- Banks Miss Out on Best Bond Market Gains as Fear Trumps Greed: Euro Credit. Europe’s banks, cutting their holdings of euro-area government bonds, are missing the region’s biggest returns. Italian and Irish bonds are leading gains among sovereign debt this year, followed by Belgian and Spanish securities, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Royal Bank of Scotland, Britain’s biggest government-owned lender, Germany’s Commerzbank (CBK) AG and France’s Credit Agricole SA (ACA) have reduced their investments in so-called euro-zone peripheral debt.
- EU Speeds Payments to Permanent Aid Fund. European leaders agreed to provide capital faster for the planned permanent bailout fund in a concession to international pressure to strengthen the bloc’s defenses against the debt crisis. Euro governments might pay the first two annual installments into the 500 billion-euro ($666 billion) fund this year and complete the capitalization in 2015, a year ahead of schedule. A decision will come later today.
- Spain Foreclosures Stymied by Nun Make Debt Investors Skittish: Mortgages. With Spain’s economy set to contract in 2012 for the third year out of five and unemployment at 23 percent, banks are increasingly easing terms for customers who are missing payments on mortgages underwritten during the country’s decade-long housing boom. Pressure to renegotiate debt and delays in repossessions are raising doubts that default rates on Spain’s 613 billion euros ($817 billion) of mortgages have stabilized. “It probably is going to be worse than people expect, even though the banks say it’s not a problem,” said Daragh Quinn, an analyst at Nomura International Plc in Madrid, on the outlook for mortgage arrears. “The more they kick the can down the road, the less visibility we have on what is really happening with asset quality.”
- Euro Defaults Loom as National Ponzi Schemes 'Run Out of Suckers': Books. Western governments are now poised to repeat that ignoble history, be it through outright default or inflating their debt away, says Philip Coggan in “Paper Promises,” a crisply written look at how the debt crisis may overturn the global economic order. “The massive debts accumulated over the last 40 years can’t be paid in full, and they won’t be paid,” Coggan says. “The debt crises of Greece, Ireland and Portugal are just the start.” With its aging populations and overstretched budgets, the West’s “Ponzi scheme is running out of suckers,” he says.
- China to Stop Local Governments' Property Easing, Securities News Reports. China will stem any new property easing by local governments as the central authority is determined to maintain curbs on housing, Shanghai Securities News reported today. The central government will “absolutely” not allow local authorities to “sing a different tune” on property control policies, the newspaper affiliated with state-run Xinhua news agency said, citing an unidentified director at the country’s housing ministry. Tensions between the two levels of authority will be on show next week as officials gather in Beijing for the annual National People’s Congress starting March 5. China’s local governments have attempted to ease property tightening policies with little success, while Premier Wen Jiabao has maintained that he won’t waver on real estate controls and efforts to bring prices down to a reasonable level. “The central government will not relax its property tightening this year,” Jeffrey Gao, a Shanghai-based analyst at Macquarie Capital Securities, said in a phone interview today. China’s February home prices posted the biggest decline in 19 months as the government pledged to maintain curbs on property, SouFun Holdings Ltd. (SFUN), the nation’s biggest real-estate website owner, said yesterday.
- BRIC Investors Losing as State Companies Forgo Earnings Amid Slower Growth. Investors in the biggest state- controlled companies are being punished with the lowest valuations in six years by emerging-market leaders putting public services ahead of shareholder profits as economies slow.
- Goldman Sachs(GS) Criticized by Judge on Kinder Morgan Conflicts. Goldman Sachs Group Inc. (GS) was rebuked by Delaware Chancery Court Judge Leo Strine for “incomplete and inadequate” handling of a conflict of interest, less than 14 months after the firm finished examining its business practices. Strine, in a ruling yesterday, cited “the disturbing nature of some of the behavior” leading to the terms of pipeline operator Kinder Morgan Inc. (KMI)’s $21.1 billion purchase of El Paso Corp., Goldman Sachs’s biggest takeover assignment last year. The bank, which stands to get a $20 million fee from El Paso, has a $4 billion stake in Kinder Morgan and two employees on its board, both of whom recused themselves from negotiations.
- Oil Rises to $110 on Report of Pipeline Explosion. Oil climbed over $110 a barrel for the first time since May after an Iranian state-run news channel reported an explosion on a pipeline in Saudi Arabia. A Saudi official said no oil facilities were sabotaged. Futures reached $110.55 at 3:17 p.m. in New York after Iran’s Press TV reported on its English-language website that “an explosion has hit oil pipelines in the flashpoint Saudi Arabian city of Awwamiya,” then fell back below $109. Major General Mansour Al-Turki, a spokesman for the Saudi Interior Ministry, said no oil facility in the region has been sabotaged after reports of a fire near the Ras Tanura refinery.
- Asia's Strong Job Market May Limit Policy Easing. Asia’s job markets are holding up even as the European crisis hurts exports, auguring stability in domestic demand that reduces the case for the region’s central banks to add monetary stimulus. “We have tight labor markets across Asia,” said Frederic Neumann, Hong Kong-based co-head of Asian economic research at HSBC Holdings Plc. “Rather than sit back and let inflation rise again, policy makers will want to be proactive and tighten the screws before it becomes a problem. We could even see rate hikes coming through at the end of the year.”
- U.S. Exporters Sell 120,000 Tons of Wheat to Iran, Most Since August 2008. U.S. exporters sold the most wheat to Iran in more than three years, the government said, raising speculation that the Persian Gulf country may be boosting stockpiles after production from last year’s crop declined. The sale of 120,000 metric tons of hard, red winter wheat is for delivery in the marketing year that ends May 31, the U.S. Department of Agriculture said today in an e-mailed statement. The sale was the biggest since Iran purchased 689,310 tons in a deal announced on Aug. 15, 2008. The U.S. hasn’t exported any wheat to Iran since a 54,267-ton shipment was sent in November 2009, USDA data show. Iran’s production of wheat, the country’s biggest crop, fell to 13.75 million tons in 2011, 13 percent less than a year earlier, the USDA estimates. While Iran is facing international sanctions over its nuclear program, U.S. restrictions provide exemptions for “licensed exports of agricultural commodities,” according to the Office of Foreign Assets Control, a division of the Treasury Department.
- U.S. Commercial Paper Falls to Lowest Level Since January 2011, Fed Says. The market for corporate borrowing through U.S. commercial paper declined to the lowest level in more than a year as investors shunned short-term IOUs from financial institutions on investor concern that Europe’s fiscal strains will taint bank balance sheets globally. The seasonally adjusted amount of commercial paper outstanding fell $10.4 billion to $927.2 billion in the week ended yesterday, the third consecutive decrease, the Federal Reserve said today on its website. That’s the longest stretch of declines since the period ended Jan. 4 and the lowest level since the market touched $916.8 billion on Jan. 19, 2011, according to Fed data compiled by Bloomberg. Demand from U.S. money-market funds, among the biggest investors in short-term financial obligations, has been capped by concern that European debt stresses may push the price of these securities lower, even after unprecedented financial aid measures for the area’s banks.
- Iranians Vote in Parliamentary Election. Iranians vote today in the country’s first election since the disputed presidential contest of 2009 sparked mass protests, as sanctions targeting the country’s nuclear program squeeze the economy. Iranian authorities have urged voters to go to the polls in a display of defiance toward the countries that are applying the pressure. The election “will be a slap in the face of enemies of the nation,” Supreme Leader Ayatollah Ali Khamenei said on his website this week.
- Retailers Join Payment Chase. Two Words: Digital Wallet—Wal-Mart and Target Join Project Aiming to Make Plastic Obsolete.
- Executive Pay Votes Spur Shifts in Policies. Shareholder votes on executive pay are starting to change the shape of compensation at some big companies. A group of institutional investors recently joined forces to seek executive-pay and governance changes at 10 companies where nonbinding "say on pay" votes narrowly passed last year. The informal coalition, led by unions and public pension funds, already has persuaded Allstate Corp., Northern Trust Co. and five other companies to ban "gross-up" payments to executives. Those payments cover taxes executives owe on benefits provided by their employer.
- What's a Splunk? Part of the Next Wave of Start-Ups Going Public. Silicon Valley's initial public offering machine is shifting to a new sweet spot: enterprise technology companies. After a year of high-profile consumer Internet IPOs—from Groupon Inc., LinkedIn Corp. and Zynga Inc. last year to Yelp Inc. and Facebook Inc. now—a slew of Silicon Valley companies that sell technology mainly to businesses are also getting ready to hit the stock market. This new crop of IPO-ready companies are solving problems that businesses are willing to spend money on, such as improved security or better insight into customer behavior.
- Greek Debt Deal Won't Trigger Payouts, for Now. Owners of insurance-like contracts designed to protect against potential losses on Greek sovereign debt won't receive payouts, at least for now, even though the country took steps in its restructuring in recent days that could force private creditors to accept losses on the face value of their bonds, a committee of dealers and investors decided. Thursday's decision marks the first time the panel of experts has held a vote on whether compensation is owed to holders of the credit-default swap protection on Greece.
- Japan Household Spending Drops, Jobless Rate Rises. January real spending by households of two or more people dropped 2.3% from a year earlier, the Ministry of Internal Affairs said. The result was well below projections for a 0.8% fall in separate surveys from Dow Jones Newswires and Reuters. January's jobless rate rose to 4.6% from December's 4.5%, with the Dow Jones Newswires survey having called unemployment to remain flat.
- FBI Director: Hacking Will Replace Terrorism As The Nation's Top Worry.
- In the Middle Of The Euro Crisis, These 12 EU Countries Sunk Even Further Into Debt. Despite the fact that European countries have bailed out Greece and Ireland, and countries like Hungary were facing harsh criticism for not reducing their GDP to debt ratios, new data from Eurostat (pdf) shows that of the 27 countries in Europe, 21 had a higher ratio in the third Quarter of 2011 than the year before. The ratio also increased in both the euro area and the EU27 , compared with the third quarter of 2010. What chance do they have now?
- How Yelp's Business Works.
- Juncker Says There Is A "Plan B" If Greek Debt Swap Fails.
- Capturing Sarkozy's Close Encounter Of The Third Estate Kind. (videos)
- Greek Crisis May Test the Value of Swaps. The restructuring of Greece’s debt that is scheduled to start next week may well demonstrate how effective credit-default swaps are. These financial instruments, which played a major role in both the 2008 financial crisis and in the European debt crisis, are meant to pay out if a company or country defaults. But the twists and turns over Greece’s debt are revealing their potential limitations for investors who hope the swaps will protect them against losses if Greece defaults.
- Oil Continues to Rise Because the Dollar Continues to Fall. The primary reason that crude oil today – Brent is at $123 per barrel – is higher than its prior average around $20 in the 1990s, or the $3.00 of the 1960s, is that the dollar has lost value over that time.
- Gingrich Says Obama Should Fire Energy Secretary For Remark About Gas Prices. Republican candidate Newt Gingrich said President Obama should fire Energy Secretary Steven Chu following his remark this week that reducing gas prices is not the “overall goal” of his agency. Gingrich said President Obama’s continued support for Chu signals a commitment to “his radical ideology, which wants to artificially raise the cost of energy.” “Just this week, Obama’s own Energy secretary, Steven Chu, admitted what we all know is true — that the Obama Energy Department really isn’t trying to lower gasoline prices,” Gingrich said while campaigning Thursday in Georgia.
- Fed Officials Flag Soft Economy But Mum On Easing. Federal Reserve Chairman Ben Bernanke and other top officials of the U.S. central bank on Thursday highlighted risks to the economic recovery despite recent signs of strength, but offered few hints that any additional monetary stimulus might be needed. Bernanke told lawmakers there was reason to be suspicious of the recent decline in unemployment given the weakness of economic growth. "There's still a bit of a contradiction between the improvement in the labor market and the speed of the overall recovery," Bernanke said in a second day of testimony to Congress. "You've still got consumption spending growing relatively weakly." Two of the Fed's regional presidents, Sandra Pianalto of Cleveland and Dennis Lockhart of Atlanta, also cited the economy's shaky stance, with Pianalto signaling that policy was appropriate for the current environment. "There'd have to be a significant change to my outlook to change my position on policy at this time," she said in rare press briefing.
- Brazil Declares New "Currency War'. Brazil has declared a fresh “currency war” on the US and Europe, extending a tax on foreign borrowings and threatening further capital controls in an effort to protect the country’s struggling manufacturers. Guido Mantega, the finance minister who was the first to use the controversial term in 2010, said the government would not “sit by passively” as developed nations continue to pursue expansionary monetary policies at the expense of Brazil.
- North Korea has several hidden uranium enrichment plants other than the Yongbyon facility, citing a South Korean government official.
- China may impose more rules ordering local governments to reinforce property curbs if new easing attempts are made, citing housing ministry researcher Wang Juelin.
- None of note
- Asian equity indices are +.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 157.0 -3.5 basis points.
- Asia Pacific Sovereign CDS Index 131.50 +2.5 basis points.
- FTSE-100 futures +.13%.
- S&P 500 futures -.03%.
- NASDAQ 100 futures +.04%.
Earnings of Note
- None of note
- None of note
Other Potential Market Movers
- The Fed's Bullard speaking, Fed's Evan speaking, ISM New York for February and the (HW) Investor Day could also impact trading today.