Today's Headlines

Bloomberg:

• Mubarak Moves to Regain Streets as Turmoil Hits Yemen. Supporters of Egypt’s Hosni Mubarak clashed in central Cairo with demonstrators demanding an end to the 30-year-reign of the president, who said yesterday he won’t step down until an election in September. The two sides hurled rocks at each other in Tahrir Square, the focus of protests since Jan. 25. Mubarak loyalists tried to storm independent newspaper Al-Shorouk’s offices, its editor said, while al-Jazeera reported live rounds were fired. Mohamed ElBaradei, an opposition leader and former United Nations diplomat, told the BBC the army should move in to end unrest incited by a “criminal regime” that “has to go immediately.” “The blood of those demanding democracy is being shed on the streets of Cairo at the hands of armed gangs,” the Cairo- based Arabic Network for Human Rights Information said in a statement on its website.
• Muslim Brotherhood Gauges Role in Post-Mubarak Egypt. Egypt’s Muslim Brotherhood didn’t immediately join the spontaneous street demonstrations against President Hosni Mubarak. Now the Islamist group, the country’s largest opposition faction, is positioning itself to help shape the country’s political future. “They are the most organized and most popular, with a hierarchy in Egypt in terms of membership and leadership,” said Omar Ashour, an Egyptian lecturer on Arab politics at the University of Exeter in England. Founded in 1928, the same year Mubarak was born, the Muslim Brotherhood has influenced Islamist movements across the globe, including Hamas in the Palestinian territories, which the U.S., European Union and Israel consider a terrorist organization. “The Muslim Brotherhood is part of Egypt’s people, and we acquiesce in the verdict of the people, whatever it may be,” al-Erian said, adding that the group seeks “a democratic regime with the Islamic Sharia as a reference,” which he said already is enshrined in Egypt’s constitution. Sharia is based principally on laws from the Koran, sayings by the Prophet Mohammed and the opinions of Muslim scholars, and it’s the basis of some areas of Egyptian law though not the penal code. That stance may conflict with other vested interests. Egypt’s military leadership is committed to the foreign policy pursued by Mubarak, who has helped Israel blockade the Hamas- ruled Gaza Strip and sought to rally Arab support against Islamic extremism. The Brotherhood “would be calamitous for U.S. security,” Leslie Gelb, president emeritus of the Council of Foreign Relations in New York and a former U.S. assistant secretary of state, wrote Jan. 29 on the Daily Beast website. The group opposes the Egyptian-Israeli peace treaty of 1979 and “would endanger counterterrorism efforts in the region and worldwide,” he said. “That is a very big deal.” It “supports Hamas and other terrorist groups, makes friendly noises to Iranian dictators and torturers,” and would be “uncertain landlords of the critical Suez Canal,” he added. The canal carries about 8 percent of global maritime trade. The idea that the Brotherhood could hijack the anti-Mubarak rebellion has been dismissed by Mohamed ElBaradei, the former United Nations atomic agency chief and one of the opposition movement’s leaders. Mubarak stoked such fears to perpetuate U.S. support, ElBaradei told ABC News on Jan. 31. “This is what the regime sold to the U.S. and the West: It’s either us and repression, or al-Qaeda type extremist groups,” ElBaradei said of the Brotherhood, describing the group as religiously conservative and nonviolent. “You have to include them.”
• Germany Rules Out Bond Buybacks by Bailout Fund, Official Says. Germany ruled out allowing the European Union bailout facility to fund bond buybacks from debt- strapped governments as euro-area officials struggle to narrow differences on a strategy to end the region’s financial crisis. A German government official briefing reporters before a Feb. 4 EU summit said the 440 billion-euro ($607 billion) European Financial Stability Facility lacks the legal authority to purchase the outstanding debt to ease finances of countries including Greece.
  
• ADP Estimates Companies in U.S. Added 187,000 Jobs. Companies in the U.S. added more workers than forecast to payrolls in January, showing a pickup in the labor market, data from a private report showed today. Employment increased by 187,000 last month after a revised 247,000 gain in December that was less than initially estimated, according to figures from ADP Employer Services. The median estimate in the Bloomberg News survey called for a 140,000 gain last month. “I see a clear pattern of strengthening, acceleration here that is very encouraging,” Joel Prakken, chairman of Macroeconomic Advisers LLC, which produces the figures with ADP, said on a conference call. “The economy is starting to accelerate.”
• Corporate Bond Risk Falls in Europe, Credit-Default Swaps Show. The cost of insuring against default on European corporate bonds fell, according to traders of credit-default swaps. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings declined 5 basis points to 400, approaching the lowest level since April, according to JPMorgan Chase & Co. prices at 8 a.m. in London. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 1.25 basis points to 95.25, JPMorgan prices show. The cost of protecting bank bonds from default also fell, with the Markit iTraxx Financial Index of 25 banks and insurers down 3.5 at 150.5 and the subordinated index 6 lower at 263.5.
• Spanish, Italian, Irish Bonds Advance, Narrowing Yield Spreads With Bunds. Spanish, Italian and Irish government bonds rose, reducing the additional yield investors demand to hold the securities instead of benchmark German bunds. Spanish 10-year bond yields fell 16 basis points to 5.05 percent as of 8:34 a.m. in London. That narrowed the difference in yield, or spread, with similar-maturity bunds to 184 basis points, the least since Nov. 2. Italian 10-year yields dropped 11 basis points to 4.53 percent, equivalent-maturity Irish bond yields fell 10 basis points to 8.93 percent and Belgian 10-year yields slid 11 basis points to 4.12 percent. The yield on 10-year Portuguese bonds fell seven basis points to 6.86 percent.
• Ireland's Rating Downgraded One Level to A- By S&P and Faces Further Cuts. Ireland had its credit rating cut one level by Standard & Poor’s and a further downgrade is possible as the government tries to contain bank-rescue costs. The rating was lowered to A- from A, S&P said in a statement from London today. That’s four levels above non- investment grade and the same level as countries including Botswana and Portugal. Ireland remains on “creditwatch with negative implications,” S&P said.
• 'Toxic' Option-ARM Mortgages Rally as Rising Resets Loom: Credit Markets. Home loans that inflated the U.S. housing bubble by giving borrowers the choice of cutting interest payments in exchange for higher balances are fueling the fastest gains in the mortgage-bond market. Prices for senior bonds tied to option adjustable-rate mortgages, called “toxic” by a government commission, typically jumped 6 cents to 64 cents on the dollar in the past month, according to Barclays Capital. The next best-performing class of home-loan securities without government backing rose 4 cents. Option-ARM debt tumbled to as low as 33 cents in 2009. Rising values show Federal Reserve efforts to stimulate the economy by purchasing an additional $600 billion of Treasuries and holding interest rates near zero percent are driving investors into ever-riskier securities. Bond buyers are overcoming a “mental hurdle” even as the debt is poised to lead a second wave of rising payments for homeowners, according to TCW Group Inc.
• Brazil Industrial Output Unexpectedly Shrank for Second Month in December. Brazil’s industrial output unexpectedly fell for a second straight month in December, prompting traders to trim bets on interest rate increases. Output in December fell 0.7 percent from November after a 0.2 percent decline in the previous month, the national statistics agency said today in Rio de Janeiro. Economists had forecast output to expand 0.9 percent, according to the median estimate of 29 analysts in a survey by Bloomberg.
• Cotton Rises to Record as Adverse Weather Cuts World Supply. Cotton futures surged to a record on mounting supply concerns after flooding in Pakistan and Australia slashed crops. Cotton futures for March delivery contract rose 3.87 cents, or 2.2 percent, to $1.7609 a pound at 10:55 a.m. on ICE in New York. Earlier, prices climbed to a record $1.7612. The most-active contract advanced 4.5 percent in the previous two sessions. The commodity has more than doubled in the past year.
• Sugar Jumps to 30-Year High on Australia, India Supply Concerns. Sugar futures surged to a 30-year high on mounting concern that global supplies will trail demand following crop damage in Australia and India, two of the world’s leading producers. Cyclone Yasi has crossed the coast of Australia’s Queensland state. The storm may cause crop losses of as much as $505 million, a grower group said. Output from India may be less than predicted after heavy rains, a producer organization said. Prices have more than doubled since the end of June. “The cyclone is the story,” said Jason Cole, a broker at Starsupply Renewables SA in Geneva. An extended rally will depend on the severity of the damage, he said. Raw sugar for March delivery climbed 1.23 cents, or 3.6 percent, to 35.19 cents at 11:38 a.m. on ICE Futures U.S. in New York. Earlier, the price reached 36.08 cents, the highest for a most-active contract since November 1980.
• Snow, Freezing Rain Cancel Flights, Trains, School Across U.S.
• Brazil to Help U.S. Counter China, Official Says. will seek closer commercial ties with the U.S. in a bid to counteract the threat posed by cheap imports from Brazilian President Dilma RousseffChina, a Brazilian official said.

Wall Street Journal:

• Mubarak Supporters Battle Protesters. The political unrest gripping Cairo turned ugly Wednesday, as groups of supporters of President Hosni Mubarak charged antigovernment protesters, underscoring the difficulty of a smooth democratic transition to a post-Mubarak Egypt. Bloody clashes in the city's main square escalated through the day, after Mr. Mubarak said Tuesday night he would step down after elections this year—angering protesters who demanded his immediate resignation after 29 years in power.
• Egypt: Live Blog.
  
• Citi's(C) $82.05M CMBS Being Offered Via Private Market - Source.
• EU Sees Massive Aid to Huawei, ZTE. The European Commission believes Huawei Technologies Co. and ZTE Corp., China's largest telecommunications equipment makers, likely benefit from significant Chinese government support, including "massive" credit lines from Chinese state-owned banks, according to a confidential commission document obtained by Dow Jones Newswires. The findings are likely to fuel further debate regarding the treatment of the large subsidies that—according to western governments and companies—Chinese businesses receive from the Chinese government.
  

Bloomberg Businessweek:

• VIX Sinking to Three-Year Low is Fastest-Growing Bet. Traders are snapping up bets that the U.S. options market gauge known as the VIX will sink to a three- year low after concern that equities will retreat fades. The number of outstanding May 15 put options on the Chicago Board Options Exchange Volatility Index jumped to 54,527 from 8,318 on Jan. 27 for the biggest one-day increase among all contracts during the past week, according to data compiled by Trade Alert LLC.

MarketWatch:

• News Corp.(NWSA) Launches The Daily on iPad. News Corp. on Wednesday launched its long-awaited iPad-based daily newspaper, The Daily, in the latest attempt to adapt newspapers to an increasingly mobile digital audience.

Business Insider:

• Gary Shilling on the Chinese Hard Landing That's Going to Prick the Global Commodity Bubble. China's economy is, "in for a hard landing...this year or next year," according to Gary Shilling, who spoke at Bloomberg's China Investment Strategies conference. He doubts the ability of the Chinese government to control the economy, and described its monetary policy as "very crude."
• There's a Fire Sale at Dubai's "The World" as Developers Pull Out.
  

New York Times:

• Playing to Hedge Funds, a Trophy Rises in Midtown. When the developer Harry Macklowe contemplated building a boutique office tower with unparalleled amenities at 510 Madison Avenue in the late 2000s, he expected it would be filled with hedge funds and other financial sector tenants who would pay rents well above $100 per square foot. But the economy slumped in late 2008, and Mr. Macklowe found himself fighting to maintain ownership of 510 Madison, at 53rd Street, where just one company had signed a lease. He lost that ownership battle to Boston Properties last September. Now, a series of leases signed at 510 Madison late last year for well north of $100 a square foot signifies a turnaround for the building — and may presage a recovery of Manhattan’s overall high-end office market, brokers said.
• Financial Disarray at S.E.C. Hurts Bid for Bigger Budget. If a company’s financial reporting were so bad that its auditor had pointed out significant weaknesses in its accounting for seven years running, the Securities and Exchange Commission would most likely be all over it. But what if the company were the S.E.C. itself?

U.S. News:

• Why the Housing Bottom Might Be Here.

Washington Post:

• TSA Debuts Less-Revealing Software for Airport Scanners. New software designed to make airport security scanners less intrusive debuted at the Las Vegas airport Tuesday, a response to last year's uproar from passengers who thought the blurry but revealing images were an invasion of privacy.

Fox Business:

• Many Hedge Funds Have Weak Start In January, Lagging Stocks. Many hedge funds lagged stock market indexes and took the wrong side of currency and interest-rate bets in January, in a lackluster start to the year for the industry. The HFRX Global Hedge Fund Index, tracking about 250 funds that report on a daily basis, gained 0.56% in January, far less than the S&P 500's 2.4%.

Real Clear Markets:

• White House Delays Fannie & Freddie Reform. Fannie and Freddie are still bleeding losses, costing taxpayers billions more each month. Yet the White House continues to delay reforms, in defiance of a congressional order.

Rasmussen Reports:

• Discover U.S. Spending Monitor Consumer Confidence Jumps 5.6 Points in January to Three-Year High.

Politico:

• Barack Obama Faces Tough Questions on Egypt. Egyptian President Hosni Mubarak’s apparent desire to hang on to power until September is forcing President Barack Obama into a difficult position.

Reuters:

• Egyptian Bourse to Reopen on Monday.
• BMO Chief Says Seeing Signs of U.S. Business Pickup. The head of Bank of Montreal, which recently moved to expand its already substantial U.S. presence, says he sees signs of increased acquisition and trade activity among the bank's U.S. clients, suggesting an improving business climate.

Le Temps:

• Iraq will increase its oil-production capacity to 11 million barrels a day within "six or seven years," the country's Deputy Prime Minister Hussain al-Shahristani said. That would make Iraq a bigger producer than Saudi Arabia, al-Shahristani said.

Der Spiegel:

• Interview With Citigroup(C) CEO Vikram Pandit.

Die Welt:

• Wolfgang Wiegard, a member of Chancellor Angela Merkel's council of economic advisers, said he doubts that Greece can avoid a debt restructuring. Wiegard said he can "imagine mechanisms" that limit restructuring costs to banks, and not German tax payers. European Union governments must sharpen their plans to include private creditors in debt restructurings, he said.

Die Zeit:

• European Union officials are considering measures that would punish countries that run excessive trade surpluses or whose competitiveness is too high, citing a document. The proposed measures would require states to keep their current account balances within a "corridor" of plus or minus four percent of GDP. A similar boundary would apply for the yearly change in unit labor costs, a measure of price competitiveness.