WASHINGTON, September 21, 2017 – As U.S. stocks continued to wobble in negative territory Thursday in response to Wednesday’s relatively stiff Fed comments on bonds and interest rates, President Trump added a new headline risk for traders and investors today with an Executive Order aimed at further cramping North Korea’s nuclear shenanigans. Major averages closed modestly in the red, at least partly in reaction to this news.
The White House issued its new EO to significantly increase the pain of the harsh international sanctions already in place against the out-of-control North Korean regime of “Rocket Man,” aka, that country’s current dictator, Kim Jong Un. CNBC reports on Trump’s Thursday morning remarks:
“‘North Korea’s nuclear weapons and missile development is a grave threat to peace and security in our world and it is unacceptable that others financially support this criminal, rogue regime,’ Trump said before a meeting with Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in. ‘Our new executive order will cut off sources of revenue that fund North Korea’s efforts to develop the deadliest weapons known to humankind. The order enhances the Treasury Department’s authorities to target any individual or entity that conducts significant trade in goods, services or technology with North Korea.’”
Somewhat surprisingly, it appears that China is cooperating with Trump’s escalation, at least to some extent, notes CNBC:
“Trump on Thursday highlighted that China’s central bank has told its banks to strictly implement U.N. sanctions. He thanked President Xi Jinping for what he called a ‘bold’ and ‘somewhat unexpected’ move.”
A Thursday afternoon report issued by ZeroHedge indicates that the Trump administration is doing everything it can, short of lobbing Daisy Cutters at Pyongyang, to starve North Korea of the funds that stubbornly enable that country’s rapid advancement of its nuclear weapons program:
“Ultimately, the White House says, ‘foreign financial institutions must choose between doing business with the United States or facilitating trade with North Korea or its designated supporters.’”
The ZeroHedge report lists the stunning details of Trump’s aggressive Executive Order:
“FINANCIAL INSTITUTIONS: The E.O. provides the authority to impose sanctions on any foreign financial institution that knowingly conducts or facilitates any significant transaction on behalf of certain designated individuals and entities, or any significant transaction in connection with trade with North Korea, on or after the date of the E.O.
° Under this new authority, the sanctions measures can be either restrictions on correspondent or payable-through accounts or blocking sanctions.
° The E.O. also provides the Secretary of the Treasury additional authority to block any funds originating from, destined for, or passing through accounts linked to North Korea that come within the United States or possession of a U.S. person.
° Foreign financial institutions must choose between doing business with the United States or facilitating trade with North Korea or its designated supporters.
“TRADE: The E.O. directly targets North Korea’s shipping and trade networks and issues a 180-day ban on vessels and aircraft that have visited North Korea from visiting the United States. This ban also targets vessels that have engaged in a ship-to-ship transfer with a vessel that has visited North Korea within 180 days. North Korea is dependent on its shipping networks to facilitate international trade. The E.O. also authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to impose sanctions on persons involved in:
° Industries: The construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles, or transportation industries in North Korea;
° Ports: Ownership, control, or operation of any port in North Korea, including any seaport, airport, or land port of entry;
° Imports/Exports: at least one significant importation from or exportation to North Korea of any goods, services, or technology.”
In other potentially disconcerting headline news, Spain has been escalating its crackdown on the Catalonian separatists’ scheduled October 1 independence referendum. In a run-up to next weekend’s now-uncertain vote, the Spanish government, led by Prime Minister Mariano Rajoy, has been arresting separatist politicians and activists, and currently holds 14 or more in custody.
Upping the ante further, Madrid has taken direct control of Catalonia’s finances, effectively cutting off any funds that might be used to promote the referendum. The Spanish government has also contracted cruise liners to house up to 16,000 Spanish riot police in a Catalan port, adding substantial muscle to the message.
It remains to be seen whether Spain can get through next week relatively unscathed, given a likely reaction by Catalonian citizens who might view Madrid’s aggressive actions with increasing hostility that could lead to violence. Should that occur, it would add considerable headline risk for Wall Street’s traders and investors.
Combined with today’s modestly negative reaction to the Fed’s apparent determination to increase interest rates while beginning a systematic liquidation of its massive QE bond portfolio, September’s final week of trading could prove to be a decidedly unpleasant experience.
*Cartoon by Branco. Reproduced with permission and by arrangement with ComicallyIncorrect.