- EU Stumbles as Merkel Signals Greece Debt Deal Delay. European leaders sparred with Greece over a second rescue program, clouding progress toward a permanent aid fund and tougher budget rules designed to stabilize the euro. Greece faced criticism that its economic makeover is faltering, and it fended off German-led calls for a European overseer to take command of its budget after its deficits surpassed targets for two years. “What the Greeks have to do is show they are ready to implement the package,” Dutch Prime Minister Mark Rutte told reporters as he arrived for a European Union summit in Brussels today. “We can help Greece through this difficult phase, but then Greece has to execute all agreements they made with us.” Bargaining with Greece over a debt writedown and its economic management threatened to overshadow a summit meant to point the way out of the financial crisis by speeding the setup of a full-time 500 billion-euro ($654 billion) rescue fund and signing off on a German-inspired deficit-control treaty. A start-of-year respite from market pressures continued today when Italy raised 7.5 billion euros, close to its maximum target, in preparation for its biggest redemption of 2012. At least five more countries plan bond sales this week. The euro slipped 0.9 percent to $1.3160 at 5:30 p.m. in Brussels, snapping a five-day rally.
- Stocks in Europe Fall Most in Six Weeks; BNP Paribas Tumbles on French Tax. European stocks dropped the most in six weeks as Portuguese bonds sank amid concern a meeting of the region’s leaders will fail to draw a line under the sovereign- debt crisis. BNP Paribas SA (BNP) tumbled 7.1 percent, leading French banks lower, as President Nicolas Sarkozy said he will unilaterally impose a financial-transaction tax. Royal Philips Electronics NV (PHIA) fell 2.2 percent after reporting a larger-than-estimated loss. Hochtief AG (HOT) slid 5.8 percent after saying it will post a wider annual loss than previously anticipated. The Stoxx Europe 600 Index retreated 1.1 percent to 252.52 at the close of trading, the largest slide since Dec. 14.
- Portugal Likely to Get Scant Relief From Greek Debt Agreement: Euro Credit. The Greek debt swap negotiations that may produce relief for Athens are fueling concerns in Lisbon where an agreement would make it more likely Portuguese investors would be next in line to accept a loss. European leaders have said a Greek accord where investors take a 50 percent writedown in the face value of their bonds is unique and won’t be applied to other nations struggling to tame rising debts. Holders of Portuguese securities are skeptical, with the yield on the nation’s 10-year bonds rising today to a euro-era record of 16.45 percent. “Portugal’s debt and lack of growth is very similar to Greece,” Yannick Naud, who manages $150 million at Glendevon King Asset Management, said in a Jan. 23 interview in London. “Its bonds are falling because it’s very obvious to everyone that if there’s a haircut for Greece, there might well be a haircut for Portugal too.”
- Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show. The cost of insuring against default on European corporate debt rose, according to traders of credit- default swaps. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 13.5 basis points to 618.5 basis points, according to JPMorgan Chase & Co. at 7:30 a.m. in London. An increase signals worsening perceptions of credit quality. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was up 3.25 at 144.75 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers added 4.5 basis points to 215 and the subordinated gauge was up six at 375.
- MF Global Said 'Never Been Stronger' a Week Before Failure. A week before MF Global Holdings Ltd. collapsed, its chief financial officer told Standard & Poor’s in an e-mail that the futures broker had “never been stronger.” S&P provided the House Financial Services Subcommittee on Oversight and Investigations with an excerpt of the e-mail from MF Global CFO Henri Steenkamp. S&P also informed the panel that Jon Corzine, then MF Global’s chief executive officer, met with its analysts on Oct. 20 to reassure them that his $6.3 billion bet on European sovereign debt was no threat to the firm, according to a Jan. 17 letter obtained by Bloomberg News.
- Canada's Subprime Crisis Seen With U.S.-Styled Loans: Mortgages. Canadian lenders are loosening standards on mortgages that are similar to U.S. subprime loans, posing an "emerging risk" to financial institutions, according to the country's banking regulator. Banks and other lenders are becoming "increasingly liberal" with mortgages and home-equity credit lines that don't require individuals to prove their income, according to documents obtained by Bloomberg News under freedom of information law from the Office of the Superintendent of Financial Institutions. The mortgages, typically granted to the self-employed and recent immigrants, "have some similarities to non-prime loans in the U.S. retail lending market," the documents show. "Non- income qualified" lending has been added to a list of issues to be considered by OSFI's "emerging-risk committee," the documents show. "It just speaks to the general easing in lending standards, which has contributed to a booming housing market," said David Madani, an economist in Toronto with Capital Economics, which estimates that Canadian housing prices may fall 25 percent over the next few years. "The problem is sort of baked in now, so I'm not sure there's a way to prevent a weakening of the housing market."
- Corn, Soybean Futures Decline as Rain May Boost Crops in Argentina, Brazil. Corn fell for the first time in eight sessions and soybeans dropped on speculation that rain in South America will boost crop potential, reducing demand for supplies from the U.S., the world’s biggest exporter.
- Consumer Spending in U.S. Stalls. Consumer spending stalled in December as Americans took advantage of a jump in incomes to restore depleted savings, indicating households remain focused on repairing finances. Purchases were little changed after rising 0.1 percent the prior month, Commerce Department figures showed today in Washington. The median estimate of 77 economists surveyed by Bloomberg News called for a 0.1 percent increase in sales. Incomes climbed by the most in almost a year, pushing the savings rate to a four-month high.
- Germany Warns Greece on Aid Funds. Germany's finance minister issued an unusually blunt warning that the euro zone might refuse to grant Greece a fresh bailout, pushing Athens into default unless it persuades Europe it can overhaul its state and economy. "Greece needs to decide," Wolfgang Schäuble said in an interview with The Wall Street Journal, when asked whether the euro zone would grant or withhold the second bailout package for the country since 2010, expected to be in excess of €130 billion ($172 billion).
- CFTC to Step Up Focus on High-Frequency Trading. The Commodity Futures Trading Commission is planning to take a closer look at high-frequency trading, with an eye on getting a clearer understanding of how electronic trading affects commodity markets and participants.
- Fed Survey Finds Banks Still Cautious to Lend. Banks in the U.S. kept credit fairly tight in the final months of 2011 even as demand for loans increased, putting a brake on the slow economic recovery. The Federal Reserve's quarterly survey showed that credit standards on commercial and industrial loans were little changed for the 56 domestic banks that were interviewed, after the banks stopped relaxing credit in the third quarter.
- Syrain Forces Battle Ahead of U.N. Talks. Syrian forces heavily shelled the restive city of Homs on Monday and troops pushed back dissident troops from some suburbs on the outskirts of Damascus in an offensive trying to regain control of the capital's eastern doorstep, activists said. President Bashar al-Assad's regime is intensifying its assault aimed at crushing army defectors and protesters, even as the West tries to overcome Russian opposition and win a new U.N. resolution demanding a halt to Syria's crackdown on the 10-month-old uprising. Activists reported at least 28 civilians killed on Monday.
Financial Times Deutschland:
- Why Even 20-Somethings Are Worried About Retirement.
- Pay Up-Front Portugal Slides Towards Bond Pariah Greece.
- Rates May Need to Rise Sooner: Philly Fed's Plosser. "If the economy evolves as I think it might, then it’s likely it might have to be sooner than that," he said of a mid-2014 increase. "I’ve said previously that I thought it possible rate hikes would have to come before mid-2013. I was unhappy with the calendar date in the statement. I’m still uphappy with the statement. I don’t think it’s the right way to convey policy." He said it is "clear" from the Fed's statement the mid-2014 date "is contingent on the evolution of the economy. It is not a commitment and shouldn’t be interpreted as a commitment. It’s a conditional statement." He acknowledged "we are punishing savers" by keeping rates at near zero. "The policy is to get people to quit saving and start spending," he said. The problem is, when they start liquidating assets "it's gonna be gone" for the next generation. He also acknowledged low interest rates are forcing some investors to take "unwise risks" in the search for yield from stocks, Plosser said.
- China Has Begun Buying Up Germany's Family-Owned Industrial Backbone.
- The Most Bullish Number From Today's Big Dallas Fed Manufacturing Report. (graph)
- Bubble Watching: My Trip To The 'Hawaii Of China'. (pics)
- European Elections And Tolstoy's Portugal.
- Everything You Need To Know About Europe In Three Charts.
- Youth Unemployment Across Europe. (chart)
- Japanese Population to Shrink by One Third, Size of Workforce to Plunge in Under 50 Years.
The Detroit News:
- Treasury Ups Auto Bailout Loss Estimate. The U.S. Treasury Department boosted its estimate of government losses in the $85 billion auto bailout by $170 million. In the government's latest report to Congress this month, the Treasury upped its estimate to $23.77 billion, up from $23.6 billion. Last fall, the government dramatically boosted its forecast of losses on the rescues of General Motors Co., Chrysler Group LLC and their finance units from $14 billion to $23.6 billion. Much of the increase in losses is due to the sharp decline of GM's stock price over the last six months. GM was trading at noon today at $24.24. It's down 35 percent over its 52-week-high of $37.23, but the Detroit automaker has rebounded from a low set last year of $19.05.
- Gulf Arabs Have Plans Against Hormuz Closure - Official. Coastguards and naval forces of the Gulf Cooperation Council (GCC) group of Arab countries have contingency plans for a possible attempt by Iran to shut the Strait of Hormuz, a Kuwaiti maritime official said on Monday.
- Oil Slips in Choppy Trade. Oil prices slipped on Monday in volatile trading a day after Iran postponed a parliamentary debate on a proposed halt to crude sales to the European Union. The dollar index .DXY strengthened and the euro fell from a six-week high against the U.S. currency as talks on a Greek debt agreement continued, keeping investors cautious about the outlook for the economy and oil demand. The possibility Iran may yet halt exports to the EU, along with data showing improved European economic sentiment and a successful bond auction in Italy, helped limit oil's losses."Oil is lower because Iran didn't cut off sales to Europe and the dollar index is stronger, and there still isn't a deal on Greece," said Phil Flynn, analyst at PFGBest Research in Chicago.Brent March crude fell 46 cents to $111 a barrel by 12:45 p.m. EST, having traded from $110.80 to $111.78. That intraday peak was in sight of front-month Brent's 200-day moving average of $111.89.U.S. March crude fell 36 cents to $99.20 a barrel, having swung from $98.50 to $100.05, seesawing either side of the front-month 50-day moving average at $99.27.
- Rajoy Says Spain Won't Make 2012 Growth Target. Prime Minister Mariano Rajoy said on Monday Spain was not going to meet its existing growth target for 2012, but wouldn't go into detail about what that may mean for its plans to cut its budget deficit sharply.
- Portugal Yields Jump On Default Fears. Portugal’s bond yields reached new euro-era highs as many investors priced in a Lisbon default amid fears its debt holders could suffer heavy losses once a restructuring deal with Greece is agreed. At one point the yield on benchmark 10-year Portuguese debt rose as much as 204 basis points to 17.26 per cent. Portuguese credit default swaps, meanwhile, rose to record levels as the market priced in about a 70 per cent chance the country would default over the next five years.
- Eurozone Crisis: Live Blog.
Financial Times Deutschland:
- Kloeckner says steel demand in Europe may drop 5% or more, citing CEO Gisbert Ruehl. Insecurity in the markets is at the moment probably higher and more threatening than during 2008 with no end in sight for the debt crisis.
- Greece should be closely monitored by the European Union if it won't manage itself, German Economy Minister Philipp Roesler said in an interview. Greece also shouldn't receive any more aid until it implements reforms, Roesler said, adding that Germany opposes adding money to the European Stability Mechanism.
- New Home Sales in Shanghai Fall to Lowest in 7 Years. NEW home sales in Shanghai during the week-long Lunar New Year holiday fell to the lowest in seven years on a sluggish buying sentiment. More than 1,700 square meters of new homes, or 16 units, excluding government-funded affordable housing, were sold across the city during the holiday which ended on Saturday, the lowest since 2006 when the city's housing data were first tracked, said a report released yesterday by Shanghai Deovolente Realty Co. The sales by area fell 33.3 percent from the Lunar New Year holiday in 2011, and the unit number shed 27.9 percent.