Evening Headlines
Bloomberg:
- EU Nears Greek Confrontation as Portugal Poses Looming Risk. European governments moved toward a confrontation over a second rescue package for Greece, just as a dimming fiscal outlook in Portugal opened a new front in the debt crisis. Euro leaders left a Brussels summit late yesterday with no accord over how to plug Greece’s widening budget hole and German Chancellor Angela Merkel voicing frustration with the Athens government’s failure to carry out an economic makeover. “Greece’s debt sustainability is especially bad,” Merkel told reporters. “You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.” Bargaining with Greece over a debt writedown and its economic management overshadowed efforts to point the way out of the financial crisis. EU chiefs agreed to speed the setup of a full-time 500 billion-euro ($654 billion) rescue fund and signed off on a German-inspired deficit-control treaty. The summit was the 16th in the two years since the Greek debt emergency provoked a Europe-wide drama, leading to unprecedented aid packages for Greece, Ireland and Portugal and shattering European faith that the common currency was indestructible. After the gathering of European leaders, EU President Herman Van Rompuy convened a smaller group, including Greek Prime Minister Lucas Papademos and European Central Bank Executive Board member Joerg Asmussen, to weigh the next steps on Greece.
- Coal-Carrier Rates Seen at Decade-Low as Glut Expands: Freight. The greatest number of coal cargoes in history still won’t be enough to eliminate a glut of Panamax vessels, driving charter rates to the lowest in a decade. Shipments will rise 3.6 percent to 956 million metric tons this year, according to London-based Clarkson Plc, the world’s biggest shipbroker. Rates for Panamaxes, each about 750-feet long, will average $12,744 a day in 2012, the lowest since 2002, the median of 10 analyst estimates compiled by Bloomberg shows. While that implies losses for ship owners, investors may profit by buying forward freight agreements, traded by brokers and used to bet on future costs, which anticipate $10,107. Panamax charter costs already tumbled 53 percent since Jan. 1, the worst start to a year since at least 1999, as the fleet expanded for a 35th consecutive month. “Demand looks good, but it’s just going to be massively outweighed by new vessels,” said Will Fray, a senior analyst at Maritime Strategies International Ltd., a London-based research company. “There’s unlikely to be enough mining output to soak up the enormous new capacity.”
- Wind Purchases, Deals to Fall in 2012 as Sinovel Profits Halved. Purchases of wind turbines and other equipment will decline 18 percent this year and won’t return to 2011 levels for five years, reducing profits at companies including Sinovel Wind Group Co. (601558), according to Bloomberg New Energy Finance. Capital investment in wind-power assets worldwide will be $60.8 billion in 2012, down from $74.6 billion last year, as oversupply and waning government support in the U.S. and Europe cut demand. Total installations will decrease 13 percent to 47 gigawatts and will remain little changed until 2019, said Justin Wu, head of wind analysis at New Energy Finance. Sinovel, China’s top turbine maker, said yesterday it expects 2011 profit to decrease by more than half from 2.86 billion yuan ($451.6 million) in 2010. Vestas Wind Systems A/S (VWS) this month cut 10 percent of its staff after twice reducing sales forecasts since October.
- S&P's Ogawa Says Japan Can't Conquer Debt Woes With Doubled Tax. Doubling Japan’s sales tax by 2015 won’t be enough to contain the nation’s growing debt load and the government needs to outline how it will pay for swelling social-welfare expenses, a Standard & Poor’s analyst said. “There’s no way that would be enough,” Takahira Ogawa, director of sovereign ratings at S&P in Singapore, said in a phone interview yesterday, referring to the plan to raise the levy by 5 percentage points. “No matter how high the sales tax is raised, there’s no point unless the government does something with the social-welfare system.” Japan’s government said last week that it will probably miss its goal of balancing the budget by fiscal 2020 even with the sales tax increase, yet to be approved by opposition lawmakers. Social-security expenses have more than doubled over the past two decades and will account for 52 percent of general spending in the year starting April, Finance Ministry data show.
- BlackRock's(BLK) Doll Says QE3 Unlikely in Contrast to Pimco's Gross. BlackRock Inc., the world’s biggest asset manager, says the Federal Reserve will refrain from conducting a third round of debt purchases as the economy grows. The outlook contrasts with that of Bill Gross, who runs the largest bond fund at Pacific Investment Management Co. and says the Fed may buy several more times. The central bank has purchased $2.3 trillion of debt in two rounds of quantitative easing known as QE1 and QE2 as it seeks to support the world’s biggest economy. Chairman Ben S. Bernanke said Jan. 25 that he’s considering another program of purchases. “QE3 will be seen only if the U.S. economy flags,” Bob Doll, chief equity strategist at BlackRock, which oversees $3.51 trillion, said today on Bloomberg Television’s “First Up” with Susan Li. “Ben Bernanke will use it if we have a rainy day and only then,” said Doll, who is based in Princeton, New Jersey.
- Florida Vote Sets Stage for Final Push.
- NYC Shifts On Teacher Evaluations. After months of talks with the teachers union, the Bloomberg administration is asking Gov. Andrew Cuomo to help put an end to the labor dispute by scrapping the state's teacher evaluation law.
- U.S. Gets Tougher on Debt Collecting. The Federal Trade Commission intensified its crackdown on the booming debt-collection industry, announcing a $2.5 million settlement with a company for allegedly coercing borrowers into paying debts they no longer legally owed. The settlement with Asset Acceptance Capital Corp., one of the nation's largest buyers of soured consumer debts, is the second-biggest penalty ever levied by the FTC against a debt collector. Officials said they are investigating other companies for alleged violations of federal law and expect to announce more enforcement actions soon.
- Cutoff Looms on Loan Accord. State attorneys general have until Friday to join a potential national settlement of alleged foreclosure abuses, according to a document reviewed by The Wall Street Journal.
- Group of Americans Takes Shelter at Cairo Embassy. A group of Americans who have been prohibited by Egypt's ruling military from leaving the country have taken refuge at the U.S. Embassy in Cairo in the midst of an Egyptian crackdown on pro-democracy and human-rights organizations and their staff.
- NYC New Construction Slid 31% in 2011. New York City's construction industry was dealt another tough year as the value of construction projects that began in 2011 sank 31% compared with 2010, new data released on Monday said. Reduced government spending on infrastructure and very few new, large commercial buildings contributed to the building industry's poor 2011. The value of construction starts fell by $6.2 billion in 2011 to $13.8 billion, according to the analysis by the New York Building Congress, an association representing real-estate developers and construction companies.
- Papademos: Greece Could Need More Public Funding. Greece's prime minister says he cannot exclude the possibility that his country will need more help — on top of a new €130 billion ($170.43 billion) bailout and a deal with private investors to slash its debt.
- European Bailout Infographic: Presenting The Truckloads Of Cash Needed To Rescue The Insolvent.
- Good Gendarme: Recently Downgraded France Opposes German Demands For Greek "Tutelage".
- Trade Protest Is Planned on Eve of a Chinese Leader's Visit. As the White House prepares for a Washington visit by the man who is expected to run China for the coming decade, trade tensions between the United States and Beijing are on the rise.
- Portugal Suffers as Loss of Confidence in Bonds Sends Yields Higher. Investors fled out of bonds of weaker European countries on Monday, sending yields on Portuguese government bonds to a record high over concerns that the euro zone debt troubles were spreading beyond Greece. The fears of contagion spreading to other periphery countries in the zone that share the euro have grown more intense in recent months, with much of the latest focus on Portugal.
- Greece Needs to Dump Euro "shackles": Commerzbank. Greece must surrender the "shackles" of the euro in order to survive if it does not want to constantly ask for a handout from euro zone governments, the supervisory board chairman of Commerzbank said late on Monday. "What do they need, another 15 billion euros? If you think that is the last 15 billion that they will have miscalculated, then best wishes," Klaus-Peter Mueller told an industry event in Frankfurt."They will come back for more and there will be no end, unless you really see them enact structural reforms, but this won't take just two-three years -- we're talking 20, 30 or 40 years for Greece. "Mueller said it doesn't do any good to Greece were euro zone governments to continue forcing them to wear the "shackles" of a currency that only permits internal adjustments via spending cuts and declining wages."The Greeks need on balance a currency that they can then devalue," Mueller said, adding it would take a long time before the government could build up from scratch functioning structures that restore competitiveness.Athens and its EU partners have long ruled out a euro exit, which could drag the bloc even deeper into crisis. However, earlier in January a Greek government spokesman said the country would have to leave the euro zone if it fails to clinch a deal on a second, 130 billion euro bailout with its international lenders. The chairman of Germany's second largest listed lender disagreed that an exit would prompt "global chaos" and cause investors to dump sovereign debt from other periphery countries like Italy and Spain. "I don't think that markets would react negatively towards the other countries that would then remain in the euro zone after such a decision," he said.
- RadioShack(RSH) Sees Profit Drop on Sprint Weakness. RadioShack Corp (RSH.N) issued a disappointing fourth-quarter earnings forecast on "significant declines" in its Sprint wireless business and the shares of the struggling electronics retailer tumbled more than 18 percent on Monday.
- The Dilemma of German Leadership.
- Banks Set to Double Crisis Loans from ECB. European banks are preparing to tap the European Central Bank’s emergency funding scheme for up to twice as much as the ECB supplied in its debut €489bn auction last month, providing further evidence of the sector’s liquidity squeeze.
- Portuguese Storm Gathers as EU Leaders Fight Over Greece. Surging borrowing costs in Portugal have raised the spectre of a second full-fledged contagion crisis in the eurozone, eclipsing the latest efforts by European Union leaders in Brussels to agree on Europe's bail-out machinery and a strategy for Greece. Yields on Portuguese 10-year bonds hit a fresh record of 17.38pc on Monday even though the country is already shielded by a €78bn (£65.2bn) package from the EU, European Central Bank (ECB) and International Monetary Fund "troika" and does not have to tap the markets this year. Reports also emerged on Monday night that European banks were gearing up to ask the ECB's emergency funding scheme for up to twice as much in funds as the central bank supplied in its debut €489bn auction last month. The news reveals the extent of the liquidity squeeze on banks – with some chief executives looking to tap the ECB for up to triple the amount they originally borrowed, when the three-year money auction takes place on February 29.
Yonhap News Agency:
- North Korea - China Trade Jumps 62% in 2011: Data. Two-way trade between North Korea and China jumped 62 percent in 2011 from the previous year, with the North doubling its exports of minerals to its major ally, data showed Tuesday.
People's Daily:
- China's textile industry outlook may be "relatively grim" in the first half, citing Wang Tiankai, president of the China National Textile and Apparel Council. Export companies may face increasing lack of demand, competitive pressure and trade friction, Wang said.
Jefferies:
- Rated (WSM) Buy, target $42.
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 187.0 +3,5 basis points.
- Asia Pacific Sovereign CDS Index 149.0 +3.25 basis points.
- FTSE-100 futures +.49%.
- S&P 500 futures +.09%.
- NASDAQ 100 futures +.18%.
Earnings of Note
Company/Estimate
- (LLL)/2.41
- (VLO)/-.18
- (X)/-.86
- (BIIB)/1.49
- (XOM)/1.98
- (MHP)/.57
- (DHR)/.78
- (MAT)/1.00
- (LLY)/.81
- (PFE)/47
- (PNR)/.54
- (LXK)/1.16
- (ADM)/.76
- (OSK)/.36
- (UPS)/1.26
- (PCAR)/.79
- (ITW)/.88
- (AVY)/.46
- (CHRW)/.68
- (UIS)/1.47
- (AFL)/1.51
- (BXP)/1.19
- (JLL)/2.24
- (BCR)/1.68
- (BRCM)/.65
- (AMZN)/.17
- (AMG)/1.73
8:30 am EST
- The 4Q Employment Cost Index is estimated to rise +.4% versus a +.3% gain in 3Q.
9:00 am EST
- S&P/CS 20 City MoM% SA for November is estimated to fall -.5% versus a -.62% decline in October.
9:45 am EST
- Chicago Purchasing Manager for January is estimated to rise to 63.0 versus 62.2 in December.
10:00 am EST
- Consumer Confidence for January is estimated to rise to 68.0 versus 64.5 in December.
Upcoming Splits
- (CMN) 3-for-2
- (TJX) 2-for-1
- The NAPM-Milwaukee for January, weekly retail sales reports and the (DLR) analyst day could also impact trading today.
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