By Michael Every of Rabobank

Yesterday’s UK labor market data were a clear story – and an ugly one. Yet the US NFIB survey summarized: “Although optimism recovered slightly in May, uncertainty is still high among small business owners. While the economy will continue to stumble along until the major sources of uncertainty are resolved, owners reported more positive expectations on business conditions and sales growth.” That’s still more ‘uh?’ for now.

In geopolitics, Russia warned it won’t end the Ukraine war until NATO pulls its troops out of the Baltic states. Whatever asset you look at, take a step back and think about that for a moment. 

Is that a bluff – how can you know? Does it mean the EU surrendering those states back to Russian influence – and where afterwards? That’s the end of the EU as we know it, let alone the version that breezily states it wants to expand to Moldova, next to a Russian client state, and Georgia, next to Russia itself. Or it implies a permanent state of EU-Russia hostility --the latter not with “an economy the size of Italy”, but a war economy with a purchasing power parity of $7 trillion and a world of physical resources-- with profound implications for both sides socio-politically, economically, and financially. 

Now think about what that implies for your asset again.

The US reportedly told Israel to end the Gaza war so it can try to get an Iran deal. Meanwhile, Israel attacked the Houthis by sea for the first time, seen as a warmup for Iran; and the head of US Central Command told the House Armed Services Committee he’d presented Defence Secretary Hegseth and President Trump with a "broad range of options" for military action against Iran if negotiations fail. So, keep an eye on those negotiations!

The US Ambassador to Israel stated the White House doesn’t fully back a Palestinian state under current circumstances: “Unless there are some significant things that happen that change the culture,” which are unlikely to occur “in our lifetime,” then “there’s no room for it.” Moreover, he added a Palestinian state doesn’t need to be in the West Bank/Gaza and could be created by taking territory from another country. This is as EU states such as Spain, Ireland, and France are pushing in the opposite direction, opening another transatlantic rift. It’s also as the UK, Canada, Australia, NZ, and Norway sanctioned two far-right Israeli government ministers, one of whom (the finance minister) responded by paralysing the Palestinian economy by freezing links between its banks and Israel’s.

In Asia, senior staff in the last Taiwanese administration were arrested for spying for China; and Pakistan accused India of manipulating the flow of the Indus River to disrupt its food security, against the backdrop of a potentially wobbly military ceasefire.

In geoeconomics, a federal appellate court ruled Trump’s IEEPA tariffs could continue as a full appeal will be heard at another court on July 31. US-India trade talks are reportedly going well; and the US and China agreed a “framework” to roll back recent export controls, so each side gets the key inputs recently cut off by the other - but that’s a pinkie swear not an FTA. 

Summing things up, the Financial Times op-ed from Martin Wolf talks of ‘An ever-riskier world economy’ as “Trump’s tariff war brings with it unpredictability and a consequent loss of confidence.” Fair enough. 

Yet, in recent FT fashion, it then argues the US is in the early stages of a “revolution” aimed at changing it into an “arbitrary dictatorship”, following yesterday’s op-ed from Edward Luce that the US is falling into “authoritarianism.” That will be seen as a pinkie paper swear by some. It certainly has far more significant implications than are being priced in by markets if it’s true; and for FT intellectual credibility if it isn’t.

The EU (again) proposed lowering the Russian oil price cap from $60 to $45, banning the use of the Nord Stream pipelines, and cutting another 22 Russian banks from SWIFT, demanding “an end to the war” – which Russia just made clear requires entirely different EU actions. 

Europe also placed 62.4% tariffs on Chinese plywood – which is what cynics see its flat-pack plans for strategic autonomy and replacing the US as home to reverse assets and the reserve FX are made of.

As the potential sale of ports at either side of the Panama Canal and a slew of others to a consortium led by ocean carrier MSC sees concerns it may end de facto neutral treatment for all cargo, the Federal Maritime Commission was warned by the Seafarers International Union of the risks of the growing “dark fleet” registering and flagging outside regulatory oversight. In short, the ‘level playing field’ assumption in global trade is seeing larger and larger potholes ahead.

In politics, Poland’s PM is expected to win his no confidence vote but still won’t be able to govern with the new president in place; and as France saw another teacher murdered by a pupil, and Austria a school shooting that killed 10, the government is to ban social media for under-15s.

And as riots continue in LA and a curfew is to be imposed in parts of it, a Wall Street Journal op-ed runs: ‘Tom Cotton: Send in the Troops, for Real’ arguing, “When local police can’t restore order, the federal government has a duty to do so with a show of force.” That echoes his June 2020 op-ed in the New York Times that led to a staff revolt and a political hoo-ha. Today’s call isn’t getting much attention, especially in markets. Which, to be fair, aren’t paying attention to the riots either: as Bloomberg ‘sagely’ noted yesterday, ‘these kinds of things don’t have an impact on stocks (or bonds or FX)’. 

Unless, of course, they aren’t noise against the backdrop of a globalized world order predicated on free trade and “because markets” but are a symptom of larger breakdowns and structural changes that shatter that order, and the markets based on it. 

However, you’d need to look at far more than a Bloomberg screen in an air-conditioned, first-world city-centre office to know which way those fat tail risks really lie; but that takes up valuable time in which one could be counting beans or shouting “Rate Cuts!”

On which note, Treasury Secretary Bessent was just named by Bloomberg as a likely candidate for Fed Chair. 

First, that’s a year before it’s even vacant, which is not how things used to work and suggests the risks of a Shadow Fed Chair emerging, with a remains-to-be-seen effect on markets. Second, it would be a successive switch from Treasury to Fed when we are constantly told these are sacrosanct positions which must co-ordinate but always remain fiercely independent of each other (“because markets”). Can even Bloomberg-screen readers spot a pattern there? 

However, the Bessent story has since been shot down by the White House. Yet names like former Fed member Warsh --who’s given some jaw-dropping comments on central banking of late-- and Director of the National Economic Council Hassett -- who’d meet the Trump insider loyalty test-- haven’t been.

But, relax: everything is as it ever was and ever will be, everywhere.