Archive - Mar 2014

U.K. natural gas jumped the most in more than 16 months and was 2.3% higher to $4.72 on supply concerns. Wheat and corn surged 4.3% and 3.3% respectively, also on supply concerns. Should relations between Russia and Western nations deteriorate further, it will have consequences for already vulnerable economies and lead to increased safe haven demand.   

Russia has lashed out following comments from US Secretary of State John Kerry:

• *RUSSIA SAYS KERRY THREATS ARE `UNACCEPTABLE'
• *RUSSIA SAYS KERRY ISN'T ANALYSING SITUATION IN UKRAINE
• *KERRY IS USING COLD WAR SLOGANS, RUSSIA FOREIGN MINISTRY SAYS
• *U.S., ALLIES IGNORED VIOLENCE, RUSSOPHOBIA IN UKRAINE PROTESTS

In addition, EU ministers debate freezing the assets of Ukrainians responsible for corruption and "targeted measures" against Russia if no change of course is undertaken.

Following a 150bps rate hike by the central bank - the largest since the 1998 default -desperate to halt capital outflows and a collapsing currency, Russian stocks have crashed led by some of the country's largest banks. USDRUB rose to just shy of 37 - the weakest RUB rate on record - but rallied back a little on the rate hike but the MICEX stock index tumbled 11% to almost 2-year lows with Sberbank (Russia's largest bank) down 17% and VTB (2nd largest bank) down 20%. Between the threat of economic sanctions from the West and simple risk-aversion-based capital flight, as one analyst noted, "uncertainty risks a further escalation in domestic capital outflow."

Ukraine's acting PM Arseniy Yatsenyuk speaks. Highlights below:

• UKRAINE TO FULFILL ALL IMF REQUIREMENTS, PREMIER SAYS - like Greece?
• UKRAINE PM SAYS BELIEVES RUSSIAN TROOPS WON'T INVADE E. UKRAINE - because they are there already?
• UKRAINE PM SEEKS TO INCREASE RESERVES TO EASE FX FLUCTUATIONS - "Whatever it takes", even printing dollars
• UKRAINE PM SAYS NAFTOGAZ SHOULD BE PRIVATIZED - Ukraine oligarchs delighted by this development
• UKRAINE PM SAYS NEW GOVERNMENT HAS NO INTENTION OF NATIONALISING PRIVATE COMPANIES" - Ukraine oligarchs even more delighted by this development

And finally, why all the above was irrelevant:

• UKRAINE PM SAYS RUSSIA REFUSES TO HOLD BILATERAL UKRAINE TALKS

Oh well, as long as it fools those USDJPY ramp algos if only for a few minutes.

• Russian markets hit as Putin tightens grip on Crimea (Reuters)
• Ukraine Sees More Russian Incursions as Standoff Worsens (BBG)
• Ukraine Crisis Roils Global Markets (WSJ)
• Cold War Ghosts Haunt East Europe in Moves for Crimea (BBG)
• How Moscow Orchestrated Events in Crimea (WSJ)
• Russia Gas Threat Shows Putin Using Pipes to Press Ukraine (BBG)
• Euro-zone PMI slowed less sharply than estimated (MW)
• Two top Microsoft execs to leave in reshuffle (Reuters)
• Soaring Luxury-Goods Prices Test Wealthy's Will to Pay (WSJ)
• IQ-Boosting Drugs Aim to Help Down Syndrome Kids Learn (BBG)

Infantry, navy, and now air force. At least according to the Ukraine, which reported that Russian fighter jets twice violated Ukraine's air space over the Black Sea during the night, Interfax news agency quoted the Defence Ministry as saying on Monday. It said Ukraine's air force had scrambled a Sukhoi SU-27 interceptor aircraft and prevented any "provocative actions" but gave no further details. That was just the cherry on top to what has already been an exhausting day for risk in Russia and the Ukraine, both of which saw their currencies tumble to all time lows.

We were perhaps even more amused than our readers by our Friday headline "Stocks Close At New Record High On Russian Invasion, GDP Decline And Pending Home Sales Miss." It appears that today the market forgot to take its lithium, and is finally focusing on the Ukraine part of the headline, at least until 3:30 pm again when everything should once again be back to market ramp normal. As expected, the PMI data from China and Europe in February, was promptly ignored and it was all about Ukraine again, where Russia sternly refuses to yield to Western demands, forcing the shocked market to retreat lower, and sending Russian stocks lower by over 11%. This is happening even as Ukraine is sending Russian gas to European consumers as normal, gas transport monopoly Ukrtransgas said on Monday. "Ukrtransgas is carrying out all its obligations, fulfilling all agreements with Gazprom. The transit (via Ukraine to Europe) totalled 200 million cubic meters as of March 1," Ukrtransgas spokesman Maksim Belyavsky said. In other words, it can easily get worse should Russia indeed use its trump card.

A look back in time helps one spot the banker propaganda about gold and silver so prevalent today.

In the era before we got our Pacific port in 1848 and in the 166-year interval since then, the security and safety of the American people have depended not one wit on the status of the Russian-speaking Crimea. Should the local population now choose fealty to the Grand Thief in Moscow over the ruffians and rabble who have seized Kiev, what’s to matter!  Worse still, how long can America survive the screeching sanctimony and mindless meddling of Susan Rice and Samantha Power? Mr. President, send them back to geography class; don’t draw any new Red Lines. This one has been morphing for centuries among the quarreling tribes, peoples, potentates, Patriarchs and pretenders of a small region that is none of our damn business.

In one of the deadliest acts of terror in China in recent memory, a group of ten knife-wielding assailants attacked passersby at the Kunming Railway Station in the southwest of the country on Saturday night, killing at least 29 and wounding another 130. Local Kunming government officials say that evidence at the scene point to separatists from China’s restive Xinjiang region, in what is being called “an organized, premeditated violent terrorist attack.” China’s state media outlet Xinhua quotes domestic senior Chinese security official Meng Jianzhu as vowing to “severely punish” the attackers. Saturday’s attack comes ahead of the annual meeting of China’s parliament on Wednesday, a time when security is usually tightened.

The phone-calls are flying. On the heels of yesterday's Obama-Putin "discussion", today has seen Merkel drop him a line (with the resultant claim that Putin has accepted a "fact-finding mission" despite all evidence to the contrary); and then Merkel, Obama, and Cameron got on a party-line to discuss "sanctions". In the face of this seriousness, we suspect, however, any of the calls to Putin all had a similar dialogue...

The plague of our time is Keynesian economics. It has destroyed the economics profession and enabled the political class to obtain powers never intended. Keynesian economics provided the intellectual cover for the criminal class we politely call “government” to plunder its citizenry.

While the images and local news have been suggesting that Russia is in control on the Crimean peninsula, US officials (according to Bloomberg) have confirmed this:

*RUSSIAN FORCES IN COMPLETE CONTROL OF CRIMEA: U.S. OFFICIAL
*RUSSIA HAS 6,000 TROOPS IN CRIMEA, U.S. OFFICIAL SAYS
*KERRY TO REAFFIRM SUPPORT FOR UKRANIAN SOVEREIGNITY, PSAKI SAYS

Obama, Merkel, and Cameron are now on a conference call to discuss this "fact" and officials have just reported that US Secretary of State John Kerry will visit Kiev tomorrow (though we suspect not Sevastopol).

UPDATE:*CHINA HSBC MANUFACTURING PMI AT 48.5 FOR FEB. (as expected and marginally above the Flash print)

Chinese manufacturing PMI fell to an 8-month low holding barely above the crucial 50 level yesterday forcing Goldman to admit that "this signals further deceleration" in Chinese growth. All sub-indices showed signs of cyclical slowdown from January to February with perhaps the two most-critical ones - production and new orders - showing considerably larger falls than the headline index itself as we await this evening's HSBC print to confirm an average 'contraction'. China's Services PMI just printed at 55, up from 53.4, to a 3-month high led by a surge in the "expectations" sub-index.