Recall that about a month ago we reported that shortly after France was stunned to see its largest bank slammed by its bestest buddy, the US, with a record $9 billion fine, "France responded to the fine by announcing it will train hundreds of Russian seamen to operate the French-Made Warship", the Mistral. In other words, for all the angry rhetoric of sanctions against Russia, France was merely the latest country to admit that it too can't exist without Russian business (not to mention natural gas) even if, or especially if, it means incurring US wrath which is taken out on its banking institutions. After all, if the US is engaging in scorched earth tactics France needs a stable trade partner, especially if it is one who turns on the gas, so to speak. However, it turns out that was only a small part of the story. Earlier today, when speaking to Russian diplomats in Moscow, Vladimir Putin accused the U.S. of blackmailing France to scrap a contract to sell Russia Mistral warships by offering to cut a record $8.97 billion fine against BNP Paribas.
The Next Global Meltdown Is Baked In: Connecting The Dots Between Oil, Debt, Interest Rates And RiskSubmitted by Tyler Durden on 07/01/2014 11:05 -0400
The bottom line is the Fed can only keep the machine duct-taped together by suppressing the market's pricing of risk. Suppressing the market's ability to price risk is throwing common-sense fiscal caution to the winds; when risk arises from its drugged slumber despite the Fed's best efforts to eliminate it, we will all reap what the Fed has sown.
- Ceasefire over, Ukraine forces attack rebel positions (Reuters)
- No Good Iraq Options for Obama as Russia, Iran Jump In (BBG)
- Japan’s Cabinet Agrees to Allow Military to Help Defend Allies (BBG)
- Obama says to reform immigration on his own, bypassing Congress (Reuters)
- South Stream Pipeline Project in Bulgaria Is Delayed (NYT)
- Foreign Banks Still in the Dark About Missing Metals in China (WSJ)
- Quelle indignity: several bankers at French bank BNP Paribas will face demotions and cuts to their pay and bonuses (FT)
- Symantec Warns of Hacker Threat Against Energy Companies (BBG)
- Shrinking Office Spaces Slow Recovery (WSJ)
- Rand Paul Slams ‘Fat Cats’ With Hedge Fund in Top Donors (BBG)
Earlier today Reuters reported that the European Commission said on Monday it had approved a Bulgarian request to extend a credit line of 3.3 billion levs ($2.30 billion) in support of banks that have come under speculative attack. “The Commission concluded that the state aid implied by the provision of the credit line is proportionate and commensurate with the need to ensure sufficient liquidity in the banking system in the particular circumstances,” the EU executive said in a statement. The statement said Bulgaria’s banking system was “well capitalised and has high levels of liquidity compared to its peers in other member states. For precautionary reasons, Bulgaria has taken this measure to further increase the liquidity and safeguard its financial system”. The move follows runs by jittery depositors on two major Bulgarian commercial banks in the space of a week. And while this latest backstop of the Bulgarian bank system should provide a respite from bank insolvency fears (if only for the time being), one wonders about Europe's true intentions.
A few days ago, when we wrote our "explainer" on the need for Russia to have an alternative pathway for its gas, one which bypasses Ukraine entirely and as the current "South Stream" framework is set up, crosses the Black Sea and enters Bulgaria before passing Serbia and Hungary on the way to the Central European energy hub located in Baumgarten, Austria, we said that "one short month after Putin concluded the Holy Grail deal with Beijing, he not only managed to formalize his conquest of Europe's energy needs with yet another pipeline, one which completely bypasses Ukraine for numerous reasons but mostly one: call it a Plan B." Today we find just what said Plan B is. As Itar-Tass reports, citing Gazprom CEO Alexei Miller, "Russia’s gas giant Gazprom does not rule out gas transit via Ukraine may be stopped completely."
- Facebook Researchers Manipulated News Feeds in 2012 Study (BBG)
- Argentina at Brink of Default as $539 Million Payment Due (BBG)
- Hedge fund correlation risk alarms investors (FT)
- As China Flexes Muscle, Obama Frets Over Rival’s Weakness (BBG)
- As caliphate declared, Iraqi troops battle for Tikrit (Reuters)
- Dubai Caps Worst Month Since 2008 as Real Estate Stocks Tumble (BBG)
- Russian Advisers Ready Iraq to Use New Combat Aircraft (BBG)
- Blackstone Readies Big-Bet Hedge Fund (WSJ) - so what was GSO?
- Pope says communists are closet Christians (Reuters)
- Thomson Reuters revising FX trading standards (Reuters)
With Petroshenko agreeing to extend today's cease-fire deadline for 3 days, the Russians, unfortunately, are not optimistic after the 'expert-level' talks in Europe. Given this, it appears Russia is preparing its retaliation for possible further sanctions that are being waved by Europe and the US. As AP reports, Russia's state-controlled gas company, Gazprom, says it could limit supplies to European customers that intend to re-sell the natural gas on to Ukraine. Whil enot naming specific countries, the Gazprom CEO explained he needed to clamp down on the so-called reverse-flow supplies the the cut-off Ukraine as they were "half-fraudulent schemes."
Abe's honeymoon is over. Following nearly two years of having free reign to crush the Japanese economy with his idiotic monetary and fiscal policies - but, but the Nikkei is up - the market may have finally pulled its head out of its, well, sand, and after last night's abysmal economic data from Japan which saw not only the highest (cost-push) inflation rate since 1982, in everything but wages (hence, zero demand-pull) - after wages dropped for 23 consecutive months, disposable income imploded - but a total collapse in household spending, the USDJPY appears to have finally been dislodged from its rigged resting place just around 102. As a result the 50 pip overnight drop to 101.4 was the biggest drop in over a month. And since the Nikkei is nothing but the USDJPY (same for the S&P), Japan stocks tumbled 1.4%, their biggest drop in weeks, as suddenly the days of the grand Keynesian ninja out of Tokyo appear numbered. Unless Nomura manages to stabilize USDJPY and push it higher, look for the USDJPY to slide back to double digits in the coming weeks.
As the war in Iraq goes from bad to worse, and as the Obama administration is tired of being humiliated by a bunch of extremist Al Qaeda tribesman, the president is once again pivoting to the place where it all started. It is here where he intends on arming the local Al Qaeda jihadists once again, and will request half a billion dollars from Congress to achieve just that. The good news: Obama will only arm just the "moderate" al Qaeda forces. So there is nothing to fear.
- Minorities Seen Driving U.S. Household Growth (Reuters)
- GM prepares to recall some Cruze sedans with Takata air bags (Reuters)
- PBOC Halts Repos as China Money Rate Climbs to Seven-Week High (BBG)
- Ukraine Optimism Wavers on Peace as Cease-Fire Winds Down (BBG)
- Economic Rebound Seen Undercut by Weak Pay as Vote Winner (BBG)
- Cracks Open in Dark Pool Defense With Barclays Lawsuit (BBG)
- The Survivor: How Eric Holder outlasted his (many) critics (Politico)
- IBM, Lenovo Tackle Security Worries on Server Deal (WSJ)
- Militants take Iraqi gas field town, president calls parliament session (Reuters)
- Carney Surprises Confounding Markets as BOE Manages Guidance (BBG)
Following yesterday's S&P surge on the worst hard economic data (not some fluffy survey conducted by a conflicted firm whose parent just IPOed and is thus in desperate need to perpetuate the market euphoria) in five years, there is little one can comment on how "markets" react to news. Good news, bad news... whatever - as long as it is flashing red, the HFT algos will send momentum higher. The only hope of some normalization is that following the latest revelation of just how rigged the market is due to various HFT firms, something will finally change. Alas, as we have said since the flash crash, there won't be any real attempts at fixing the broken market structure until the next, and far more vicious flash crash - one from which not even the NY Fed-Citadel PPT JV will be able to recover. For now, keep an eye on the USDJPY - as has been the case lately, the overnight USDJPY trading team has taken it lower ahead of the traditional US day session rebound which also pushes the S&P higher with it. For now the surge is missing but it won't be for longer - expect the traditional USDJPY ramp just before or as US stocks open for trading.
Turkey's "200 Tons Of Secret Gold" Trade With Iran: The Biggest, Most Bizarre Money Laundering Scheme Ever?Submitted by Tyler Durden on 06/25/2014 22:18 -0400
While Ben Bernanke once said that "gold is not money", it appears China, Dubai, and most especially Turkey and Iran would disagree. On the heels of the "Petrogold" wars we discussed previously, a leaked report of a secret plot to 'juice' Turkey's trade balance exposes gold at the heart of "one of the most complex illicit finance schemes [prosecutors] have seen."
Putin Scores Another Historic Victory: Austria Signs South Stream Pipeline Deal In Defiance Of EuropeSubmitted by Tyler Durden on 06/25/2014 07:23 -0400
In the great chess-vs-checkers game, Putin just keeps steamrolling his clueless opposition.
The story of energy and the economy seems to be an obvious common sense one: some sources of energy are becoming scarce or overly polluting, so we need to develop new ones. The new ones may be more expensive, but the world will adapt. Prices will rise and people will learn to do more with less. Everything will work out in the end. It is only a matter of time and a little faith. In fact, the Financial Times published an article recently called “Looking Past the Death of Peak Oil” that pretty much followed this line of reasoning. However, energy common sense doesn’t work because the world is finite.
No one ever thinks about the water.. until they have to. Hours ago, the local gas company in Kiev (Kyivenergo) announced that they would be shutting off the hot water supply to most of the city. While the official reason for the hot water shutoff is that Kyivenergo (the energy supplier to Kiev) owes a debt to the Ukrainian state gas company (Naftogaz) of over $100 million; it’s just a quirky little coincidence that this debt suddenly became materially important only one week after Russia shut off natural gas supplies to Ukraine. Funny thing is that Ukrainian politicians for years had been telling people not to worry about this. Clearly this turned out to be a big fat lie.