Archive - Feb 27, 2014

All those clips we showed in the past few days of Russian forces amassing in the Crimean? Well, turns out they were all predictive of what has just happened in the Crimean region parliament at Simferopol, where around 120 pro-Russian Gunmen occupied the parliament building and raised the Russian flag. The scene was the site of Wednesday’s scuffles between Tatar groups and pro-Russian supporters. As Euronews reports, local Tatar leader Refat Chubarov posted that the buildings have been occupied by men in uniforms bearing “no recognisable insignia.” Kyiv says it would regard any movements by Russian military in Crimea outside Moscow’s Black Sea Base in Sevastopol as an act of aggression. Following the fall of President Viktor Yanukovych divisions in Ukraine have come to the fore. All this happens as Russian troops in the area are building up and at the same time as Russia put fighter jets on combat alert, according to Interfax.

According to the meteorologists interpreting last week's initial claims report, it must have snowed a lot in the week ended February 22, because while no states had any numbers estimated, the initial claims for the past week jumped by 14K, to 348,000 - the highest weekly number in all of 2014, and the biggest miss of expectations of 335K in a month, with the prior week's print revised as usual higher by 2K to 336K. Curiously while the Oracles attribute the seasonally adjusted number to seasonal factors (the NSA print actually dropped from 321K to 311K), the DOL itself said there were no special factors in last week's claims figures. So someone is lying. What is not lying, is that as the chart below clearly shows, the weekly claims level is now back to levels last seen in July of 2013 and is continuing to deteriorate. A lot of snow must have fallen in the past 7 months to explain this.

With just released inflation figures out of Germany coming weaker than expected, Mario Draghi's monetary nightmare - how to spur credit creation in Europe to the private sector - just got even worse. Incidentally the topic of Draghi's "Monetary Nightmare" is well-known to regular readers and has been covered here extensively in the past, most recently here. So while we await to see how the ongoing deflation in Europe, soon hitting its core too, spreads through the system, the most recent data out of Europe is that lending to non-financial corporations declined once again in January, this time by €11.7billion, adjusted for securitizations and sales. On an annual basis, the decline in January was -2.0%, the same as December, and worse than the -1.8% in November as reported by the ECB.

The political and economic crisis in Ukraine has led to a currency crisis. The Ukrainian hryvnia has fallen by 50.14% against gold in 2014 and by 28% in the last four days alone. Ukrainians who own gold have protected their savings - again showing gold’s safe haven properties.

• European Bonds Surge on Slowing German Inflation, Ukraine Tumult  (BBG)
• Ukraine tensions hit shares (Reuters)
• Debating Geithner’s Appearances in 2008 Transcripts  (Hilsenrath)
• Tensions in Asia Stoke Rising Nationalism in Japan (WSJ)
• GM Investigated Over Ignition Recall Linked to 13 Deaths (BBG)
• Smartphone wars shift from gadgetry to price (Reuters)
• Some Companies Alter the Bonus Playbook (WSJ)
• London’s Subterranean Luxury Manors Lure New Breed of Lenders (BBG)
• Japan No Country for Old Farmers as 7-Eleven Takes Plow (BBG)
• Dream of U.S. Oil Independence Slams Against Shale Costs (BBG)

Three unlucky attempts in a row to retake the S&P 500 all time high may have been all we get, at least for now, because the fourth one is shaping up to be rather problematic following events out of the Crimean in the past three hours where the Ukraine situation has gone from bad to worse, and have dragged the all important risk indicator, the USDJPY, below 102.000 once again. As a result, global stock futures have fallen from the European open this morning, with the DAX future well below 9600 to mark levels not seen since last Thursday. Escalated tensions in the Ukraine have raised concerns of the spillover effects to Western Europe and Russia, as a Russian flag is lifted by occupying gunmen in the Crimean (Southern Ukrainian peninsula) parliament, prompting an emergency session of Crimean lawmakers to discuss the fate of the region. This, allied with reports of the mobilisation of Russian jets on the Western border has weighed on risk sentiment, sending the German 10yr yield to July 2013 lows.

Government spending is out of control. But even if voters and politicians wanted to stop, they couldn't. The root of the problem is a flaw in the nature of the dollar.