As was reported earlier, the Turkish premier, embroiled in what increasingly appears a career terminating corruption and embezzlement scandal (it is not exactly clear yet just how involved the CIA is in this particular upcoming government overthrow), blocked Turkey's access to Twitter last night, hours after vowing to "destroy twitter." The idiocy of this escalation against dissemination of information in the internet age needs no comment. Well maybe one. This is what we said in our post from this morning: "since Turkey will certainly not stop at just Twitter, here is what is coming next: "Last week, Erdogan said the country could also block Facebook and YouTube." It now appears that at least half of this threat is about to materialize because moments ago Google just announced that it would not remove a previously uploaded video, one in which Erdogan tells his son to hide money from investigators (one which can be seen here), and which Erdogan demanded be pulled from Google (seemingly unaware that by doing so he simply made sure that everyone saw it). This means that within days, if not hours, Turkey will likely block Google-owned YouTube, if not Google itself.
In the hopes of maintainijng his status quo amidst a plethora of corruption probes and allegations, Turkey's Erdogan has blocked Twitter after pledging to "destroy" the social media platform after troubling leaks occurred appearing to confirm his corruption. As one can imagine, the Turkish people (among others) are not happy...
When we reported early yesterday that Turkey's Prime Minister Erdogan threateningly warned that since Twitter had ignored court orders to remove content related to a government corruption scandal., that he would "destroy Twitter" and that "we'll dig up Twitter - all of them - from the roots," he raged, "they'll see the power of the Republic of Turkey" it may not have been quite clear what he meant. A few hours later it was revealed, when virtually all Twitter access was blocked in Turkey ten days ahead of the general election in a move that has already enraged the nation and resulted in a powerful public outcry.
- Australia says nothing spotted in search for plane (AP)
- Putin looks to Asia as West threatens to isolate Russia (Reuters)
- China Billionaire Builds Metals With Dreyfus, Glencore Hires (BBG)
- China Beige Book Says Economy Slowing (BBG)
- Caterpillar Said to Be Focus of Senate Overseas Tax Probe (BBG)
- US Cancels Summit With Divided Group of Gulf Nations (WSJ)
- Cyprus defense minister suffers aneurysm (AP)
- Abe to zero in on economy as tax hike looms (Nikkei)
- Europe strikes deal to complete banking union (Reuters)
Once again there has been little fundamental news or economic data this morning in Europe with price action largely driven by expiring option contracts. In terms of key events, Putin says Russia should refrain from retaliating against US sanctions for now even as Bank Rossiya discovered Visa and MasterCard have stopped servicing its cards, and as Putin further added he would have his salary sent to the sanctioned bank - the farce will go on. Continuing the amusing "rating agency" news following yesterday's policy warning by S&P and Fitch on Russian debt (was that a phone call from Geithner... or directly from Obama), Fitch affirmed United States at AAA; outlook revised to stable from negative, adding that the US has greater debt tolerance than AAA peers. Perhaps thje most notable move was in Chinese stocks which rallied overnight after major domestic banks said to have stopped selling trust products which were blamed for encouraging reckless borrowing and diluted credit standards. Speculation of further stimulus and the potential introduction of single stock futures also helped the Shanghai Comp mark its biggest gain of 2014 closing up 2.7%.
It appears the madness is contagious. Turkish Prime Minister Recep Tayyip Erdogan, embroiled in an ongoing and huge corruption probe, lashed out at "international conspiracies" in a speech at a rally in Bursa. "We'll dig up Twitter - all of them - from the roots," he raged, "they'll see the power of the Republic of Turkey." With the looming elections - sure to fair and equitable to all - he warned he would "settle scores" after winning. Indeed...
It took only a 60 USDJPY pip overnight ramp to send US equity futures 20 points off the overnight lows in the immediate aftermath of the Crimean referendum, which from a massive risk off event has somehow metamorphosed into a "priced in", even welcome catalyst to buy stocks. The supposed reasoning, and in a world in which Virtu algos determine the price action of the USDJPY from which all else flows based solely on momentum we use the word reasoning "loosely", is that there was little to indicate that the escalation between Russia and Ukraine was set to accelerate further. As we said: an annexation is now seen as risk off, something even Goldman appears unable to comprehend (more on that shortly). In macroeconomic news, European inflation - at least for the Keynesians - turned from bad to worse after the final February inflation print dropped from the flash, and expected, reading of 0.8% to just 0.7% Y/Y, a sequential increase of 0.3% and below the 0.4% expected, confirming that deflationary forces continue to ravage the continent. The only question is how soon until Europe comes up with some brilliant scheme that will help it join Japan in exporting its deflation.
While we thought Venezuelan President Maduro was doing well in the verbal combat sparring match of global diplomacy, and of course Russian President Vladimir Putin holds the lead in proclaimed "despotism", it is the corruption-probe bedraggled Prime Minister of Turkey that is head-and-shoulders above the rest of the world's leaders in his insults. As Zaman reports, not a day goes by when Erdogan does not spew forth some insult-infused speech to rally his cheering supporters and here are his Top 15...
The Battle for Ukraine Was Planned in 1997 … Or Earlier
“The risk of catastrophe will be very high. The nation could erupt into insurrection or civil violence, crack up geographically, or succumb to authoritarian rule. If there is a war, it is likely to be one of maximum risk and effort – in other words, a total war. Every Fourth Turning has registered an upward ratchet in the technology of destruction, and in mankind’s willingness to use it.”
The core elements of this Fourth Turning continue to propel this Crisis: debt, civic decay, global disorder. Central bankers, politicians, and government bureaucrats have been able to fashion the illusion of recovery and return to normalcy, but their “solutions” are nothing more than smoke and mirrors exacerbating the next bloodier violent stage of this Fourth Turning. The emergencies will become increasingly dire, triggering unforeseen reactions and unintended consequences. The civic fabric of our society will be torn asunder.
We've discussed margin debt records, the jump in earnings-less-IPOs, the massive surge in junk-debt-issuance, and the spike in penny-stock speculation - which we are told by Janet Yellen are no indication of a bubble in US equities. Given her perspective then we are sure the following two charts will doubly-confirm the lack of any exuberant activity...
It was another day of ugly overnight macro data, all of it ouf of China, with industrial production (8.6%, Exp. 9.5%, Last 9.7%), retail sales (11.8%, Exp. 13.5%, Last 13.1%) and fixed asset investment (17.9% YTD vs 19.4% expected) all missing badly and confirming that in a world of deleveraging, the Chinese economy will continue to sputter. Which is precisely what the "bad news is good news" algos needs and why futures levitated overnight: only this time instead of latching on to the USDJPY correlation pair, it was the AUDJPY which surged after Australia - that Chinese economic derivative - posted its third best monthly full-time jobs surge in history! One can be certain that won't last. But for now it has served its purpose and futures are once again green. How much longer will the disconnect between deteriorating global macro conditions and rising global markets continue, nobody knows, but sooner rather than later the central planner punch bowl will be pulled and the moment of price discovery truth will come. It will be a doozy.
Ukraine, we are told, is infamous for its colorful proverbs and as the title suggests Citi's Matt King warns that emerging market (EM) bond investors may yet become familiar with more of them in coming weeks. Unfortunately Ukraine’s importance is greater than its economic or even geopolitical significance would suggest. Risk premia everywhere have been compressed by the prolonged force-feeding of central bank liquidity. EM in particular has benefited from enormous inflows. However, for developed market (DM), King believes even a serious deterioration in Ukraine still feels unlikely to really derail the serene march tighter we see in spreads – but even so, he warns there are some broader implications of the EM woes which investors would do well to be aware of as "drunkards know no danger".
The Fed is playing a very dangerous game here. It was way behind the curve on deflation and economic weakness going into the crash of 2008. Today, it continues to worry about deflation when the clear signs show that inflation is already on the rise.
The Turkish yield curve has inverted once again as the 10Y bond yield in the troubled nation crosses 11% and hits record highs for that maturity. 2Y at 11.2% has broken to almost 5 year high yields as the Lira also presses back lower to six-week lows. This comes as the nation mourns the death of a teenager from last year's riots and Erdogan remains defiant ahead of March 30 elections in the face of rising calls from the EU to let the law run its course:
- *TURKEY 10-YR BOND YIELD RISES TO 11.34% RECORD ON CLOSING BASIS
- *ERDOGAN: MAR 30 VOTE MOST IMPORTANT IN TURKEY DEMOCRACY HISTORY
- *ERDOGAN SAYS VIOLENT PROTESTS WON'T BRING DEMOCRACY TO TURKEY
- *EU PARLIAMENT URGES TURKEY NOT TO INTERFERE WITH LEGAL PROBES
- *ERDOGAN RECITES ISLAMIC POEM FOR WHICH HE'D BEEN JAILED IN 1997
So once again political instability is soaring and with it capital outflows and bond yields. No, EM is not fixed!