Today's Headlines

Bloomberg:

• Monti Prescribes 'Aspirin' for Debt Ache. Prime Minister Mario Monti is prescribing more “aspirin” to revive an Italian economy that’s probably in a recession and tackle almost half a trillion euros in debt sales after the worst year on record for Italian bonds. At a year-end press conference in Rome on Dec. 29, Monti pledged to ready measures to spur competition and growth in the euro region’s third-biggest economy before a meeting of European finance ministers on Jan. 23. The plan comes after he spent his first month in office enacting 30 billion euros ($39 billion) in austerity and growth measures aimed at taming Italy’s surging borrowing costs. “Monti has taken only one aspirin, now he needs to take two,” Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co. in New York, said by phone. Still, “investors are underestimating Italian resolve and European resolve to keep Italy in the monetary union” as well as “the range of tools Italy still can have with a strong leadership,” he said. The key to the euro’s survival may lie with Italy, the region’s second-biggest debtor after Greece. The nation must repay about 130 billion euros in debt in the first quarter with its 10-year bond yield close to the 7 percent level that led Greece, Ireland and Portugal to seek bailouts. The $2.3 trillion economy probably entered a recession in the three months through December, its fourth since 2001, according to the government.
  
• Merkel Resumes Debt Crisis Fight as Scrutiny of German President Increases. Chancellor Angela Merkel returns from a two-week break to the front line of the debt crisis amid a clamor over the conduct of Germany’s president that threatens to damage her own standing and detract from her efforts to defend the euro. Merkel, whose last official engagement was on Dec. 20, will resume her public duties in two days with the public spotlight on President Christian Wulff over a loan from a friend’s wife to buy a house and vacations at the homes of business people. Scrutiny of the mainly ceremonial president intensified yesterday after Bild, Germany’s biggest-selling newspaper, said that the president had attempted to stop the editor from publishing the loan story last month. “The president is Merkel’s creation and if he’s forced to leave in such an ignominious way it would weaken her,” Jan Techau, director of the Brussels-based European center of the Carnegie Endowment for International Peace, said by phone.
• Weidmann Says ECB as Lender of Last Resort Would Be 'Wrong'. Bundesbank President Jens Weidmann said it would be “profoundly wrong” for the European Central Bank to become a lender of last resort and step up its purchases of government bonds to contain the fiscal crisis. “It may appear tempting from the point of view of highly- indebted states and the banks that hold their paper if central banks assume their role of lender of last resort,” Weidmann wrote in an opinion piece for Germany’s Boersen-Zeitung newspaper published today. “However, the Eurosystem would throw its principles overboard and ignore the existing legal framework. This would be the profoundly wrong way.”
• Hungary Borrowing Costs Jump to 2009 High; Bond Risk at Record. Hungary sold three-month Treasury bills at the highest yield since 2009 at its first debt auction after passing laws that diminished the country’s chance of obtaining international financial aid. The cost of contracts to protect the nation’s debt climbed to a record. The government raised 45 billion forint ($190 million), the full amount planned, according to data from the Debt Management Agency published on Bloomberg. The average yield increased to 7.67 percent, the highest for three-month notes since August 2009, climbing from 7.43 percent at the last sale a week ago. “The country’s financing will be impossible over the longer term at such high yields,” Balint Torok, an analyst at Buda-Cash Brokerhaz Zrt., said in a telephone interview. “Investor confidence in Hungary is deteriorating further as the government isn’t showing enough commitment to reaching a deal with the IMF and EU.” The cost of insuring Hungarian bonds using credit-default swaps climbed to 651 basis points from 635 basis points on Dec. 30, data provider CMA said. Declines in 10-year forint-denominated bonds lifted yields 27 basis points to 10.36 percent, the highest since June 2009, according to generic prices compiled by Bloomberg at 5 p.m. in Budapest. The spread over similar-maturity Polish debt rose to 447 basis points, the biggest gap since April 2009.
• U.S. Factories Grow as Manufacturing Improves. U.S. factories expanded in December at the fastest pace in six months, adding to evidence manufacturing is improving from India to the U.K. entering 2012. The Institute for Supply Management’s factory index climbed to 53.9 last month from 52.7 in November, the Tempe, Arizona- based group’s data showed today.
• Construction Spending in U.S. Climbs 1.2%. Construction spending in the U.S. rose in November for a third time in four months, indicating the industry helped boost growth at the end of 2011. Building outlays increased (CNSTTMOM) 1.2 percent, exceeding the median estimate of 46 economists in a Bloomberg survey that called for a 0.5 percent gain, Commerce Department figures showed today in Washington. The October reading was revised down to show a 0.2 percent drop from a previously projected 0.8 percent increase, showing the initial data are susceptible to swings in direction.
• China's Wen Sees 'Relatively Difficult' First Quarter as Exports Weaken. Chinese Premier Wen Jiabao said business conditions may be “relatively difficult” this quarter and monetary policy will be fine-tuned as needed. “We see downside pressure on our economy and elevated inflation at the same time,” Wen said during a two-day trip to Hunan province, according to a statement on the government’s website yesterday. “We also face problems of weakening external demand and rising costs for companies.” “With an expected deceleration in property investment and exports, we expect to see more weakness in industrial activity.” Nomura Holdings Inc. said last month that China’s economic expansion may decelerate to 7.5 percent in the three months through March from 9.1 percent in the third quarter, as export growth slows and the government’s campaign to check property prices damps investment. The government seeks to stabilize growth and consumer prices (CNCPIYOY) to “promote social harmony,” Wen said. China’s money supply has “structural issues” and one can’t simply say that there is too much or too little lending or sufficient or insufficient liquidity, Wen said. The government will tighten or loosen policies according to the needs of different industries, he said. “Priority will be given to key projects and projects under construction, and we will limit industries suffering from overcapacity, those that cause heavy pollution and are energy intensive,” Wen said, reiterating existing government policy.
• Hedge Funds Had Second-Worst Year in 2011, Eurekahedge Says. The Eurekahedge Hedge Fund Index was down 4.1 percent in 2011, the Singapore-based data provider said in an e-mailed statement. Total asset flows for the year amounted to $67 billion, bringing the entire industry size to $1.72 trillion, it said.
• Oil Increases on Global Manufacturing, Iran Concerns. Oil climbed to a six-week high after manufacturing in the U.S. and Asia expanded in December and as concern persisted that further sanctions against Iran may disrupt shipments. Crude oil for February delivery rose $3.37, or 3.4 percent, to $102.20 a barrel at 11:52 a.m. on the New York Mercantile Exchange. The contract touched $102.88, the highest level since Nov. 17. Futures climbed 8.2 percent in 2011, the third consecutive annual increase. Brent oil for February settlement advanced $3.37, or 3.1 percent, to $110.75 a barrel on the London-based ICE Futures Europe exchange.
• Gold Rises Most in 10 Weeks on Iran Nuclear Concern: Wien Predicts $1,800. Gold futures headed for the biggest gain in 10 weeks on increased demand from investors after reports that Iran produced its first nuclear fuel rod and as the dollar weakened. Silver also gained. A domestically-made rod was inserted into the core of Tehran’s atomic research reactor after performance tests, the Iranian Students News Agency reported yesterday. Blackstone Group LP’s Byron Wien, who had correctly predicted last year’s gain in gold, said bullion will rally 15 percent in 2012 to $1,800 an ounce. “Fear trade is back because of Iran,” Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Also, we are seeing buying across commodities because of the weaker dollar.” Gold futures for February delivery climbed 2.3 percent to $1,603.40 an ounce at 12:40 p.m. on the Comex in New York, heading for the biggest gain since Oct. 25. While prices rallied 10 percent last year, the 11th straight annual advance, the metal slumped 10 percent in December and touched $1,523.90 on Dec. 29, the lowest since July 7.
• WJB Capital Halts Brokerage Operations. WJB Capital Group Inc., a Wall Street firm with more than 100 employees, shut its brokerage operations amid “financial issues,” according to its main attorney. “A decision was made -- and I might say it was a very painful decision -- that it would terminate its broker-dealer operations, and it has done so,” Mark Skolnick, general counsel for the company at law firm Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow LLP, said today. The firm has some non- brokerage operations and is exploring “other possibilities,” he said. WJB Capital was “unable to resolve its financial issues in a manner that would have allowed it to continue its operations under the current economic climate and the constraints that would’ve been placed on the corporation and its investors,” Skolnick said.

Wall Street Journal:

• Live Blogging the Iowa Caucuses.
• Europe at the Brink - A WSJ Documentary. (video)
• French, Spanish Bond Yields Rise. French government bond yields rose Tuesday as dealers tried to make room for bond supply later this week, with worries over the country losing its coveted triple-A rating also keeping investors cautious. Spanish bonds also suffered after the new government signalled that the budget deficit in 2011 would be higher than previously estimated, spurring investors to book profits after a recent rally. Italian bond yields meanwhile eased with traders citing purchases by the European Central Bank, although the 10-year yield was still just shy of the psychologically crucial 7% mark that in the past toppled Greece, Ireland, and Portugal.
  

MarketWatch:

• Ten Trends for Hedge Fund Flows in 2012.
• Hedge Funds Like These Biotechs.
  

CNBC.com:

• Total Signs $2.3 Billion Shale Deal With Chesapeake(CHK). France's Total signed a $2.3 billion deal with Chesapeake Energy and EnerVest that will see it expand its position in lucrative shale oil and gas basins in the United States.
• Greek, Italian Cash Heads for Hills, or Underground. Greeks and Italians are taking their money and running, moving it abroad or even burying it underground for fear the euro zone crisis will topple banks and wipe out what remains of their savings.
• Euro Break-Up Biggest Threat in 2012: CFOs Survey.
  

Business Insider:

• A Major Conflict Is Stirring Behind The Scenes In North Korea.
• Fed Announces Major Changes In Communication Strategy.
• Jeff Gundlach: 5 Key Factors Every Investor Should Consider In 2012.
• Starbucks(SBUX) Is Hiking Prices On A Bunch Of Its Drinks To Deal With Rising Costs.
• Byron Wien's 10-Predictions For 2012.
• The 10 Biggest Risks The World Is Facing In 2012.
  

Zero Hedge:

• Exposing American Banks' Multi-Trillion Umbilical Cord With Europe.
• Would A Ponzi By Any Other Name Smell As Bad?
  

LA Times:

• Bank of America(BAC) Severing Some Small-Business Credit Lines. Bank of America is demanding that some small-business customers pay off their credit line balances all at once instead of making monthly payments. Bank of America Corp., under pressure to raise capital and cut risks, is severing lines of credit to some small-business owners who have used them to stay afloat. The Charlotte, N.C., bank is demanding that these customers pay off their credit line balances all at once instead of making monthly payments. If they can't pay in full, they are being offered new repayment plans for as long as five years, but with far higher interest rates than their original credit lines had.
  

c/net:

• Hitwise: U.S. Google(GOOG)+ Traffic Leaps 55% in December.

Reuters:

• Exclusive: Pakistan Taliban Commanders "at each others throats". Al Qaeda, the Afghan Taliban and Pakistani militants have held a series of meetings aimed at containing what could soon be open warfare between the two most powerful Pakistani Taliban leaders, militant sources have said.

Financial Times:

• US and Europe Steel Prices Diverge Sharply. The $500bn-a-year steel market is one of the best barometers of the health of the manufacturing and construction sectors, and the rare split in transatlantic prices offers an insight into business sentiment in the US and Europe as companies prepare to report their annual results. The price of benchmark hot-rolled coil steel in the US Midwest rose to $756 a tonne in December, 12.5 per cent higher than in November, according to CRU, a leading consultancy. The price of the same type of steel in Germany dropped 7.8 per cent, while in Italy it fell 9.4 per cent. The difference between US and German steel prices is $128 a tonne, the largest gap since May 2008, the consultancy said. The split has averaged $20 a tonne over the past decade.

Telegraph:

• A Depressingly Familiar Story Of Denial From The Eurozone.
  

BBC:

• Greece Warns On Euro Exit If Bailout Not Signed. Greece may have to leave the eurozone if it fails to secure its latest bailout from the EU, IMF and banks, a government spokesperson has warned. "The bailout agreement needs to be signed otherwise we will be out of the markets, out of the euro," spokesman Pantelis Kapsis told Skai TV. The government is struggling with public opposition to new austerity measures, demanded by lenders. Analysts suggest the warning is designed to win support for the moves.

Channelnewsasia:

• Singapore Could See 2 Years of Sub-Par Growth. Singapore's economy is expected to enter a phase of slower growth. Deputy Prime Minister Tharman Shanmugaratnam said this is due to the recession in Europe and economic weakness in the US. He added that the expected slowdown may last for at least two years.