Archive - Feb 24, 2014 - Story

Ever since the weekend's coup d'etat (as he called it: remember, it isn't officially a coup until John Kerry deems it so - see Egypt), Ukraine's overthrown president Victor Yanukovych (despite signing an agreement with the opposition and blessed by Europe which foresaw new legitimate presidential elections sometime after September) has been in hiding, following an aborted attempt to depart the country by plane. This is understandable: after all a warrant has been issued for his arrest. Which perhaps explains why as Gazeta.ru, citing UNIAN.net, reports his latest location is the Russian military base in Sevastopol, the one place where the Ukraine government, legitimate or not, will never dare to tread. UNIAN adds that Yanukovich will "board a landing ship of the Black Sea Fleet of the Russian Federation, which the deposed president will use to go to Russia, according to TV channel ATR."

Since his historical track record has been spot on until now, we thought it useful to reflect on the wisdom of the maestro as he speaks this morning and his recent appearances. On the heels of the success of his un-best-selling book, Greenspan explains:

• *GREENSPAN SAYS 'NO DOUBT' BUBBLES ARISING IN CHINA'S ECONOMY
• *GREENSPAN SAYS OF BITCOIN: 'IT'S A BUBBLE'
• *GREENSPAN SAYS 'I DON'T SEE' SIGNS OF A BUBBLE IN STOCK MARKET
• *GREENSPAN SEES SIGNIFICANT RISE IN LONG-TERM RATES COMING

It appears he bubble-vision is strong and yet he notes that US income inequality is potentially harmful to the US political system and Dodd-Frank doesn't work; adding that the US needs 4% growth to fix itself.

For those who have been following the abysmal loan creation in Europe, which recently dropped to an all time low today's inflation, or rather make that deflation, data out of Europe should not come as much of a surprise. Then again, with January inflation posting the biggest drop in history, when it tumbled by a record 1.1% from December levels, even the skeptics may be stunned by how rapidly deflation is gripping the continent.

Much as the 3rd grade Markit US Manufacturing PMI 'beat' was blamed for the furious rally last Thursday in stocks, it appears bad news in the form of today's 3rd grade Markit Services PMI 'miss' is (rightly) completely ignored by the market. While the Services segment of the economy is vastly larger and more important for 'guessers', it seems USDJPY would not provide the juice this morning as this is the weakest services performance in 4 months. Of course, "weather" is blamed and optimism for the future remains but what was odd to us is that economists claim that in February manufacturing returned to normal... but clearly services did not.

The last 3 days have seen China's Shanghai Composite index tumble over 3% - its largest drop since October as sentiment comes under pressure from concerns about tightening in the real estate sector. The pace of price appreciation has slowed notably - especially 'existing' apartment sales (i.e. the speculators are exiting) - as it appears houing demand is cooling off with the number of cities with falling MoM home prices rose to six in January from two in December.The PBOC has jawboned as much and real estate sector financial condtions are tightening is slowing as a number of banks curb lending to developers. This is weighing on copper prices also as construction activity slows (exacerbating problems in the shadow banking system's collateral pools). The PBOC is getting what they wanted - but may regret it.

• Ukraine Seeks $35 Billion as Yanukovych Warrant Is Issued (BBG)
• Ukraine's fugitive president wanted for mass murder (Reuters)
• Polar Vortex to Bring More Snow on Return to U.S. This Week (BBG)
• China property prices continue to rise (FT)
• Microsoft Said to Cut Windows Price 70% to Counter Rivals (BBG)
• Pentagon to propose shrinking Army, scrapping some jets (Reuters)
• Hedge Funds Turn Bearish on S&P 500 as VIX Advances (BBG)
• Draghi’s Data Jigsaw Takes Shape as ECB Readies Showdown (BBG)
• China, eyeing Japan, seeks WW2 focus for Xi during Germany visit (Reuters)

Asian equities are trading lower across the board on the back of some negative credit stories from China. Shanghai Securities News noted that ICBC and some other banks have curbed loans to developers in sectors such as steel and cement. Slower gains in home property prices in China’s tier 1 cities are also not helping sentiment. Beijing and Shenzhen prices rose 0.4% in January, which looks to be the slowest monthly gain since October 2012 according to Bloomberg. Elsewhere there are reports that a property developer in Hangzhou (Tier 2 city in China) is reducing its unit prices by 19%. Our property analysts noted that given the strong gains seen in Tier-1 and some bigger Tier-2 cities in 2013, a slowdown or negative trends in price growth should not be a surprise. Nevertheless, it has been a very weak day for Chinese and HK markets with the Shanghai Composite and the Hang Seng indices down -2.0% and -1.2% lower as we type. Across the region, bourses in Japan and Korea are down -1.0% and -0.6%, respectively.