Russia's food for thought leaves Europe with gas problem

First – Surprise! Yes ladies and gents – Friday’s NFP report (Non Farm Payrolls) caught everyone off guard – and rightly so – I mean the prior macro data reports were all pointing to a weak number, speculation during the week caused some of the investment banks to lower guidance – and then – somehow the number beat the original expectation coming in at +175k jobs created (with upward revisions to the prior months)
….Unemployment which had been going down – even on the prior horrendous numbers suddenly ticked up this time….going from 6.6% to 6.7% - and the mkt was unfazed. Unfazed because an uptick in unemployment is considered bullish….now work with me here…..

If the reason that the rate had been falling was not because of jobs created, but because they were discouraged and just dropped out of the work force and thus no longer counted, then it makes sense that if people are suddenly encouraged and start looking for work again then they must be counted as looking but unemployed so the rate edges higher….and this my friends is considered bullish. I can think of another word that sounds like bullish…..

At 8:28 am on Friday– a full two mins ahead of the official release – futures spiked higher for no (apparent) reason – computers kicked into high gear, creating buy orders BEFORE the news hit the tape….Now could those computers be that smart to know what the report was before it was made public? Are the HFT computers ‘co-located’ in the BLS (Bureau of Labor Statistics) office? I'm just askin’…..

And the game was on…..so it felt as if the mkt was poised to challenge 1900…..clearly they were already challenging the highs at 1885 in the mins before the release and it did feel like they were gonna let it rip…but then it failed. Why? Well – as discussed in my note last week – Was it a classic - buy the rumor/sell the news event? It appears so….

Now what is interesting is that the uptick in the unemployment rate gives Janet and her co-workers a bit of breathing room – in case they were looking for a reason to taper the taper – but I do not believe that will happen – it seems that the taper is on and the FED wants out. Are mkts fairly priced? Well, are about to find out.

US futures were pointing lower - down 6 pts in overnight trading but have since rebounded and are now only down 2 pts at 6:40 am. …..Asian stocks took a hit closing lower in Monday trading – Chinese exports fell 18%, while imports rose 10% producing a trade deficit of $23 bil – (vs. exp of a rise in both exports and imports), Japanese GDP was revised lower to 0.7% from the original estimate of +1%. Australia reacts to the negative China data, the ongoing crisis in Ukraine and the weekend crash of a Malaysia Airlines jet only added to the negative tone. ..China - 3%, Japan ended -1%, Hong Kong -1.7% and ASX -0.9%

In Europe – mkts opened a bit lower and remain confused…..weak Asian data, ongoing trouble in Ukraine and the disappointment over real action from the ECB last week all causing traders to take a Risk Off position in early trade. Russian forces tightened their grip around Crimea on Sunday in a sign that EU and US threats of sanctions were having little success in persuading Vladimir to ease tensions over the southern Ukrainian peninsula. Russian troops took over a Ukrainian border post and now occupy a 12 such posts. Yet despite the continued uncertainty surrounding Ukraine, the markets have taken it in stride…..not going into ‘panic mode’ - (though a topping pattern does seem to be developing). This suggests that the mkts remain hopeful that a worst case scenario can still be avoided.

However, serious concerns that natural gas supplies that run through Ukraine could be halted are causing some angst. We (The US) have approved a $1 bil aid package to help Ukraine pay its bill to Russia - that only helped calm the markets for a few days, The Europeans are working on their own aid package and they have begun the paperwork to allow Ukraine to join the EU– but if Vladimir should decide to turn up the pressure and turn off the pipelines then the mkt will need to re-assess what the potential damage might be.

There are no eco data reports today at home, but we will get Chicago Fed Pres Charles Evans to speak at about 12:30 pm. Mkts will continue to focus on Russia since there are no real macro data points to consider. The S&P remains locked in the 1860/1885 range. It keeps testing this 1875 level - for support - any breach will take us to 1860. If it finds support at 1875 - then a retest of the highs at 1885 will be the next move.

Sweet Sausage Risotto

This dish can be a first or main course depending on how hungry you are.

You will need: olive oil, butter, onions, sweet Italian sausage (removed from casing), minced garlic, thyme, Arborio Rice, white wine, chicken broth, frozen peas and Parmegiana Cheese.

In a sauce pan - heat up about 6 cups of chicken broth.

In a heavy pan - heat the oil and 1/4 stick of butter over med heat. Add chopped onion and sauté until soft and translucent. Next add the sausage meat and brown. When ready add minced garlic - no more than a tblspn, and some thyme....do not overdo....about 3/4 tspn. You can always add less and then taste. Sauté for another couple of mins to blend the flavors. Now add 1 1/4 cup of Arborio Rice and about 1 cup of dry white wine...mix well and stir until the wine is absorbed. Season with a bit of pepper. NO SALT needed.

Now - one ladle at a time...add the hot stock to the rice and stir...you must stay at the stove - this is key. You need to stir the rice and not allow it to stick. As the stock is absorbed - add another cup and stir...continue this until the rice is tender and creamy....maybe like 20 mins....but taste as you go to determine. (You will not need all of the stock - but just in case you did it wrong you can always try to save by adding a bit more stock.) Now add 1 cup + of frozen peas...you can always add more if you like peas.....and a handful of grated Parmegiana Cheese. Stir well for about another 5 mins so that the peas have time to warm up......taste. Taste good? then you are ready to serve...If not - keep stirring. Do not let the rice dry out... This meal should take you about 30 mins - (40 max).

Serve in warmed bowls and garnish with a bit of chopped Parsley...always have extra cheese on the table for your guests.