It appears the European leaders, rather than actually unleash sanctions (as the US has dictated asked), has decided to 'warn' of possible sanctions with a 10-page memo of options available to them. As The FT reports, the memo (full memo below) prepared by the European Commission and distributed to national capitals, includes a proposal to ban all Europeans from purchasing any new debt or stock issued by Russia’s largest banks and also proposes barring the Russian banks from listing new issues on European exchanges, preventing them from using London or other EU stock markets to raise funds from non-Europeans. While Germany (and many other EU nations remain nervous of the blowback) the 'options memo' is extensive and would likely have significant impact on the Russian economy.
- EU to weigh extensive sanctions on Russia (FT)
- U.S. lifts flight ban to Israel (Reuters)
- Russia says will cooperate with MH17 probe led by Netherlands (Reuters)
- Norway faces ‘concrete and credible’ terrorist threat (FT)
- Don’t Tell Anybody About This Story on HFT Power Jump Trading (BBG)
- But... but... PMI: Unilever Sales Growth Misses Estimates on Asian Slowdown (BBG)
- World’s Biggest Wealth Fund Reviews $8 Billion Russian Stake (BBG)
- Qualcomm latest US tech company to reverse in China (FT)
- Hamptons Home Sales Rise as Buyers Find More Inventory (BBG)
Ever since going public, it appears that Markit's giddyness about life has spilled over into its manufacturing surveys: after a surge in recent Markit mfg exuberance in recent months in the US, it was first China's turn overnight to hit an 18 month high, slamming expectations and fixing the bitter taste in the mouth left by another month of atrocious Japan trade data (where even Goldman has thrown in the towel on Abenomics now) following which the euphoria spilled over to Europe just as the triple-dip recession warnings had started to grow ever louder and most economists have been making a strong case for ECB QE. Instead, German July mfg PMI printed at 52.9, above the 52.0 in June and above the 51.9 expected while the Composite blasted higher to 55.9, from 54.0, and above the 53.8 expected thanks to the strongest Service PMI in 37 months! End result: a blended Eurozone manufacturing PMI rising from 51.8 to 51.9, despite expectations of a modest decline while the Composite rose from 52.8 to 54.0, on expectations of an unchanged print. Curiously the soft survey data took place as Retail Sales declined both in Italy (-0.7%, Exp. +0.2%), and the UK (-0.1%, Exp. 0.3%), which incidentally was blamed on "hot weather." Perhaps Markit, now that it has IPOed successfully, can step off the gas or at least lobby to have surveys become part of GDP.
Exclusive: High-Level NSA Whistleblower Says Blackmail Is a Huge – Unreported – Part of Mass SurveillanceSubmitted by George Washington on 07/23/2014 13:52 -0400
The Untold Story In the NSA Spying Scandal: Blackmail
Ukraine, Gaza, Iran, Isis, Syria and Turkey are all just pawns in a grotesque geopolitical game. All sides have their narratives. But in all cases, innocents must die ...
Despite yesterday's lackluster earnings the most recent market levitation on low volume was largely due to what some considered a moderation in geopolitical tensions after Europe once again showed it is completely incapable of stopping Putin from dominating Europe with his energy trump card, and is so conflicted it is even unable to impose sanctions (despite the US prodding first France with BNP and now Germany with the latest DB revelations to get their act together), as well as it being, well, Tuesday, today's moderate run-up in equity futures can likely be best attributed to momentum algos, which are also rushing to recalibrate and follow the overnight surge in the AUDJPY while ignoring any drifting USDJPY signals.
NY Fed Slams Deutsche Bank (And Its €55 Trillion In Derivatives): Accuses It Of "Significant Operational Risk"Submitted by Tyler Durden on 07/22/2014 20:41 -0400
First it was French BNP that was punished with a $9 billion legal fee after France refused to cancel the Mistral warship shipment to Russia (which promptly led to French National Bank head Christian Noyer to warn that the days of the USD as a reserve currency are numbered), and now moments ago, none other than the 150x-levered NY Fed tapped Angela Merkel on the shoulder with a polite reminder to vote "Yes" on the next, "Level-3" round of Russia sanctions when it revealed, via the WSJ, that "Deutsche Bank's giant U.S. operations suffer from a litany of serious problems, including shoddy financial reporting, inadequate auditing and oversight and weak technology systems." The shortcomings amount to a "systemic breakdown" and "expose the firm to significant operational risk and misstated regulatory reports," said the letter from Daniel Muccia, a New York Fed senior vice president responsible for supervising Deutsche Bank.
Now that the black boxes from flight MH-17 have been handed over by the Ukraine separatists to Malaysian authorities (somewhat denting the credibility of the fabricated Ukrainian YouTube clip in which the rebels were "instructed" by Moscow to hide the black boxes), there was one question: which impartial entity and/or country would be tasked with an objective retrieval and analysis of the contents. A little while ago we got the answer courtesy of none other than UK Prime Minister David Cameron. "We've agreed Dutch request for air accident investigators at Farnborough to retrieve data from #MH17 black boxes for international analysis." This is the same Cameron who at the same time called on Europe to impose “hard-hitting sanctions” on Russia and "invoked the spectre of the Second World War and compared Russia’s aggression to that of Nazi Germany."
For those just waking up and looking to catch up on all the latest news out of Ukraine and the MH17 crash response in particular, here is the latest news roundup.
- EU Works to Punish Russia as MH17 Bodies Leave Rebel Area (BBG)
- Bodies From Malaysia Airlines Flight Begin Long Trip to Netherlands (WSJ)
- Israel pounds Gaza as Kerry arrives (Reuters)
- U.S. judge dismisses Republican lawsuit over Obamacare subsidy for Congress (Reuters)
- Israel Soldier Missing Amid Assault on Hamas in Gaza (WSJ)
- Detroit Retirees Vote in Favor of Pension Cuts (WSJ)
- Russia Axes 1st Bond Sale in 3 Months as Ukraine Drives Up Yield (BBG)
- Wall Street Cut From Guest List for Jackson Hole Fed Meeting (BBG)
- Credit Suisse to Exit Commodities, Posts Big Quarter Loss (BBG)
- Draghi Cedes Euro Control to Yellen on Fed Rate Wagers (BBG)
With the German economy already suffering (and AMD cutting its outlook), it appears Putin's promise to ensure Obama's action will see retaliation are starting to weigh as much on the rest of the world as Western media suggest US sanctions are weighing on Russia. This time, after blocking foreign cars and Intel/AMD chips, Bloomberg reports the State Duma, Russia’s lower house of parliament, is drafting a bill to require government agencies and state-run enterprises to give preference to local providers of software and hardware. For some context, IBM, Microsoft, HP, Cisco, Oracle, and Germany’s SAP SE had combined revenue of 285 billion rubles ($8.1 billion) from Russia (with 77% coming from government and SOEs). “This all has to do with sanctions,” warned one Russian politician.
Just like a century ago when waning British power invited a power struggle among rising nations, waning US power is creating conflict with Russia, China, etc. A century ago, they settled it on the battlefield. The great war brought brutal mass killings, bombings, heavy artillery, gassing, etc. And it changed warfare forever. This time around, the way we conduct war is different. Similarly, leaders are miscalculating, thinking that they can scare their opponents with warships and fighter jets. But modern warfare isn’t fought with boots on the ground. In 2014, cyberwar and economic war looms. And this type of war is something that will affect literally every person who is plugged in to the global financial system.
Equity prices tumbled early on - giving up all Friday's gains - before rampaging phoenix-like (thanks to an AUDJPY driven short squeeze) back to 'unch' after rumors of ceasefire discussions in Israel rolled around trading desks. Oil - it appears - was looking at the death-toll (and the fact that Hamas can only accept a deal that denies Israel's existence) and soared back towards $105 (its 2nd biggest day in over a month) notably divergent from stocks. The Russell 2000 was the laggard all day (ramped the most of the lows on the squeeze) and Trannies the leader. Since the MH17 headlines hit, the Nasdaq is the only index green, Treasury yields are -4bps, and oil up almost $4. The USD ended the day unch, 30Y Yield -2.5bps, gold, silver, and copper up modestly, and VIX up 0.5 vols at 12.7. Stocks closed on the weak side.
Russia is mounting a major publicity campaign in Europe for its proposed South Stream gas pipeline in an apparent effort to reassure its EU customers that they can rely on Russian gas for the indefinite future.
It is no secret that the gist of western thinking has been that sanctions against Russia would pressure its economy enough to force Putin to finally crawl to the negotiating table, tail between his legs, and beg for western forgiveness. Call it the law of unintended consequences striking once again, because while Russia's economy continues to hum along (if only for now, something that can't be said about Ukraine's) and has forced the Kremlin to seek a variety of deals with China to avoid western isolationism, one other country may have been crippled far faster than Russia: Germany.