Tailing 10Y Auction Prices At Highest Yield Since 2007

When discussing yesterday's stellar 3Y auction, we said that the impressive demand for 3 year paper indicated that nobody was worried about today's CPI print... and as we learned this morning, that was justified, since the CPI came in right as expected. And since inflation is tame, and the labor market is not overheating, virtually nobody were worried that today's 10Y auction would have any issues finding new holders. Well, they were right: moments ago the US sold $42 billion in 10Y coupons, the week's second refunding auction. It priced at a high yield of 4.683%, up from 4.586% a month ago, and just wide of the 4.682% When Issued, translating to the first tail since May. Perhaps more notably, today's 10Y auction priced at the highest yield since 2007.

The bid to cover was virtually unchanged from last month, and in line with where it has been for much of the past decade: plus or minus 25bps of 2.50%. Sure enough, at 2.532, the bid to cover was a bit lower than the 2.592 a month ago, but above the six auction average of 2.47.

Internals were also solid, if hardly great, with Indirects awarded 76.73%, down from 81.49% in July - one of the highest ever - but above the recent average of 71.33, as foreign buyers once again park their excess cash in the US. And with Directs awarded 14.67%, up from 10.73% in July and the highest since May, Dealers were left holding 8.6%, one of the lowest on record.

Overall, this was a solid auction, and following yesterday's impressive 3Y, we expect tomorrow's 30Y sale to have no problems finding buyers.

Tyler Durden Wed, 08/12/2026 - 13:26

US Now Expects Iran War Oil Supply Disruptions To Last Through End Of 2027

At first, the Hormuz lockdown was supposed to last a few weeks, tops. Not any more: the US now expects oil supply disruptions stemming from the US-Iran war to reach about 600,000 barrels per day through the end of next year as the conflict continues to crimp shipments via the critical Strait of Hormuz.

Oil transported through the waterway averaged 4.9 million barrels per day in the second quarter of this year, according to estimates from the US Energy Information Administration’s Short-Term Energy Outlook. That compares to an average of 21.6 million in the last quarter of 2025, before the US and Israel launched attacks on Iran.

The figures indicate that a brief intermission in fighting, when a so-called memorandum of understanding was signed, did little to blunt the impact of one of the worst disruptions to global energy markets in history. A deal between Iran and Oman to reopen the strait remains elusive, though officials indicate talks are progressing.

"The ongoing closure of the Strait of Hormuz and elevated fuel prices continue to weigh on oil consumption," the Paris-based IEA said.

As the conflict extends into a sixth month, consumers around the world are once again facing the prospect of higher fuel prices and inflation. The EIA hiked gasoline and diesel price forecasts for 2026 by 3.7% and 5.4% respectively and increased its 2027 forecast for retail gasoline prices by 6.5% from its estimates a month earlier.

The volume of oil moving through the Strait of Hormuz remains difficult to pin down in real time, as vessels going dark obscure shipping activity, leading to discrepancies in estimates among market participants. About 9 million barrels of oil a day exited the strait on average over the past week, according to Energy Secretary Chris Wright, however independent tanker tracking services put the number far lower. 

The agency also estimates that Middle East production shut-ins eased to average about 5.5 million barrels a day in July, compared to 7.5 million barrels a day in June. The volume of oil shut in is expected to swell again to 6.6 million barrels a day in the third quarter.

Multiple Middle Eastern countries have been forced to curtail output as limited access to global markets strains available storage capacity.

The report assumes that recent threats to vessels carrying Saudi Arabian crude through the Bab el-Mandeb Strait have not resulted in additional production shut-ins. If that assumption holds, the agency expects most production and trade flows to take until early 2027 to return to pre-war levels.
 

Tyler Durden Wed, 08/12/2026 - 13:20

Venezuela & Israel Restore Consular Ties After 17 Years Of No Diplomatic Relations

Venezuela and Israel have agreed to restore consular relations, in a major historic shift, following the US orchestrated overthrow of longtime leader Nicolas Maduro back in January.

Interim President Delcy Rodriguez, who was Maduro's VP, is at the head of a state system that is still fundamentally the same - which can be summed up as Chavismo Socialism - except the government now serves to do Washington's bidding from opening up oil access to foreign policy realignment. 

via Reuters

This external realignment has been seen most on the world stage on issues where Caracas was once among the most outspoken Global South countries condemning 'Western hegemony'.

Venezuela’s minister of foreign relations, Felix Plasencia Gonzalez, announced on X on Tuesday: "The Governments of the Bolivarian Republic of Venezuela and the State of Israel report that they have agreed to continue bilateral technical cooperation derived from the emergency and recovery efforts following the double earthquake, as well as to establish a coordination mechanism for the provision of consular services to their respective citizens residing in both countries."

Caracas had severed ties 17 years ago in light of Israeli bombardment of Gaza at the time. Venezuela had also very openly aligned itself with America's longtime foe Iran, in addition to Russia and China. 

The former Maduro government had even pursued military cooperation with these countries, and hosted some of their military deployments over the years.

For its part, the Israeli government announced on X on its Spanish-language account that "both governments recognize the importance of the bond between the State of Israel and the Jewish community residing in Venezuela, which constitutes an important historical bridge of friendship between the two countries."

And a group called the Confederation of Jewish Associations of Venezuela announced that "After 17 years without consular relations, Venezuela and Israel are advancing in a confidence-building process that began with the various Israeli and Jewish organizations that came to Venezuela on the occasion of the double earthquake that struck the country on June 24, and which on that occasion provided great technical and humanitarian aid in the face of the tragedy and devastation."

Consulates are expected to open up in each country, to facilitate travel and help deepen relations to between the countries, now that relations are moving toward normalization again.

Venezuela and Israel have agreed to start offering consular services for each other's citizens.

There is still no talk of sending diplomats or opening permanent missions, however. pic.twitter.com/zuOQS5UEz5

— Elias Ferrer (@FerrerBreda) August 11, 2026

Since the Spring, American consular activity has been up and running, along with presumably the Caracas CIA station, also as even the Pentagon has held military drills in and around the Venezuelan capital.

Tyler Durden Wed, 08/12/2026 - 12:40

Ceuta Migrants Reach Mainland Spain Despite Government Denials; Report

Via American Greatness,

Dozens of migrants who entered the Spanish territory of Ceuta during last month’s massive border surge have reportedly reached mainland Spain, contradicting the socialist government’s insistence that none had left the North African enclave.

Sky News reported Tuesday, citing Spanish police sources, that about 75 migrants who entered Ceuta in late July had reached Andalucía in southern Spain.

“Spanish sources in Andalucía said that around 75 migrants out of the estimated 72,000 who entered Ceuta illegally in a mass rush to the border at the end of July had reached the mainland,” Sky News reported.

The report directly conflicts with assurances from the government of socialist Prime Minister Pedro Sánchez.

“Nobody has left the city towards the peninsula, nor can they do so,” Foreign Minister José Manuel Albares said Tuesday during a visit to Ceuta.

Tens of thousands of mostly male North African migrants entered Ceuta on July 30, overwhelming the territory’s law enforcement, migrant processing facilities and other public services. Estimates have placed the number of arrivals between 60,000 and 80,000, approaching Ceuta’s normal population of about 80,000.

The surge followed a Spanish judicial ruling preventing authorities from immediately returning migrants who reach Spanish territory by land and requiring a longer legal process before removal.

Ceuta President and Mayor Juan Jesús Vivas has sharply criticized Madrid’s response and disputed the government’s portrayal of the crisis as under control.

“Ceuta has suffered and continues to suffer an invasion,” Vivas said Tuesday.

“We calculate that 10,000 immigrants are still in Ceuta and this creates an unsustainable situation.”

“The reaction of the government has not been on par with the demands of what occurred,” he added.

“A violation of the territorial integrity of Spain has occurred.”

The numbers provided by Madrid and local officials have also raised questions about the whereabouts of thousands of migrants. El País reported that the Sánchez government says 70,000 people entered Ceuta and 7,000 have been deported. El Mundo reported Monday that local officials estimate about 11,000 remain in Ceuta out of roughly 80,000 who entered.

Police sources told Sky News the crossings to mainland Spain represented a “worrying reactivation” of the migration route across the Strait of Gibraltar.

Albares nevertheless maintained Tuesday that the government would ultimately remove those who entered illegally.

“Up to the last person who entered irregularly into Spain will return to Morocco,” he said.

El País noted that Albares did not provide a specific timetable or mechanism for carrying out those removals.

The reports that migrants have reached mainland Spain add to mounting questions over Madrid’s handling of the crisis and whether the Sánchez government has accurately accounted for those who entered Ceuta.

Tyler Durden Wed, 08/12/2026 - 12:20

Putin Threatens Seizures Of European Ships Over EU's "Piracy & Banditry"

Russian President Vladimir Putin on Wednesday addressed the persisting issue of European governments and navies seizing what they deem Russian 'shadow fleet' vessels off Europe's coast.

The past year alone has seen several examples, sometimes involving French or Swedish commandos descending onto a tanker's deck from helicopters and arresting crew members. The seized vessels are then taken to nearby European ports.

The latest European Union sanctions package passed last month stipulates that EU members can sell the oil or any seized cargo obtained from these 'shadow fleet' vessels.

Putin has reiterated Kremlin outrage at this scheme, condemning it as "piracy and banditry". This after Sweden has lately declared its intent to hand seized Russian grain over to Ukraine.

Pool Sputnik Kremlin via AP

The Russian leader's patience has reached its limit, apparently, as he is now putting European governments that their own ships become at risk of seizure in return.

"We will be forced to respond in kind," Putin said while overseeing naval drills in Russia's Far East, aboard the Russian cruiser Varyag off the island of Sakhalin.

Russian forces will act "wherever we ourselves deem necessary and appropriate — anywhere," he added.

According to some of his fuller remarks as translated and presented in Reuters:

"We can see that the authorities of certain countries, in violation of international maritime law, are attempting to restrict the movement of our economic operators’ vessels..., and ​have recently gone so far as to consider the possibility of seizing our vessels and selling off ⁠the ⁠property they have plundered from ⁠us," said Putin.

"Naturally, ​this is nothing less than piracy and robbery. And if this begins to be put into ​practice, we shall be forced ⁠to respond in kind. And not necessarily in those waters where raids on our ships and vessels are planned, but wherever we ourselves deem it necessary and appropriate."

So while Russia would not likely act in European waters, such a scenario would be more likely to go down in places like the Black Sea or Baltic region, or perhaps the faraway Indian Ocean.

Russian President Vladimir Putin threatens to seize ships belonging to European countries in retaliation for plans to intercept and seize Russian vessels suspected of being part of Moscow’s “shadow fleet.” pic.twitter.com/k6Dig6bvni

— Al Arabiya English (@AlArabiya_Eng) August 12, 2026

Putin also took the opportunity to address broader tensions with NATO and spillover from the Ukraine conflict, but also as it specifically impacts the Pacific and Arctic regions...

"We can see that, unfortunately, the potential for conflict is growing here; NATO is making inroads here; new military-political blocs are being formed; and new weapons systems are being deployed here, or are planned for deployment, which ​also pose a threat to our country," the president said.

Tyler Durden Wed, 08/12/2026 - 12:00

Trump Mulls Capital Gains Relief As Midterm Sweetener

President Donald Trump is looking for new policy pledges to put before voters ahead of November, and two of them involve cutting capital gains taxes, according to National Economic Council Director Kevin Hassett and former NEC chief Larry Kudlow, who discussed the proposals on Fox Business Tuesday.

Kudlow, who ran the council during Trump's first term and remains close to the president, said he had raised two ideas with Trump directly. The first is indexing capital gains to inflation, so investors would be taxed only on real gains rather than on the portion of an increase that simply reflects the dollar losing value. The second is exempting home sales of $2 million or less from capital gains taxes entirely.

"I spoke to him, he liked the idea of the indexing, he liked the idea of a bigger exemption," Kudlow said, adding that "the boss is very interested."

Hassett confirmed the broader effort and was unusually direct about the political strategy behind it. "He wants to hit people with the things that are promises that we're going to do if the Republicans have power in the future," he said. "So you can expect a lot more policy between now and the midterms."

The catch

Neither idea can happen without Congress, which means neither is likely to take effect before November. These are campaign commitments contingent on Republicans retaining power, a point Hassett effectively made explicit.

There is a potential workaround, and it has been tried before. Trump's first administration considered indexing capital gains through executive action, without legislation, but ultimately abandoned the effort. The obstacle is that the tax code's definition of an asset's "cost" has long been interpreted to mean the nominal price paid, making any change a matter for Congress rather than Treasury. Kudlow was pushing the unilateral approach as far back as 2018. It didn't happen then, either.

The legislative route isn't dead, but it is expensive. Republican Senators Ted Cruz and Tim Scott introduced an indexing bill earlier this year that was estimated to reduce federal revenue by roughly $200 billion. Indexing has never commanded unanimous Republican support, and versions of the idea have repeatedly failed since the Reagan years. Congress passed one in 1995, only for Bill Clinton to veto it as a tax cut for the rich.

Home Sale Exemption

The home-sale exemption may have better bipartisan prospects, for a reason that goes beyond either party's talking points. The current exclusion - $250,000 for single filers and $500,000 for married couples - was set in 1997 and has never been indexed for inflation, even as the median US home price has nearly tripled. A $500,000 exemption in 1997 dollars would be worth more than $1 million today.

The National Association of Realtors estimates that roughly 34% of American homeowners - about 29 million people - could already exceed the $250,000 single-filer cap, while about 10%, or 8 million, are above the $500,000 joint threshold. The group expects both figures to rise by 2030 and has warned of a "capital gains cliff" that can discourage homeowners from selling, further constraining supply and putting upward pressure on prices.

Midterms

The party holding the White House typically loses ground in midterm elections, and this cycle is not shaping up as an obvious exception. Republicans are contending with voter dissatisfaction over the economy and the war in Iran, while a recent Reuters/Ipsos poll reportedly gave Democrats an edge when voters were asked which party they trusted more to manage the economy.

White House spokesman Kush Desai kept his distance from the specifics. Trump is "always exploring new ideas to Make America Wealthy Again," he said, "but any policy announcements will come from the Administration directly."

Which is to say: two proposed tax cuts, no clear legislative path, and eleven weeks until the election.

Tyler Durden Wed, 08/12/2026 - 11:20

Lacy Hunt Turns Bearish Bonds: Studying His Reversal

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

Economist Lacy Hunt has been a bond bull longer than most money managers have been in the business.

Recently, he made a surprising U-turn on his bullish stance. The following paragraph opens his Second Quarter Review and Outlook.

The structural backdrop for U.S. inflation increasingly suggests that the long-run equilibrium range is migrating from roughly1.5–3.5% toward 3.5–4.5%, with a significant risk of episodes of inflation above 5%. An important core reason is the steady erosion of the disinflationary architecture that dominated the 1990–2020 period, even as various cyclical pressures also play a role.

For nearly four decades, Lacy Hunt has been pounding the table for lower yields. As chief economist of Hoisington Investment Management, Hunt bought long-term bonds, betting that globalization and excessive debt impede economic growth, keeping a lid on inflation and interest rates. Despite the extraordinary monetary efforts to stem the 2008 financial crisis, the decade of extremely loose monetary policy following the crisis and even through the pandemic-related surge in the money supply and high inflation, Hunt held his deflationist line.

So, when Lacy Hunt and his partner Van Hoisington posted their Second Quarter Review and Outlook titled “Capital Scarcity and the End of Globalization’s Disinflationary Era,” heads turned. Backing their words with action, Hoisington Investment Management, managed by Hunt and Hoisington, sharply reduced their clients’ bond duration and put the proceeds in Treasury bills.

That reversal of such long-held opinions deserves serious attention. We provide a summary of their new views and some counterpoints to help you assess their new stance.

Our objective in this article is not to support Lacy Hunt or rebut his work, but to present his case and accompanying data to help you better assess his warning.

A Broken Production Function

Lacy Hunt’s basic bond bullish thesis for the last thirty-plus years rested on the core economic framework that economic output is a function of labor, capital, technology, and resources. Thus, anticipating changes to those four factors is paramount to forecasting output and inflation.

Hunt argues that the collapse of the Iron Curtain and China’s entry into global trade, along with economic globalization involving many other countries, introduced “One of the largest positive supply shocks in modern economic history.”

Hundreds of millions of low-cost workers entered the global economy, with manufacturing concentrating in the regions that could do so most cost efficiently. Simply, those countries that could produce at the cheapest costs did so to the benefit of the global economy. From the US perspective, outsourcing production resulted in cheaper goods.

Moreover, with enhanced global trade, global capital flows increased, and resources became more abundant. Further, because of the dollar’s reserve status, steadily increasing global trade boosted demand for US dollars and dollar investments like US Treasury debt.

Deflationary Debt

Hunt claims that the macroeconomic environment of the last 30 to 40 years helped explain why increasing debt levels were disinflationary. Per Hunt:

Diverted income away from consumption, restraining aggregate demand growth, while expanding global productive capacity absorbed liquidity and credit expansion without generating broad pricing pressure.

Further to his case, monetary velocity fell. Velocity calculates how often a dollar circulates through the economy. Inflation is a function of the supply of money and, often overlooked, the velocity of money. For the better part of the last 40 years, velocity declined as money was increasingly parked in financial assets rather than investments in plant and equipment or consumption. Corporate executives increasingly favored financial engineering, like stock buybacks, over capital investments. This inflated financial asset prices while doing little for the economy’s underlying productive capacity.

Hunt’s Shift

Hunt’s new stance appears to be predominantly based on three factors.

First, in his opinion, globalization is reversing. Tariffs, reshoring and friendshoring, alongside security-related trade protectionism, replace the “lowest-cost producer” model with a more expensive “secure and resilient producer” model.

Second, labor supply growth is slowing. The combination of lower birth rates, an aging population, and reduced immigration is decreasing the supply of labor, thus raising wage costs. Furthermore, with deglobalization, less outsourcing forces corporations to use more expensive labor domestically.

Third is capital scarcity. AI data centers, electrical grid modernization, and semiconductor fabs are all vying for the same scarce pool of capital, commodities, and skilled labor. At the same time, government deficits require significant capital, and it comes at a time when the national savings rate is near historic lows.  

Hunt’s Argument Versus Data

While Hunt makes a very convincing argument, we must analyze recent and historical data to see if the trends he envisions are starting to play out.

Inflation Expectations

The market isn’t buying into Hunt’s inflation forecast.  As we share below, the 5-, 10-, and 30-year breakeven inflation rates, as determined by TIPS and nominal Treasury securities, are at the same level they have been for the last four years and not that different from the post-financial crisis era. For context, Hunt is forecasting a 3.5-4.5% equilibrium range, and “episodes above 5%” which he flags as a real risk.

While expected long-term inflation hasn’t budged, long-term real yields have risen appreciably as shown below.

Given that Treasury yields are a function of expected inflation, current inflation, and the term premium, the graphs suggest that the term premium is largely to blame for higher interest rates. Investors are demanding higher yields as they are likely worried about the government’s growing borrowing needs alongside the massive capital being allocated to AI. This feeds into Hunt’s scarcity-of-capital argument, which we discuss next.

Capital Scarcity- Savings Rate

The United States appears to be entering a period in which the demand for capital is rising far faster than the domestic supply of saving.

Debt must be financed by domestic saving, foreign capital, or government intervention like quantitative easing (QE). A low domestic savings rate, shown below, means a greater reliance on the other funding sources. Hunt warns that expanding the money supply via increasing the Fed balance sheet (QE) can help the scarcity problem, but it can also drive inflation higher.

The U.S. has operated with a low net national saving rate for most of the last twenty-five years. This shortfall of an important funding source for US Treasury debt has in part been financed by foreign capital requiring dollar assets and QE at times. Despite the recent bout of higher inflation, poor bond returns, large fiscal deficits, and recent policy actions like tariffs, the international inflow of capital to the US Treasury has continued to grow, offsetting the low saving rate.

Whether we can continue to depend on foreign investors depends heavily on the dollar’s reserve-currency status, a variable Hunt’s letter doesn’t directly address.

We view the military actions in Venezuela and Iran, as well as some recent trade deals, as viable attempts to strengthen the dollar’s reserve currency status, thus bolstering foreign demand for US debt.

Furthermore, forcing crypto stablecoins to hold US Treasury securities as collateral should provide a multi-trillion-dollar source of new funding for the Treasury.

QE

Hunt mentions QE as another possible source of future deficit funding. He views this as inflationary. To wit, he provides recent evidence:

Substantial liquidity injections occurred from mid-December 2025 through June 2026. In this period, the Federal Reserve purchased approximately $290 billion of Treasury securities, igniting a surge in bank deposits and loans. ODL rose at a torrid 8.9% annualized rate in this year’s first six months—more than 1.6 times faster than its ten-year compounded growth rate… This Fed-driven liquidity event, along with the recovery in velocity, may explain a sharp February reacceleration in inflation prior to the latest geopolitical energy shock.

Hunt assumes that a recent seven-month bout of QE was inflationary. It may have been, but the graph below shows a weak but negative historical correlation between QE and inflation.

Hunt does concede that QE may not be an inflationary concern. He credits Fed Chair Kevin Warsh’s balance-sheet restraint as “an important monetary offset to fiscal expansion.”

Warsh, a Fed governor from 2006 to 2011, was arguably the Fed’s most consistent skeptic of asset purchases, and after his term ended, he became one of the most vocal outside critics. Warsh as the Fed chair, on its face, is a bet against the QE playbook Hunt says just reignited inflation. Hunt’s 3.5 – 4.5% inflation range may hold water if fiscal and market pressures overwhelm Warsh’s instincts.

Global Trade

President Trump has imposed tariffs and other protectionist measures on many imported products. He has also incentivized domestic companies to shift production back home. While the actions may appear to have an anti-globalization impact, the data so far tell a different story.

Global trade, exports plus imports relative to world GDP, climbed to an estimated 68.5% in 2025, the highest level in 46 years, per the World Bank. Moreover, despite Trump’s trade policies, 2025’s 68.5% was a big jump from 56.7% in 2024. If tariffs and reshoring were meaningfully unwinding globalization, that ratio would be flat or falling. Similarly, the US trade deficit is bouncing around the same levels as it was under President Biden and worse than any reading before 2020.

AI And Productivity

Moving on to AI and productivity, Hunt rightly blames the capital intensity of building data centers and the resulting upgrades to the electrical grid for making capital scarcer and pushing interest rates higher. However, he gives little weight to the possibility that AI-driven productivity gains show up sooner rather than later and act as a disinflationary force, much as prior technology waves eventually did.

In our opinion, it is unknown when the productivity benefits of AI, including lower inflation, will ease the capital scarcity argument. History shows that the benefits could accrue rapidly or they could take time.

Summary

None of the recent evidence we share indicates Lacy Hunt will be wrong. He is forecasting a regime change to the macroeconomic environment that recent data trends haven’t picked up on. 

Hunt also acknowledges his forecast is not necessarily that of higher interest rates. He writes:   

The result is not a simple forecast of continuously rising interest rates, but rather a more volatile interest-rate regime.

He notes that a recession, a favorable supply shock, or successful balance-sheet restraint under Chairman Warsh could still deliver lower inflation and falling rates. His Treasury Bill purchases appear to be not just a bet on higher inflation and a sustained high term premium, but equally a desire to avoid volatility in the long end of the curve.

While we have the utmost respect for Lacy Hunt, we must remember that he is making a forecast, an educated guess. His warnings may prove correct. But he is forecasting a big change in the way the global economy operates and its impact on capital flows. Further, he is making assumptions about one of the greatest technological innovations that is just in its infancy.

Might the Covid echo be coming to an end and the historical disinflationary trends of the last forty years be reasserting themselves, or are we in the early innings of the macroeconomic regime change Hunt is calling for?

Tyler Durden Wed, 08/12/2026 - 11:00

WTI Dips After Massive Crude Inventory Build, Big SPR Drain, Surge In Imports

Oil prices are marginally lower this morning as OPEC again cut its forecast for global oil-demand growth for this year, but stalled talks to reopen the critical Strait of Hormuz waterway and risks in the Red Sea prolong disruptions to global supplies.

Physical disruptions are spreading beyond Hormuz. Refinery attacks and fires have hit Russia and Libya, while the Houthis claimed another attack on Saudi Aramco’s Jazan complex. The Red Sea has become a key alternative export route for the Kingdom, and Houthi attacks are putting that release valve under pressure.

Overnight saw API report a huge crude inventory build and 

API

• Crude +9.1mm

• Cushing +1.6mm

• Gasoline -1.5mm

• Distillates -600k

DOE

• Crude +17.4mm (-1.4mm exp) - biggest build since Jan 2023

• Cushing +1.61mm

• Gasoline -968k

• Distillates -10k

After API's reported large build, the official data showed an almost unprecedented 17.4mm barrel build in crude stocks (the biggest since Jan 2023), Cushing saw another build while products saw draws for the second week in a row...

The massive oil stock build was driven by imports which rose to the highest level since November 2024. The US imported over a million barrels a day of oil last week, in part driven by a rise in Venezuelan imports and a return of Saudi Arabian oil. This is a sharp reversal from only a few months prior when oil was flowing abroad in massive quantities.

Net Imports at their highest since June 2025 (thanks in addition to a big slump in US crude exports to the lowest since Nov 2025) ...

Stocks at the critical Cushing Hub are limping off 'tank bottoms'...

As we detailed here, the Strategic Petroleum Reserve saw drawdowns re-accelerate last week (with 6.1mm barrels leaving the caves of salt), back below $300 million barrels to its lowest level since January 1983. Nevertheless, total commercial crude stocks rose 11.3mm barrels last week - the largest since February...

A total of 117 million barrels of crude has been taken out of the SPR since late March under a program to release 172 million barrels as part of a relief plan coordinated by the IEA aimed at lowering energy costs.

US Crude production also limped higher near record highs as the rig count continues to rise...

The oil stock build comes even as refiner runs rose and are sitting at the highest seasonal level since 2019. Fuel makers have signaled they intend to run harder-than-usual through the third quarter, a time when plants typically go down for maintenance.

WTI dipped back below $83 after the official data, holding gains from Friday's close around $77...

Interestingly, Bloomberg points out that US gasoline demand continued to remain resilient in the face of elevated gasoline prices. US retail gasoline prices are averaging over $4 per gallon, almost $1 per gallon (29%) higher than last year’s level at this time, according to data from the American Automobile Association. However, this week’s gasoline demand is only 36,000 barrels per day -- 0.4% lower compared to last year. 

Finally, as we noted yesterday, quoting Bloomberg macro strategist, Michael Ball, market structure reflects that stress better than outright prices. Brent and WTI curves remain backwardated and refining cracks are elevated, signaling near-term scarcity. Options are less aggressively bullish, with 25-delta call skews in both benchmarks dropping to their least bullish levels since July 10.

That points to a market vulnerable to spot disruptions while increasingly pricing a path toward de-escalation.

Tyler Durden Wed, 08/12/2026 - 10:39

Speaking Loudly And Leaning On A Big Schtick

By Michael Every of Rabobank

Yesterday saw the regular schtick where the Middle East situation remains worrying, but markets reacted to more positive narratives. After four crew and two rescuers were killed in a Houthi Red Sea attack on a ship and the US struck another in the Gulf of Oman’ trying to break its Iran blockade; Iran said Hormuz will stay closed unless the US meets its over-reach conditions; Trump doubled down on economic warfare vs Tehran because he thinks it’s “bleeding badly” -with the other option still being to “hit them really hard”; yet the Wall Street Journal reported ‘Iran Is Defying US Pressure by Becoming a ‘Survival Economy’; Pakistan claimed a US-Iran deal is close, and US Energy Secretary Wright said far more oil is flowing through Hormuz than others estimate, suggesting the US doesn’t really need to act.

This routine will likely continue through to the US midterms – and then we will see what happens. The old presidential adage is that one should speak softly and carry a big stick. Speaking loudly and leaning on a big schtick is not going to work for ever. On which, recent reports that the US is ‘out of munitions' are true for precision varieties, not more traditional types that need to be used in greater proximity. If the US isn’t ultimately prepared to take those kinds of risks in a war against Iran, it will carry a geopolitical message that will not speak softly at all.

What the US (and allies) are running low on is Patriot missile defences. Yet just after the Pentagon gave US military industries 21 days to submit plans for “significantly faster” weapons production, Boeing has unveiled a cheap radar seeker built from off-the-shelf parts. They say necessity is the mother of invention; just not of higher margins, perhaps. (Then again, as I have repeatedly stressed, wars are won with bullets, not profits.) Yet much broader structural shifts in economics, not just economies, is evident on the ground and the Establishment intellectual level.

The pro-free trade Economist argues China’s neo-mercantilist, Leninist trade model is so effective that no form of western capitalism can withstand it. Stop looking at your screen for a moment and contemplate what that implies both right now and going forwards.

The sine qua non free trade academic Paul Krugman just admitted two hundred years of positive-sum free-trade thinking has been a ”sunny view… based on the assumption that we care about economic prosperity, not national power” – which is not true. War is raging and economies, currencies, and commodities have been weaponised. He admits we now need to look at ‘geoeconomics’ instead, which is the history of zero-sum economic statecraft and neo-mercantilism.

Foreign Affairs (‘The Right Way to Balance Trade: What Comes After the Neoliberal Order’) attacks Trump’s tariffs but argues for a West+ bloc common tariff against China and any trans-shipment, with low intra-bloc trade restrictions for those who also don’t run large trade surpluses, and industrial policies. Regular readers might recall this is what we have previously argued was the logical US grand macro strategy – and that attacks on Canada and Europe, etc., could be attempts to force them into accepting the common external tariff over the heads of vested interests vociferously against them. (If so, would a carrot not be better than a stick? Perhaps: but this wasn’t a normative call, just a descriptive one.)

Some also point out that even as Europe warms up for a potential trade war with China, it does not grasp the scale of the change in the world economy is lives in.

In particular, the Chinese industries the EU will likely take aim at are now mature, so require few direct subsidies that the EU will be looking for; the Leninist Chinese model helps supersize future industries so they can then stand on their own two feet. What policy framework, and working with whom, will Europe ultimately put in place within a ‘rules-based approach’ to try to retain its mature industries and to ensure that it develops new ones? (The same question also applies to the US, of course.)

As a signal, Vietnam -- a GDP growth star via a low valued-added, FDI-based, export-driven economic model-- is pivoting: it now wants to grow its own Korean-style ‘chaebol' conglomerates to boost productivity and growth longer term on its terms. Is it wrong to do so when it could instead be focusing on quarterly earnings reports and outsourcing everything that it can?

Football provides an analogy to what the above may mean for us all in time: the world’s Beautiful Game --which recall isn’t actually big in India, China, or the US, the three most populous and first-, second-, and fifth-largest economies-- might split.

Trump backs FIFA President Infantino, under furious attack over a World Cup sale plan dreamed up during a hydration break. UEFA, with some other federations, are developing a new rival framework for running world game. Might we end up with World Cups with different rules, sponsors, and participants?

If so, note what was a medieval mob game took a long time to grow into the rules-based one played first by English gents before then becoming a globalized money-making behemoth; and that there were early splits between those who wanted to play only with feet and those who wanted to also handle the ball – which ultimately became other sports.

In short, the West needs to relearn the Beautiful Great Game. But are its universities teaching geoeconomics or neo-mercantilism to allow the next generation of leaders to think up, and the bureaucrats to implement, such policies? Are its economists really capable of adapting to that reality rather than giving the same old advice under a new label? Are its analysts capable of projecting the dots of what it all implies?

Notably, the ECB’s annual conference in September will be held under the title ‘Geoeconomics and the International Trading System’, but the participants are still economists rather than the likes of Edward Luttwak, who coined the phrase geoeconomics in 1990 to describe how the "logic of conflict" merges with the "grammar of commerce.”

Today, of course, we can put that all aside to focus on US CPI, as if it isn’t intimately tied up with the above backdrop. Here is an ugly game all of its own – and one where the ‘rules’ change all the time.

Tyler Durden Wed, 08/12/2026 - 10:20

First Morgan Stanley, Now BofA To "Mobilize And Deploy" $250 Billion Into America's Infrastructure Supercycle

Bank of America unveiled a massive 18-month initiative to mobilize and deploy $250 billion across critical US infrastructure, targeting the computing, energy, and industrial systems needed to support artificial intelligence and accelerate the transition toward physical AI.

The announcement comes just days after Morgan Stanley launched its US Innovation Infrastructure Initiative, which aims to facilitate $1.5 trillion in capital raising and financing over the next decade. The back-to-back commitments signal that Wall Street is positioning for a multiyear capital-spending supercycle spanning data centers, power generation, grid modernization, semiconductors, advanced manufacturing and robotics.

*MORGAN STANLEY TO FACILITATE UP TO $1.5T OVER 10 YRS

this explains why they went so bullish on credit in the past 3 months https://t.co/nnhdOyD5x5

— zerohedge (@zerohedge) August 10, 2026

"Without hard infrastructure, it's difficult to preserve our competitiveness and leadership for the next generation," Karen Fang, global head of infrastructure and sustainable finance and co-head of global capital solutions, said in an interview with Bloomberg. "Old infrastructure has to be modernized."

BofA's financing will span three broad categories:

• Digital infrastructure, including data centers, computing equipment, chips, telecommunications and semiconductors
• Energy and power, including conventional and renewable generation, storage and distribution systems
• Core infrastructure, including transportation, electricity transmission, grid modernization, water systems, critical minerals and mining

Surging demand for computing power, energy, manufacturing capacity and more resilient supply chains is driving a new investment cycle across the US. BofA said the initiative could support tens of thousands of jobs in construction, manufacturing, technology and long-term operations.

Morgan Stanley mapped out the AI infrastructure supply chain:

Nancy Lazar, Piper Sandler's chief global economist and head of the firm's economics research team, recently outlined how data center construction, reshoring, infrastructure upgrading and the reenergizing of America's industrial base are creating an all-American blue-collar comeback as goods-producing jobs begin to reverse their multidecade downturn and shift higher.

Lazar noted:

Bullish on Goods-Producing Jobs vs. Hotel & Restaurant Jobs.

When China joined the WTO in 2001, U.S. goods-producing jobs began a decade of decline, while leisure & hospitality and education & health jobs continued to rise...

...so today, goods-producing jobs are less than half those of low-paying service jobs; their share was over 50% in the mid-1980s.

That employment mix shift gave us the bifurcated consumer, as lower-paying jobs gained share. Goods-producing jobs pay more than overall service-producing jobs, and lots more than leisure & hospitality or education & health care jobs.

Good news: That mix is now shifting the other way, as the long-running (not just tech) capex cycle raises productivity and margins, encouraging companies to add headcount.

Look at relative earnings growth by sector below.

Let's come back to our "Powering Up America" and nuclear-power investment themes (began Decemeber 2020) over the last several years. They were right on the money, and both remain intact ahead of the multiyear capital-spending supercycle that BofA and Morgan Stanley are about to unleash.

Related:

• Nvidia Confirms Record $500 Billion Off-Balance Sheet SPV Deal To Fund The World's Biggest Circle Jerk

The infrastructure required to power the AI economy, strengthen energy security, and support the AI revolution will be central to writing the next chapter ofAmerica'ss growth story into the 2030s.

Tyler Durden Wed, 08/12/2026 - 10:05

Turkey Thinks Israel Fabricated Trump Air Force One Assassination Plot

Authored by Dave DeCamp via AntiWar.com,

Turkish officials suspect that an Israeli intelligence report about an Iranian plot to assassinate President Trump at the NATO summit in Ankara last month was a ruse designed to derail diplomacy between the US and Iran, Middle East Eye reported on Tuesday.

The Washington Post first reported on Monday that the US thought there was a credible enough threat against Trump that he secretly swapped planes when he departed Turkey. The president flew into Ankara on a new version of Air Force One donated by Qatar, but made a public show of departing on the older Air Force One, saying he was doing so for "old time’s sake."

Trump boards Air Force One at Ankara Esenboga International Airport in Ankara, Turkey on Wednesday, July 8, 2026

According to the Post report, after boarding the older Air Force One, Trump was then moved to a third plane, an Air Force C-32A, via a catering truck.

Some White House staffers and reporters on the older Air Force One thought President Trump was also onboard as they flew to the UK, making them unwitting decoys.

Missing from the Post report was where the intelligence about a plot against Trump came from. According to Middle East Eye and also a report from The Wall Street Journal, it came from Israel, which aligns with reports from the time.

Sources told MEE that the Israeli intelligence report warned that Iranian covert forces could target Air Force One at the airport in Ankara using shoulder-fired rockets, known as MANPADS, from just one kilometer away.

MANPAD file image

Due to the alleged threat, the Secret Service moved the departure point from Ankara Airport to Esenboga Airport and wanted to switch from the new Air Force One to the old one.

"Of course, we took the report very seriously and tried to assist our American counterparts as much as possible," a source, described as a person familiar with the matter, told MEE. "Yet it was very clear to us that there was no way this report was true."

The report said Turkish officials believe that the government of Israeli Prime Minister Benjamin Netanyahu devised the plot to make it appear that Israel was protecting Trump, further derail diplomacy between the US and Iran, and also strain relations between Trump and Turkish President Recep Tayyip Erdogan, whom the US president repeatedly praised during the summit.

Israel has strongly opposed the idea of the US selling F-35 fighter jets to Turkey, something Trump has said he’s strongly considering.

US President Donald Trump says the decision to make a plane switch in Turkiye after the NATO summit was made by the Secret Service.

The Washington Post revealed Trump boarded Air Force One, but used a catering truck to move to another aircraft due to an alleged Iranian threat. pic.twitter.com/dg1jz2DdBI

— Al Jazeera English (@AJEnglish) August 12, 2026

Another source, described as an Ankara insider, told MEE that it was ironic that the Secret Service's decision to move Trump has been leaked just one month after it happened. "I guess they need heroes for an attack that never happened and, most likely, was never planned," the insider said.

Tyler Durden Wed, 08/12/2026 - 09:45

Who's Afraid Of The Big Bad Wolf?

Authored by Steve Watson via Modernity News,

Cambridge University has now decided that even Little Red Riding Hood is too dangerous for young minds.

Clare College issued an official content warning ahead of a free online humanities webinar for state sixth-form pupils, flagging "adult content including themes of violence, with reference to fairytales."

The session, part of a course designed to prepare GCSE and A-level students for university study, encouraged participants to "read beneath the surface" of bedtime stories. Official course notes still felt the need to caution: "Content warning: Please note this session will involve discussion of some adult content including themes of violence, with reference to fairytales."

Cambridge University slaps Little Red Riding Hood with trigger warning over 'themes of violence'
https://t.co/6TUushF83Y

— GB News (@GBNEWS) August 11, 2026

In Charles Perrault's original 1697 version, the wolf eats both grandmother and the girl. The later Brothers Grimm retelling keeps the violence but allows a huntsman to save them. Modern adaptations have dialled the darkness up further.

None of this is news to anyone who has ever heard the story. Yet Cambridge treated it as a potential trauma event for teenagers.

Lord Toby Young of the Free Speech Union cut through the nonsense: "Putting trigger warnings on fairytales is infantilising, even for Cambridge."

Professor Dennis Hayes, director of Academics For Academic Freedom, has long warned where this leads. "Once you get a few trigger warnings, lecturers will stop presenting anything that is controversial. Gradually, there is no critical discussion."

Commentator Adam Brooks captured the wider reaction in a short video that has been circulating widely. He called the move "ridiculous," asked what is wrong with a culture that raises perpetual victims, and accused left-wing universities of brainwashing students while staff appear "away with the fairies."

What was once a children's warning about talking to strangers has been reclassified as adult material requiring institutional protection.

The message to the next generation is clear: the world is too frightening to confront without official guidance, and the stories that once toughened character must now be handled with kid gloves.

This is just the latest chapter in a long campaign to wrap classic culture in the same cotton wool as modern culture.

For example, Disney has slapped outdated-cultural-depiction warnings on its own older films, and publishers have begun printing classic books with trigger warnings at the front.

The Wicked movie was mocked for warning audiences about discrimination against people with green skin.

One Massachusetts university even banned the phrase "trigger warning" itself because the words might be triggering.

A woke tech company tried to scrub "violent language" from everyday speech.

In a dark twist of irony, a 75th-anniversary edition of Orwell's 1984 arrived with its own trigger warnings and lectures about the book's "problematic" hero.

Shakespeare's plays have been systematically infested with the same notices.

The Royal Shakespeare Company even warned audiences that The Merry Wives of Windsor contains "body-shaming."

Universities that once prided themselves on forming adults now specialise in manufacturing fragility.

The wolf is no longer the danger. The real threat is an education system determined to keep students forever inside the cottage, doors locked, lights on, and every traditional tale carefully labelled for their own safety.

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

Tyler Durden Wed, 08/12/2026 - 09:05

Futures Rise Led By Tech Before Key CPI Report

US: Futures are higher, led by Tech as AI infra earnings boost the theme while the Semis trade was bid overnight led by a surge in Korea's Kospi. As of 7:45am ET, S&P futures are up 0.2% ahead of today's CPI report, while Nasdaq futures gain 0.7% as investors react positively to updates from US technology firms. Semis / Memory are outpacing broader markets with Mag7 trading higher, too. Software is lower, so watch to see if the +Semi / -Software dynamic returns after a significant reversal. CoreWeave shares are up ~17% in premarket on stronger-than-expected sales growth. Super Micro Computer shares have climbed 9% after their revenue forecast topped estimates. Tech stocks also outperfomed in Asia where the Kospi climbed 3.7%. European stocks are inching higher. The market has seen muted volumes this week into today’s CPI print, with PPI and Retail Sales tomorrow, providing more details on the growth / inflation dynamic. Consensus sees Headline CPI MoM of +0.1% and Core MoM of +0.2%, which is 3.4% YoY for Headline and 2.5% YoY for Core (our preview is here). A dovish print today may remove Sept hike expectations, boosting stocks.Broader risk sentiment has improved as Brent crude futures turned negative and fell back below $89 a barrel after another well-time headline by Pakistan which said the 60-day deadline for a US-Iran MoU may be extended, but the larger peace process has stalled. Earlier, Donald Trump said the US “totally” controls the Strait of Hormuz. Treasuries extend gains ahead of the US CPI report, with US 10-year yields down 2 bps at 4.66%. European government bonds followed suit. The Bloomberg Dollar Spot Index is little changed. Precious metals are advancing, with spot silver up almost 3%. Looking at today's economic data calendar we get July CPI data at 8:30am and July federal budget balance at 2pm. Fed speaker slate is blank; Cleveland Fed’s Hammack and Richmond Fed’s Barkin have appearances slated Thursday

In premarket movers, Nvidia is the biggest gainer among Mag 7 stocks. The chipmaker’s partner Hon Hai reported a better-than-expected increase in quarterly profit, signaling robust global demand for AI hardware. (Nvidia +1.2%, Alphabet +0.8%, Meta +0.7%, Tesla +0.5%, Amazon +0.4%, Apple little changed, Microsoft -0.8%)

• Cava (CAVA) jumps 13% after the restaurant chain operator reported store comp sales for the second quarter that beat the average analyst estimate. Analysts again note positive trends for its pomegranate glazed salmon.
• CoreWeave (CRWV) rallies 18% after the cloud-computing provider reported second-quarter results that beat expectations. Analysts are positive about the company’s margins and note that AI demand remains robust.
• ERock (EROC) is up 13% after the power systems firm reported revenue for the second quarter that beat the consensus estimate, and said Anthropic has agreed to buy 470 megawatts of onsite power equipment.
• H&R Block (HRB) is up 15% after the tax preparation company gave a full-year forecast that was stronger than expected. It also reported fourth-quarter results that beat expectations.
• Hyliion Holdings (HYLN) is up 23% after the company boosted its full-year revenue forecast from $10 million to $15 million.
• Lumentum (LITE) gains 8%. Analysts are positive on the maker of optical equipment after it reported fourth-quarter results that beat expectations and gave an outlook above analyst consensus.
• Super Micro Computer Inc. (SMCI) jumps 9% after giving a revenue forecast for the current quarter that topped analysts’ estimates, a sign the booming artificial intelligence market continues to bolster sales of the company’s servers.
• US Antimony Corp. (UAMY) falls 14% after the natural resource company cut its full-year outlook for gross revenue.

Tech stocks are trading higher as CoreWeave Inc. surged 18% in premarket trading on stronger-than-expected sales, while Super Micro Computer Inc. gained 8.6% after its revenue forecast topped estimates. The latest slew of results was welcomed by investors looking for evidence AI infrastructure companies can deliver the earnings needed to propel the tech rally further.   

“The reports from CoreWeave and Super Micro are further evidence that AI infrastructure demand remains strong,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. However, he cautioned that strong earnings don’t automatically translate into higher valuations, especially given elevated financing costs.

Eslewhere, oil pared earlier gains after a Pakistan Foreign Ministry spokesperson said the deadline for a memorandum of understanding between the US and Iran can be extended. But with oil trading near $89 a barrel and no peace deal in sight, concerns remain that elevated energy prices could prompt a more hawkish response from the Federal Reserve. 

“A higher inflation reading would likely boost expectations of a hike in September and December and thereby putting pressure on equity and bond prices,” said Stephan Kemper, chief investment officer at BNP Paribas Wealth Management Germany.

Wednesday’s headline inflation gauge probably rose 0.1% in July following a 0.4% decline in the prior month (our CPI preview is here). Here is JPM's CPI Secnario Analysis for today's CPI print

• Core MoM prints above 0.30%. SPX declines 1.5% - 2.5%, odds: 5.0%
• Core MoM prints between 0.25% - 0.30%. SPX declines 50bp – 1.25%, odds; 25.0%
• Core MoM prints between 0.20% - 0.25%. SPX gains 25bp – 75bp, odds; 40.0%
• Core MoM prints between 0.15% - 0.20%. SPX gains 50bp – 1%, odds: 25.0%
• Core MoM prints below 0.15%. SPX gains 1% - 2%, odds: 5.0%

Both PIMCO’s Marc Seidner and Goldman’s Matheus Dibo say inflation will continue to moderate, allowing the Fed to hold policy steady in the foreseeable future. Dibo told Bloomberg TV he doesn’t see signs inflationary pressure is broadening, while Seidner pointed to a lack of growth in real incomes keeping prices suppressed.  

Strong earnings growth and a solid economy should help the S&P 500 withstand a modest increase in interest rates, according to RBC Capital strategists, who maintained their positive view on the benchmark over the next year.

European stocks are inching higher. Energy stocks rose with oil prices for a third day while healthcare was the worst performing sector. Here are the biggest movers Wednesday:

• Vestas shares rose as much as 19%, the steepest gain since July 2022, after the Danish turbine maker raised its guidance for this year’s adjusted Ebit margin and announced a new €400m share buyback program
• Balfour Beatty shares surged as much as 12%, hitting a new all-time high, after the engineering and construction group posted strong growth in first half revenue and adjusted pretax profit and raised its full-year guidance for profit from operations and net cash
• Kingspan shares rose as much as 8.3%, to the highest since January 2022, after announcing the acquisition of BMC Manufacturing Group for an initial consideration of €850m
• TKMS rose more than 15% after beating analyst expectations in the third quarter and lifting its guidance for the full year
• ABN Amro gained as much as 6.3%, the most since May and to a record high, after its latest quarterly earnings
• Zehnder climbed as much as 7.8%, to the highest since April 22, after Kepler Cheuvreux upgraded the stock to buy from hold
• Shurgard shares fell as much as 10%, the most since March 2020, after the self-storage company cut its FY26 guidance and said it isn’t reaffirming its medium-term outlook
• European luxury stocks dropped as Deutsche Bank lowers its price targets for heavyweights Hermes and LVMH, citing limited improvements during the second-quarter earnings season and a lack of catalysts for existing headwinds to ease
• Atalaya Mining Copper shares fell as much as 6.9% to 925.5 pence apiece on Wednesday after the offering of about 16.8 million shares by holder Trafigura prices at 915 pence per share
• Bilfinger shares fell as much as 9.3% to the lowest level in over a year after the industrial plant group posted weaker margins and orders in its second quarter results
• Raspberry Pi shares fell as much as 6.5% after being initiated at hold by Berenberg, which sees a fragmented customer base, a memory price surge and required capital spending capping upside for the stock
• TUI shares fell as much as 3.7%, the most in six weeks, after the travel and tourism group reported a miss on third-quarter Ebit as the Middle East conflict inflicted a €20 million hit to the group’s Cruise division

Asian stocks climbed, driven by gains in chipmakers, as earnings from US technology companies bolstered sentiment toward the region’s AI infrastructure firms. The MSCI Asia Pacific Index rose 0.8%, with Samsung Electronics, SK Hynix and TSMC the three biggest contributors. South Korea’s Kospi advanced for a third day, gaining 3.7%, as optimism over chipmakers’ shareholder returns and possible investment by Singapore’s Temasek added to momentum. Shares also rallied in Taiwan, Japan and mainland China. The AI trade got a boost after Super Micro Computer and CoreWeave jumped in late US trading following their earnings reports. Asia’s tech hardware stocks have recovered part of July’s big losses as investors refocus on the AI theme and overlook ongoing geopolitical uncertainty.  Equities also gained in Vietnam and Indonesia. Hong Kong’s benchmark Hang Seng Index declined 0.8% before heavyweight Tencent announced its results after the market closed. The firm’s net income of 56 billion yuan fell shy of analysts’ estimates, though revenue of 204.8 billion yuan was a slight beat. Here are the most notable movers:

• Situational Awareness bought shares in Japanese server components maker Taiyo Yuden Co. in late June and built up its stake to as much as 16.61% before cutting it back down, according to multiple filings by the artificial-intelligence hedge fund.
• South Korean chipmakers rallied as risk appetite returned after last month’s rout and traders weighed a local media report that Singapore’s Temasek Holdings Pte plans to invest in Samsung Electronics Co. and SK Hynix Inc.
• Sanrio shares dropped the most since 1985 after the Hello Kitty owner’s quarterly profit missed estimates.
• Rakuten Group Inc.’s shares sank the most in over two years after the Japanese e-commerce pioneer failed to erase persisting losses at its mobile unit.
• Chinese aluminum stocks, including Shandong Hongqiao Aluminum, advance as the metal extends rally after a key producer said it was slashing production. Tencent Music’s shares fall in Hong Kong after 2Q results.
• Tingyi shares rise as much as 5.5% in Hong Kong after the foodmaker reported first half earnings that Jefferies said beat market estimates.
• FleetPartners shares rise as much as 6.7% in Sydney to their highest since 2017, after the Australian fleet management company said it received multiple acquisition bids, including an offer raised from an earlier proposal.
• Sanrio Co. shares tumbled as much as 20%, the most in more than 12 years, after the company’s first quarter operating income missed market estimates.
• Tencent Music’s shares fall 11% in Hong Kong after 2Q results, while Citi cut the company’s target price citing challenging outlook for the second half due to decelerating growth in ad revenues and margin pressure.
• Rakuten Group’s shares plunge as much as 10%, the most since February, after the Japanese e-commerce and fintech company reported a smaller-than-expected second-quarter operating income.

In FX,the Bloomberg Dollar Index was little changed, while Treasury yields slipped 1-2bps; Swaps continued to imply 13bps of Fed rate increases at the September meeting. The yen was little changed around 159.17 per dollar. Investors are watching the currency as it approaches the key level of 160, which may trigger Japanese authorities to intervene again.  NZD/USD fell as much as 0.4% to 0.5856, leading G-10 losses against the dollar; New Zealand Prime Minister Christopher Luxon survived a leadership challenge, quelling for now a messy bout of infighting less than three months before a general election. USD/JPY dropped 0.1% to 159.16. GBP/USD rose 0.1% to 1.3520. EUR/USD steadied at 1.1538

In rates, treasuries are extending gains ahead of the US CPI report, with US 10-year yields down 2 bps at 4.66%. Yields are about 2bp-3bp lower with curve spreads little changed, off session lows reached concurrently with oil prices during European morning in response to signals about the ongoing Middle East war that has disrupted supply. European government bonds followed suit. $42b 10-year note auction at 1pm New York time has WI yield near 4.68%, which would match highest level in recent years Tuesday’s 3-year note auction stopped through by less than 1bp and has richened about 2bp from its 4.291% result; this week’s cycle concludes Thursday with $25 billion 30-year new issue. Ahead of July CPI data, Fed-dated OIS swap rates price in about 50% of a quarter-point rate hike at the September policy meeting, fully price in a move by year-end and mostly price in a second hike by mid-2027. IG credit new-issue calendar is bare so far and expected to remain muted by the risk CPI data move the market; 29 offerings priced over the past two days made for the market’s most active period since January. Focal points of US session include July CPI report and 10-year note new-issue auction. 

In commodities, Brent crude futures turned negative and fell back below $89 a barrel after Pakistan said the 60-day deadline for a US-Iran MoU may be extended, but the larger peace process has stalled. Earlier, Donald Trump said the US “totally” controls the Strait of Hormuz. Oil wavered. Precious metals are advancing, with spot silver up almost 3%.

Looking at today's economic data calendar we get July CPI data at 8:30am and July federal budget balance at 2pm. Fed speaker slate is blank; Cleveland Fed’s Hammack and Richmond Fed’s Barkin have appearances slated Thursday

Market Snapshot

Top Overnight News

• Iran-backed Houthi rebels killed six people aboard a cargo ship in the Bab el-Mandeb Strait on Tuesday, the first reported fatalities from attacks targeting Red Sea shipping in more than a year. CNBC
• Pakistan said the 60-day deadline for a US-Iran MoU may be extended, but the larger peace process has stalled. Earlier, Donald Trump said the US “totally” controls the Strait of Hormuz. Oil wavered. BBG
• President Trump is betting the pressure of sanctions and a naval blockade will force Iran to bend. But the country’s rulers are taking time-tested steps to keep their chronically battered economy functioning just enough to resist a drawn-out campaign. WSJ
• The oil market faces a severe supply deficit of 1.8 million b/d this quarter due to renewed Middle East conflict, despite high prices cutting demand by half to 1.6 million b/d, the IEA said. BBG
• US-Japan efforts to support the yen risk being undermined by tensions between Scott Bessent’s calls for BOJ tightening and Sanae Takaichi’s preference for accommodative policy, investors said. BBG
• CPI Preview: We expect a 0.19% increase in July core CPI (vs. +0.2% consensus), corresponding to a year-over-year rate of +2.47% (vs. +2.5% consensus). We expect a 0.05% increase in headline CPI (vs. +0.1% consensus), reflecting lower energy prices. Our forecast is consistent with a larger 0.26% increase in core PCE in July, reflecting a large increase in its portfolio management component.  GIR
• Democratic socialist Francesca Hong’s loss in Wisconsin’s Democratic gubernatorial primary Tuesday night revealed limits to the far left’s power — and is undercutting the narrative of an emerging insurgency. Politico
• President Donald Trump is looking for new policy pledges he can present to voters ahead of the midterm election, according to a top economic aide and a former administration official, including potentially calling on Congress to cut capital gains taxes and create an exemption for certain home sales. BBG
• Oracle has drawn up plans for a new round of job cuts to reduce payroll as it racks up billions in debt to fund AI infrastructure, according to people familiar with plans. Business Insider

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed amid geopolitical uncertainty, earnings releases and as participants await US CPI data. ASX 200 retreated as attention turned to earnings and with the top-weighted financial sector in the red after CBA posted full-year results, which mildly beat estimates and showed a 7% increase in cash profit, although its CEO warned that economic growth is slowing. Nikkei 225 was choppy on return from the holiday closure and amid a lack of tier-1 data, while participants continued to reflect on recent currency moves and increased BoJ rate hike expectations. KOSPI rallied on tech momentum and futures triggered a sidecar, with firm gains seen in both Samsung Electronics and SK Hynix propelling the index higher. Hang Seng and Shanghai Comp were mixed, with the Hong Kong benchmark pressured as markets await earnings results, including Tencent kicking off Chinese tech earnings, while sentiment was also contained after the PBoC skipped its 7-day Reverse Repo operations for a second consecutive day.

Top Asian News

• Japanese PM Takaichi may reshuffle the cabinet during mid-September at the earliest, according to Japan Times.

European bourses initially opened entirely in the green but has since pared back the earlier gains, now trading with slight losses. Similar price action was seen in Asia, with equities ending mixed. KOSPI was the clear outperformer, driven by gains in SK Hynix and Samsung Electronics (+5.5% and +6.7% respectively) after Asia Business Daily reported that Singapore's Temasek is planning to invest directly into the two Cos through its internal investment team. Newsflow has been light, with focus on the US CPI report at 13:30BST. Markets are expecting core CPI to tick lower to 2.5%, its lowest level since early 2021. After the close in Taiwan and Hong Kong, Foxconn and Tencent reported earnings. For Foxconn, its Q2 net income, revenue and operating profit beat consensus and guided Q3 revenue to rise strongly. For the latter, Tencent's revenue and capex topped forecasts however operating profit missed. Sectors point to a mixed picture. Basic Resources outperforms, followed by Construction and Telecoms. To the downside is Health Care, given the broker downgrade for Novo Nordisk (-2.8%), with Consumer Products & Services and Optimised Personal Care rounding out the sector laggards.

Top European News

• German HICP Final (Jul YY) 2.8% vs. Exp. 2.8% (Prev. 2.4%).
• German HICP Final (Jul MM) 0.9% vs. Exp. 0.9% (Prev. -0.2%).
• Italian HICP Final (Jul YY) 2.9% vs. Exp. 2.9% (Prev. 3%).
• Italian HICP Final (Jul MM) -1.0% vs. Exp. -1% (Prev. 0.0%).

FX

• G10s are mostly flat against the Buck, low-yielders CHF and SEK underperform despite a lack of specific catalysts.
• DXY is flat heading into the US CPI print. More weight on the CPI print today after those FT sources suggested Warsh was more attentive to the inflation side of the mandate, in the weeks ahead at least. Despite the recent USD action, the market is primed for a soft 0.2% M/M core print; a figure which could see some reduction of tightening bets. As it stands, the market sees September as a coin-flip between hold and hike. In terms of levels into CPI, the DXY's NFP low was 99.40 to the downside, 99.18 is the 200DMA. To the upside is 100.00, thereafter the 21/50DMAs are around 100.50, which could come into play on a hot print.
• No EUR move to unrevised Italian and German CPI; EUR likely to trade at the whim of the Buck on US CPI; the single currency currently flat at 1.1540 with catalysts absent, also flat against CEE, where focus remains on the implications of the European heatwave for energy supply.
• The same story for GBP, which is flat, but more resilient than others to the modest USD strength. For the moment eyes are on UK data with GDP scheduled tomorrow following yesterday's BRC report, which showed sales growth below expectations. Cable is within a c. 30 pip range.
• SEK and CHF are among the worst performers vs the USD. Despite headline specific newsflow being light, action is potentially a function of carry funding amid the recent unwinding of JPY shorts.

Fixed Income

• USTs are slightly firmer heading into US CPI for July. Currently, in a 108-13+ to 108-22 band. Today’s data is of note after the particularly weak NFP report last week, which saw a pullback in near-term tightening expectations leaving September essentially a coin-flip, as it stands. However, before the September Fed we get PPI, PCE, Jackson Hole, August NFP and then the August CPI series.
• Currently, CME pricing has September evenly split between a hold and hike; a 37% chance of a hold in October, 50% to a 25bps hike and just over 12% implied probability for a 50bps move. By end-2026 (i.e. December’s meeting) there is a 21% chance of the Target Rate still being at 3.50-3.75%, 45% probability of one 25bps hike, 28% chance to two and around a 5% likelihood of 75bps worth of tightening.
• EGBs devoid of specific catalysts in conditions more typical of summer markets. Bunds in a narrow 124.63-95 band, and unchanged in that. Gilts started with a little more pressure, opened lower by 24 ticks at 87.00 before paring around half of that and now trading in-line with EGBs.
• Aside from CPI, the docket also features US supply. As a reminder, Tuesday’s 3yr auction was strong, though not as well received as the last outing.
• Germany sells EUR 1.95bln vs exp. EUR 2.5bln 2038 and 2053 Bund.
• The UK sells GBP 1.5bln 1.125% 2035 I/L Gilt: b/c 3.37x (prev. 3.35x), real yield 1.725% (prev. 1.515%).
• Japan sells JPY 250bln 10-year I/L JGBs: b/c 3.27x (prev. 3.40x), Yield at the Lowest Accepted Price 0.860% (prev. 0.578%), Lowest Accepted Price 97.70 (prev. 100.20).
• Australia sells AUD 1bln 4.25% March 2036 bonds, b/c 4.73, avg. yield 4.9923%.

Commodities

• There has been little in terms of notable geopolitical updates throughout the European morning. The main recent development is that Iran’s Secretary of the Supreme National Security Council said the Strait of Hormuz would not open until the US accepts Iran's conditions, conditions that prove unfavourable for Washington. Elsewhere, Pakistan said it continues to activate direct and indirect diplomatic channels between the US and Iran and are working to bring both sides to the negotiating table in Islamabad, whilst Pakistan remains optimistic as a mediator.
• WTI Sept and Brent Oct futures initially held onto mild gains amid a lack of constructive updates to resume oil flows. This morning, the IEA OMR forecasted an oil market deficit of some 1.8mln BPD in Q3, more than double the prior month’s forecast of 800k BPD. IEA also noted that although the market is projected to return to surplus towards the end of this year, risks remain substantial and the urgency of reopening the Strait has increased, as previously available inventory buffers are rapidly depleting. Note, OPEC will be releasing its oil market report at 13:00 BST, albeit the report is backwards looking. The space gradually dipped into flat territory throughout the morning. WTI resides the bottom end of a 82.57-84.35/bbl range (vs yesterday’s USD 84.61 high), while Brent trades in a USD 88.27-90.07/bbl range (vs yesterday’s USD 90.03/bbl peak).
• Precious metals are firmer despite a lack of newsflow in the runup to the US CPI report. The data will be key in shaping expectations for the September FOMC meeting; the weak July NFP report prompted participants to pare rate hike expectations, although the subsequent rebound in crude prices has helped push September pricing back towards a coin flip (full preview on the headline feed). Spot gold trades in a USD 4,363-4,424/oz range, within yesterday’s 4,356-4,435/oz range.
• Base metals are also firmer across the board but gains capped ahead of US CPI, whilst ongoing hopes of Chinese stimulus keep the complex underpinned. 3M LME copper resides in a USD 14,134.03-14,237.97/t range.
• IEA OMR: Oil Market in a 1.8mln bpd deficit in Q3 (prev. forecast 800k bpd), Sees World Oil Supply 1.27mln bpd lower than demand in 2026 (prev. 860k bpd), 2026 world oil supply to fall by 4.3mln BPD (prev. 3.7mln fall). Says that although the market is projected to return to surplus towards the end of this year, risks remain substantial and the urgency of reopening the Strait has increased, as previously available inventory buffers are rapidly depleting.
• US Private Inventory Data: Crude Oil Stock Change (Aug/07)(bbls) +9.1mln vs. Exp. -0.5mln (Prev. +2.7mln), Gasoline -1.5mln (exp. -1.6mln), Distillate -0.6mln (exp. -1.6mln), Cushing +1.6mln
• Kuwait set September export crude to Asia at a USD 3.75/bbl discount.
• ADNOC sets the September Murban crude OSP to USD 79.07/bbl.

Central Banks

• Fed's Collins (2028 voter) told the FT that poor Americans are struggling to make ends meet, and warned that the central bank may need to raise rates to cool inflation. She added that she would be open to backing an increase as soon as September if the data dictated it.

Geopolitics: Iran

• US President Trump said they totally control the Strait of Hormuz, while he said regarding the flight change during the return trip from Turkey in early July that he was following what the Secret Service said and the plane he flew on was at greater risk. Furthermore, Trump said that he doesn't trust Iran.
• Pakistan's Foreign Ministry said it continues to activate direct and indirect diplomatic channels between the US and Iran and that they are working to bring both sides to the negotiating table in Islamabad. The Ministry added that they remain optimistic and not discouraged by escalations. Furthermore, the Ministry added that with the 60-day MoU deadline approaching, the deadline can be extended.
• Pakistani Interior Minister is said to have given an important message to Iran.
• Iranian Army official said Iran intends to maintain control and oversight of the Strait of Hormuz as a key source of its geopolitical power, Mehr News reported.
• Iran's IRGC said that if a threat against Iran occurs again, "hundreds of thousands of miles of energy transmission lines, thousands of power plants, all US and non-US systems, and even global infrastructure connected to the Internet are at risk," Sepah reported.
• Japanese PM Takaichi held a phone call with the Iranian President, on de-escalation of tensions in the Middle East and the security of maritime transit, Kyodo reported, citing sources.
• Yemeni Deputy Foreign Minister said there has been no direct or indirect negotiations with the Houthis, Al ArabyTV reported.
• Israel conducted airstrikes in southern Lebanon, according to IRIB.

Geopolitics: Ukraine and NKorea

• White House official told Al Jazeera that President Trump remains optimistic about the possibility of reaching a peace agreement between Russia and Ukraine.
• Ukraine Air Force said guided bombs were fired at southern Dnipropetrovsk and drones are heading to Sumy from the North.
• Russia said they targeted a Ukrainian forces fuel depot in Odessa.
• Russia's Novorossiysk grain terminal has halted operations after being hit by an attack and damaged, according to sources.
• Russia's Orsk refinery suspended processing on August 11th following a drone attack, according to sources
• North Korea fired an unidentified projectile. In response, the South Korean Presidential Office held a meeting regarding North Korea's missile launch and will call for a stop to provocations.

US Event Calendar

• 7:00 am: Aug 7 MBA Mortgage Applications, prior -2.9%
• 8:30 am: Jul CPI MoM, est. 0.1%, prior -0.4%
• 8:30 am: Jul Core CPI MoM, est. 0.2%, prior 0%
• 8:30 am: Jul CPI YoY, est. 3.4%, prior 3.5%
• 8:30 am: Jul Core CPI YoY, est. 2.5%, prior 2.6%
• 2:00 pm: Jul Federal Budget Balance, est. -346b, prior -291.14b

DB's Jim Reid concludes the overnight wrap

As we go to press this morning, markets have put in a pretty mixed performance across different asset classes. On the positive side, we’ve seen fresh equity gains overnight, as the latest earnings from CoreWeave and Super Micro Computer led to renewed optimism on the AI trade, with US equity futures pushing higher as well. Indeed, in South Korea this morning, the KOSPI is currently up +3.79%, which as it stands would be its best daily performance so far this month. However, the geopolitical news continued to raise concerns, with the Strait of Hormuz still blocked and there’s still no sign of a deal to reopen it yet. In turn, that’s led to further gains for oil, and this morning Brent crude is on track for a 6th consecutive increase, having risen another +0.93% to $89.74/bbl. So concerns about inflation remain top of the agenda, and investor attention is now shifting towards today’s US CPI report, particularly with market pricing for the Fed’s next decision still in the balance.

In terms of those geopolitical developments, we’ve seen competing headlines over the last 24 hours that have pushed oil prices in both directions. Initially, there was more optimism about some kind of deal that sent oil prices lower. For instance, Al Jazeera cited a spokesman from Qatar’s Foreign Ministry, who said that talks between Oman and Iran had reached an advanced stage. Then soon afterwards, oil prices saw an even bigger move lower after Pakistan’s defence minister said the US and Iran were “close to some sort of arrangement”, and that “things are shaping up in favor of peace”. So at the intraday low, Brent crude was down to $86.60/bbl.

However, oil prices then started to pick up from yesterday afternoon, and they’ve moved steadily higher since then, and are currently at $89.74/bbl. In part, that followed more hawkish Iranian comments reported by Iran’s state-run IRIB news. They reported an adviser to Iran’s supreme leader saying that “the Strait of Hormuz will not be reopened until Iran’s conditions are met”. And they also cited the recently-appointed Secretary of the Supreme National Security Council, who said that a deal between Iran and Oman on control of the Strait “will remain a separate issue from the Strait’s closure”. He also said that “The US must end the war, unfreeze Iran’s blocked assets, and the war must cease across the entire region, including Lebanon and Gaza”. So even as the mediating countries were suggesting a deal might be moving closer, there was little signal of that from either the US or Iran yesterday. Meanwhile, President Trump himself said that “We totally control the Strait of Hormuz” and that “Right now, we’re in a very good position”.

So after all those intra-day swings, Brent crude was ultimately up +1.36% to $88.91/bbl by the close, and this morning it’s up another +0.93% to $89.74/bbl. Moreover, there were signs of investors pricing in more protracted disruption, with prices moving up across the oil futures curve. For instance, the 12-month Brent future was up +0.33% yesterday to $76.53/bbl, and is up another +0.47% this morning to $76.89/bbl.

With concern about inflation mounting again, this makes it an interesting point to get the US CPI print for July, which is out at 13:30 London time. This is set to get particular attention, in part because of the quieter summer newsflow, but also because Fed pricing for the next meeting is completely in the balance. Indeed, futures this morning are pointing to a 51% chance of a September hike, so if we do get an upside or downside surprise today, that could help shift the balance one way or the other. In some respects, the recent newsflow has been more dovish, with the last CPI print surprising on the downside, and payrolls unexpectedly contracted in the latest jobs report. But there’s been plenty of hawkish arguments too, with oil prices picking up again, whilst the unemployment rate hit a 13-month low as well, so the CPI print today will really help set the narrative for the decision, particularly as we approach the Jackson Hole Symposium towards month-end.
In terms of what to expect, our US economists think that headline CPI will come in at a monthly +0.15% pace, which would bring the year-on-year rate down to +3.45%, with a decline in gas prices weighing on that headline number. Meanwhile, they see core CPI coming in a bit stronger at +0.26% on the month, which would leave the year-on-year reading at +2.51%. Remember as ever that the Fed’s official target is for the PCE measure of inflation rather than CPI, which isn’t out for another couple of weeks. But today’s CPI and tomorrow’s PPI (where a few components feed into the PCE) will offer us an initial steer on prices in July and will help to shape the upcoming market narrative. For more details, you can see our US economists’ full preview here.

Ahead of that, yesterday was a pretty mixed session for equities, with the S&P 500 down -0.32% amidst weakness from the Magnificent 7 (-0.90%). However, we’ve since had some more positive tech news after the US close, with results from CoreWeave and Super Micro Computer. CoreWeave shares surged by about +15% in extended trading after the AI cloud computing specialist reported a stronger sales outlook and a smaller-than-expected net loss. Meanwhile, SMC rose by more than +7% after-hours as its sales guidance for Q3 came in well ahead of estimates. So that’s boosted investor sentiment this morning, with S&P 500 futures up +0.10%, and NASDAQ 100 futures up +0.21%.

That trend has been clear in Asia overnight as well, where most of the major indices have moved higher this morning. That includes the KOSPI (+3.79%), which at current levels would be its strongest daily performance so far in August. Moreover, the Nikkei (+0.67%), the CSI 300 (+0.65%) and the Shanghai Comp (+0.32%) have all moved higher as well, although the Hang Seng (-1.17%) has lost ground.
Before those earnings however, there was a more subdued performance, with no huge moves on either side of the Atlantic. As mentioned, the main underperformer was the Magnificent 7 (-0.90%) which dragged on the S&P 500 (-0.32%). But otherwise, the rest of the index put in a steady performance, and the equal-weighted S&P 500 (+0.21%) hit another record high. There was also some optimism in Europe, where the STOXX 600 (+0.01%) just about posted a 7th consecutive gain for the first time in over a year, inching up to a new record. That included records for the DAX (+0.26%) and the IBEX 35 (+0.20%) as well, but the FTSE 100 (-0.17%) and the CAC 40 (-0.13%) both fell back.

Otherwise, sovereign bonds recovered on both sides of the Atlantic yesterday, with a small but clear fall in yields across the board. So in the US, the 2yr Treasury yield (-2.7bps) fell to 4.22%, the 10yr yield (-1.8bps) fell to 4.69%, and the 30yr yield (-1.1bps) fell to 5.24%. The outperformance in front-end Treasuries was helped by a solid 3-year auction that saw $58bn of notes issued -0.5bps below the when-issued yield. Meanwhile, over in Europe, yields on 10yr bunds (-2.1bps), OATs (-0.2bps) and BTPs (-1.4bps) all fell back as well. And overnight, we’ve seen the 10yr Treasury yield fall another -0.6bps to 4.68%.

Finally, we got a bit of US data yesterday for July, which generally came in on the positive side. That included the NFIB’s small business optimism index, which rose more than expected to an 11-month high of 99.8 in July (vs. 97.5 expected). Meanwhile, existing home sales came in at an annualised pace of 4.06m in July (vs. 4.05m expected), which was a 3-month low but slightly better than expected. That said, in another sign of a subdued US housing market, the New York Fed’s household debt report for Q2 showed the biggest quarterly decline in mortgage debt since 2013.

Looking at the day ahead, the main data highlight will be the US CPI print for July. Otherwise, today’s earnings releases include Cisco Systems.

Tyler Durden Wed, 08/12/2026 - 07:56

Earnings Drive Both Bull & Bear Markets

Authored by Lance Roberts via RealInvestmentAdvice.com,

“Earnings drive market outcomes. In 151 years, every single 20% market decline was accompanied by a double-digit earnings decline, with zero exceptions.”

Every few months, a new reason to sell arrives. Capital spending is too high. The deficit is unsustainable. Oil just broke out. The conclusion attached to each is always the same: investors are about to lose half their money. I’ve watched that warning recycle for three decades, and it’s a smoke detector that goes off every time somebody makes toast. What actually matters is far less exciting. Earnings drive market corrections, and the historical record on that is close to airtight.

A probability tree from BCA Research has been circulating that makes the point simply. It shows the S&P 500 rising 84% of the time overall, and only 64% of the time in years when earnings fall. The framing is right. The specific numbers, when I rebuilt them from scratch, turned out to be a good deal more interesting than the chart suggested.

The Bear Case That Keeps Not Working

Start with why the popular scare stories fail as timing tools. Capital spending, government deficits, and energy prices are all real economic variables. None of them repriced the market on their own. If earnings drive market corrections, then every one of these stories has to travel through profits before it can do any damage, and most of them never complete the trip.

The reason is mechanical. A stock is a claim on future cash flows, and its price is that claim divided by a discount rate. So there are exactly two ways to knock the market down hard. Either the expected cash flows fall or the discount rate rises. That’s the whole list. Capex, deficits, and oil only matter to the extent they eventually show up inside one of those two variables, and most of the time they don’t show up in either with enough force to matter.

Consider what that means in practice. Hyperscaler capital spending can run at what looks like a reckless pace for years without producing a bear market, because the spending itself is a transfer from cash flow to depreciation schedules rather than a destruction of earning power, and the market will happily fund that trade for as long as revenue keeps validating it. The spending isn’t the risk. The risk is that the moment revenue stops validating it, it becomes an earnings problem wearing a capex costume. I made a version of this argument in AI Capex Depreciation Risk Is The Catch To Record Earnings, where the concern isn’t the capex line but the impact deferred costs have on reported profits later.

Deficits work the same way, of course. They can widen for a decade, and the only reliable transmission into equity prices runs through interest rates, which is the discount-rate channel rather than the earnings channel. Oil, in contrast, is the most direct of the three, because energy is an input cost that compresses margins. Even there, the market doesn’t fall when oil rises. It falls when the margin compression shows up in guidance.

How Earnings Drive Market Corrections Over 151 Years

Rather than take anyone’s chart on faith, I rebuilt the analysis from Robert Shiller’s monthly S&P 500 dataset, which carries index price, dividends, and trailing reported earnings per share back to the nineteenth century. That yields 151 complete calendar years, from 1872 through 2022, where both an annual total return and a year-over-year change in reported earnings can be computed. Reported earnings, not operating earnings, and certainly not forward estimates. Actual bottom-line profits.

Here’s what the conditional probabilities look like.

Two things stand out. The unconditional hit rate is 74%, not 84%. That figure cross-checks cleanly against Aswath Damodaran’s independent dataset at NYU Stern, which records 71 positive years out of 97 from 1928 through 2024, or roughly 73%.1 The 84% figure only appears if you start the sample in the mid-1980s, which conveniently excludes the Depression, the 1970s, and both world wars.

The second finding is the one that should give a strategist pause. In years when earnings fell, the market still rose 66% of the time, which is close to BCA’s 64%. But in years when earnings rose, the market rose only 79% of the time, not 92%. Widen the sample and the gap between the two branches collapses from 28 percentage points to 13. Over the 1928 to 2022 subsample it shrinks to roughly three points.

So does that kill the thesis? No. It relocates it.

Earnings Drive Market Corrections By Severity, Not Direction

Up or down is the wrong question. A tree that sorts years into two buckets throws away the only variable an investor actually cares about, because a year finishing 2% lower lands in the same box as a year finishing 38% lower, which is how you end up holding a chart that looks decisive while telling you nothing whatsoever about risk. Sort the same 151 years by the magnitude of the earnings change instead. The relationship of the binary version buried comes into focus immediately.

Read the middle column first. When reported earnings fell by less than 10%, not a single one of those 25 years saw a decline worse than 10%. Zero. The worst outcome in that entire bucket was a year that finished down 9.4%. A mild earnings dip is a nothing-burger for the index, which is exactly why the market shrugs off the soft patches that dominate financial television.

Now read the left edge. When earnings fell by more than 25%, half of those years saw declines of more than 10%, and a quarter saw declines of more than 20%. The average outcome in that bucket is negative. That’s the only bucket in the entire 151-year record where the average annual return is below zero.

Ultimately, that is the sentence to carry out of this article. Earnings drive market corrections through severity, not through direction. Whether the market finishes a given year up or down is close to a coin weighted by sentiment, liquidity, and valuation. Whether the market takes a 20% beating is an earnings question, and the historical record answers it without a single exception.

Every Major Decline, And The Earnings Behind It

In fact, only eight calendar years in the entire sample have a total return worse than-20%. That’s a small enough list to examine one at a time, which is the appropriate level of humility when you’re drawing conclusions from tail events.

Look at the last column. Every one of the eight is accompanied by a double-digit earnings decline. Three of them, 1937, 1974, and 2002, had earnings still growing in the year the market fell apart, which is why a naive year-by-year test would file them as counterexamples and move straight on. They aren’t. The 1937 crash preceded a 43.4% earnings collapse in 1938. Same pattern in 1974, which preceded a 10.5% drop the year after. And 2002 had the sequence reversed, arriving after the 50.6% collapse of 2001 and the valuation reset that followed.

“In each apparent exception, the market didn’t ignore earnings. It got there first.”

That is the mechanism, stated properly. As a result, the market prices expected earnings, so it turns before reported earnings turn. Which means anyone waiting for the profit decline to appear in the data before reducing risk is reading a rear-view mirror and calling it a windshield.

The Strongest Objection, And What It Costs The Thesis

There is a real argument on the other side that we should examine.

“But Lance, 2022 was a 25% bear market, and earnings never fell. That was rates, full stop.”

It’s the best objection available, and it’s half right. On forward operating estimates, 2022 is a clean multiple-compression event. Estimates actually rose through much of the decline, and the forward multiple did nearly all of the work as it compressed from the low twenties into the mid-teens. No earnings recession required.

Here’s the wrinkle. On trailing reported earnings, the measure this entire study is built on, 2022 shows a 12.7% decline. Both statements are true at once, and the gap between them is the point. Operating earnings exclude what companies would rather you ignore. GAAP earnings don’t. When those two series diverge sharply, you’re looking at a quality-of-earnings problem, and I’ve written about that divergence in Shiller’s CAPE: Is It Really Just B.S. more than once.

Still, the objection lands a genuine hit, and I’d rather concede it than dress it up. Rates are an independent channel. A discount-rate shock can produce a serious decline on its own, and 1937, 1974, and 2002 all carried heavy multiple-compression components alongside their earnings problems. So the honest formulation isn’t that earnings are the only thing that matters. It’s that earnings are the variable that separates a routine 10% air pocket from a portfolio-altering event, while rates determine how much valuation cushion you have when the earnings news arrives. Watch both. Weight earnings more heavily.

What about the other direction?

There’s a mirror-image error that costs investors more money than the one this article is mostly about. Earnings collapsed by more than 25% in 12 separate years, and in half of those years the market went UP. For example:

• 1921: earnings fell 63.8%, yet the market still returned 14.1%.
• 1938: down 43.4% on earnings, up 19.8% on price. In In
• 2020, earnings were off 32.5%, and the index was up 18.2%.

Why? Because by the time the earnings collapse is measurable, the market has moved on to pricing the recovery. Markets bottom before earnings bottom, without exception in the record above. Selling into a confirmed earnings recession is frequently the worst available trade.

Watch The Estimates, Not The Reports

If earnings drive market corrections and the market front-runs reported earnings, then the practical question becomes which earnings number carries information. The answer isn’t the one company’s report. It’s the one analysts are revising.

That would be more comforting if analysts were good at it. They aren’t. A McKinsey study spanning 25 years found Wall Street pegging earnings growth at 10% to 12% annually, while actual growth came in at around 6%, roughly the economy’s nominal growth rate, which is why forecasts drift so reliably above outcomes.2

Every year, since 1994, when operating earnings became the convention, initial quarterly forecasts have been skewed optimistically by something close to 30%. I’ve covered the machinery behind that bias in Earnings Season and The Truth About Wall Street Analysis, and the arithmetic of overpaying for those estimates in Estimates By Analysts Have Gone Parabolic.

Of course, the bias doesn’t make estimates useless. It makes the level useless and the direction valuable. Nobody should care that the consensus is too high, because the consensus is always too high. What matters is the second derivative, meaning the rate and breadth at which estimates are being cut. As Bob Farrell’s Rule #9 puts it, when all the experts and forecasts agree, something else is going to happen. The tell isn’t the agreement. It’s the moment the agreement starts quietly dissolving, which typically shows up first in the number of companies being revised down rather than in the index-level figure.

In addition, the breadth of revisions matters more than the magnitude, and index-level estimates hide it. When a handful of very large companies carry the aggregate, the index number can climb while the median company deteriorates. That’s the setup I flagged in Earnings Estimate Revisions Are Very Optimistic, and it’s the single most common way a deteriorating profit cycle stays invisible for a couple of quarters longer than it should.

Investor Tactics When Earnings Drive Market Corrections

None of this matters without a process. Howard Marks has made the point for years that you can’t predict, but you can prepare, and preparation here means deciding well in advance which signals change your positioning and by exactly how much, so that the decision isn’t being made while you’re staring at red numbers and feeling something about them.

Warning Signals Worth Monitoring

Credit markets whisper what equities later shout. Bondholders get paid to worry about whether a company survives at all, so they reprice deteriorating fundamentals well ahead of equity holders, who spend their days pricing growth and tend to read the balance sheet last. Gilchrist and Zakrajšek demonstrated this formally in their NBER work, building a credit spread measure that predicted declines in economic activity and equity prices considerably better than standard default-risk indicators.3 I’ve walked through the practical version in Credit Spreads: The Market’s Early Warning Indicators.

A caution on all of it. Earnings drive market corrections, but these are monitoring tools, not triggers. Spreads spent long stretches at complacent levels while equities compounded, and investors who de-risked the moment spreads looked tight gave up substantial returns for the privilege of being early. The rate of change matters more than the level; confirmation across several signals matters more than any single one; and the correct response to a deteriorating dashboard is usually a smaller position rather than no position.

Frequently Asked Questions Do earnings declines always cause market corrections?

No, and that’s the most misunderstood part. Across 151 years, the market rose in 66% of the years when reported earnings fell. Small earnings declines are routine, and the index absorbs them easily. The data show that large earnings declines are a precondition for large market declines.

If earnings drive bear markets, how large does an earnings decline have to be to matter?

From the data, an earnings decline of roughly 10% appears to be the threshold. When reported earnings fell less than 10%, no year in the sample produced a decline worse than 10%. Once earnings fell more than 25%, half of those years produced a double-digit decline, and a quarter exceeded 20%.

Why did the market fall in 2022 if earnings didn’t decline?

It depends on which earnings series you use. For example, forward operating estimates rose, making 2022 look like a pure valuation reset driven by rates. Trailing reported GAAP earnings fell 12.7%. The divergence between operating and reported earnings is itself the story.

Should I sell when earnings start falling?

Usually, the opposite is true if the decline is already visible in reported data. Indeed, markets bottom before earnings bottom. In 1921, 1938, and 2020, earnings fell more than 25% while the market delivered double-digit gains. The useful signal is estimated revisions and credit spreads, both of which move earlier.

Are capital spending and deficits irrelevant to market risk?

Not irrelevant, but indirect. However, they affect equity prices only by working through expected cash flows or through the discount rate. Watching them without considering earnings and rates means watching the symptom rather than the disease.

What This Means Going Forward

Earnings drive market corrections. That’s the finding, and the next serious decline won’t arrive with a headline about capital spending or the deficit but will begin exactly where all eight of the others began, in the profit cycle, surfacing in credit spreads and revision breadth well before it reaches any earnings report you can actually read. The investors who get hurt won’t be the ones who missed the story. They’ll be the ones watching a different story entirely, waiting on confirmation that always arrives late.

Tyler Durden Wed, 08/12/2026 - 07:20

Swedish PM Calls Spanish Illegal Immigrant Amnesty 'Very Bad Idea'

Authored by Guy Birchall via The Epoch Times,

Swedish Prime Minister Ulf Kristersson has called the Spanish government's amnesty for illegal immigrants a "very bad idea," warning that it could spark another migrant crisis akin to the one that beset the continent in 2015.

Swedish Prime Minister Ulf Kristersson in Brussels on Dec. 19, 2024. Johanna Geron/Reuters

The center-right politician, who is running for reelection next month, told the Financial Times in an interview published on Aug. 11 that the Spanish amnesty for more than a million illegal immigrants had caused a "pretty big outcry" at the last summit of EU leaders.

Spanish Prime Minister Pedro Sánchez's government granted a royal decree on April 14, launching the regularization of people living illegally in the country.

The proposal was first presented on Jan. 27 to allow about 500,000 illegal immigrants already living and working in Spain to obtain legal status through an accelerated process. According to figures from the Spanish government, almost 1.2 million applications for regularization were received.

The move was controversial, but the migrant surge in Ceuta, a Spanish exclave on the North African side of the Mediterranean at the end of July, compounded concerns.

Kristersson said a knock-on effect from Madrid's move could pose a serious threat to the European Union's free movement zone, known as the Schengen Area.

"It symbolizes that we still have to be very, very careful not to act in a way that could even come close to what happened in 2015," Kristersson said. "I think Spain got the message ... but it shows the vulnerability."

He said he had told Sánchez that he disapproved of the move.

"Having [the amnesty] also creates a possibility for you to use European territory. That is specifically damaging for us because we know from experience that many people coming to Europe prefer to go north. Exactly that happened in 2015," Kristersson said.

"It is not the time to get relaxed on this ... there is a huge majority in Sweden saying they cannot go back to an uncontrolled situation. ... Doing things that could jeopardize a stable situation would be a very bad idea."

In 2015, 1.3 million people, mostly fleeing war in Syria and Iraq, sought refuge in Europe, causing the EU's asylum system to collapse; reception centers were overwhelmed in Greece and Italy, with countries further north erecting barriers to stop illegal immigrants from entering.

Illegal immigrants gather along the fence at the site of clashes near Fnideq on the Morocco-Spain border, in Fnideq, Morocco, on July 31, 2026. Abdel Majid Bziouat/AFP via Getty Images

The unprecedented influx into Ceuta began on July 30, when an estimated 50,000 to 60,000 people entered the exclave from Morocco by land and sea. Many swam around a border breakwater after social media posts claimed that Spain had opened its border.

More than 80 people died on both sides of the border, according to figures released by Spanish and Moroccan authorities. Some drowned while attempting to swim to Ceuta, while others were crushed or trampled during chaotic efforts to climb a breakwater and border fence.

Moroccan migrants swim across the sea border into Ceuta, Spain, near Avenida Martínez Catena, on July 31, 2026. Etienne Fauchaire for The Epoch Times

In the wake of that incident, multiple leaders around Europe issued sharp criticism of Sánchez's government, with Italy temporarily suspending its Schengen Area agreement with Spain.

The one-month suspension of border-free travel between Italy and Spain was announced on July 31 by Italian Prime Minister Giorgia Meloni and Deputy Prime Ministers Antonio Tajani and Matteo Salvini, who described the move as necessary for security.

France, which shares a land border with the Spanish mainland, also announced an intensification of controls along the border.

Italy's move was supported by a number of EU member states, including Finland, Denmark, and the Czech Republic, with the governments of all three saying that Brussels should consider closing the Schengen Area to Spain.

On Aug. 4, EU interior ministers called for stronger borders, faster returns, and expanded efforts to dismantle migrant-smuggling networks as a result of the Ceuta surge.

Kristersson faces an election on Sept. 13, having led the Scandinavian nation since 2022 as head of a coalition comprising his Moderate Party, the Christian Democrats, and the Liberals with additional support from the Sweden Democrats.

Swedish polling company Novus's poll of 5,726 eligible voters, conducted 6-9 July, gave the Social Democrats 32 percent, the Sweden Democrats 20 percent, and Moderates 17 percent.

Sweden tightened its previously liberal immigration and citizenship policies earlier this year because of the vast numbers of immigrants it has taken in over the past two decades.

In November, Stockholm launched an inquiry to investigate "parallel social structures" that had emerged in the country.

Swedish Minister for Education and Integration Simona Mohamsson said in a statement at the time that these structures, consisting of "clans and family-based networks," undermine "the rule of law, threaten democracy, and hamper integration."

A policeman watches over a queue of newly arrived people at Hyllie Station, outside Malmo, Sweden, on Nov. 19, 2015. Johan Nilsson/TT News Agency via AP

"It is unacceptable that people in Sweden live under social control, are subjected to honour-based violence and oppression or are prevented from fully participating in society," she said. "With this inquiry, we are taking an important step towards addressing these problems."

The inquiry's report is due to be presented on Aug. 20.

In June, the Swedish parliament passed a law allowing authorities to revoke residence permits from immigrants for "not behaving properly," the latest in a series of moves breaking away from the country's once-liberal immigration system.

Residency permits can now be revoked for conduct including unpaid debts, undeclared work, organizing begging, and more, even where the behavior falls short of a criminal conviction.

Tyler Durden Wed, 08/12/2026 - 06:30

World's Largest Alumina Refinery Outside China Abruptly Halves Output On NatGas Disruption

Norwegian aluminum producer Norsk Hydro's Alunorte plant in Brazil, one of the world's largest alumina refineries, reduced output by 50% following disruptions to natural gas availability.

Bloomberg reports that disruptions to NatGas availability at Alunorte forced a 50% reduction in output and sent aluminum prices in London to a seven-week high. Hydro said production would return to full capacity once gas supplies normalize.

Aluminum rose nearly 2% in London and traded at $3,373 a metric ton. Alumina futures gained 1% in Shanghai.

NatGas is critical to Alunorte because alumina refining requires high-temperature heat and steam. The gas powers the Bayer process, which refines bauxite: 

• Digestion: Bauxite is mixed with caustic soda and heated under pressure to dissolve the aluminum-bearing minerals.
• Evaporation and steam generation: Large boilers provide steam throughout the refinery.
• Calcination: Aluminum hydroxide is heated to around 1,832F to remove water and produce smelter-grade alumina.

The disruption means that Alunorte cannot maintain enough steam and furnace heat to operate its production lines, forcing the refinery to reduce throughput. For context, Alunorte is the world's largest single-site alumina refinery and the largest outside China. It is located in Barcarena, Pará, and has an annual capacity of 6.3 million metric tons.

Inventories in London Metal Exchange warehouses have fallen to 250,000 tons, the lowest level since November 1990. Norsk Hydro recently warned that the annual global aluminum deficit could top 900,000 tons if trade through the Strait of Hormuz remained disrupted.

Also in the industrial metals space, copper futures in London are trading above $14,000 per ton as metal inflows into the US continue ahead of President Trump's expected tariff, effectively tightening global supplies.

Surging prices for both industrial metals will only make electrification and decarbonization even more expensive.

"Copper and aluminum are important beneficiaries of electrification and decarbonization," said UniCredit SpA strategist Thomas Strobel. "While copper's investment case is driven by structural supply constraints, aluminum benefits from lightweighting, grid expansion and recycling. Together, they offer complementary exposure to some of the strongest long-term trends in the global economy."

Tyler Durden Wed, 08/12/2026 - 05:45

Iran's Military Command Reshuffle Digs In For 'Hardline' Confrontation: US Must Meet All Demands For Hormuz Opening Summary

• Iran rejects peace push narrative: Tehran says Hormuz stays closed until the US accepts all its conditions.
• Hardliners take control: Iran reshuffles top military leadership, signaling a tougher stance.
• Pakistan pushes talks: Interior Minister arrives in Tehran for mediation efforts.
• US enforces blockade: American forces reportedly fired on a ship trying to breach the Iran blockade.
• Shipping attacks escalate in region: A Houthi attack reportedly killed three crew members, while another vessel was struck in the Gulf of Oman.

 

//--> //--> //--> Strait of Hormuz traffic returns to normal by September 30?
Yes 18% · No 83%
View full market & trade on Polymarket

*  *  *

Iran Pours Cold Water on Pakistan's Diplomatic Optimism

Pakistan started the day by floating optimistic reports of the warring sides reverting to 'moving toward peace efforts' - however that appears very short-lived, or really was probably never a reality, given soon on the heels of these claims a top Iranian official has reiterated that the Strait of Hormuz will remain closed until the US corrects its 'behavior'. According to fresh reports out of state media sources:

Secretary of the Supreme National Security Council of Iran Rezaei says Strait of Hormuz will not open until the US changes its behavior and accepts Iran's conditions.

This comes amid widespread reports that Iran has just undergone a significant military shuffling of top command leadership, which points to the ascent of the 'hardliner' crowd - as in those who are against signing an MoU deal with Washington...

Iran’s Leader has appointed 6 top military commanders:

• Ali Abdollahi: Chief of Staff
• Ahmad Vahidi: IRGC Commander
• Kiumars Heydari: Deputy Chief of Staff
• Mostafa Izadi: Deputy IRGC Commander
• Ali Ozmayi: IRGC-Navy Commander
• Hossein Taeb: Chief of Basij. pic.twitter.com/3usuJwSm1y

— Arya Yadegaar (@AryJeayBackup) August 10, 2026

The Wall Street Journal and others are picking up on Tehran's obvious shift away from negotiations, and toward a more permanent state of military resistance. It writes: "Now, the new supreme leader, Khamenei’s son Mojtaba, is putting his own stamp on the country’s national-security policy amid a confrontation with the U.S. that could last months or even years."

According to more of WSJ's analysis:

In a sweeping overhaul of the government’s top echelon on Sunday and Monday, Iran named seasoned hard-liners to run the country’s security policies and institutions of repression.

It marked the most significant government reshuffle under Mojtaba Khamenei, who hasn’t been seen in public since the war began. U.S. intelligence agencies say he is alive but severely injured, and top Iranian cabinet members say they have never met him since he took office. Iranian officials say he was injured but in good health.

Analysts said the appointments signaled Khamenei’s determination to hold fast in a showdown with President Trump, who is seeking concessions on Iran’s nuclear program and the Strait of Hormuz. 

“The regime is preparing for a more confrontational posture at home and abroad,” said Kasra Aarabi, an expert on the Islamic Revolutionary Guard Corps, a powerful paramilitary force, at United Against Nuclear Iran, a policy organization that opposes Iran’s government.  

For some - especially the non-interventionists, it was obvious the war would take this course from day one.

'Return of Peace Efforts' Headline Pushes Oil Down

Despite what are clearly ongoing attacks on international vessels in regional waters, suddenly mediators are feeling optimism again, and decided to float another apparent round of pre-US market open headlines suggesting peace could return.

Though there's as yet no evidence of this, the Pakistani Defense Minister has signaled that the US and Iran are close to some agreement and that the situation is moving towards peace. Oil prices promptly plummeted ahead of market open. Pakistan’s interior minister Mohsin Raza Naqvi, has also just arrived in Tehran for talks with Iranian officials amid going mediation efforts, according to Iran’s Mehr news agency.

US Fires on Ship Attempting to Break Iran Blockade

This came ironically just as reports of more serious shipping incidents, at least one of them deadly, emerged in regional waters, but perhaps the brief 'peace is near' headline redux had its intended effect on markets.

And significantly, the US is clearly still enforcing its military blockade of Iranian ports - and so no, the warring sides do not seem 'close' to a return to deal-making, instead the ground reality is quite the opposite:

US forces reportedly fired on a Panama-flagged ship that attempted to run the American blockade of Iranian ports early Tuesday, according to WSJ citing a US official.

"A U.S. military helicopter fired at the rudder of the ship after its crew ignored warnings from American personnel working to enforce the naval blockade of Iran’s ports, the official said," The Wall Street Journal details:

"There were no immediate reports of any casualties in the incident, which took place before dawn on Tuesday. The U.S. official said the ship appeared to be attempting to transfer its crew to another civilian vessel after the attack," the report adds.

Deaths of Crew Members under Houthi Attack

There's been a major deadly attack on a commercial ship in the Red Sea and Bab al-Mandeb Strait region off Yemen on Tuesday, amid the ongoing escalation against Saudi shipping by the Houthis.

Yemen's internationally recognized government has announced that at least three people have been killed in a Houthi attack on an unidentified commercial ship in the Bab al-Mandeb Strait, however there's been no immediate confirmation forthcoming from the Houthis themselves.

The small vessel has been identified as the Tanzania-flagged Tihamah, and reports say this marks the first deaths from Houthi maritime attacks since the start of the Iran war in February.

File image via OilPrice

According to emerging details in Reuters via maritime monitors:

UK Maritime Trade Operations said it ​had been informed that a cargo vessel off the coast of al-Mokha, Yemen, had been hit by an unknown projectile, resulting in casualties.

British maritime security company Ambrey said the ship was reportedly targeted and ​damaged by the Houthis, killing three crew members, while at anchor 3.3 nautical miles ​northeast of Perim Island, Yemen.

Two Pakistanis and one Indonesian person were killed as the ship sailed ‌from Salalah ⁠in Oman via Djibouti, the Yemeni sources said. After the attack, the crew lost control of the ship and were approached by Yemeni coast guard, they added.

And yet the stricken vessel does not appear to be Saudi-owned or operated, which could signal that the Houthis are expanding their siege of the waterway to include all foreign vessels and not just Saudi and Israeli-linked ones.

Further east, UKMTO also received a report of an incident involving a container ship and military forces in the Gulf of Oman.

UKMTO WARNING 109-26

Click here to view the full product ⤵️ https://t.co/352rLshzGu#MaritimeSecurity #MarSec pic.twitter.com/5g4OTPteMc

— UKMTO Operations Centre (@UK_MTO) August 11, 2026

If this alleged incident which is closer to the Persian Gulf and Strait of Hormuz is confirmed, it would likely be a directly Iranian-linked incident. WSJ details that "maritime security firm Vanguard reported that a Panama-flagged containership called Vela Nova was struck by a missile fired from a helicopter while transiting westbound through the Gulf of Oman about 71 nautical miles from the coast of Pakistan."

"The missile struck the vessel, causing a fire that was subsequently extinguished," said Vanguard, noting that all 17 crewmembers are accounted for.

Since joining the regional conflict on Iran's side, the Houthis - which have long been seen as proxies of Tehran, have attacked dozens of vessels after declaring their "siege for siege" operations against Saudi Arabia.

Overnight Developments

• Iran’s new supreme leader, Khamenei’s son Mojtaba, is putting his own stamp on the country’s national-security policy amid a confrontation with the U.S. that could last months or even years. In a sweeping overhaul of the government’s top echelon on Sunday and Monday, Iran named seasoned hard-liners to run the country’s security policies and institutions of repression. WSJ
• Persian Gulf energy producers are concluding that Iran’s control over the Strait of Hormuz will become permanent, disrupting their oil and gas exports and global energy supplies indefinitely. The problem is they worry the alternative—going back to war—would be worse. WSJ
• There was a maritime incident reported in Bab al-Mandab, with Fars reporting that a Saudi ship was reportedly targeted by the Yemeni army. In other news, 
• Yemeni sources said a second missile targeted a ship while the coast guard was rescuing its crew in Bab al-Mandab.
• The UKMTO has received a report of an incident involving a tanker and military forces in the Gulf of Oman.
• Iranian Foreign Minister Araghchi said the world should hold the US accountable for the Hormuz block, while Hormuz security requires end to US aggression, according to Fars News Agency.
• Yemen military source said government forces launched a concentrated attack on militia positions in Harib, Shabwa, according to Al Arabiya.
• Explosions reported in Yemen's Marib, according to SNN.
• Lebanon and Israel are expected to hold the next round of talks in early September, according to Al-Arabiya.
• Israeli forces conducted new strikes in southern Lebanon, according to SNN.

Tyler Durden Wed, 08/12/2026 - 05:15

British Police Unit Flags Over 100 Social Media Posts For Arrest Amid Immigration Backlash

Via American Greatness,

A specialist British police unit created to track online sentiment has referred more than 100 social media posts to local forces for potential arrest, according to data obtained through Freedom of Information requests and reported by The Times of London.

The National Internet Intelligence Investigations unit notified local police about 106 posts, with 50 of those flagged in June alone, in the aftermath of disclosures surrounding the murder of teenager Henry Nowak.

Nowak was stabbed to death by Vikrum Digwa, and his pleas for help were reportedly ignored by officers who doubted the dying student after his killer claimed to be a victim of racism.

Footage of Nowak’s final moments spread widely online and triggered protests and riots in Southampton, fueling accusations of two-tier policing among critics who argued Nowak was treated differently from his killer because he was white.

The task force traces its origins to the Southport riots, which broke out after Axel Rudakubana, a teenager of Rwandan heritage, murdered three young girls and wounded 10 others in a mass stabbing at a Taylor Swift-themed dance event.

Rather than reckon with the role immigration policy played in the tragedy, the Labour government under then-Prime Minister Sir Keir Starmer labeled the public backlash “far-right” and launched a sweeping crackdown, arresting more than 1,876 people, including some individuals whose only offense was a social media post.

Police chiefs declined to detail the specific posts flagged by the unit, saying disclosure could jeopardize ongoing investigations.

They nonetheless acknowledged the initiative remains “still in the early stages of being established,” a signal that the volume of flagged posts is likely to grow.

Britain already ranks among the most aggressive Western nations in policing online speech. 

The Times of London has estimated that police made 33 arrests per day in 2023 over allegedly offensive online content, totaling 12,183 arrests for the year, all before this new task force reached full operation.

The National Police Coordination Centre, the same body that oversaw Britain’s policing response during COVID-19 lockdowns, defended the unit’s mission, saying it “supports policing’s understanding of protest-related activity in the online environment by developing a broader picture of emerging, potential risks.”

The centre added: “Looking across force boundaries enables the identification of issues that may not be evident from information held within individual force areas alone.”

The online monitoring effort follows a pattern set during the pandemic, when the British government deployed the Army’s 77 Brigade, a specialist “information warfare” unit, to track and influence public opinion, including monitoring journalists and politicians critical of lockdown policy.

Tyler Durden Wed, 08/12/2026 - 05:00

Alleged International Crime Boss Daniel Kinahan Extradited To Ireland Following Dubai Arrest

Alleged Irish mob boss Daniel Kinahan was charged in Dublin, Ireland on August 9th with directing a criminal organization. 

Alleged Irish crime gang boss Daniel Kinahan, after being extradited from the United Arab Emirates, leaves the Special Criminal Court in Dublin, Ireland, on Aug. 9, 2026. Natalia Campos/Reuters

The 49-year-old Kinahan was arrested in April in Dubai, where he had been residing for several years, following an extradition request from the Republic of Ireland. He was flown to a military base on the outskirts of Dublin after being handed over to Irish authorities in Dubai earlier Sunday - after which he was taken directly to the court for an unusual Sunday night sitting. Kinahan was remanded into custody afterward. 

After acknowledging that he he understood the charges, and one of the three presiding judges told him a bail application could only be made through the High Court, Kinahan said: "I think we know I won't be getting bail, but thank you so much for explaining."

He told the court he had not had time to arrange legal representation while being held in custody in Dubai, and believed a relative was arranging counsel. Kinahan will remain in custody and will have to appear again, either in person or via video link, on Oct. 5.

In Ireland, the Special Criminal Court hears cases involving terrorism and organized crime, which are heard by judges rather than a jury.

Justin Kelly, the commissioner of An Garda Síochána, Ireland's police force, said Kinahan was handed over in Dubai as a result of an arrest warrant issued by the Irish courts, and was extradited following a judicial process in the UAE, the Epoch Times reports.

"This arrest shows our determination, along with our international policing partners including Dubai Police, to target transnational organized crime groups," Kelly said. "As the matter will be before the Courts, An Garda Síochána will not be making any further comment."

As The Epoch Times notes further, In April 2022, Kinahan was named by the United States as one of three leaders of the Kinahan Organized Crime Group (KOCG) and a $5 million reward was offered for information leading to his arrest.

At the time, then-U.S. Under Secretary for Terrorism and Financial Intelligence Brian E. Nelson said, "The Kinahan Organized Crime Group smuggles deadly narcotics, including cocaine, to Europe, and is a threat to the entire licit economy through its role in international money laundering."

In April 2023, Kinahan's alleged rival, Gerry "The Monk" Hutch, was acquitted at the Special Criminal Court of trying to kill Kinahan.

The prosecution claimed that on Feb. 5, 2016, Hutch tried to kill Kinahan at a weigh-in for a boxing event at the Regency Hotel in Dublin, but he slipped away, and an associate, David Byrne, 33, was fatally shot instead.

The Regency Hotel shooting was allegedly carried out in revenge for the murder of Hutch's nephew, Gary Hutch, in Spain in September 2015 by the Kinahan gang.

After the Regency Hotel shooting, another 18 people were murdered in a series of tit-for-tat killings over the next three years. Hutch was arrested in Spain in August 2021, and extradited to Ireland, but after being acquitted, he returned to Spain.

Kinahan gave an interview with British podcaster James English last week, denying the allegations against him and saying everything was "in God's hands."

"I always wanted to do good things and big things," Kinahan said. "Obviously life didn't go that way for me, what with all the stuff in the media and what people think of me and the perception they have. But I'm still so proud to be from Ireland."

In March 2022, Thomas Kavanagh, who Britain's National Crime Agency said acted as the figurehead of the Kinahan organization in the UK, was jailed for 21 years after being convicted of smuggling large quantities of cocaine and cannabis into Britain. Two other Irishmen, described as associates, Gary Vickery and Daniel Canning, were also jailed.

The National Crime Agency's deputy director of investigations, Matt Horne, said at the time that the cartel brought millions of pounds worth of drugs into Britain.

"Kavanagh was a high ranking member of the Kinahan cartel, an organized crime group synonymous with acts of violence," Horne said.

Wanted posters showing the U.S. government's $5 million reward for the arrest of Daniel Kinahan (C); his father, Christopher Kinahan (R); and his brother, Christopher Kinahan Jr.(L) are displayed at Dublin City Hall on April 12, 2022. Niall Carson/PA Tyler Durden Wed, 08/12/2026 - 04:15

UK Regulators To Prepare Tokenized-Gold Framework: Report

Authored by Zoltan Vardai via CoinTelegraph.com,

The UK’s Financial Conduct Authority (FCA) has reportedly held talks with banks and other industry participants over potential rules for tokenized gold.

The FCA has also sought feedback on the use of tokenized gold as collateral in wholesale markets, people familiar with the matter told the Financial Times.

The regulator is reportedly preparing to outline plans for new regulatory standards for tokenized gold.

Cointelegraph has approached the FCA for comment on the matter.

London is the world’s largest over-the-counter gold trading hub, accounting for about 70% of global notional gold trading volume, according to the World Gold Council.

“There’s huge competitive pressure from Shanghai and Hong Kong... Shanghai wants to become the wholesale hub for the gold market,” one of the people said, adding that if London does not modernize its gold market through measures including tokenization, other venues may take the lead.

The talks come amid a broader UK push to expand tokenized financial markets.

A government-backed industry task force said in July that tokenization could add as much as 33 billion British pounds ($44 billion) to the UK’s annual economic output by 2035.

The roadmap also calls for the UK’s first tokenized government bond by early 2027 and seeks to make tokenized securities usable for trading, settlement and as collateral.

The World Gold Council said this year that digital gold would mean ownership “would no longer be constrained by bar sizes, vault locations or fragmented settlement mechanisms”.

Tyler Durden Wed, 08/12/2026 - 03:30