Volkswagen

For the wealthy Chinese with 5 million Yuan (around $800,000) burning a hole in their pocket, there is a new must-have 'toy'. Instead of the latest Ferrari or Lambo, it is none other than the provocatively named "Red Flag L5" that is popping eyeballs and leaving the wealthy Chinese breathless...

We all know the Federal Reserve is terrified of deflation, because they keep telling us that deflation is the equivalent of death and inflation is the equivalent of oxygen. What they fail to mention is that inflation is only oxygen for debtors barely able to service their debt and those who profits from debt, i.e. bankers and financiers. For everyone earning a wage or salary, inflation is the equivalent of death by a thousand cuts and deflation is the elixir of life. When prices decline, our money goes further, i.e. our purchasing power increases. Only bankers, governments and other parasites that live off the carrion of debt fear deflation and try to destroy the purchasing power of wages with everything in their power.

• Sensitive Market Data Leaked After Government Phone Call (WSJ)
• This is a actual Bloomberg headline: China Fake Data to Skew More Export Numbers (BBG)
• This is another actual BBG headline: U.S. as Global Growth Engine Putt-Putts Instead of Purring (BBG)
• Ukraine wants to buy European gas to boost energy security (Reuters)
• JPMorgan Profit Falls 19% on Trading, Mortgage Declines (BBG)
• Record Europe Dividends Keep $2.8 Trillion From Factories (BBG)
• Why is Goldman shutting down Sigma X: SEC eyes test that may lead to shift away from 'dark pools' (Reuters)
• Ebola Outbreak Empties Hotels as West Africa Borders Closed (BBG)
• Australian PM says searchers confident of position of MH370's black boxes (Reuters)
• Gross Says El-Erian Should Explain Reason for Exit (BBG)

Lots of moves appear to be afoot on the macro front at the moment. Today's deal between the People’s Bank of China (PBOC) and Germany’s Bundesbank seems quite significant given the importance of Germany within the global economy generally and the E.U. specifically. And with that in mind, let’s not forget that Obama is currently in Saudi Arabia trying to restore ties with the Medieival Kingdom, i.e., he is trying to figure out a way to arm al-Qaeda in Syria without the American public finding out about it. It appears that becoming entrenched in a Syrian civil war is still very much on the table...  The months ahead should be very interesting to say the least.

• How Putin Parried Obama's Overtures on Crimea (WSJ)
• West Readies Tighter Sanctions After Russia Seals Crimea Claim (Bloomberg)
• Putin says U.S. guided by 'the rule of the gun' in foreign policy (Reuters)
• JPMorgan Said to Agree on Commodities Unit Sale to Mercuria (BBG)
• Short Sellers Target Chinese Developers as Rout Deepens (BBG)
• HFT finally under the spotlight: High-Speed Trading Firms Face New U.S. Scrutiny (WSJ)
• Chinese Dollar Bond Investors Demand Higher Yields After Default (BBG)
• According to Joe LaVorgna it's the snow's fault: Deutsche Bank Said to Plan Job Cuts at Investment Bank (BBG)
• Israeli airstrikes kill 1 Syrian soldier, wound 7 (AP)

Presenting the US car market this cold, stormy, sunny, dry, and rainless winter according to "The Haves... and The Have-Nots..."

Moments ago GM reported that February total sales in February dropped 1% Y/Y to 222,2014, beating expectations of a 7.7% drop (if the same beat was not matched by GM's key competitor Ford, whose February sales dropped 6.1%, below the 5.3% expected, and Volkswagen whose US sales tumbled 13.8%). The bounce was largely thanks to Buick sales which posted an 18.8% increase in February. However, the actual sales were largely irrelevant. What was notable is the following number: 805,769. This is the number of units in dealer inventory at month end. This was an increase from the 780,140 in January and is the largest ever channel stuffing print yet recorded by the post-bankruptcy GM in history.

Asian equities are trading lower across the board on the back of some negative credit stories from China. Shanghai Securities News noted that ICBC and some other banks have curbed loans to developers in sectors such as steel and cement. Slower gains in home property prices in China’s tier 1 cities are also not helping sentiment. Beijing and Shenzhen prices rose 0.4% in January, which looks to be the slowest monthly gain since October 2012 according to Bloomberg. Elsewhere there are reports that a property developer in Hangzhou (Tier 2 city in China) is reducing its unit prices by 19%. Our property analysts noted that given the strong gains seen in Tier-1 and some bigger Tier-2 cities in 2013, a slowdown or negative trends in price growth should not be a surprise. Nevertheless, it has been a very weak day for Chinese and HK markets with the Shanghai Composite and the Hang Seng indices down -2.0% and -1.2% lower as we type. Across the region, bourses in Japan and Korea are down -1.0% and -0.6%, respectively.

While US organized labor has been in a state of steady decline for several generations, never had it suffered as crushing a blow as it did last night, when in a 712 to 626 vote, Volkswagen's hourly workers in Chattanooga, TN, rejected joining the United Auto Workers labor union. What makes the defeat even more bitter is that a win would have marked the first time the union has been able to organize a foreign-owned auto plant in a Southern U.S. state, and would have been particularly meaningful, because the vote was set in a right-to-work state in the South, where anti-union sentiment is strong and all past UAW organizing drives at automobile plants have failed. What is most shocking, however, is that the defeat came even though the UAW had the cooperation of Volkswagen management and the aid of Germany's powerful IG Metall union, and yet it still failed to win a majority among the plants 1,550 hourly workers.  As the WSJ notes, "the defeat raises questions about the future of a union that for years has suffered from declining membership and influence, and almost certainly leaves its president, Bob King, who had vowed to organize at least one foreign auto maker by the time he retires in June, with a tarnished legacy."

• Euro-Area Growth Eases Pressure on Draghi for Stimulus (BBG)
• Germany Beats Growth Estimates With France Amid Recovery (BBG)
• Argentina revises ‘bogus’ inflation figures (FT)
• Wells Fargo edges back into subprime as U.S. mortgage market thaws (Reuters)
• China Banks’ Bad Loans Reach Highest Since Financial Crisis (BBG)
• Time Warner Cable Deal to Test Comcast CEO's Washington Clout (WSJ)
• Risky Loans in Europe Banks’ Dark Corners to Be Exposed  (BBG) - yeah, right... sure
• Gold Extends Climb Above $1,300 as Investors Boost SPDR Holdings (BBG)
• SEC Takes Steps to Stem Courtroom Defeats (WSJ)

• Frustrated by Karzai, U.S. Shifts Afghanistan Exit Plans (WSJ)
• Yellen Testimony Guide From Payrolls Report to Emerging Markets (BBG)
• Gold hits three-month high, shares up ahead of Yellen (Reuters)
• Tightfisted New Owners Put Heinz on Diet (WSJ)
• Senator describes "gruesome" bin Laden photos (Reuters)
• More reasons for the ongoing economic contraction: U.S. Winter Storm Seen Spreading Snow, Sleet Across South (BBG)
• Barclays Cuts Up to 12,000 Jobs as Quarterly Profit Falls  (BBG)
• Boeing Considering 787-Size Medium-Range Jetliners (WSJ)
• AOL Chief Apologizes for ‘Distressed Babies’ Comment (BBG)

• Goldman to Fidelity Call for Calm After Global Stock Wipeout (BBG)
• Turnabout on Global Outlook Darkens Investor Mood (Hilsenrath)
• EU Said to Weigh Extending Greek Loans to 50 Years (BBG)
• Second Storm Hitting Northeast Halts Planes, Schools (BBG)
• Small Banks Face TARP Hit (WSJ)
• As Sony prepares PCs exit, pressure mounts for reboot on TVs (Reuters)
• IBM Uses Dutch Tax Haven to Boost Profits as Sales Slide (BBG)
• ECB faces dilemma with inflation drop (FT)
• London Subway Strike Snarls Traffic as Union Opposes Cuts  (BBG)

• Global makets plunge (Reuters)
• Goodbye Mrs. Watanabe - Japan Sees Worst Developed-Stock Rout as Nikkei 225 Drops (BBG)
• Who could have possibly predicted this - Firms Pinched by Pressure to Hold Down Their Prices (WSJ)
• RBA Shifts to Neutral as It Signals Comfort With Aussie’s Level (BBG)
• Fractures Emerge Between Obama, Congressional Democrats (WSJ)
• Brazil suffers record trade deficit (FT)
• El Salvador fisherman washes up in Marshall Islands after year adrift (Reuters)
• Apple Quietly Builds New Networks (WSJ)
• One-year prison sentence for 21-year-old Twitter user who glorified terrorists (El Pais)

It is still all about the Yen carry which overnight tumbled to the lowest level since November, dragging the Nikkei down by 4.8% which halted its plunge at just overf 14,000, only to stage a modest rebound and carry US equity futures with it, even if it hasn't helped the Dax much which moments ago dropped to session lows and broke its 100 DMA, where carmakers are being especially punished following a downgrade by HSBC of the entire sector.  Also overnight the Hang Seng entered an official correction phase (following on from the Nikkei 225 doing the same yesterday) amid global growth concerns and has filtered through to European trade with equities mostly red across the board. Markets have shrugged off news that ECB's Draghi is seeking German support in the bond sterilization debate, something which we forecast would happen a few weeks ago when we pointed out the relentless pace of SMP sterilization failures, with analysts playing down the news as the move would only add a nominal amount of almost EUR 180bln to the Euro-Area financial system. Elsewhere, disappointing earnings from KPN (-4.3%) and ARM holdings (-2.5%) are assisting the downward momentum for their respective sectors.

• Emerging-Market Rout Seen Enduring on Low Real Rates (BBG)
• After rocky January, markets eye data and central banks (Reuters)
• Europe will feel the pain of emerging markets  (FT)
• Lloyds delays dividend prospect after mis-selling charge (Reuters)
• Snow Set to Snarl New York Commute as U.S. Flights Halted (BBG)
• Rate Decision to Drive Yellen's Early Agenda  (Hilsenrath)
• Thai protesters move to downtown Bangkok in bid to topple PM (Reuters)
• China says Japan's 'hype' on air defence zone spreads tension (Reuters)
• Hedge funds seek 1.8 billion euros damages from members of Porsche's owning family (Reuters)