South Korea’s KOSPI equities index sank 10.0% Tuesday, rallied 3.3% Wednesday and an additional 5.4% Thursday, before sinking 5.8% in wild Friday trading. At intraday Friday lows, the index was down 9.3%. Japan’s Nikkei 225 Index was 5.4% lower at Friday’s intraday trough, ending the session with a 4.2% loss. Taiwan’s TAIEX Index lost 4.6% in Friday trading, with China’s CSI 300 Index down 3.0%, and Hong Kong’s Hang Seng Index 1.8% lower. AI Bubble leaks.
The Dollar Index traded this week to a one-year high. The Norwegian krone lost 2.3%, the New Zealand dollar 1.7%, the Australian dollar 1.7%, and the Swedish krona 1.6%. EM currency losers included the Russian ruble (6.7%), Chilean peso (2.0%), Thai baht (1.6%), Polish zloty (1.4%), and the Hungarian forint (1.3%).
The iShares Emerging Markets ETF (EEM) dropped 5.1% this week. “EM Stocks Post Worst Week in More Than Three Months on AI Rout.”
Even with Friday’s 1.5% rally, the MAG7 Index ended the week down 5.5%. At Thursday’s intraday lows, MAG7 suffered a 14% m-t-d loss. Losses this week included Nvidia (NVDA) 8.6%, Alphabet (GOOGL)/Google 8.3%, Tesla (TSLA) 5.2%, Amazon (AMZN) 4.8%, Apple (AAPL) 4.8%, and Meta Platforms (META) 4.7%. SpaceX sank 17.2%.
June 26 – Bloomberg (Caleb Mutua, Ying Luthra, and Brian W Smith): “SpaceX’s blockbuster bond sale is weakening so quickly in the secondary market that traders say they can’t recall another recent deal that widened this sharply. One large dealer was quoting SpaceX bonds maturing in 2056 on Friday at levels as much as 0.32 percentage point wider than the issue price of 1.75 percentage points above Treasuries… Paper losses on SpaceX’s $25 billion offering have mounted since the debt began trading and totaled roughly $305 million as of late Thursday relative to Treasuries.”
It’s worth noting that Oracle (ORCL) CDS (Credit Default Swap prices) surged 16 this week to an eight-week high of 172 bps (began ’26 at 145). CoreWeave bond yields (8.5%, 2032) surged 37 bps to 8.64%. High yield spreads (to Treasuries) widened a notable 17 bps – the largest widening since the start of the war – to 282 bps (high since April 7th). Leverage Loan prices fell 27 cents to 94.95 (low since April 15th).
Meanwhile, weekly junk issuance surpassed $7 billion, according to Bloomberg, “the busiest since early this month.” Month-to-date issuance is a chunky $33.5 billion.
June 24 – Bloomberg (Jack Trapanick): “US investment-grade bond sales set another record in June, fueled by voracious investor demand and a wave of borrowing tied to the artificial intelligence spending boom. Issuance has reached $175 billion…, 60% above that for all of June 2025 and topping the old high set in 2020 — when near-zero interest rates in the wake of the Covid-19 pandemic helped drive a borrowing frenzy… Sales opened 2026 with a record January, followed by the second-highest volumes the following three months. At $1.15 trillion, this year’s investment-grade supply is equal to this point in 2020. Issuance for all of that year reached $1.75 trillion…”
At least in some market sectors, there’s some real pain developing. Bitcoin (BTC.X) dropped another $3,350, or 5.3%, to $59,850, the low back to September 2024 (down 31.7% y-t-d). WTI crude was pummeled 10.7% to $69.23, the low since early March. Silver was slammed 8.9%, trading below $60 for the first time since December (down 17.5% y-t-d). The Bloomberg Commodities Index lost 3.1%. Outside of energy, commodity losses this week included Aluminum 6.4%, Nickel 5.0%, Cotton 5.7%, and Wheat 4.5%.
Trading dynamics point to faltering hedge fund trades and strategies. The long “big tech” versus shorts elsewhere has been a recent loser. For the week, the Nasdaq100 dropped 4.2%, while the small cap Russell 2000 advanced 1.0%. Indicative of the unwind of “pairs trades,” the Goldman Sachs (GS) short index outperformed again this week, rising another 1.9%. Curiously, the Broker/Dealer index was hammered 4.8% this week, as the (typically correlated) KBW Bank index rose 1.5% (trading Thursday at an all-time high).
There was some “risk off” movement this week in high yield spreads and CDS, leveraged loans, and swap spreads. Treasuries and global bonds appeared to benefit somewhat from safe haven demand (and short covering).
Most financial conditions indicators, however, held notably steadfast at “loose.” Considering the degree of cross asset market instability, especially volatility and losses in “big tech,” I would have expected more of a market shift to incipient risk aversion. I expect de-risking/deleveraging to gain momentum. But it’s almost as if U.S. markets assume “the fix is in” for the midterms.
June 24 – Reuters (David Lawder and Susan Heavey): “U.S. Treasury Secretary Scott Bessent… applauded Federal Reserve Chair Kevin Warsh’s plan to reduce forward rate guidance, but said Fed policymakers need to keep an open mind on the inflation impact of the Iran conflict and productivity gains driven by artificial intelligence models.”
June 24 – Axios (Courtenay Brown): “In a speech in New York…, Treasury Secretary Scott Bessent said that a long-running bet on cheaper goods and deeper economic integration making America richer and safer had failed. The speech set a framework for President Trump’s economic policies since his second term, including tariffs and calls for reshoring. But it also suggests that those policies may be part of a broader rethinking of globalization that extends well beyond one administration... ‘The nation that depends on its adversaries for critical inputs is not truly sovereign. And the nation that reduces its economics to consumption is not truly prosperous,’ Bessent told the Economic Club of New York. Policymakers incorrectly assumed that ‘low prices would compensate for lost capacity,’ he added. Bessent argued that America got cheaper goods and more efficient supply chains, but became too dependent on foreign countries in the process. He said the answer is an economic strategy that puts greater weight on domestic production, supply chain resilience and national security.”
Extracts from Bessent’s Wednesday policy speech:
“In my remarks before the Economic Club of Dallas, I detailed how the structural vulnerabilities that we allowed to accumulate over time precipitated a drift into dependence. And last month… I noted that under President Trump, America has awoken to the risks we can no longer ignore and is now attuned to the responsibilities we can no longer neglect. So tonight, I would like to take the next step and describe our strategy for economic statecraft, by which I mean the disciplined use of America’s economic power in service of our sovereignty.”
“We opened our market because it helped to create a more prosperous world. And we tolerated imbalances because American economic strength appeared unassailable. Over time, however, those choices hardened into habits. Habits into assumptions. And assumptions, left unexamined, into vulnerabilities. We came to believe that access to the American market could be extended without condition—and therefore without consequence.”
“And to repair those imbalances with the world is not to retreat from it. On the contrary, it is to engage on terms that make America stronger. It is to insist on trade that is fair, reciprocal, and consistent with our national interest. And it is to more closely bind what we should have never allowed to cleave: our economic and national security.”
“So tonight, guided by these priorities, I want to organize our approach to economic statecraft under President Trump around five core principles. The first is that economic security begins with national capacity… The nation that depends on its adversaries for critical inputs is not truly sovereign. And the nation that reduces its economics to consumption is not truly prosperous.”
“The second principle is that America’s openness will be matched by reciprocity, which is the basis of durable cooperation… The third principle is that America will write the rules of the next economy…”
“The fourth principle is that financial leadership is a central instrument of statecraft… Of course, that leadership role bestows enormous advantages, among them lower borrowing costs, deeper capital markets, enhanced sanctions capabilities, and great influence across the global financial system.”
“The fifth and most important principle is that economic statecraft must serve the American people. The purpose of American economic statecraft is to connect national power with household prosperity.”
I have long argued against massive current account deficits and the hollowing out of our nation’s manufacturing base. For decades, trading endless dollars for imported goods and services has been the path of least resistance. There have been major Washington policy mistakes. Foreign countries have certainly been content to exploit opportunities.
But I have a fundamental disagreement with the Trump administration’s prognosis. Three decades of loose finance, Credit excess, and market Bubbles are the root cause of our nation’s vulnerabilities and global imbalances. Why manufacture when we can so easily finance all the imports we desire? Flooding the world with dollar balances has come with momentous consequences at home and abroad. For much too long, we have wielded our unique power to inflate finance. This overworked expedient is coming home to roost.
“I think we’re going to have a high GDP economy, without the traditional inflation seeping in. And as over the past few days, we’ve read the obituaries on Alan Greenspan. He had the foresight that in the ’90s, productivity was about 1.5% or leading into the ‘90s, he saw that the office modernization and the internet could be a boom for non-inflationary growth. And he let the economy, you know, I think that there was an early ’97, there was one tap on the brakes rate hike. But other than that, we had the longest sustained growth period in history. And I think there’s a very good chance that we could see that again.” Treasury Secretary Scott Bessent, interviewed by CNBC’s Joe Kernen, June 24, 2026
And from December (All-In Podcast): “If we go back to the 1990s, Alan Greenspan did a magnificent job, because he had an open mind that the Internet and office modernization boom was going to create a productivity bonanza for the U.S. economy. And he let it rip.”
“President Trump has left no stone unturned in his effort to spur investment in the American economy—from reordering the global trade landscape to creating an entirely new investment vehicle for newborn Americans. But the White House can only do so much; at a certain point, the Federal Reserve must also do its part to spur investment. The Fed needs to have merely an open mind. The open-mind maestro, former Fed Chairman Alan Greenspan, resisted premature rate hikes during the technology boom of the 1990s—and history proved him right.” Scott Bessent comments to the Economic Club of Minnesota, January 8th, 2026
Alan Greenspan lived an extraordinary life. He was a three-year-old toddler during the 1929 stock market crash – an adolescent of the Great Depression. Greenspan passed away Monday, as the Semiconductor Index (up 106% y-t-d) posted an all-time high. Ayn Rand disciple and free market ideologue. Townsend-Greenspan & Co. Advisor to Presidents Nixon and Carter. Replacement to Paul Volcker, serving as Fed Chairman from 1987 to 2006. “The Maestro.”
My career in the markets overlapped Scott Bessent’s. Post-1987 stock market crash excesses (i.e., real estate, junk bonds, M&A, S&L excess) culminating with an early-nineties deep recession and banking crisis. Greenspan slashed rates to a then remarkable 3%, creating an artificially steep yield curve to help recapitalize a deeply impaired banking system. This policy was instrumental in promoting leveraged speculation, the fledging hedge fund community in particular, along with Wall Street financial engineering.
Unprecedented leveraged speculation ensured that a “baby step” 25 bps rate increase in February 1994 triggered a highly destabilizing deleveraging and bond/derivatives market crisis. It wasn’t recognized as QE – and in fact it wasn’t recognized at all. But the GSEs stepped up in 1994 for an unprecedented $150 billion of marketplace liquidity. As they say, “the rest is history.”
Between the GSE market bailout and Washington’s Mexico bailout, it was off to the races. U.S.-generated (hedge fund leveraging and current account deficits) finance was instrumental in financing the Asian Tiger Bubbles, which collapsed horrendously in 1997. Things really came home to roost in September 1998, with the Russia and Long-Term Capital Management (LTCM) collapses. More bailouts.
Greenspan: “Had the failure of LTCM triggered the seizing up of markets, substantial damage could have been inflicted on many market participants… and could have potentially impaired the economies of many nations, including our own.”
The Nasdaq Composite returned 85.6% in 1999 – and another 24% in 2020 through March 10th. The nineties Bubble collapsed, with the Nasdaq losing 78% of its value at October 2022 lows. Rates were slashed to an unprecedented 1%.
Household mortgage Credit expanded 10.8% in 2001, 13.3% in 2002, 12.8% in 2003, 14.3% in 2004, 13.7% in 2005, and another 11.5% in 2006. System repo assets expanded 13.8% in ‘03, 18.7% in ‘04, 11.9% in ‘05, and 14.2% in ’06. Broker/Dealer assets expanded 21.3% in ’03, 23.5% in ‘04, 9.5% in ‘05, and 17.8% in ‘06.
Greenspan discussed a so-called “conundrum” in early 2005 – the Fed having raised the federal funds rate by 150 bps since June 2004, but the 10-year Treasury yield remained essentially unchanged. There was no conundrum. Massive leveraged speculation was over liquefying debt markets, certainly including Treasuries, MBS, and non-conforming mortgage ABS.
Why such confidence within the rapidly expanding leveraged speculating community? A long history of reliable bailouts, Greenspan’s “asymmetrical” (cut aggressively, raise cautiously) monetary policy, and unlimited GSE liquidity. GSE assets expanded $305 billion in 1998, $317 billion in 1999, $242 billion in 2000, $345 billion in 2001, $242 billion in 2002, and another $246 billion in 2003. Accounting scandals concluded GSE market liquidity backstop operations, with Fed QE taking over in 2008.
“As Fed chair, Greenspan relished poring over obscure economic data, from monthly boxcar loadings to steel production, all in a bid to assess where the economy was going. He would often phone economists at other government agencies to discuss details, and he would rise early each morning for a two-hour soak in his bathtub, using that time to review statistics and Fed staff memos.” PBS, Martin Crutsinger, June 22, 2026
Alan Greenspan enjoyed a celebrated obsession with analyzing data. Did he monitor Fannie (FNMA) and Freddie (FMCC)'s monthly activity reports? Did he study the Fed’s own quarterly Z.1 Credit and flow of funds data? Wall Street firms’ quarterly financial filings?
Bessent: “Alan Greenspan resisted premature rate hikes during the technology boom of the 1990s—and history proved him right.” Well, the Treasury Secretary should know that’s BS. “We had the longest sustained growth period in history.” Greenspan aptly titled his 2007 memoir “The Age of Turbulence.”
Bessent: “He let it rip.” Undoubtedly true. And our system – and the world – has suffered unrelenting boom and bust cycles since the Greenspan Fed unleashed unfettered Credit – historic booms in non-bank finance, leveraged speculation, derivatives, securitizations, the GSEs, and “Wall Street finance” more generally.
Scott Bessent was in the catbird’s seat for all this. To be sure, our economy must restructure. There is no other option than to become more self-sufficient. Revitalizing a strong manufacturing base is an imperative. It took us decades to dig this hole. Rectification will be a lengthy and arduous process. Dysfunctional finance continues to only deepen our massive hole.
The problem I have is that the administration is hellbent on prolonging loose conditions and Bubble excess to achieve political aims. Deregulation at peak Bubble excess. $2 TN plus deficits as far as the eye can see. The current trajectory of debt growth, financial excess, and economic maladjustment ensures a highly destabilizing crisis of confidence. As I’ve argued for years, inflationism is not the solution - it’s the problem. Just over four months until the midterms. We live in a most extraordinary period.
A report this week from Federal Reserve economist Phillip J. Monin, “Decomposing Hedge Funds’ U.S. Treasury Exposures,” provides important insight into massive hedge fund positioning throughout Treasury and repo markets. With speculative leverage having such a profound impact on marketplace liquidity and bubble inflation, I've heavily extracted from Dr. Monin's report.
“Overall, hedge funds' Treasury positions are large in both absolute and relative terms, with the basis trade at $830 billion, swap spread arbitrage at $305 billion, and maturity-matched trades at $395 billion. With hedge funds holding about 8.5% of total outstanding Treasuries and about 90% of these exposures concentrated among the top 50 funds, the combination of large scale, high concentration, and elevated leverage creates the potential for systemic stress if multiple strategies face simultaneous pressure or if severe shocks affect the largest participants.”
“Hedge funds’ repo cash borrowing has grown to $3.0 trillion as of September 2025. The scale of this expansion is striking: since the beginning of 2023, hedge funds' gross Treasury exposures, repo borrowing levels, and monthly turnover in Treasury markets have all more than doubled.”
“Between 2023 and September 2025, large hedge funds' gross U.S. Treasury exposures doubled to $4.0 trillion, comprising $2.4 trillion in long exposure and $1.6 trillion in short exposure.”
“We find that highly leveraged arbitrage strategies dominate hedge funds’ Treasury positioning. The Treasury cash-futures basis trade has grown to approximately $830 billion as of September 2025, about double its previous peak in early 2020 and representing 35% of hedge funds' total long Treasury exposures. The swap spread arbitrage trade reached approximately $305 billion (13%) by September 2025, though it experienced notable stress following the April 2025 tariff announcements when about $60 billion unwound rapidly before recovering within months. Beyond these directly estimated arbitrage trades, we identify substantial positioning in broader trade categories: maturity-matched trades (including on-the-run/off-the-run arbitrage and other strategies with approximately equal durations) totaling $395 billion (17%), and steepener-like trades totaling $375 billion (16%).”
“A key driver of the growth of hedge funds' Treasury exposures has been the resurgence of the Treasury cash-futures basis trade. The basis trade is constructed by going short a Treasury futures contract and long a repo-financed Treasury security that is deliverable into the futures. The trade is typically highly leveraged due to low or zero percent haircuts on the repo borrowing and low margin requirements on the futures. While the basis trade plays an important role in price discovery and liquidity provision, it also presents financial stability risks due to its substantial and interconnected exposures across Treasury cash, futures, and repo markets, combined with its high leverage and potential for rapid growth.”
“Another relative value trade that has recently gained popularity among hedge funds is the swap spread arbitrage trade. The long swap spread arbitrage trade involves balanced positions in repo-financed Treasury securities and a pay-fixed, receive-floating position in an interest rate swap… Our estimates suggest that long swap spread arbitrage positions were relatively modest until 2019, when they increased to approximately $100 billion. Positions declined following March 2020 and then steadily increased starting in late 2022. Growth accelerated sharply in late 2024 and early 2025, with positions increasing approximately $175 billion between January 2024 and March 2025, reaching about $295 billion.”
“The April 2025 tariff announcements triggered steep declines in swap spreads amid sharply increased Treasury yields and deteriorating Treasury market liquidity. Market participants noted that strained conditions in Treasury markets were likely exacerbated by hedge funds rapidly unwinding their swap spread trades…”
For the Week:
The S&P500 slumped 2.0% (up 7.4% y-t-d), while the Dow added 0.6% (up 7.9%). The Utilities rallied 3.7% (up 8.6%). The Banks gained 1.5% (up 11.1%), while the Broker/Dealers were slammed 4.8% (up 7.9%). The Transports increased 0.9% (up 25.7%). The S&P 400 Midcaps added 0.7% (up 15.5%), and the small cap Russell 2000 rose 1.0% (up 21.3%). The Nasdaq100 dropped 4.2% (up 15.3%). The Semiconductors sank 7.9% (up 86.4%). The Biotechs surged 8.1% (up 20.3%). With bullion down $67, the HUI gold index slumped 7.2% (down 6.9%).
Three-month Treasury bill rates ended the week at 3.659%. Two-year government yields declined eight bps to 4.09% (up 62bps y-t-d). Five-year T-note yields fell 10 bps to 4.13% (up 40bps). Ten-year Treasury yields declined eight bps to 4.37% (up 20bps). Long bond yields dipped three bps to 4.87% (up 2bps). Benchmark Fannie Mae MBS yields dropped 11 bps to 5.33% (up 29bps).
Italian 10-year yields dropped 11 bps to 3.59% (up 3bps y-t-d). Greek 10-year yields fell 12 bps to 3.54% (up 10bps). Spain's 10-year yields dropped 11 bps to 3.34% (up 6bps). German bund yields fell 13 bps to 2.85% (unchanged). French yields declined 11 bps to 3.64% (up 7bps). The French to German 10-year bond spread widened about two to 79 bps. U.K. 10-year gilt yields fell 11 bps to 4.73% (up 25bps). U.K.’s FTSE equities index gained 1.4% (up 5.7% y-t-d).
Japan’s Nikkei 225 Equities Index slumped 2.7% (up 37.8% y-t-d). Japan’s 10-year “JGB” yields dipped four bps to 2.62% (up 56bps y-t-d). France’s CAC40 slipped 0.4% (up 2.9%). The German DAX equities index fell 1.3% (up 0.7%). Spain’s IBEX 35 equities index increased 0.4% (up 12.2%). Italy’s FTSE MIB index dropped 3.0% (up 14.1%). EM equities were mixed. Brazil’s Bovespa index rallied 2.9% (up 7.6%), while Mexico’s Bolsa index declined 0.7% (up 4.4%). South Korea’s Kospi reversed 7.1% lower (up 99.6%). India’s Sensex equities index increased 0.4% (down 9.5%). China’s Shanghai Exchange Index fell 1.5% (up 1.5%). Turkey’s Borsa Istanbul National 100 index dropped 3.1% (up 26.8%).
Federal Reserve Credit gained $8.1 billion last week to $6.690 TN, with a 28-week expansion of $199 billion. Fed Credit was down $2.200 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.963 TN, or 80%. Fed Credit inflated $3.879 TN, or 138%, since November 7, 2012 (711 weeks). Elsewhere, NY Fed holdings for foreign owners of Treasury, Agency Debt recovered $3.8 billion last week to $2.924 TN - just off the low back to September 2010. “Custody holdings” were down $295 billion y-o-y, or 9.2%.
Total money market fund assets (MMFA) declined $18.9 billion to $7.900 TN. MMFA were up $877 billion, or 12.5%, y-o-y - having ballooned a historic $3.316 TN, or 72%, since October 26, 2022.
Total Commercial Paper slipped $3.4 billion to $1.397 TN. CP declined $71 billion, or 4.9%, y-o-y.
Freddie Mac 30-year fixed mortgage rates increased two bps to 6.49% (down 28bps y-o-y). Fifteen-year rates gained three bps to 5.84% (down 5bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate down four bps to 6.67% (down 26bps).
Currency Watch:
For the week, the U.S. Dollar Index added 0.6% to 101.366 (up 3.1% y-t-d). On the downside, the Norwegian krone declined 2.3%, the New Zealand dollar 1.7%, the Australian dollar 1.7%, the Swedish krona 1.6%, the Mexican peso 0.9%, the euro 0.8%, the Brazilian real 0.4%, the Swiss franc 0.3%, the South Korean won 0.3%, the Canadian dollar 0.3%, the Japanese yen 0.3%, the British pound 0.2%, the Singapore dollar 0.2%, and the South African rand 0.1%. China's (onshore) renminbi declined 0.47% versus the dollar (up 2.76% y-t-d).
Commodities Watch:
June 22 – Bloomberg (Yihui Xie): “China’s monthly gold imports reached their highest in more than two years in May… Imports were around 163 tons last month, the highest since March 2024… Volumes for the first five months of 2026 were about 692 tons, up by about 76% from a year earlier.”
The Bloomberg Commodities Index slumped 3.1% (up 12.1% y-t-d). Spot Gold declined 1.6% to $4,089 (down 5.3%). Silver sank 8.9% to $69.23 (down 17.5%). WTI Crude fell $8.31, or 10.7%, to $69.23 (up 21%). Gasoline declined 1.6% (up 72%), while Natural Gas rose 2.5% to $3.279 (down 11%). Copper slumped 3.0% (up 9%). Wheat sank 4.5% (up 14%), and Corn declined 1.1% (down 6%). Bitcoin sank $3,350, or 5.3%, to $59,850 (down 32%).
Market Instability Watch:
June 24 – Wall Street Journal (Abhishek Vishnoi and Youkyung Lee): “The volatility in South Korea's benchmark equity index has become so extreme that investors and analysts are likening the market’s surging intra-day swings to the meme-stock frenzy. While the comparison may at first sound exaggerated given the Kospi is supported by robust earnings from world-leading chipmakers, it’s not without merit. Escalating interest from retail investors has seen the equity benchmark close up or down by at least 5% on 20 occasions this year — including a 10% plunge on Tuesday — up from just two in 2025.”
June 23 – Reuters (Cynthia Kim and Jihoon Lee): “South Korea’s KOSPI plummeted 9.99%, its steepest drop in more than three months, on Tuesday… On Monday, the head of South Korea’s market watchdog Lee Chan-jin said the government had been too hasty in approving leveraged funds tied to some of the country’s best-known chip stocks… Regulators recently cautioned retail investors against the use of leverage on the KOSPI, as margin debt, or borrowing to buy stocks, rose to a record high in June.”
June 23 – Bloomberg (Charlotte Yang): “Leveraged exchange-traded funds tracking Samsung Electronics Co. (SSNLF) or SK Hynix Inc. (HXSCL) were likely forced to sell a combined $6 billion of the Korean chipmakers' shares Tuesday to maintain leverage ratios, underscoring how such products can amplify market moves… Selling by these single‑stock ETFs, designed to provide twice the daily returns of the chipmaker they track, accounted for about 14% of turnover in Samsung and SK Hynix on Tuesday… The rebalancing mechanics of these leveraged products have drawn intense scrutiny, given their ballooning size and role in volatility in the South Korean stock market, the global front line of this year’s AI trade. Because these funds must rebalance daily to maintain fixed leverage ratios, they are mechanically forced to buy into market rallies and sell into declines.”
June 23 – Bloomberg (Isabelle Lee and Denitsa Tsekova): “South Korea’s AI-fueled selloff has put a spotlight back on one of the fastest-growing corners of retail investing: leveraged exchange-traded funds. The products have been a fixture among day traders for years, but the sharp swings in Samsung Electronics Co. and SK Hynix Inc. this week — and an expression of regret from Korea’s top markets regulator over allowing single-stock leveraged ETFs — have put fresh scrutiny on whether they are amplifying market swings…”
June 23 – Bloomberg (Michael Msika): “Bouts of volatility in the artificial intelligence trade are threatening to snowball into a rout as positioning and crowding levels flash red, with traders steeling themselves for a rollercoaster ride into the summer… Stretched positioning, massive leverage in exchange-traded funds, options-related hedging activity and a sharp rise in both prices and swings across semiconductors are creating a treacherous landscape. Whether it's active or passive funds, hedge funds or quantitative strategies, institutions or retail investors, everyone is effectively getting longer AI by the day, according to Goldman Sachs… partner Bobby Molavi. ‘The co-correlation of strategies is a point to watch,’ he said. ‘Feels great on the way up, but can be extremely dangerous on the unwind.’”
June 22 – Bloomberg (Chloe Cresswell): “Exchange-traded funds are attracting cash at a record-breaking trillion-dollar pace… US-listed ETFs have absorbed about $1 trillion this year, reaching the milestone before June is over. That’s after taking all of 2024 and 10 months last year to do the same. Flows are now on pace to ‘easily break’ last year’s record haul of $1.5 trillion, which itself had topped the 2024 peak of $1.1 trillion…”
June 22 – Financial Times (George Steer and Peter Wells): “Elon Musk’s SpaceX shed $400bn in market value on Monday in a fresh bout of volatility for the rockets and AI company following its record-breaking Wall Street debut. SpaceX shares ended Monday down 16.4% at $154.60, leaving them 31.5% below the high struck after the group’s $86bn initial public offering on June 11. The shares were listed at $135.”
June 24 – Bloomberg (John Cheng): “Bond strategists are warning that Prime Minister Sanae Takaichi’s $2.3 trillion investment plan risks putting fresh pressure on Japan’s government debt market. The strategy unveiled Wednesday… comes with uncertainty over how it will be financed and whether it can generate promised growth… Strategists at brokerages including SMBC Nikko Securities Inc. (SMFG) and Daiwa Securities Group Inc. (DSEEY) said the prospect of greater government borrowing risks pushing long-term bond yields higher.”
June 26 – Reuters (Gaurav Dogra): “U.S. equity funds came under selling pressure in the week to June 24... Investors pulled $3.53 billion from U.S. equity funds during the week, partly reversing net purchases of $37.63 billion in the prior week…”
U.S. Credit Trouble Watch:
June 22 – Financial Times (Eric Platt and Antoine Gara): “Investor redemption requests at Apollo (APO)’s flagship retail private credit fund surged to 17% of the vehicle’s value in the second quarter, underscoring fears of falling returns and rising stress in debt markets. The firm’s $15bn Apollo Debt Solutions fund pitched to wealthy individual investors reported roughly $2.4bn of withdrawal requests in the most recent period. The fund met less than 30% of the withdrawals it faced in the quarter, capping redemptions at 5%... The Apollo fund, which has an investment portfolio worth nearly $26bn, had been hit with withdrawal requests of 11% in the first quarter. The rising withdrawal requests at the fund signal that the broader investor exodus from private credit has not abated…”
June 26 – Bloomberg (Olivia Fishlow): “Ares Management Corp. (ARES) curbed withdrawals from one of its private credit funds for the second consecutive quarter after redemption requests rose to 14.4%, the latest sign that the $1.8 trillion industry remains under pressure. The $22.6 billion Ares Strategic Income Fund said it would allow investors to take out 5% of their shares… In line with most of its peers, the fund saw demand for cash accelerate from the first quarter, when investors asked to redeem 11.6%.”
June 23 – Reuters (Pragyan Kalita): “Morgan Stanley (MS) has limited redemptions again at its $7 billion flagship private credit fund after investors sought to withdraw almost 11.6% of units outstanding… North Haven Private Income Fund (PIF) said it would meet 43% of second‑quarter redemption requests after investors sought to withdraw about 10.9% of the fund in the prior quarter … Morgan Stanley said the PIF was invested in 301 borrowers across 45 industries as of May 31 and had around 22.7% exposure to the software industry.”
June 24 – Wall Street Journal (Matt Wirz and Shane Shifflett): “Insurance companies are exposed to the embattled private-credit industry in more ways than one, according to… Clearwater Analytics, a portfolio management software provider. About one-quarter of the life insurers tracked by Clearwater that hold stakes in private-credit funds also lend money to them. The insurers typically lend $2 to the funds for each dollar of shares they own… The findings offer a window into the complex ties between the insurance industry and the rapidly expanding business of private fund managers. Many fund managers, like Apollo Global Management and KKR (KKR), now own life-insurance companies, which in turn have become big investors in private credit. Insurers buy private bonds and loans directly but also invest in private-credit funds as a way to easily get exposure to the hundreds of deals that funds bundle together.”
June 24 – Bloomberg (Scott Carpenter): “A letter posted… by Extenet Systems warning of a possible collapse within days has stunned the firm’s bondholders and sent shock waves through the market for funding digital infrastructure projects. Creditors were blindsided by Chief Executive Officer Rich Coyle’s warning that the company could be forced to cease operations as soon as June 25… The cash crunch ‘represents the first crack in the digital infrastructure ABS market,’ said Marcello Cricco-Lizza, a principal at Balbec Capital, which invests in the sector’s asset-backed securities… ‘Until there is clarity on debt service obligations and the liquidation pathway for this collateral, it’s likely there will be investors who sit out on additional fiber ABS transactions.’”
June 24 – Bloomberg (Miranda Davis, John Gittelsohn, and Natalie Wong): “A Blackstone Inc. (BX) loan on an office tower in the heart of Chicago’s financial center has gone into default… 601W Companies, which purchased the 40-story building in 2018, defaulted on a $343 million loan on June 9…”
Global Credit Bubble Watch:
June 23 – Wall Street Journal (Paul Vieira): “Excess global imbalances are widening again, with risks of an economic disruption heightened by an increasing share of financial activity being conducted outside of the regulated banking sector, says Canada’s top central banker. Bank of Canada Gov. Tiff Macklem said it is up to global officials to adjust their policies to encourage increased savings in the U.S., more consumption in China and a pickup in investment in Europe. Complicating these efforts, Macklem said, is the growing influence of nonbank lenders such as hedge and pension funds, private-finance companies and other asset managers in global financial activity… ‘That leaves us with two clear risks. First, large capital inflows into the U.S. could once again be misallocated—stretching valuations in equities and credit and setting the stage for a painful correction,’ Macklem said… ‘Second, those flows could reverse suddenly. Either outcome could send stress far beyond U.S. borders. So the problem is not just that imbalances are widening again. It is also that they are widening in a world where the financial system is now faster, more complex and less transparent’…”
June 25 – Bloomberg (Vlad Savov and Sangmi Cha): “Samsung Electronics Co. and SK Hynix Inc. are preparing to announce hundreds of billions of dollars worth in new investments on Monday, according to South Korean media reports…. Samsung Group is set to unveil a 1,000 trillion won ($646bn) spending package over the next decade… in what would be the largest such plans in the country’s history.”
June 23 – CNBC (Justina Lee): “The annual global deal value of mergers and acquisitions is on track to reach $4 trillion in 2026, making it the strongest year since 2021… according to a PwC report. M&A transactions above $5 billion have contributed almost half of total global deal value so far this year, PwC said. It expects a 40% year-on-year rise in deal values from megadeals in 2026 if the current pace continues. ‘2026 is the year M&A supersized,’ said Brian Levy, global deals industries leader at PwC US, adding that AI is propelling megadeals... ‘AI is intensifying the K-shaped M&A market and it is forcing dealmakers to radically rethink how deals get done,’ Levy added.”
June 25 – Axios (Dan Primack): “‘Big’ has been the operative word for dealmaking in the first half of 2026, which already has hit an all-time record. Global M&A is valued at around $2.7 trillion so far this year, according to… LSEG. That’s up a whopping 47% over the same period in 2025, and 88% higher than the first half of 2024. Over half the 2026 volume has come from deals valued at $5 billion or more… The actual number of deals is down 10% year-over-year, for the lowest first-half total since pandemic-plagued 2020. The number of U.S. deals is down 20%. Global private equity is one area that saw increased numbers across the board, with $583 billion (+54% year-over-year) for 5,729 deals (+10%).”
June 26 – Bloomberg (Argin Chang and Twinnie Siu): “BofA Securities (BAC) raised its Taiwan GDP growth forecast for 2026 to 12% from 7.2% on strong demand for technology goods, while projecting a 7% expansion in 2027… 12% growth potentially the fastest since 1987… BofA also upgrades EM Asia (ex. China) growth to 5.9% in 2026 from 4.9%, and expand by 5.8% in 2027…”
Leveraged Speculation Watch:
June 24 – Bloomberg (Edward Bolingbroke): “Hedge funds’ growing exposure to Treasuries is primarily due to the revival of the cash-futures basis trade, according to a Federal Reserve economist. The highly leveraged trade now accounts for $830 billion of hedge funds’ Treasury long positioning as of September, about double its previous peak in early 2020, according to a report authored by… Phillip Monin. That represents 35% of their total long Treasury exposure, which is dominated by arbitrage strategies including swap spreads and maturity-matched trades… Between September 2023 and September 2025 hedge funds’ gross US Treasury exposure had doubled to $4 trillion, made up of $2.4 trillion long positioning and $1.6 trillion short. Basis trade and swap spread arbitrage account for nearly half of the long positions, while the remaining exposure is distributed across yield curve trades, unencumbered cash holdings, and long-only investment uses, according to Monin.”
June 26 – Bloomberg: “Two of China's best-known hedge fund managers are warning that the artificial intelligence boom in global stock markets has become an unsustainable bubble. Wealspring Asset, whose founder Yang Dong is well-known in China for calling the top in 2007, said global AI stocks have become a ‘super bubble’ and that the ‘collapse point may not be far away’… Shanghai Banxia Investment Management Center said ‘the trigger for the AI bubble to burst has already appeared,’ citing pressure on breakneck revenue growth at Anthropic PBC.”
Iran War Watch:
June 26 – New York Times (Helene Cooper, Euan Ward, Jenny Gross and Pranav Baskar): “President Trump on Friday called Iran’s attack on a container ship transiting the Strait of Hormuz a day earlier a ‘foolish’ act. The U.S. military said it launched strikes on Iran on Friday in retaliation for an Iranian attack in the Strait of Hormuz a day earlier, hours after President Trump called the Iranian action a ‘foolish violation’ of the fragile cease-fire between the two countries. U.S. Central Command said… it had struck Iranian missile and drone storage locations and coastal radar sites as a ‘powerful response’ to the Iranian attack on Thursday… Iran’s security forces claimed that in response to the American attacks on Friday, Tehran had struck U.S. Army positions in the region.”
June 25 – Wall Street Journal (Shelby Holliday and Rebecca Feng): “Iran’s Islamic Revolutionary Guard Corps attacked a Singapore-flagged cargo ship Thursday in the Strait of Hormuz…, testing the deal signed last week… The attack damaged the ship’s bridge but left no casualties… The incident took place near the coast of Oman hours after the Iranian paramilitary’s navy warned ships not to use routes through the waterway that the regime hadn’t sanctioned.”
June 26 – Reuters (Jana Choukeir, Eman Abouhassira and Jonathan Saul): “Tehran reasserted its right on Friday to control shipping in the Strait of Hormuz and warned Gulf states against siding with the U.S., a day after an attack on a ship near Oman highlighted the fragility of a preliminary deal to end the Iran war. Iran was responding to what it called an ‘interventionist, irresponsible and provocative’ joint statement by the United States and six Gulf states that rejected Iran’s insistence that it could charge tolls on vessels transiting the strait. ‘Safe passage through the Strait of Hormuz cannot be guaranteed under ambiguous arrangements, parallel routes or decision-making that does not take Iran's role as a coastal state into account,’ Deputy Foreign Minister Kazem Gharibabadi said…”
June 26 – Bloomberg (Samy Adghirni, Fiona MacDonald and Ania Nussbaum): “Oman has told European officials there’s no way of going back to the pre-war status quo with the Strait of Hormuz and transiting ships may have to be charged some fees, according to people familiar... While Omani officials said they will always abide by international maritime law, they added there could be fees for services related to de-polluting the strait or helping ships navigate it…”
June 23 – Associated Press (Munir Ahmed, David Rising and Jon Gambrell): “The U.S. and Iran were in dispute Tuesday over whether Tehran had agreed to allow U.N. inspections of its nuclear sites. As officials negotiated over how to permanently end the war in Iran, a separate plan emerged to break the shipping bottleneck through the Strait of Hormuz. The disagreement over nuclear inspections came as Iran’s president met with Pakistani mediators and technical teams from the U.S. and Iran continued talks in Switzerland… Earlier in the day, a spokesperson for Iran’s Foreign Ministry, Esmail Baghaei, told reporters in Tehran that U.N. inspectors were not scheduled to examine nuclear sites bombed by the U.S. last year, rejecting comments made a day before by U.S. Vice President JD Vance.”
June 22 – Reuters (Jarrett Renshaw and Tala Ramadan): “U.S. President Donald Trump said on Tuesday that Iran had agreed to nuclear inspections into ‘infinity,’ while Tehran said it had made no such concession in negotiations, raising questions about the viability of their fragile peace deal. The two countries… also offered conflicting accounts about financial incentives for Iran, control of the Strait of Hormuz, and Israel’s parallel war in Lebanon - all major aspects of their framework deal signed last week aiming to end the war.”
June 23 – Bloomberg (Omar Tamo and Julian Lee): “Iran and Oman said they’ll begin work on finding an agreement over the future administration of the Strait of Hormuz, including the cost of managing transit, as traders and shipowners fret over the prospect of the introduction of a tolling arrangement. The two nations — which border the narrow opening to the Persian Gulf — will begin discussions on the services relating to navigation, including ‘costs associated with them in accordance with international standards,’ according to a joint statement.”
June 24 – Bloomberg (Jennifer A Dlouhy): “President Donald Trump said tolls on ships sailing in the Strait of Hormuz would be a red line issue for the US in negotiations with Iran. Asked if he would reject a final Iran deal if it included any service or shipping fees in the strait, Trump said that he would. ‘It would be unacceptable to me, because we have numerous strengths, and if you did that for them, you’d have to do it for other people,’ the president told reporters… ‘It would be a game changer.’”
June 25 – Bloomberg (Fiona MacDonald): “The US wants to reach a deal with Iran to end the war but won’t do so ‘at any price,’ Secretary of State Marco Rubio said…, as he reiterated that tolls in the Strait of Hormuz were unacceptable. ‘You can call it a toll, you can call it a fee, whatever you want to call it — it’s a game of semantics,’ Rubio said…, as he finished a whirlwind tour of the Persian Gulf. ‘That will never be an acceptable condition of any deal.’”
June 25 – Wall Street Journal (Benoit Faucon, Summer Said, Costas Paris and Robbie Gramer): “Iran is pushing to make billions of dollars from the Strait of Hormuz as the regime positions itself to manage the global oil artery it severed at the start of the war. The Islamic Republic estimates that charging for security, safety and environmental services in the strait would bring in $40 billion a year in revenue for states involved, according to officials familiar with the matter. The idea, if implemented, would give Tehran cash flow and control that it didn’t command before the war. The regime is looking to models around the world, including the Dardanelles, the officials said…”
June 22 – Axios (Barak Ravid): “Israel’s government is concerned that the U.S. is effectively legitimizing Iran’s influence in Lebanon and eroding Israel’s freedom of operation there through new understandings reached in Switzerland and the memorandum of understanding signed with Iran last week… Iran has managed to wrap the situation in Lebanon into its negotiations with the U.S. to support its proxy, Hezbollah. The Trump administration accepts that it must now contain Israel’s actions in Lebanon to advance its diplomacy with Iran.”
Iran War Ramifications Watch:
June 23 – Associated Press (Lisa Mascaro): “The Senate for the first time approved a war powers resolution… It was the 10th time the Senate has tried to stop the war, and the outcome, on a vote of 50-48, was a stunning turnaround from past efforts. While the resolution is largely symbolic, and does not carry the full force of law, it reflects the growing concerns from a number of Republican lawmakers in both the House and Senate over both the war and the deal Trump struck with Iran to end it… Trump responded angrily Tuesday night on his Truth Social platform, calling the vote ‘poorly timed and meaningless’ and saying it ‘provided aid and comfort’ to Iran.”
June 22 – Financial Times (Alice Hancock and Lee Harris): “Shipowners are in deep confusion over the safest route out of the Gulf amid conflicting instructions from Iran, the US and western insurers. While traffic through the Strait of Hormuz has picked up, Iran has said vessels risk ‘penalties’ and may be forced to turn back if they do not seek permission beforehand from Tehran and take a route close to the Iranian coastline. At the same time the US and some western insurers are advising ships to follow a route protected by US air cover on the Omani side of the strait…”
June 25 – Bloomberg (Julian Lee): “A week after the US and Iran signed their interim peace deal, crude exports from the Persian Gulf have recovered to at least 75% of pre-war levels… Yet that may have been the easy part. Of the nearly 13 million barrels a day of crude that left the region in the three days through Wednesday…, much of it came from a backlog of stranded cargoes that Iran and others have started to clear out.”
June 24 – Wall Street Journal (Giulia Petroni): “President Trump said he instructed the Justice Department to look into major oil companies, accusing them of ‘gouging’ customers by not lowering gasoline pump prices in line with falling crude costs. ‘The big Oil Companies are not dropping their price at the pump commensurate with the sharply lower prices they are paying for Oil,’ Trump said... ‘In other words, customers are being ‘gouged,’’ he wrote.”
Trump Administration Watch:
June 24 – Wall Street Journal (Philip Wegmann, Marianne LeVine and Lindsay Wise): “At 2:38 a.m. on Wednesday, President Trump delivered a political attack line that most Republican politicians could rally behind. ‘America the Beautiful will NEVER be a Communist Country,’ he wrote…, criticizing the progressive candidates aligned with the Democratic Socialists of America who won primary elections for House seats in New York…Hours later… Trump turned his ire to a less-conventional target: his own allies. The president abruptly canceled plans to sign a bipartisan housing bill that Republican leaders and senior White House officials had touted as transformational. He then went to Capitol Hill and berated Senate Republicans during a testy closed-door lunch, calling one GOP lawmaker a loser… Back in the Oval Office…, he laid into European allies, declaring that the U.K. was ‘dying’ and arguing that other longtime American partners had let the U.S. down.”
June 24 – Axios (Josephine Walker, Stef W. Kight, and Kate Santaliz): “President Trump cancelled Wednesday’s planned signing of a landmark bipartisan housing bill, demanding Congress pass the unrelated SAVE America Act first. Trump has been angling for Congress to pass the voting bill for months, and previously threatened to withhold his signature on any other legislation until lawmakers passed it. ‘Today’s Housing News Conference and Signing is hereby cancelled until such time as we pass the desperately needed SAVE AMERICA ACT, which I consider to be a National Emergency,’ Trump posted… The president’s decision came as House GOP leaders were touting the housing bill's attributes during their weekly press conference.”
June 24 – Axios (Stef W. Kight): “President Trump is making life hell for Senate Republicans, and they’re returning the favor. ‘I make no apologies for standing up to the president,’ Sen. Bill Cassidy (R-La.) told reporters after he got into a shouting match with Trump… at a Senate GOP lunch. ‘I made it clear that I wasn’t going to be bullied.’ Trump’s push for a pre-midterm elections crackdown, via the SAVE Act, has opened of the deepest GOP ruptures of his second term. To his fury, Trump is finding that senators he’s written off, alienated or even helped defeat in primaries are choosing Senate traditions over his political demands. In the middle is Senate Majority Leader John Thune (R-S.D.), who’s been blunt with the reality that Trump doesn’t have the votes to get what he wants.”
June 26 – Washington Post (Isaac Arnsdorf and Natalie Allison): “President Donald Trump denounced Democrats as communists after self-described democratic socialists won primaries in New York this week, previewing a new emphasis for his campaigning in this year’s midterms… Trump used demonizing and dehumanizing language to describe his political opponents and gave violent warnings about their intentions. ‘They’re animals,’ the president said…, speaking to Christian conservatives at a convention of the Faith & Freedom Coalition in Washington. ‘We have to stop this, this horrible thread of cancer that’s permeating our country called communism’… Trump said communists pose a special threat to Christians, referencing violence in countries such as Nigeria… ‘They will close your churches in this country,’ Trump said. ‘They will kill your people. And that's what they’re about.’”
June 25 – Axios (Ashley Gold, Sam Sabin and Mike Allen): “The Trump administration has asked OpenAI to limit the release of its next model, GPT-5.6, to only a small set of government-approved partners before any wider release, citing security concerns, according to a source familiar with the matter. This marks the first time the U.S. government has preemptively asked an American AI company to restrict the launch of a model before release.”
June 25 – Bloomberg (Scott Carpenter): “Fannie Mae and Freddie Mac are taking on more interest-rate risk in their rapidly growing investment portfolios, driving a key gauge of their exposure to levels that rattled Wall Street two decades ago. Disclosures from the housing-finance giants show their duration gaps — a measure of how closely assets, liabilities and hedges offset one another — have widened sharply in recent months, leaving their holdings more exposed to rate swings… The shift comes as the government-backed companies have added more than $135 billion to their retained portfolios over the past year, part of President Donald Trump's push to ease housing costs by shrinking the supply of mortgage-backed securities available to investors.”
June 26 – Bloomberg: “The earthquakes that struck Venezuela… have become the first major political test for acting President Delcy Rodríguez, with the disaster quickly evolving into a contest over competence. By Friday morning, the official death toll had risen to nearly 600, and authorities reported 3,000 injured people… As Rodríguez’s administration races to rescue victims, restore infrastructure and secure international assistance, the opposition is mounting its own support operation.”
June 26 – Bloomberg (Li Liu): “Chinese President Xi Jinping says China stands ready to provide assistance to Venezuela in disaster relief and reconstruction, Xinhua reports.”
June 23 – Bloomberg (Rebecca Beitsch): “Acting Director of National Intelligence Bill Pulte is already delivering on the controversial tenure feared by critics when President Trump selected him to step into the role. Pulte began his new job Friday… but has swiftly been carrying out a desire of Trump’s: laying off staffers at the Office of the Director of National Intelligence (ODNI). It’s unclear how many of the agency’s staff members have been let go, but the White House on Tuesday pointed to a June 10 social media post from Trump calling on Pulte, who retains his other job as the head of Fannie Mae and Freddie Mac, ‘to execute the immediate and needed downsizing of the office.’”
June 23 – Wall Street Journal (Jennifer Hiller): “The Trump administration is so eager to see a nuclear power renaissance that it is starting to fund billions of dollars for reactor orders. In a new deal…, low-interest loans amounting to $17.5 billion from the Energy Department will be available for utilities to finance equipment orders for the Westinghouse AP1000, the company’s flagship nuclear reactor… The loans are intended to speed up construction of 10 reactors…”
Trade War Watch:
June 26 – Bloomberg (Jennifer A. Dlouhy): “President Donald Trump threatened to impose 100% tariffs on goods imported from countries that impose digital services taxes, escalating pressure on European nations that just ratified a trade pact with the US. ‘Numerous European Countries have been discussing the imminent implementation of a Digital Services Tax on American Companies,’ Trump said… ‘Please let this statement serve to represent that any Country that imposes such a Tax will immediately be met with a 100% TARIFF on any and all Goods sent to the United States of America.’ Trump said the threatened tariff would be imposed ‘immediately’ and would supersede any existing trade deals made with affected countries.”
June 21 – Financial Times (Edward White): “China has restricted trading with several American companies, in a retaliatory move that targets some groups central to US attempts to build a rare earth supply chain to rival Beijing’s. USA Rare Earth and MP Materials (MP), as well as high-tech motor manufacturer Aveox, were among the 10 American companies added to China’s ‘entities list’… The commerce ministry said the move was in response to the ‘wrongful’ addition of Chinese entities to Washington’s ‘Chinese Military Companies List’ while also safeguarding China’s ‘national security and interests’.”
June 22 – New York Times (Keith Bradsher): “China took aim… at a U.S. government program to reduce American reliance on Chinese imports for rare-earth magnets, a move that risks reigniting trade tensions with President Trump. New restrictions will prohibit Chinese companies from shipping certain rare-earth metals to two companies that are leading the Trump administration’s efforts to revive the American rare-earth industry. The metals banned by China’s Ministry of Commerce are critical for a wide range of products, from cars to military drones, and China controls nearly the entire global supply of them.”
June 24 – Bloomberg (Ruchi Bhatia): “India’s trade minister said he had concluded talks with his US counterpart, without indicating whether the two sides had bridged the remaining gaps holding up an interim trade agreement. ‘We reviewed progress of the ongoing India–US trade discussions and explored avenues to further deepen our economic partnership,’ Commerce and Industry Minister Piyush Goyal said… following talks with US Trade Representative Jamieson Greer… India’s trade ministry said both sides are seeking a ‘balanced’ agreement that delivers ‘tangible benefits for businesses, farmers, workers and consumers in both countries.’”
Budget Watch:
June 25 – Wall Street Journal (Damian Paletta): “President Trump has pledged that all agencies of the government will move to assist Venezuela following deadly earthquakes… Defense Secretary Pete Hegseth, meanwhile, has been meeting with lawmakers about securing $350 billion for the military through an uncertain budget maneuver. This is part of the $1.5 trillion Pentagon budget he wants. And he wants another $67 billion related to Iran and other urgent military needs. After a brief dalliance with austerity in 2025 (remember DOGE), the White House is on an attempted spending spree. The Iran war has cost billions and the White House wants to urgently replenish its military stockpile while upgrading its fleet for the future. The Congressional Budget Office projects the U.S. government will run a $1.9 trillion deficit in 2026 and 2027 before bumping up to a $2.1 trillion deficit in 2028.”
June 24 – CNBC (Angela D. Greiling Keane and Justin Papp): “The White House… asked Congress for $87.6 billion in supplemental spending to pay for the Iran war and a host of other things including aid to U.S. farmers, and Ebola response… The request includes $21 billion for the Defense Department to ‘support critical capabilities, munitions procurement, and strengthen the U.S. industrial base,’ $1.4 billion for Ebola response and $768 million for the Energy Department for nuclear and other energy security… Vought’s letter also requests $10 billion for farmers…”
June 22 – Associated Press (Kevin Freking and Lisa Mascaro): “The Pentagon has told senators it needs roughly $80 billion, mostly to cover the cost of the U.S. war against Iran, adding to what is already a sizable military spending boost being sought by President Donald Trump. The White House Office of Management and Budget has yet to make a formal request to Congress.”
June 22 – Wall Street Journal (Lara Seligman, Marcus Weisgerber and Drew FitzGerald): “President Trump has summoned senior Pentagon officials and the top military contractors to the White House… to discuss ramping up munitions production amid concerns about the supply of U.S. missiles… Deputy Defense Secretary Stephen Feinberg notified defense-industry leaders earlier this month to prepare for the meeting, which is expected to be contentious…”
New World Order Watch:
June 21 – Financial Times (Gideon Rachman): “When the US celebrates the 250th anniversary of the Declaration of Independence next month, its friends and allies will join in the festivities. But, behind the scenes, many of the same countries are striving to increase their independence from America. Washington’s traditional partners have discovered that longstanding ties to the US do not buy them immunity from abuse and pressure tactics from the Trump administration. Giorgia Meloni, Italy’s prime minister, spoke for many when she complained that the US president often treats democratic allies worse than authoritarian rivals. In this new atmosphere, close ties to America that were once seen as a strength increasingly look like a potential vulnerability.”
June 21 – Bloomberg: “China warned that supply chains may become disconnected as key trading partners mull new measures to address growing imbalances and reduce rare earths dependencies. ‘Unilateralism and protectionism are on the rise, the risk of global supply chain fragmentation is growing,’ Chinese Vice Premier Ding Xuexiang said… China’s growing trade surplus with key partners has come in focus in recent months, with the European Union contemplating new measures to counter the export surge.”
U.S./Russia/China/Europe/Iran Watch:
June 23 – Financial Times (Max Seddon, Henry Foy and Christopher Miller): “Russia has accused the US of abandoning efforts to broker an end to the war in Ukraine after Donald Trump appeared to be shifting again in favour of Kyiv. Russian foreign minister Sergei Lavrov… said the US was ‘seemingly stepping back from the role of an objective mediator’ in the war and had ‘forgotten’ about Trump’s own statements last year inching towards Moscow’s position. Instead, Trump was ‘hugely impressed and enthusiastic’ about Ukraine’s recent campaign of long-range strikes on targets deep inside Russia at last week’s G7 summit, said two people briefed… Trump at that summit also agreed to increase sanctions on Russian energy.”
June 24 – Bloomberg: “China has built a new US destroyer replica at a remote missile-testing site in its northwestern desert, satellite imagery shows, a target analysts say could be used to test anti-ship weapons. Satellite images show a structure resembling a US Navy Arleigh Burke-class guided-missile destroyer in the Taklamakan Desert in far-western Xinjiang since at least June.”
Ukraine War Watch:
June 25 – Financial Times (Anastasia Stognei): “For many Muscovites, the first warning that the war was coming closer was not an official alert but drones overhead at night, followed by explosions at the capital’s largest oil refinery. As Ukraine has stepped up its drone campaign against Moscow this spring, residents in the Russian capital have sheltered in basements, watched businesses burn and found cars spattered with toxic ‘oil rain’… ‘If Ukraine burns, your Moscow will burn too,’ said Ukrainian President Volodymyr Zelenskyy on June 18, when Moscow’s main refinery was set ablaze, sending a huge plume of smoke into the sky.”
June 21 – Wall Street Journal (Alexander Osipovich): “Ukraine is pounding Russian oil refineries with long-range drone strikes, leading to restrictions on fuel sales, surging gasoline prices and huge lines of cars outside gas stations hundreds of miles from the front lines. Last week, drones repeatedly hit a refinery in Moscow that produces more than one-third of the fuel supply for the Russian capital and the surrounding region… It was the latest in more than two dozen strikes on Russian refineries since March…”
June 24 – Associated Press (Illia Novikov): “Ukrainian forces struck a major natural gas processing plant and two key satellite communications centers in their latest nighttime attacks on Russia, Ukraine’s General Staff said… The operation was part of Ukraine’s aerial campaign targeting energy facilities and military industries that has intensified as Kyiv builds bigger and better long-range weapons… In response, Moscow has ordered the redeployment of some air defense systems from Russian regions to the capital and to Crimea’s Kerch Bridge, a crucial link for supplying Russian troops, Ukrainian President Volodymyr Zelenskyy said.”
June 23 – Reuters: “Russian President Vladimir Putin said… Ukraine was attacking civilian infrastructure in Russia in an attempt to destabilise society. Ukraine’s attacks on oil refineries have doubled since the start of 2026, leading to long lines and higher prices for gasoline in some regions. Kyiv has said its aim is to sap a key source of Russia's war funds and show Russians the conflict is no longer distant.”
Taiwan Watch:
June 24 – Wall Street Journal (Joyu Wang): “A new campaign by Chinese coast-guard vessels to exercise authority over foreign commercial ships on the Pacific side of Taiwan’s main island drew a round of rebukes… from the U.S. and other Western countries. Earlier this month, China’s coast guard began issuing direct commands to foreign commercial vessels while patrolling the waters east of Taiwan’s main island. The five-day operation… has caused alarm among Taiwanese, American and other Western officials. It has also been described by some military analysts as a possible rehearsal for a naval quarantine of Taiwan, a self-governed democratic island that China claims as part of its territory.”
AI Bubble/Arms Race Watch:
June 25 – New York Times (Rob Copeland and Mike Isaac): “OpenAI is leaning toward holding off its initial public offering until next year, three people involved in the company’s deliberations said, a turnabout that punctuates the uncertain future for fast-rising artificial intelligence giants. The maker of ChatGPT hired bankers and lawyers with an eye toward a public offering as soon as the third or fourth quarter of this year… Sam Altman… pushed those advisers to find a way for the start-up to be valued at $1 trillion, up from the company’s last private valuation of $730 billion…”
June 25 – Axios (Amy Harder): “Water is fast becoming one of the defining fights around the AI buildout. After spending much of the past year defending data centers’ electricity demands, major tech companies driving the AI boom are increasingly making the case that their water use is manageable too. Over the past several weeks, Google, Amazon and Microsoft (MSFT) have each launched new efforts to explain and justify the water use of their AI infrastructure… ‘The growing conversation about water and energy use by data centers has forced these companies to scramble, to rethink what they’re doing and to become more transparent about what they’re doing,’ said Peter Gleick, co-founder of the Pacific Institute… one of the nation’s leading water experts. ‘They’re starting to understand the reputational risk of the massive rollout of data centers that have big energy and water footprints.’{“
June 25 – Bloomberg (Shruti Singh and Nic Querolo): “A flood of data center projects with their heavy power and water demands are introducing credit risks for state and local governments, according to Moody’s (MCO)… The growth of these facilities ‘may require major expansion of power, transmission and water infrastructure, creating costs that may fall on governments or ratepayers if not fully recovered from the new data centers,’ Moody’s analysts said in a report…”
June 24 – Bloomberg (Michael Hytha and Dani Burger): “The rebound in blank-check companies is proving to be a useful route to public markets for companies involved in the artificial intelligence-data center build-out… SPAC deals hit an all-time high in 2021, with 199 mergers that took companies public. That plunged to 43 in 2025. Already this year, 20 such mergers have been completed and 110 more are pending… Anna Pinedo, a partner at law firm Mayer Brown, said deals by SPAC companies will benefit from regulatory changes by the US Securities and Exchange Commission.”
Bubble Watch:
June 23 – Financial Times (Michelle Chan): “SpaceX is set to pay interest rates above those of companies with similar credit profiles in its upsized $25bn bond offering, underscoring how investors are demanding a hefty premium to bankroll Elon Musk’s rocket and AI bets… The bond offering attracted nearly $90bn of orders at around noon… The strong demand allowed bankers to upsize the deal from $20bn to $25bn. It also squeezed the expected yield to 1.1 to 1.75 percentage points above US Treasuries…”
June 23 – Wall Street Journal (Juliet Chung): “The ranks of the ultrawealthy hit a high in 2025 as the AI trade lifted global markets, according to… wealth-intelligence firm Altrata. The number of ultrawealthy individuals—those Altrata defines as having a net worth of more than $30 million— jumped by 14.4% last year to 556,850 people worldwide by the end of 2025. That’s the fastest pace of growth since 2017. ‘What we’ve been seeing in the past decade is, on the whole, it’s been going up over time and it’s been growing quickly,’ said Altrata Senior Director Maya Imberg, referring to the number of ultrawealthy people.”
June 22 – Wall Street Journal (Theo Francis and Peter Santilli): “The $100-million-plus CEO is back with a bang… More U.S. CEOs last year crossed the once-rare pay threshold than in any year since 2021—and nearly a dozen topped $200 million. Their compensation looked like crumbs, of course, compared with Elon Musk’s $158 billion pay package from Tesla… No. 2 Shankh Mitra reached $821 million from Welltower (WELL), a real-estate investment trust focused on senior housing and healthcare. That lands him one of the biggest executive-pay packages for a public-company CEO over the past decade…”
Crypto Bubble Watch:
June 25 – Bloomberg (Sidhartha Shukla): “Fears that Michael Saylor’s Bitcoin buying machine is beginning to seize up are spilling across the crypto market… At the center of those concerns is Strategy Inc. (MSTR)‘s financing model, which transformed the company into Bitcoin’s largest corporate buyer by repeatedly issuing securities to fund additional purchases. Investors are increasingly questioning whether that machine can keep running after a prolonged decline in Bitcoin, now trading firmly below $60,000, mounting obligations and a collapse in the market value of the company’s preferred stock.”
June 26 – Bloomberg (Sidhartha Shukla): “Michael Saylor’s great crypto experiment is fast running out of believers. Strategy Inc.’s market value has traded below the value of its Bitcoin holdings for much of the past seven months, a stunning reversal for the company that once commanded a rich premium over the cryptocurrency it owns… The shares of the dot-com-era software maker turned cryptocurrency accumulator have slumped more than 80% from their record high in November 2024…”
June 24 – Bloomberg (Sidhartha Shukla): “Michael Saylor’s Bitcoin buying machine Strategy Inc. should stop purchasing the cryptocurrency if it wants to restore market confidence in its shares. That's according to Julio Moreno, head of research at CryptoQuant, who argues Strategy's priority should be to restore its dollar cash buffer rather than keep buying Bitcoin whenever capital is available. The company needs a more systematic, fundamentals-driven approach to timing Bitcoin purchases, he said... ‘Buying at cycle tops and accumulating during bear markets has resulted in rapid unrealized loss growth and deteriorating STRC fundamentals,’ Moreno said.”
Inflation Watch:
June 25 – Associated Press (Christopher Rugaber): “The Federal Reserve’s preferred inflation gauge rose to a new three-year high in May as gas prices peaked, a sign rising costs could pose political problems for President Donald Trump and his political party as midterm elections near. Consumer prices rose 4.1% in May from a year earlier…, the largest annual increase since April 2023. On a monthly basis, inflation was 0.4% last month, matching April’s increase and down from 0.7% in March.”
June 25 – Reuters (Lucia Mutikani): “U.S. inflation increased further in May, breaking above 4.0% for the first time in three years as the Middle East conflict boosted energy prices, and keeping an interest rate increase from the Federal Reserve this year on the table… The personal consumption expenditures price index surged 4.1% in the 12 months through May, the largest increase and first reading above 4.0% since April 2023… PCE inflation rose by an unrevised 3.8% in April.”
June 23 – Reuters (Angela Christy): “Nvidia's AI chips have more than doubled in price on China's black market, the Financial Times reported…, citing multiple Chinese chip traders.”
June 25 – Reuters (Stephen Nellis and Aditya Soni): “Apple raised iPad and MacBook prices…, saying it could no longer shield customers from soaring memory and storage chip costs driven by the AI industry's datacenter buildout… ‘We have never seen a component price increase this much, this quickly,’ Apple said... ‘We have shielded our customers from these increases so far, but we have now reached a point where we need to begin raising prices on a number of products, including today's increases for iPad and Mac.’ Apple hiked the price of MacBook Air with 512 gigabytes of storage rose to $1,299 from $1,099, while the MacBook Pro with 1 terabyte of storage rose to $1,999 from $1,699…”
June 26 – Axios (Courtenay Brown and Nathan Bomey): “People spend a lot of time on their devices. The AI boom means they will also be spending more for them. The enormous sums of money going into the AI race are driving up costs for resources and components throughout the economy. That’s now becoming increasingly apparent to ordinary Americans… Apple provided the clearest evidence yet Thursday, raising prices by as much as 25% on MacBook and iPad models… The same memory squeeze is now hitting gaming consoles. Also on Thursday, Microsoft announced price increases of as much as $150 on Xbox consoles… Storage and memory costs have more than doubled since last fall…”
June 19 – Wall Street Journal (Amrith Ramkumar, Rolfe Winkler and Raffaele Huang): “The last thing President Trump wants is another hit to consumers’ pocketbooks. But there is little policymakers can do to quickly address the memory-chip shortage behind Apple’s decision to raise prices. Only a handful of companies make memory and storage chips, and it takes years to build new factories. Three industry titans—Samsung Electronics, SK Hynix and Micron Technology (MU)—dominate the business of memory chips, also called DRAM. They are using much of their capacity to serve the fast-growing artificial-intelligence industry, squeezing consumer-technology companies.”
June 20 – Wall Street Journal (Robbie Whelan): “Want a sleek new Microsoft Surface Pro laptop? The latest models start at $1,599, or $600 more than the previous generation, the PC maker said this past week. Dying to buy a Nintendo (NTDOY) Switch 2 console and fire up the new ‘Legends of Zelda’ game? That will be $499, after Nintendo lifted prices by $50 in May. (‘We sincerely apologize for the impact these price revisions may have on our customers,’ the company lamented.) And don’t be surprised if your iPhone 18 Pro costs an eye-popping $1,299 when it comes out in September. The memory armageddon has arrived. From smartphones to the Sony (SONY) PS5 Pro (which rose in price to $900 from $750 in April) to PCs, buyers of consumer electronics are getting hit. The primary driver is the skyrocketing cost of memory and storage chips…”
June 25 – Bloomberg (Chris Welch): “Microsoft Corp. announced a third substantial price increase for the company's current-generation Xbox video-game consoles in a glaring example of the component shortage crisis that has universally driven up the cost of consumer tech products… Xbox consoles will increase by $100 for models with 512 gigabytes of storage and $150 for 1 terabyte versions.”
June 24 – Wall Street Journal (Justin Lahart): “President Trump’s trade wars have waned. The price of gas is finally falling. But inflation has a new catalyst: America’s massive artificial-intelligence build-out is beginning to push up prices on everything from smartphones to electricity. The question now is how widely that build-out might ripple through the economy, and how long it could keep inflation elevated… The money pouring into the AI arms race is unprecedented. Analysts peg capital spending at five of the so-called hyperscalers—Alphabet, Amazon, Meta Platforms, Microsoft and Oracle—at $741 billion this year, according to FactSet (FDS), up nearly 75% from last year.”
June 24 – Reuters (David Shepardson): “Average U.S. domestic air fares rose 4.7% in the first three months of 2026 to $428 as oil prices soared in March due to the U.S.-Israeli war on Iran… Without adjusting for inflation, air fares in the first quarter were up 5.7% over the prior three months and up 7.7% over the same period last year.”
June 25 – Axios (Adriel Bettelheim and Tina Reed): “Growing demand for medical care and high-cost drugs helped drive up national health spending 7.3% last year, to $5.7 trillion… It marked the third consecutive year that health spending rose above 7%... The actuaries project that outlays for medical care and services will reach nearly $9 trillion by 2034 and represent 20.6% of the economy. Health care's share of the overall economy rose to 18.4% last year, up from 18% in 2024... Hospital spending remained the biggest category of medical services, rising 8.2% in 2025 to $1.8 trillion. Physician and clinical services spending grew 6.2% to $1.2 trillion. Overall prescription drug spending was up 11.1%, reaching $518.7 billion.”
June 24 – Bloomberg (Annika Inampudi): “The US is expected to spend more than $560 billion on prescription medications in 2026, up 8.2% from last year as drugs for obesity and diabetes grow increasingly popular. The nation’s total healthcare tab… is projected to surpass $6 trillion in 2026, fueled in large part by prescription drug outlays, according to… the Centers for Medicare and Medicaid Services…”
June 23 – Bloomberg (James Mayger): “Australia’s core inflation remained above the top of the Reserve Bank’s target in May, reinforcing expectations policymakers will maintain a hawkish stance on interest rates. The… trimmed mean gauge of annual consumer-price growth, which shaves off volatile items, rose 3.6%, versus economists’ estimate of 3.5%... The headline consumer price index rose 4%, with the cost of all 11 groups of goods and services increasing.”
Federal Reserve Watch:
June 22 – Bloomberg (Steve Matthews and Scott Lanman): “Alan Greenspan, the Federal Reserve chairman proclaimed a wizard for guiding a then-record US economic expansion, only to see his luster dimmed by the financial crisis that erupted less than two years after he stepped down, has died. He was 100.”
June 19 – Wall Street Journal (Nick Timiraos): “Kevin Warsh’s first assignment as Federal Reserve chairman isn’t what to do about interest rates. It is figuring out what kind of moment he’s in. The economy he inherited can be read two ways, and they turn on the same development: the artificial-intelligence build-out. Everyone can see it pumping demand into the economy—the data centers, the electricity, the chips, the soaring tech stocks. The question is what comes next. In one reading, the productivity payoff is coming soon and big, enough that the Fed should largely sit still and let it arrive… In the other, the payoff is real but years off, while the demand is here today—so the boom is overheating the economy now. A Fed that waits for the productivity dividend to show up will have waited too long.”
June 24 – Bloomberg (Bill Dudley): “Federal Reserve Chair Kevin Warsh is changing how the central bank conducts monetary policy. A fresh look is appropriate, especially given the Fed’s failure to achieve its 2% inflation objective for more than five years. But this needs to be done with greater care than Warsh has shown to date. In particular, deliberately obscuring the Fed’s monetary policy reaction function — how the Fed would likely adjust interest rates in response to changing economic circumstances — threatens to undermine its effectiveness and make it harder for the Federal Open Market Committee to achieve its stated goal of price stability.”
June 25 – Reuters (Michael S. Derby): “Federal Reserve Bank of New York President John Williams said… that while inflation pressures are likely to moderate this year they remain too high, as he pushed back his expectation of getting inflation back to the Fed's 2% target. ‘On the price stability side of our dual mandate, inflation is unquestionably elevated and well above the (Federal Open Market Committee's) longer-run goal of 2%’ and ‘it is imperative that we restore it to our 2% longer-run goal on a sustained basis,’ Williams said…”
June 22 – Reuters (Ann Saphir): “Chicago Federal Reserve President Austan Goolsbee said… that with the labor market stable, he is focused on figuring out whether too-high inflation will stay that way persistently or if it will recede as the effect of high tariffs fades and if the conflict in the Middle East gets resolved. ‘We’ve been dealing with an inflation problem that’s well above the target and has been going the wrong way… What’s been on my mind is, what is the evidence that this is going to be temporary, and that we're going to get back on path to 2%, which is what we've promised.’”
June 24 – Bloomberg (Katanga Johnson): “Federal Reserve Vice Chair for Supervision Michelle Bowman has completed a shakeup of the agency’s bank-oversight unit as she aims to prioritize what she sees as core financial risks. ‘The reorganization represents a significant milestone in our effort to refocus supervision on material financial risks and make the Federal Reserve’s oversight of banks more effective, efficient, fair, transparent, and publicly accountable,’ Bowman wrote…”
June 24 – Bloomberg (Katanga Johnson): “All of the biggest US banks cleared the Federal Reserve’s annual stress test, setting the stage for lenders to boost buybacks and dividends… The exam this year assessed how 32 large lenders would withstand a severe global shock with heightened stress in both commercial and residential real estate markets in addition to corporate debt markets.”
U.S. Economic Bubble Watch:
June 25 – Associated Press (Paul Wiseman): “The U.S. economy expanded at a solid and unexpected 2.1% annual pace from January through March, the Commerce Department reported… in its final estimate of first-quarter growth. The growth in gross domestic product… marked a rebound from a sluggish 0.5% in the last three months of 2025 when a 43-day federal government shutdown weighed on the economy. Thursday’s numbers were an upgrade from… previous first-quarter estimate of 1.6% growth… Excluding housing, private investment jumped 10.6%, up from 2.4% in fourth-quarter 2025. In a sign of the AI boom, investment in information-processing equipment jumped at a 39.9% pace as companies scrambled to outfit their data centers.”
June 23 – Bloomberg (Maya Prakash): “US business activity expanded at the fastest pace in five months, bolstered by a surge in demand for manufactured goods. The S&P Global flash composite purchasing managers index rose to 52.2 in June… The group’s manufacturing gauge rose to 55.7, the highest since May 2022, as factories ramped up production to meet the strongest new orders growth in more than four years.”
June 25 – Reuters (Lucia Mutikani): “New orders for key U.S.-manufactured capital goods rebounded sharply in May as demand increased broadly, suggesting business spending on equipment would again underpin economic growth in the second quarter. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, increased 1.6% last month after an upwardly revised 0.7% decline in April… Business spending on equipment recorded double-digit growth in the first quarter. Gross domestic product growth estimates for the second quarter are currently as high as a 3.0% annualized rate.”
June 25 – Associated Press (Matt Ott): “Fewer Americans applied for jobless aid last week as layoffs remain low… U.S. applications for unemployment benefits in the week ending June 20 fell by 12,000 to 215,000… The total number of Americans filing for unemployment benefits for the previous week ending June 13 increased by 21,000 to 1.82 million.”
June 24 – Reuters (Lucia Mutikani): “The U.S. current account deficit widened more than expected in the first quarter amid a shortfall on the primary income balance… The current account deficit, which measures the flow of goods, services and investments into and out of the country, increased $5.8 billion, or 2.6%, to $226.8 billion last quarter. Data for the fourth quarter was revised to show the deficit at $221.1 billion instead of the previously estimated $190.7 billion.”
June 26 – Reuters (Lucia Mutikani): “The U.S. trade deficit in goods swelled to a 14-month high in May… The goods trade gap increased 27.4% to $105.8 billion last month, the highest level since March 2025… Imports of goods increased $10.9 billion, or 3.6% to $313.4 billion, also a 14-month high. They were driven by a 6.3% surge in imports of automotive vehicles. Imports of consumer goods soared 5.7%.”
June 25 – Axios (Courtenay Brown): “Income growth is accelerating — supporting consumer spending — while inflation is rising even beyond the energy-price shock. That combination… creates a complex reality for Kevin Warsh’s young Federal Reserve chairmanship... ‘The U.S. consumer is not cracking,’ Olu Sonola, an economist at Fitch Ratings, wrote…, adding that the oil price shock has not derailed consumer spending. ‘Headline inflation may be nearing a peak as energy prices fall, but the underlying details are still too firm for the Fed to ignore.’ ‘For markets hoping the Fed can avoid raising rates in 2026, the data are moving in the wrong direction.’”
June 24 – Bloomberg (Michael Sasso): “Sales of new homes in the US fell again in May to the lowest level since the start of the year as heavy discounts failed to offset high mortgage rates. Purchases of new single-family homes decreased by 7.3% to an annual rate of 580,000 last month… The median sales price edged higher to $424,900, little changed from a year earlier… In May, the for-sale supply of new homes fell 1.4% from a year ago to 496,000. Even so, that represented 10.3 months of supply at the current sales rate, matching the highest level since 2009. Contractors have slowed their pace of construction in an attempt to reduce an oversupply of new homes on the market, including of so-called ‘spec homes’ built without a signed contract.”
China Watch:
June 23 – Bloomberg (Diana Li, Denise Wee, Trista Xinyi Luo, Venus Feng and Dave Sebastian): “When Chinese authorities announced sweeping measures to stem capital outflows from the mainland last month, tax adviser Patrick Yip started getting urgent calls from clients. They were wondering how the moves would affect their bank accounts in Hong Kong, where most of the money that leaves China winds up. They worry the crackdown ‘is just the tip of the iceberg, and that more restrictive policies or enforcement concerning cross-border capital flows could be coming,’ said Yip, at law firm Karas So LLP… At stake is hundreds of billions of dollars of mainland wealth that has bolstered everything from luxury spending and real estate to the stock market.”
June 23 – Bloomberg: “China is choking shipments of some critical minerals to Japan, a slowdown that’s hurting companies and prompting calls for Prime Minister Sanae Takaichi to find a diplomatic off-ramp with Beijing. The world’s No. 2 economy has stopped nearly all supplies of some forms of tungsten this year, while magnet flows last month fell to their lowest since May 2025 when shipments collapsed as China rolled out its export-control regime globally. The throttling of goods began after Takaichi angered Beijing last November with comments about self-ruled Taiwan.”
June 22 – Bloomberg: “China narrowed its cumulative fiscal deficit for the first time in more than two years… The combined shortfall under China’s two biggest government budgets shrank 4.1% in the first five months from the same period a year earlier to 3.16 trillion yuan ($466 billion)… Last month alone, government expenditure fell 3.9% on year, the third consecutive month of decline.”
Central Banker Watch:
June 24 – Wall Street Journal (Ed Frankl): “The European Central Bank will need to keep increasing borrowing costs to control inflation that jumped on higher energy prices due to the war in the Middle East, executive board member Isabel Schnabel said. ‘From today’s perspective, we will need to raise interest rates further in order to bring inflation back to our 2% target over the medium term,’ she told German weekly Die Zeit…”
June 26 – Bloomberg (Tom Rees): “As London bakes in record-breaking sunshine, Bank of England officials are beginning to fret that, as one supply shock dissipates, the weather could produce the next one to push up inflation. Climate scientists increasingly expect a severe El Niño event disrupting global weather patterns will take hold later this year and into 2027. Now economists are beginning to worry that it could cause the next supply shock that boosts food inflation and provide the latest setback for central banks.”
June 22 – Reuters (Balazs Koranyi): “The European Central Bank’s estimate for the neutral interest rate, which neither stimulates nor slows growth, is not used as an explicit goalpost by policymakers when setting interest rates, ECB President Christine Lagarde said…”
Europe/UK Watch:
June 22 – Bloomberg (Joe Mayes, Chloe Chaplain and Ellen Milligan): “Keir Starmer said he would step down as Britain’s prime minister, marking a precipitous fall from favor two years after leading the Labour Party back to power with a landslide majority. Starmer’s departure paves the way for Andy Burnham to attempt to take over as successor, after the long-time mayor of Manchester won a parliamentary seat last week in order to mount a challenge. Starmer's exit opens the door to Britain's fifth premier since 2022: a jarring milestone for a political system which once prized itself on its stability.”
June 25 – Financial Times (Attracta Mooney, Rachel Millard, Ian Johnston and Sarah White): “Europe’s energy system has come under intense pressure with power plants forced to reduce output and wholesale electricity prices soaring as the continent battles an unprecedented June heatwave. France, Spain and the UK have all reported record June temperatures this week, fuelling demand for air conditioning and other forms of cooling… In France, almost 70,000 customers in Brittany were left without power after a heat-related transformer failure, while the national utility EDF also cut nuclear power generation as the heatwave increased river temperatures. In the UK, five major gas-fired power plants were forced to reduce output as they struggled to cool… ‘What we are seeing is an aged grid and old power stations not being able to cope with fossil fuel-driven heat,’ said Bruce Douglas, chief executive of the Global Renewables Alliance…”
June 25 – Bloomberg (Laura Millan and Olivia Rudgard): “The heat wave searing much of Europe is officially the most severe ever recorded in the region, according to a study… Researchers at World Weather Attribution, who looked at heat and humidity levels during both the day and night during three consecutive days in the month of June, found that temperatures were between 5C and 12C above the seasonal averages across France, Germany, Italy, Spain and southern England.”
June 26 – Bloomberg (Nayla Razzouk, Sabrina Nelson Garcinuño, Eleanor Thornber and Agnieszka de Sousa): “The scorching heat sweeping Europe has parched soils, distressed livestock and is keeping farmers away from fields, superseding the Iran war as the greatest challenge to food supplies. In France, record-breaking temperatures are damaging corn crops and wiping out hundreds of thousands of chickens. In Spain, pigs are losing their appetite and some fruit is threatened at the key blossoming stage. In the UK, distressed cows are producing less milk.”
Japan Watch:
June 23 – Bloomberg (Toru Fujioka): “The Bank of Japan signaled the need for further increases to the benchmark interest rate in a summary of opinions from a last week’s board meeting… ‘As for the future conduct of monetary policy, given that underlying CPI inflation has been approaching 2% and financial conditions have been accommodative, it is appropriate for the bank to continue to raise the policy interest rate’ in response to economy, inflation and financial conditions, one of nine board members said, according to a summary of the June 15-16 meeting…”
June 24 – Bloomberg (Toru Fujioka): “The Bank of Japan needs to raise interest rates every few months and should quicken the pace in the face of stronger inflation risks, said Naoki Tamura, one of the most hawkish board members. ‘What I envisage as a baseline path is raising the interest rate by a quarter percentage point at intervals of a few months toward the neutral interest rate level of 2%,’ Tamura said…”
June 24 – Financial Times (Leo Lewis): “Sanae Takaichi has set out a ¥370tn ($2.3tn) investment roadmap for Japan in the biggest policy move since her pledge to build a ‘strong and prosperous archipelago’ helped secure an election landslide in February. The prime minister’s 14-year spending blueprint, which is Japan’s largest-ever and longest-term such plan, combines public and private investment in 17 strategic sectors of the economy and includes more than $600bn for AI and semiconductors. The scale of the plan… revived questions about how Takaichi plans to pay for the implied fiscal expansion.”
June 24 – Bloomberg (Mia Glass): “Japan’s 20-year bond auction drew the weakest demand since the market upheaval just over a year ago as worries about inflation and fiscal policy came back to the fore. The bid-to-cover ratio at the first super-long sovereign debt sale since the Bank of Japan’s rate hike showed that investors are wary. It dropped to 2.97, well below the 12-month average and the lowest since May 2025.”
Emerging Market Watch:
June 25 – Associated Press (Sibi Arasu): “The late arrival of India’s monsoon season and below-average rainfall have caused problems ranging from planting delays for farmers to water restrictions for construction sites in its largest business hub, Mumbai. Water shortages have been reported around the country due to the late start of the rainy season… Climate experts said the El Nino, a warming of the Pacific that affects weather around the globe, combined with an already heating planet, will likely result in weak, scattered rainfall across the country.”
June 23 – Reuters (Aida Pelaez-Fernandez and Ricardo Figueroa): “Mexico’s economy posted its largest monthly expansion in more than five years in April, ahead of expectations… Mexico’s economic activity grew 1.2% in April from the prior month… Activity in Latin America's second-largest economy posted its sharpest month-on-month expansion since March 2021…”
June 21 – Wall Street Journal (Juan Forero): “Far-right populist Abelardo de la Espriella was narrowly elected president of Colombia on Sunday, setting the country on a collision course with the cocaine-trafficking networks and criminal gangs that have extended their reach across drug-producing regions. A flamboyant 47-year-old lawyer who flaunts his wealth and holds U.S. citizenship, de la Espriella received 12.9 million votes, or 49.6% of the ballots cast, by pledging to dismantle armed groups that have surged in recent years.”
Social, Political, Environmental, Cybersecurity Instability Watch:
June 24 – Axios (Jim VandeHei and Mike Allen): “The Five Eyes intelligence alliance issued a rare joint warning this week that frontier AI capable of crippling governments and businesses is close. The fast rise of Chinese and Japanese models helps explain the urgency and fear, officials tell us. Yes, Anthropic's Mythos model is the most cyber-lethal threat in the world. But OpenAI is close here in America. And China and Japan, using much cheaper models, have gotten closer, faster than intelligence agencies anticipated. ‘The timeline is not years, it is months,’ Five Eyes warned. Five Eyes, composed of the U.S., U.K., Canada, Australia and New Zealand, is considered the world's most comprehensive and powerful spy network.”
June 22 – Financial Times (Mehul Srivastava): “The west’s artificial intelligence-armed adversaries may succeed within months in developing attacks that could overwhelm the defences of governments and companies, the cyber chiefs of the Five Eyes intelligence partnership have warned. For now, the west has an advantage — advances in commercial AI and their integration into their militaries and spying capabilities appear to have outpaced those of Russia, China and others. But that lead may not last for long, the rare joint warning by the US-led alliance, which also includes the UK, Canada, New Zealand and Australia, said. ‘The timeline is not years, it is months,’ the joint communiqué said.”
June 24 – Bloomberg (John Ainger): “The largest US power grid is creating a new emergency warning as surging data-center demand pushes electricity supplies toward shortages beyond periods of extreme weather. PJM Interconnection LLC, which serves 67 million people across 13 states, agreed… to add a new ‘capacity advisory’ to warn customers when electricity supplies could become tight even without the extreme temperatures that have historically driven power shortages. ‘With the recent load growth and changing generation patterns, what we have seen already experienced is that we have gotten to capacity emergency type situations without meeting the triggers for a hot or cold weather alert,’ said Paul Dajewski, a senior manager at PJM. ‘We want to make sure that we have enough generation.’”
June 24 – Bloomberg (Ilena Peng): “Four cases of the New World screwworm have been confirmed on the same Texas property, marking the largest cluster of detections to be reported since the parasite was found in the US earlier this month.”
June 23 – Bloomberg (Alastair Marsh): “As Europeans head into a period of dangerously high temperatures, a team of executives from JPMorgan (JPM)… says that more frequent heat waves come with profound implications for energy demand. ‘On extreme hot days everything is pushed to its limit,’ Sarah Kapnick, the bank’s global head of climate advisory, said... ‘There are these intense moments where having access to electricity becomes important not just to the functioning of commerce and society, but also to life itself.’”
June 23 – Bloomberg (Mary Hui and Ishika Mookerjee): “Exceptionally warm sea surface temperatures in the Pacific Ocean are setting the stage for a potential ‘super’ El Niño of record-breaking intensity. Temperatures in a part of the equatorial Pacific that’s closely monitored to define El Niño and La Niña events are currently at 29.4C (84.9F), or 1.7C above the 30-year average… That’s on track to be the largest warm deviation from the historical average for June since 1981… ‘The data show these incredibly warm temperatures,’ said Benjamin Horton, chair professor of earth science at the City University of Hong Kong… Even more worrying, he said, is how quickly temperatures in the equatorial Pacific have risen to abnormally warm levels from below normal temperatures just earlier this year.”
June 22 – Bloomberg (Jack Wittels): “Falling Rhine water levels are choking fuel shipments to parts of western Europe as a heat wave grips the region, forcing barges to sail with less than half their normal loads. Earlier on Monday, barges carrying diesel through Kaub in Germany — a critical waypoint on the river — were limited to about 1,070 tons of cargo… That represents only about 45% of their full carrying capacity.”
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