Trump bows to Putin Presented by U.S. Bank

TRUMP BOWS TO PUTIN — Not much more for MM to add to what’s already been said about President Trump’s stunning performance in Helsinki in which he sided with Russian President Vladimir Putin over America’s own law enforcement and intelligence agencies which have exhaustively documented Russia’s extensive efforts to undermine American democracy. He repeatedly painted the United States and Russia as morally equivalent.

Republicans mostly sprinted away from Trump’s performance with notably fiery condemnations coming from Mitt Romney, Senator John McCain and even staunch Trump ally Newt Gingrich. Few defenders could be found. And why would there be any? The performance was indefensible. Just a couple of highlights for posterity.

Trump on Putin: “I called him a competitor and a good competitor he is. I think the word competitor is a compliment.”

Asked if he faults Russia for attacking American democracy: “I hold both countries responsible. I think the United States has been foolish. I think we have all been foolish. … I think we're all to blame. … I think that the [Mueller] probe is a disaster for our country.

Trump asked if he believes Putin or U.S. intelligence agencies over Russian hacking: “You have groups that are wondering why the FBI never took the server, why haven't they taken the server. … My people came to me, Dan Coats came to me and some others and said they think it's Russia. I have President Putin, he just said it's not Russia. I will say this. I don't see any reason why it would be, but I really do want to see the server.

“I have great confidence in my intelligence people, but I will tell you that President Putin was extremely strong and powerful in his denial today.”

MARKETS STILL DON’T CARE — Markets again did not react in any significant way to Trump’s embrace of Putin over his own country, presumably because investors see no immediate threat to the American economy or corporate profits. And indeed data continue to come in strong with retail sales up 0.5 percent in June and the Empire State manufacturing survey also continuing to show solid growth. GDP growth in the second quarter could come in over 4 percent. All of this, for now, has Wall Street pretty much ignoring The Trump Show.

BUT ARE MARKETS REALLY THAT STRONG? — The Dow is now up just slightly on the year. As Josh Brown (aka The Reformed Broker) notes here, the S&P 500 is up 2.6 percent this year but “technology stocks have contributed approximately all 2.6% of it. Just a few large tech stocks in particular.” The vast bulk of the gains came from the FAANG group: Facebook, Apple, Amazon, Netflix and Google (AKA Alphabet). Without those stocks, total return on the S&P would -0.7 percent.

So the question now is whether market resilience to Trump’s behavior – on trade and on the international stage – is sustainable. Or whether trade wars and future Mueller probe revelations could finally crack through Wall Street’s “we don’t care because everything is awesome” attitude.

ROOM TO DROP — Via Morgan Stanley’s Michael Wilson: “With the S&P 500 near the top of the resistance level that has held since February (2,800 / 2,825), the team thinks the risk-reward skews lower. … For them, the technical evidence combined with the risks of trade escalation, margin pressures, relative valuations and crowding is enough.”

REACTION ROUND UP — POLITICO’s Eleanor Mueller has the round up of condemnations of Trump’s performance from both sides of the political aisle.

FIRST LOOK: TRADE WAR DAMAGE AHEAD — Scott Minerd, global chief investment officer at Guggenheim Investments, in a new piece: “The idea that the United States can win a trade war is pure foolishness. Tariffs are a form of taxation that ultimately is paid not by the exporter, but by the U.S. consumer. If you want to see who the real victims of tariffs are, go look in the mirror. Most analysis of the trade situation does not reflect this hard truth. …

“If tariffs are imposed on Chinese electronics or European automobiles, which represent a much larger sector of the economy than washing machines, that won’t just drive up the prices of computers and cars that are being imported into the country, it will drive up prices for those products across the board just as it did with washing machines. If Chinese machinery coming into the United States is slapped with a 25 percent tariff, then all machinery prices will rise.”

PRO SUMMIT TODAY! — Hope to see some readers at the POLITICO Pro Summit this morning at the Renaissance Hotel in DC. The full agenda is here. Live stream will be here. Join the conversation under the hashtag #ProSummit. MM is hosting a panel at 3:10 p.m. with Harvard’s Ken Rogoff, Rep. Gwen Moore (D-Wisc.), Better Markets’ Dennis Kelleher and Bank Policy Institute’s Jeremy Newell.

A message from U.S. Bank Banks must do more and better to reverse systemic inequality. At U.S. Bank, that starts by committing $116 million to address social and economic inequities and elevating Black voices and Black-owned businesses. Because we’re small enough to care – and big enough to make a difference. Learn more.

POWELL PREP — Fed Chairman Jay Powell's testifies this morning before Senate Banking. He’s not likely to make a ton of news. KBW's Brian Gardner: “We expect much of the questioning from lawmakers will be about banking regulation and trade policy with only limited questions on monetary policy. As for his prepared remarks and comments on the economy and monetary policy, we expect that Powell will stick to his remarks from his June press conference.”

HOUSE HEARING PREP — Cowen’s Jaret Seiberg on Tuesday’s House Financial Services Committee hearing on bank capital: “Our expectation is that this hearing will include a pitch to recalibrate the capital regime so the biggest banks can get relief. Our view is that the biggest banks will get some capital relief at the margins, but we still question if the political environment is conducive to more substantive changes”

Fed Chair Jay Powell hits the Hill on Tuesday. | Alex Wong/Getty Images

GOOD TUESDAY MORNING — Email me on [email protected] and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on [email protected] and follow her on Twitter @AubreeEWeaver.

JUST RELEASED: View the latest POLITICO/AARP poll to better understand Arizona voters over 50, a voting bloc poised to shape the midterm election outcome. Get up to speed on priority issues for Hispanic voters age 50+, who will help determine whether Arizona turns blue or stays red.

What role will Hispanic voters over 50 play in Arizona this fall? Read POLITICO Magazine's new series "The Deciders" which focuses on this powerful voting bloc that could be the determining factor in turning Arizona blue.

DRIVING THE DAY — Powell testifies before Senate Banking at 10:00 a.m. … House Financial Services subcommittee holds a hearing on bank capital at 2:00 p.m. … Industrial Production at 9:15 a.m. expected to rise 0.5 percent …

BANKING IN TRUMP’S WORLD — The Street’s Bradley Keoun: It's Trump's schizophrenic economy. Bankers are just living in it. A trio of earnings reports on Friday from U.S. banking behemoths JPMorgan Chase, Citigroup and Wells Fargo & Co. showed just how tricky the finance business has become for executives trying to navigate the twists and turns of President Donald Trump's policies, for better or worse.

“Profits are soaring, thanks to the president's steep tax cuts in December. But the big banks' stock prices are down on the year, due to concerns that Trump might start a trade war with China while cozying up to Russian leader Vladimir Putin and alienating traditional military allies in Europe.” Read more.

WYDEN CALLS FOR ROSS PROBE — POLITICO’s Megan Cassella: “The top Democrat on the Senate Finance Committee is calling on the DOJ to investigate Commerce Secretary Wilbur Ross' ‘questionable stock trade’ to determine whether they violated federal law.

“In a letter to Attorney General Jeff Sessions, Sen. Ron Wyden (D-Ore.) highlighted the Office of Government Ethics' determination last week that Ross had committed ethical violations, potentially criminal ones, when he failed to properly report and divest his financial holdings. … Wyden's letter comes a day after Senate Commerce Chairman John Thune wrote to the Commerce Department's Office of Inspector General asking for a second opinion as to whether Ross violated conflict of interest laws” Read more.

S&P 500 DIPS, FANG DOWN — Reuters' Caroline Valetkevitch: "The S&P 500 ended slightly lower on Monday following a drop in oil prices that weighed on energy shares and offset a jump in financials as Bank of America’s results reinforced expectations of a strong U.S. earnings season. … Facebook, Amazon.com and Google parent Alphabet — the other ‘FANG’ stocks — were down more than 1 percent in after-hours trading. The stocks have led the technology and consumer discretionary sectors back to record-high levels in recent days." Read more.

And it was a rough day for Netflix, too — AP's Michael Liedtke: "Netflix is adding subscribers at a slower pace than envisioned, renewing fears that its growth may sputter as the video streaming service tries to fend off fiercer competition. The numbers released Monday mark a rare letdown for a company that has enthralled investors with its ability to consistently top expectations.

"But Netflix missed its target badly in the April-June period, causing its high-flying stock to plummet by about 14 percent to $345.63 in extended trading. The shares had more than doubled before the sell-off. If the stock plunges on the same trajectory during Tuesday’s regular trading session, it will be the steepest drop in nearly four years." Read more.

FOR MARKETS, GROWTH TRUMPS POLITICS — WSJ's Richard Barley: "For fans of high political drama, recent months have been packed with excitement. For markets, not so much. In the battle between economics and politics, faith in growth still has the upper hand for now. Last week alone saw tense meetings at NATO, deepening trade tensions between the U.S. and China, and high-level resignations from the U.K. government over Brexit. Rhetoric ramped up as U.S. President Donald Trump described Germany as “captive to Russia.” Monday, Mr. Trump met Russian President Vladimir Putin against the backdrop of continuing rows about meddling in U.S. elections.

"Brief wobbles aside, however, key markets are sailing on. Last week the MSCI All-Country World index of developed-market stocks gained 1 percent; 10-year U.S. bond yields oscillated in a narrow range around 2.85 percent; the dollar posted a small gain. Even emerging-market equities rallied." Read more.

POWELL PRESENTS A CHARM OFFENSIVE — WSJ's Nick Timiraos and David Harrison: "Five months into his term as Federal Reserve chairman, Jerome Powell is investing considerable time and energy on Capitol Hill. Mr. Powell, who heads to Congress on Tuesday to begin two days of testimony on the economy, has met individually with 18 lawmakers — 10 Republicans and eight Democrats — during his first four months as chairman, according to his public calendar. He also had eight calls with lawmakers, equally split between Republicans and Democrats.

"By contrast, former Fed Chairwoman Janet Yellen met with just three lawmakers — two Democrats and one Republican — during her first four months as the central bank’s leader. She spoke with four Democrats by phone. 'As far as meeting with Congress is concerned, I’m going to wear the carpets of Capitol Hill out by walking those halls and meeting with members,' Mr. Powell said in a radio interview on the Marketplace program last week. 'I feel like that’s a really important thing that the chair can do.'" Read more.

UBER'S BAD NEWS RUN RETURNS — NYT's Jack Nicas: "Federal officials are investigating allegations that Uber discriminated against women in hiring and pay, another federal inquiry into a company that has been rocked by scandals over its workplace culture and other issues.

"The Equal Employment Opportunity Commission, which polices work force discrimination, began investigating Uber last August, according to two people familiar with the inquiry who declined to be identified because they were not authorized to discuss an active investigation. The commission is examining whether Uber systematically paid women less than men and discriminated against women in the hiring process, among other matters, one of the people said. The Wall Street Journal earlier reported the investigation." Read more.

IMF PREDICTS 3.9 PERCENT GROWTH — AP's Paul Wiseman: "The International Monetary Fund is keeping its forecast for global economic growth unchanged at 3.9 percent this year despite worries about rising trade tensions and higher oil prices. But the lending agency is downgrading the outlook for Europe and Japan.

"The IMF now predicts that the economy of the 19-country eurozone will grow 2.2 percent in 2018, down from the 2.4 percent it forecast in April. The fund expects the Japanese economy to expand 1 percent this year, downgrading its 1.2 percent April forecast. The IMF still expects tax cuts to lift U.S. economic growth to 2.9 percent this year, up from 2.3 percent in 2017." Read more.

But it wasn't all sunshine — Bloomberg's Liz McCormick and Lu Wang: "A growing chorus of observers is saying that financial markets are too sanguine about the threat that a U.S.-instigated trade war poses to global output and asset values.

“The [IMF] joined the fray Monday, echoing warnings from investors including Larry Fink that trade friction could upend the current market-friendly backdrop of low volatility in equities and rates, and crimp economic growth. For Paul Tudor Jones, the list of worries should also include the specter of higher borrowing costs and America’s expanding deficits. Read more.

BLACKROCK CEO WARNS ON TRADE WAR — NYT's Landon Thomas Jr.: "The chief executive of BlackRock, Laurence D. Fink, warned on Monday that a sustained trade war could cause markets to tumble. During a discussion of BlackRock’s second-quarter earnings, Mr. Fink said that investors in both Europe and the United States were either withdrawing money from the markets or choosing not to increase their positions substantially.

"'If we do see these tariff increases come to pass and if they are sustained over time, I think it would be proper to recalibrate forecasts of G.D.P. and earnings growth,' he said. 'And then the markets would probably fall.' Mr. Fink pointed out that the tax cuts enacted last year could spur increased economic growth and compensate for the tariffs’ negative impact. 'We have one of the fastest-growing economies in recent years and really strong earnings growth,' he said." Read more.

FED'S KASHKARI CALLS FOR RATE HIKE PAUSE — Reuters' Ann Saphir: "The narrowing gap between yields on long-term and short-term Treasury bonds to little more than the equivalent of one rate hike from the Federal Reserve has helped sour at least one U.S. central banker on any further interest rates increases. Minneapolis Federal Reserve Bank President Neel Kashkari, who does not vote this year on Fed policy but takes part in the U.S. central bank's regular discussion of interest-rate policy, said Monday that the flat yield curve means interest rates are close to neutral.

"'This suggests that there is little reason to raise rates much further, invert the yield curve, put the brakes on the economy and risk that it does, in fact, trigger a recession,' he said in a blog post. 'If inflation expectations or real growth prospects pick up, the Fed can always raise rates then.'" Read more.

BEZOS THE RICHEST — Via Bloomberg: Amazon CEO Jeff Bezos' net worth broke $150 billion according to the Bloomberg Billionaires Index, making him the richest person in modern history. He's worth $55 billion more than Bill Gates.

PUERTO RICO HEARING SET — Via POLITICO’s Colin Wilhelm: House Natural Resources will hold a hearing on Puerto Rico’s electrical grid on July 25. The hearing is on the grid’s recovery and possible improvements to make it more efficient and resilient to future hurricanes. On top of the devastation caused by Hurricane Maria last year, Puerto Rico’s electric utility owes bondholders $9 billion and most of its leadership depart last week after clashes with Gov. Ricardo Rosselló over executive compensation and political control of the utility, which is quasi-governmental.

COINBASE GETS LICENSED — Also from Colin: “Coinbase, the largest virtual currency exchange in the U.S., says it has acquired broker-dealer, alternative trading system and registered investment adviser licenses.

“The exchange will obtain those licenses through the purchase of three firms already registered with the Securities and Exchange Commission and FINRA, according to a Coinbase spokesperson.” Read more.

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