Fulcrum Perspectives
An interactive blog sharing the Fulcrum team's policy updates and analysis.
CBO Estimates Inflation Reduction Act will Trim $102 Billion off Federal Deficit
The Congressional Budget Office (CBO) has scored the $739 billion “Inflation Reduction Act” (a.k.a. Build Back Better-lite). The CBO forecast the legislation will lead to a net deficit decrease of more than $102 billion over the next ten years.
You can access the CBO report HERE.
The CBO scoring will be seen as a victory for Senate Democrats and clearly helpful to their efforts to get the Reconciliation package voted on in the next week. Moreover, they hope it helps convince Senator Kyrsten Sinema (D-AZ) - whose vote will make or break the deal - to get to a “yes” vote on the deal.
As of this writing, Sinema has yet to comment on the bill, saying she wanted to see how the Senate Parliamentarian ruled on the package (e.g., will it qualify as a Reconciliation worthy bill, or will certain parts be struck as not meeting the Reconciliation standard).
The End of a Violent Life Doesn’t Mean the End of a Global Threat
The news of the death of Al-Qaeda leader Ayman al-Zawahiri leaves many of us with the sense an era has passed - or perhaps, a bad nightmare. al-Zawahiri was killed in a US intelligence operation by Hellfire Ninja R9X missile - a drone-fired missile that uses pop-out swords rather than explosives to take down high-profile targets. A gruesome but, quite frankly, appropriate end to an individual who helped plan the 9/11 attacks and a host of other violent, vicious attacks on civilians across the globe.
What will be interesting to read in the months and years to come as the mission is declassified is how long Western intelligence services had been tracking him. Perhaps for years - wouldn’t you want to track those he was in communications with so you could be ready to stop them before they attacked? Or did they just find his whereabouts in recent months as he moved to Kabul (a rather audacious move which one has to suspect the Taliban government likely was not too pleased with on some level)? Also, since the US left Afghanistan almost a year ago, what does this say for “Over the Horizon” intelligence? Is it that good or did we leave a large number of assets in place in Afghanistan that will make “Over the Horizon” up close and personal? All fascinating questions about the future of the War on Terror.
Either way, justice was delivered. But the threat remains. al-Zawahiri was only one ugly head of a multi-headed monster that constantly plots to strike targets worldwide.
Al-Qaeda is now believed to be led by Saif al-Adel, a former Egyptian Army Colonel who fled to Afghanistan in 1988 after being accused of trying to overthrow the government. After joining with Osama Bin-Laden and al-Zawahiri, he went on to help mastermind the 1998 bombing of the US Embassy in Kenya, which killed more than 200 people, the training of and participation with radicalized Somalis who attacked US troops in Mogadishu (“Black Hawk Down”) in 1993, the abduction and gruesome murder of Wall Street Journal reporter Richard Pearl, and the 2003 suicide bombing in Riyadh, Saudi Arabia. It is a resume of extraordinary audacity, meticulous planning, and brutal execution.
For the moment, the world is safer with al-Zawahiri’s death. But just for a moment. The fight continues in the Forever War against radicalized terrorists.
A Check-List to Getting the Inflation Reduction Act (“BBB-lite”) Done
Last Wednesday, Senator Joe Manchin (D-WV) surprised the markets and most of his fellow members of Congress by announcing he and Senate Majority Leader Chuck Schumer (D-NY) had reached an agreement on a new $739 billion energy/climate change/drug price cap/tax/deficit reduction package – in effect, Build Back Better-lite (BBB-Lite) but now being called “The Inflation Reduction Act.”
We have been warning since December 2021 – when the original $3.5 trillion Build Back Better (BBB) package was declared “dead” – that it really was still alive, albeit barely. We thought then, as we think now, it was just too important for the base of the Democratic Party going into the November mid-terms. Defeat was simply not an option – it was just a matter of how much they could winnow down the package from the original proposal without losing the support of Progressive Democrats in the House and Senate.
Passage is not a “slam dunk” by any measure, but we believe there is now more than a 60% chance they will get it done in the next two weeks and on the President’s desk to be signed into law.
Before we lay out what is in the bill, we thought it a good idea to offer a rough “check-list” of what must be done to pass this legislation into law. Here is our “check-list” – with the quick caveat we may find a few new items to add as Congress moves forward:
Getting Senator Krysten Sinema (D-AZ) to Sign-Off on the Deal: With a Senate divided 50-50 by Party, every vote matters, as we saw when Senator Manchin temporarily scuttled BBB last December. Now, all eyes are on Senator Sinema and whether she will support or oppose the package. As of this writing (Tuesday morning), Senator Sinema has not commented one way or another. Her staff has told reporters and other senate staffers, “she is reviewing the bill and waiting for the ruling from the Senate Parliamentarian” (see next item on what that means). But Sinema has long opposed making any changes to existing tax laws dealing with carried interest. This draft legislation closes the carried interest loophole. We have learned Sinema was not consulted on the deal. There have been issues between her and the Senate Majority Leader in the past and it is not clear what level of discussions are happening between Sinema and Leader Schumer now. If Sinema opposes the package, it will not pass;
Getting the Senate Parliamentarian to Sign-Off on the Legislation Qualifying as a Reconciliation Bill: Reconciliation legislation is very arcane and confusing. In short, it is legislation that cannot be blocked by filibuster in the Senate. A simple one-vote majority wins. But it must pass a strict requirement that the bill deals strictly with 1) spending, 2) revenue, and 3) federal debt limit. The Senate can only use Reconciliation once in a calendar year per those three criteria (e.g., three Reconciliation bills per year). And a Reconciliation bill cannot add to the federal deficit. The Senate Parliamentarian – who is charged with interpreting the Standing Rules of the US Senate and parliamentary procedure – must decide if the bill meets these criteria. We expect the Parliamentarian to approve by the end of this week.
Getting Sign-Off from the House SALT Caucus: Last year, more than 15 Democratic House members sent a letter to Speaker of the House Nancy Pelosi (D-CA) threatening to vote against BBB unless there was a lifting of the $10,000 cap on state and local tax deductions. The letter signatories came from states with high state and local taxes (primarily New York and New Jersey). The current draft bill does not lift SALT caps – so what will these members do? Recall that Democrats only have a four-seat majority in the House, so every vote is needed if and when the bill comes over for a vote. We believe all signatories will yield and vote in favor of the package.
Making Sure All Senate and House Members Are Healthy/COVID-Free: In the last month, at least six Senate Democrats have been diagnosed with COVID. This has, in turn, slowed Leader Schumer’s efforts on several pieces of legislation and a slew of presidential nominations needing all 50 votes plus the Vice President’s tie-breaking vote. If this bill is to pass in the next seven to ten days, a completely healthy Democratic Caucus in both chambers is critical. But we would quickly note the same is true for Republicans – and Senator John Cornyn (R-TX) who is the Deputy Minority Leader announced yesterday he has tested positive.
Can Democrats Successfully Push Back on Two Studies Arguing the Bill Will Not Lessen Inflation and/or Will Actually Raise Taxes On Those Earning $400,000 or less? The Congressional Joint Committee on Taxation (JCT) – a bipartisan congressional committee that is non-partisan – as well as the University of Pennsylvania’s Wharton School of Business Budget Model each offered an analysis of the bill which says it will do virtually nothing to reduce inflation. The Wharton study (HERE) actually says it will slightly increase inflation until 2024. And the JCT analysis (HERE) says it will raise taxes on households earning less than $400,000 (meaning it breaks President Biden’s promise not to raise taxes on those earning less than $400,000). But will either or both reports help opponents of the Schumer-Manchin deal? In short, we do not think so. But they do not help and will be used by Republicans going into the November mid-term elections against Democrats.
Turning to what is in the legislation, here is a link to the US Senate Majority Leader’s website that offers:
The full text of the Inflation Reduction Act of 2022;
A one-page summary of the Act;
An overview of the tax provisions;
An overview of the provisions aimed at capping drug prices and;
A summary of the energy security and climate change investments in the bill.
The legislation includes roughly $790 billion in offsets to fund approximately $485 billion in new spending and tax breaks. Below is a breakdown of the expenditure and revenue:
Source: Committee for Responsible Federal Budget
We hope you find this helpful. Please let us know if you have any questions.
The Global Week Ahead: July 31-August 2022
This week, Asia will get a lot of focus both politically and economically. US Speaker of the House Nancy Pelosi (D-CA) is expected to visit Taiwan in the face of heavy criticism from China. She will be the highest-ranking US official to visit the island nation in decades. Meanwhile, ASEAN Foreign Ministers will gather in Cambodia as well as Russian Foreign Minister Sergei Lavrov and US Secretary of State Anthony Blinken. This all happens as the markets brace for a flood of major economic data reports from across the Indo-Pacific region.
As the Russian invasion of Ukraine grinds on, global leaders and markets will watch to see if grain shipments will finally begin to ship from Ukrainian ports. And in the US, the US Senate will seek to pass a hefty climate/energy/tax “Reconciliation” package as markets closely watch Friday’s jobs numbers and signs of further economic downturn. Here is what we are watching in the coming week:
Sunday, 31 July 2022:
Global
Nothing of significance to report.
Americas
Political/Social Events –
US Speaker of the House Nancy Pelosi (D-CA) continues her visit to the Indo-Pacific which may include a controversial visit to Taiwan. She is also visiting Japan, Indonesia, and Singapore.
Economic Reports/Events –
Nothing significant to report.
Asia:
Political/Social Events –
The 55tth ASEAN Foreign Ministers meeting in Phnom Penh, Cambodia. Russia Foreign Minister Sergey Lavrov to attend.
Economic Reports/Events –
China NBS PMI Composite (July)
Europe:
Political/Social Events –
Russia celebrates Navy Fleet Day. President Putin is expected to attend a parade in St. Petersburg.
Economic Reports/Events –
Nothing significant to report.
Middle East:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Saudi Arabia GDP figures (Q2)
Africa:
Political/Social Events –
Senegal holds parliamentary elections.
Economic Reports/Events
Nothing significant to report.
Monday, 1 August 2022:
Global
The UN holds the 10th Review Conference of the Parties to the Treaty on the Non-Proliferation of Nuclear Weapons in New York.
Americas
Political/Social Events –
US Southern Command holds PANAMAX 2022 exercise in San Antonio, Texas through August 12th. The exercise brings together military representatives from seven Caribbean and South American countries to better plan for crises.
Jamaica marks Emancipation Day, the day African slaves in British colonies were granted freedom from slavery.
The US House of Representatives is out of session for the month of August. The US Senate is in session this week and will seek to pass a Budget Reconciliation bill.
Economic Reports/Events –
US ISM Index (July)
Brazil central bank market readout, balance of trade (July)
Mexico Business Confidence (July), FX reserves (June), S&P manufacturing PMI (July)
Asia:
Political/Social Events –
Operation Garuda Shield military exercise to being in Indonesia. It will include troops for the US, Singapore, Australia, and Japan.
Maldivian President Ibrahim Mohamed Solih visits India for four days.
China marks the anniversary of the founding of the People’s Liberation Army (PLA).
China’s latest amendments to anti-monopoly laws go into effect.
China to drop taxes on 98 percent of Afghan imports and resume issuing visas to Afghans.
Cook Island holds parliamentary elections.
Economic Reports/Events –
South Korea exports (July)
China Caixin PMI (July)
Thailand Markit manufacturing PMI (July)
Taiwan Markit manufacturing PMI (July)
Malaysia Markit manufacturing PMI (July)
Vietnam Markit manufacturing PMI (July)
South Korea Markit manufacturing PMI (July)
Philippines Markit manufacturing PMI (July)
India Markit manufacturing PMI (July)
Indonesia Markit manufacturing PMI (July), CPI (July)
Hong Kong GDP (Q2)
Australia manufacturing PMIs (July), inflation gauge (July)
Europe:
Political/Social Events –
The EU’s 15 percent voluntary demand reduction target for natural gas goes into effect until March 31, 2023.
Germany expected to halt purchases of Russian coal.
Hungary begins export ban on fuels.
Switzerland celebrates National Day.
Economic Reports/Events –
The UK marks St. Andrew’s Day (A bank holiday in Scotland)
In the UK, BT and Openreach union members set to strike for 24 hours over a pay dispute. They also struck this past Friday for 24 hours.
Germany retail sales (June), S&P/BME manufacturing PMIs (July)
Spain retail sales (June), S&P manufacturing PMIs (July)
Italy S&P manufacturing PMIs (July)
France S&P manufacturing PMIs (July)
Eurozone S&P manufacturing PMIs (July), unemployment rate (June)
Russia monetary policy report
Middle East:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Turkey’s Istanbul Chamber of Industry Manufacturing PMI (July)
Africa:
Political/Social Events –
The corruption trial of former South African President Jacob Zuma resumes in Johannesburg.
Economic Reports/Events –
South Africa manufacturing PMI (July)
Angola gross reserves (July)
Tuesday, 2 August 2022:
Global
Nothing significant to report.
Americas
Political/Social Events –
Missouri holds US Republican gubernatorial primary.
Washington State holds a congressional primary.
US Republican senatorial, congressional, and state primaries in Arizona.
Michigan holds a Republican gubernatorial primary and four congressional primaries.
Kansas holds vote on state constitution regarding abortion and Republicans hold primary for gubernatorial candidate and other candidates for November elections.
Argentina’s transportation workers expected to hold nationwide strike.
Economic Reports/Events –
US JOLTS Report (June), total vehicle sales (July)
Brazil industrial production (June)
Canada S&P manufacturing PMI (July)
Asia:
Political/Social Events –
South Korea to launch first lunar mission.
Economic Reports/Events –
South Korea CPI (July)
Hong Kong retail sales value (July), retail sales volume (June)
Singapore SIPMM Manufacturing PMI (July)
Central Bank of Australia rates decision, commodities price index (July)
Japan’s monetary base figures (July)
India imports/exports/balance of trade (July)
Europe:
Political/Social Events –
Russia to celebrate Airborne Forces Day.
Economic Reports/Events –
Spain unemployment figures (July)
Middle East:
Political/Social Events –
Yemen’s UN-mediated cease-fire between Saudi-led coalition and Houthi militants to expire.
Economic Reports/Events –
Nothing significant to report.
Africa:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Seychelles interest rate decision
South Africa non-farm payrolls, South African Reserve Bank quarterly bulletin for Q1
Wednesday, 3 August 2022:
Global
OPEC+ set to meet to discuss calls for increased crude oil output. The meeting will be held virtually.
Americas
Political/Social Events –
The Federal Reserve Bank of Philadelphia holds its 6th annual Fintech Conference. A number of leading US regulators are expected to speak and potentially lay out new plans for regulatory decisions impacting cryptocurrency, consumer banking, and other fintech-related services.
Economic Reports/Events –
US ISM services index (July), factory orders (June)
Brazil IPC-Fipe inflation figures (July), central bank interest rate decision, S&P composite, and services PMIs (July)
Asia:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Hong Kong Markit PMI Composite (July)
Singapore Markit PMI Composite (July)
Australia services PMI (July), retail trade (Q2)
New Zealand household labor force survey (Q2)
India S&P global composite PMI (JulY0
Europe:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Spain unemployment figures (July)
Germany export and import figures and trade balance (June), S&P Services PMIs (July)
Spain S&P Services PMIs (July)
Italy S&P Services PMIs (July), retail sales (June)
France S&P Services PMIs (July)
Eurozone S&P Services PMIs (July), S&P Composite PMIs (July), PPI’s (June), retail sales (June)
Russia S&P services PMI (July)
Middle East:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Saudi Arabia S&P PMI (July)
Turkey inflation rate (July), PPI (July)
Africa:
Political/Social Events –
Niger celebrates its Independence Day.
Economic Reports/Events –
Uganda PMIs (July)
Mozambique PMIs (July)
Kenya PMIs (July)
South Africa PMIs (July)
Ghana PMIs (July)
Thursday, 4 August 2022:
Americas
Political/Social Events –
The CPAC Conference begins in Dallas, Texas (through August 7th)
Tennessee holds a Republican congressional primary.
Economic Reports/Events –
US trade balance (June)
Canada building permits (June), international merchandise trade (June)
Mexico consumer confidence (July)
Asia:
Political/Social Events –
China celebrates the Qixi Festival.
Economic Reports/Events –
Nothing significant to report.
Europe:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Bank of England rate decision (expected 50bp move to 1.75%)
Germany factory orders (June)
Middle East:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Turkey FX reserves (July)
Africa:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Zambia PMIs (July)
Friday, 5 August 2022:
Global
Nothing significant to report.
Americas
Political/Social Events –
The island nation of St. Kitts & Nevis holds general elections.
Economic Reports/Events –
US employment numbers (July), non0farm payrolls (July), average hourly earnings (July), participation rate (July), consumer credit (June)
Canada unemployment figures (July)
Asia:
Political/Social Events –
The World Cosplay Summit is held in Nagoya, Japan.
Economic Reports/Events –
Indonesia GDP (Q2)
Philippines CPI (July)
Thailand CPI (July)
Singapore retail sales (June)
Taiwan CPI (July)
India exports/imports/trade balance (July)
Japan household spending (June), labor cash earning (June), lending and coincident index (June)
Europe:
Political/Social Events –
In the UK, approximately 150,000 Conservative Party members are due to receive their ballot to begin voting for the new leader (and new British Prime Minister)
Economic Reports/Events –
Germany industrial production (June)
France private sector payrolls (Q2), wages (Q2), industrial production (June)
Spain industrial production (June)
Italy industrial production (June)
Russia FX reserves (July)
Middle East:
Political/Social Events –
Turkish President Recep Tayyip Erdogan will travel to Sochi, Russia to meet Russian President Putin to discuss grain transport through the Black Sea and possible future Russian investments in Turkey, and the situation in Syria.
Economic Reports/Events –
Nothing significant to report.
Africa:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Mauritius inflation and gross reserves (July)
Seychelles inflation figures (July)
South Africa reserves and bond purchases (July)
Saturday, 6 August 2022:
Global
Nothing significant to report.
Americas
Political/Social Events –
Bolivia celebrates Independence Day.
Jamaica celebrates Independence Day.
Economic Reports/Events –
Nothing of significance to report.
Asia:
Political/Social Events –
77th anniversary of the bombing of Hiroshima, Japan.
Economic Reports/Events –
Nothing significant to report.
Europe:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Nothing significant to report.
Middle East:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Nothing significant to report.
Africa:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Nothing significant to report.
Sunday, 7 August 2022:
Americas
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Nothing significant to report.
Asia:
Political/Social Events –
China exports/imports/trade balance (July)
Economic Reports/Events –
Europe:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Nothing significant to report.
Middle East:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Nothing significant to report.
Africa:
Political/Social Events –
Ivory Coast celebrates Independence Day.
Economic Reports/Events –
Nothing significant to report.
IMF Downgrades Global Economy Forecasts: Going From Bad to Worse
The International Monetary Fund (IMF) released their new baseline forecast this morning, and it is quite a gloomy outlook. Noting the global economy is “reeling from the pandemic, and Russia’s invasion of Ukraine [the world] is facing an increasingly gloomy and uncertain outlook.” You can access the full report HERE
With this in mind, the IMF downgraded their growth forecast from 6.1 percent (which they made only in April) to 3.2 percent for the remainder of 2022 and down further to 2.9 percent in 2023.
Of note, they see China - facing further COVID lockdowns and a deepening and worrisome real estate crisis — seeing its growth pushed down to 3.3 percent this year. That is the slowest growth in China in four decades.
The Eurozone is facing particularly rough waters ahead, with growth now projected to slow to 2.6 percent for 2022 and 1.2 percent in 2023.
Added to this, the IMF assessment sees global inflation spiking to 6.6 percent for advanced economies and 9.5 percent in emerging and developing countries.
With rapidly growing food security issues in Africa and the Middle East caused by Moscow’s aggression, these assessments will likely change again. Our assessment is this, in turn, will bring new pressures on the EU and US to either accelerate military aid to Ukraine or begin to contemplate ways to find a negotiated solution - something we believe Moscow will not be particularly interested in pursuing unless they continue to suffer significant military losses. It is going to be a tough fall with many historic decisions facing leaders everywhere.
The Week Ahead: July 24-31, 2022
This week, the markets are holding their collective breath as the Federal Reserve meets to decide the size of the next rate hike – will it be 75 basis points? Could it be 100? The decision comes as GDP figures are released in the US and across the EU which are likely to tell us if we are actually in recession or about to enter one.
On the geopolitical front, Russia’s Foreign Minister Lavrov barnstorms across Africa and Asia seeking support and to weaken growing global sanctions on Russia. Simultaneously, the EU’s energy ministers will hold an extraordinary meeting to set energy consumption caps in the face of likely energy shortages this coming winter. And in Washington, the US Senate prepares to vote on a landmark competitiveness bill that could super-charge semiconductor manufacturing and research and development efforts across the US.
Here is what we are watching in the coming week:
Sunday, 24 July 2022:
Global
Nothing significant to report.
Americas
Political/Social Events –
Economic Reports/Events –
Nothing significant to report.
Asia:
Political/Social Events –
China to use Long March 5B rocket to launch the second module of their space station.
Economic Reports/Events –
Nothing significant to report.
Europe:
Political/Social Events –
The turbine needed for maintenance for Nord Stream 1 pipeline is expected to arrive in Russia from Canada.
Economic Reports/Events –
Nothing significant to report.
Middle East:
Political/Social Events –
Russian Foreign Minister Sergey Lavrov to address the Arab League in Cairo, Egypt. He is also expected to visit Egypt, Ethiopia, the Republic of the Congo, and Uganda throughout the week.
Economic Reports/Events –
Nothing significant to report.
Africa:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events
Nothing significant to report.
Monday, 25 July 2022:
Global
World Trade Organization’s General Council to meet.
The UN Security Council meets to discuss the mission in Libya.
Americas
Political/Social Events –
US President Biden expected to hold a video call with Chinese President Xi Jinping (to be confirmed).
Economic Reports/Events –
US Chicago Fed National Activity Index (June), Dallas Fed Manufacturing Index (July)
Brazil central bank focus market readout, Current Account (April, May, June), FDI (March-May), consumer confidence (July)
Mexico economic activity (May)
Asia:
Political/Social Events –
Indonesia President Joko “Jokowi” Widodo visits Beijing for bilateral meetings with Chinese President Xi and Premier Li Keqiang. Indonesia is chairing the upcoming (November) G-20 Leaders’ Summit in Bali. The meeting is expected to focus on the agenda including climate, global inflation, and global security issues.
Newly elected Philippine President Ferdinand Marcos, Jr. to give first state of the nation address.
ASEAN Economic Ministers to meet (by video)
Taiwan’s Army will hold the Han Kuang real artillery exercise – the nation’s largest annual war game.
Economic Reports/Events –
Thailand export figures (June)
Singapore CPI (June)
Taiwan industrial production (June)
Hong Kong exports/imports/trade balance (June)
Europe:
Political/Social Events –
French President Emmanuel Macron is to visit Cameroon, Benin, and Guinea-Bissau to discuss food security issues – especially with regard to Russia’s growing relations with Cameroon.
Uzbekistan to host a two-day conference on Afghanistan. Approximately 20 countries will participate.
UK’s Conservative Party Leadership candidates Rishi Sunak and Liz Truss will debate on national television (BBC).
UK’s Unite union will begin votes on whether to strike at the Liverpool container port, the largest in the nation.
Economic Reports/Events –
Germany Ifo Business Confidence/Current Conditions/Expectations reports (July)
UK CBI Industrial Trends Report (July), CBI Business Optimism Index (Q3)
Middle East:
Political/Social Events –
Tunisia to vote on a constitutional referendum changing the country from a parliamentary system to a presidential system.
Turkish President Recep Tayyip Erdogan to begin a week-long visit to Venezuela, Argentina, and Mexico.
Economic Reports/Events –
Saudi Arabia reports balance of trade (May)
Turkey Business Confidence Report (July)
Africa:
Political/Social Events –
See above regarding French President Macron’s visit to Cameroon, Benin, and Guinea-Bissau. Otherwise, nothing significant to report.
Economic Reports/Events –
Ghana interest rate decision and presentation of the mid-term budget.
Tuesday, 26 July 2022:
Global
The UN Security Council holds an open debate on the Middle East.
Asalha Puja, commemorating Buddha’s first sermon in the Deer Park in Benares, is celebrated by Buddhists around the world.
Americas
Political/Social Events –
The US Senate is expected to begin voting on legislation boosting the American semiconductor industry, the National Science Foundation, and other R&D programs. Estimated at more than $60 billion dollars, the CHIPs Act is aimed at helping the US better compete with China.
Cuba celebrates Revolution Day, marking the day Fidel Castro began the armed revolution.
Economic Reports/Events –
US Redbook (July), S&P/Case-Schiller Home Prices (May), House Price Index (May), New Home Sales (June), Consumer Confidence (July), Richmond Fed Manufacturing and Services Indexes (July),
Brazil IPCA mid-month CIP (July)
Canada wholesale sales (June)
Argentina retail sales (May)
Asia:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
China industrial profits (June), FDI (June)
The Bank of Japan releases the minutes of its Policy Board meeting.
South Korea GDP (Q2)
Singapore industrial production (June)
Thailand value-added production (June)
Europe:
Political/Social Events –
EU energy ministers to hold an extraordinary energy council meeting to vote on a proposal to bind natural gas consumption cuts by 15 percent in case of an energy supply emergency this fall and winter.
Scotland’s GMB union votes on whether to strike later this summer over pay.
The Lambeth Conference, the once every decade meeting of Anglican bishops, begins in London.
Economic Reports/Events –
Spain PPI’s (June)
Middle East:
Political/Social Events –
Saudi Crown Prince Mohammed bin Salman visits Greece to establish new trade ties.
Economic Reports/Events –
Nothing significant to report.
Africa:
Political/Social Events –
Kenyan Presidential debate held in Nairobi.
Economic Reports/Events –
Seychelles interest rate decision
South Africa non-farm payrolls, South African Reserve Bank quarterly bulletin for Q1
Lesotho interest rate decision
Wednesday, 27 July 2022:
Global
The Pre-S20 Summit is to be held in Bali, Indonesia in advance of the November G-20 Leaders meeting.
The UN Security Council holds a briefing on peacebuilding and sustaining peace.
Americas
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
The US Federal Reserve Board begins two days of meetings to consider another possible 75 basis point hike; US MBA mortgage figures (July), durable goods orders (June), retail inventories (June), goods trade balance (June)
Mexico balance of trade (June)
Asia:
Political/Social Events –
Indonesian President Joko Widodo to arrive in Tokyo, Japan to discuss the upcoming G-20 meeting with Prime Minister Fumio Kishida.
South Korea celebrating the anniversary of the armistice of the Korean War. North Korea celebrates this date, too, but they claim victory.
Economic Reports/Events –
Japan Coincident Index (May), Leading Economic Index (May)
Australia CPIs (Q2)
South Korea Business Confidence (July)
Europe:
Political/Social Events –
UK’s Aslef union strike ballot closes for train drivers. Separately, rail workers of the RMT union plan to walk out on strike.
Economic Reports/Events –
Germany GfK Consumer Confident (August)
France Consumer Confidence (July), unemployment figures (June)
Eurozone Loans to Households (June)
Italy Consumer Confidence (July)
Russia's GDP (June), unemployment rate (June), real wage growth (May), retail sales (June), industrial production (June), Business Confidence (July)
Middle East:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Nothing significant to report.
Africa:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Kenya interest rate decision
Thursday, 28 July 2022:
Global
The UN Security Council holds votes on UN Peacekeeping Force in Cyprus, Central African Republic sanctions, and the UN mission in Libya.
Americas
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
US GDP (Q2), initial jobless claims (July), consumer spending (Q2),
US Financial Stability Oversight Council (FSOC) meets to discuss findings of the Hedge Fund Working Group, an update from the Council’s climate-related Financial Risk Committee; an update on the report on Responsible Development of Digital Assets; the Office of Financial Research’s work on non-centrally cleared bilateral repo data collection.
Argentina consumer confidence (July)
Canada CFIB Business Barometer (July)
Mexico unemployment figures (June)
Brazil PPIs (June)
Asia:
Political/Social Events –
Indonesian President Joko Widodo arrives in Seoul, South Korea for talks with South Korean President Yoom Seok Yeol about the upcoming G-20 meeting.
Economic Reports/Events –
Japan CPIs, industrial production, labor force surveys
Australia retail sales (June), international trade prices (Q2)
New Zealand ANZ Business Survey (July)
Europe:
Political/Social Events –
The two final candidates for the UK’s Tory Party leadership – Rishi Sunak and Liz Truss - face party members in Leeds in the first of a series of party campaign meetings around the country.
Russia to hold preliminary court hearing to begin dissolving Israeli-backed Jewish Agency inside Russia.
Separately, Russia begins legal proceedings against WhatsApp and Snapchat for refusing to localize data of Russians.
The 22nd Commonwealth Games begin in Birmingham, England.
Economic Reports/Events –
Germany inflation rate figures (July)
France PPIs (June)
Spain retail sales (June), unemployment (Q2), Business Confidence (July)
Italy industrial sales (May)
Eurozone economic sentiment (July), consumer confidence (July), consumer inflation expectations (July)
Middle East:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Turkey MPC meeting summary; inflation report
Africa:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Zambia inflation data (July), trade balance (June)
South Africa PPIs (June)
Kenya announces interest rate decision
Friday, 29 July 2022:
Global
Islamic New Year (Al-Hijra) 1444 begins.
Americas
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
US consumer spending figures (June), Chicago PMI (July) Michigan Consumer Sentiment/Consumer Expectations/Inflation Expectations Reports(July)
Canada GDP (May and June)
Mexico GDP (Q2), fiscal balance (June)
Brazil's unemployment rate (June)
Asia:
Political/Social Events –
Australia set to double foreign investment fees and penalties for purchasing farms, properties, and businesses.
Japan and the United States hold “2+2 talks” between foreign and commerce ministers.
Economic Reports/Events –
Japan consumer confidence index (August), new housing starts (July), Bank of Japan summary of opinions, retail sales (June)
India FX reserves (July)
South Korea's industrial production (Q2)
Taiwan GDP (Q2)
Sri Lanka CPI (July)
Australia PPIs (Q2), private sector credit
New Zealand ANZ Consumer Confidence (July)
Europe:
Political/Social Events –
The UK’s Communications Workers Union is set to go on a 24-hour strike.
Economic Reports/Events –
France GDP (Q2), inflation figures (July)
Germany's GDP (Q2), import prices (June), unemployment rate (June)
Spain GDP figures (Q2), inflation rate (July), current account (May)
Italy GDP (Q2), inflation rate (July), PPis (June)
UK mortgage lending (June), Bank of England Consumer Credit (June)
Eurozone GPD figures (Q2)
Middle East:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Turkey's balance of trade (June)
Africa:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
South Africa's money supply, trade figures, and budget balance data (all June)
Kenya inflation figures (July)
Uganda inflation figures (July)
Namibia money supply data (June)
Democratic Republic of Congo S&P Global rating assessment due.
Saturday, 30 July 2022:
Americas
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Nothing significant to report.
Asia:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
China BBS Manufacturing (July), NBS General PMI (July)
Europe:
Political/Social Events –
UK Aslef train drivers at eight rail companies will strike over pay disputes.
Economic Reports/Events –
Nothing significant to report.
Middle East:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Nothing significant to report.
Africa:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Nothing significant to report.
Sunday, 31 July 2022:
Americas
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Nothing significant to report.
Asia:
Political/Social Events –
The 55tth ASEAN Foreign Ministers meeting in Phnom Penh, Cambodia. Russian Foreign Minister Sergey Lavrov to attend.
Economic Reports/Events –
China NBS PMI Composite (July)
Europe:
Political/Social Events –
Russia celebrates Navy Fleet Day. President Putin is expected to attend a parade in St. Petersburg.
Economic Reports/Events –
Nothing significant to report.
Middle East:
Political/Social Events –
Nothing significant to report.
Economic Reports/Events –
Nothing significant to report.
Africa:
Political/Social Events –
Senegal to hold parliamentary elections.
Economic Reports/Events –
Nothing significant to report.
It didn’t even last 24 hours… Putin breaks newly signed grain deal with missile attack on Odessa
Yesterday afternoon brought news of a deal brokered by the United Nations and Turkey enabling grain shipments to resume from Ukraine. The deal was seen as going a long way to helping to ease the growing food security crisis. Less than 24 hours later, Russian President Putin broke the deal when four Russian “Kalibr” cruise missiles rained down on the port city of Odessa. Two directly hit Odessa’s port and the other two were shot down by Ukrainian defense forces.
Less than 24 hours had passed since Putin agreed to the deal. Why Russia would break the deal so quickly is still unknown - especially since Moscow’s approval of the deal was something of a small PR win. Now, by so aggressively and wantonly disrespecting the UN (not to mention Turkey), Russia further demonized itself internationally.
But we do see one reason we see for the violation: Russia is making money a lot of money on selling bootleg grains. The attack has set off wild swings in prices and probably will continue to do so for some time. We note wheat prices fell more than 6 percent on the announced deal. Now, they are spiking up again. The benefit to Russia is significant. Since seizing Crimea in 2014 and now significant portions of the Donbas - including Sevastopol — in the last four months, the flow of sanctioned Russian wheat (including wheat stolen in mass quantities from Ukraine by Russian forces) has gone up more than 50 percent.
The UN estimates there are currently 828 million people around the world going hungry of whom an estimated 40-50 million are on the brink of starvation. For Putin, keeping the wheat/grain markets off balance serves two purposes: 1) it helps further fund Putin’s war efforts, and, 2) it puts increased pressure on Western governments to step up to help those countries at most risk for food shortages.
Moreover, considering many of these countries are found in North and Central Africa, the risk of mass migration north across the Mediterranean Sea and into the EU is growing by the day. With the growing list of economic challenges, the EU is already facing due to Russia’s aggression in Ukraine, dealing with a mass-migratory crisis would be a significant political and social destabilizing issue.
When the gas gets shut off: Which EU country will get hurt the most
Great chart from the IMF courtesy of Axios. It tells the whole story very neatly:
Why it Matters: Italy’s latest political crisis could result in EU turbulence
We have been watching closely the political crisis in Italy these past few weeks which resulted in Prime Minister Mario Draghi resigning. Italian politics are always complex and at times bewildering. There have been 66 changes of government in Italy since the end of World War II. But this change could be a shock to not only Italy but to the rest of the European Union.
A snap election is to be held on September 25th but polls today show the Brothers of Italy Party with a clear majority. The right-wing party, whose name comes from the Italian national anthem, is led Giorgia Meloni. They have formed a coalition with other right-of-center parties including Forza Italia (led by former Prime Minister Silvio Berlusconi) and the Italian League (led by Matteo Salvini) and the populist Five Star Movement. Together, they would form what would be seen as the most conservative - both fiscally and socially — political party in the EU.
If elected, markets should expect a much more disruptive Italy within the EU governance structure, challenging the EU rules over budget and other issues including migration and social issues (including gay rights and abortion). Most investors have become worried Italy carries too much debt now. A Brothers of Italy coalition would not make debt reduction a priority.
If elected, Meloni would become Italy’s first female premier. She has made clear, however, that Italy will continue to support Ukraine in the war effort against Russia.
We will be tracking this election closely and sharing our analysis going forward. Here are the latest polls:
About that polling bounce for Democrats from the Roe v. Wade Reversal…
We have gotten a lot of client questions about the impact of the US Supreme Court’s recent reversal of Roe v. Wade. Several initial polls were showing Congressional Democrats had gained substantially versus Republican challengers heading toward the November elections. But may have faded already: A new poll out Thursday by the Marquette Law School Poll suggests that the pro-choice voter energy that emerged since the leak in early May from the Supreme Court and subsequent official opinion being handed down in July is fading. Moreover, the survey found that “those favoring Roe’s overturning… are more motivated to vote in November.”
The poll - which you can access here — “finds little evidence that partisan motivation to vote in the 2022 elections has been altered” by the decision.
The poll also finds an 18 percentage point advantage for Republicans among voters, effectively erasing gains Democrats had gained toward leveling that difference. Let’s see if this holds up in the next three months before the elections.
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