Today's Headlines

Bloomberg:

• European Stocks Retreat Amid Turmoil in Spain, Italy. European stocks tumbled the most in more than three months as Spanish and Italian banks retreated with the nations’ government bonds amid signs of returning political uncertainty in the region’s weakest economies. Banco Santander SA (SAN), Spain’s largest bank, sank the most in six months as Prime Minister Mariano Rajoy denied corruption allegations. UniCredit SpA, the biggest lender in Italy, posted the largest drop since June as former premier Silvio Berlusconi gained in opinion polls before elections this month. Julius Baer Group Ltd. (BAER) fell 3.1 percent after the wealth manager reported declining revenue margins. The Stoxx Europe 600 Index (SXXP) retreated 1.5 percent to 283.9 at the close of trading, the largest decline since Oct. 23. “Spanish yields have blown up in the past hour to their highest levels since December as concerns about the Spanish government mount,” said Ioan Smith, a strategist at Knight Capital Europe Ltd. in London. “In addition to the growing corruption scandal in Spanish politics, the Italian elections towards the end of the month are also a concern.”

• Commerzbank Reports Quarterly Loss of 720 Million-Euro. Commerzbank AG (CBK), Germany’s second- largest lender, posted its biggest quarterly loss in three years after taking charges related to the sale of Bank Forum and a tax asset writedown. The fourth-quarter loss of 720 million euros ($976 million) compares with a profit of 320 million euros in the year-earlier period, the Frankfurt-based bank said today in a statement. Bank Forum charges totaled 185 million euros, while Commerzbank wrote down 560 million euros on deferred tax accruals.

• Euro Weakens as Spanish, Italian Yields Rise on Political. The euro fell the most in two weeks against the dollar as Italian and Spanish bonds slumped amid political turmoil in the euro-area’s third- and fourth-largest economies, damping demand for the shared currency. The 17-nation euro dropped versus the majority of its 16 major peers as Spanish Prime Minister Mariano Rajoy faced calls to resign after newspaper reports alleged he accepted illegal cash payments. A poll showed former Italy Premier Silvio Berlusconi closed the gap on front-runner Pier Luigi Bersani even as he appeals a four-year prison sentence for tax fraud.

• Australian Homebuilders Can’t Give Them Away: Mortgages. Australian housing developers are resorting to discounts, gift cards and help with mortgage payments to compete for dwindling buyers as home sales slow. Stockland (SGP), Australia’s biggest listed home builder, is giving rebates and gift cards of as much as A$30,000 ($31,300) at projects in Victoria, Queensland and New South Wales states. Devine Ltd. (DVN) is matching deposits in South Australia and taking over mortgage payments for as long as a year in Melbourne. Peet Ltd. (PPC) has been offering discounts of as much as A$50,000 in Western Australia, Queensland and Victoria.

• Spring Airlines May Halt Flights to Japan on China Protests. Spring Airlines Co., China’s biggest carrier outside government control, is considering ending flights to Japan after a territorial dispute between the Asian countries last year emptied planes and caused losses. Spring hasn’t decided on the 12 weekly flights between China and Japan, Chairman Wang Zhenghua said in an interview in Singapore, adding his “Japanese friends” are asking him to continue. Shanghai-based Spring has put on hold plans to add more Japan services as it’s filling less than 50 percent of the seats on those flights, compared with an average 92 percent occupancy on other sectors.

Wall Street Journal:

• U.S., States Plan to File Civil Charges Against S&P. The Justice Department and state prosecutors intend to file civil charges alleging wrongdoing by Standard & Poor's Ratings Services in its rating of mortgage bonds before the financial crisis erupted in 2008, according to people familiar with the matter. The allegations likely would be made in lawsuits by federal and state officials that are expected to be filed as soon as this week, the people said. The alleged wrongdoing by S&P, a unit of McGraw-Hill Cos., MHP -6.56% centers on allegations related to the model used by S&P to rate mortgage bonds. The likely move by U.S. officials would be the first federal enforcement action against a credit-rating firm for alleged illegal behavior related to the crisis. Several state attorneys general are expected to join the case, making it one of the highest-profile and widest-ranging enforcement crisis-era crackdowns.

• 'Volcker Rule,' EU-Style. Germany, U.K. Move to Tackle Proprietary Trading by Banks. Two of Europe's biggest countries moved Monday to beef up laws aimed at solving the problem of banks that are considered too big to fail, but the initiatives again highlighted big differences between European countries' strategies. In the U.K., Chancellor of the Exchequer George Osborne bowed to pressure from a parliamentary commission and said he would give regulators powers to break up banks if they try to circumvent a new law forcing them to separate their retail and commercial banking activities from their riskier, market-based businesses.

MarketWatch.com:

• Banks keep lending standards tight as demand rises. Banks have kept their lending standards fairly tight while demand for business loans, mortgages and car loans has picked up, according to a survey released by the Federal Reserve on Monday. The January senior loan officer survey found that “generally modest” fractions of lenders made it easier to get loans over the last three months. The survey was conducted from officers of 68 domestic banks and 22 foreign ones operating state-side. 

• The cost of air pollution in China. Thick smog hanging over cities may pressure governments to act.

Fox News: 

• Sophisticated cyber-attack hits Energy Department, China possible suspect. The Energy Department has been hit by a major cyber-attack, which resulted in the personal information of several hundred employees being compromised and could have been aimed at obtaining other sensitive information, The Washington Free Beacon reports. 

CNBC: 

• Question of Aiding Cyprus Places Germany in a Bind. When German officials said they would save the euro zone at all costs, the prospect of bailing out Russian oligarchs was not what they had in mind. But eight months before a crucial election in Germany, Chancellor Angela Merkel is facing charges that Europe is doing just that as the tiny island of Cyprus, a haven for Russian cash, threatens to become the next point of contention in the euro crisis.

• Obama Questions 'Carried Interest' Tax Break. President Barack Obama said on Sunday more tax revenue would be needed to reduce the U.S. deficit and signaled he would push hard to get rid of loopholes such as the "carried interest" tax break enjoyed by private equity and hedge fund managers.

• Consumers Taking Financial Hit From Rising Fuel Prices. Consumers have been spending more on gasoline than they have in nearly three decades. With pump prices at their highest level on record for this time of year, the stage is set for an even greater climb in gasoline prices and expenditures than in 2012. Retail gasoline prices have surged 17 cents in a week to top $3.50 a gallon on average, posting the highest prices on record for the beginning of February. (Read More: Gasoline at Highest Price Ever for This Time of Year.)

Zero Hedge:

• It Is Not The United States Of Europe; Just The Opposite. 

• The Subsidy Addiction: Jobs Vs Foodstamps. (graph) 

• Europe Plunges By Most In Six Months. 

• Factory Orders Ex Transports Post First Annual Decline Since July. (graph) 

• Meanwhile In European Financials...(graphs)

• Bank Of Italy Caught Lying About Imploding Monte Paschi, Counters With Even More Ridiculous Lies. 

• Madrid Protests Return: Live Stream.

Business Insider:

• Silvio Berlusconi Made A $5.4 Billion Offer The Caused The Italian Market To Get Crushed Today. 

• Oracle(ORCL) Thumbs Nose At Cisco(CSCO) And Buys Acme Packets(APKT) for $2.1 billion. 

• Hackers Post Private Data From More Than 4,000 US Bank Executives. 

• MICHAEL LEWIS: Break Up Goldman Sachs(GS). 

• Greek Neo-Nazis Golden Dawn March To US Embassy. (video)

• JEFF SAUT: The Stock Market Will Probably Tank After Obama's State Of The Union.

• Here's The Former Marine Accused Of Shooting The US Military's Deadliest Sniper In The Back. 

• Asian Investors Have A Frighteningly Simple Explanation For Why Japan Is Doomed.

Reuters:

• Suicide bomber kills 22 in attack on Iraq militia. A suicide bomber attacked a government-backed militia in Iraq on Monday, killing at least 22 people in an apparent attempt by Sunni insurgents to provoke unrest against Shi'ite Prime Minister Nuri al-Maliki. Dressed in civilian clothes, the bomber infiltrated a meeting of Sahwa tribal fighters and detonated his explosives as they picked up salaries in Taji, a town 20 km (12 miles) north of the capital Baghdad, police said. It was the seventh suicide bombing in a month in Iraq, indicating insurgents are intent on stepping up violence a year after U.S. troops pulled out of the country, where Shi'ite, Sunni and ethnic Kurdish factions still struggle over how to share power.

• Italian prosecutors interview ex-Monte Paschi chairman. Italian prosecutors called in the former chairman of Monte dei Paschi di Siena on Monday as they pursued their corruption investigation into an opaque series of loss-making derivatives trades at the bank. 

• Fed's Fisher says he would support tapering QE3 when time comes. A top U.S. Federal Reserve official critical of the central bank's policy of monetary easing on Monday said he would support tapering, rather than stopping, the Fed's current bond-buying program once the labor market improves. St. Louis Federal Reserve President James Bullard last week advocated such an approach.

Telegraph:

• Eurozone factory prices fall leaving door open for rate cut. Eurozone factory prices fell for the second month in a row in December, leaving room for a possible European Central Bank interest rate cut to revive the weak economy.

Ansa:

• Italy Prosecutor Probing 5 Foreign Banks on Euribor. The prosecutor in Trani, Italy is probing five banks, seven traders, citing judicial sources.