Archive - Mar 24, 2014 - Story

Despite the ubiquitous pre-open ramp by USDJPY, equity markets resumed Friday's weakness out of the gate led by the best of the worst. Biotechs are being battered (-13% from highs) and momentum-high-flyers are being monkey-hammered (led by NFLX and TSLA). This is weighing most heavily on Nasdaq for now but the dive in JPY crosses is dragging all stocks lower. Treasuries are rallying and the USD is rising modestly.

Malaysia Airlines: deeply regret that we have to assume beyond any reasonable doubt that #MH370 was lost and none of those on board survived

— Sky News Newsdesk (@SkyNewsBreak) March 24, 2014

Last month's exuberance-filled, and instantly extrapolated, Markit US PMI print at the lofty levels of 57.1 (proving that the weather-delayed pent-up-demand was truly back) has been dashed on the shores of ugly reality. March's print dropped to 55.5, missing expectations by the most since Feb 2013 as jobs grew at a slower pace and factory orders declined. This slowing in the US economy's growth adds to last night's weakness in Chinese growth. Given weather was not a majr issue in March, what excuse can we find for this?

With the world particularly sensitive to any news involving stray and/or missing Boeing 777 airplanes, especially if said massive stray airplane is heading toward the Nuclear security summit taking place at the Hague, it is no surprise that the news which appeared about an hour ago that two Dutch F-16s were scrambled to intercept a unresponsive Boeing 777 in Dutch airspace, received such a prompt response.

In the glorious game of pin the 'explanation' tail on the 'manipulated market' tail, this morning, we suspect traders wil be hard-pressed to find a fun-durr-mental trigger for the 830ET trigger pull to dump gold and silver and buy USD against JPY in size... but then, since when did explanations matter?

One would think that for all its demonization in the Western press, not to mention the countless comparisons to Hitler and/or the Antichrist, that Putin's Russia would be viewed relatively negatively especially in that bastion of western thought: Britain. Yes, perhaps: it certainly doesn't have a sterling image. However what is remarkableis that depite recent events in the Crimea, Britons still see Russia in a more positive light than the European Union, despite recent tensions with Moscow over Ukraine, according to a poll published on Saturday. Perhaps this is not surprising, because as AFP reports, voters in Britain are also equally divided about whether to remain in the 28-member bloc, a subject on which Prime Minister David Cameron has promised a referendum in 2017 and which is the reason for the blistering ascent in popularity of such political parties as the UKIP. The league table of 27 "liked" countries and institutions put the European Parliament -- for which elections are being held in May -- sixth from bottom, and the EU fourth from bottom.

Last week, after western sanctions against Russia expanded to include not only the first financial institution, Bank Rosiya, but also SMP bank whose main shareholders were on the sanctions list, unexpectedly both Visa and MasterCard halted providing transaction services to the two banks, without providing an explanation. Over the weekend, one of the banks got its full credit card functionality back after Visa Inc and MasterCard both resumed services for payment transactions for clients at Russia's SMP bank. What was the purpose of this escalation? Simple: as Reuters reports, SMP Bank said on Monday around 9 billion roubles ($248 million) had been withdrawn by depositors since U.S. sanctions were announced last week. Washington imposed sanctions on Thursday against 20 Russians close to President Vladimir Putin over Moscow's involvement in the Ukraine crisis, including Boris Rotenberg and his older brother Arkady, the co-owners of SMP Bank. SMP CEO Dmitry Kalantyrsky told a news conference that an estimated 4 billion roubles had been withdrawn by individuals and 5 billion by organisations. In other words, the staggered escalations against Russian banks, to which credit card processors have joined without any specific reason, were meant solely to incite a bank panic and to promote bank run conditions. With SMP this succeeded partially, with quarter of a billion withdrawn, however hardly enough to cripple the bank. At least for now.

If there was one thing that the market was demanding after last night's disappointing March HSBC manufacturing PMI, which has now fallen so low, local market participants are convinced a stimulus is imminent (despite China's own warnings not to expect this), and sent both the SHCOMP and the CNY surging, it would have been further weak data out of Europe, where the other possible, if not probable, "QE-stimulus" bank is located now that the Fed is in full taper mode. It didn't get precisely that however there was a step in the right direction when overnight the Euro area Composite Flash PMI eased marginally from 53.3 to 53.2 in March, largely as expected. The country breakdown showed a narrowing of the Germany/France Composite PMI gap owing to a notable (3.7pt) increase in the French PMI while the German PMI eased somewhat (1.4pt). On the basis of past correlations, a Euro area Composite PMI of 53.2 is consistent with GDP growth of around +0.4%qoq, slightly stronger than our Current Activity Indicator (+0.35%qoq).

• U.S. Small-Cap Rally Sends Valuation 26% Above 1990s  (BBG)
• Russian troops seize Ukraine marine base in Crimea (Reuters)
• Apple in Talks With Comcast About Streaming-TV Service (WSJ)
• Top J.P. Morgan Executive in China to Leave Bank (WSJ)
• Treasury's Lew to undergo treatment for enlarged prostate (Reuters)
• Billionaire Sought by U.S. Holds Key to Putin Gas Cash  (BBG)
• Israel closes embassies around the world as diplomats strike (Reuters)
• Herbalife to Nominate Three More Icahn Candidates to Board (BBG)
• Australian ship homes in on possible debris from Malaysia plane (Reuters)
• California DMV Investigating Potential Credit Card Breach (WSJ)