Today's Headlines

Bloomberg:

• French, British Banks Have Most Exposure to Egyptian Loans, BIS Data Show. International banks have lent $49.3 billion to Egyptian borrowers, with French and U.K. banks having the most exposure to the country torn by anti-government protests, data from the Bank for International Settlements show. French banks’ claims on Egyptian borrowers stood at $17.6 billion at the end of September, BIS statistics released Jan. 27 show. U.K. banks’ exposure was $10.7 billion and Italian banks had $6.3 billion in claims, the data show. European banks’ total claims amounted to $40.3 billion.
• Purchasing Managers Index Rises as Business Expands. Businesses in the U.S. expanded in January at the fastest pace since July 1988, indicating the world’s largest economy has momentum at the start of the year. The Institute for Supply Management-Chicago Inc. said today its business barometer rose this month to 68.8 from 66.8 in December. “This fortifies the stability of the recovery,” said Maxwell Clarke, chief U.S. economist at IDEAglobal in New York. “You definitely see traction from manufacturing going forward.” The Chicago group’s production gauge rose to 73.7 from December’s reading of 72.2. The gauge of new orders increased to 75.7, the highest since December 1983, from 71.3. The employment measure rose to 64.1, the strongest since May 1984, from 58.4 the prior month.
  
• Fed's Lockhart Says Unemployment 'Nowhere Near Acceptable,' Sees Recovery. Federal Reserve Bank of Atlanta President Dennis Lockhart said policy makers should continue with record monetary stimulus and try to bring down unemployment that’s persisting at an unacceptably high level. “There are definitely hopeful signs of sustained recovery in 2011,” Lockhart said today in the text of a speech in Miami. “That said, I believe it is a bit early to declare victory, and, to be sure, employment is nowhere near acceptable levels.” The Fed last week reaffirmed its plan to buy $600 billion in Treasuries through June, pressing on with stimulus aimed at reducing the 9.4 percent unemployment rate and keeping inflation from slowing.
• ECB Must Monitor Prices More Closely, Wellink Tells Dow Jones. European Central Bank Governing Council member Nout Wellink said the bank should watch price developments more closely than before, Dow Jones reported, citing an interview. “Rising global commodity prices are putting pressure on inflation, that’s quite clear,” Wellink, who also heads the Dutch central bank, was quoted as saying on Sunday in Kyoto, Japan. “It’s a reason to monitor even more closely than before the inflation developments in Europe,” Wellink said, according to the report.
• Barai Capital Winds Down Funds After FBI Raid, Investor Says. Barai Capital Management LP, the New York-based hedge fund run by Samir Barai, is liquidating its funds after being raided by the Federal Bureau of Investigation as part of the government’s insider-trading probe, according to a memo from the firm that seeded the manager. “BCM has informed us that they are cooperating fully with the government’s investigation. The firm also has informed its investors that it commenced an orderly wind down of the BCM funds," Protege Partners LP co-founders Jeff Tarrant and Ted Seides said in an e-mail sent today to investors, a copy of which was obtained by Bloomberg.
• The Baltic Dry Index, a measure of commodity-shipping costs, fell to the lowest in almost two years as new vessels joined the fleet. The index fell 30 Points, or 2.6%, to 1,107 points, the lowest since February, 2009. Rates dropped 38% this month, and 17% last week alone.
• Record Cotton Prices May Curb China Textile Growth, Planer Says. Record gains in prices of cotton and rising labor rates may limit the expansion of China’s textile industry and reduce export competitiveness, according to the National Development & Reform Commission. In 2010, prices surged to 30,000 yuan ($4,551) per metric ton from 14,000 yuan at the beginning of the year, while labor costs gained as much as 20 percent, the top economic planner said in a report on its website yesterday. “Raw material and labor shortages are the industry’s bottleneck,” the report said. A slower rate of recovery of the global economy and world consumer demand, as well as a stronger yuan, will reduce the competitiveness of China’s textile products, the report said.
• Tiger Woods Dubai Gulf Resort Halted as Luxury Market Struggles. Work on a Tiger Woods branded golf resort in Dubai has been halted by developer Dubai Properties Group, which cited a struggling luxury property market. “The decision was based on current market conditions that do not support high-end luxury real estate,” Dubai Properties, a unit of Dubai Holding, said in a statement via mobile-phone text message today. “These conditions will continue to be monitored and a decision will be made in the future when to restart the project.”
• Organized Crime Blamed for Roiling $110 Billion Carbon Market. Organized criminals are being blamed for stealing European Union pollution permits and sparking a police hunt across the continent, battering confidence in an 80 billion-euro ($110 billion) market. Thieves who steal CO2 permits try to sell them in the market before owners realize they are missing, according to Czech trader Nikos Tornikidis. The criminals may have exploited “negligent” security standards in some EU nations that participate in the world’s largest system for trading rights to discharge greenhouse gases, Jos Delbeke, director general for climate at the European Commission, said in an interview.
• Intel(INTC) Reduces First-Quarter Forecast Due to Cougar Point Chip-Design Error. Intel Corp., the world’s largest maker of semiconductors, said a design error in one of its chips will reduce sales and profit margins as it spends $700 million to repair and replace affected products. The flaw will cut first-quarter revenue by $300 million and gross-profit margin by 2 percentage points, Santa Clara, California-based Intel said in a statement today. Intel shares fell and rival Advanced Micro Devices Inc. climbed.
• Huntsman Said to Be Planning to Resign as Ambassador to China. Jon Huntsman, the U.S. ambassador to China, has told the Obama administration he plans to resign, an administration official said, a sign the former Utah governor may bid for the 2012 Republican presidential nomination. Obama has been informed that Huntsman intends to leave in May, according to the official, who spoke on condition of anonymity.
• Bearish Dell(DELL) Options Bets Surge to 12-Year High Before Earnings. Dell Inc. options traders are making the most bearish bets in 12 years before the world’s second- biggest maker of personal computers reports fourth-quarter earnings results next month. The ratio of outstanding puts to sell Dell stock versus calls to buy reached 1.1-to-1 last week after January contracts expired, rising to the highest level since November 1998.
• Espirito Santo Sells Loans as Iberian Lenders Plan to Abandon Infrastructure. Portuguese and Spanish banks may be forced to sell some of the $55 billion of loans they made to finance projects from highways to clean energy since 2006 as their own cost of funding makes holding the debt uneconomical.
• Irish Central Bank Lowers Growth Forecast for 2011. Ireland’s central bank cut its forecast for economic growth this year by more than half as the government steps up budget cuts and consumers trim spending. Gross domestic product will probably rise by 1 percent this year instead of the 2.4 percent forecast in October, after falling an estimated 0.3 percent in 2010, the Dublin-based bank said today in its quarterly bulletin.
• Exxon(XOM) Profit Rises as Energy Prices, Demand Climb. Exxon Mobil Corp., the world’s largest company, posted its biggest quarterly profit in more than two years as energy demand boosted oil and fuel prices.

Wall Street Journal:

• Calls for Change Intensify in Cairo. Egyptian protest organizers are calling for one million people to march Tuesday to demand the ouster of President Hosni Mubarak, a new sign that the calls for regime change in the Arab world's most populous country could be reaching a crescendo. On the seventh consecutive day of demonstrations, Mr. Mubarak overhauled the government in his latest attempt to defuse unprecedented public anger at his 30-year rule. His new ministers include stalwarts from his ruling party and security apparatus, which is widely reviled for its brutal intelligence and police networks. He also kicked out his longtime finance minister who is highly regarded among financial institutions but disliked within Egypt and blamed for the lack of jobs and high unemployment. Egypt's fragmented opposition groups Monday were lining up behind Nobel Peace laureate Mohamed ElBaradei as their best chance to oust Mr. Mubarak, while the nation's military closed ranks with the government leadership but allowed protesters to continue mass demonstrations.
• Hedge-Fund Group Asked SEC About Expert Networks. A hedge-fund industry group has asked the Securities and Exchange Commission for guidelines on the use of expert networks, which have been under scrutiny in a federal insider-trading probe, the organization's chief executive said on Monday.
• Oil Trading Hits Record Levels. Trading volumes in oil-futures contracts rose to the highest level on record Friday, spurred by unrest in Egypt that could threaten key oil shipments. A record 1,472,088 contracts changed hands for light, sweet crude-oil futures on the New York Mercantile Exchange, surpassing the previous record of 1,423,536 contracts set in April 2010. On the ICE Futures Exchange, the comparable contract for West Texas Intermediate futures reached a record 496,165 contracts, surpassing its April 2010 high. On Monday, Brent crude prices hit $100 a barrel for the first time in more than two years amid the tensions in the Middle East. The records came amid a turnaround rally in crude Friday, with oil futures surging 4.3% to $89.34 a barrel after antigovernment protests intensified in Egypt and investors worried that unrest across the Middle East in recent weeks could spread to major oil-producing states. The rise in trading volumes underscores the surging investor interest in commodities, particularly crude oil. The price increase to $147 a barrel in 2008 created a wider following of the oil markets, drawing retail investors as well as new institutional money managers into a market dominated for decades by global trading firms, major banks and dedicated specialists. Rising energy prices and oil's potential hedge against political upheaval in the Middle East have turned crude oil into a key asset for many investors' portfolios. A string of financial products, including exchange-traded funds, have made it easier for retail investors to enter the market. The U.S. Oil Fund, the world's largest commodity ETF, has grown to $1.7 billion.

Bloomberg Businessweek:

• Fed Says Banks 'Significantly More Upbeat' on Delinquencies. Most banks in the U.S. expect loan delinquencies and charge-off rates to improve in 2011, a Federal Reserve survey showed, as standards eased and demand increased for business lending. “Expectations were significantly more upbeat than in past years,” the central bank said today in its quarterly survey of senior loan officers. “Banks reported that they expected improvements in delinquency and charge-off rates during 2011 in every major loan category.”

CNBC:

• Egypt Sends Message to Leaders, and Markets: El-Erian. Turmoil in Egypt has sent a message to rulers through the region that they need to get "ahead of the curve" or face similar destabilizing problems, Pimco's Mohamed El-Erian told CNBC.

Business Insider:

• Mind of a Hedge Fund Manager: Inside Hugh Hendry's Head. When it comes to media appearances, major hedge fund managers can be a rather reclusive lot. Unless your name happens to be Hugh Hendry. During this week's Alternative Investment Conference in London, the iconoclastic speculator waxed philosophical about his own "self loathing" and the "voices inside his head", described indirect ways to play the Chinese property bubble, and explained how desperate he is to "see inside the envelope waiting in the future which contains my 10-15-20 year performance results."
• The 10 Worst University Endowment Managers.
• Beware Egypt's Muslim Brotherhood.
• Another Gigantic Storm is Aiming at Australia.
  

Zero Hedge:

• Interactive Global Inflation Heat Map.

New York Post:

• Wal-Markdown Inventory Glut Cuts Giant Retailer Down to Size. Wal-Mart is coping with a bad case of post-holiday indigestion. After binging on Christmas inventory, the world's biggest retailer has been forced to take drastic steps in recent weeks to clear stores and warehouses of excess goods, according to sources close to the company. The culprit: disappointing December sales. "It looks like they are in danger of heading into another negative 'comp' for the quarter," according to an executive at a major Wal-Mart supplier, referring to the retailer's fourth-quarter comparable-store sales, or sales at stores open at least a year -- a key measure of performance.

Forbes:

• Egypt is the Next Tunisia. What is the Next Egypt?

Washington Post:

• New Estimates Put Pakistan's Nuclear Arsenal At More Than 100. Pakistan's nuclear arsenal now totals more than 100 deployed weapons, a doubling of its stockpile over the past several years in one of the world's most unstable regions, according to estimates by nongovernment analysts. The Pakistanis have significantly accelerated production of uranium and plutonium for bombs and developed new weapons to deliver them. After years of approximate weapons parity, experts said, Pakistan has now edged ahead of India, its nuclear-armed rival. An escalation of the arms race in South Asia poses a dilemma for the Obama administration, which has worked to improve its economic, political and defense ties with India while seeking to deepen its relationship with Pakistan as a crucial component of its Afghanistan war strategy.

Opalesque:

• Hedge Fund Managers' Confidence in US Equities Falters Slightly, But They Remain Bullish Overall - Baryclays TrimTabs. Hedge fund managers are upbeat on U.S. equities but less bullish than a month ago, according to the TrimTabs/BarclayHedge Survey of Hedge Fund Managers for January. About 37% of the 91 hedge fund managers the firms surveyed in the past week are bullish on the S&P 500, down from 46% in January, while 26% are bearish, up from 19%. “Less upbeat forecasts are somewhat surprising in that hedge fund managers performed exceptionally well in the final four months of 2010,” said Sol Waksman, founder and President of BarclayHedge. “Nevertheless, the January bullish reading is the second-highest since the inception of our survey in May 2010, while the bearish reading is the second-lowest. Hedge fund managers still have plenty of skin in the game.”

Politico:

• U.S. Wary of What's Next for Egypt.

Reuters:

• US Muni Rating Cuts to Outpace Upgrades - Fitch. Ratings on bonds sold by hard-pressed U.S. states and local governments will continue to be downgraded more frequently than upgraded, as was the case during 2009 and 2010, Fitch Ratings said on Monday.

Guardian:

• Middle Eastern Debt Costs Rise Sharply. Gavan Nolan of Markit believes that that the latest scenes from Cairo are making traders fear regional contagion. The cost of insuring Egyptian government debt increased sharply today, in a sign that investors have grown more nervous about the ongoing crisis. Other Middle Eastern government debt also came under pressure, as the protests against president Hosni Mubarak entered a seventh day. The five-year Egypt credit default swap rose by 17 basis points to 445bps, according to data from Markit. This is close to its highest level since April 2009. This means it costs £445,000 to insure £10m of Egyptian debt. In comparison, the UK five-year credit default swap trades around 60bps, while Ireland's CDS hit 600bps recently. Elsewhere, the Saudi Arabia CDS jumped by 29bps to 120bps, Bahrain rose by 28bps to 220bps, and Qatar gained 17bps to 110bps. The only faller in the region was Israel, down 1bps at 145bps. Gavan Nolan of Markit believes that the latest scenes from Cairo are making traders more risk averse. "Fears of contagion are increasing, as investors wonder if the events in Egypt will spread across the Arabian peninsula," said Nolan.

Xinhua:

• China enacted a regulation today requiring reporters to be "prudent" when reporting securities and futures news that may affect investors' prospects or market stability. The rule was issued by the General Administration of Press and Publication and the China Securities Regulatory Commission, Xinhua said.

Shanghai Daily:

• Shanghai January the Coldest for 30 Years, Forecasters Say.

MehrNews.com:

• Iran to Display New Satellites, Rockets in Early February. Defense Minister Ahmad Vahidi has said new range of rockets and satellites will be showcased during the Ten-Day Dawn celebrations which will start on February 1. The Ten-Day Dawn celebrations are held across the country to commemorate the anniversary of the victory of Islamic Revolution in 1979.