- Ukraine anxiety triggers flight to safety, stocks tumble (Reuters)
- Woodrow Wilson’s Ukraine Failure Foreshadows West’s Dilemmas (BBG)
- Fortress Executives Join Peers Selling Stock After Rally (BBG)
- 303 Deaths Seen in G.M. Cars With Failed Air Bags (NYT)
- Putin Deports Executives for Speeding as Sanctions Loom (BBG)
- Russia blocks internet sites of Putin critics (Reuters)
- China Bond Risk Exceeds Ireland as Defaults Unavoidable (BBG)
- China H-Shares Post Biggest Weekly Drop Since October (BBG)
- Surge in Rail Shipments of Oil Sidetracks Other Industries (WSJ)
- Blackstone’s Home Buying Binge Ends as Prices Surge (BBG)
It has been a relatively quiet overnight session, aside from the already noted news surrounding China's halt on virtual credit card payments sending Chinese online commerce stocks sliding, where despite an ongoing decline in the USDJPY which has sent the Nikkei plunging by 3.3% (and which is starting to impact Abe whose approval rating dropped in March by a whopping 5.6 points to 48.1% according to a Jiji poll), US equity futures have managed to stay surprisingly strong following yesterday's market tumble. We can only assume this has to do with short covering of positions, because we fail to see how anyone can be so foolhardy to enter risk on ahead of a weekend where the worst case scenario can be an overture to World War III following a Crimean referendum which is assured to result in the formal annexation of the peninsula by Russia.
Bond Trading Grinds To A Halt: Goldman Set To Report Weakest Q1 Since 2005; Revenues Down As Much As 25% ElsewhereSubmitted by Tyler Durden on 03/12/2014 11:47 -0400
Since Wall Street has been explicitly fighting the Fed (remember: the main reason there is no volume is because nobody is selling) Wall Street has once again lost, and despite its appeals, the time to pay the piper has come. Said payment will be taken out of bank Q1 earnings which as everyone knows, will continue the declining trend seen in recent years (so much for that whole Net Interest Margin fable), but to learn just how bad, we go to the FT which reports that fixed income groups across Wall Street "are set for their worst start to the year since before the financial crisis, with revenue declines of up to 25%." The punchline: "Analysts now expect Goldman Sachs to record its weakest first quarter since 2005 and JPMorgan Chase and Bank of America are forecast to see their lowest revenues since they bought Bear Stearns and Merrill Lynch, respectively, in 2008."
- Malaysia Says Stolen Passport User Had No Links to Terror Groups (BBG)
- Malaysia military tracked missing plane to west coast (Reuters)
- Freescale loss in Malaysia tragedy leads to travel policy questions (Reuters)
- Top German body calls for QE blitz to avert deflation trap in Europe (Telegraph)
- Firms Suffer 23% Drop in Asia Fees Amid Search for Cash (BBG)
- Putin Dismisses U.S. Proposal on Ukraine (WSJ)
- Lenovo says China strike an IBM matter, but it won't cut wages (Reuters)
- Congress to Investigate GM Recall (WSJ)
- New hedge funds face life or death battle for funding (FT)
- Muni Bond Costs Hit Investors in Wallet (WSJ)
- BOJ keeps stimulus in place, cuts view on exports in warning sign (Reuters)
- ECB Homes In on Risky Assets as Inspectors Fan Out Across Europe (BBG)
- Snowden: "The Constitution was violated" (Reuters)
Just when it seemed that the ever deteriorating situation in the Crimean, the unexpected plunge in Chinese exports which has sent the Yuan reeling again, the Copper slam which is down some 10% in two days, and the outright collapse in Japan's capital flows, not to mention the worst GDP print under Abe, may not be quite "priced in" by a market that is now expecting well beyond perfection in perpetuity, further shown by Goldman over the weekend which reprorted that revenue multiples have never been greater, and futures may finally dip, here came - right on schedule - the USDJPY levitation liftathon, which boosted futures from down 10 to barely unchanged, and which should be green by the second USDJPY ramp some time just after 8 am.
UPDATE: EU is suggesting it will help Ukraine pay its $2bn Russian gas bill (to keep its spice flowing)
The question many are asking this morning is what is the iron-first of Putin thinking? With his "military exercise" over, does he believe it enough to have shown the world his potential for disruption? We suspect another reason may have been weighing on his mind. As we noted previously, Europe accounts for around a third of Gazprom's total gas sales, and around half of Russia's total budget revenue comes from oil and gas... and whatever Putin's geo-political ambitions, we suspect he did not want to jeopardize that source of revenue - no matter how much sabre-rattling and Gazprom-fear-mongering. As the following chart shows, Europe should be sighing a huge relief this morning - but remain cognizant that this, we suspect, is far from over.
Since Ukraine is the only wildcard variable in the news these past few days, it was to be expected that following i) the end of the large Russian military drill begun two weeks ago and ii) a press conference by Putin in which he toned down the war rhetoric, even if he did not actually say anything indicating Russia will difuse the tension, futures have soared and have retraced all their losses from yesterday. And not only in the US - European equity indices gapped higher at the open this morning in reaction to reports that Russian President Putin has ordered troops engaged in military exercises to return to their bases. Consequent broad based reduction in risk premia built up over the past few sessions meant that in spite of looming risk events (ECB, BoE policy meetings and NFP release this Friday), Bund also failed to close the opening gap lower. At the same time, USD/JPY and EUR/CHF benefited as the recent flight to quality sentiment was reversed, with energy and precious metal prices also coming off overnight highs.
A look back in time helps one spot the banker propaganda about gold and silver so prevalent today.
- Yuan suffers biggest weekly loss as PBOC punishes speculators (Reuters)
- Euro Gains as Bonds Decline With Stocks on Inflation Data (BBG)
- Biggest Sovereign Fund Forced to Sell Stocks as Mandate Breached (BBG)
- Because we don't already have enough fried foods.. (Reuters)
- Putin: Russia to Consider Aid to Ukraine (AP)
- Wall Street Hates JPMorgan Fee for $1 Trillion Junk Loans (BBG)
- Yellen Sticks to Plan Amid Weather Doubts (WSJ)
- U.S. Retail Chains See First Profit Decline Since Recession (BBG)
And just like that the Chinese yuan devaluation has shifted away from the merely "orderly." In the past few hours of trading, China, which as we reported two days ago has started intervening aggressively in the Yuan market, has seen its currency crash by nearly 0.9%, which may not seem like much, but is in fact the largest drop since December of 2008, and at last check was trading at around 6.18, even as the PBOC fixed the CNY reference rate 0.02% higher from the last official close to 6.1214, erasing pivot support point at 6.1346 and 6.1408. Naturally this means that the obverse, the CNYUSD, has crashed to as low as 0.1620. Should this move sustain without reverting, this will be the biggest weekly loss ever! The dramatic move is shown on the chart below.
- European Bonds Surge on Slowing German Inflation, Ukraine Tumult (BBG)
- Ukraine tensions hit shares (Reuters)
- Debating Geithner’s Appearances in 2008 Transcripts (Hilsenrath)
- Tensions in Asia Stoke Rising Nationalism in Japan (WSJ)
- GM Investigated Over Ignition Recall Linked to 13 Deaths (BBG)
- Smartphone wars shift from gadgetry to price (Reuters)
- Some Companies Alter the Bonus Playbook (WSJ)
- London’s Subterranean Luxury Manors Lure New Breed of Lenders (BBG)
- Japan No Country for Old Farmers as 7-Eleven Takes Plow (BBG)
- Dream of U.S. Oil Independence Slams Against Shale Costs (BBG)
The seemingly incessant strengthening trend of the Chinese Yuan (much as with the seemingly inexorable rise of US equities or home prices) has encouraged huge amounts of structured products to be created over the past few years enabling traders to position for more of the same in increasingly levered ways. That was all going great until the last few weeks which has seen China enter the currency wars (as we explained here). The problem, among many facing China, is that these structured products will face major losses and as Morgan Stanley warns "real pain will come if CNY stays above these levels," leading to further capital withdrawal, illiquidity, and a potential vicious circle as it appears the PBOC is trying to break the virtuous carry trade that has fueled so much of its bubble economy.
Tesla has just announced it intends to issue a $1.6 billion convertible note offering "for the development of a "Gigafactory" and a "Gen III" vehicle." While not that unusual - and of course, why not take advantage of low cost financing and a surging momentum in your stock - what we did find at least intriguing was the underwriters included Morgan Stanley. This is the same firm (though we would be very sure that Chinese walls ensured total lack of knowledge) that doubled their price target (from $153 to $320) for TSLA yesterday (following the analyst's now almost clairvoyant questions during the earnings conference call). Paging Henry Blodgett?
- California couple finds $10 million in buried treasure while walking dog (Reuters) ... not bitcoin?
- Dimon Says Threats to JPMorgan Span Google to China Banks (BBG)
- Stocks So Many Love to Hate Buoyed by Fed’s Jobs Priority (BBG)
- White House Weighs Four Options for Revamping NSA Phone Surveillance (WSJ) ... to pick the fifth one
- Credit Suisse Executives Weren’t Aware of U.S. Tax Dodges (BBG)
- Militias Hunt Kiev Looters From Central Bank to Bling Palace (BBG)
- Crisis Gauge Rises to Record High as Swaps Avoided (BBG)
- Obama to Propose Highway-Repair Program (WSJ)
- Ukraine Pledges to Protect Deposits as Kiev Rally Called (BBG)
A well-placed Morgan Stanley "Utopia" upgrade here, a 'gigafactory' promise there, sprinkle in a 37% short-interest and what do you have? Telsa is surging once again (up 17% today)... breaking above a $30 billion enterprise value - just 25% below that of GM, based on Bloomberg's data.