Middle East

The lock-step inverse relationship between the dollar and the stock market appeared to take the day off Monday. Pre-opening, the dollar had backed off slightly in the face of new rumors of a Greek rescue package. Stock futures and oil firmed in reaction. Gold refused to get out of bed. As U.S. markets opened, the dollar began to firm on the lack of any details of the rumored package. The dollar rally failed to even dent the rally in stocks and crude. Around noon, the dollar (DXY) rally topped out and the greenback began to weaken. Stocks and crude did not appear to even notice. - Art Cashin

Some traders claimed that other assets did not react to the dollar rally because of its relative level. The DXY rally failed to reach the levels it hit in the hours after the Discount Rate hike. It was a nice theory but failed to explain the afternoon selloff in crude that accompanied further weakness in the dollar.

The Middle East peace talks are at a deadlock. Negotiations between Israel and the Palestinians to move ahead with the plan established by the so-called Quartet – the US., U.N., EU and Russia -- have faltered and come to a complete standstill. Continuing with this inertia will have a long-term negative effect on the future of the region both from a political point of view as well as from a business perspective. With the exception of a few risk-takers, what company or business executive would be willing to invest in the Middle East once the region plunges onto the abyss amid renewed violence?

And whenever trouble brews in the Middle East it tends to spill over into other parts of the world. The risk that Mideast violence could spread to nearby Europe might have been one of the reasons that pushed Italian Prime Minister Silvio Berlusconi to say that Israel should be admitted into the European Union earlier this week. Berlusconi made the statement during an official state visit to Israel. Berlusconi, of course, is one of Israel’s strongest supporters.