Archive - Mar 2014 - Story

S&P, still deep in the mire of a legal battle with the US government, has decided now is an opportune time to cut the ratings outlook on Russia:

• *RUSSIAN FEDERATION OUTLOOK TO NEGATIVE FROM STABLE BY S&P
• *S&P SEES EU-U.S. IMPOSING FURTHER SANCTIONS

Russia remains a BBB credit (but with the outlook shift remains open to a downgrade with 24 months). S&P has cut 2014 GDP forecast to 1.2% and 2015 to 2.2%. Of course, we are sure, this would have nothing to do with currying favors with the US government (who threatened them when they downgraded the USA). Full report below.

It would appear the IMF's dirty little fingerprints are all over this latest piece of legislation in Ukraine. The Ukraine Finance Ministry is proposing to take a very-similar-to-Cyprus approach to bailing in its despositors:

*UKRAINE PROPOSES NEW TAX ON DEPOSITS EXCEEDING 100,000 HRYVNIA
*UKRAINE TAX PROPOSAL WOULD INCLUDE 1.5% OF ALL DEPOSITS

This would appear a measure designed to stabilize the budget for potential IMF negotiations and fits perfectly with what the IMF has consistently hinted as the next steps for many nations.

One of these markets has recovered all of the post-Yellen move from yesterday... (and only one)...

US and European stocks are spiking higher this morning supposedly on the back of better-than-expected data (Philly Fed) and self-referencing bias that surely Janet Yellen didn't mean what she said. Stocks (oddly) melted up on the last Philly Fed release (which was a massive miss). Anyway, fun-durr-mentals aside, this move is all about AUDJPY all the time as Financials lead the way (and are the only sector green post Yellen). European stocks are merelty tagging along for the exuberant melt-up ride. Beware of financials as CDS are widening even as stocks soar - a pattern we have seen before into the run-up to CCAR (stress-tests) and doesn't end well for bank stocks.

It appears the madness is contagious. Turkish Prime Minister Recep Tayyip Erdogan, embroiled in an ongoing and huge corruption probe, lashed out at "international conspiracies" in a speech at a rally in Bursa. "We'll dig up Twitter - all of them - from the roots," he raged, "they'll see the power of the Republic of Turkey." With the looming elections - sure to fair and equitable to all - he warned he would "settle scores" after winning. Indeed...

The people sanctioned via the Russian foreign ministry:

• Caroline Atkinson
• Daniel Pfeiffer
• Benjamin Rhodes
• Harry Reed
• John Boehner
• Robert Menendez
• Mary Landrieu
• John McCain
• Daniel Coats

After warning of the potential for "dangerous risks of escalation" President Obama, absent his Congress, has signed an Executive Order authorizing further penalties on more Russian individuals and also a bank. "We’re imposing sanctions on more senior officials of the Russian government,” Obama said. “In addition, we are today sanctioning a number of other individuals with substantial resources and influence who provide material support to the Russian leadership, as well as a bank that provides material support to these individuals.” The list includes Bank Rossiya (Russia's 5th largest bank), and 20 more individuals including Billionaire Gennady Timchenko, and Duma Deputy Speaker Evgeny Bushmin.

As is widely known by now, Barack Obama, in an executive order, earlier this week as well as moments ago in a very dramatic follow up performance, decided to sanction a handful of Russian military leaders and Kremlinites close to Putin. He didn't touch Putin of course, that could be seen as too strong a signal one which may cut off German gas supplies for a day or two. Remember: there are "costs" and stuff. So while Russian official debate just how to retaliate best to US and European sanctions, as they said they would, ordinary Russians are taking matters into their own hands. And on twitter. Here are some examples in which the "Russian on the street" has some fun with Obama's sanctions, and prohibits the US president and people close to him to approach, enter and/or use the facilities.

No conventional scenario accounts for the methodical disabling of the communications systems, the bizarre altitude changes and professional navigation to way points, or the presumed turn south and a flight path that extended to at least 8:11 a.m. Every plausible theory about what happened to Flight 370 has to not only fit the most reliable facts (radar tracks and satellite data) but basic geography.

Despite Russia's scoffing at the extent of the West's sanctions and Ukrainian politicians seemingly resigned to the fact that Crimea is lost (and wanting some compensation), we are sure President Obama will want to reset the narrative. As Jay Carney noted earlier in the week, we suspect a broad-based "sell Russia" recommendation will be issued along with threats of more "costs" and strongly worded language...

The chart below from Bank of America - showing the progression of first-time US homebuyers in recent months - should scare everyone who still believes that there is some sort of "housing recovery" in the US.

Vladimir Putin's approval rating has soared to new five-year highs as the State Duma ratifies the agreement on Crimea's admission to Russia. However, it is the clear distain that the Russian Foreign Affairs Committee Deputy Chairman Alexander Romanovich had for the West's response so far. "The US and EU sanctions against Russia are absurd and unreal," the lawmaker scoffed, adding "this is an operetta, and we can only laugh." So much for non-mutually-assured-destruction-based sanctions. The Duma are considering how retaliatory sanctions could be imposed.

Another month, another confirmation that the so-called housing recovery is sputtering on its last breath and is being held up entirely by the higher end segment, which however is also coming to an end now that wealthy Chinese have started liquidating their ultra luxury housing. In February, according to the NAR, some 4.6 million annualized existing homes were record, in line with expectations, and a 0.4% decline from the 4.62 million print in January. This was the 19th monthly drop in a row, and the lowest since July 2012, and a 7.1% drop year over year. But the worst news is that housing is increasingly unaffordable to the poorer Americans, with houses costing in the $0-$100 bucket down 18% from a year ago. Since nobody is applying for a mortgage any more this is hardly surprising. Finally, in addition to the usual weather excuse for weak housing sales, a new scapegoat has appeared: soaring student loans: "20 percent of buyers under the age of 33, the prime group of first-time buyers, delayed their purchase because of outstanding debt. 56 percent of younger buyers who took longer to save for a downpayment identified student debt as the biggest obstacle." Oops.

The Philly Fed Factory Index surge 15.3 points from February's plunge for its biggest jump in nine months. New Orders recovered most of last month's loss but the employment sub-index dropped to its lowest since June 2013. Perhaps even more troubling was the drop in the business outlook with the average workweek and new orders expected to drop.

Short, sweet and to the point.