Futures Sell Off As Ukraine Situation Re-Escalates

Tyler Durden's picture

Three unlucky attempts in a row to retake the S&P 500 all time high may have been all we get, at least for now, because the fourth one is shaping up to be rather problematic following events out of the Crimean in the past three hours where the Ukraine situation has gone from bad to worse, and have dragged the all important risk indicator, the USDJPY, below 102.000 once again. As a result, global stock futures have fallen from the European open this morning, with the DAX future well below 9600 to mark levels not seen since last Thursday. Escalated tensions in the Ukraine have raised concerns of the spillover effects to Western Europe and Russia, as a Russian flag is lifted by occupying gunmen in the Crimean (Southern Ukrainian peninsula) parliament, prompting an emergency session of Crimean lawmakers to discuss the fate of the region. This, allied with reports of the mobilisation of Russian jets on the Western border has weighed on risk sentiment, sending the German 10yr yield to July 2013 lows.

Regional German CPIs have fallen across every reported state, suggesting today’s expectation of an unchanged German prelim CPI could be unfounded (currently seen inline with the previous at 1.3%). This disinflationary threat heightens the focus on tomorrow’s Eurozone CPI estimate – the catalyst for the November rate cut from the ECB. Somewhat bucking the trend, Italian debt markets were unfazed by the geopolitical tensions as peripheral bonds are in favour once more – the Italian treasury sold 5yr debt at the lowest auction yield on record, as the IT 10yr yield fell below 3.5% to multiyear lows.

Turning to the day ahead, markets will be watching Janet Yellen’s return trip to Congress today for her Senate Banking Committee testimony (10am USET), which was postponed from February 13th due to bad weather. Though much of her testimony will be similar to her February 11th appearance at the House Financial Services, there have been a few more data releases since that day and markets will be wondering what she has to say on the weather-effect now that the worst of the storms appear to have passed. In addition to Yellen, a number of central bank representatives from the ECB (Nowotny) and Fed (Fisher, Lockhart) will be giving speeches today. The highlights on the data docket will be Euroarea money supply data, German unemployment, US durable goods and initial jobless claims.

Bulletin headline summary from Bloomberg and RanSquawk:

  • Global equities are being weighed upon heavily by escalated tensions in the Ukraine which has fuelled risk-off sentiment.
  • Today's fall in regional German CPIs comes ahead of tomorrow's Eurozone CPI release which will be a release closely watched by the ECB ahead of the upcoming rate decision and has thus seen a weaker EUR with expectations of a rate cut mounting.
  • Attention for the rest of the session turns to weekly jobs data and durable goods orders from the US, with Fed’s Yellen due to be presenting the (delayed) second part of her semi-annual testimony.
  • Treasuries gain, 10Y yields near lowest levels in over two weeks, amid escalating unrest in Ukraine and month-end extensions; week’s $109b auction cycle concludes today with $29b 7Y notes.
  • 7Y yields 2.11% in WI trading, below January’s auction stop.
  • Yesterday’s 5Y notes were awarded at 1.530% vs 1pm WI yield of 1.538%; 2.98 bid-to-cover was highest since Sept. 2012
  • An armed group occupied the parliament and government buildings in the capital of the Crimea region, replacing the Ukrainian flag with Russia’s tricolor
  • Arseniy Yatsenyuk won the support of Ukrainian protesters in Kiev to lead an interim cabinet and avert a default after the nation’s bloodiest unrest since World War II as the U.S. said it was working on a $1b rescue
  • Yatsenyuk said in Bloomberg TV interview that Russia “would never intervene” with military
  • China’s one-year interest-rate swaps dropped by the most in eight months after the PBOC signaled cash supply in the financial system is adequate
  • German unemployment fell for a third month in Feb., with the number of people out of work falling by a seasonally- adjusted 14k (est. 10K) to 2.914m
  • RBS posted its biggest full-year loss since receiving a government bailout in 2008 as CEO Ross McEwan outlined plans to shrink its investment banking and overseas operations
  • Republican lawmakers want Yellen and her FOMC colleagues to replace discretionary policy with a rules-based approach to what they say would be more understandable and reliable; Yellen testifies before Senate at 10am ET
  • Sovereign yields lower. EU peripheral spreads tighten. Nikkei -0.3%; Shanghai Composite gains 0.3%. European stocks and U.S. stock-index futures fall. WTI crude falls; gold and copper little changed

US Event Calendar:

  • 8:30am: Durable Goods Orders, Jan., est. -1.6% (prior -4.3%, revised -4.2%);
    • Durables Ex-Transportation, Jan., est. -0.3% (prior -1.6%, revised -1.3%);
    • Cap Goods Orders Non-defense Ex-Air, Jan., est. -0.2% (prior -1.3%, revised -0.6%)
    • Cap Goods Shipments Non-defense Ex-Air, Jan., est. -1% (prior -0.2%, revised 0.6%)
  • 8:30am: Initial Jobless Claims, Feb. 22, est. 335k (prior 336k)
  • Continuing Claims, Feb. 15, est. 2.985m (prior 2.981m)
  • 10:00am: Fed’s Yellen testifies to Senate Banking Committee
    11:00am: POMO - Fed to purchase $3.5b-$4.25b in 2018 sector
  • 1:00pm: U.S. to sell $29b 7Y notes

Asian Headlines

10yr JGBs reversed early gains overnight to finish lower by 3 ticks at 145.15, despite firm demand seen at the 2yr auction, whilst data overnight also showed that foreigners became net buyers of Japanese bonds. The Nikkei 225 saw indecisive trade overnight and fluctuated between gains and losses to close in the red (-0.3%). The Shanghai Composite saw gains of 0.3% being buoyed by the oil & gas sector after the NDRC lifted fuel prices and Sinopec were raised to conviction buy at Goldman Sachs. (RANsquawk)

BoJ's Sato said long term rates are likely to shoot up long before exit and the BoJ can continue QE after CPI reaches 2% if it judges that gains are not sustainable. However, Sato added that the BoJ could exit easing before inflation reaches 2%. (BBG)

EU & UK Headlines

German Unemployment Change (000's) (Feb) M/M -14k vs. Exp. -10k (Prev. -28k)

- German Unemployment Rate (Feb) M/M 6.8% vs. Exp. 6.8% (Prev. 6.8%)
German CPI Saxony (Feb) Y/Y 1.2% (Prev. 1.4%)
German CPI Bavaria (Feb) Y/Y 0.9% (Prev. 1.1%)
German Hesse CPI (Feb) Y/Y 1.0% (Prev. 1.2%)
German Brandenburg CPI (Feb) Y/Y 1.2% (Prev. 1.5%)
German CPI North Rhine Westphalia (Feb) Y/Y 1.6% (Prev. 1.7%)
German CPI Baden Wuerttemberg (Feb) Y/Y 1.1% (Prev. 1.3%)

Eurozone M3 Money Supply (Jan) Y/Y 1.2% vs Exp. 1.1% (Prev. 1.0%)
- Eurozone M3 3-month average (Jan) M/M 1.2% vs Exp. 1.2% (Prev. 1.3%)

EU Consumer Confidence (Feb F) M/M -12.7 vs. Exp. -12.7 (Prev. -12.7)
- EU Economic Confidence (Feb) M/M 101.2 vs. Exp. 100.7 (Prev. 100.9, Rev. 101.0)
- EU Industrial Confidence (Feb) M/M -3.4 vs. Exp. -4.0 (Prev. -3.9, Rev. -3.8)
- EU Service Confidence (Feb) M/M 3.2 vs. Exp. 2.5 (Prev. 2.3, Rev. 2.4)
- EU Business Climate Indicator (Feb) M/M 0.37 vs. Exp. 0.20 (Prev. 0.19, Rev 0.25)

UK YouGov inflation expectations fell from 2.4% to 2.2% in Jan, according to Citi.

Italian auction results: Sells EUR 7bln vs. Exp. EUR 7bln, 5yr auction yield lowest on record.

Barclays preliminary pan-Euro agg month-end extensions: +0.07y (12m avg. +0.07y)

Barclays preliminary Sterling month-end extensions:+0.05y (12m avg. +0.06y)

US Headlines

Fed's Pianalto (voter, neutral) said the Fed's QE program has pushed down long-term rates and that QE tapering is likely to continue with employment gains. (BBG)

Barclays preliminary US Tsys month-end extensions:+0.13y vs. prelim. +0.12y (12m avg. +0.07y)


Risk-aversion has weighed heavily upon European equities with the DAX seeing notable underperformance as it accelerated below the 9600 level. The FTSE 100 has also being weighed upon by RBS who provided a particularly disappointing pre-market update which revealed an operating loss of GBP 8.2bln vs. Exp. GBP 6.7bln loss. In terms of other notable movers, Veolia Environment are seen higher by nearly 7% following their strong Q4 numbers whilst Man Group are seen higher by over 11% after share buyback news and better than expected assets under management.


Following the fall in German CPI's EUR has softened against most other currencies, breaking through the 50DMA at 1.3651. Elsewhere in FX, the JPY benefited from flight to quality, with the decline in USD/JPY seeing the pair break below the 100DMA at 101.82 with analysts at IFR noting that Japanese bank stops are touted below 101.50. This move also follows the earlier comments from BoJ's Sato saying the BoJ could exit easing before inflation reaches 2%.


Iranian oil exports rose around 100,000bpd in Feburuary, for the fourth consecutive month, with more being exported to ally Syria, according to sources who track tanker movements. (RTRS)

Iraq's Basra oil refinery is planning a 50% capacity boost, up to 210,000bpd, by 1st March. (BBG)

ANZ analysts have increased end-Q1 targets for gold to USD 1,280 per oz, up from USD 1,150 per oz. With forecasts steady at 1,450 per oz at year-end, with 2015 forecasts rising USD 1,500 per oz. (BBG)

* * *

Finally, the overnight recap from DB's Jim Reid

Markets were dampened to some degree by EM stories yesterday with the S&P 500 (unch) failing to hold its intra-day record highs at the close for the third day running. Will Yellen's delayed and second testimony today be the catalyst for closing through the all time highs again? Though EM underperformed as group yesterday, the stories were mostly idiosyncratic. Starting with the Ukraine and Russia, there are fears of an escalation in regional tensions after Vladimir Putin placed Russian armed forces near the Ukrainian border on alert and ordered an unscheduled military exercise in the area. The FT says that the moves were prompted by pressure from nationalistic elements within Russia’s leadership after media reports about alleged threats to ethnic Russian interests in Crimea. US secretary of State John Kerry urged Moscow to “be very careful in the judgements that it makes” over Ukraine, stoking fears that the Ukraine could be a new front for a proxy US-Russian standoff. News ( Reuters) that the US would offer a $1bn loan guarantee to the Ukraine failed to stem the nervousness, and markets are still left waiting for details of the potential EU/IMF package. The Ruble and Ukrainian Hryvnia fell by 1.0% and 4.4% against the greenback respectively, and the Ruble traded above 36.0 for the first time since Q1 2009. The Russian 10yr bond sold off by 5bp, in an otherwise better day for fixed income. In Turkey, there were fresh corruption allegations centred around a voice recording of a conversation between the PM and a family member (Reuters). This prompted the TRY to fall 0.75% against the USD with Turkish bonds taking another leg lower. Elsewhere in EM, the Brazilian central bank has decided to hike the benchmark Selic rate by 25bp to 10.75% as expected in its latest bid to rein in above-target inflation.

Turning to China and overnight markets, sentiment has been supported by a stabilisation in the CNH and CNY which are both slightly firmer following a fortnight of depreciation against the USD. Stocks are trading firmer throughout the region led by the Hang Seng (+1.3%) and Shanghai Comp (+0.7%), with the exception being Australia (ASX200 -0.5%). There’s been some focus on the Chinese import iron prices which have fallen by 5% in the last week and a half and more than 12% year-to-date in its worst start to the year since 2008. There has been talk about destocking and lower construction demand, but we shouldn’t dismiss the possibility that the most recent fall in iron ore prices has been driven by an unwind of USD-yuan carry trades (where iron ore importers have been using the inventory as collateral to borrow USD to fund yuan investments). Indeed the carry trade as a whole has taken a sharp hit of late amid the yuan’s depreciation, as we detailed yesterday. Our FX strategists write that the RMB complex has been thrown into complete disarray over the past few days, with the scale of moves in onshore and offshore spot particularly striking given the hitherto low vols on these currency pairs. They do not think this represents a structural shift in PBoC policy towards depreciating the currency. But equally, they worry that such strategic policy moves carry risks of error, particularly given the scale of the problem, as was the case with the episodes of domestic cash squeezes in June and December of last year.

If this is seen as further damaging China's growth prospects, it could snowball into a wider global risk off event. China remains an underperformer in the credit space overnight, with Chinese bank CDS 10bp wider today in illiquid markets, while EM sovereigns such as Indonesia continue to tighten. On a separate but not completely unrelated matter, the Australian dollar suffered another drop today (- 0.3%) following significantly weaker than expected private capex data (Q4 capex - 5.2% vs -1.3% expected).

Returning to DM, there was some better news on the housing front after January’s new home sales in the US beat expectations (468k vs 400k), jumping 9.6% (-3.4% expected) on a sequential basis. Markets were left wondering why the weather did not have a larger impact on the data, but DB’s Joe Lavorgna writes that the strong January result was in fact partly due to a rebound in the Northeast (+73.7% vs. - 40.6%), which appears to have been severely impacted by adverse weather in December. US homebuilding stocks jumped 3% yesterday thanks largely to the data, which took the S&P 500 homebuilders index to its highest level since late May 2013. The index has now managed to recover all of its losses following Bernanke’s 'tapering' JEC speech last year.

Away from the housing theme, there were some interesting micro themes which popped up yesterday. US retailers (+1.11%) were the best performing stocks in the US, driven by an earnings beat from Target (+7.04%) which was a tailwind for other major retailers including Staples (+4.62%). Target’s Q4 revenue and earnings beat convinced some that the impact of the company’s data breach was only temporary. Other retailers such as Lowe’s (+5.4%) and Abecrombie & Fitch (+11.3%) also had very strong days, but their performance was mostly driven by the announcement of new/accelerated share buybacks. On the topic of stock buybacks, the FT reports that US investment grade companies have been exceptionally active in raising debt financing to fund stock buybacks in 2014.

Indeed, the total amount of debt raised for buybacks in the year-to-date is already >55% of the total debt funds raised for buybacks by US investment grade
companies in the whole of 2013.

Turning to the day ahead, markets will be watching Janet Yellen’s return trip to Congress today for her Senate Banking Committee testimony (10am USET), which was postponed from February 13th due to bad weather. Though much of her testimony will be similar to her February 11th appearance at the House Financial Services, there have been a few more data releases since that day and markets will be wondering what she has to say on the weather-effect now that the worst of the storms appear to have passed. In addition to Yellen, a number of central bank representatives from the ECB (Nowotny) and Fed (Fisher, Lockhart) will be giving speeches today. The highlights on the data docket will be Euroarea money supply data, German unemployment, US durable goods and initial jobless claims.

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skwid vacuous's picture

Already halfway back to green, guess i picked the wrong day to quit sniffing glue

flacon's picture

Skwd, yeah me too. At least silver bounced off the 200 dma. 

GetZeeGold's picture



Attention span of a nat.

skwid vacuous's picture

Got to get up at 5:30 am these days to BTFD, before the rise of the machines- unreal...

skwid vacuous's picture

no i wish i had - when WW3 starts we will be green by 11 am...

Independent's picture

As usual the merchants and traders behind the desks and monitors make a crap of money while the Ukrainians hit rock bottom.  The revolution needs to storm the buildings of high finance and the banks before a real revolution can be had.

Came across a good comment by a guy on a Ukraine article

Your journalists (I choke on that term thanks to you) seem to be having a bit of trouble accepting that Crimean Russians would like to have a say in who governs them. This opportunity for self-determination will not be a result of violence and intimidation by a minority of your fawned-over thugs, such as we've seen in Kiev, nor will it be brought about by a criminal war, such as we saw in Serbia, resulting in the mafia state of Kosovo. It will be accomplished through a thoroughly democratic process, a referendum. I believe that this paper was quite supportive of the residents of the Falklands when they chose this route and voted to maintain their ties to the UK (and was very supportive of the war fought over them). It would be the height of hypocrisy to support "democracy in action" in some circumstances, especially when they coincide with the interests of NATO and/or the UK, but disparage it in others, no? Of course it would be, but hypocrisy and support of violence and terrorism are this paper's stock in trade - whether it's maniacal organ-eaters in Libya or Syria, Albanian organ traffickers in Kosovo, or their Nazi fellow travelers in Ukraine, as long as they're useful tools for the EU/IMF/NATO cabal, they're freedom fighters!
Keep it up Mr. Rusbridger, you won't lose any readers The news itself is quite entertaining if viewed as a shameless parody of truth, the weather report is fairly trustworthy, and the comments are always worth a read (do you read them?).
Kind regards, and sincere hopes that you'll eventually stop bringing journalism into disrepute.


toothpicker's picture

PM algos shut off news from Ukraine

buzzsaw99's picture

Bullish. the imf will make sure they can still pay interest to the overlords. they won't be able to buy bread but since when do the maggots care about that?

NoDebt's picture

Russia begins USSR 2.0

"Only the parts we really want this time!"

wmbz's picture

The criminal cartel will hold their course and keep right on pumping until they blow this MFer up. Whch can take long, long time.

Bernake left Jack Yellen his knee pads, she knows who she as to blow.

thismarketisrigged's picture

guarantee we see green today.


futures didnt go down due to ukraine, futures went down because kevin henry woke up late this morning to print future contracts up. dont worry now, he is up now and we should see the daily 10 am pump to green.

MFLTucson's picture

ahahahaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa!!!!!!!!!!!!!!!!!!!! Are you fucking joking?  The Ukraine's economy is about 16 billion in total.  This whole game of the equity markets is nothing short of a casino!

marginnayan's picture

Futures now down foood stamps handle 3.50 only. USD/JPY now at 101.84 from a low of 101.72. The racketeering bastards won't let it go down.


Ban KKiller's picture

Yellen is expert at speaking without saying anything concrete. Double talk that would make the three stooges proud. She will never answer with yes or no. 

"The indicators are..." Typical bullshit.

Total criminal stooge..obviously.

Dollarmedes's picture

Ukraine has done exactly the wrong thing.

They should call Putin's bluff, and call for Russian troops to evict the gunmen.

thismarketisrigged's picture

magically, futures turn green. truly amazing.


 must be the awesome durable goods numbers that we got.