and weaker consumer confidence take their toll on housing demand. Sellers are no longer in the driver’s seat and aren’t getting the prices they want. Atlanta saw the highest share of homes come off the market in April, with 1 in 10 delisted. San Jose, California, followed with roughly 9% pulled, then Los Angeles (7.8%), Dallas (7.8%) and Seattle (7.7%).”
China Watch:
June 2 – Reuters (Liangping Gao and Ryan Woo): “China’s services activity expanded at the fastest pace in three months in May, helped by stronger growth in new business and a rebound in overseas demand, though rising cost pressures weighed on firms, a private-sector survey showed… The RatingDog China General Services Purchasing Managers’ Index… rose to 54.4 in May from 52.6 in April…”
Central Banker Watch:
May 30 – Bloomberg (Zoe Schneeweiss): “The European Central Bank shouldn’t hesitate to act, given elevated consumer-price pressures, according to Governing Council member Alvaro Santos Pereira. ‘I think it’s better to act sooner rather than later so that we don’t have much greater second-order effects later on… When there are potential inflationary spirals, I prefer that we act more quickly and decisively.’”
June 2 – Wall Street Journal (Paul Hannon): “The case for raising the Bank of England’s key interest rate grows stronger the longer the conflict in the Middle East continues, and action may be needed within the next few weeks, a member of the Monetary Policy Committee said… Megan Greene said the MPC can’t rely on markets to do its job, and yields will likely fall back if the BOE doesn’t raise the key rate. ‘I think the case for hiking rates grows as the conflict wears on and believe a tightening in monetary policy over the next few weeks or months may be necessary,’ she said…”
Europe Watch:
June 2 – Financial Times (Olaf Storbeck and Ian Smith): “Eurozone inflation rose to 3.2% in May, bolstering the case for the European Central Bank to raise interest rates for the first time in nearly three years as it seeks to contain price pressures unleashed by the conflict in the Middle East. Tuesday’s estimate… was up from 3% in April and marked the highest annual inflation rate since September 2023. Energy was 10.9% more expensive than a year before, a slight increase from April’s 10.8% rise.”
Japan Watch:
June 4 – Reuters (Leika Kihara): “Bank of Japan Governor Kazuo Ueda has all but cemented a June rate hike in a clear narrative pivot toward inflation fighting as the Iran war-driven energy shock sharpens price risks and opens the door to more frequent increases in borrowing costs. In his speech on Wednesday, Ueda shed his dovish image and stressed the BOJ’s readiness to act against mounting inflation that could harm the economy if left unchecked… ‘Even if the situation surrounding the Middle East remains unclear, we must discuss the pros and cons of raising the policy rate if we judge that upside risks to prices outweigh downside risks to economic activity,’ Ueda said, language that reinforced dominant market bets of a rate hike at the June 15-16 meeting.”
June 3 – Bloomberg (Toru Fujioka): “Bank of Japan Governor Kazuo Ueda indicated a good chance of an interest rate hike this month if the risk of hotter-than-expected inflation looks bigger than the potential hit to the economy from the Middle East crisis. ‘Even if the situation remains unclear, should it be judged that upside risks to prices outweigh downside risks to economic activity, it will be necessary to thoroughly discuss the pros and cons of raising the policy interest rate,’ Ueda said…”
June 2 – Bloomberg (Erica Yokoyama): “Japan’s cabinet approved a $19.4 billion extra budget to fund measures meant to cushion households from inflation tied to Middle East turbulence, putting fiscal policy back in the spotlight for bond investors. Prime Minister Sanae Takaichi’s cabinet endorsed a ¥3.1 trillion ($19.4bn) package that includes a newly created ¥2.5 trillion reserve fund to respond to rising prices for commodities by providing subsidies.”
Emerging Market Watch:
June 1 – Bloomberg (Sangmi Cha): “South Korea’s equity market has overtaken India’s as the world’s sixth largest, driven by a relentless surge in chip heavyweights powering the global artificial intelligence buildout. The total market capitalization of Korea-listed companies has soared 86% this year to $5 trillion, while India’s has declined to $4.8 trillion…”
June 5 – Bloomberg (Ruth Carson, Abhishek Vishnoi, and Matthew Burgess): “Global investors are rapidly losing confidence in Indonesia as the nation’s stocks tumble at the fastest pace worldwide and its currency sinks to all-time lows. Just five months after hitting a record high, the benchmark stock index has tumbled 38% to become the worst performer this year among more than 90 global gauges tracked by Bloomberg. The rupiah has weakened about 7.5%, while foreign investors have pulled billions of dollars from Indonesian bonds. It marks a dramatic turn for a commodities-rich country that had been a staple allocation in many emerging-market portfolios.”
June 1 – Reuters (Shubham Batra): “India’s fiscal deficit stood at 4.4% of the gross domestic product for the year ended March 31, 2026…, in line with government's revised estimates.”
Social, Political, Environmental, Cybersecurity Instability Watch:
June 2 – Politico (Zia Weise): “The world must prepare for a surge in weather extremes and heat waves as a potentially exceptional El Niño emerges, the United Nations’ World Meteorological Organization has warned. The WMO said… there’s an 80% chance of an El Niño — the warm phase of a natural climate cycle in the Pacific Ocean — developing between June and August, and a 90% chance the event will arrive by November. El Niño’s return heralds a temporary upsurge in global temperatures on top of the warming effect of human-caused climate change. The event also disrupts rainfall patterns around the world, usually producing intense downpours and floods in some regions while bringing drought to others.”
June 2 – Bloomberg (Olivia Raimonde): “Extreme weather will likely spur more than $20 trillion in global spending over the next decade, boosting sales and earnings for reinsurers and companies involved in energy efficiency and climate security, according to… Bloomberg Intelligence. Returns for a group of 275 companies focused on environmental adaptation and mitigation beat the broader market by almost 32 percentage points in the year through April 19, Bloomberg Intelligence analysts Andrew John Stevenson and Eric Kane wrote… Spending on climate adaptation has helped drive gains for companies including BWX Technologies Inc., RenaissanceRe Holdings Ltd., Woodward Inc. and Dycom Industries Inc., they wrote.”
June 4 – Axios (Ben Berkowitz): “A deadly cattle pest called New World screwworm has been found in Texas, 60 years after it was effectively eradicated in the United States. The U.S. beef herd is already the smallest it’s been in 75 years, and retail prices for the staple protein are at record highs. The U.S. Department of Agriculture confirmed the case in Zavala County, Texas… The industry long feared an infestation in the United States after the pest — actually the burrowing larvae of a fly — was found moving north in Mexico.”
