Weekend Headlines
Bloomberg:
- Euro Ministers Set to Clash Over Terms of Channeling Aid. European finance ministers gathering for the first time this year begin the long march to enacting policies they promised to subdue the debt crisis, beginning with how to channel firewall funds directly to banks. At a meeting in Brussels today, where an assessment of Spain, Cyprus and Greece will feature, euro-area ministers are likely to clash over how and when the 500 billion-euro ($666 billion) European Stability Mechanism can bypass governments and provide direct help to banks.
- Merkel’s Party Loses Lower Saxony Election Even as FDP Surges. German Chancellor Angela Merkel’s party lost control of Lower Saxony state as the Social Democrats and Greens took a single seat majority, buoying the opposition parties eight months before federal elections.
- Spain Recession Scars Exposed as Jobless Seen at 6 Mln. Spain’s scars from the slump that overshadowed Prime Minister Mariano Rajoy’s first year in office will emerge this week as data show the toll on economic output that may have kept as many as 6 million people out of work. Spanish exports fell 0.6 percent in November from the same month the previous year, when they had risen 7.4 percent, the Economy Ministry said today. House-price data tomorrow will show if the property market endured a fourth year of declines. The Bank of Spain may also release its estimate for fourth-quarter gross domestic product, and the data will culminate in jobs figures on Jan. 24, forecast by economists to show a record 26 percent of Spaniards unemployed.
- Rajoy Orders Audit of PP Finances to Stem Corruption Scandal. Spanish Prime Minister Mariano Rajoy ordered an internal and external audit of the ruling People’s Party’s finances as he tries to stem the fallout from allegations of kickbacks being paid to top officials. The probe will go back to the founding of the People’s Party in 1989 and the results of the investigation will be made public, Maria Dolores de Cospedal, the party’s deputy leader, said at a press conference in Madrid today. “We’re going to look at everything, everything,” Cospedal said today. “We have already started and this will happen quickly.”
- Russia-Cyprus Money Flows Imply Laundering, Schaeuble Says. Two-way investment flows between Russia and Cyprus creates suspicion that money laundering may be behind the transactions, German Finance Minister Wolfgang Schaeuble said. “Suspicion arises -- and it’s plain to see -- because Russian investment in Cyprus is so high and at the same time Cypriot investment in Russia is high,” Schaeuble said today on Germany’s ARD television 2+Leif program. “You may ask why Cyprus is the second-largest foreign investor in Russia and we need clear answers to that.”
- Kishida Says Japan Won’t Concede to China on Islands. Japanese Foreign Minister Fumio Kishida said today that Japan won’t make concessions to China in their dispute over islands that China calls Diaoyu and Japan calls Senkaku. “Japan will not concede,” Kishida said today in Washington after a meeting with Secretary of State Hillary Clinton. Japan will “uphold our fundamental position that the Senkakus are an inherent part of Japan,” Kishida said.
- China Expresses ‘Strong Discontent’ With U.S. Diaoyu Comments. China expresses “strong discontent” with comments made by U.S. Secretary of State Hillary Clinton over the Diaoyu islands, Foreign Ministry spokesman Qin Gang said in a statement on the ministry’s website today. China expresses “firm opposition” to remarks Clinton made after meeting Japan’s Foreign Minister Fumio Kishida, Qin said, referring to her comments that the U.S. doesn’t hold any position on the sovereignty of the islands. “We urge the U.S. side to adopt a responsible attitude with regard to the issue of the Diaoyu islands,” Qin said.
- Beijing Smog Rules Would Shut Factories When Pollution Spikes. The city of Beijing proposed rules that would shut down factories and take cars off the road when smog reaches dangerous levels, as officials stepped up efforts to address pollution that reached record levels this month. Under the new rules, drivers could face 3,000 yuan ($482) in fines if their vehicles exceed emissions limits, while the construction of new cement and steel plants would be outlawed. A draft was posted on the Beijing government’s website Jan. 19 and the public will have until Feb. 8 to comment.
- China Signals Shrinking Pool of Workers Will Limit Recovery. China’s growth rebound will be capped by a labor-force squeeze and shrinking resources that leave the government satisfied with rates of expansion as low as half the peak during the past decade.
- China’s Stocks Drop, Led by Property, Consumer Staples Shares. Guangzhou Shipyard International Co. (600685), a unit of China’s biggest shipbuilder, dropped 2.5 percent after saying profit probably slumped as much as 99 percent last year. Poly Real Estate Group Co., China’s second-largest developer by market value, declined 2.6 percent after the stock jumped more than 50 percent since the end of August. “There are some risks from corporate earnings and investors will dump shares if companies fail to meet expectations,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages $120 million. “After a good run for stocks, we’ll see more volatility and profit taking from here.” The Shanghai Composite Index (SHCOMP) slid 1 percent to 2,304.81 at 10 a.m. local time.
- Iron Ore Seen Losing 21% as Supply Erodes ‘Unsustainable’ Rally. Iron ore may tumble 21 percent by the year-end as global supply increases, undermining a rally that pushed the price of the steel-making raw material to the highest level in 15 months, according to Bank of America Corp. The commodity may fall to $110 a ton by the end of the year from $140 a ton in the first quarter, the bank said in a report dated yesterday. Ore with 62 percent iron content delivered to the Chinese port of Tianjin rose 0.6 percent to $145.90 a dry ton yesterday, according to data from The Steel Index Ltd.
- HP’s(HPQ) Bradley Says Windows 8 Had Slower Than Expected Start. Hewlett-Packard Co. (HPQ) Executive Vice President Todd Bradley said sales of the latest version of Microsoft Corp. (MSFT)’s flagship Windows operating system had a disappointing debut. As the largest personal-computer maker, Hewlett-Packard has insight into purchases of devices that run Windows 8, which went on sale Oct. 26.
- Speculators Boost Bullish Bets Most Since November: Commodities. Hedge funds raised bullish commodity wagers by the most since November as a jump in U.S. housing starts and the first acceleration in Chinese growth since 2010 drove prices to a three-month high. Speculators increased net-long positions across 18 futures and options by 4.3 percent to 682,521 contracts in the week ended Jan. 15, the biggest gain since Nov. 27, U.S. Commodity Futures Trading Commission data show. Wagers on a soybean rally rose for the first time in four weeks on signs of improved demand for supplies from the U.S., the biggest exporter. Gold holdings rebounded from the lowest since August.
- Speech Signals A President Set to Fight Over New To-Do List. The Barack Obama who was inaugurated as the nation's 44th president four years ago talked about soaring above the nation's existing political order: "The stale political arguments that have consumed us for so long no longer apply," he said in his first inaugural address. The Barack Obama inaugurated Monday was not only grayer, he also sounded less like a man preparing for lofty flights, and a lot more like a man preparing for ground battles. His rhetoric was less about soaring above Washington's political system and more about conquering it, one small and hard-fought step at a time if necessary.
- We the Government. An inaugural address of striking liberal ambition and partisanship. President Obama's second inaugural address won't be remembered for stirring lines, but then its purpose seemed to be more political than inspirational. Mr. Obama was laying down a marker that he has no intention of letting debt or deficits or lagging economic growth slow his plans for activist, expansive government. Inaugurals usually include calls for national unity and appeals to our founding principles, which is part of their charm. With the election long over, swearing in a President is a moment for celebrating larger national purposes. But Mr. Obama's speech was notable for invoking the founding principles less to unify than to justify what he called "collective action." The President borrowed the Constitution's opening words of "we the people" numerous times, but his main theme was that the people are fundamentally defined through government action, and his government is here to help you.
- Algeria Attack Shows Reach of Militants. The death toll in the desert siege of an energy complex in North Africa rose to 37 foreigners, including three Americans, officials said Monday, as new details demonstrated how al Qaeda-linked militants are increasingly equipped to sow terror across the Sahara region. Algerian officials described a well-organized, heavily armed group of militants who collected advance intelligence on the sprawling natural-gas complex, including its layout and foreign workforce. The attackers commanded an arsenal of missiles, explosives and guns that weapons experts told The Wall Street Journal appeared to have been pilfered from Libyan stockpiles. They easily took over the plant, seized hostages and held on for four days during a brutal Algerian effort to dislodge them and rescue their captives.
- Health Law Pinches College Teachers. The federal health-care overhaul is prompting some colleges and universities to cut the hours of adjunct professors, renewing a debate about the pay and benefits of these freelance instructors who handle a significant share of teaching at U.S. higher-education institutions.
- Dreamliner Probes Intensify. Twin Investigations of Jet's Batteries Show Signs of Diverging.
- France Wants U.S. to Do More in Mali. France is increasingly upset by what it sees as limited Obama administration support for the war it is waging in Mali against al Qaeda militants, as well as a U.S. demand that Paris foot the bill for any Air Force transport flights, French officials familiar with the matter said over the weekend.
- HP's(HPQ) Long-Term Plan. Meg Whitman is president and chief executive of Hewlett-Packard Co. and former president and CEO of eBay Inc.
- Bundesbank Head Cautions Japan. Bundesbank President Jens Weidmann warned Japan not to "politicize" its exchange rate by pursuing an overly aggressive monetary policy, reflecting mounting concern in Europe that other central banks may cheapen their currencies as a means of stimulating economic growth. Japan's government as well as Hungary's "are intervening heavily in the duties of the central banks, pressuring for a more aggressive monetary policy" that threatens central-bank independence, Mr. Weidmann said in a speech on Monday. "A consequence, whether intended or not, could lead to an increasingly politicized exchange rate. Until now, the international monetary system has come through the crisis without a race to devaluation, and I really hope that it stays that way," Mr. Weidmann said.
Marketwatch.com:
- Money can’t buy growth: Andy Xie. Evidence shows monetary stimulus in China, U.S. isn’t working.
- China state-owned banks cut profit outlook. Four of the five state-owned banks have reduced their expectation for this year’s profit growth, as banking reform continues and regulators keep a firm grip on credit supplies.
Fox News:
Business Insider: - House GOP to shift gears, pressure Senate Dems with new debt ceiling plan. House leaders on Monday unveiled legislation to permit the government to continue borrowing money through May 18 in order to stave off a first-ever default on U.S. obligations. It is slated for a vote on Wednesday. The measure marks a change in strategy for House Republicans, who have backed off demands that any extension of the government's borrowing authority be accompanied by stiff spending cuts. The legislation is also aimed at prodding Senate Democrats to pass a budget after almost four years of failing to do so.
- Doug Casey: "We Are Living In The Middle Of The Biggest Bubble In History."
- Did Tim Geithner Leak Every Fed Announcement To The Banks?
- Presenting The S&P500's 50 Point Surge Courtesy Of The Illegal "Geithner Leak".
- Caterpillar(CAT) Punked By Chinese Fraud, To Write Off Half Of Q4 Earnings.
- Where Did All The Jobs Go? (graphs)
- Charts Of The Day: The Economic Recovery Story.
- Declining Global Growth. (graph)
- The Market Can Only Ignore Fundamentals For So Long. (graphs)
- The Strange Case Of Diverging Spanish Exports And What It Means For Europe.
- Japan Unveils Extensively Priced In "Open-Yended" Monetization News.
- France And The UK Could Be The Lynchpins Of Europe.
- ECONOMISTS ANSWER: What If China's Economy Lands Hard?
- 5 New Reasons China And Japan May Go To War Over Disputed Islands.
- Facebook's(FB) Business Model Is A Dead End.
- $7.66 Trillion Of Stimulus In America From 2008 To 2012, Itemized.
- Obama And The Last Congress Have Left Us With A Major Tax Increase That Will Slam The Working Poor.
- Japan Threatens To Fire On Chinese Fighters — China Says 'There Will Be No Second Shot'.
- Iraq Just Discovered Another Billion Barrels Of Oil.
- Berlusconi poll recovery shakes up Italy election race. Four-time Prime Minister Silvio Berlusconi extended his surge in Italy's opinion polls on Friday, increasing prospects that the centre-left Democratic Party now leading the race will have to seek a pact with Mario Monti's centrist bloc. With a little over a month to go before the vote, Berlusconi narrowed the gap with Pier Luigi Bersani's centre-left coalition by 4 percentage points in just a week, but still trails by 6 percentage points, a poll published on Friday showed.
- EU groups face questions over goodwill. European companies are under mounting pressure to come clean about overpriced acquisitions after regulators found that losses taken on past deals were suspiciously low. In a warning shot ahead of the release of 2012 results by many companies, the pan-European securities regulator on Monday questioned why weak economic conditions had not caused heavier writedowns.
- Davos 2013: Global economy still at risk of collapse, says Klaus Schwab. The world has not yet escaped the risk of a collapse in the global economy despite some renewed confidence heading into 2013, founder of the World Economic Forum Klaus Schwab said.
- Greek eurozone exit still likely despite European leaders resolve, warn economists. Greece is still likely to leave the eurozone, according to leading economists, but it could take several years as the European leaders resolve to save the debt-laden country has been underestimated.
- Lacker Says Fed Should End QE as Soon as Possible. Richmond Fed President Jeffrey Lacker said the U.S Fed should "stop printing money as soon as possible," citing an interview. The risks from Quantitative Easing exceed the program's benefits, he said. The Fed many not be able to act in time once inflation accelerates, Lacker said.
- French 2012 Imports of Chinese Textiles Fall 5.4%. First decline in at least 10 years on rising Chinese salaries, citing Anne-Laure Linget of industry body Federation de la Maille et de la Lingerie. Imports also declined from Italy, Bangladesh and India.
- Japan to Launch 6 Spy Satellites Over Next 5-10 Years. Japan plans to launch 3 optical satellites and 3 radar satellites.
Economic Information Daily:
- China should pay special attention to risks from local government financing vehicles, citing Huang Shuhe, vice chairman of State-owned Assets Supervision and Administration Commission. Local governments' debt scale will continue increasing at a fast speed, according to a person familiar with the matter.
- Private asset management companies in the eastern Chinese city of Wenzhou may buy non-performing loans from banks, citing Ma Xing, deputy director of city's finance office.
- Shanghai Vows 'Severe' Punishment on KFC Violation. City's food safety watchdog is continuing investigation of Yum! Brands(YUM) and unit KFC over antibiotics-tainted chicken, citing Yan Zuqiang, director of Shanghai Municipal Food Safety Commission Office.
Weekend Recommendations
Barron's:- Bullish commentary on (CROX) and (FOSL).
- Bearish commentary on (LL).
- Asian indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.75 +.75 basis point.
- Asia Pacific Sovereign CDS Index 85.75 -2.0 basis points.
- FTSE-100 futures +.01%.
- S&P 500 futures +.20%.
- NASDAQ 100 futures +.27%.
Earnings of Note
Company/Estimate
- (TRV)/.14
- (DD)/.07
- (WAT)/1.59
- (RF)/.21
- (VZ)/.50
- (DAL)/.28
- (AMTD)/.24
- (JNJ)/1.17
- (FCX)/.72
- (TXN)/.07
- (CSX)/.39
- (CA)/.60
- (IBM)/5.25
- (GOOG)/10.55
- (NSC)/1.19
- (IGT)/.24
- (EAT)/.50
- (ISRG)/4.04
- (ETH)/.38
10:00 am EST
- Existing Home Sales for December are estimated to rise to 5.1M versus 5.04M in November.
- (SBS) 2-for-1
- The BOJ rate decision, Germany ZEW Index, Israeli elections, ECB's Draghi speaking, Australia inflation data and the Chicago Fed Nat Activity Index for December could also impact trading today.
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