After Kissinger says Ukraine needs to move toward negotiations: DC shifts to damage Control

Revelations 6:3-4 “when he opened the second seal, I heard the second living creature say, “Come!” 4 And out came another horse, bright red. Its rider was permitted to take peace from the earth, so that people should slay one another, and he was given a great sword.

Important Takeaways:

  • DC shifts to damage control as Ukraine defense fades
  • Speaking at a Democratic National Committee fundraiser in Los Angeles, Biden blamed Volodymyr Zelensky for allegedly not heeding American warnings about a Russian invasion:
  • President Biden and his top officials are now focused on damage control – warning Ukraine through proxies that it will have to sacrifice territory for a ceasefire.
  • Kissinger told the World Economic Forum on May 23 that “movement towards negotiations and negotiations on peace need to begin in the next two months…[and] Ideally, the dividing line should return the status quo ante.”
  • The “status quo ante” implies that Ukraine will make territorial concessions to Russia—a phrase that Kissinger did not use.
  • One possible outcome that’s been floated in the American media and closely considered in Moscow is a Korean-style armistice, with an armistice line between East and West Ukraine but without a peace treaty.
  • An armistice would allow Ukraine to deny that it had given up claims on territory held by Russia.

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Trump-Xi trade armistice clears way for more market gains

FILE PHOTO: U.S. President Donald Trump and China's President Xi Jinping shake hands after making joint statements at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Damir Sagolj/File Photo

By Jonathan Spicer and Lewis Krauskopf

NEW YORK (Reuters) – One of the darkest clouds hanging over Wall Street somewhat dissipated on the weekend when China and the United States agreed to shelve any new tariffs and reset discussions, at least temporarily halting an increase in their tensions over trade.

Investors said the agreement, lasting 90 days, between Chinese President Xi Jinping and U.S. President Donald Trump at the G20 summit, spelled a reprieve for stocks and could pave the way for a positive bookend to a volatile trading year.

U.S. stock index futures jumped as trading for the week began late on Sunday, with benchmark S&P 500 e-mini futures up 1.55 percent. Treasury futures were soft, suggesting an appetite for risk-taking could extend last week’s gains in the stock market.

The trade tension between Washington and Beijing, along with an uncertain outlook for U.S. rate hikes, have for months dogged prospects for equities. The U.S. pledge not to boost tariffs on $200 billion of Chinese goods could mark the most important deal in years between the world’s top two economies.

“It sets a pretty positive tone (and) stocks should have a decent rally into December,” said Nathan Thooft, Boston-based global head of asset allocation for Manulife Asset Management.

Thooft said he believed the Trump administration was using a threat to raise tariffs to 25 percent on Jan. 1, from 10 percent now as a negotiating tactic. “So when you start to see evidence that there is the ability to come to some type of agreement, that has to be viewed as a positive,” he said.

The stock market logged an official correction after a selloff in October and continued volatility in November that, just over a week ago, had left the benchmark S&P 500  stock index down 10 percent from its all-time high.

Markets rebounded last week on comments perceived as dovish from Federal Reserve Chair Jerome Powell, though the S&P was up only 2.4 percent in 2018.

The latest trade standoff began in September when the United States imposed the 10-percent tariffs, prompting China to respond with its own. Ahead of the leaders’ dinner in Argentina, investors had been bracing for a range of outcomes including a worse-case end to talks and more tit-for-tat measures that would have continued to crimp economic and corporate profit growth.

Instead, the Americans and Chinese officially lauded the result.

Beijing agreed to buy what the White House called a “very substantial” amount of agriculture, energy, industrial and other products. While the clock ticks on the 90-day tariff reprieve, the two sides will try to work out thorny issues including technology transfer, intellectual property and cyber theft.

“It’s not solved by any stretch of the imagination,” said Thooft. But risk assets and cyclical U.S. sectors like materials and industrials should benefit, he said on Sunday.

An initial jump late on Sunday of nearly 2 percent in Nasdaq 100 e-mini futures suggested that technology companies, many of which were hardest hit in the selloff, could rebound.

Gary Shapiro, CEO of the Consumer Technology Association, said he was encouraged by the trade talks and warned that raising tariffs to 25 percent as the White House had threatened “would likely hurt consumers, put several American companies out of business and displace thousands of American workers.”

POWELL TESTIMONY

Energy prices could also rebound on Monday since cooling trade tensions could boost the world economy and spur demand.

Oil prices had dropped from a four-year high of about $76 per barrel in early October to just above $50 on Friday. But U.S. crude oil was up 2.7 percent to $52.37 a barrel as of 6:07 p.m. EST (2307 GMT) on Sunday.

Aside from trade policy, Wall Street’s attention has also been trained on Fed policy.

Powell was scheduled to testify on Wednesday to a congressional Joint Economic Committee. But the hearing is expected to be postponed to Thursday because major exchanges will be closed on Wednesday in honor of former U.S. President George H.W. Bush, who died on Friday at the age of 94.

Last week, Powell backed the Fed’s gradual tightening but said its policy rate was “just below” a range of estimates of the so-called neutral level that neither stimulates nor cools growth. In response, stocks shot up and largely recovered November’s earlier losses.

In the wake of Powell’s speech, Nicholas Colas, co-founder of DataTrek Research, said: “what happens in Buenos Aires will determine if stocks post a positive 2018.”

The specter of a global trade war has hovered over the market since March when Trump announced tariffs on imported steel and aluminum. He also recently said the United States was studying auto tariffs, which could ripple through Europe and Japan, while a pact with Canada and Mexico left some investors heartened about potential progress with China.

Nancy Lazar, economist at research firm Cornerstone Macro, said in a note that the 90-day tariff delay and China’s “incremental concessions” are good news.

“But given the stern U.S. stance, we’re certainly not raising our outlook,” she said of a 2.8-percent growth estimate for the fourth quarter, still comfortably above potential.

With U.S. corporate leaders increasingly voicing concerns over rising costs associated with tariffs, Wall Street appeared set on Monday to welcome any development that eases those pressures.

(Reporting by Jonathan Spicer and Lewis Krauskopf; Editing by Grant McCool and Sandra Maler)

South Korea says it wants U.S. troops to stay regardless of any treaty with North Korea

FILE PHOTO: U.S. army soldiers take part in a U.S.-South Korea joint river-crossing exercise near the demilitarized zone separating the two Koreas in Yeoncheon, South Korea, April 8, 2016. REUTERS/Kim Hong-Ji

By Christine Kim

SEOUL (Reuters) – South Korea said on Wednesday the issue of U.S. troops stationed in the South is unrelated to any future peace treaty with North Korea and that American forces should stay even if such an agreement is signed.

“U.S. troops stationed in South Korea are an issue regarding the alliance between South Korea and the United States. It has nothing to do with signing peace treaties,” said Kim Eui-kyeom, a spokesman for the presidential Blue House, citing President Moon Jae-in.

The Blue House was responding to media questions about a column written by South Korean presidential adviser and academic Moon Chung-in that was published earlier this week.

Moon Chung-in said it would be difficult to justify the presence of U.S. forces in South Korea if a peace treaty was signed after the two Koreas agreed at an historic summit last week to put an end to the Korean conflict.

However, Seoul wants the troops to stay because U.S. forces in South Korea play the role of a mediator in military confrontations between neighboring superpowers like China and Japan, another presidential official told reporters on condition of anonymity earlier on Wednesday.

Presidential adviser Moon Chung-in was asked not to create confusion regarding the president’s stance, Kim said.

The United States currently has around 28,500 troops stationed in South Korea, which North Korea has long demanded be removed as one of the conditions for giving up its nuclear and missile programs.

However, there was no mention in last week’s declaration by Moon Jae-in and North Korean leader Kim Jong Un of the withdrawal of U.S. forces from South Korea. Kim and Moon Jae-in pledged to work for the “complete denuclearisation” of the Korean peninsula.

U.S. troops have been stationed in South Korea since the Korean War, which ended in 1953 in an armistice that left the two Koreas technically still at war.

Moon Jae-in and Kim have said they want to put an end to the Korean conflict, promising there will be “no more war” on the Korean peninsula.

(Reporting by Christine Kim; Editing by Paul Tait)