Things you need to know
- Mexico trade war continues to dominate global action
- New Chinese rhetoric also turns up the heat
- Trump visits the UK
- Indexes break long term support and now look for stability – VIX spikes.
Stocks got slammed on Friday – closing on the lows setting us up for a further test lower on Monday morning……..the latest news that Donny is going to start to impose tariffs on Mexico – to try and force them to the table to discuss the onslaught of immigrants thru Mexico to the US from neighboring Latin American nations set the tone early on. The late Thursday evening announcement (via Twitter) sent US futures into a tailspin overnight and then sent US stocks into a tailspin once trading began on Friday morning. By the end of the day – the Dow had given up 354 pts or 1.4%, the S&P lost over 36 pts or 1.32%, the Nasdaq was down 114 pts or 1.5%, the Russell 2000 lost 20 pts or 1.35% and the Transports gave up 188 pts or 1.9%. See tweet below –
“On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP. The Tariff will gradually increase until the Illegal Immigration problem is remedied,..”
And so it is – Donny is going to address the immigration problem with or without congress’s help – it was one of his signature campaign promises and now – after being poked by the ultra-right on a conservative radio show – he has had it with the lack of movement by Congress and the ‘turn your back’ attitude that Mexico appears to have. Going against his advisors – Lighthizer, Mnuchin and even his son-in-law Jared Kushner – Donny announced the imposition of a new set of tariffs on our 3rd largest trading partner behind China and Canada.
And as you can imagine – this sent global mkts into a tizzy…as more drama over trade and the damage it is and could do to the US and global economy builds…..As if it isn’t enough that we are in this ongoing battle with China – who has vowed to fight to the end – we now have to consider a new trade battle right on our southern border. So the next question is who knew of this announcement during the day on Thursday – or even Wednesday evening – I mean when did this discussion take place and who was in the room? It is clear that an announcement like this – creates both noise and drama for global investors and that the mkts would not respond positively – and you could see the mkts reaction Thursday evening – the moment ‘the Tweet’ hit the tape….investors and mkts were caught by surprise – and as we have discussed so many times – the last thing either like is a surprise – and so THAT was the catalyst for the selloff on Friday and was the conversation all weekend and will be the conversation again today as investors had all weekend to consider the implications.
Look, there are many who will applaud this move and there are others who will not – One way or the other – he has managed to get everyone’s attention on this issue now – like it or not – he changed the narrative – (or has he?) – for the day – taking the focus off of him, Mueller, The Russians and impeachment – causing new noise to roil the mkts… I was on CNBC – Squawk in the Street on Friday with Michelle Caruso-Cabrera who had great insight into the Mexican dilemma – and one that is very interesting to listen to – and while we disagree with the extent of the potential damage – her insight in invaluable when it comes to the lay of the land across that country – where she points out that while Mexican President Andres Manuel Lopez Obrador acknowledges the issue – there may be little he can do to stop the flow of immigrants thru his country. . See the segment below.
And so – as I pointed out at the top of the note – the action on Friday – and the way they closed ‘em – (on the lows) sets us up for a further test lower this morning….US futures are down again overnight – currently off 10 more pts as this drama continues to unfold. Lots of talk over the weekend on all of the major Sunday talk shows – with both sides making an argument about the latest shot across the bow….. Asian mkts opened lower on Monday and are all under pressure (again) as the worries over trade got an added boost. Chinese manufacturing data from the private survey (Caixin/Markit) – was reported over-night and was better than expected –The May reading was 50.2 (same as April) but better than the expected 50 – recall that last week the ‘official’ China read was 49.4 -both below the April read of 50.1 and below the expectation of 49.9 – which set up another conversation that the ongoing trade war is taking a toll on China – (remember a read below 50 suggests contraction in the economy). And while that latest data point is positive – the focus is NOT on the fundamentals right now – and so that gets lost in the conversation.
European mkts opened lower as the new trade war between US and Mexico gets added to the agenda. The ongoing Chinese ‘trade war’ continues to put pressure on the outlook for the global economy and the rhetoric and tone of the conversation takes a new turn. The conversation (which causes lots of noise) now has gone from just trade with China to conversations about ‘contested territories in the South China Sea and China’s role in that part of the world. US Defense Secretary Patty Shanahan – chiming in – saying that the ‘states would no longer tiptoe around Chinese behavior in Asia’ causing China’s Defense Minister Wei Fenghe to say that ‘the US couldn’t interfere in security disputes concerning the South China Sea and Taiwan’ So all of this is causing a risk off mentality for global mkts. In addition – Donny and Melania have landed in the UK and are on a 3 day state visit – which in itself is causing angst among the Brits as opposition leader Jeremy Corbin criticized Trump for ‘unacceptable interference’ in UK politics after Donny appeared to be supportive of Boris Johnson as the next Prime Minister. (Recall that Boris is the guy that looks like Dr. Emmet Brown from Back to the Future)
US futures are under pressure and tested as low as 2733 before finding some support. Dow futures are down by 183 pts, the S&P off by 18 pts, the Nasdaq is lower by 58 and the Russell 2000 is off by 10. Do not be surprised to see the mkt (S&P) test somewhere between 2700/2725 before it finds stability – and that only depends upon the tone of the headlines – yet to come….A move to that level still only represents a 7.5% move lower off the highs – still well within what is known as ‘normal trading range’. For the year – the indexes are still positive – with the Dow up 6.4%, the S&P up 9.8%, the Nasdaq up 12.3% and the Russel 2000 up 8.6%. Eco data today includes Markit PMI – exp of 50.6, ISM Manf of 53 (both Expansionary) and Construction Spending of 0.4% m/m. On Wednesday – we will get ADP Employment report – exp of 188k new jobs and on Friday we get the official NFP report and that is expected to show an increase of 185k new jobs with the unemployment rate holding steady at 3.6%. Avg hrly earnings growth of 0.3% m/m and 3.2% y/y.
Oil – got smashed last week – breaking all levels of trendline support closing down 5% on Friday as the talk of a new trade war put pressure on oil and this morning oil is off another 1% as they try to tell us that demand is waning as the fear of a global slowdown weighs on investors minds. Now again- I would say that is all baloney…..yes – talk of a slowdown is real, but demand is not waning (IMO) – oil is under pressure because all of that fear talk become self-fulfilling – causing tech levels to be tested and when they fail – the automated black boxes (robots) send sell orders to the mkt as they respond to those technical breaks. Buyers know this and back off – leaving a void in liquidity – causing the mkts to come under pressure much faster. Oil is back to January prices and could trade to $50 before seeing any stability. – The December lows of $45 barrel is within sight – and unless OPEC and Russia announce new production cuts – the path of least resistance is lower in light of all the trade talk.
I will be in Washington DC on Wednesday evening attending the launch of the Headstrong Project in DC – This is sure to be a huge success. Many of you know my own WTC 911 story – and it is for this reason that this organization means so much to me. The Headstrong Project – is a veteran’s organization that treats returning 911 combat veterans that suffer from the hidden wounds of war – PTS. As an advisory board member and the evening’s auctioneer – I cannot tell you how great this organization is. I welcome you to join us for this launch. You can click on the link below to learn more.
It is sure to be an interesting week –
Take good care.
Pasta Fresca with Grilled shrimp –
This is a great summer time dish and easy to make. It can be a main course or a side dish to a summer BBQ. You can eat it hot, cold or room temp – it is very versatile and looks great when presented on a striking white dish.
You will need fresh garden tomatoes, basil, garlic, red onion, fresh Mozzarella, grated Parmegiana or Loccatelli Romano cheese…..and a pasta of your choice….Penne Rigate, Farfalle, Mostaciolli Rigate, …. 1 lb of medium cleaned and deveined shrimp. (This is optional – if you don’t like shrimp then just eliminate)
Essentially – you are making a summer tomato salad and then putting it over pasta….so Dice the tomatoes, slice the red onion, slice the garlic, add chopped basil, chunks of fresh Mozz, s&p, “splash” of water, and a couple turns of olive oil. (you can also add a bit of Oregano – but not too much) try it first without….
Prepare and let it sit out and marinate. It will create its own juice the longer it sits. You want it to be room temp when you mix it with the pasta. If you make it the day before then remove from fridge and let warm up for about 30 mins…..
Light the grill and let it get nice and hot – then turn heat to med at the same time bring a pot of salted water to a rolling boil. Set the table outside, turn on some relaxing music to set the mood, light the candles and enjoy the setting sun on a great summer eve. Never rush – enjoy the moment
Season the shrimp with s&p, and chopped garlic, then massage with a bit of olive oil allow to marinate for 10 mins. Using a skewer – place the shrimp on the grill and cook until pink – they will cook fast – remove and set aside.
Add pasta to the boiling water and cook for 8 / 10 mins….or until aldente. Strain – always reserving a mugful of water…..return the pasta to the pot – add back ¼ mug of water to re-moisten.
Toss – wait a min or two so that the pasta absorbs the water…you do not want a puddle of water in the bottom of the pan. Now add the tomato salad, and the grilled shrimp and 2 or 3 handfuls of grated cheese and toss well. Serve immediately.
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