Ukraine Has Failed Bond Auction As CDS Soar To Pre-Bailout Levels

Yesterday we reported a warning by BNP that "The Run On Ukrainian Deposits May Have Already Started." Obviously, while the real implications for the country's financial system should a full-blown bank run emerge would be dire , they would take some time to manifest themselves, especially since as Interfax reported, the country's central bank still has $17.8 billion in reserves as of today (if sliding at an alarming pace). To be expected, overnight the same central bank reiterated its support for the currency, knowing that the last thing it can afford is an evaporation in confidence. However, judging by the surge in Ukraine CDS ealier today, which soared by 89bps to 1,089bps today, highest since Dec. 10 on closing basis, i.e., before the Russian bailout (which may or may not be concluded), investors are hardly convinced by the local developments. And the final confirmation that very soon it will be all up to a Russian bailout to fix the situation, was news from minutes ago that the Ukraine just had a failed bond auction. Then again, Russia itself had a failed bond auction just days ago, so perhaps it has bigger fish to fry than pre-funding the Ukraine rescue package.

Why Tomorrow's Jobs Report May Surprise

With all eyes hope-full-y transfixed on tomorrow's non-farm payrolls data and its confirmation-biased 'select-a-headline' post-data farce, we thought it worth a look at the noise in the signal and a reminder, as Bloomberg's Joseph Brusuelas notes, the annual benchmark revisions that will be published and likely obliterate everything we thought we knew about job growth (or lack of). As Brusuelas notes, the January jobs report is likely to be better-than-forecast because the weather-impacted December estimate will see upward revisions as firms probably made up for hiring postponed during the previous month. While weather effects may dominate the topline estimate, the underlying trend in hourly and weekly earnings is likely to remain quite weak since it’s not contingent on swings in seasonal patterns.

Where Today's Max Pain Is

While the stock market ramp on the disappointing ECB press conference can be, somewhat, explained and was to be expected by the central bank-addicted market's renewed focus that since the ECB did nothing, it is now the BOJ's turn to ramp up Quantitative Easing - a thesis which has been floating since November, and at one point resulted in 700 pips of "priced in" USDJPY upside - one group of investors is having a bad day: all those short Green Mountain Coffee shares, which as we pointed out last night exploded to 52 week highs in the aftermath of the Coke minority investment announcement. This is today's maximum pain trade.

The Mafia State Of Mind

Once the mafia state of mind has seeped into every nook and cranny of the society and economy, it's not even recognized as corruption: it's simply the way the system works. And so the residents of nominal democracies in Asia, Europe and the Americas do not even realize how thoroughly corrupted their societies and economies really are; they cling to the illusions of choice even as their incomes, wealth and political influence are funneled into the hands of various elites by overlapping extortion rackets.

Turkish Government Restricts Internet Access; Erdogan Compared To Hitler

"Remember that Adolf Hitler used the same methods when he rose to power," opposition leader Hasan Oren blasts as Turkish PM Erdogan as the Turkish parliament has approved a bill that would tighten government controls over the internet. As The BBC reports, the new law allows the government to block websites without first seeking a court ruling. "Now you are implementing fascism," Oren goes on, despite promises of "enhancing democracy in Turkey" when Erdogan was elected. The Erdogan government had already restricted access to "the scourge of Twitter" and Facebook's "menace to society," but this latest step dismisses any legal limits or restrictions.

Live Hearing On Financial Stability And Data Security

Moments ago, the Senate Banking Committee started a hearing on the topic of "Financial Stability And Data Security." We assume the topic discussed will be financial stability, the highly diluted final version of the Volcker Rule, Dodd Drank, the London Whale, and other things legislators have no understanding of. As such it will be a complete waste of time, and the only thing that can possibly force anyone to fix the broken system is the next systemic crash, one which the central banks, already all in with their bailout efforts, will be unable to resolve.

Wondering Why Stocks Are Soaring?

Draghi did nothing; data provided no impetus; and earnings have destroyed many "narratives". So why are stocks soaring? Simple: in lieu of the ECB actually doing anything, it appears that the head of the ECB just announced the BOJ is launching more QE.

Albert Edwards: The "Freddie Kruger-Like Nightmare" For Stocks Is Coming

"The slump in the recent ISM data may be the ?straw in the wind? of what is to come. Certainly the three-month change of the leading indicator has now turned down sharply ? even before the recent ISM data has been incorporated. We watch the unfolding EM crisis with increasing trepidation because we know how this story ends. We have been here before. And even if the Fed resumes massive QE at some point as the world melts down, and markets desperately attempt their return to the dream trance, they will instead find themselves locked into a Freddie Kruger-like nightmare in which phase 3 of this secular bear market takes equity valuations down to levels not seen for a generation." - Albert Edwards

Putting The Market Mayhem Into Perspective

As the Fed continues to extract liquidity from the financial markets, it is likely that we will continue to see increased volatility in the markets.  However, despite the ever bullish calls by the mainstream analysts, the current market rout has awoken many overly complacent, excessively bullish, investors. The 5-panel chart below really tells you all you need to know about the current market environment.  We are overbought, over extended and exceedingly bullish.  The combination of these metrics has a history of bad outcomes.  Unfortunately, because these measures are generally overrun in the short term by price momentum and sentiment, they are disregarded as "this time is different."

Here Come The Q4 GDP Downward Revisions As December Exports Tumble, Trade Deficit Balloons

Here come the downward revisions to the "strong" initial Q4 GDP print. Moments ago the December trade deficit was released, and it soared from the impressive November deficit print of $34.6 billion to a far less impressive $38.7 billion, far above the $36.0 billion expected, and an indication that, as we warned, the Q4 GDP revisions are imminent (unless of course inventory numbers rise even more to offset the weakness). As the BEA simply explains, "The deficit increased... as exports decreased and imports increased." Indeed.

Stocks Dump & Euro Pumps As Draghi Says No "QE" Discussed

While rate cuts were hoped for but not expected, the key to Draghi's jawboning or future easing efforts was hopes that the recent failed sterlizations of their SMP program (i.e. as close to outright money printing as they can get within the treaty as it stands) were supporting Europe. That was until:

DRAGHI SAYS STOPPING SMP STERILIZATION WAS NOT DISCUSSED

DAX is re-tumbling, EURUSD is soaring, and US Stocks have crumbled 10 points to overnight lows. It seems everyone wanted some intervention... and for now Draghi has disappointed.

Initial Jobless Claims Flat At 8-Month Average

Initial jobless claims fell 20k from a previously revised up 351k (the highest in a month) and hovers at the the average level of the last eight months as the downward trend in this apparently key indicator has broken. The BLS cites nothing unusual in this report aside from Kansas estimated its numbers (so we have no real way of deciphering signal from noise once again). Continung claims rose a modest 15k seasonally-adjusted (and less modest 44k non-adjusted) as emergency benefits remains at 0.

GM Slides On Big Miss As Jim Cramer Does It Again

What better way to assure your company has an earnings bomb? Have Jim Cramer tout it before earnings of course. Sure enough from January 28: "GM sales are going to be superb", and "Europe's coming back." Fast forward to today when GM reports Q4 revenues of $40.5 billion which missed expectations of $40.9 billion, and EPS of $0.67 vs the $0.87 expected. Additionally, GM's global market share just dropped to 11.4% - matching the lowest in the past year. So much for the superb sales. As for Europe? Well, as the chart below shows, Europe just posted its weakest quarter in the past year. And don't count on much growth either: CapEx was down to $7.5 billion in 2013, from $8.1 billion in 2012, even as the company's total free cash flow declined from $4.3 billion last year to just $3.7 billion.

Germany's DAX Halted On Draghi-Driven Dump

No sooner had the ECB statement been released with its disappointing lack of unsterlizied QE or negative rate promises than European stocks mini-flash-crashed. Most notable was Germany's DAX which collapsed over 200 points only and was promptly halted in the futures markets. Only to magically re-appear after the halt almost unchanged...

ECB Keeps All Rates Unchanged

For once, the vast majority of economists was correct, with 62 of 66 predicting accurately what the ECB would do today: nothing. At least so far - moments ago Mario Draghi's central bank just announced no cuts across all three major rates.

Frontrunning: February 6

  • Draghi as ECB Master of Suspense Keeps Investors on Edge (BBG)
  • Abe lays out detailed plan for expanding defense powers (Nikkei)
  • Inflation Fuels Crises in Two Latin Nations (WSJ)
  • Obama walks into crossfire of Asian tensions (FT)
  • Harvard Makes Professor Disclose More After Blinkx Slides (BBG)
  • Hedge Funds Rework Currency Positions in Market Drop (BBG)
  • Canada, U.S. Strike Tax-Information Sharing Deal (WSJ)
  • Indonesia calls for greater clarity from Fed on tapering (FT)
  • Sony to cut 5,000 jobs, split off PC, TV operations (Reuters)

Previewing The ECB (No) Decision: The Four Possible Scenarios

Over 92%, or 62 of 66 economists surveyed by Bloomberg, expect no surprises from the ECB in half an hour. Whether that guarantees a "surprise" we leave it up to readers, but here courtesy of ABN Amro's head of macro research Nick Kounis, are the four possible decisions scenarios that Mario Draghi can reveal to the world today.

Equities Supported By Optimism Of Positive ECB Surprise

Today the lingering problems of the "emerging" world and concerns about the Fed's tapering take a back seat to what the European Central Bank may do, which ranges from nothing, to a rate cut (which sends deposit rates negative), to outright, unsterilized QE - we will find out shortly: with 61 out of the 66 economists polled by Bloomberg looking for no rate changes from the ECB today it virtually assures a surprise . However, despite - or perhaps in spite of - various disappointing news overnight, most notably German factory orders which missed -0.5% on expectations of a +0.2% print, down from 2.4%, the USDJPY has been supported which as everyone knows by now, is all that matters, even if it was unable to push the Nikkei 225 higher for the second day in a row and the Japanese correction persists.

Argentine Banking System Archives Destroyed By Deadly Fire

While we are sure it is a very sad coincidence, on the day when Argentina decrees limits on the FX positions banks can hold and the Argentine Central Bank's reserves accounting is questioned publically, a massive fire - killing 9 people - has destroyed a warehouse archiving banking system documents. As The Washington Post reports, the fire at the Iron Mountain warehouse (which purportedly had multiple protections against fire, including advanced systems that can detect and quench flames without damaging important documents) took hours to control and the sprawling building appeared to be ruined. The cause of the fire wasn’t immediately clear - though we suggest smelling Fernandez' hands...