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Frontrunning: February 23

  • Tsipras Tamed as Economists Declare Greece Loses Austerity Fight (BBG)
  • Greece readies reform plans to first sign of leftist unrest (Reuters)
  • Yellen Faces Congress Amid Direst Threat to Fed Since Dodd-Frank (BBG)
  • The war must go on: Kiev says cannot withdraw heavy weapons as attacks persist (Reuters)
  • Ukraine fears spread of war after blast in eastern city (Reuters)
  • Denmark Dismisses Report It Could Consider Capital Controls (BBG)
  • Deadline Nears on Homeland Security Funding Impasse (WSJ)
  • Gross Fund Hurt by Oil’s Plunge Amid Bets on Energy Bonds (BBG)

Stocks Coiled To Soar On Any Positive Greek News

With the new and revised (until it is re-revised again to some future date), Greek D-Day set for today's third in the past 2 weeks Eurogroup meeting, every favorable headline serves as a springboard for ES-buying algos, while every negative headline is promptly ignored. And since this is Europe's style trial ballooning, there have been many of both with just these two hitting in the last hour:

  • GREECE, EURO ZONE NEAR DEAL ON PACKAGE, REUTERS CITES UNIDENTIFIED GREEK OFFICIAL
  • GREECE DID NOT GO FAR ENOUGH IN THEIR LATEST PROPOSAL: GREEK GVOERNMENT SPOKESMAN

Guess which one pushed ES into the green?

Frontrunning: February 19

  • Greece requests euro zone loan extension, offers big concessions (Reuters)
  • Germany Rejects Loan Request Saying Greece Must Meet Conditions (BBG)
  • Did the Fed Just Enter the Currency Wars (BBG)
  • French consumer prices fall for first time since 2009 (Reuters)
  • Oil falls sharply after U.S. crude inventories rise (Reuters)
  • High-Speed Firm Virtu Revives IPO Plans (WSJ)
  • Fed Tiptoes Into Rate-Hike Debate (Hilsenrath)
  • Rajoy’s Nemesis Is Back: Anti-Graft Editor Targets Vote (BBG)

Stocks Rebound On Hopes Of Resolution To Greek Impasse

After yesterday's FOMC Minutes, despite a huge dovish reversal by the Fed - one which increasingly puts its "credibility" and reputation at risk - stocks were unable to close green, or even above 2100, for one simple reason: uncertainty with the fate of Greece. Overnight there has not been much more clarity, when as previously reported Greece submitted a 6 month extension request to its master loan agreement but not to its bailout extension, a nuance lost in the annals of diplomacy. But is this the much-awaited Greek capitulation? Or will the Eurogroup reject this too? The answer may be available in a few hours after an emergency Eurogroup meeting due later today. However, as usual stocks are ready to "price in" yet another Greek conflict resolution, and after futures were lower by 7 points overnight, were up 4 points at last check: a rebound which will not correct if the latest Greek "compromise" fails to deliver.

Obama To Allow "Moderate" Syrian Rebels Call In B-1B Bombers For Air Support

While Obama desperately tries to stick to his now crushed "Nobel peace prize winner" image, by not succumbing to an all-out land war in the one nation where his progressive "pacifism" brought him fame (and according to some, the presidency), namely Iraq, the rest of militant, "interventionist" US foreign policy is rapidly starting to resemble that waged by the most brutally rabid, neo-con Republican leader. Case in point an absolute stunner reported minutes ago by the WSJ, according to which the White House has decided to provide pickup trucks equipped with mounted machine guns and radios for calling in U.S. airstrikes to some moderate Syrian rebels aided by American B-1B bombers!

Futures Rebound On Collapse In Greek Negotiations, After Europe's Largest Derivatives Exchange Breaks

There was a brief period this morning when market prices were almost determined by non-central banks. Almost. Because shortly before the European market open, a technical failure on the Eurex exchange prevented trading in euro-area bond futures the day after Greek debt talks collapsed. And sure enough, after initially seeing significant downward pressure, which nobody could capitalize on of course courtesy of the broken Eurex, risk both in Europe and the US has since rebounded courtesy of the ECB, SNB and BIS, led by the EURUSD (because a Grexit threat which according to Commerzbank has been raised from 25% to 50% is bullish for the artificial currency), which is now at the level last seen just before yesterday's negotiations broke down, and US futures are about to go green.

German DAX Rises Above 11,000 For First Time After European GDP Surprises To Upside

Who would have thought all it takes for Eurozone Q4 GDP to print above expectations, even if by the smallest of possible margins - one which even the Chinese goalseek-o-tron bows its head down to in respect - which at 0.3% Q/Q was above the 0.2% expected and above Q3's 0.2%, was for Europe to admit it has finally succumbed to deflation. Oh, and for the ECB to admit the situation has never been more serious by launching Q€. Oh, and add the "estimated contribution" to GDP from hookers and drugs. Put all that together and on an annualized basis, the European economy grew by 1.4%. Whatever the reason, Q4 GDP was the best print since Q1, even as Germany blew not only consensus of 0.3%, but the highest GDP estimate of 0.6% out of the water when it reported that courtesy of a spike in spending, its economy grew by 0.7% in the fourth quarter, up from the near-recessionary 0.1% in Q3. That, together with QE and ZIRP now raging across the continent, was enough to push the DAX above 11,000 for the first time ever.

Want To Know Where The Next Bear Market Is? Look Around!

If you want to know where the next bear market is, look around at the people who are enjoying unimaginable wealth. Mr. Market has a habit of correcting things over time. My guess is that you won’t be paid $200K/year to drive trucks in North Dakota for much longer. The best thing about capitalism is that everything is temporary. The last time around, people had the stock, could have sold it, and didn’t. Nothing lasts forever.

Frontrunning: February 12

  • 'Glimmer of hope' for Ukraine after deal at Minsk peace summit (Reuters)
  • Ruble Rebounds, Russian Stocks Surge on Ukraine Cease-Fire Deal (BBG)
  • Greek PM Tsipras in Brussels as clock ticks on EU bailout (Reuters)
  • Emerging-Market Currencies Rout Not Over for Traders (BBG)
  • Little noticed, new Saudi king shapes contours of power (Reuters)
  • In Wake of Financial Crisis, Goldman Goes It Alone (WSJ)
  • AmEx Is Losing Its Millionaires (BBG)
  • Thousands to Lose Health Insurance Over Residency Questions (WSJ)

Ukraine Ceasefire Deal Agreed After Negotiations All-Nighter; Doubts Remain About Its Implementation

It would have simply been too much to handle for Europe and the risk off algos if hours after the embarrassing failure of the emergency Eurogroup meeting in Brussels failed to reach any deal involving Greece, the Ukraine ceasefire negotiations in Minsk were also to fall apart. Again. Which is probably why after a marathon session lasting 17 hours, and following repeated trial balloons that a deal had and/or had not been reached, a short while ago all major media outlets were delighted to finally blast some Risk On news namely that leaders of France and Germany brokered a renewed deal to end Ukraine’s 10-month civil war in the separatist eastern region, which means that we have a Minsk-signed Ukraine ceasefire. Again.

Fourth Turning: The Shadow Of Crisis Has Not Passed - Part 2

The dominoes are beginning to fall. The initial spark in 2008 has triggered a series of unyielding responses by those in power, but further emergencies and unintended consequences juxtapose, connect and accelerate a chain reaction that will become uncontainable once a tipping point is reached. The fabric of society is tearing at points of extreme vulnerability, with depression, violence and war on the foreseeable horizon. Mr. President, the shadow of crisis has not passed. The looming shadow of crisis grows ever larger and darker by the day as this Crisis enters the most dangerous phase, where the existing social order will be swept away in a torrent of carnage and ferocious struggle. We are not a chosen people. We are not immune from dire outcomes.

Market Wrap: Stocks Drift, Dollar Stronger, Oil Snaps Rally, Treasurys Slide On Microsoft Deal

So far it has been largely a repeat of the previous overnight session, where absent significant macro drivers, the attention again remains focused both on China, which reported some truly ugly inflation (with 0.8% Y/Y CPI the lowest since Lehman, just call it deflation net of the "goalseeking") data (which as usually is "good for stocks" pushing the SHCOMP 1.5% higher as it means even more easing), and on Greece, which has not made any major headlines in the past 24 hours as patience on both sides is growing thin ahead of the final "bluff" showdown between Greece and the Eurozone is imminent. The question as usual is who will have just a fraction more leverage in the final assessment - Greece has made its ask known, and it comes in the form of 10 billion euros in short-term "bridge" financing consisting of €8 billion increase in Bills issuance and €1.9 billion in ECB profits, as it tries to stave off a funding crunch, a proposal which will be presented on the Wednesday meeting of euro area finance ministers in Brussels. The question remains what Europe's countrbid, if any, will be. For the answer: stay tuned in 24 hours.

Europe, US Risk Off After Greece Rejects European Ultimatum, Ukraine Peace Talks Falter

In the absence of any notable developments overnight, the market remains focused on the rapidly moving situation in Greece, which as detailed over the weekend, responded to Europe's Friday ultimatum very vocally and belligerently, crushing any speculation that Syriza would back down or compromise, and with just days left until the emergency Eurogroup meeting in three days, whispers that a Grexit is imminent grow louder. The only outstanding item is what happens to the EUR and to risk assets: do they rise when the Eurozone kicks out its weakest member, or will they tumble as UBS suggested this morning when it said that "the escalation of tensions between the Greek government and its creditors is so far being shrugged off by investors, an attitude which is overly simplistic and ignores the risk of market dislocations" while Morgan Stanley adds that a Grexit would likely lead to the EURUSD sliding near its all time lows of about 0.90.

Shunned Greece Agrees To Boost Economic Cooperation With Russia

It's been an odd few days for Greece's new PM Alexis Tsipras. From being lambasted by Jeroen Dijsselbloem, shunned by Angela Merkel's henchmen, holding hands with Jean-Claude Juncker, and losing a key funding channel from Mario Draghi; Tsipras' anti-austerity platform has been 'supported' by Barack Obama and he has been invited for a visit to Russia by Vladimir Putin, and reminded that Russia is willing (and able) to provide financial aid if asked by finance minister Anton Siluanov. So headlines this evening from ekathimerini should not be entirely surprising that Putin and Tsipras have agreed to boost cooperation in the economy and energy, tourism, culture and transport sectors; and discussed the possible creation of a pipeline to carry natural gas from Russia to Europe via Turkey and Greece.