Ukraine

Russia has lashed out following comments from US Secretary of State John Kerry:

• *RUSSIA SAYS KERRY THREATS ARE `UNACCEPTABLE'
• *RUSSIA SAYS KERRY ISN'T ANALYSING SITUATION IN UKRAINE
• *KERRY IS USING COLD WAR SLOGANS, RUSSIA FOREIGN MINISTRY SAYS
• *U.S., ALLIES IGNORED VIOLENCE, RUSSOPHOBIA IN UKRAINE PROTESTS

In addition, EU ministers debate freezing the assets of Ukrainians responsible for corruption and "targeted measures" against Russia if no change of course is undertaken.

Ukraine's acting PM Arseniy Yatsenyuk speaks. Highlights below:

• UKRAINE TO FULFILL ALL IMF REQUIREMENTS, PREMIER SAYS - like Greece?
• UKRAINE PM SAYS BELIEVES RUSSIAN TROOPS WON'T INVADE E. UKRAINE - because they are there already?
• UKRAINE PM SEEKS TO INCREASE RESERVES TO EASE FX FLUCTUATIONS - "Whatever it takes", even printing dollars
• UKRAINE PM SAYS NAFTOGAZ SHOULD BE PRIVATIZED - Ukraine oligarchs delighted by this development
• UKRAINE PM SAYS NEW GOVERNMENT HAS NO INTENTION OF NATIONALISING PRIVATE COMPANIES" - Ukraine oligarchs even more delighted by this development

And finally, why all the above was irrelevant:

• UKRAINE PM SAYS RUSSIA REFUSES TO HOLD BILATERAL UKRAINE TALKS

Oh well, as long as it fools those USDJPY ramp algos if only for a few minutes.

• Russian markets hit as Putin tightens grip on Crimea (Reuters)
• Ukraine Sees More Russian Incursions as Standoff Worsens (BBG)
• Ukraine Crisis Roils Global Markets (WSJ)
• Cold War Ghosts Haunt East Europe in Moves for Crimea (BBG)
• How Moscow Orchestrated Events in Crimea (WSJ)
• Russia Gas Threat Shows Putin Using Pipes to Press Ukraine (BBG)
• Euro-zone PMI slowed less sharply than estimated (MW)
• Two top Microsoft execs to leave in reshuffle (Reuters)
• Soaring Luxury-Goods Prices Test Wealthy's Will to Pay (WSJ)
• IQ-Boosting Drugs Aim to Help Down Syndrome Kids Learn (BBG)

Infantry, navy, and now air force. At least according to the Ukraine, which reported that Russian fighter jets twice violated Ukraine's air space over the Black Sea during the night, Interfax news agency quoted the Defence Ministry as saying on Monday. It said Ukraine's air force had scrambled a Sukhoi SU-27 interceptor aircraft and prevented any "provocative actions" but gave no further details. That was just the cherry on top to what has already been an exhausting day for risk in Russia and the Ukraine, both of which saw their currencies tumble to all time lows.

We were perhaps even more amused than our readers by our Friday headline "Stocks Close At New Record High On Russian Invasion, GDP Decline And Pending Home Sales Miss." It appears that today the market forgot to take its lithium, and is finally focusing on the Ukraine part of the headline, at least until 3:30 pm again when everything should once again be back to market ramp normal. As expected, the PMI data from China and Europe in February, was promptly ignored and it was all about Ukraine again, where Russia sternly refuses to yield to Western demands, forcing the shocked market to retreat lower, and sending Russian stocks lower by over 11%. This is happening even as Ukraine is sending Russian gas to European consumers as normal, gas transport monopoly Ukrtransgas said on Monday. "Ukrtransgas is carrying out all its obligations, fulfilling all agreements with Gazprom. The transit (via Ukraine to Europe) totalled 200 million cubic meters as of March 1," Ukrtransgas spokesman Maksim Belyavsky said. In other words, it can easily get worse should Russia indeed use its trump card.

In the era before we got our Pacific port in 1848 and in the 166-year interval since then, the security and safety of the American people have depended not one wit on the status of the Russian-speaking Crimea. Should the local population now choose fealty to the Grand Thief in Moscow over the ruffians and rabble who have seized Kiev, what’s to matter!  Worse still, how long can America survive the screeching sanctimony and mindless meddling of Susan Rice and Samantha Power? Mr. President, send them back to geography class; don’t draw any new Red Lines. This one has been morphing for centuries among the quarreling tribes, peoples, potentates, Patriarchs and pretenders of a small region that is none of our damn business.

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...

While the images and local news have been suggesting that Russia is in control on the Crimean peninsula, US officials (according to Bloomberg) have confirmed this:

*RUSSIAN FORCES IN COMPLETE CONTROL OF CRIMEA: U.S. OFFICIAL
*RUSSIA HAS 6,000 TROOPS IN CRIMEA, U.S. OFFICIAL SAYS
*KERRY TO REAFFIRM SUPPORT FOR UKRANIAN SOVEREIGNITY, PSAKI SAYS

Obama, Merkel, and Cameron are now on a conference call to discuss this "fact" and officials have just reported that US Secretary of State John Kerry will visit Kiev tomorrow (though we suspect not Sevastopol).

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.

Surprise! The pump on Friday afternoon has given way to the 5th 'dump' in 5 days as US equity futures have crumbled back top Friday's lows and are catching down to USDJPY's early weakness. Gold is up $10 at $1,338. It seems once again that stocks, despite all those talking heads on Friday afternoon so confidently explaining how Ukraine was priced-in, knew nothing... US Treasury futures are well bid implying 10Y -5bps at 2.60% and 5Y -4bps at 1.46%.

At this stage we see very little from the Ukraine priced into the market as a best-case (encroachment into Eastern Ukraine that is quickly and peacefully resolved) scenario appearing to be the blissful hope. However, as some of the other scenarios (described below) potentially come into play, whether in reality or perception, the risk to further downside in the market is significant. Since we are already recommending being short based on the economy and the misperception of the Fed’s next steps, you effectively pick up the conflict for free. With VIX being so low, picking up some downside protection makes a lot of sense here.

The last two weeks have seen events escalating at a rapid pace in Ukraine with the center of attention quickly shifting from Kiev's deadly protests to Crimea's "invasion." With Russia's Prime Minister Dmitry Medvedev warning that Ukraine's new leaders seized power illegally and predicting their rule would end with "a new revolution" and more bloodshed, we thought the following infographic would provide some context for how Ukraine got here so fast.

Here is what is and is not known about the location of US naval forces.

With Friday's farcical 3:30pmET ramp firmly in mind, USDJPY has opened decidedly down-beat in very early (and illiquid) trading suggesting a rude-awakening for US equity futures when they open...