- Merkel’s Euro Doctrine Threatened as Italians Snub Austerity. Silvio Berlusconi may have the last laugh -- at Europe’s expense. Once the subject of German Chancellor Angela Merkel’s barely suppressed titters, the former Italian leader roared back from the political wasteland in yesterday’s election, blocking the formation of a new Italian government and fracturing the euro zone’s brittle newfound stability. The billionaire’s resurrection coupled with the emergence of comedian-turned-politician Beppe Grillo risked igniting anti- austerity forces in southern Europe’s depressed economies, overturning the German-led crisis-management formula and renewing doubts about popular backing for the euro. “This is a catastrophe for Europe,” Luxembourg Foreign Minister Jean Asselborn said in a telephone interview. “There are a lot of people in Italy, in Europe, who think that Europe is to blame for Italy’s problems. Second, I have very serious doubts that populism would make it possible to find a solution to create stability in Italy.”
- Italy Confronts Vacuum as Leaders Seek to Avoid Election.Italian party chiefs began jockeying to forge a coalition of rivals and head off a second vote as a political vacuum of at least a month loomed, threatening to whipsaw financial markets. In the aftermath of an inconclusive election, Democratic Party leader Pier Luigi Bersani and resurgent ex-Premier Silvio Berlusconi may be seeking to avoid a ballot that would favor populist Beppe Grillo, whose movement was the top vote-getter in its first national contest. No formal steps can be taken until a new parliament convenes March 15. “If they don’t change strategy and go vote again with similar candidates, the risk is a Grillo landslide,” Giovanni Orsina, a history professor at Luiss Guido Carli University in Rome, said in an interview today.
- Italy’s Bonds Slump After Inconclusive Elections. Italy’s government bonds slumped, leading declines among securities from Europe’s high-deficit nations, as inconclusive election results triggered renewed concern that the region’s sovereign-debt crisis will worsen. Italian 10-year yields climbed the most in 14 months as results showed pre-election favorite Pier Luigi Bersani won the lower house by less than a half a percentage point, while Silvio Berlusconi, the former premier fighting a tax-fraud conviction, gained a blocking minority in the Senate. Spanish and Portuguese securities also slid, while German and Finnish bonds advanced for a fourth day. Italy sold 8.75 billion euros ($11.4 billion) of six-month bills at the highest yield since October. Italy’s 10-year yield climbed 40 basis points, or 0.4 percentage point, to 4.89 percent at 4:42 p.m. London time after rising as much as 44 basis points, the biggest increase since Dec. 19, 2011. The extra yield, or spread, investors demand to hold Italian 10-year securities instead of similar-maturity bunds widened 50 basis points to 344 basis points after expanding to 347 basis points, the most since Dec. 11.
- Bank Credit Risk Surges in Europe Amid Italian Election Deadlock. The cost of insuring against default on European bank debt surged to the highest in three months on concern deadlock in Italy’s elections will trigger a flight from risky assets as a political vacuum roils markets. The Markit iTraxx Financial Index of credit-default swaps on 25 banks and insurers climbed 12 basis points to 163, at 11:30 a.m. in London, the highest since Nov. 28 and headed for the biggest monthly increase since May. Contracts insuring Italy’s bonds rose 43 basis points to a 2 1/2-month high of 293, the biggest jump since December 2011. Italy faces months of political turbulence which may see President Giorgio Napolitano install an interim government to write a new election law as the prelude to another vote.
- “Gridlock in parliament means gridlock in the economy,” Alberto Gallo, the head of European macro credit research at Royal Bank of Scotland Group Plc in London, wrote in a client note. “The longer the instability lasts, the more the recession can deepen, pushing up unemployment, defaults and bad loans. In the worst-case scenario, the weaker banks could see deposit outflows re-emerge.” The Markit iTraxx Europe Index of swaps on investment-grade companies rose seven basis points to 120, the highest since Nov. 30. The Markit iTraxx Crossover Index of swaps on 50 companies with mostly speculative-grade ratings climbed as much as 26 basis points to 470, the highest this year before paring the gain to 465 basis points.
- European Stocks Decline on Italian Election Deadlock. European stocks declined as Italy’s inconclusive parliamentary election renewed concern that the Mediterranean nation will dilute its austerity program and the region’s sovereign-debt crisis will deepen. Italian shares led the retreat, with the FTSE MIB Index (FTSEMIB) tumbling 4.9 percent.
- ECB Should Join ‘Currency War’ to Weaken Euro, Montebourg Says. The European Central Bank should weaken the euro, confronting the new “currency war” head on to help address economic stagnation in the region, French Industry Minister Arnaud Montebourg said today. Calling for a more activist and “political” management of the currency shared by 17 European nations, Montebourg said at a press conference in Paris that he wants “the European Central Bank to do its job.” “The euro is too strong and doesn’t correspond to economic fundamentals,” he said. The ECB “should prepare to confront a new currency war in which the weakening of currencies becomes a political tool.”
- Italy Votes for Chaos and the Euro Crisis Is Back. Italy’s parliamentary election could not have gone worse for the country or the euro area. It is now possible that in the coming months the currency zone’s third-largest economy will need a bailout from international creditors, at a time when Italy will have no government in place to ask for, or negotiate, a rescue. In case you had any doubts, the euro-area crisis is back.
- UBS Sees Iron Ore Plunging 54% to Lowest Since ’09 on Supply. Iron ore, trading near 16-month highs, may slump 54 percent to the lowest level since 2009 as China boosts production and global supply climbs, said UBS AG. (UBSN) Rates may tumble to $70 a ton in the three months ending September after trading between $130 and $160 through June, Sydney-based commodity analyst Tom Price said in a phone interview today. China is the world’s biggest importer. “We expect a big correction in the third quarter,” said Price. “We see a big lift in supply.”
- Aluminum Falls as Commodities Slide on Inconclusive Italian Vote. Aluminum fell for a seventh session in London as commodities slid amid concern that the euro-area debt crisis might worsen, following an inconclusive election in Italy. The Standard & Poor’s GSCI Spot Index of 24 raw materials fell to the lowest since Jan. 17. China, the biggest aluminum consumer, is set to have a “significant” surplus of about 700,000 metric tons that is likely to be partly shipped in the form of semi-fabricated products, according to Goldman Sachs Group Inc. “There is selling across the board as there is so much uncertainty because of Italy,” Walter de Wet, an analyst at Standard Bank Plc, said today in a telephone interview. “The fundamentals are also very weak.” Aluminum for delivery in three months declined 0.5 percent to $2,027.50 a metric ton at 3:09 p.m. local time on the London Metal Exchange. Prices earlier touched $2,010, the lowest since Nov. 29.
- Brazil’s Unemployment Rises More Than Forecast in January. Brazil’s unemployment rate rose more than analysts predicted in January as the world’s second-biggest emerging economy continues to respond slowly to government efforts to spur growth. The jobless rate jumped to 5.4 percent from the record low 4.6 percent in December, the national statistics agency said in Rio de Janeiro today. Economists had forecast unemployment would rise to 5.2 percent, according to a survey by Bloomberg of 28 analysts.
- Consumer Confidence in U.S. Increases More Than Forecast. The Conference Board’s index climbed to 69.6, exceeding all forecasts in a Bloomberg survey of economists, from a revised 58.4 in January, data from the New York-based private research group showed today. It was the first improvement in four months and the biggest since November 2011.
MarketWatch:
- Gold set for biggest one-day gain of the year. Prices top $1,600 on Bernanke testimony, Italy election uncertainty.
- ECB bond-buying program may not be there to save Italy.
- DHS to release thousands of illegal immigrants, blaming budget cuts. The Department of Homeland Security has started releasing hundreds of illegal immigrants held in local jails in anticipation of automatic budget cuts, in a move one Arizona sheriff called politically motivated -- and dangerous.
- Republicans accuse Obama of using military as 'prop,' crying wolf over budget 'chaos'.
- Foreign Autos Shut Out Big 3 In New Report. In a report that will trouble fans of the Big 3, the annual selection of top automobiles and top brands by Consumer Reports shows Detroit falling behind its foreign competitors. In fact, for the first time since 2007 the top ten vehicles picked by Consumer Reports does not include a model built by General Motors, Ford or Chrysler.
- Bernanke: My Inflation Record at the Fed Is One of the Best. Federal Reserve Chairman Ben Bernanke strongly defended the central bank's easy monetary policy before a Senate committee on Tuesday and said there's little risk of a spike in inflation in the near term. In criticizing the central bank's easy monetary policy, Sen. Bob Corker, a Republican from Tennessee, called Bernanke the biggest dove since World War II.
- Why Italy’s Stalemate Could Mean Chaos for Euro Zone.
- Case Shiller Home Prices Post Tiny Increase In December Driven By Las Vegas, Los Angeles. (graph)
- Dear Senate: Please Ask Bernanke To Explain This. (graphs)
- New Home Sales Seasonal Adjustments. (graph)
- The Huge Shift In Market Structure That Occurred Yesterday. (graphs)
- The Unsafe Foundation of Our Housing 'Recovery'. (graphs)
- The Part Of The Drone War We Still Know Nothing About.
- BOEHNER: THE SENATE NEEDS TO 'GET OFF THEIR ASS'.
- Strong sales help Home Depot(HD) outshine Lowe's(LOW). Improvements in the U.S. housing market and sales tied to Hurricane Sandy helped Home Depot Inc report a higher-than-expected quarterly profit and outshine rival Lowe's Cos Inc for the 15th straight quarter.
- French jobless claims hit 15-year high in Jan. The number of people out of work in France shot up again in January after a smaller rise in December, piling new pressure on Socialist President Francois Hollande who has made tackling joblessness his top priority. The number of jobseekers in mainland France jumped by 43,900 or 1.4 percent, signalling a return to the rapid pace of increase seen over 19 straight months to December - although half of the rise was due to a change in methodology in January. Without the adjustment the January increase would have been 22,800, still a much bigger jump than the 8,000 seen in December and dealing a blow to Hollande, who has promised to stem the rise in unemployment by the end of 2013.
Frankfurter Allgemeine Zeitung:
- Lars Feld, a member of a panel of economic advisers to German Chancellor Angela Merkel, said the euro crisis will return "with a vengence" as capital loss will lead to higher risk premiums for Italy's interest rates, citing an interview. Anton Boerner, head of Germany's BGA exporters' association, says Italy must reform tax, labor, judicial system or risk "irreparable damage" of euro. Boerner says if Italy not willing to reform, "we have to think about how to deal with a modified eurozone".
- European Union President Herman Van Rompuy said Italy has "no alternatives" to continuing fiscal reforms. "Now it's up to the leading politicians to make the necessary compromises to form a government on a stable basis and keep the course of fiscal consolidation and reforms. There is no way back, there are no alternatives."
- Bank of America's(BAC) Brazil credit exposure has risen to $10 billion.
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