Daily Agenda: Europe at Odds Over Russia and Ukraine

German Chancellor Angela Merkel and French President François Hollande traveled to Moscow on Friday to negotiate a cessation of hostilities in eastern Ukraine. Their mission appears to have achieved little beyond the agreement to a second round of talks on Wednesday in Belarus capital Minsk. Cyprus is denying reports from Russian media sources this past weekend that the nation will host several Russian military bases, including one within 50 kilometers of Akrotiri, a U.K. air base that holds NATO operations. Multiple cabinet members within the newly installed Greek government have referred repeatedly to offers for meetings with Russian counterparts. The prospect of a Russian military presence within the European Union itself was coupled with the announcement on Friday that two key separatist groups fighting in eastern Ukraine have begun to discuss a political merger, a potentially ominous development for Kiev. Criticism from officials including Republican U.S. Senator John McCain has likened this approach to foreign policy with the Munich Agreement of 1938, which resulted in the famous “peace for our time” speech by U.K. Prime Minister Neville Chamberlain. For now, however, geopolitical worries seem to be taking a market sentiment backseat to concerns over deflation and the resulting response by central banks.

Chinese trade data disappoint。Trade data for January released in Beijing over the weekend indicated an unexpected slowdown in international trade forChina。While, given global growth concerns, a 3.3 percent decline in exports from the same month versus a year earlier was perhaps not entirely surprising, a nearly 20 percent year-over-year decline in imports exceeded consensus analyst forecasts, even after factoring inweak oil prices。与春节季节性下滑is a potential driver for temporary distortions. Initial negative reactions in Asian equity markets overnight, however, suggest that significant concerns over demand within the Chinese economy remain strong.

HSBC under scrutiny for tax evasion.News broke on Sunday that Washington-based press network International Consortium of Investigative Journalists had secured a large number of documents that suggest HSBC’s private banking arm helped clients avoid taxes and hide assets through a Swiss subsidiary. The list, provided by former employees, includes data on more than 100,000 clients from more than 200 nations.

JPMorganunder investigation.Media reports emerged over the weekend indicating that U.S. authorities are investigating whether JPMorgan Chase violated the Foreign Corrupt Practices Act. At issue is the hiring and subsequent employment of the child of a senior Chinese government official despite underqualification and poor performance.

Loews bests estimates, still shows slump.Hotel, energy and financial services conglomerate Loews Corp. beat consensus estimates for the fourth quarter of 2014. With adjusted earnings of $0.57 per share, the company achieved $1.55 for all of 2014. Despite topping analyst expectations, fourth-quarter results still represented a 13 percent decline.

U.S. Treasuries see jump in yield.In reaction to a U.S. Department of Labor report that was stronger than forecast, the yield on five-year U.S. Treasuries went up 18 basis points as credit spreads narrowed considerably, led by high-yield and emerging markets. With average hourly earnings rising by 2.2 percent year-over-year in January, many bond investors appear to see a greatly lessened chance that theFederal Open Market Committeewill pause before tightening policy rates.

Portfolio Perspective: Does a China Slowdown Mean Deflation?—罗伯特•萨维奇CCTrack解决方案s

The drumbeat for a weaker yuan was loud last week, and many see the financial reform and widening of the currency’s band as a backdoor to allow yuan weakness to offset the ongoing credit driven slowdown in China. Over the weekend, China posted its January trade surplus, which came out at a shocking $60.03 billion, up 88.4 percent year-over-year and up from $49.60 in December. Exports fell 3.3 percent year-over-year to $200.26 billion, while imports fell 19.9 percent to $140.23 billion.

There are at least a couple of main takeaways from this report. First, anyone that thinks a $60 billion surplus isn’t enough to help offset capital outflows is missing the point. A weaker yuan isn’t going to do much more for trade supporting the Chinese economy. It may help spark inflation — but that is another story and the Japanese yen’s recent travails suggest a large amount of caution. Second, anyone that thinks the China demand drop doesn’t matter is also ignoring the trouble in 2015. The roles of the U.S. and EU in keeping China on track are changing. This is important as China is one of the key backstops forGreece。

Robert Savage is the CEO ofCCTrack Solutions, a New York–based hedge fund firm. CCTrack is backed by Citic Capital Holdings, which in turn is backed by the sovereign wealth funds of China and Qatar.