What's up with the Troika?
- -0.07%: Germany Secures Record Low Funding Cost at Bond Auction (WSJ)
- Pentagon Sees Possible Role for U.S. Ground Forces Against Islamic State Militants (WSJ)
- China Joins ECB in Adding Stimulus as Fed Scales Back (BBG)
- Stealthy or Normal? Analysts Diverge on PBOC’s Action (BBG)
- Sony Forecasts Massive $2B Loss as Smartphones Lag (AP)
- Islamic State campaign tests Obama's commitment to Mideast allies (Reuters)
- Brent Crude Rebounds as Libya’s Sharara Oilfield Shut (BBG)
- Market calm over Scottish vote at odds with disaster warnings (Reuters)
In the past month, a group of radical Islamic extremists based in the Middle East beheaded at least 23 people and enforced a ban on Christianity by arresting a group of people for practicing the faith in a private home. No, we're not talking about ISIS. The real culprit is the Kingdom of Saudi Arabia, one of the America’s closest global allies.
We recently explained how ISIS remains so well funded but what was unclear was who exactly what purchasing their 'recently-provisioned' oil reserves? The assumption being some desperate third-world nation or some scheming offshore hedge-fund arbitrageur; however, as Sott.net reports, a senior European Union official has revealed that some EU member states have purchased oil from ISIL Takfiri militants despite their rhetoric against the group. The official declined to disclose any names but Turkey remains a front-runner (having already shunned President Obama) and potentially France (after their recent anti-Petrodollar comments).
Ukrainian President Petro Poroshenko faces rising criticism for his decision to delay implementation of part of a European Union deal to avoid threatened Russian retaliation. And this is why neither side can afford to blink, because the moment one side folds, its domestic support collapses. And blinking is precisely what Ukraine just did and with that it set in motion the events that will likely terminate prematurely the brief, irrelevant presidency of Ukraine's "Chocolate Baron" Poroshenko. It got so bad over the weekend, that former Prime Minister Yulia Tymoshenko, who was the person least actively supported by the CIA and US state department in Ukraine's less than peaceful transition in February, and thus lost a May presidential election to Mr. Poroshenko, said the delay in implementing the EU free-trade part of the pact until 2016 was "a betrayal of national interests."
Friday saw the largest demonstration in the history of Barcelona with 1.8 million people showing up, exceeding all previous records, calling for Catalan independence... and as Deutsche Bank warns "Catalonia matters!" seeing four key scenarios.
"We always encourage the people who are making those decisions to consider the very broad collateral damage of who are they really harming with sanctions."
- Rex Tillerson, CEO Exxon Mobil
While the world was poring through the details of the latest round of preannounced western sanctions against Russia - a round which Russia commented would have little actual impact - and just as excitedly awaiting the Kremlin's retaliation, which Putin warned is coming shortly, far from the glare of the center stage Europe quietly folded to a bigger Russian demand namely to delay the implementation of a Ukraine free trade deal by more than one year until the end of 2015 and likely beyond.
Moments ago, as was widely preannounced, the US Treasury unveiled its latest round of Russian sanctions. While the bigger picture was well-known, here are some of the highlights:
- U.S. SANCTIONS FOCUS ON FINANCIAL, ENERGY, DEFENSE SECTORS
- U.S. TREASURY ADDS SBERBANK TO SANCTIONS LIST,
- U.S. TREASURY SANCTIONS AFFECTS GAZPROM, GAZPROM NEFT, LUKOIL, ROSNEFT, AND SURGUTNEFTGAZ
- U.S. TIGHTENS DEBT FINANCING RESTRICTIONS TO 30 DAYS
And instantly: PUTIN: GOVT DRAFTING PROPOSALS TO RETALIATE AGAINST SANCTIONS
As usual, every European snaction (sic) has an equal and opposite Russian reaction. Here is how the Russian Foreign ministry responded to what van Rompuy announced earlier today would be a new round of Russian sanctions, which wil finally be enforced tomorrow. First from the Russian foreign ministry:
- NEW EU SANCTIONS AGAINST RUSSIA LEAVE RUSSIA NO OTHER CHOICE BUT TO GO FOR CERTAIN COUNTER-MEASURES - RUSSIA'S PERMANENT REP TO THE EU CHIZHOV
And the punchline from the foreign ministry statement: "Finally, give people a chance for peace." So Obama channels Dubya and Putin channels John Lennon. The New Normal sure is strange.
- Obama orders U.S. airstrikes in Syria against Islamic State (Reuters)
- Obama Relying on Mideast Allies to Counter Islamic State (BBG)
- Scotland Nationalists Claim U.K. Oil in 40-Year Campaign (BBG)
- Scottish Polls Embolden Catalans Pushing Rajoy for Vote (BBG)
- Royal Bank of Scotland: RBS will leave Scotland if voters back independence (Guardian)
- Most Hedge-Fund Managers Are Overpaid, Unigestion Says (BBG)
- China Inflation Softens to Four-Month Low (WSJ)
- Munger Hosts Groupies, Mocks Wall Street, Praises Buffett (BBG)
Following yesterday's confusing exuberance, which saw the sluggish market rise in the last hours of trading as the latest Scottish poll showed a reverse of the "Yes" momentum (and fading Gartman's latest reco of course), overnight European jitters have re-emerged once more following a speech by Catalonia's Artur Mas, who has long pushed for independence of the region, and who said that while there are different ways Catalonia can vote, the important issue is that Catalans vote somehow. Mas says Spanish govt will likely try to block Catalan vote "the reasons why the central government is blocking the vote are political not legal", which in turn has once again brought attention to Europe's artificial, unstable and temporary political and monetary union, which threatens a reversion of the nightmare days from 2012 when Mario Draghi was promising he would do everything in his power to send the EUR higher (as opposed to now).
Current finance minister Sapin, perhaps unsurprisingly, has admitted that France will miss EU deficit targets and needs more time to rein in public finances - proclaiming, as Reuters reports, that it may take until 2017 to bring it in line. Germany's response "nein, nein, nein" with Merkel demanding EU nations stick to commitments (rejecting any plans to 'bend rules') and Schaeuble blasting that Germany is "certain France is aware of its responsibilities." But the real stunner is that as France shows its utter ineptitude in managing an economy, EU President Juncker has placed former French finance minister Moscovici in charge of Europe's taxes and finances. German lawmakers exclaimed this is "not a wise personnel decision." The core splinters...
The dramatic rise in support for Scottish independence is nowhere more evident than in GBPUSD implied volatility, which has soared to 3-year highs as The Guardian reports a further poll showing next week's referendum is on a knife-edge with a gap of just 1 percentage point between yes and no. As one 'Yes Scotland' representative noted, "This new Scotland could be less than a fortnight away. But we must not be complacent. The scaremongering, dissembling and misrepresentation of the no campaign will be ramped up as we approach polling day." Of course, Scotland is not the only EU nation seeking separation, as we illustrate below, and as Goldman Sachs notes, there could be a broader impact on the risk premium across Europe as Scottish independence leads to other calls for more regional autonomy.
- Showtime for Apple: Big phones, smart watches and high expectations (Reuters)
- Bank of England Gov. Mark Carney Signals Spring Rate Rise (WSJ)
- Quebec Shows Scots Question Returns Even If Answer Is No (BBG)
- Hush money with a 9 year vesting period: Ex-SAC Fund Manager Martoma Sentenced to Nine Years in Prison (BBG)
- Dreams on hold, Brazil's 'new middle class' turns on Rousseff (Reuters)
- Fed to Hit Biggest U.S. Banks With Tougher Capital Surcharge (WSJ)
- Egypt court sentences Brotherhood leader, cleric to 20 years in jail (Reuters)