European Union

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US Holds Massive Nuclear Weapons Exercise "To Deter And Detect Strategic Attacks" Days After Russian Drill





Last week it was Russia, so now it is America's turn. As the U.S. Strategic Command reported earlier, the US will conduct Exercise Global Lightning 14 from May 12-16 in coordination with other combatant commands, services, and appropriate U.S. government agencies "to deter and detect strategic attacks against the U.S. and its allies." Among the units taking part in this drill are bomber wings that will fly approximately 10 B-52 Stratofortresses and up to six B-2 Spirit bombers "to demonstrate flexibility and responsiveness in the training scenarios throughout the continental U.S."

 
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US Futures Blast Out Of The Gate On More Empty Promises By The ECB





East Ukraine may be independent in a result which the Kremlin said it "respects" and hopes for a "civilized implementation" of the referendum results, and which assures further military escalation in the proxy war of east versus west, but stocks are happy to ignore it all again.  The reason: a positive close over in Asia (ex-Japan) after China’s State Council pledged to reform markets buoyed demand for risk, although it really is just a follow through to the furious VIX slam in the last hour of US Friday trading, which said otherwise, means buying of US equities was the reason to buy US equities. More importantly and adding to the early spoo euphoria were comments by ECB's Nowotny who said that interest rate cut alone would likely be too little to combat low inflation - suggesting a European QE is coming - also acted as a catalyst for the latest uptick in stocks: when trapped like the ECB and when "guiding" to future activity, if unable to actually execute it, may as well go all the way. End result, Spoos up nearly 0.5% because, well, others are buying spoos.

 
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Russia And The Ukraine – The Worrisome Connection To World Oil And Gas Problems





The US approach to the Russia/Ukraine situation reflects a serious misunderstanding of the situation. Russia has little choice but to try to raise the price of products it is selling, any way it can. It needs to cut out those who cannot afford its products, including the Ukraine. If Europe increasingly cannot afford its products, Russia needs to find customers who can afford them. There is little chance that the United States is going to be able to help Europe with its natural gas needs in any reasonable timeframe. Our best chance at keeping the global economy “working” for a little longer is to try to keep globalization working as best we can. This will likely require “making nice” to countries we are unhappy with, and putting up with what looks like aggression. Policymakers like to think that the US has more power than it really does, and like to encourage stories suggesting great power in the press. Unfortunately, these stories are not true; we need policymakers who understand our real situation

 
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Why Hasn't The U.S. Gone After Gazprom?





Amidst the deepening war of words over Moscow’s annexation of Crimea, U.S. President Barack Obama on April 28 added more Russian individuals and companies to a sanctions list that already included influential members of Russian President Vladimir Putin’s inner circle and Bank Rossiya, which has close ties to the Russian leadership. The new list freezes the assets of Igor Sechin, head of Russia's major oil company, Rosneft, six other individuals and 17 companies. Significantly, the new U.S. list does not include Alexei Miller, CEO of the Russian natural gas state monopoly, Gazprom. Although the European Union has imposed its own tough sanctions on 48 Russian individuals, Gazprom is arguably where daylight exists between the Obama administration and the EU on the issue of penalizing Moscow for its actions in Ukraine. The numbers make it clear why...

 
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March Trade Deficit Worse Than Expected; Decline From February Due To Winter Olympic Royalties End





And just like that Q1 GDP may have turned even more negative, after the March trade deficit ended up being worse than the $40.0 billion expected, printing at $40.4 billion. However, the one offset may be that the February deficit was revised from $42.3 billion to $41.9 billion, in effect being a wash to the Q1 GDP number, which as most already know, is set to be -0.4% at the first revision. Among the reasons for the (smaller than expected) decline in the deficit was a "decrease in imports of services mainly accounted for by a decrease in royalties and license fees, which in February included payments for the rights to broadcast the 2014 Winter Olympic Games." For once (not so) harsh weather (in USSR 2.0) was a boost to the economy.

 
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Frontrunning: May 6





  • Both sides bury dead as Ukraine slides towards war (Reuters)
  • Dollar wilts to 6 1/2-month low; shares drift (Reuters)
  • Draghi Grapples With Money Markets Signaling Recovery Too Early (BBG)
  • Foreign wristslaps: Credit Suisse Nears Record Tax Plea: Credit Suisse Settlement Expected to Exceed $1 Billion (WSJ)
  • OECD joins IMF in cutting global growth forecast, demanding moar QE from ECB  (WSJ)
  • Three Bankers Bolster Blankfein as Goldman Trading Sinks (BBG)
  • Strong performance from eurozone services sector (FT)
  • OECD Cuts Forecast for 2014 Global Growth; Urges ECB Action (WSJ)
  • Elite Colleges Don't Buy Happiness for Graduates (WSJ)
  • How Russia Inc. Moves Billions Offshore -- and a Handful of Tax Havens May Hold Key to Sanctions (BBG)
 
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Moldova Puts "Borders On Full Alert" As Latvia Admits "Society Has Fear"





The activity across the entire Eastern European region is starting to rattle the nerves of more than just the well-meaning sanctionsers in Washington. Today saw Moldova:

*MOLDOVA PUTS ITS BORDERS ON ALERT CITING UKRAINE UNREST

And Latvia:

"The society has fear... We know what it means to be under Russia."

Both nations are also extremely divided along ethnic Russian lines and leadership is gravely concerned that any further gains by a pro-Russian force in Ukraine will either a) spill over physically into their nations; and/or b) instill confidence in the deeply divided nations' Russian-speakers.

 
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Warning: Ukraine Is At A Flashpoint





As tensions between all parties in Eastern Europe boil over, Chris Martenson provides a brief tour through just some of the antics surrounding the US' involvement in bringing about change (you can believe in!) in Ukraine. We raise these items to counter the usual clutter and complete lack of context being provided in the US press and to illustrate that the US is already in pretty deep and therefore unlikely to back down now. Before we move on, do you not find it at all strange that the US media, usually extremely sensitive to anti-semitism, has given the McCain and Nuland support of the Svoboda party a complete pass? I find it to be like the case of "the dog that did not bark", meaning the silence reveals a very fickle moral compass at the heart of the western press. The demonization of Putin as the bad guy here is near complete in western media. But there’s plenty of mischief all around and, as usual, the US finds itself with some pretty strange bedfellows as it seeks an outcome it likes.

 
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"We Are Essentially At War" Ukraine Admits, After Dozens Killed





While there may be some confusion about why massive bond buying greeted yesterday's "better than expected" loss of 209 jobs in the 25-54 age group, dragging stocks down, the answer is actually very simple: there is a war in the Ukraine.

 
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Switzerland’s Role In The Gold Market





When one thinks of Switzerland, banking comes to mind easily but gold doesn’t as much. But, "it is said that the Swiss only love money... this is not true. They also love gold." A full two-thirds of the world’s gold goes through Switzerland and, in an average year, it refines grossly 70% of the world’s gold. Six of the gold refiners on the LBMA Good Delivery list make for 90% of global volume, and four of those are in Switzerland. Up until 1992, the Swiss franc’s 40% backing by gold was written in the country’s Constitution. When Switzerland became a member of the IMF it had to abandon this backing by gold. Today, Swiss citizens have asked for a referendum to be called in order to get back to that backing. As Gilles Labarthe wrote, "Switzerland is for gold what Bordeaux is to wine."

 
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EU Commissioner Warns "Any 'Sensible' Person Should Oppose Further Russia Sanctions"





Obama won't be happy! "It would harm everybody, the Europeans and the Russians," warned Olli Rehn, the European Commissioner for Economic Affairs, adding that "any 'sensible' European Union citizen should oppose further sanctions on Russia because of the economic cost for Europe." As Merkel and Obama cozy'd up for discussions this morning, we can only imagine the promises being made if only she would support his crusade (which she clearly indicated she did not want to). Perhaps she should check in with her nation's CEOs (who have vociferously demanded no more sanctions) and, as Rehn acknowledges, the slowing Russian economy is already having a “negative impact” on Finland and Austria, and "that economic fallout probably will spread to Germany, Poland and the Baltic countries."

 
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Ukraine Begins Army Offensive To Regain Slavyansk; Separatists Fight Back, Shoot Down Helicopters





After a few days of extended verbal foreplay, it was only a matter of time before Ukraine finally snapped and resumed a military operation to regain the lost cities in the east, especially once the warmongering IMF made it explicitly clear that should Ukraine lose control of pro-Russian controlled cities the $17 billion bailout package would be lost too. Sure enough, early this morning Kiev launched a military operation to regain control of the pro-Russian separatist stronghold of Slovyansk, overrunning numerous roadblocks and surrounding the city, officials said, but meeting stiff resistance from militants who managed to shoot down at least one helicopter.

 
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France Plays Russian Roulette: Why Europe Is Scared Of Sanctions Against Russia





While everyone is by now fully aware just how dependent Europe is on Russia's energy supplies (and most are aware of the "nonsense" that the US will fill any gap if Russia steps up its actions - which Barroso said wouldn't happen because "Russia has self-interest not to play the energy card") but few are truly aware of the scale of contagious debt-driven defaults that could occur if the US (and a reluctant Europe) decide to undertake more aggressive economic sanctions, which, as Germany's Europe minister stated today, "are on the table." As the following chart of Europe's domestic bank exposure to Russia show, Roth's warning that Russia's retaliation could mean "anything is possible," is a major problem for the Germans, Italians, and most of all - The French.

 
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IMF Approves Loan (To Pay Ukraine's Gazprom Bill): Putin 1 - 0 IMF





After 'billing' Ukraine this morning, Gazprom must be jubilant this evening as news exudes from Washington that...

  • *IMF APPROVES UKRAINE LOAN OF $17 BLN OVER TWO YEARS
  • *UKRAINE EXPECTS FIRST TRANCHE OF IMF AID MAY 5-MAY 8: FIN MIN

But,

  • *IMF SAYS IMMEDIATE UKRAINE LOAN DISBURSEMENT TO BE $3.2 BLN

So that won't even cover the $3.49bn they already owe to Gazprom? (In fact, $2.2bn is approved for dissemination to Gazprom)

 
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