Today's Headlines

Bloomberg:

• Euro Finance Chiefs to Meet as Greece Pushes For Deal. Euro-area finance ministers are due to hold an emergency meeting in Brussels tomorrow as the Greek government pushes to complete talks on terms of a rescue. The policy makers, to be joined by International Monetary Fund chief Christine Lagarde, will convene at 6 p.m., according to a statement today by Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of finance chiefs from the 17- nation euro area. That gathering will follow the monthly meeting of the European Central Bank’s governing council in Frankfurt and an assembly of Greek creditors in Paris. While no information was provided about the ministers’ agenda, the scheduling suggests policy makers, who have to ratify a Greek accord, were optimistic about negotiators reaching an agreement in Athens.
• Merkel Austerity Called Counter-Productive by French Socialists. Germany’s push to treat Europe’s financial crisis with austerity may backfire by stifling its exports to the euro area, says Jerome Cahuzac, economic adviser to France’s Socialist presidential candidate. “No country in Europe will obtain balanced budgets without growth,” Cahuzac, a lawmaker who also heads the Finance Committee at the lower chamber of Parliament, said in an interview in Paris Feb. 1. “It is also in the interest of Germany that growth resumes everywhere and not just in Germany.” His comments underscore the schism between Francois Hollande, the Socialist candidate who leads President Nicolas Sarkozy in polls, and policy makers in Berlin. Hollande has vowed to renegotiate the German-inspired treaty tightening budget rules endorsed by 25 European Union leaders last month, saying it is biased against economic growth. “A Hollande government might be on a collision course with Germany,” George Magnus, senior economic adviser at UBS AG, said in an e-mailed note Feb. 6 that pointed to the increasing chance of a Hollande victory in the voting that concludes with a runoff on May 6.
  
• Sovereign Bond Risk Rises in Europe, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and bank debt rose, reversing an earlier decline, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index linked to 15 governments rose from a three-month low, climbing three basis points to 321 at 2:30 p.m. in London. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers climbed four basis points to 196, according to JPMorgan Chase & Co. The subordinated gauge was four basis points higher at 336. Contracts on the Markit iTraxx Crossover Index of 50 European companies with mostly high-yield credit ratings fell one basis point to 552.5, JPMorgan prices show. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 0.25 basis point to 129 basis points.
• U.S. Faces Downgrade If No Plan: Chambers. The U.S., lacking a plan to contain $1 trillion deficits, faces the prospect of another rating cut in six to 24 months depending on the outcome of November elections, according to John Chambers of Standard & Poor’s. America has had an AA+ rating with a negative outlook since Aug. 5 when the New York-based unit of McGraw-Hill Cos. stripped the nation of its AAA ranking for the first time, citing the government’s failure to agree on a path to reduce deficits. The U.S. has a one-in-three chance of another downgrade, Chamber said today during an S&P sponsored Webcast. “What the U.S. needs is not so much a short-term fiscal tightening, but it has to have a credible medium-term fiscal plan,” said Chambers, managing director of sovereign ratings. “That is going to have to say something about entitlements, and that is probably going to have to say something about revenues.”
• Bad Home Loans Top $72 Billion in 'Colossal Failure': Mortgages. Costs from faulty mortgages and shoddy foreclosures have topped $72 billion at the biggest U.S. banks as they near a settlement of a 50-state probe into the industry’s practices. Wells Fargo & Co., Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Ally Financial Inc., the five largest home lenders during the real estate boom, tallied at least $6.78 billion in new costs tied to mortgages during the second half of 2011, according to data compiled by Bloomberg. Bank of America, ranked second among U.S. banks by assets, contributes $41.8 billion of the overall total.
• Mortgage Bonds in Eye of Storm as Refis Decline: Credit Markets. Investors in U.S. government-backed mortgage bonds who benefited from a decline in early payoffs by homeowners are bracing for the fallout from a loosening of refinancing rules at Fannie Mae (FNMA) and Freddie Mac. Prepayments for Fannie Mae’s 30-year fixed-rate securities fell 8 percent last month to a pace that would erase 21.6 percent of the debt in a year, the slowest since September, data released Feb. 6 by the Washington-based company show. Refinancing damages securities that trade for more than face value by returning principal faster at par and curbing interest. An expansion of the Home Affordable Refinance Program urged by President Barack Obama is set to boost speeds by 1 or 2 percentage points each month, Barclays Capital analysts wrote in a report this week titled, “Calm Before the Storm.”
• Arabs Seek Safety in Dollars After Euphoria Fades. As he watched Egypt’s revolt turn into a financial crisis that devoured 50 percent of the nation’s foreign-currency holdings last year, Ahmed El-Rifai started charging some clients in U.S. dollars. The 32-year-old owner of Egyweb, a Web-development company in Cairo, says he may also buy real estate with his Egyptian pound savings, concerned that the loss of reserves will lead to a devaluation. That has already sent the pound down 3.8 percent since the start of last year. Iraq’s central bank says its dollars are fueling Syria’s black market. In Tripoli, Libya, dozens are queuing every morning at banks to buy the U.S. currency.
• YPF Argentine Unit Said to Boost Shale Oil Estimate to 23 Billion Barrels. Repsol YPF SA (REP)’s Argentine unit estimates its shale oil resources at the Vaca Muerta formation in the south of the country contain about 23 billion barrels, according to two people familiar with the situation. The unit previously announced resources of around 1 billion barrels.
• Jobless Decline Masks Drop in U.S. Labor Force. The unemployment rate’s unexpected drop to a three-year low has overshadowed a less-positive labor- market development: fewer Americans are looking for work. Last week’s Labor Department announcement that the jobless rate fell to 8.3 percent in January sent stocks and bond yields higher. The same report showed the share of working-age people in the labor force had declined to the lowest level in 29 years.
• Oil Fluctuates After U.S. Inventories Increase Amid Declining Demand. Oil fluctuated after the U.S. Energy Department reported that inventories climbed as fuel consumption dropped to the lowest level in almost 13 years. Futures slipped from the day’s highs after the department said crude supplies rose 304,000 barrels to 339.2 million in the week ended Feb. 3. Gasoline stockpiles increased to the highest level in almost a year and inventories of distillate fuels unexpectedly gained. Total fuel demand fell 0.5 percent to 17.6 million barrels a day, the lowest level since 1999. “We had supply builds in each of the major categories, while fuel demand remained impressively weak,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Traders seem reluctant to abandon the idea of oil in a perpetual uptrend, otherwise prices would be much lower.” Crude oil for March delivery fell 30 cents to $98.11 a barrel at 2 p.m. on the New York Mercantile Exchange. Prices are up 13 percent from a year ago.

Wall Street Journal:

• India Increases Iran Oil Imports. India increased its imports of Iranian oil to become the Islamic Republic's largest customer last month, largely offsetting a cut in Chinese purchases as sanctions fail to significantly dent Tehran's sales for now, people within the oil industry said this week.
• Turkey Seeks Pressure Group as Syria Pounds Homs. Turkey said Wednesday that it was seeking to form an international group on Syria "as soon as possible" to coordinate policy between regional players and world powers, as Syrian troops continued an attack on the city of Homs that activists said left at least 50 dead.

CNBC.com:

• Gas Prices in All 50 States Back Above $3 a Gallon.
• Government Bailout Actually Hurt Housing Recovery: Zell. Government intervention has prevented the real estate market from healing, with the commercial sector hit especially hard, investor Sam Zell said. As sales languish and prices continue to fall, the head of Equity Group Investments and numerous other ventures pinned the blame on policies that refused to allow market forces to take hold. "Rather than let the elements of the business world take care of the problems, we basically stopped the process of creating market clearing," Zell said in a CNBC interview. "Had we allowed the market to clear without trying to stop reality...we would have a healthy housing market today."
• Greece Keeps Promising Reform, but Few Believe It. Taxes go uncollected, deficit targets are routinely missed, job cuts from the state payroll are postponed, privatizations have barely begun and pharmacies are still shut in the middle of the day.

Business Insider:

• FAA: Look for 30,000 Drones To Fill American Skies By The End Of The Decade.
• States are Rebelling Against The Indefinite Detention Of American Citizens.
• 18 Staggering Charts On The Rise Of Government Dependence.
• Why I Don't Believe The European Crisis Is Over. (graph)
• Chris Matthews Calls Obama's War Against The Catholic Church 'Frightening'. (video)

Zero Hedge:

• European FX Swap Line Usage With NY Fed Rises To Fresh Multi-Year High as More Banks Demand More Dollars. (graph)
• Italian Recession Accelerating.
  

Reuters:

• Greek Debt Not Sustainable With 70% Haircut, Credit Conditions Deteriorating in Itlay, France: S&P. Greece will likely not achieve sustainable debt levels with a 70 percent reduction in the value of bonds held by its private creditors, Standard & Poor's warned on Wednesday, putting pressure on the official sector also to take losses. Private-sector bond holders currently account for only a small part of Greece's creditors since most of the country's debt has migrated to the hands of the European Central Bank and other official institutions, S&P analyst Frank Gill said in a webcast with clients. "In our original estimate, which was made two years ago, at that time debt-to-GDP would have been restored to a far more sustainable level," Gill said. "But because only a small subcomponent of investors are actually taking the haircut and the official sector is not, or only partially, then the reduction... is probably not sufficient debt relief to make debt sustainable given the outlook for GDP itself." S&P, which currently rates Greece at CC with a negative outlook, said it intends to downgrade the country to "selective default," but just temporarily, while the government concludes its debt swap. S&P also warned that credit conditions continue to deteriorate in Italy and France after it downgraded both countries last month, despite extraordinary steps by the ECB to boost liquidity in the market. "We still see credit conditions deteriorating in places like Italy, places like France, and that is going to weaken domestic demand," Gill said. "That makes it very difficult to project what the fiscal outcome is going to be this year in those countries."
• United Tech(UTX) CFO Warns of "Tough" First Quarter. United Technologies Corp Chief Financial Officer Greg Hayes hammered home the message on Wednesday that the world's biggest maker of elevators and air conditioners is having a difficult first quarter. "The first quarter is going to be tough," Hayes said at an investor conference in New York. "We've purposely said that so as not to surprise anybody when we report (first-quarter results) in April." Weak demand for its Carrier air conditioners and high expenses at the Pratt & Whitney jet engine unit will take a toll on results, Hayes added.

Imerisia:

• The Greek government's revenue from value-added tax totaled $2.85 billion last month, an 18.7% drop compared with January 2011, mainly due to increasing company closures.