Today's Headlines

Bloomberg:

• Greece, Italy Borrowing Costs Rise at Bill Sales. Greek and Italian borrowing costs rose and demand fell at sales of almost 9 billion euros ($11.7 billion) of bills amid concern appetite for bonds from the region’s most indebted nations may flag at auctions this week. Greece sold 1.95 billion euros of six-month bills at a yield of 4.90 percent, data from the debt agency showed today. That compares with 4.82 percent at a previous auction on Nov. 9. The Italian government said it sold 7 billion euros of 12-month securities to yield 2.067 percent, up from 2.014 percent at a Dec. 10 auction. Portugal plans to sell as much as 1.25 billion euros of 2014 and 2020 bonds tomorrow as concern mounts the nation will follow Greece and Ireland in seeking a European Union bailout amid a rise in bond yields for the euro region’s most-indebted nations. The bonds of those countries climbed after traders said the European Central Bank bought Portuguese, Irish and Greek securities before the auctions. “All eyes are on the Portuguese auction,” said Mohit Kumar, a fixed-income strategist at Deutsche Bank AG in London. “While I don’t expect it to fail, if the spreads at which it clears is large, this could potentially become a trigger for Portugal going to the” the European bailout mechanism.
• Verizon Wireless(VZ) to Start iPhone Sales Next Month, Ending AT&T(T) Exclusivity. Verizon Wireless will start selling Apple Inc.’s iPhone early next month, ending rival AT&T Inc.’s exclusive hold on the device in the U.S. and more than doubling the potential customer base for the touch-screen smartphone. The iPhone 4 will be available on Verizon’s network on Feb. 10 with preorders for existing customers starting online Feb. 3, the companies said in a statement today. The phone will start at $199.99 with a two-year wireless-service contract.
• Small-Business Confidence in U.S. Fell in December on Outlook. Confidence among U.S. small businesses dropped in December for the first time in five months, indicating a sustained rebound will take time to develop, a private survey found. The National Federation of Independent Business optimism index decreased to 92.6 from November’s 93.2 reading that was the highest since the recession began in December 2007, the Washington-based group said today. Four of the index’s 10 components fell, led by a dimmer outlook on the economy. “The hope for a pickup in the small business sector did not materialize,” William Dunkelberg, the group’s chief economist, said in a statement. “Owners remain stubbornly cautious and uncertain about the future course of the economy and their business prospects.” The report reflects an economic recovery that hasn’t been strong enough to reduce unemployment, which has exceeded 9 percent for 20 straight months. The gauge of expectations for better business conditions six months from now fell percentage points to a net 9 percent, today’s report showed. An index of whether firms think this is a good time to expand fell 1 point to a net 8 percent. Figures on the employment outlook were more promising. Small businesses with plans to add to payrolls rose 2 points to net 6 percent, a 27-month high. A net 13 percent of firms in the December survey said they were having trouble filling job openings, up 4 points from November. “Overall job creation is likely to continue, but at a tepid pace,” Dunkelberg said in the statement. “Until sales pick up, there is no pressing reason to hire.” December was the 25th consecutive month when more small business owners reported cutting average selling prices than raising them. At the same time, plans to raise prices rose to the highest reading in 26 months.
• European Union Said to Consider Separate Tests on Bank Capital, Liquidity. European Union regulators will discuss plans to conduct separate stress tests on bank capital and liquidity provisions at a meeting tomorrow, a person familiar with the negotiations said. Supervisors at the European Banking Authority in London will decide what sort of information lenders should provide for this year’s EU-wide stress tests on capital, as well as possible exams on liquidity, said the person, who declined to be identified because the meetings are private. Regulators will also choose an interim chairman to manage the EBA until a permanent chief is installed later this year. “A liquidity assessment needs to be included in the future stress tests of the banking sector,” Olli Rehn, the EU’s economy commissioner, told reporters in Brussels in December. The next round should be “even more rigorous and even more comprehensive.”
• Bank of Portugal Says Economy Will Shrink After Government's Spending Cuts. Portugal’s economy will contract this year as consumer demand drops and the government cuts spending, the country’s central bank said. Gross domestic product will shrink 1.3 percent in 2011 and expand 0.6 percent in 2012, following estimated growth of 1.3 percent last year, the Bank of Portugal said in its winter economic bulletin. On Oct. 7, the bank forecast no GDP growth in 2011, a projection that didn’t take into account budget deficit- cutting measures announced by the government on Sept. 29. “The Portuguese economy’s growth outlook will be significantly affected in the short term by the process of budget consolidation,” the Lisbon-based bank said in today’s e- mailed report. “Regarding the international context, it is still difficult to assess the degree of strength of the recovery of the world economy.” Portugal is raising taxes and cutting wages as it tries to convince investors it can narrow its budget gap further after the Greek debt crisis led to a surge in borrowing costs for indebted euro nations last year.
• Alcoa(AA) Sees 'Headwinds' in Growth in China Aluminum Use as Car Demand Slows. Alcoa Inc. said growth in demand for aluminum in China, the world’s largest market for the metal, will decelerate as government measures to curb inflation slow housing and automobile sales. Metal used by truck makers will rise as much as 3 percent this year, compared with a jump of about 60 percent in 2010, Chief Executive Officer Klaus Kleinfeld said on a conference call. “For 2011 we see some headwinds like the phasing out of the stimulus package, uncertain housing market,” the CEO of the world’s third-largest producer of the metal said. “Construction is such a huge part of first-end use of aluminum in China, almost 50 percent,” Peter Richardson, chief metals economist at Morgan Stanley Australia Ltd., said by telephone from Melbourne today. “The measures that have been progressively ratcheted up to control speculation and other excesses within construction and high-end property would have inevitably been expected to be reflected in slower growth.” Shipments of aluminum used in autos may also slow after China raised the sales tax on small vehicles to 10 percent from 7.5 percent on Jan. 1 as it scales back measures to support auto sales.
• Canadian Banks May Buy SunTrust(STI), Zions(ZION) as 'Fire Sale' Continues in U.S. Canadian banks, involved in a record $15.9 billion of acquisitions last year, may target U.S. lenders such as SunTrust Banks Inc., Zions Bancorp and Regions Financial Corp.(RF) to expand abroad, analysts said.
• Singh Calls Meeting With Ministers, Advisers as Indian Onion Prices Surge. Indian Prime Minister Manmohan Singh has convened a meeting with his cabinet colleagues to discuss ways to rein in food prices as opposition parties prepare to launch nationwide protests against inflation.
• Clinton Tells Yemenis Terrorism an Urgent Concern. Secretary of State Hillary Clinton said that Yemen-based terrorists are an “urgent concern” for the U.S. and the development of the Middle Eastern nation. “They have sought, more than once, to attack our country,” Clinton, on the first trip by a U.S. secretary of state to Yemen in 20 years, said at a forum in the capital, Sanaa. “Stopping such threats would be a priority for any nation, and it is a priority for us.”
• Job Openings in U.S. Decrease for Third Time in Four Months. Job openings in the U.S. fell in November from the highest level in two years, signaling a sustained labor market recovery will take time to develop. The number of positions waiting to be filled decreased by 80,000 to 3.25 million, the Labor Department said today in Washington. The number of people hired dropped from the prior month and separations climbed.
• Sears(SHLD) Rises After Quarterly Profit Forecast Tops Estimates. Sears Holdings Corp., the largest U.S. department-store chain, climbed the most in a year after its fiscal fourth-quarter profit forecast surpassed analysts’ projections. The shares advanced as much as 11 percent after Sears said today that profit, excluding store closings, restructuring and impairment charges, will be $3.39 to $4.12 a share in the quarter ending Jan. 29. Analysts surveyed by Bloomberg had estimated $3.05 on average.
• Brevan Howard Says Failure to Address Debt Crisis is Biggest Growth Risk. Brevan Howard, Europe’s biggest hedge-fund firm, said the greatest risk to global economic growth would be the failure of European Union leaders to tackle the sovereign-debt crisis. It wouldn’t be “a policy mistake but a political choice by triple-A rated governments unwilling to finance what is going on in the periphery,” Luigi Buttiglione, head of global strategy at Brevan Howard, said at a conference in Geneva today. “This would have a substantial impact on the economic outlook.

Wall Street Journal:

• EU Weighs Boosting Bailout Fund. European Union governments are discussing proposals to increase the €440 billion ($569.98 billion) bailout fund for indebted euro-zone countries, a recognition that the fund might prove too small if the region’s debt crisis spreads to Spain, according to European officials. No decision has been taken yet, and none is currently expected at next week’s meeting of EU finance ministers, said a senior European official, who pointed out that hardly any of the fund’s firepower has been used yet.
• China Stealth Test Upstages Gates, Hu. China’s first test flight of its stealth fighter Tuesday overshadowed a mission to China by U.S. Defense Secretary Robert Gates to repair frayed military relations, and prompted concern about whether President Hu Jintao and the civilian leadership are fully in control of the increasingly powerful armed forces.

Bloomberg Businessweek:

• Baltic Dry Index Falls to 21-Month Low on Flooding in Australia. The Baltic Dry Index, a measure of dry-bulk commodity-shipping costs, fell to a 21-month low as flooding in Australia shut mines and halted railroads, curbing volumes of cargo to be delivered. The index declined 15 points, or 1 percent, to 1,480 today, according to data from the Baltic Exchange in London. The drop was the 20th in a row. Daily rents for capesize ships, the biggest tracked by the gauge and typical haulers of iron ore and coal, lost 5.3 percent to $11,266, a two-year low.

CNBC:

• Crisis is 'Systemic' for Europe: Greek Finance Minister. Greek Finance Minister George Papanconstantinou sought to reassure investors over the country’s debt burden on Tuesday, saying spreads between Greek and German bonds were high because of broader market turbulence rather than a real threat of default.
• Fed's Bond-Buying Could Soon Backfire: Plosser. The U.S. Federal Reserve's aggressive bond-buying plan could soon backfire unless the central bank gradually changes course to head off inflation, a top Fed official known for his hawkish stance said on Tuesday. Philadelphia Federal Reserve Bank President Charles Plosser said the $600-billion quantitative easing plan, known as QE2, would need to be reconsidered if the U.S. economy's current "moderate recovery" picks up steam. "The aggressiveness of our accommodative policy may soon backfire on us if we don't begin to gradually reverse course," he said.
• The Fed's QE2 Traders, Buying Bonds by the Billions. Deep inside the Federal Reserve Bank of New York, the $600 billion man is fast at work.

MarketWatch:

• Schwab(SCHW) Settles YieldPlus Case for $119 Million. Charles Schwab Corp. said on Tuesday that it has agreed to pay regulators about $119 million to settle claims it wrongly marketed its short-term money-market fund YieldPlus to clients.

Business Insider:

• Chart of the Day: Hedge Funds Are Still Crazy About Gold. (graph)
• It's Confirmed: WikiLeaks is Targeting Bank of America(BAC).
  

Zero Hedge:

• Market Stutters As $6 Billion In ES Goes Through. We are hearing that the recent market downdraft and volume upswing occurred as a major block of just about $6 billion in E-Minis hit the bid. What is odd is that such a big order would go as a block and not be split. Either this was a fat finger or someone is making a statement.
• Is Telestone Technologies(TSTC) a "RINO" in Sheep's Clothing? The backlog of alleged Chinese "scam" stocks is starting to trouble us: not even we suspected when we commenced our little crusade against Sino-fraud, and domestic stock exchange complacency to host said fraud on what are increasingly becoming discredited exchanges, that it would lead to such an explosion in content, confirming time after time, that a material number of Chinese companies, most notably of the reverse merger variety, are nothing short of pure-bred frauds.

New York Times:

• Euro's Architect Warns About Currency's Future. Even some architects of the euro are becoming pessimistic about its future. Otmar Issing, the influential former chief economist of the European Central Bank, warns that the common currency’s existence could be threatened unless member countries find a way to impose tougher spending curbs on one another. “With the failure to make sovereign states’ fiscal policies consistent with the conditions for the single currency area,” Mr. Issing wrote in an article to be published this week, “policy makers not only have weakened the functioning of monetary union, but have also called into question its very survival.” Mr. Issing’s views are particularly noteworthy because he was a key figure in the introduction of the euro. “From a former board member of the E.C.B. this is a very pessimistic statement,” said Jörg Krämer, chief economist at Commerzbank in Frankfurt. “There is a lot of disappointment in this article.” In the article, Mr. Issing wrote that rescue of countries that have pursued bad policies “adds up to an open invitation to states to live beyond their means at the expense of others.” Predictions by euro skeptics have proved true, Mr. Issing wrote in the article, which will be published this week in the bulletin of the Official Monetary and Financial Institutions Forum. “The crisis brought further evidence of a basic design flaw of monetary union, namely that we could not rely for its sound working on member countries to carry out appropriate economic policies,” Mr. Issing wrote. Mr. Issing also warned leaders not to try to create a stronger political union behind the backs of European citizens. “A political union worthy of the name cannot be set up by stealth,” he wrote. If leaders create a de facto political union under which disciplined countries subsidize the undisciplined, Mr. Issing wrote, “it will not be long before opposition to monetary union, and possibly other policies as well, appears on the agenda not just of extremist groupings but also of established political parties, in Germany and elsewhere.” Mr. Issing called for tighter rules on government spending, with automatic sanctions, and for independent organizations to determine when countries are in violation.
• Hedge Funds Pinched by Health Care Reform. A survey by insurance broker SKCG Group found that the hedge fund industry is paying more but getting less. SKCG, which interviewed more than 100 of its hedge fund clients with assets ranging from $250 million to $20 billion, said that premiums for hedge funds increased between 6 percent and 18 percent in 2010. In part, insurance companies, the broker noted, are hiking rates in response to new health care reform. “What’s really troubling is that some insurance companies are asking for rate hikes twice in one year. That’s a huge break with tradition,” said David Parker, president of the employee benefits division at SKCG, in a statement. Meanwhile, SKCG said the coverage is being “watered down.” Case in point: One hedge fund firm experienced a 300 percent jump in deductibles for out-of-network visits.

LA Times:

• New Generation of Unmanned Spy Planes is Being Tested. Three drones being flown in the coming weeks are speedier, stealthier and higher-flying.

CBS News:

• Poll: Most Americans Feel Rhetoric, Tucson Shooting Unrelated. Nearly six in 10 Americans say the country's heated political rhetoric is not to blame for the Tucson shooting rampage that left six dead and critically wounded U.S. Rep. Gabrielle Giffords, according to a CBS News poll. In the wake of the shooting, much focus has been put on the harsh tone of politics in Washington and around the country, particularly after a contentious midterm election. Rhetoric and imagery from both Republicans and Democrats have included gun-related metaphors, but the majority of the country isn't connecting the shooting to politics. The lone suspect in the attack, 22-year-old Jared Lee Loughner, had expressed in recent years a deep-seated distrust of the government and personal animosity toward Giffords, according to evidence collected by authorities, YouTube videos he made and accounts from former acquaintances. Overall, 57 percent of respondents said the harsh political tone had nothing to do with the shooting, compared to 32 percent who felt it did. Republicans were more likely to feel the two were unrelated - 69 percent said rhetoric was not to blame; 19 percent said it played a part. Democrats were more split on the issue - 49 percent saw no connection; 42 percent said there was. Independents more closely reflected the overall breakdown - 56 percent said rhetoric had nothing to do with the attack; 33 percent felt it did.

MobileBeat:

• KreditFly Launches Mobile Payments System With Credit Guarantees.

Politico:

• Gabrielle Giffords 'Generating Her Own Breaths'. Arizona Rep. Gabrielle Giffords is breathing on her own again at the University of Arizona Medical Center, where she is still in critical condition three days after being shot in the head during an outdoor meeting with constituents in Tucson.
• U.S. Chamber of Commerce Backs Health Repeal. U.S Chamber of Commerce president Tom Donohue said Tuesday that the powerful business lobby supports the House Republican legislation to repeal President Obama’s health care reform law. “Last year, while strongly advocating health care reform, the Chamber was a leader in the fight against this particular bill — and thus we support legislation in the House to repeal it,” Donohue said during a speech on the state of American business. “We see the upcoming House vote as an opportunity for everyone to take a fresh look at health care reform, and to replace unworkable approaches with more effective measures that will lower costs, expand access, and improve quality.”
• Jon Stewart: Rhetoric Isn't to Blame. He may have hosted the Rally to Restore Sanity and/or Fear last year, during which he called for a more civilized political discourse, but comedian Jon Stewart doesn't blame what he called "the toxic political environment" as the cause of the Arizona shootings this weekend. "We live in a complex ecosystem of influences and motivations and I wouldn't blame our political rhetoric any more than I would blame heavy metal music for Columbine," Stewart said on "The Daily Show" Monday night. "Boy, would it be nice to draw a straight line from this horror to something tangible, because then we could convince ourselves that if we just stopped this, then the horrors will end." "You cannot outsmart crazy," Stewart said. "You don't know what a troubled mind will get caught on." Stewart said he doesn't know "if there is a way to make sense" of the shootings. Nevertheless, he did stress a need to tone down political "ramblings." "It would be really nice if the ramblings of crazy people didn't resemble how we talk to each other on TV," he said. "Let's at least make troubled individuals easier to spot."

Telegraph:

• Barclays(BCS) Boss Bob Diamond Says Banks Should Be Allowed to Fail. Bob Diamond, Barclays' chief executive, has told a committeee of MPs that badly-run banks should not be bailed out by taxpayers.

Publico:

• Talks on possible European assistance for Portugal are proceeding "very discreetly at a technical level," citing two European diplomats.