Norway

With Western nations heavily indebted, including the hugely indebted U.S.,  Russia looks like the only realistic source of such funds. Geopolitical risk remains very much underestimated and there remains the risk of financial, economic and currency wars where the Kremlin uses gold as a geopolitical weapon to undermine the dollar.  

This week markets are likely to focus on a few important data prints in DMs, including Philly Fed in the US (expect solid expansionary territory) and 1Q GDP releases in the Euro area (with upside risks). In DMs, the highlights of the week include [on Monday] Japan’s trade balance data and Australia business conditions; [on Tuesday] US retail sales, CPI in Italy and Sweden; [on Wednesday] US PPI, Euro area IP, CPI in France, Germany and Spain; [on Thursday] US Philly Fed, CPI, capacity utilization, Euro area and Japan GDP; and [on Friday] US Univ. of Michigan Confidence. In the US, we expect Philly Fed to print in solidly expansionary territory (at 14, similar to consensus) and to inaugurate what we call the active data period of the month. We also expect CPI inflation to print at 0.3% mom (similar to consensus), and core CPI inflation at 0.18% mom (slightly above consensus).

...What’s left for the Empire of Chaos is to pray for chaos to keep spreading across Ukraine, thus sapping Moscow’s energy. And all this because the Washington establishment is absolutely terrified of an emerging power in Eurasia. Not one, but two – Russia and China. Worse: strategically aligned. Worse still: bent on integrating Asia and Europe. So feel free to picture a bunch of Washington angry old men hissing like juvenile delinquents: “I don’t like you. I don’t want to talk to you. I want you to die.”

The Nuclear Core Has Finally Been Found … Scattered All Over the World

This week, markets are likely to focus on US ISM Nonmanufacturing, services and composite PMIs in the Euro area (expect increases), ECB’s Monetary Policy Decision (expect no change in policy until further ahead), and Congressional testimony by Fed’s Yellen.

The coming week will be busy in terms of data releases in the US; highlights include an improvement in consumer confidence, anemic 1Q GDP growth, and solid non-farm payrolls (consensus expects 215K). Wednesday brings advanced 1Q GDP - consensus expected a pathetic 1.1% qoq, on the back of what Goldman scapegoats as "weather distortions and an inventory investment drag", personal consumption (consensus 1.9%), and FOMC (the meeting is not associated with economic projections or a press conference). Thursday brings PCE Core (consensus 0.20%). Friday brings non-farm payrolls (consensus of 215K) and unemployment (6.6%). Other indicators for the week include pending home sales, S&P/Case Shiller home price index, Chicago PMI, ADP employment, personal income/spending, and hourly earnings.

For most of Canada's existence, it has been regarded as the weak neighbor to the north by most Americans.  Well, that has changed dramatically over the past decade or so.  Back in the year 2000, middle class Canadians were earning much less than middle class Americans, but since then there has been a dramatic shift.  At this point, middle class Canadians are actually earning more than middle class Americans are.  The Canadian economy has been booming thanks to a rapidly growing oil industry, and meanwhile the U.S. middle class has been steadily shrinking.  If current trends continue, a whole bunch of other countries are going to start passing us too.  The era of the "great U.S. middle class" is rapidly coming to a bitter end.

If Cheniere Energy's CEO calling the Obama plan to export LNG to Europe "nonsense" is not enough, the following will provide more than enough color to explain why, as Peak Prosperity's Chris Martenson pointedly remarks, recent entreaties by various US politicians to help wean Europe off of Russian gas are simply preposterous.  The numbers don't add up, and they never will.

The latest development out of NATO, which was already largely expected, must be part of the just announced elaborate de-escalation scheme.  From VOA: "NATO members are sending navy ships to the Baltic Sea to increase the security of the alliance's eastern European allies in response to the Ukraine crisis. NATO's Maritime Command said Thursday it is sending four minesweepers and a support vessel to the Baltic Sea. The ships are from Norway, the Netherlands, Belgium and Estonia."

There is a reasonably quiet start to the week before we head into the highlights of the week including the start of US reporting season tomorrow, FOMC minutes on Wednesday and IMF meetings in Washington on Friday. On the schedule for today central bank officials from the ECB including Mersch, Weidmann and Constancio will be speaking. The Fed’s Bullard speaks today, and no doubt there will be interest in his comments from last week suggesting that the Fed will hike rates in early 2015.

Dr Faber discussed the importance of not owning gold stored in the U.S., the mystery of the Fed gold, why Singapore is safest for gold storage, the risks of bitcoin and how small countries should revert to national currencies. The must watch interview can be watched here ...

With the story of the day undoubtedly Yellen's first (bungled) press conference, it was easy to forget that the second coming of the Cold War is raging in the Ukraine. For those curious what they may have missed, here is a summary of the major events that took place in the troubled country this afternoon. Highlights from AP, AFP, Reuters, WSJ, Bloomberg, RIA and Interfax.

With the Sunday Crimean referendum seemingly unstoppable now, its outcome certain, it is set to unleash a chain of events that is not entirely predictable but is at best, ominous, as it will involve the launch of trade, economic and financial sanctions against Russia (despite China's stern disapproval), which will lead to a "symmetric" response in kind by Moscow. And in a worst case escalation scenario, should game theory completely collapse and everyone starts defecting from a cooperative equilibrium state, the first thing to go will be European gas exports from Russia, anywhere from one day to indefinitely. So which European countries are most exposed to the whims of Gazprom? The following map from the WSJ, shows just how reliant on Russian gas exports most European countries are.

"I don’t think they’ve solved anything. I think they’ve compounded the underlying problems that caused the last crisis, and so now the next crisis will be that much worse because of what the central banks did, in particular the Federal Reserve...The Fed is building an economy that is completely dependent on that cheap money. And so if you take it away, the economy implodes, but if you don’t take it away, then it’s worse." The idea is to preempt capital controls - "get out the window before it slams shut!"

This week brings a slew of central bank meetings: At the forefront will be the BOJ meeting on Tuesday where no changes to monetary policy are expected. However, we will be watching the commentary closely for hints to further monetary easing in the coming months. Goldman, and others, still expect the BOJ to provide additional stimulus in the second quarter of this year as the impact of the consumption tax hike on the economy becomes visible - it is that expectation that sent the USDJPY above 100 in late 2013 and any disappointment by the BOJ will certainly have an adverse impact on the all important Yen carry pair.  In terms of the key data to watch this week, the themes of recent weeks remain the same: US activity data, with retail sales and the U. Michigan Consumer sentiment survey the main releases, European inflation trends (French and German HCPI data on Thursday and Friday, respectively), and finally external balances in EM. Within that group, the latest data points for trade and current account balances in India, Turkey and South Africa will receive the most attention.