Sunday, July 2, 2017

SUNDAY 7/2/17

Arab states such as Saudi Arabia have imposed an embargo on Qatar and the situation becomes more serious. The Saudi’s want Qatar to become more proactive in fighting terrorism. Qatar says the neighboring Arab states instead want to curtail their sovereignty. Saudi Arabia, UAE, Egypt and Bahrain plan to impose further sanctions unless Qatar complies with the plan to rid terrorism from its country.

US Secretary of State Tillerson is on the phone trying to help broker an agreement. The Qatar stock market, that only trades 42 stocks, loses more than -3% with 41 tickers trading lower. The Qatar stock market has dropped -12% since Saudi Arabia and the other nations began sanctions one month ago. The Middle East is remains a powder keg.

A US Navy destroyer cruises near disputed islands in the South China Sea. The United States is sending a loud and clear signal to China that their communist claims to territorial waters are not recognized. China continues its military aggression and takeover of islands in the South China Sea that began under former President Obama’s watch. Obama was far too timid and weak on foreign policy during his eight years in office allowing China to use him as a doormat.

President Trump speaks with Chinese President Xi and Japan PM Abe via telephone. The North Korea situation is the major topic of discussion. In addition, Xi and Trump discuss the escalating trouble in the South China Sea where the Chinese communists are occupying and building military bases on disputed islands.

The drama with the US healthcare bill continues. President Trump sends mixed signals saying that the republican-led Senate and House should repeal Obamacare and replace it later. The whole reason the House and currently the Senate remain in turmoil over finding a workable health insurance bill is because Trump said he wanted the ACA (Affordable Care Act; Obamacare) repealed and replaced at the same time. In fact, the orange-headed showman had bragged that he would repeal and replace the ACA on day one of his presidency and that it would be a very easy task to accomplish.

Fast forward a few months and Trump now says the process to develop a new healthcare law is very complex and difficult. It appears that the president makes no effort to understand what exactly is in the bill. The republicans committed a massive error that will likely hurt the party going forward. For eight years, the republican leadership bragged that an alternative to Obamacare was ready to go as soon as their party gained control of government.

President Trump wins the election and both houses (the Senate and House) gain republican majorities but the conservatives drop the ball admitting that they had no healthcare plan ready to go. The healthcare quagmire is delaying progress on Trump’s campaign promises including tax reform, reducing regulations and providing huge infrastructure spending.

President Trump creates more drama by posting a 10-year old video of when he appeared at a wrestling match in a mock fight. The CNN cable news logo is placed on top of the other person’s face so the video clip displays Trump beating up on CNN. The cable news outlet takes offense to the latest childish tweet and says the president is threatening CNN with violence.

Trump’s handlers say the video is meant as a harmless joke. It is ridiculous that the president and the media occupy their time with such juvenile baby games. Americans have lost patience with the incompetence in Washington, DC. If the healthcare bill and other items on Trump’s agenda are further delayed, many Americans will blame the president for spending time on adolescent games on Twitter rather than carrying out the people’s business. Trump needs to set aside the cartoons and insults and get to work.

BAC analyst Stephen Suttmeier proclaims that the SPX will print above 2500 this month or higher. Suttmeier says the SPX may rise to as much as 2550 in July.

The trading day ends in Qatar with the key index finishing down -2.3%. Qatar will not meet tomorrow’s deadline for providing a plan to address terrorism. Saudi Arabia and other Arab neighbors may announce more sanctions against Qatar.

Tokyo assembly elections occur this weekend and Prime Minister Abe’s LDP party is dealt a negative blow losing seats.

Euro 1.1421. Dollar/yen 112.35. Pound 1.3021. Canadian dollar 1.2964. WTIC oil 46.33. Brent oil 48.77. Natural gas 3.04. Gold 1241. Silver 16.63. Copper 2.71.

US Treasury yields are; 2-year 1.39%, 5-year 1.89%, 10-year 2.30%, 30-year 2.83%. The 2-10 spread is 91 bips. The spread dropped under 78 bips early last week and then the yield curve steepened to 91 bips after central bankers talked more hawkishly than expected. German bun 0.47% (the bund was at 0.26% this time last week). Japan 10-year yield 0.08%. UK gilt 1.26%. France 10-year yield 0.82%.

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