Futures are treading water once more now that Ukraine has stormed to center stage from the backburner after everyone was convinced Putin would let the situation cool off after annexing Crimea. Guess not. Adding the renewed geopolitical jitters to what has already been a beta stock bloodbath into a holiday shortened week assures some high volatility fireworks. Cautious sentiment was observed over in Asia (Nikkei 225 -0.36%) amid renewed fears that geopolitical tensions in Ukraine will flare up again following reports of exchange gunfire with pro-Russian militants. This sentiment carried over into the European session with stocks lower across the board (Eurostoxx50 -0.71%). EUR is lower after ECB’s Draghi said any further strengthening of the EUR would warrant further action by the ECB, including non-standard measures such as quantitative easing – it is amazing how frequently and often the Virtu algos still fall for Draghi’s jawboning trick which has now become all too clear will never be implemented and certainly not if he keeps talking about it daily, as he does.
The trading week has gotten off to a subdued start in Asia today, but this morning’s falls in equities have been smaller than what one would expect following last Friday’s 0.95% fall in the S&P500. Nonetheless, negative headlines in Ukraine are keeping a lid on risk sentiment today. The Nikkei – 0.4%) and HSCEI (-0.3%) are a touch lower, as are S&P 500 futures (-0.1%). A Chinese media outlet is suggesting that a number of Chinese banks including the country’s largest bank may issue around CNY80bn (US$13bn) in preference shares each as they look to build capital buffers amid rising credit quality concerns. Banks are weighing on Chinese bourses today. Elsewhere, Asian credit is trading a few bps wider but the strength of US rates is capping any EM widening.
Taking a look at some other weekend headlines, the conflict between the Ukraine and Russia reaches an inflection point today after the Ukrainian government gave pro-Russian separatists in eastern Ukraine a Monday morning deadline to disarm or face a “full-scale anti-terrorist operation” by its armed forces. Over the weekend Ukraine had sent in forces to regain control of government buildings in a number eastern Ukrainian cities but some anti-Kiev blockades remain across the east. Russia’s UN ambassador warned that in a few hours time, things in the Ukraine could take “an irreversible turn for the worse†and requested that Ukraine drop its Monday ultimatum. The UN Security Council is meeting as we type. This is something to watch out for today. Palladium futures are up 0.7% overnight while Wheat futures are up 1.5%.
Elsewhere in the week ahead, the key data releases include Eurozone’s industrial production today, the German ZEW survey tomorrow and Spanish/Italian trade on Wednesday. Foreign ministers from Ukraine, Russia, EU and the US will hold a summit on Thursday where the weekend’s clashes between the Ukrainian military and pro-Russian forces in Eastern Ukraine will be discussed. Credit Suisse reports 1Q 14 numbers on Wednesday. In EM, it will be an important week for China-watchers with China reporting a range of data including industrial production, Q1 GDP and retail sales on Wednesday. DB expects China’s first quarter growth to be 7.4% which puts it above consensus at 7.3%. Elsewhere in EM, there is IP data for Russia (Tuesday) and inflation readings in India (Tuesday) and Brazil (Thurs).
Bulletin Headline Summary From Bloomberg And RanSquawk
- Treasuries steady, 2Y-7Y yields lowest since mid-March; 10Y after rallying 10bps last week on declines in stocks and bund yields, strength in JPY amid Ukraine and global growth concern.
- The U.S. and EU have reached “crunch time†to halt further destabilization in Ukraine and curb any further Russian expansion in the region
- Russia and the U.S. traded barbs at an emergency meeting of the UN Security Council as a deadline passed for pro-Russian separatists to leave buildings they occupied amid escalating violence in eastern Ukraine
- Draghi said a further appreciation of the euro would trigger more monetary stimulus in his strongest warning yet about the region’s rising currency
- Republican odds of U.S. Senate takeover is rising amid fall- off in turnout in 2014 midterms when the electorate will trend older and whiter and as Obama’s public approval lags
- The lopsided bond market has caught the attention of the SEC, which is examining whether the biggest players, such as Pimco and BlackRock, get preferential prices and access because of their influence
- China’s banking regulator ordered owners of the nation’s 68 trust companies to be prepared to provide funding or sell their stakes as the risk of defaults rises in the $1.9t industry for high-yield investment
- Sovereign yields mostly lower. Asian stocks mixed, Nikkei -0.4%, Shanghai little changed. European equity markets U.S. stock futures fall. WTI crude and copper lower, gold gains
