Recap 3-03-14


I don’t know much about the Ukraine situation, but I do have some experience with the impact of geopolitics on markets. And I think that like the situation with Syria, the half-life of these things are short, and the news flow will need to get worse at an accelerating rate for the market impacts to substantially worsen beyond what we’ve seen so far. The WSJ published something on this also:

Now that I’ve professed my ignorance on the topic, I would like to point out that no one seems to have a good idea of the Russian intentions given their perceived gain/loss trade offs. Most of the commentary seems to be some version of ‘Russia is trying to influence things in Ukraine,’ but that doesn’t really qualify as insight, does it? Anyway, there seems to be a fairly high hurdle for substantive Western action against Russia, so the ball seems to be fully in Russia’s hands for now. Given that Russian news sources have a history of publishing falsehoods, we should probably expect some tape bombs while this continues.


  • PMI:
  1. US ISM improved to 53.2 vs 52.3 exp and 51.3 prev. ISM: “several comments from the panel mention adverse weather conditions as a factor impacting their businesses in February”
  2. UK PMI improved to 56.9 vs 56.8 exp and 56.7 prev
  3. EU Final PMI was revised slightly higher to 53.2 vs 53 prev. Italy PMI declined to 52.3 vs 52.9 exp and 53.1 prev
  4. China Markit Mfg PMI declined to 48.5 as exp vs 49.5 prev
  5. China Mfg PMI declined to 50.2 vs 50.1 exp and 50.5 prev
  6. China Non-Mfg PMI improved to 55.0 vs 53.4 prev
  7. Australia Mfg PMI improved to 48.6 vs 46.7 prev

Japan Capital Spending improved to 4.0% YoY in 3Q vs 4.9% exp and 1.5% prev

Russia / Ukraine:

  1. Russian equities are down >10% and the ruble dropped 1.8%. The Russian central bank held an emergency meeting and hiked rates by 1.5% to 7%. 10yr yields are up 35bps and the 5yr CDS is 9bps wider.
  2. Russia appears to be attempting to create pretext, setting a series of tripwires throughout Crimea in an effort to provoke a response from Kiev that would justify a further military invasion of the peninsula by Moscow. Troops void of identifying insignia (although which by all accounts are Russian or at least directed explicitly by Russia) have assumed position around key Crimea installations and are effectively in control of the region. However, actual fighting has been minimal… Divining Russia’s goals isn’t entirely clear – whether Moscow truly wants to annex Crimea (or at least turn it into another South Ossetia-like state whose sovereignty is recognized only by Russia) or is simply using the current conflict as a negotiating tactic to shape the course of Ukraine’s new government isn’t clear. JPM
  3. The euro area receives 25% of its gas from Russia with Finland 100% dependent and Austria 67% dependent.

Upcoming Data:

  • Tue: Australia GDP, China HSBC Services PMI
  • Wed: EU Service PMI, US ADP, BoC, US Non-Mfg ISM, Australia Trade Balance
  • Thu: BoE, ECB, Dudley Speaks, US Jobless Claims