- No need to use military force in Ukraine for now: Putin (Reuters)
- Russia Orders Drill Troops Back to Bases (WSJ)
- Ukraine premier agrees to reforms for aid package (FT)
- Japan Base Wages Rise for First Time in Nearly Two Years (WSJ)
- Only the algos are trading: Citigroup Joins JPMorgan in Seeing Trading-Revenue Drop (BBG)
- Vietnam sends blogger to prison for critical posts (AP)
- At White House, Israel's Netanyahu pushes back against Obama diplomacy (Reuters)
- Obama to offer new tax breaks for workers in election year budget pitch (Reuters)
- China Banks Show Too-Connected-to-Fail Link to Shadow Loans (BBG)
- Ex-BOK Deputy Lee Named to Head South Korea Central Bank (BBG)
- No mortgage origination problem in the UK: Mortgage approvals climb to six year high (Telegraph)
Since Ukraine is the only wildcard variable in the news these past few days, it was to be expected that following i) the end of the large Russian military drill begun two weeks ago and ii) a press conference by Putin in which he toned down the war rhetoric, even if he did not actually say anything indicating Russia will difuse the tension, futures have soared and have retraced all their losses from yesterday. And not only in the US - European equity indices gapped higher at the open this morning in reaction to reports that Russian President Putin has ordered troops engaged in military exercises to return to their bases. Consequent broad based reduction in risk premia built up over the past few sessions meant that in spite of looming risk events (ECB, BoE policy meetings and NFP release this Friday), Bund also failed to close the opening gap lower. At the same time, USD/JPY and EUR/CHF benefited as the recent flight to quality sentiment was reversed, with energy and precious metal prices also coming off overnight highs.
Having explained the Ukraine "situation" in one map, it appears the inter-connectedness of Ukraine and Russia is becoming any increasingly problematic part of the current crisis. As Reuters reports, absent Russian gas, Ukraine's natural gas stocks can meet just 4 months of demand. The modest silver-lining is that the stocks are generally in the west of the country (away from potential Russian intervention) but it bears noting that Ukraine meets around half its gas demand through Russian imports (and Russia has cut supplies in the past). The situatio is not just energy though as Bloomberg notes, that Ukraine relies on Russia for about 30 percent of its global trade activity, compared with Russia’s 6 percent dependency on Ukraine. However, Ukraine has another big problem - while it would like $3bn in IMF loans, that will not even cover interest and principal payments through June...
Gold and crude oil prices rose steadily all day even as US equities oscillated around VWAP unable to break above Friday's lows (and trading in a narrow range) on heavier than normal volume. USDJPY and US equities remained roughly coupled but stocks auctioned up and down in search of stops with algos desperate to cling to VWAP on a big down day as a rally mid-afternoon reached the S&P into the green for 2014 and marked the top of the day. Gold ended at 4-month highs, the USD rose 0.4% (led by GBP and EUR weakness), WTI crude back over $104.50 (near 6-month highs), and Treasury yields dropped 5bps or so with 10Y back under 1.60% (2nd lowest yield close in 4 months). VIX jumped above 16% - 1-month highs but still the asset-gatherers demand we BTFWWIII...
After once again clearly delineating that Russian "costs" are set to surge, and hopefully he means more than just the drop in the Micex and its artificial, paper wealth effect which Putin couldn't care less about as long as crude is soaring...
- OBAMA SAYS INCIDENT WITH UKRAINE WILL BE ‘COSTLY’ FOR RUSSIA
... the US president has laid out his latest tactic:
- OBAMA SAYS HE'S CONSIDERING ECONOMIC STEPS TO ISOLATE RUSSIA
And the punchline:
- OBAMA URGES CONGRESS TO PROVIDE PACKAGE OF ASSISTANCE QUICKLY TO UKRAINIAN PEOPLE; SAYS SHOULD NOT BE PARTISAN ISSUE ON CAPITOL HILL
Maybe time to send Obamacare to Kiev: so many young, strapping participants just waiting to sign up? Or maybe it just time to raise minimum wages in the Ukraine while giving the local population the safety of mind that comes with investing in the "no risk, guaranteed return" MyRA.
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.
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.
There’s good propaganda and bad propaganda. Bad propaganda is generally crude, amateurish Judy Miller “mobile weapons lab-type” nonsense that figures that people are so stupid they’ll believe anything that appears in “the paper of record.” Good propaganda, on the other hand, uses factual, sometimes documented material in a coordinated campaign with the other major media to cobble-together a narrative that is credible, but false. The so called Fed’s transcripts, which were released last week, fall into the latter category... But while the conversations between the members are accurately recorded, they don’t tell the gist of the story or provide the context that’s needed to grasp the bigger picture. Instead, they’re used to portray the members of the Fed as affable, well-meaning bunglers who did the best they could in ‘very trying circumstances’. While this is effective propaganda, it’s basically a lie, mainly because it diverts attention from the Fed’s role in crashing the financial system, preventing the remedies that were needed from being implemented (nationalizing the giant Wall Street banks), and coercing Congress into approving gigantic, economy-killing bailouts which shifted trillions of dollars to insolvent financial institutions that should have been euthanized. What I’m saying is that the Fed’s transcripts are, perhaps, the greatest propaganda coup of our time.
Current US foreign policy in a nutshell: Barack Obama tells Vladimir Putin "there will be costs" if Russia invades Ukraine. What does Putin do? He invades Ukraine. Only this time it's official: AP reports that the Kremlin says Russian President Vladimir Putin has asked parliament for permission to use the country's military in Ukraine. Putin says the move is needed to protect ethnic Russians and the personnel of a Russian military base in Ukraine's strategic region of Crimea. RIA further adds, the military use is virtually assured as it was leaders of Russia’s upper and lower houses of parliament who first called Saturday on President Vladimir Putin to stabilize the situation in Crimea and protect Russian citizens. The leader of Federation Council, Russia’s upper house, said the use of military force in the former Soviet nation could be justified after the opposition swept into power in Kiev last weekend.
In addition to the already noted fireworks out of China, where the Yuan saw the biggest daily plunge since 2008 and the ongoing and very rapid newsflow out of the Ukraine, focus this morning was very much of the latest Eurozone CPI data, which despite matching previous low levels, came in above expectations and in turn resulted in an aggressive unwind of short-EUR bets as market participants were forced to re-asses the likelihood of more easing by the ECB. Still, even though the Euribor curve bear steepened and Bunds came under significant selling pressure, the EONIA forward curve remained inverted, signifying that there is still a degree of apprehension over what is unarguably very low inflation data.
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.
- California couple finds $10 million in buried treasure while walking dog (Reuters) ... not bitcoin?
- Dimon Says Threats to JPMorgan Span Google to China Banks (BBG)
- Stocks So Many Love to Hate Buoyed by Fed’s Jobs Priority (BBG)
- White House Weighs Four Options for Revamping NSA Phone Surveillance (WSJ) ... to pick the fifth one
- Credit Suisse Executives Weren’t Aware of U.S. Tax Dodges (BBG)
- Militias Hunt Kiev Looters From Central Bank to Bling Palace (BBG)
- Crisis Gauge Rises to Record High as Swaps Avoided (BBG)
- Obama to Propose Highway-Repair Program (WSJ)
- Ukraine Pledges to Protect Deposits as Kiev Rally Called (BBG)
For the second night in a row, China, and specifically its currency rate which saw the Yuan weaken once more, preoccupied investors - and certainly those who had bet on endless strenghtening of the Chinese currency - however this time it appeared more "priced in, and after trading as low as 2000, the SHCOMP managed to close modestly green, which however is more than can be said about the Nikkei which ended the session down 0.5%. Still, the USDJPY was firmly supported by the 102.00 "fundamental" fair value barrier and as a result equity futures, which had to reallign from tracking the AUDUSD to the old faithful Yen carry, have been propped up once more and are set to open at all time highs. If equities fail to breach the record barrier for the third time in a row and a selloff ensues after the open in deja vu trading, it will be time to watch out below if only purely for technical reasons.
All eyes were on China overnight, where first the PBOC drained a quite substantial CNY 100 billion in liquidity via 14 day repos in the month following the biggest credit injection on record, pushing those worried about China's credit schizophrenia to the edge, and then things got even more bizarre when in an act of clear PBOC intervention, the CNY dropped to the lowest since August 2013 as concerns about the global carry trade's impact on China (as noted here previously) start to reverberate. We will have more to say about China's Yuan intervention, but what should be noted is that the Shanghai Composite has tumbled nearly 10% in the past week, and was down another 2% overnight and is once again just barely above 2000, a level it can't seem to get away from for years (which is fine: recall that the real bubble in China is not the stock but the housing market). Chinese property stocks dropped to 8-month lows as concern continues about bank's withdrawing some liquidity for the asset class.The USDJPY drifted along and after rising to a resistance level of about 102.600 has since slide just shy of its 102.20 support area which means US equity futures are now in the red, and concerns that the S&P 500 may not close at a new record high are start to worry the technicians.
A 65-mile stretch of the Mississippi near New Orleans remained closed Monday after two vessels collided and caused an oil spill on Saturday in foggy conditions about 30 miles west of New Orleans. As NBC news reports, the Lindsay Ann Erickson crashed with the Hannah C. Settoon, which was pushing two barges carrying barrels of light crude oil that spilled into the river. Clean-up efforts are underway.