Frank Kelly’s Geopolitical Week Ahead | August 11, 2024

It is supposed to be a quiet August, with much of the world on holiday. But, while there is not much officially scheduled this coming week, three potentially seismic events are happening this week which are not on the calendar.

1. First, Israel (and the rest of the world) continues to wait and watch for an almost assured retaliatory strike from Iran following Israel’s killing of senior Hezbollah leader, Fuad Shukr, in Lebanon and then Hamas’ political leader, Ismail Hanihey, who was visiting Tehran for the inauguration of Iran’s new President, Masoud Pezeshkian.  Our view is Iran has few options on how to attack Israel without risking causing an immediate and massive escalation potentially leading to an all-out war.  In the midst of all this, negotiations being brokered by Qatar and other nations between Israel and Hamas for a ceasefire and release of the remaining Israeli and U.S. hostages appear to be closer than ever before to reaching a deal.  A new round of talks is expected this Thursday, either in Doha or Egypt.

2. Second, Venezuelan President Nicholás Maduro is expected to ramp up further his mass arrests of anyone who voted against him and opposes his regime in the face of the recent fraudulent election he carried out last month. Venezuela accounts for more than 17 percent of the known existing oil reserves globally. But the ongoing crisis caused by Maduro’s increasingly dictatorial regime and resulting economic catastrophe has caused one of the largest displacement crises currently in the world, with close to 8 million Venezuelans fleeing the country.
   
   And in the midst of all this comes news that the U.S. has held secret talks with Maduro offering him amnesty if he cedes power – offering full pardons for Maduro and his top henchmen who are currently under multiple U.S. Justice Department indictments (for Maduro, the fear is ending up like former Panamanian strongman Manuel Noriega who was captured when U.S. military forces invaded the country and arrested him. Noriega ended up dying in a Panamanian prison in 2017 after serving years in a U.S. “Supermax” prison in Colorado). Maduro is unlikely to take a deal, instead seeking stronger relations with Russia, Iran, Cuba, and other rogue regimes for support. 

3. Finally, Ukraine’s audacious military incursion into Russia’s Kursk region has shocked Russia’s leadership and population, showing how large areas of southwestern parts of Russia were left vulnerable and undefended. Russian President Vladimir Putin has declared “a federal-level emergency” and ordered a rush of reinforcements. It will be quite interesting to see how this changes the dynamics of the war but at the very least, it has doubtless left a lot of Russian’s questioning Putin’s leadership.

On the global radar screen this week

• Markets are gearing up for the Fed’s Jackson Hole Symposium (August 22-24).
• There are no major central bank speeches this coming week.
• Markets are waiting to see the release of the S. July CPI figures and retail sales numbers this week.
• Markets are also watching for China’s July PMIs and Japan’s GDP figure for the second quarter and July PPI print.
• Beijing will publish a 70-city housing price data report, likely to provide further insight into the struggling real estate market.
• India reports inflation data and trade balance numbers for July.

In Europe, the U.K. has several important data releases this week: first, employment numbers (Tuesday), then the inflation print on Wednesday, and the monthly GDP figure on Thursday. These numbers will be the headline data releases this week. Germany’s ZEW survey comes out this week, too, likely to give further evidence of continued economic weakness.