U-2 Spy-Plane-Inspired Radar Crash Was Sparked By Insufficient RAM

Having admitted that last week's air traffic control system crash was due to the fact that a U-2, Cold War-era, spy plane still in use by the U.S. military sparked a "glitch" in radar systems and grounded all west coast planes for over 45 minutes, Reuters reports that an inside account suggests this was due to a common design problem in the U.S. air traffic control system  - a lack of memory in the computer! What is perhaps more worrisome, in theory, the same vulnerability could have been used by an attacker in a deliberate shut-down, the experts said, and "shows a very basic limitation of the system," and could be used as a new "attack surface."

Is The Market Consolidating Or Topping?

"Good" economic news and "stronger than expected" earnings reports have apparently buoyed the market against the drain of liquidity from the Federal Reserve. Today, the market ripped higher at the open as hopes of a "QE" program from the ECB rippled through the markets. Despite commentary from the mainstream media that the markets are doing great, the updated chart below shows the markets continuing its tug-o-war between support and resistance. This is an important point to remember. While it is certainly possible that the markets could ratchet higher from here due to the "psychological momentum" that currently exists, the likelihood of a runaway bull market from here is remote.

Spanish Ruling Party Politician Assassinated In Broad Daylight

Until recently, it was mostly bankers that were the victims of a perplexing epidemic of untimely deaths, either at their own hand or the result of someone else's rage. Today that changed in Spain when hours ago a member of the ruling Partido Popular, and president of the council of Leon, Isabel Carraso, 59, was assassinated in broad daylight on a street in the center of the city of Leon. Her death was certified at 5:20 pm local time.

And The Best Performing Economy In The World Is...

Ireland's Services economy is expanding at the fastest pace in the world, according to the latest round of survey-based PMI data from Markit. The worst...contraction... France Construction

Russia Demands "Immediate Talks" With Kiev; Says Referendums Show "Real Mood" Of People

UPDATE: AP reports Pro-Russian protesters declare independence for the Luhansk region in eastern Ukraine.

With local reporters citing officials claiming "direct talks between the eastern regions of Ukraine and Kiev are now out of the question", Russia's foreign ministry has commented directly that:

*RUSSIA SAYS SEPARATIST REFERENDUMS SHOW 'REAL MOOD' IN EAST
*RUSSIA EXPECTS KIEV GOVT TO REACH OUT TO EAST, WANTS 'RESULTS'

Adding that the Dontesk and Lugansk referenda short evidence of the people's strong will to make decisions on their own, Russia wants "immediate" talks in Ukraine on state governance... and cites Kiev's criminal unwillingness to engage in dialogue with his people.

Goldman Says European QE Will Come In 2015 At The Earliest, If At All

  • Goldman’s Andrew Wilson Says QE in Europe a 2015 Story If at All
  • European economy would have to weaken significantly before QE comes into play, said Andrew Wilson, co-head of Global Fixed Income and Liquidy management team at Goldman Sachs Asset Management.
  • Says Draghi has foreshadowed policy easing at next meeting, expects ECB to cut rates 1-2 times before they look to other methods such as an LTRO
  • Says if other methods don’t work it would “ultimately have to be QE”

Spot The Goldman And Glencore Aluminum Warehouses

Across the 137 warehouses that the London Metal Exchange has begun tracking, 2 stand out. Having been at the center of allegations of manipulation of the metals markets - most notably Aluminum - thanks to monopolistic warehousing, the following report from the LME will not entirely shock that none other than Goldman Sachs (and Glencore) have simply incredible waiting times for delivery of the base metal. We discussed the monopolization (thanks to lax Fed regulation) here, here, here, and here and as Reuters reports lengthy logjams at warehouses monitored by the LME, the world's oldest and biggest market for industrial metals, prompted bitter criticism by consumers and sparked a wide-ranging reform program at the exchange. With nearly 2-year-waits for Aluminum delivery by Goldman - we are sure regulators will see nothing wrong at all.

Short Squeeze Bloodbath To Start The Week

After "most shorted" stocks had their best (i.e. worst or biggest loss) week in 2 years last week, it was perhaps not entirely surprising that 'they' would smash VIX and JPY to manufacture a short squeeze bloodbath this morning at the open...

East Ukraine's Donetsk Declares Itself Sovereign: Asks Putin To "Consider Absorption" Of Newly Independent State

Just as we predicted last week, Crimea 2.0 is here.

  • DONETSK PEOPLE'S REPUBLIC DECLARES ITSELF SOVEREIGN STATE: RIA
  • UKRAINIAN SEPARATIST LEADER PUSHILIN SAYS ASKING MOSCOW TO CONSIDER THE ABSORBTION OF DONETSK REGION INTO THE RUSSIAN FEDERATION

While Putin has not yet confirmed it will, begrudgingly, annex Donetsk as a reminder earlier today the Kremlin said it "respects" the independence vote and calls for a "civilized implementation." And what could be more civilized than annexing two regions of Ukraine in under two months without firing a single shot?

A Commodities Trading Titan Staffed With Former Goldman And JPM Employees Is Quietly Growing In Switzerland

If there was any confusion about what may be coming next, now that the bulk of the TBTFs are liquidating their commodities trading divisions having been caught manipulating virtually every physical asset under the sun (except for Goldman: the bank will first stage a mutiny at the Fed before it is forced to spin off its legendary J Aron commodity division which spawned such taxpayer generosity recipients as Gary Cohn and Lloyd Blankfein), the most recent events at Swiss commodities giant Mercuria should clarify "next steps." Because after Mercuria last month acquired JPMorgan's physical commodities trading business for $3.5 billion however without the scandal-plagued Blythe Masters, the Geneva commodities group needed someone to fill in the big enough shoes which may now belong to the world's largest, and very much still under the radar, physical commodities trader.  It picked Magid Shenouda, who was co-head of commodities for Goldman until the end of last year.

Ukraine CDS Explode; Bonds, Stocks, & FX Tumble On Referendum Vote

While US equity markets could not be more excited at the prospect of more bloodshed, more sanctions, and more WWIII, it seems the Ukrainian markets are not amused. Short-dated CDS are spiking, bond yields surging, stock prices tumbling, and the Hyrvnia is back at one-month lows. Ukrainian stocks are now the worst-performing market in the world and with 10Y bond yields back over 10% (and 5Y near 14%), it seems the exuberance for risk in Western markets is not spilling out into a nation that is 'saved' by the IMF loans and western confidence.

VIX Slammed To 11-Handle Sends Dow To Record-er Highs

Just as Gold was monkey-hammered late last night, we warned in the pre-open that it might happen and sure enough... VIX has been smashed back under 12 this morning, lifting the Dow to new record-er all-time highs and sending the S&P chasing its highs too... why not... Draghi promised to do something, sometime soon (even as the Fed is tapering and China says no more stimulus). What is really helping is USDJPY 102 once again which provided the opening ramp ignition. For all those on the 'healthy' rotation bandwagon.. the Nasdaq and momo names are outperforming (Nasdaq now unchanged for May) - so it's not that. Gold is up $25 from overnight lows and Treasuries are flat to modestly weaker as stocks smash higher.

China's "New Normal" Means Slower Growth, President Warns

"If everyone in society is trying to get into the financing business, we may have entered a phase where a fever has started to affect our ability to think," warns one analyst of the bubble-fervor in China... but President Xi Jinping dashed the hopes of stimulus-hunters everywhere (once again) last night amid a slowdown that analysts forecast will lead to the weakest expansion since 1990. As Bloomberg reports, Xi said there will be no major stimulus and commented that "[Chinese] must boost [their] confidence, adapt to the new normal condition based on the characteristics of China’s economic growth in the current phase and stay cool-minded." In other words, keep calm and carry on (oh and don't lever any more carry trades please!).

Key Events In The Coming Week

This week markets are likely to focus on a few important data prints in DMs, including Philly Fed in the US (expect solid expansionary territory) and 1Q GDP releases in the Euro area (with upside risks). In DMs, the highlights of the week include [on Monday] Japan’s trade balance data and Australia business conditions; [on Tuesday] US retail sales, CPI in Italy and Sweden; [on Wednesday] US PPI, Euro area IP, CPI in France, Germany and Spain; [on Thursday] US Philly Fed, CPI, capacity utilization, Euro area and Japan GDP; and [on Friday] US Univ. of Michigan Confidence. In the US, we expect Philly Fed to print in solidly expansionary territory (at 14, similar to consensus) and to inaugurate what we call the active data period of the month. We also expect CPI inflation to print at 0.3% mom (similar to consensus), and core CPI inflation at 0.18% mom (slightly above consensus).

Janjuah-pdate On The S&P 500: First 1950, Then 1700

"Notwithstanding the view that we may see S&P get up to 1950 (+/- a little) over the next fortnight or so, over the rest of Q2 and Q3 we could see a decent correction of up to 20% in the risk-on trade. Low 1700s in the S&P attracts, and thereafter, depending on weekly closes, low 1600s/mid-1500s S&P could be in play. For now, however, the key level to the upside is 2000 as a weekly close on the S&P – if achieved then I would have to revisit my bearish bias for the belly of 2014. To the downside a weekly close below 1770 would, I feel, easily put a 1700 S&P within reach. Beyond that I would need to assess data and price action at the time before highlighting the next set of levels, but I would not be surprised to see policymakers again attempt to boost markets later this year - there should be no surprise if this happens because the reaction function of central bankers has become depressingly predictable."

Putin Speaks On Ukraine Independence Vote: "Respects" Result, Calls For "Civilized Implementation"

As previously reported, the key event of the weekend was the east Ukraine independence referendum which, as expected, passed by a landslide. Of course, the outcome of the referendum itself was largely irrelevant: all that mattered was that it happened, and that it gave the Kremlin the necessary and sufficient justification to intervene and enter the eastern territory when so needed. And hours ago, in its first official statement on the referendum, the Kremlin said Monday "it respects the secession referendum in eastern Ukraine and hopes for a "civilized implementation" of the results through talks between Kiev and representatives in the east." In other words, at least in the eyes of Putin, Ukraine no longer has a legitimate claim to remain in east Ukraine.

Frontrunning: May 12

  • Hillary and Me: The 2008 campaign was a nightmare. Will 2016 be as bad?  (Politico)
  • What Timothy Geithner Really Thinks (NYT)
  • Rebels declare victory in east Ukraine self-rule vote (Reuters)
  • Race for AIG's Top Job Has Two Favorites (WSJ)
  • America on the Move Becomes Stay-at-Home Nation for Millennials (BBG)
  • Old, Fired at IBM: Trendsetter Offers Workers Arbitration (BBG)
  • Bad luck Jonathan: Pressure Mounts on Nigerian President (WSJ)
  • Iran leader slams West's 'stupid' missile stance before talks (Reuters)
  • Conchita Wurst of Austria Wins Eurovision Song Contest (WSJ)
  • Greek Finance Ministry expects Q1 GDP contraction of less than 1.5 pct (Kathimerini)