Today's Headlines

Bloomberg:

• Stocks Drop Worldwide as Oil, Dollar Surge After Egypt Protests. Stocks worldwide plunged the most since November, crude oil jumped and the dollar gained against the euro after protests in Egypt intensified and President Hosni Mubarak imposed a nationwide curfew. Egypt’s dollar bonds sank, pushing yields to a record high. The MSCI World All-Country World Index of stocks in 45 countries lost 1.3 percent at 12:23 p.m. New York time.
  
• U.S. Economy Quickens on Gains in Spending, Exports. The U.S. economy accelerated in the fourth quarter of 2010 as consumer spending climbed by the most in more than four years. Gross domestic product grew at a 3.2 percent annual rate, Commerce Department figures showed today in Washington, falling short of the 3.5 percent median forecast of 85 economists surveyed by Bloomberg News because of a slowdown in inventories. Excluding stockpiles, the economy rose at a 7.1 percent pace, the most since 1984. “The consumer really drove the economy in the fourth quarter,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, who accurately forecast the rate of growth. “The economy has moved beyond recovery to a stable state of growth.” A separate report today showed consumer confidence fell less than expected in January, a signal the biggest part of the economy may extend the gains in spending. The Thomson Reuters/University of Michigan final index of consumer sentiment decreased to 74.2 from 74.5 in December. Inventories last quarter were stocked at a $7.2 billion pace, down from a $121.4 billion rate in the third quarter. The slowdown subtracted 3.7 points from growth, the most since 1988. Leaner stockpiles may help set the stage for faster growth in the first half of this year.
• Oil Rises Most Since 2009 on Concern Egyptian Unrest to Spread. Oil surged the most since September 2009 as unrest in Egypt raised concern that protests would spread to major oil-producing parts of the Middle East. Crude gained as much as 4.8 percent after a day of clashes between police and protesters demanding an end to Egyptian President Hosni Mubarak’s 30-year regime. The unrest in Egypt followed an uprising that led to the Jan. 14 overthrow of Tunisian President Zine El Abidine Ben Ali. “Tunisia isn’t a big oil producer, and Egypt isn’t a big oil producer, but it’s moving closer to the oil fields,” said Phil Flynn, vice president of research at PFGBest in Chicago. “This thing seems to be spreading from border to border.”
• Gold Jumps Most in 12 Weeks on Haven Demand Amid Egypt Tensions. Gold futures jumped the most in 12 weeks on demand for a haven amid escalating tensions in Egypt. Tens of thousands of marchers chanted “liberty” and “change” as rallies began today at points across Cairo in the biggest challenge to Egyptian President Hosni Mubarak’s 30-year rule. Gold futures for April delivery rose $22.30, or 1.7 percent, to $1,342.10 an ounce at 12:19 p.m. on the Comex in New York, heading for the biggest gain since Nov. 4.
• ECB's Tumpel-Gugerell Says Governments Failing to Meet Obligations to Euro. European Central Bank Executive Board member Gertrude Tumpel-Gugerell criticized governments for failing to fulfill their obligations in the monetary union, saying they must do a better job if the central bank is to guarantee the euro’s stability. “The crisis is clear evidence that parts of the common foundation of the economic and monetary union have not been implemented,” Tumpel-Gugerell said in a speech in Mainz, Germany, last night. “The ECB’s task is to ensure price stability. Confidence in the euro states and their finances can only be created by the states themselves, particularly through common effort.”
• Saudi Arabia Credit-Default Swaps Jump 18.5 Basis Points to 93.50. The cost of insuring the sovereign debt of Saudi Arabia rose 18.5 basis points to 93.5, the highest level in almost a year, according to CMA prices for credit- default swaps.
• Ackermann Says Bailout Risk Lurks for Hedge Funds. Deutsche Bank AG Chief Executive Officer Josef Ackermann said unregulated financial companies such as hedge funds may pose a systemic risk to the economy if oversight isn’t increased. “You have an unregulated area which becomes -- as a consequence of all the regulatory changes -- more and more important,” Ackermann, 62, said in an interview at the World Economic Forum in Davos, Switzerland. “You may one day wake up and realize that the systemic challenges are so big that you will have to bail out or at least help support the unregulated sector.” Ackermann’s warning echoes comments made by former U.S. Treasury Secretary Lawrence Summers, who said this week in Davos that regulators haven’t paid enough attention to problems that could emerge in “a large, less healthy buccaneer sector.” Hedge funds have dodged the brunt of new global banking regulation aimed at avoiding a repeat of the worst global financial crisis since the Great Depression.
• Democratic Senator Who Shot Cap-and-Trade Bill in Ad Named to Energy Panel. The Senate committee with primary jurisdiction for U.S. energy policy added Joe Manchin, the former West Virginia governor who won office after using climate-change legislation for target practice in a 2010 ad. Manchin will join the Senate Energy and Natural Resources Committee, according to an e-mail yesterday from Bill Wicker, a committee spokesman. The panel, led by Senator Jeff Bingaman of New Mexico, plans to draft legislation that sets guidelines for how much electricity comes from sources such as coal, natural gas, wind and sun. West Virginia is the second-biggest coal-producing state after Wyoming, according to Energy Department data. In his commercial, Manchin loads a rifle and fires a single bullet into a copy of the cap-and-trade bill backed by President Barack Obama that would penalize utilities for using coal.
• Japan's Bonds to Rise on Emerging-Market Tightening, DIAM Says. Japan’s bond may rise as interest- rate increases in emerging nations dim global growth prospects, spurring demand for the safety of debt, according to DIAM Asset Management Co. “With emerging nations such as China entering a monetary tightening mode, investors are becoming aware of risks to the economic outlook,” said Nobuto Yamazaki, an executive fund manager who helps oversee the equivalent of $12 billion at the Tokyo-based firm. “They appear to be wondering whether to keep buying commodities and stocks.”
• China Said to Plan to Raise Capital Ratio When Credit Excessive. China may order its biggest lenders, including Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp., to raise capital ratios to as high as 14 percent when credit growth is judged excessive, said a person familiar with the matter. Newly proposed rules would require increasing capital adequacy buffers by as much as 2.5 percentage points when the banking regulator determines loan growth to be too fast, said the person, declining to be identified as the plan isn’t public.
• Emerging Equity Funds Have Biggest Outflow Since 2008. Emerging-market equity mutual funds had their biggest weekly outflows since mid-2008 as investors speculated rising interest rates will curb economic growth, according to Citigroup Inc. The funds lost $3 billion during the week ended Jan. 26, Citigroup’s Hong Kong-based strategist Markus Rosgen wrote in a report today, citing data compiled by research firm EPFR Global. The outflows amounted to 0.4 percent of the funds’ assets, the most since May, Rosgen wrote. Investors are paring bets on shares in the fastest-growing economies after pouring more than $90 billion into emerging- market stock funds last year, the biggest-ever annual inflows, according to EPFR data.
• IMF's Lipsky Says 'Never Say Never' on Another Possible Euro-Area Bailout. International Monetary Fund First Deputy Managing Director John Lipsky said the organization may have to provide further financial aid to so-called peripheral European countries if the region’s debt crisis doesn’t ease. “It certainly will depend on circumstances,” Lipsky said in an interview today with Bloomberg Television at the World Economic Forum in Davos, Switzerland, when asked if the IMF may have to provide assistance to more euro-area members. “Never say never.”
• Dimon Says Deficits, Spending Are New Global Risk. The U.S. government’s estimated $1.5 trillion deficit and record government spending around the world are the biggest potential threats to the global economy, JPMorgan Chase Co.(JPM) Chief Executive Officer Jamie Dimon said. “I’m not just talking about just the United States,” Dimon said in an interview on Bloomberg Television in Davos, Switzerland today. “The governments have to show the will that we have this under control. Because you don’t want to get them under control of the markets the wrong way.”

Wall Street Journal:

• Curfew Set As Regime Defies U.S. Calls. President Hosni Mubarak declared a curfew in riot-wracked Egyptian cities and army tanks began to enter streets to beat back protesters that took to the streets en masse Friday, as the Egyptian leader essentially defied U.S.'s recent urging to embrace reform.
• Egypt Unrest Starts to Rattle Other Markets. The civil unrest in Egypt is gaining more attention among investors, and it could be one reason that the U.S. stock market is struggling at the end of the week. Given that events in Egypt come after the overthrow of the government in Tunisia, more people are wondering about political stability from Morocco to Lebanon. The Market Vectors Egypt Index (EGPT) ETF is down 20% since Jan. 14 and down 2.9% today on more than six times the daily average volume. Egypt’s credit-insurance costs have also spiked. According to Markit, a data provider, a credit-default swap to insure $10 million of Egyptian sovereign debt over five years has spiked 33% to $405,000. (Update: the CDS cost has jumped to $450,000 since this post was first made.)
• Egypt Live Blog: Rolling Updates.
  
• Schmidt Defends Incoming Google(GOOG) CEO. A week after announcing a management shakeup at Google, outgoing Chief Executive Eric Schmidt defended the credentials of company co-founder Larry Page, who will take the reins at the Internet giant in April. “When people criticize Larry as the new CEO, that’s grossly unfair to Larry,” he said on Thursday at a small press conference in Davos, Switzerland, at the World Economic Forum. “He has been with me at every business decision for 10 years.”Though he stayed largely behind the scenes while Mr. Schmidt was the public face of Google, Mr. Page has long called the shots on product initiatives.
• France's Lagarde: We Have A Very Tense Monetary Situation. There is a very tense global monetary situation, including a problem of balance between the U.S. and China, French Finance Minister Christine Lagarde says in a television interview to be broadcast on French television channel LCI later Friday. "There are zones in the world where we are seeing monetary overheating," Lagarde says in the interview, noting the rise in the Brazilian real, the slow rise in the Chinese yuan and carry trades and capital movements that aim to benefit from different rates. "We have a situation that is extremely tense, especially on the monetary level," she says in the interview recorded Wednesday before her departure to Davos for the annual World Economic Forum. "The Brazilians are talking about currency wars, Americans have a real problem with balance and imbalance vis-a-vis China, whose currency is appreciating slowly and at China's rhythm," she added.

MarketWatch:

• Ford(F) Posts 79% Profit Drop, Trims Debt. Shares fall more than 14% in worst decline since May 2009.

Business Insider:

• Why This is Just The Beginning of Egypt's Crippling Demographic Crisis.

Zero Hedge:

• Quant Wipeout In Process?
• Has Joe Cassano Committed Perjury: AIG(AIG) Took Subordinated Pieces of CDOs It Insured.
  

DealBreaker:

• Hedge Fund Managers Less Than Thrilled With Goldman Sachs(GS) President's Interpretation of Who Caused The Financial Crisis, Why Banks Don't Need Increased Regulation.

Reuters:

• 410 Wounded in Cairo Protests on Friday.
• China Rating Agency Blames U.S. for "Credit War". The ultra-loose monetary policy of the United States is setting the stage for "a world credit war," a Chinese rating agency said on Friday, in the latest warning against soaring debt burdens in developed economies.
• Microsoft(MSFT) Shares Fall on Windows, Tablet Worries. Microsoft Corp shares fell more than 4 percent to a six-week low on Friday as investors took profits from a recent run-up in the stock and fretted about the strength of its core Windows franchise and the emerging threat from tablet computing.
• ECRI Leading Economic Growth Gauge Falls to 6-Week Low. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell to 127.5 in the week ended January 21 from 128.9 the previous week. That was the lowest since December 10, 2010, when it stood at 127.2. The index's annualized growth rate fell to 3.5 percent from 4.1 percent a week earlier. That was the lowest since December 31, 2010, when it was 3.2 percent.
• Monster(MWW) Shares Fall on Weak Q4 Revenue, Bookings. Shares of Monster Worldwide Inc fell as much as 22 percent on Friday, a day after the online recruiter posted lower-than-expected fourth-quarter revenue and bookings, mainly hurt by currency headwinds and lower government budgets.

AP:

• Egyptian police used a water cannon on opposition leader Mohamed ElBaradei and his supporters at a protest.

Financial Times:

• Derivatives Still in Flux as Dodd-Frank Deadline Looms.

Telegraph:

• Austerity Preferable to Euro Break-Up, Says German Chancellor Angela Merkel.

Guardian:

• Egyptian Government On Last Legs, Says ElBaradei. Exclusive: Mohamed ElBaradei says he is sending a message 'to the Guardian and to the world'. The Egyptian dissident Mohamed ElBaradei warned President Hosni Mubarak today that his regime is on its last legs, as tens of thousands of people prepared to take to the streets for a fourth day of anti-government protests. The Nobel peace prize winner's comments to the Guardian represented his strongest intervention against the country's authoritarian government since he announced his intention to return to Egypt to join the protests. "I'm sending a message to the Guardian and to the world that Egypt is being isolated by a regime on its last legs," he said. His words marked an escalation of the language he used on arrival in Cairo last night, when he merely urged the Mubarak government to "listen to the people" and not to use violence.

Der Standard:

• Willem Buiter, the former Bank of England Monetary Policy Committee member who is chief economist at Citigroup Inc.(C), said the U.S., U.K. and France don't deserve the highest credit ratings. "Ratings agencies give AAA ratings to countries that don't deserve it," Buiter said. Germany is "the most deserving" of the AAA rating "but even Germany has debt equal to 80% of GDP," he said. Greece and Ireland will likely be forced to restructure their debt, Buiter said. Europe's rescue fund is inadequate and won't be able to assist struggling countries out of their "debt holes," Buiter said.

Profil:

• Egyptian President Hosni Mubarak could be forced to relinquish his 30-year rule over the country "very quickly," opposition leader and Nobel Peace Prize winner Mohamed ElBaradei said. "Nobody though that in Tunisia things would change overnight," he said. "Things in the last days show that it can happen very quickly. If Mubarak continues like this, it will surely backfire."