Today's Headlines

Bloomberg:

• Portugal Isn't Significant Default Risk to Euro Zone, Fitch Ratings Says. Portugal doesn’t present the risk of default that Greece does to the rest of the European Union because officials there are seeking to contain the nation’s financial crisis, according to Fitch Ratings. “The government there is committed and credible. The economy is highly indebted, but they are working on organizing a debt-for-equity swap,” David Riley, head of the sovereign-debt unit at Fitch Ratings, said at a conference in New York today. “That is the right strategy and in the near term we don’t see them as a significant risk to the rest of the euro zone.” Banks in Germany, France, Belgium and the U.K. have the least periphery exposure to Portugal, excluding Ireland, among the debtor nations at the heart of the region’s financial crisis, according to data provided by Fitch at a presentation today.
• Portugal's Borrowing Costs Fall at Bill Auctions; Investor Demand Declines. Portugal’s borrowing costs declined at a sale of 1.5 billion euros ($2 billion) of bills even as demand for the securities dropped. The country sold 750 million euros of bills due in July 2012 at an average yield of 4.463 percent, the debt management agency said today. That compares with an average yield of 4.74 percent at a previous auction of similar securities on Jan. 18. The auction attracted bids for 2.65 times the amount sold, compared with a bid-to-cover ratio of 2.97 in January. Portuguese two-year notes jumped, with yields 108 basis points lower at 19.47 percent at 12:57 p.m. London time. Ten- year bonds also climbed, pushing the yield down 97 basis points, or 0.97 percentage point, to 15.43 percent. The extra yield investors demand to hold the 10-year securities instead of benchmark German bunds fell 1 percentage point to 13.61 percent.
• Italian Banks Gain as Central Bank Set Buybacks Rules in Line With Europe. Italian lenders climbed in Milan, leading gains in the European Stoxx 600 Banks Index, after the Bank of Italy allowed more flexibility in buying back subordinated bonds. The Italian central bank’s new regulations meet European buyback rules on hybrid securities. Banks won’t have to simultaneously issue new instruments to replace those being repurchased and don’t need the approval of Italy’s stock market regulator, the Bank of Italy said on its website. The Bank of Italy will authorize banks to buy back securities that qualify as regulatory capital as long as their financial position isn’t put at risk, it said.
• Default Risk Falls to Five-Month Low in Europe on Manufacturing. The cost of insuring against default on European corporate debt fell to the lowest since August after a report showed U.S. manufacturing expanded at the fastest pace in seven months. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings dropped 28 basis points to 590, the lowest since Aug. 8, according to JPMorgan Chase & Co. prices at 4:30 p.m. in London. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 5.75 basis points to 137.5 basis points, the lowest since Aug. 5, JPMorgan prices show. Financial-company bond risk also fell, with the Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers declining 8.5 basis points to 210.5 and the subordinated index was 20 basis points lower at 362. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments fell 14 basis points to 325. European manufacturing shrank less than forecast, data released today showed, as Germany made up for weakness in countries from France to Ireland. A euro-region factory index rose to 48.8 in January, below the 50 threshold that indicates expansion.
• Worst Profits Since 2006 Fail to Dent Rally in Europe Stocks. The highest proportion of European companies on record are missing profit estimates even as the region's stocks post their best start to a year since 1998. Siemens AG and Ericsson AB are among the 59 percent of Stoxx Europe 600 Index companies reporting earnings that fell short of forecasts during the current quarter, according to data compiled by Bloomberg. That's the worst ratio since Bloomberg started collating estimates in 2006, with 39 percent of companies missing projections in an average quarter.
• ECB Loan Collateral Plan Said to Be Avoided by Some Euro Members. The European Central Bank’s plan to accept more bank loans as collateral may not be used by all euro-region nations, threatening to fragment the rules applying to bank funding operations, said two euro-area officials with knowledge of the discussions. The initiative is likely to be implemented on a voluntary basis by national central banks and several of them may opt out, said the officials, who declined to be identified because the information is confidential. Germany’s Bundesbank has indicated it may be among those to shun the measure, arguing the country’s banks don’t need to borrow more from the ECB.
• U.S. Manufacturing Expands In ISM Index. Manufacturing in the U.S. grew in January at the fastest pace in seven months, adding to signs of a global pickup from Germany to China. The Institute for Supply Management’s index climbed to 54.1, from 53.1 in December, the Tempe, Arizona-based group’s report showed today. Figures greater than 50 signal expansion. Other reports showed U.S. construction spending increased at the fastest pace in four months and companies added 170,000 workers to payrolls in January.
• Commodity Shipping Costs Fall to Quarter-Century Low on Glut. Commodity shipping costs slumped to the lowest in a quarter century as a glut of new carriers overwhelmed demand at a time of slowing global economic growth. The Baltic Dry Index, a measure of costs across four vessel sizes, retreated 2.6 percent to 662 points today, according to the London-based Baltic Exchange, which publishes rates across more than 50 maritime routes. The gauge fell 61 percent this year and is now at its lowest since August 1986. Rates for Capesizes, the largest iron ore and coal carriers, dropped 84 percent since mid-December.
• Oil Futures Erase Gains After Inventories Increase More Than Expected. Oil erased gains after an Energy Department report showed that U.S. inventories climbed more than expected and gasoline demand tumbled to a 10-year low. Futures dropped after the report showed supplies rose 4.18 million barrels to 338.9 million last week, the report showed. A 2.6 million-barrel increase was forecast, according to analysts surveyed by Bloomberg News. Gasoline use dropped to 7.97 million barrels a day. “The tone is turning bearish,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “We continue to get bearish reports week after week and the market has been able to hold on. It looks like that is about to end and we’ll test the $97.50 area.” Crude oil for March delivery fell 2 cents to $98.46 a barrel at 1:03 p.m. on the New York Mercantile Exchange.
• Fed Nominee Stein Earned Fees From Bank of America(BAC), State Street(STT). Harvard University professor Jeremy Stein earned $198,500 giving speeches and consulting for financial institutions prior to his nomination to the Federal Reserve’s Board of Governors. Stein, a professor with expertise in banking and finance, received earned speaking fees of $35,000 from Deutsche Bank AG, $20,000 from State Street Corp. and $25,000 from Bank of America-Merrill Lynch in 2010 and 2011, according to his financial disclosure with the Office of Government Ethics. He also was paid $100,000 for a consulting report for the Clearing House Corporation, a group of the nation’s largest commercial banks.
• American Airlines to Cut Up to 15,000 Jobs. (video)
  

Wall Street Journal:

• Rating Firms Face Pressure on Hill. Measure Would Require Quarterly Reviews to Help S&P, Moody's, Fitch Sound Earlier Warnings. U.S. lawmakers plan to introduce a measure that would force credit-rating firms to affirm the accuracy of their views every quarter, arguing that more frequent ratings would help sound the alarm sooner on potential problems. Standard & Poor's Ratings Services, Moody's Investors Service and other firms drew scrutiny in the wake of the 2008 financial crisis for failing to keep pace with a credit market in rapid descent. Those concerns were revived in recent months by the collapse of MF Global Holdings Ltd.
• EU Considers Loosening Rules on Bank Liquidity. Under heavy pressure from the banking industry, European regulators are considering loosening some rules that require lenders to maintain deep pools of ultrasafe assets to protect them in a crisis, according to bankers and regulatory officials involved in the discussions. Policy makers and regulators in the European Union are weighing whether to permit banks to hold a broader variety of assets to meet new safety standards, these people say. Such a change would make it easier for banks to comply with the rules, according to people familiar with the deliberations.
• Facebook IPO: Should You Invest In It?
  

CNBC.com:

• Fed's Low Rates Killing Credit, Slowing Recovery: Gross. The Federal Reserve's zero-interest-rate policy is hampering economic recovery by discouraging bank lending, Pimco bond titan Bill Gross said in an analysis.
• Philly Fed's Plosser Slams 2014 Low-Rate Forecast. A top Federal Reserve official sharply criticized the U.S. central bank's decision last week to telegraph ultra low interest rates for nearly three more years, saying on Wednesday the move undermined confidence and caused confusion.
• Ford, Chrysler January US Sales Jump; GM Slips. Chrysler Group posted a 44 percent rise in U.S. auto sales in January, led by gains for its Jeep brand, while its larger domestic rival General Motors lost ground in a month marked by modest growth.

Business Insider:

• At Least 53 People Have Died After Riots Broke Out at An Egyptian Soccer Match. (video)
• Prepare For A Giant New Wave Of US Bank Failures.
• 43% of US Households Live An Emergency Away From Food Stamps.
• 13 People Who Came To America With Nothing And Made A Fortune.
• Here's The Worst Part Of The CBO's Dismal Outlook. (graph)
• Best Buy(BBY) Tells Its Employees Not To Worry About Store Closures Because It's Opening More In China.
• The Most Important Chart You Need To Be Watching In Europe. News out of Europe has grown increasingly more positive of late, convincing some investors to question their strongly bearish views of how the crisis will play out. At the very least, a look at the volume of funds at the European Central Bank's deposit facility should give us pause. Deposits at the facility are still near an all-time high, falling for the first time since December only on the last week of January. High usage of the deposit facility indicates that banks are still incredibly wary of lending.

Zero Hedge:

• Explaining Portugal's Disappearing Risk.

LA Times:

• Gallup: Obama Approval Rating Down In All But Three States In 2011. President Obama's job approval rating declined in all but three states in 2011, with some of the steepest declines coming in likely battlegrounds he must win this fall to claim a second term. New state-by-state data released by Gallup on Tuesday (see chart below) shows that a majority of residents approve of the president's performance in only 10 states plus the District of Columbia, down from 13 a year earlier. Meanwhile the number of states where his approval rating was below 40% doubled in 2011, from 10 to 20. That list now includes New Hampshire, where his approval rating was 38.7% -- the lowest score in any of the states he carried in 2008. Put into electoral terms, states with majority approval of Obama in 2011 account for 159 electoral votes, Gallup's Jeffrey Jones points out. Those states where he is below 40% account for 153 electoral votes. The remaining 226 electoral votes include the key prizes of Ohio (42.1% approval), Pennsylvania (45% approval) and Florida (43.6% approval).
  

CNN:

• Secret NATO Taliban Report Revives Pakistan Fears. Pakistan continues to support the Taliban in Afghanistan, a secret NATO report says, according to a journalist who has read it, despite years of Pakistani denials and American pressure to stop backing the insurgency. The Taliban are absolutely confident of victory, he said the report found, based on 27,000 interviews with more than 4,000 detainees ranging from senior Taliban commanders to Afghan civilians.

National Journal:

• Catholic Backlash Against Obama Grows. The American Catholic backlash against the administration’s treatment of contraceptive services in the new health care law continues to grow, threatening President Obama’s support among a key group of swing voters that was critical to his victory in 2008. In the 11 days since the Health and Human Services Department announced its new policy, the administration has been condemned even by progressive Catholic leaders and, remarkably, denounced from the pulpit in thousands of Catholic churches across the country and by bishops representing more than 100 dioceses.

Reuters:

• Exclusive: JPMorgan(JPM) Adds Muscle to Metal Warehousing Money. Investment bank JP Morgan is bulking up its metal warehousing facilities in Rotterdam and Chicago, industry sources say, in a business that consumers complain deliberately delays delivery of metals to boost revenues from rent. London Metal Exchange rules allow warehouse companies to release only a fraction of their inventories per day, much less than is regularly taken in for storage, creating long queues to get metal out and guaranteeing rental income.

Financial Times:

• Morgan Stanley's(MS) Most Mysterious Footnote - Part 1. Morgan Stanley refuses to talk about the spell it cast on Italy to get its Treasury to play ball, and frankly we’re not surprised. Unless this is a technicality that the bank cleverly built into its swaps, all the other banks will want some too, and it’s unlikely to be favourable to Italy to do whatever it did en masse (otherwise they already would have done it, right?).
• Credit Squeeze Threatens Eurozone Recovery.
  

Bild-Zeitung:

• German Chancellor Angela Merkel may struggle to convince lawmakers from her coalition of Christian Unionists and Free Democrats to back a second aid package for Greece, citing party officials.

Arab News:

• Saudi Arabia and Pakistan want to strengthen their defense links, citing Muhammad Naeem Khan, Pakistan's ambassador to Saudi Arabia.