- Spanish Core Inflation Up Even as Recession Deepens. Spain’s core inflation rate accelerated in January as the deepest austerity measures in the nation’s democratic history sustained price increases while pushing the economy deeper into recession. Core inflation, which excludes energy and fresh food prices, accelerated to 2.2 percent in January, the National Statistics Institute in Madrid said today. That’s more than the 2.1 percent median of four forecasts in a Bloomberg survey. Underlying prices fell 1.6 percent from the previous month. Spain, the euro area’s fourth largest economy, is headed for a second straight year of recession as Prime Minister Mariano Rajoy’s tax increases and spending cuts undermine domestic demand.
- Draghi Says Exchange Rate Is Important for Growth, Inflation. European Central Bank President Mario Draghi said while the ECB doesn’t target the exchange rate, it plays an important role in assessing the economic outlook. The ECB’s mandate is to pursue price stability “in both directions,” Draghi said at a press conference today in Moscow, where he’s attending a Group of 20 meeting. “The exchange rate is not a policy target but important for growth and price stability,” he said, adding the central bank will publish new projections next month.
- Wal-Mart(WMT) Executives Sweat Slow February Start in E-Mails. Wal-Mart Stores Inc. had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News. “In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal- Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.” Wal-Mart and discounters such as Family Dollar Stores Inc. are bracing for a rise in the payroll tax to take a bigger bite from the paychecks of shoppers already dealing with elevated unemployment. The world’s largest retailer’s struggles come after executives expected a strong start to February because of the Super Bowl, milder weather and paycheck cycles, according to the minutes of a Feb. 1 officers meeting Bloomberg obtained.Murray’s comments about February sales follow disappointing results from January, a month that Cameron Geiger, senior vice president of Wal-Mart U.S. Replenishment, said he was relieved to see end, according to a separate internal e-mail obtained by Bloomberg News. “Have you ever had one of those weeks where your best- prepared plans weren’t good enough to accomplish everything you set out to do?” Geiger asked in a Feb. 1 e-mail to executives. “Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?” Wal-Mart fell 3.3 percent to $68.46 at 2:12 p.m. in New York and earlier slid as much as 3.8 percent for the biggest intraday decline since Nov. 15. Both executives attributed the performance to increased payroll taxes and delayed tax returns, which Geiger called “a potent one-two punch,” according to the e-mails. When a payroll-tax break expired Dec. 31, Americans began paying 2 percentage points more in Social Security taxes on their first $113,700 in wages. For a person making $40,000 a year, that is about $15 a week. The extra tax bite is about equal to a year of car insurance for a family making $30,000 or a basket of groceries per month for a family making $50,000, according to Wal-Mart’s analysis. Other retailers who court low-income Americans also are bracing for the rising taxes. Higher payroll taxes “go against our customers’ wallet,” Family Dollar Chief Executive Officer Howard Levine said on a Jan. 3 conference call. “Clearly, they do not have as much for discretionary purchases than they did.” Simon cited negative economic growth, declining consumer confidence and rising unemployment as challenges facing the company. The U.S. economy shrank at a 0.1 percent annual rate in the fourth quarter, and the unemployment rate rose 0.1 percentage point to 7.9 percent in January. The Conference Board’s measure of consumer confidence declined last month to the lowest since November 2011.
- Biggest Buyers Stampede From Junk Bonds on Loss: Credit Markets. The biggest buyers of junk bonds are in retreat as exchange-traded funds suffer unprecedented withdrawals with the debt facing its first losses in eight months. The outflows sent the combined value of the five biggest junk-debt funds down 7 percent from a four-month high in January to $29.8 billion, according to data compiled by Bloomberg. State Street Corp.’s $11.9 billion fund reported withdrawals of about $988 million in the 12 days ended Feb. 13, the longest stretch since August 2011.
- Commodities Revenue of 10 Biggest Banks Slumped 24% Last Year. Commodities revenue of the 10 largest banks slumped 24 percent last year, the first contraction since at least 2008, according to Coalition, a London-based analytics company. The total fell to $6 billion from $8 billion in 2011, Coalition said in a report today. Their investment banking revenue rose 10 percent to $159 billion, the first gain in three years, Coalition estimates. “Low volatility and reduced client activity led to a 24 percent drop in revenues,” Coalition said in the report. “Performance was also subdued by ongoing concerns about increased regulation and capital sensitivity, pushing banks to re-evaluate their commodities strategies.” Banks including Goldman Sachs Group Inc. and Morgan Stanley face higher capital requirements and tightening regulation that restrict commodities trading.
- Democrats’ Plan Furthers U.S. Tax Divide as Budget Cuts Near. Senate Democrats unveiled a $110 billion plan to delay federal spending cuts that includes tax increases Republicans already say they won’t accept. “No one takes it seriously,” said Senator Bob Corker, a Tennessee Republican. “It is my guess that sequester is going to kick in on March 1.”
- Gold Falls Below $1,600 as Bernanke Says Economy Recovers. Gold futures slumped below $1,600 for the first time since August after Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is recovering, easing pressure for more stimulus measures.
- Oil Drops on U.S. Industrial Output, Euro-Area Exports.West Texas Intermediate oil fell after U.S. industrial production unexpectedly shrank and euro- area exports declined the most in five months, raising concern that fuel demand may be weakened. Prices erased the week’s gain as U.S. factory output slipped 0.1 percent last month while euro-area exports dropped a seasonally adjusted 1.8 percent in December.
- Fed Official Says Bond Purchases Could Slow. A veteran central-bank official on Friday said the time may be coming for the Federal Reserve to start lowering its purchases of Treasury and mortgage bonds. "While our policies have been effective, our experience with our asset-purchase programs is limited and, as a result, we must analyze their benefits and costs carefully," Federal Reserve Bank of Cleveland President Sandra Pianalto said. "Over time, the benefits of our asset purchases may be diminishing,"Ms. Pianalto said, as she pointed to concerns she has with the program. While the nonvoting member of the Federal Open Market Committee said Fed bond buying and other stimulus measures have helped to get the economy back on its feet, there are risks that may encourage changes in the pace of purchases. "It is critical that we take these risks into consideration" as officials look to the future, Ms. Pianalto said. "To minimize some of these risks, we could aim for a smaller-sized balance sheet than would otherwise occur if we were to maintain the current pace of asset purchases through the end of this year, as some financial-market participants are expecting," she said. "This course of action would be all the more attractive if the economic outlook continues to improve, as I expect it will."
- Meteorite Hits Russia, Causing Panic. A meteor plunged toward earth over Russia's Ural Mountains Friday, exploding into flames in a powerful blast that damaged buildings in nearby areas, injuring around 1,000 people.
- Egypt: Islamists rally in Cairo against opposition. Several thousand mostly hard-line Islamists protested in Cairo on Friday against a recent wave of violent anti-government protests, while liberal activists staged a smaller demonstration across town to call for accountability and justice from the country's leaders. The parallel rallies mirror the deep divisions that have plagued Egypt in the two years since longtime autocrat Hosni Mubark's ouster, leaving the country's politics polarized and its economy battered by the continuous turmoil in the streets.
- State Online Sales Tax Bill Revived in U.S. Congress. U.S. states could collect millions of dollars in online sales taxes, with members of both parties in Congress sponsoring legislation on Thursday that would resolve states' decades-long struggle to tax businesses beyond their borders.
- Should You Worry About Your Money Market Fund? The $2.7 trillion money market fund industry is in dire need of new regulations to keep it from collapsing, and is vulnerable to a massive run on assets similar to what occurred in 2008, according a government oversight panel.
- Euro-Land Banks In Trouble. (graph)
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- Brazil finance minister says inflation raises concerns -report. Brazil's Finance Minister Guido Mantega on Friday expressed concern about Brazil's inflation rate, fueling market bets that the central bank could raise interest rates this year. Mantega, who is in Moscow for a meeting of the G20 group, said that "inflation above the center of (the government's) target raises a yellow flag," according to a report published on the Web site of Valor Economico's website. "Fortunately, it has been under control for the past few years," he added, arguing that inflation has been pressured by seasonal factors, such as higher food prices, rather than structural reasons. Brazil targets inflation of 4.5 percent, with a tolerance band of 2 percentage points up or down. In the 12-month period through January, consumer inflation rose to 6.15 percent, the highest reading in a year.
- Exclusive: North Korea tells China of preparations for fresh nuclear test - source. North Korea has told its key ally, China, that it is prepared to stage one or even two more nuclear tests this year in an effort to force the United States into diplomatic talks with Pyongyang, said a source with direct knowledge of the message. Further tests could also be accompanied this year by another rocket launch, said the source who has direct access to the top levels of government in both Beijing and Pyongyang.
- Brazil is More Worried About Inflation Than Growth. Inflation is the govt's biggest concern this year, citing govt. officials. Demand is still moderate and economic activity hasn't yet shown unequivocal signs of recovering; inflationary pressure comes from lack of supply. If necessary, central bank won't be blocked from increasing rates. The 12-month inflation rate won't fall below 6% until 2H at the earliest.
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