The dismal news overnight that a Malaysian Airlines jet, carrying over 200 passengers and crew, had "gone missing" appears to have become considerably more troublesome. News this morning of pools of oil off the Vietnam coast - suggestive of a crash - are dreadful but, as NBC News reports, perhaps more crucially, U.S. officials told NBC News on Saturday they are investigating terrorism concerns after two people listed as passengers on the missing Malaysia Airlines jet turned out not to be on the plane and had reported their passports stolen (while in Thailand).
Many observers have focused on the relative paucity of the West's diplomatic and military options in Ukraine. Others focus on Russia's sources of leverage: cutting off natural gas to western Ukraine and Europe and/or dumping its reserves of U.S. dollars. All those focusing on the West's lack of leverage are forgetting that the Empire retains multiple way of striking back. For example, bringing the costs of misadventure home to Russia's politically influential 1/10th of 1%.
- High Stakes Limit Bid to Cow Putin (WSJ)
- Russia says can't control Crimea troops ahead of U.S. talks (Reuters)
- Crimea Crisis Haunted by Ghosts of Bungled World War I Diplomacy (BBG)
- Putin’s Ukraine Gambit Hurts Economy as Allies Lose Billions (BBG)
- Germany Says It Provided Equipment and Training to Ukraine's Riot Police (WSJ)
- China signals focus on reforms and leaner, cleaner growth (Reuters)
- China Shares in Hong Kong Decline Amid Default Concern (BBG)
- Beijing Signals New Worry on Growth (WSJ)
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.
We had previously warned that Putin's "trump card" had yet to be played and with Obama (and a quickly dropping list of allies) preparing economic sanctions (given their limited escalation options otherwise), it was only a matter of time before the pressure was once again applied from the Russian side. As ITAR-TASS reports, Russia's Gazprom warned that not only could it cancel its "supply discount" as Ukraine's overdue payments reached $1.5 billion but that "simmering political tensions in Ukraine, that are aggravated by inadequate economic conditions, may cause disruptions of gas supplies to Europe." And with that one sentence, Europe will awaken to grave concerns over Russia's next steps should sanctions be applied.
Perhaps surprisingly, Germany's DAX index was the weakest in Europe today as the Russia-Ukraine debacle escalates, underperforming high-beta "safe-havens" like Spain and Italy (which also fell rather notably). Despite the 2.5% to 3% declines across all major European equity markets, sovereign bond spreads barely budged! Seriously, Italian and Spanish bond spread rose a mere 5bps on the day. European banks collapsed 3.6%, its biggest drop in 6 months. EURCHF continues to collapse, now at 14 month lows (-200 pips today) as 2Y Swiss rates close at -11.4bps (the lows of 2014).
The phone-calls are flying. On the heels of yesterday's Obama-Putin "discussion", today has seen Merkel drop him a line (with the resultant claim that Putin has accepted a "fact-finding mission" despite all evidence to the contrary); and then Merkel, Obama, and Cameron got on a party-line to discuss "sanctions". In the face of this seriousness, we suspect, however, any of the calls to Putin all had a similar dialogue...
By now it was only a formality, as the likelihood of the G-8 meeting taking place in Sochi in June, months after the Russian invasion of the Ukraine, was zero at best. So the fact that G-8, pardon, G-7 countries announced the halting of their preparation for a June vacation on the Black Sea should not surprise anyone.
Near-Bankrupt Rome Bailed Out As Italy Unemployment Rises To All Time High, Grows By Most On Record In 2013Submitted by Tyler Durden on 03/01/2014 14:34 -0500
A few days ago, we reported that, seemingly out of the blue, the city of Rome was on the verge of a "Detroit-style bankruptcy." " And just as expected, yesterday Rome was bailed out. What is certain is that this year will not be the last one Rome is bailed out either. In fact, it will continue getting rescued for years to come because contrary to the propaganda, the Italian economy continues to get worse with every passing month, yields on Italian bonds notwithstanding. Ansa reports that in January the Italian unemployment rate rose to a record 12.9%, and that "reducing Italy's "shocking" rate of unemployment must be the government's highest priority, Premier Matteo Renzi said Friday." How, by pretending everything is ok, kicking the Roman can and hoping things improve by bailing out anyone that is insolvent? Putting 2013 in perspective, this is the year when according to national statistical agency Istat, some 478,000 jobs were lost in Italy in 2013, the worst year since the global financial crisis of 2008-2009, with an average annual jobless rate of 12.2% last year.
A weekly technical outlook for the major currencies.
With European peripheral bond yields collapsing every single day to new all time lows (primarily driven by Europe's near-certainty that a US-style QE is imminent as we first showed here in November, despite Mario Draghi's own words from November 2011 that a QE intervention is virtually impossible), increasingly more of Europe is trading just as safe, if not more, as the United States. And in keeping with the analogies, considering a major US metropolitan center, Detroit, recently went bankrupt, it is only fair that Europe should sacrifice one of its own historic cities to the gods of negative cash flows. The city in question, Rome, which as the WSJ reports, is "teetering on the brink of a Detroit-style bankruptcy."
- 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.
It’s like 34 drunken sailors holding each other up. That’s the best way I can think of to describe the latest product from the good idea factory that is the OECD. Over the weekend in yet another cushy five-star hotel, representatives from this unelected supranational bureaucracy announced plans for world governments to exchange all their citizens’ tax and financial data with one another. It’s a pathetic display of exactly the sort of tactics that governments embrace when they go broke. And most of these OECD countries ARE broke – Italy, Japan, the US, Spain, Greece, etc.