- Europe Demands More Greek Budget Controls in Struggle to Forge Rescue Plan. Europe’s creditor countries struggled to bridge divisions over a rescue of Greece, seeking more control over how future aid is spent as the clock ticked toward a possible default next month. In a replay of the brinkmanship that marked the early stages of the Greek crisis two years ago, euro-area finance ministers extracted concessions from political leaders in Athens intended to pave the way for the endorsement of a 130 billion- euro ($171 billion) aid package next week. While “further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of program implementation,” Europe is set to make “all the necessary decisions” on Feb. 20, Luxembourg Prime Minister Jean-Claude Juncker said in an e-mailed statement after chairing a conference call of finance chiefs late yesterday. Greece’s plea for more aid on top of the 110 billion euros awarded in 2010 has stirred recriminations on both sides of Europe’s north-south economic divide, with taxpayers in better- off countries rebelling against further handouts. Each day lost brings Greece closer to a March 20 bond redemption when it must make a 14.5 billion-euro payment or become the first country in the euro’s 13-year history to default.
- Greece Debt to Fall Less Than Forecast, Economists Tell FTD. Economists at European banks expect Greece’s national debt to fall less than expected by the so- called troika as consolidation efforts sap economic growth, Financial Times Deutschland reported. “Even with the discussed creditor participation it is now hardly realistic that the state debt falls to a sustainable level,” Frank Hansen, head economist of Danske Bank, was cited as saying by the newspaper. The troika, which includes the International Monetary Fund, European Commission and European Central Bank, “massively underestimated how dramatically damaging consolidation is for the economy,” the FTD cited Fabio Fois, European economist at Barclays Capital, as saying.
- France Joins Spain to Defy Moody's With 14.3 Billion-Euro Debt-Sale Plan. France and Spain plan to sell as much as 14.3 billion euros ($18.7 billion) in bonds today, defying concern about a second bailout for Greece and after Moody’s Investors Service cut ratings for some European nations. France plans to sell as much as 8.5 billion in two- three- and five-year bonds, while Spain aims to sell a maximum of 4 billion euros in securities maturing in January and July 2015 and October 2019. France is also auctioning as much as 1.8 billion euros of index-linked bonds. The European Central Bank’s three-year lending program for banks, dubbed LTRO, may help demand for the auctions, which come three days after Moody’s cut the ratings of six European nations including Spain and revised its credit outlook on France to “negative.”
- Morgan Stanley(MS), UBS May Be Cut Up to Three Levels by Moody's. UBS AG, Credit Suisse Group AG and Morgan Stanley's credit ratings may be cut by as many as three levels by Moody's Investors Service, which is reviewing 17 banks and securities firms with global capital markets operations. Goldman Sachs Group Inc., Deutsche Bank AG, JPMorgan Chase & Co. and Citigroup Inc. are among companies that may be downgraded by two levels, Moody's said in a statement, adding that the “guidance is indicative only.” Moody's today cut some European insurers' ratings based on risks stemming from the region's sovereign debt crisis.
- Chinese Shift to Wealth Products Seen Undermining Bank Stability. In January, depositors pulled 800 billion yuan from savings accounts, about 1 percent of the total, the central bank reported. It was the largest monthly decline in at least 12 years, according to data compiled by Bloomberg.
- Al Gore Likens Carbon to Subprime Debt in Plan to "Repair" Capitalism. Former U.S. Vice President Al Gore said investors in oil and gas companies who ignore the cost of emitting carbon dioxide and other greenhouse gases are making a mistake similar to those who invested in subprime mortgages. “The value of the subprime mortgages was based on a false assumption,” Gore said yesterday in an interview. “In almost exactly the same way, the value of all of these carbon fuel reserves is based on a similarly absurd assumption.” “The bitter experience that the subprime mortgages caused should be a reminder that stranded assets have the potential for doing a great deal of damage,” Gore said in a video link between Generation’s New York and London offices. The firm manages about $6.5 billion. “These subprime carbon assets have an asserted value based on the assumption that it’s perfectly OK to put 90 million tons of global warming pollution into the atmosphere every 24 hours,” he said. “Actually it’s not.”
- China's Foreign Direct Investment Falls for a Third Month. Foreign direct investment in China fell for the third month in January as slowing economic growth and Europe’s debt crisis prompted companies to rein in spending. Foreign investment declined 0.3 percent to $9.997 billion last month from a year earlier, the Ministry of Commerce said in a statement in Beijing today. Spending dropped 12.7 percent in December after a contraction the previous month that was the first since 2009. The outlook for foreign investment in China, which attracted a record amount of spending last year, is “not optimistic,” the ministry said in December. Weaker global growth and changes to the nation’s policies on overseas funding for some industries may temper gains this year.
- Real-Estate Chief Exits From China Wealth Fund. The head of real estate for China's giant sovereign-wealth fund resigned last week after two months on the job, following other departures from the real-estate division of one of the world's most-active property investors. Patrick Wu, who had been with China Investment Corp. for about four years, was elevated to the top position in the real-estate group in December, succeeding Collin Lau, who took a position with the fund's European private-equity division.
- Toxic? Says Who? Taste For 'Subprime' Returns. Investors' belief that the worst is over for the U.S. housing market is fueling renewed interest in once-toxic mortgage bonds that were at the heart of the financial crisis. Prices of some distressed bonds backed by subprime home loans—those issued before the crisis to borrowers with sketchy credit histories—have chalked up double-digit percentage gains this year, with one prominent market index rising 14%. The rally has drawn investors back to a corner of the credit markets that was pummeled from 2007 to 2009 and has been volatile since. The latest upswing has some money managers setting up investment funds dedicated to buying beaten-down mortgage bonds, hoping to reap fat yields while waiting for the housing market to turn. The recent resurgence in battered mortgage bonds that were left for dead during the crisis reflects how investors' appetite for risk is returning, even after many banks and hedge funds lost money last year on similar assets.
- Oil Rise Imperils Budding Recovery. Rising oil prices are emerging once again as a threat to the U.S. economic recovery just as it appears to be gaining momentum. Oil prices have climbed sharply in recent weeks as mounting tension with Iran has raised the threat of a disruption in global supplies. On Wednesday, oil futures on the New York Mercantile Exchange rose $1.06 to $101.80 a barrel on reports that Iran had cut off sales to six European countries in response to the European Union's newly stepped-up sanctions. Iran's oil ministry later denied the report.
- NetApp's(NTAP) 3Q Profit Falls, But Sentiment Improves. NetApp Inc.'s (NTAP) fiscal third-quarter earnings fell 36% on higher charges and weaker margins, but the data-storage company posted double-digit sales growth and helped to alleviate some fears about slowing tech spending.
- Cliffs Natural(CLF) 4Q Net Down 52% On Weakness In Asia Pacific. Cliffs Natural Resources Inc.'s (CLF) fourth-quarter earnings sank 52% on weaker sales volume and pricing in the Asia Pacific region, and higher input costs, though its revenue increased.
- New Bill Clouds Legality Of Tips. The political-intelligence industry thought it scored a great success last week when Republicans yanked a provision from a bill that would have forced firms to register their activities. Now it is confronting the possibility that the legislation—more broadly aimed at banning insider-trading in Congress—could put the entire industry in jeopardy.
- How I'll Respond to China's Rising Power by Mitt Romney. The character of the Chinese government—one that marries aspects of the free market with suppression of freedom—shouldn't become the norm.
- Meet the ObamaCare Mandate Committee. Think the contraception decision was bad? Wait until bureaucrats start telling your insurer which cancer screenings to cover. Offended by President Obama's decision to force health insurers to pay for contraception and surgical sterilization? It gets worse: In the future, thanks to ObamaCare, the government will issue such health edicts on a routine basis—and largely insulated from public view. This goes beyond contraception to cancer screenings, the use of common drugs like aspirin, and much more. Under ObamaCare, a single committee—the United States Preventative Services Task Force—is empowered to evaluate preventive health services and decide which will be covered by health-insurance plans.
- Fed Minutes Show Few Supporters For QE3. Only a few members of the Federal Open Market Committee favored another round of quantitative easing, or bond purchases, according to minutes of the last meeting released Wednesday.
- CF Industries(CF) More Than Doubles Profit. CF Industries Holdings Inc.'s CF -2.61% fourth-quarter earnings more than doubled as higher prices lifted revenue and margins surged.
- Across The Western World Elections Could Set Off Crisis.
- This Is Just Getting Ugly, As A Verbal War Is Breaking Out Between Germany And Greece.
- Intelligence Reports Suggest Iran And Al Qaeda Are Teaming Up To Attack The West.
- As Greece Crashes And Burns, Troika Arrives In Portugal With "Soothing Words Of Support".
- Brent Priced In EUR At Record Highs. (graph)
- Biderman Beyond Baffled by B.O.'s Budget. (video)
- Moody's Downgrades Generali, Cuts Megainsurer Allianz Outlook To Negative. (graphs)
- Is The US Heading For Another Credit Downgrade? (video)
- World Bank's Zoellick to Step Down, US Eyes Spot. World Bank President Robert Zoellick said on Wednesday he will step down in June and Washington pledged to put a replacement candidate forward within weeks for a job that has always gone to an American.
- Loss of a Wireless Dream Caps a Fast Fall From Grace. It was as ambitious a bet as any hedge fund manager could imagine: building a wireless network from scratch to compete with the likes of AT&T and Verizon.But the dream has come crashing down to earth for Philip A. Falcone, the investor whose multibillion-dollar wager has been all but halted by the Federal Communications Commission.
- GE's(GE) Rice Sees China Growth Slowing In 2012. General Electric Co believes China's economy, a key source of revenue growth for the largest U.S. conglomerate, will slow this year but not substantially below 8 percent, said the executive who runs the company's international operations. "The growth rate in China is going to be a little bit lower than we thought a year ago. But still a very manageable, healthy if you will, 8 percent," Vice Chairman John Rice said on Wednesday. "If it does drop below 8 percent for a while, that's not the end of the world either."
- Copper Hits Two-Week Low as Greece Delay Sours Mood.
- Nvidia(NVDA) warns of chip supplies and loss of Samsung. Nvidia Corp warned that delays in ramping up new manufacturing technology are affecting sales of its PC graphics chips and that smartphone chip-customer Samsung Electronics has become a rival.
- More Chinese Cities Halt Apple(AAPL) iPad Orders - Reports. Retailers in more Chinese cities have been told by authorities to take the popular iPad tablet PCs off their shelves this week, media reports said on Thursday, due to a legal battle between a Chinese technology firm and Apple Inc over trademark issues.
- Evangelos Venizelos warns Germany is 'playing with fire' on Greece. Greek finance minister Evangelos Venizelos accused European leaders of "playing with fire" by trying to oust the beleaguered country from the eurozone amid fears they want to delay releasing the €130bn (£108bn) bail-out until after Greek elections in April.
- Single Currency's Struggle Takes Its Toll On Europe. The diverse nature of the 17 countries brought together in monetary union has never been so apparent.
- Fed Member: US Banks Must Be Broken Up For Stability. Richard Fisher, president of the Federal Reserve Bank of Dallas, said on Wednesday that the largest American banks still posed a major risk to the US and were "too dangerous to permit". In a speech in New York, Mr Fisher said: "Downsizing the behemoths over time into institutions that can be prudently managed and regulated across borders is the appropriate policy response. Then, creative destruction can work its wonders in the financial sector, just as it does elsewhere in our economy." He warned that the US banking had "become more concentrated" with five of the largest banks accounting for half the industry's assets. "Sustaining too big-to-fail-ism and maintaining the cocoon of protection of SIFIs [systemically important financial institutions] is counter-productive, expensive and socially questionable. Perhaps the financial equivalent of irreversible lap-band or gastric bypass surgery is the only way to treat the pathology of financial obesity, contain the relentless expansion of these banks and downsize them to manageable proportions," said Mr Fisher.
- China will gradually expand the nation's property tax reform trial, Chinese Vice Premier Li Keqiang wrote in an article. Excess global liquidity, market pessimism and a "relatively large" domestic money supply will challenge China's ability to maintain economic growth and stable consumer prices, Li wrote.
- China's contribution to a European financial stability facility should be capped at 92.6B euros, the same as Spain's, Peng Xingyun, a researcher with the Chinese Academy of Social Sciences, writes in a commentary.
- Rated (LO) Buy, target $139.
- Asian equity indices are -1.50% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 169.0 +4.5 basis points.
- Asia Pacific Sovereign CDS Index 136.25 -1.25 basis points.
- FTSE-100 futures -1.03%.
- S&P 500 futures -.53%.
- NASDAQ 100 futures -.49%.
Earnings of Note
8:30 am EST
- The Producer Price Index for January is estimated to rise +.4% versus a -.1% decline in December.
- The PPI Ex Food & Energy for January is estimated to rise +.2% versus a +.3% gain in December.
- Initial Jobless Claims are estimated to rise to 365K versus 358K the prior week.
- Continuing Claims are estimated to fall to 3490K versus 3515K prior.
- Housing Starts for January are estimated to rise to 675K versus 657K in December.
- Building Permits for January are estimated to rise to 680K versus 679K in December.
10:00 am EST
- Philly Fed for February is estimated to rise to 9.0 versus 7.3 in January.
- None of note
Other Potential Market Movers
- The Fed's Bernanke speaking, France/Belgium/Spain bond auctions, ECB's Coene speaking, 4Q Mortgage Delinquencies, 4Q MBA Mortgage Foreclosures, 30Y Tips Auction, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations for February, (HNT) Investor Day, (WGL) Analyst Meeting, (IT) Investor Day, (ZION) Investor Day, (SNDK) Analyst Meeting, (JDSU) Analyst Day, (NILE) Investor Day and the KBW Cards/Payments/Financial Tech Symposium could also impact trading today.