T minus 0...and the US Tries to RE-engage China

T MINUS 0…….(no explosion)!  

So, what do Pork, Cranberries, Bourbon, Harley Davidsons, Peanut Butter, and Orange Juice have in common this morning?  Come on – think hard……Bingo – Tariffs!  And today the EU (European Union) is imposing tariffs on about $3.4 bil worth of US exports to the EU….
 
Cecilia Malmstrom – EU Trade Chief – put it this way….
 
"We are left with no other choice.  The rules of international trade, which we have developed over the years hand in hand with our American partners, cannot be violated without a reaction from our side.  Needless to say, if the U.S. removes its tariffs, our measures will also be removed."”
 
Now recall that Donny imposed tariffs of 25% on steel imports and 10% on imported aluminum imports from the EU on June 1….so the trade war that ‘isn’t’ is now unfolding across the global stage….and the beat goes on……
 
“Do you ever wonder That to win, somebody's got to lose.  I might as well get over the blues
Just like fishing in the ocean, there’ll always be someone new.  You did me wrong cause I've been through stormy weather” – The Whispers
 
And this has Stevey Mnuchin – Treasury Secretary in a tizzy……as he tries really hard to re-start talks with his Chinese counterpart on US tariffs that are about to be imposed on China on July 6^th….and this is causing some anger within the WH…. why?  Because some of the residents (Ross, Lightizer and Navarro) prefer that we take a HARD line with Xi Xi and push for structural changes in China’s policies…. While Stevey (Mnuchin) and Larry (Kudlow) are much more interested in working with our Chinese counterparts to lower the bilateral trade deficit………
 
Now word has it that the National Economic Council has reached out to both sides as they try to gauge what the chances are for ‘high-level’ discussion in the next two weeks……as some US officials are looking for a way out of the potential mess that will be created if these $30 bil of Chinese products get hit with the $50 bil of tariffs……triggering a trade war between the world’s two largest economies……now to be honest – chances are slim – Donny is not backing down – but I suppose there is always an 11^th hour back room deal that can happen…..
 
Recall that China responded to the US tariffs with counter threats on the like number of tariffs on US products – which caused Donny to create a second list of an additional $200 bil of Chinese products that he would then impost a 10% tariff on…. Are you following me? 
 
Then Wilbur (Ross) gets on Bloomberg TV saying that
 
 “US trade partners are spoiled and it is game over…. If it really does get to be a big war, we have many more bullets than any of these other countries”
 
Let’s just put this in perspective…Wilbur is 80 yrs old, He is basically on the 18^th hole…. Chances are 50/50 AT BEST that he makes it to the pin – and now he wants to start this trade war with China?  He wants to hold the line, he is not interested in saying “Let’s Make a Deal?” (Think Monty Hall – I’ll give you $100 if you have a toe nail clipper in your bag!)
 
So yesterday – the mkt got whacked a bit…. the 8^th down day for the Dow -0.8% …. while the S&P and Nasdaq and Russell all ended the day lower -0.6%, 0/8% and -1% respectively….…. Look – uncertainty and chaos in trade policy will have consequences….and the mkts will react to that chaos in different ways – depending on who is doing the talking….and yesterday – the mkts did not like what they heard….
 
Industry specific headlines caused investors/traders to re-think stock prices…. The Supreme Court ruled that states have the right to force online retailers to collect state taxes on items sold…. causing pressure in that sector – AMZN -1.3%, BABA – 1.9%, EBAY – 3%, MELI – 3%,  US Oil companies have apparently cut back on capital spending – no matter that prices have risen some 43% in the past year…..and this is raising some concerns that this move could threaten the long term supply of oil….CVX – 2%, IMO – 1%, XOM – 1%, SU – 1.7%, and global auto stocks got kicked in the gut after Daimler (Mercedes Benz) issued a profit WARNING blaming nothing other than trade war talk  - ……GM – 2%, f – 1.3%, TSLA – 4%, FCAU – 5% , HMC – 1.4%, TOYOTA – 2.6%, NISSAN - .65% BMW – 0.48%.  And INTC -2.3% got slammed after the CEO was ousted for a ‘consensual sexual relationship’…. leaving some investors to question the depth of the bench now that he is gone….
 
But again, today is a new day and global mkts are ignoring the negativity from yesterday and focusing on part 1 of the US banking stress tests….and the headlines say it all.
 
‘Big Banks Clear Fed’s Stress Tests – Federal Reserve releases first round of results of annual exams assessing banks’ health, second part is next Thursday’ –
 
Expect the banks to get a boost when the mkt opens…. JPM, MS, C, BAC etc….
 
US futures are UP 12 pts….in early trading thanks to the decent stress test reports and good global economic data.  European June Flash PMI’s beat estimates 54.8 vs. 53.9) and Japan 53.1 vs. previous 52.8 and this is reassuring investors/traders that talk of a global slowdown may be a bit premature…. Do not discount the rumor that the US is attempting to restart trade talks with China – and while it is not a done deal at all…. the rumor of such talk is causing excitement amongst the algo’s.  And here at home – eco data includes Markit PMI – est of 56.3 are bullish but a stronger print will put everyone at ease as the talking heads talk down the negative impact of the trade rhetoric. 
 
Now look – investors are all keeping an eye on the TECH sector – as this sector remains important…. Tech has led markets higher over the past 6 months – so was yesterday’s weakness indicative of a change in psyche?  Most likely NOT - so if tech can bounce back today, expect the broader mkt to follow.   
 
In Europe this morning – mkts there are also on a tear…. The banks leading the way…. FTSE +0.92%, CAC 40 + 0.83%, DAX + 0.39%, EUROSTOXX + 0.78%, SPAIN +0.86% and ITALY +1.14%.
 
The S&P tested 2743 yesterday – just a bit below support but managed to rally back and end the day at 2748…. this morning with futures up – it feels ok – but if there is a change of heart – we need to hold yesterday’s low…if we fail – then a swift test of the 50 dma at 2710 is in the cards.  I still think that 2780 continues to represent resistance….so we remain stuck in the 2745/2800 range….
 
Oil is UP  86 cts at $66.46 on the back of that news about US producers and the uncertainty over what OPEC will say after their meeting in Vienna today.  Now while the Saudi’s and the Russians want to increase production a bit – other OPEC members do not……and so oil mkts will be held in check until that announcement is made most likely tomorrow…. - Oil remains in the $65.84/$67 range until we find out the news…. if it is as expected I suspect oil will settle in right here…. If they do not increase production then look for oil prices to spike on supply concerns….
 

Campanelle w/Roma Tomatoes & Mozzarella 

A great easy pasta dish - This is a classic Italian pasta dish.... simple, easy, and so good for you.  You will be amazed at how you can create this dish and look like a super star.... You will need:  6 roma ripe plum tomatoes, 2 cloves fresh garlic, s&p, 4 or 5 fresh basil leaves, olive oil and fresh "fresh: mozzarella and a box of Campanelle (bells) 
 
In a pot of boiling salted water - add a box of Campanelle - these should take no longer than 8 / 10 mins to cook - so you must concentrate and work fast.
 
slice the tomatoes in half and then cut into bite size pieces by slicing in half again then turn and slicing twice to make 6 bite size pieces. do this to all the tomatoes.
 
 In a deep sauté pan - heat up olive oil - medium heat - enough to cover the bottom of the pan and add the crushed/sliced garlic. (When you break the clove off the head of garlic - take the knife and lay the flat side down and press on the garlic clove to crush and break the skin.  Remove the skin and rough chop the garlic and add to the oil....).
 
Once warmed - not browned stir it around and add the tomatoes.  Now season with S&P - smell how delicious this is. Next - cut the fresh mozzarella into bite size pieces by cutting a slice (1/4 inch) and then cubing it until you have cut the whole ball of Mozzarella.
 
Next - strain the pasta (reserving a mug of pasta water) and add to the sauté pan with the tomatoes/garlic.  You may add a bit of the pasta water if it is looks a bit dry.... but should not be.  Move around to coat and keep warm.... now turn off heat - add the chopped fresh basil and the cubed mozzarella - stir to warm and serve immediately.  Simple, easy and delicious....
 

  
Buon Appetito.