headlines

Goldman recently warned that they are "more worried than we have been since the start of the Euro area crisis," and judging by the extraordinary surge in "Grexit" headlines, it appears this time is different from 2012...

With reports of near mutiny in Syriza's ranks amid the back-bending they have done to try to meet Germany's demands - only to be abjectly denied by a non-ultimatum-setting Schaeuble - it is perhaps time to prepare (ahead of tomorrow's apparent "G" day) for the possibility that Greece creates a systemic event. As Goldman recently warned, there are aspects that leave us more worried than we have been since the start of the Euro area crisis with a tight schedule to avert a disorderly outcome. Risk markets so far have traded in a resilient (well managed) manner but risks of an accident remain and here is how Goldman suggests you hedge that exposure.

GABRIEL: `WE HAVE REASONS WHY CAN'T SAY YES TO GREEK PROPOSALS'
GERMANY REJECTS GREEK EXTENSION PROPOSAL, GOVT OFFICIAL SAYS

The January statement had only modest changes so reading the tealeaves of the FOMC Minutes 'should' provide little additional color with the main focus on the meaning of 'patient', fears over 'international developments', the 'right' gauge of inflation, and pace of rate lift-off...

• *MANY FED OFFICIALS INCLINED TO STAY AT ZERO LONGER: MINUTES
  
• *MANY OFFICIALS FELT DROPPING `PATIENT' MAY LEAD TO DATE FOCUS
  
• *MANY FED OFFICIALS SAW RISKS IF FOREIGN WEAKNESS WORSENED
  
• *FED OFFICIALS AGREED POLICY SHOULD STAY DATA DEPENDENT

It appears The Fed is 'worried' again... lower for longerer. Pre-FOMC Minutes: S&P Futs 2091.25, 10Y 2.122%, Gold $1201.50, WTI $52.05

Who could have seen that coming... as we explained minutes after the Greek headlines hit yesterday, the Greek 'loan' extension was not news at all... and neither was Schaeuble's response...

There was much confusion yesterday when algos went into a buying frenzy on news that Greece would submit a request for a 6 month loan extension, believing this means Greece has caved and will agree to a bailout programme extension as well. Nothing could have been further from the truth as we explained first moments after the headline struck, and also as Reuters validated moments ago when it said that "Greece will submit a request to the euro zone on Wednesday to extend a "loan agreement" for up to six months but EU paymaster Germany says no such deal is on offer and Athens must stick to the terms of its existing international bailout." But since the political nuances of diplomacy are lost on the math Ph.Ds who program the market-moving algos, the S&P did manage to roar above 2100 on what was another headfake and then forgot to sell off on the reality.

The "conundrum" between lower gasoline prices and retail sales is not really one at all. Furthermore, the real story behind the weakness in retail sales also suggest that something is "amiss" within the broader economic backdrop. When combined with the deterioration in earnings, the risk of a "gotcha" moment in the market has risen markedly.

What happens when the "impartial and independent" media puts its relationship with advertisers (especially when said advertisers are admitted criminal consortiums among whose chief sources of revenue in recent decades has been facilitating tax evasion and "laundering the world's drug money") above the interests of its readers and the presentation of "imperatial and independent" facts? This: "The coverage of HSBC in Britain's Daily Telegraph is a fraud on its readers. If major newspapers allow corporations to influence their content for fear of losing advertising revenue, democracy itself is in peril."

Now where have we seen this before? Surprise contradictory headlines that occur shortly after vehement statements by leaders: *GREECE AIMS TO REQUEST LOAN ACCORD EXTENSION TOMORROW: OFFICIAL

This comes after Varoufakis and Tspiras specifically saying that they will not extend the current loan accord: "Salvation will not come by extending the mistake," adding that compromise on the current program "is not an agreement but a surrender that would complete the euthanasia of our country."

The chances of Greece being forced out of the euro zone have risen but a compromise agreement between Athens and its European partners is still possible, Greek media and investment banks said on Tuesday.

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.

Ultimately, then, we are still left with the same three-step process to reach a conclusion to the Greek crisis.

• Step 1 consists of a request for a new program or an application for a 3rd ESM program with Greece committing to some a prior conditionality.
• Step 2 consists of negotiating the substance around this conditionality, in particular the prior actions that would need to be fulfilled to disburse funding to Greece.
• Step 3 would consist of passing such prior actions through the Greek parliament and ultimately servicing Greece's loan obligations.

The more each of these steps is delayed, the shorter the timespans available and the greater the risks of failure.

UPDATE: *EU FINANCE MINISTERS' TALKS WITH GREECE OVER FOR TODAY, GREECE SAYS WON'T TAKE ORDERS ON BAILOUT

That didn't last long. It seems - just as earlier in the week - the ability for either side in this Euro-system death match game of chicken to find any common ground to even start negotiations remains lost: GREEK GOVT OFFICIAL SAYS THAT "THERE CANNOT BE A DEAL TODAY", EUROGROUP DISCUSSED "UNREASONABLE", "UNACCEPTABLE" DRAFT TEXT INSISTING ON EXTENDING BAILOUT.  In fact, reports sya that the text presented was a reversal of last Thursday's agreement... The Germans are now calling for Tsipras to replace Varoufakis at the negotiating table. EURUSD is tumbling and S&P Futures are falling fast.

Moments ago, Interfax made it a trifecta when it reported that:

RUSSIA PUTS AIRBORNE TROOPS ON ALERT IN VOLGOGRAD REGION: IFX
ASSAULT LANDING UNIT OF AIRBORNE TROOPS ALERTED IN VOLGOGRAD REGION

As a reminder, Volgograd is about 150 miles east of Ukraine.

It has been a quiet start to the week, with US equity futures and European stocks mostly unchanged with all eyes on what progress (if any) will be made between Greece and the Eurogroup, where the press conference is scheduled for 7:00 pm GMT (expect significant delays) in what is otherwise expected to be a relatively subdued day with the US away from market and a light macroeconomic calendar.