Poland

The coming week will be busy in terms of data releases in the US; highlights include an improvement in consumer confidence, anemic 1Q GDP growth, and solid non-farm payrolls (consensus expects 215K). Wednesday brings advanced 1Q GDP - consensus expected a pathetic 1.1% qoq, on the back of what Goldman scapegoats as "weather distortions and an inventory investment drag", personal consumption (consensus 1.9%), and FOMC (the meeting is not associated with economic projections or a press conference). Thursday brings PCE Core (consensus 0.20%). Friday brings non-farm payrolls (consensus of 215K) and unemployment (6.6%). Other indicators for the week include pending home sales, S&P/Case Shiller home price index, Chicago PMI, ADP employment, personal income/spending, and hourly earnings.

This should be good... how will Kerry explain the 2nd warship in the Black Sea and Poland troops as non-escalation but Russia military exercises as escalation when Ukraine has now re-launched its anti-terrorist operations...

It seems the truce "deal" is well and truly dead...

600 U.S. TROOPS HEADING TO EUROPE FOR EXERCISES: PENTAGON
U.S. AIRBORNE TROOPS GOING TO POLAND, LITHUANIA, LATVIA,ESTONIA
U.S. MILITARY EXERCISES ARE IN RESPONSE TO UKRAINE CRISIS:KIRBY
MORE MILITARY EXERCISES 'COMING THROUGH' NATO: PENTAGON

The question now, of course, is - what will Putin do in response to this action?

As we warned numerous times in the last few days since the "de-escalation deal" was reached over Ukraine (sparking an instantaneous risk-on short-squeeze in stocks), the de-escalation has not happened. It seems even John Kerry has faced up to that reality now:

• *KERRY SAYS GENEVA ACCORD ONLY 'PIECE OF PAPER' WITHOUT ACTION

So now what? More red-lines? More sanctions? Just don't tell the headline-buying algos... Of course, he blames the Russians for the worthlessness of the deal.

It has been a largely event-free weekend except, of course, for the previously reported re-escalation in Ukraine following what was a lethal shooting in the east Ukraine city of Slavyansk blamed on Ukraine's Right Front, which has made a mockery, as expected, of the Geneva Ukraine de-escalation announcement from last Thursday. Overnight in Asia, Japan reported its largest ever trade deficit, providing yet more evidence that Abenomics has been an abysmal failure: all we are waiting for now is confirmation that basic Japanese wages have fallen yet again, which would make nearly 2 years in a row of declines. Still, the USDJPY, gamed as usual by HFT algos for which FX is now the last respite as the equity market crackdown gets louder, is doing its best to ramp from the overnight lows and ahead of the traditional US market open surge, as a result equity futures are modestly higher.

So what part of "All sides must refrain from any violence, intimidation or provocative actions," did the US not understand when they decided that deploying troops to Poland was in keeping with the four-party deal? As WaPo reports, Poland and the United States will announce next week the deployment of U.S. ground forces to Poland as part of an expansion of NATO presence in Central and Eastern Europe in response to events in Ukraine. As a reminder, we noted in December, Russia's placement of tactical nuclear-capable weapons near the Polish border which at the time sent a very clear message of escalation (despite the, at the time, lack of New Cold War headlines).

Moments ago, in a show of continued solidarity with the people of (West) Ukraine, US Defense Secretary Chuck Hagel announced the latest batch of "non-lethal" aid to Ukraine. Among the items that would be shipped are:

• Sleeping mats;
• Water purification systems;
• Medial supplies; and
• Helmets

Why no healthcare plans? Hagel added that while US actions are "provocative" and "heighten tensions", the US supply of equipment to non-NATO member Ukraine is not meant to "provoke or threaten Russia" and will review providing Ukraine with more support, also saying that the US is offering "planners" to help NATO update plans. The same NATO which as we reported yesterday, is preparing to expand its air and water presence around Russia... also obviously in a way that is not meant to threaten provoke Russia.

A day after Putin called Obama to warn him that only the US president can prevent bloodshed in Ukraine - something which Obama failed at based on this morning's reports out of east Ukraine - German Chancellor Angela Merkel had a follow up phone call with the Kremlin a few hours ago, in which Putin told her that "The sharp escalation of the conflict puts the country, in essence, on the verge of a civil war".

One can see that while the traditional 6:00 AM USDJPY buy program is just duying to resume aggressive upward momentum ignition, futures are still leery and confused by the recent post-open high beta selloffs. Then again, things like yesterday's ridiculous no news 3:30pm ramp happen and confused them even more just as momentum is about to take a downward direction. Stocks in Asia (ex-China) advanced amid a reversal in sentiment after Citigroup (+4.15%) inspired positive close on Wall Street, however Shanghai Comp (-1.4%) underperformed as concerns over GDP data on Wednesday following weak money supply data weighed on sentiment. Stocks remained on the back foot (Eurostoxx50 -0.42%), with Bunds supported by the release of lower than expected German ZEW survey and also ongoing concerns surrounding the stand-off between Ukraine/Russia. Short-Sterling bear steepened after UK CPI fell to its lowest level since October 2009, but house prices across Britain posted its biggest rise since June 2010, reviving concerns over an overheating market.

"Ball is in Kiev's court." That is how we concluded our article yesterday reporting that Moscow won't accept force against demonstrators after Kiev warned it would use special forces to quell ongoing "terrorist" uprisings across cities in east Ukraine. Predictably, Ukraine couldn't wait to shoot the ball right back at Russia and re-escalate (in hope that the west will finally stand up and side along the acting government in what continues to be a very foolish gambit) and early this morning local time, units of the Ukraine special forces started an anti-terrorist operation in eastern town of Slavyansk, where police station was seized yesterday by separatist protesters, as reported by the Interior Minister Arsen Avakov posts on Facebook, who also warned local residents to stay inside, saying separatist protesters have opened fire in direction of approaching special police units. Moments later the operation turned deadly after at least one member of the special forces was killed and as many as 9 wounded, as well as an unknown number of casualties on the "separatist" side. But most importantly, Russia now has a pretext to step in and "defend" its ethnic population just as it warned it would do.

Over the weekend, Nigeria’s government made an accounting adjustment in how it calculates its GDP statistics. By changing the base-year in GDP calculations from 1990 to 2010, Nigeria increased the reported size of its economy by 89% over the weekend. So with a stroke of a pen, the West African nation leapfrogged South Africa to become the continent’s largest economy. And in doing so the country’s debt-to-GDP ratio fell below 20%. Of course, the US government does exactly the same thing… often conveniently leaving out huge portions of its total debt such as the non-marketable securities it owes to the Social Security trust funds. It’s all about maintaining a false sense of confidence at all costs, no matter what lies they have to fabricate, no matter what fraud they have to commit.

There is a reasonably quiet start to the week before we head into the highlights of the week including the start of US reporting season tomorrow, FOMC minutes on Wednesday and IMF meetings in Washington on Friday. On the schedule for today central bank officials from the ECB including Mersch, Weidmann and Constancio will be speaking. The Fed’s Bullard speaks today, and no doubt there will be interest in his comments from last week suggesting that the Fed will hike rates in early 2015.

Days after the US escalated, announcing it will be sending a Navy warship back into The Black Sea, and on the heels of NATO ordering its military planners to draft measures to beef up defenses amongst its Eastern European members, Russia is demanding answers for this escalation. As Reuters reports, Russian Foreign Minister Sergei Lavrov said any increase in NATO's permanent presence in eastern Europe would violate a 1997 treaty on NATO-Russian cooperation: "We have addressed questions to the north Atlantic military alliance. We are not only expecting answers, but answers that will be based fully on respect for the rules we agreed on." De-Escalation-Off.

Polish magazine "Fakt" has laid out the following scenario of just how a Russian invaston would look like, sweeping the Baltics, Belarus, and all of Ukraine, in one offensive wave.

On the heels of NATO's declaration that is was suspending all practical cooperation with Russia (and ordered military planners to draft new measures to strengthen its defenses), Bloomberg reports that the US will be sending a Navy warship back to the Black Sea. Pentagon spokesman Army Colonel Steve Warren told reporters that the ship (as yet unnamed) wil be there to conduct exercises with allies and is a "direct response to the circumstances in Ukraine." and is the first in the Black Sea for 2 weeks.