Bloomberg:
- Draghi Confronts Italy Impact as ECB Seen Keeping Rates on Hold. The European Central Bank has to decide how big a threat Italy poses to Europe’s recovery. A rejection of austerity in the euro area’s third-largest economy has produced a political stalemate that’s driven up bond yields and undermined confidence in ECB President Mario Draghi’s scenario of a gradual economic upturn. While that’s prompted some observers to bring forward expectations for lower interest rates, economists from Nomura International Plc to ABN Amro Bank NV say the ECB is more likely to hold fire and keep the pressure on governments to enact reforms. “The Italian election has brought the centrifugal force of dysfunctional politics back into focus, but rate cuts are not the answer,” said Richard Barwell, senior economist at Royal Bank of Scotland Group Plc in London. “The ECB cannot save governments and countries that do not want to save themselves.”
- Napolitano Girds for Battle to Resolve Italy Election Impasse. President Giorgio Napolitano, a former communist resistance fighter who negotiated Silvio Berlusconi’s resignation, is preparing his final political battle as he seeks to steer Italy out of its latest government crisis before his term expires in May. Napolitano, 87, is charged with resolving the political logjam caused by elections last month that produced a hung parliament. To avoid a new vote, he can try to forge a national- unity government, accept an administration without a majority or appoint a non-politician to head a so-called technical government, similar to that of Prime Minister Mario Monti. Markets are pricing in two scenarios, “another technical government or the possibility, which is less and less likely, of a bipartisan government,” Mario Spreafico, who manages 1.5 billion euros ($1.95 billion) as chief investment officer at Schroders Private Banking for Italy, said in a phone interview. “Both would be temporary solutions” before new elections.”
- Merkel’s One Europe Attacked by Adenauer Grandson. Stephan Werhahn remembers playing at the feet of his grandfather as a child. The man was a towering figure in more ways than one. Lionized as Der Alte, or the Old One, Konrad Adenauer was West Germany’s first post-war chancellor, a founder of the Christian Democratic Union (CDU) political party and an early proponent of European unification. At 59, Werhahn is adding politics to a 30-year career in finance by running against Chancellor Angela Merkel in an election scheduled for Sept. 22, Bloomberg Markets will report in its April issue. Werhahn says he’s doing his bit to protect his grandfather’s greatest legacy, the European Union. Werhahn’s proposed resolution to the crisis is harsh in its own way: He would forgive most of the money owed by Greece and other debt-choked countries and then banish them from the euro area in order to save the single currency.
- China Opposes Others’ Loose Policy, Li Keqiang Co-Author Says. China doesn’t approve of excessively loose monetary policies by other nations, according to a senior government adviser who wrote a book with Li Keqiang, the country’s incoming premier. “We have already taken a position on this before and China doesn’t approve of some countries’ overly accommodative monetary policy,” Li Yining, 82, a Peking University professor and delegate to China’s top advisory body, said at a briefing in Beijing today when asked about Japan’s recent easing. “This is an act of transferring the crisis to others.” The remarks may reflect official displeasure over the yen’s depreciation amid Japanese Prime Minister Shinzo Abe’s campaign for more monetary easing to fight deflation.
- Fed’s Fisher Says He’s Worried Abe Has ‘Politicized’ BOJ. Federal Reserve Bank of Dallas President Richard Fisher said Japanese Prime Minister Shinzo Abe has “politicized” the Bank of Japan (8301) in a quest to halt more than a decade of falling prices. “He’s aggressive. He has basically politicized the central bank, which worries me personally,” Fisher said today in a speech in San Antonio.
- Korea Data Heralds Surprise China Exports Drop: Chart of the Day. South Korea is the only one of Asia’s 10 biggest economies to report February trade data thus far. Given that China is its biggest export market, Korea’s sales drop signals that its larger neighbor is poised to report weaker-than-expected shipments, said Zhang Zhiwei, Nomura’s chief China economist. “The data suggests China’s recovery is not so strong,” Hong Kong-based Zhang said. “We still call for the People’s Bank of China to tighten policies, hike interest rates and regulate shadow banking activities this year. But recent weak macro data will only make the central bank delay it.”
- China’s Property Curbs Are Not Successful, Billionaire Lo Says. China’s property curbs in the past decade have been unsuccessful and the new round of measures will slow property sales, said billionaire Vincent Lo, also a member of the government’s advisory board. “Certainly they haven’t been,” said Lo, chairman of Shui On Land Ltd. (272), a Shanghai-based developer, in an interview in Beijing yesterday. “Had they been successful, home prices wouldn’t have risen higher the more the government curbed.” The new measures will slow down property sales immediately because the 20 percent tax is not that easy to bear, Lo said.
- Chinese Anger Over Pollution Becomes Main Cause of Social Unrest. Pollution has replaced land disputes as the main cause of social unrest in China, a retired Communist Party official said, as delegates to the country’s legislature lamented environmental degradation. China now sees 30,000 to 50,000 so-called mass incidents every year, Chen Jiping, a former leading member of the party’s Committee of Political and Legislative Affairs, said yesterday. Increased use of mobile phones and the Internet has allowed protesters to show their anger more effectively, he said.
- BOJ Rejects Accelerated Open-Ended Asset Buys as Shirakawa Exits. The Bank of Japan (8301) rejected a call for an immediate start to open-ended asset purchases in Governor Masaaki Shirakawa’s final meeting before new leaders take over. The board voted against a proposal by member Sayuri Shirai, the BOJ said in a statement in Tokyo today after a two-day meeting. Policy makers left an asset-purchase fund unchanged at 76 trillion yen ($810 billion) as forecast by all 23 analysts in a Bloomberg News survey.
- Iron Peaked After Restocking Rally, Morgan Stanley Says. Iron ore is poised to decline over the rest of the year as global supply increases and a rally spurred by restocking in China ends, according to Morgan Stanley. The price probably peaked at about $159 a ton last month and will average $129 over the rest of the year, analysts Joel Crane and Peter Richardson said in a report. The raw material may average $133 a ton over 2013, with prices seen dropping to $130 in the fourth quarter from $142 in the first, they said.
- Sumitomo Sees Aluminum Surplus at Highest Level in Two Years. Sumitomo Corp. (8053), Japan’s fourth- largest trading house, raised its forecast for a global aluminum surplus to the highest level in two years as demand from China, the biggest consumer, won’t be enough to absorb new capacity. Supply will outpace demand for a seventh year by 866,000 metric tons this year from 760,000 tons in 2012, said Shingi Yamagiwa, manager of light metals trading at Sumitomo, which has stakes in smelters in Australia, Brazil, Malaysia and Indonesia.
- Impotent Mursi Losing Grip on Egypt as Unrest Prompts Reversals. Egyptian President Mohamed Mursi’s declaration of a state of emergency in three restive provinces had all the earmarks of an autocrat’s command, right down to the 9 p.m. curfew. “When I see the security of the nation is in peril, then I act. And I now act,” Mursi thundered in a Jan. 27 late-night television broadcast. After protestors ignored him -- some in the port of Ismailia played 9 p.m. soccer games in front of the provincial government headquarters -- the president backed down. Within 48 hours, he allowed local officials to relax the late-night ban.
- Tracking Sensors Invade the Workplace. Devices on Workers, Furniture Offer Clues for Boosting Productivity. As Big Data becomes a fixture of office life, companies are turning to tracking devices to gather real-time information on how teams of employees work and interact. Sensors, worn on lanyards or placed on office furniture, record how often staffers get up from their desks, consult other teams and hold meetings.
- Mideast Defies U.S. Bid to 'Pivot'. The Obama administration hopes to "pivot" away from a hyper-focus on the Middle East during its second term, but John Kerry's maiden overseas mission as secretary of state—a nine-nation odyssey across Europe and the Persian Gulf—highlighted why that goal may be elusive. Imminent threats posed by Syria's civil war and Iran's nuclear program, and longer-term challenges of Egypt's flagging economy and the moribund Arab-Israeli peace process, dominated Mr. Kerry's 11-day trip, even his stops in European capitals.
- Offshore Tax Probe Picks Up. U.S. Chase for Cheats With Secret Accounts Looks to Israel, India and Elsewhere. We're still coming after you. That is the message from the U.S. government to Americans who evaded federal taxes by stashing money in secret offshore accounts, say lawyers who represent some of those people.
- O'Grady: Venezuela After Chávez. Restoring democracy in the oil dictatorship won't be easy, even with the dictator gone.
- Leaked email adds fuel to claims White House playing politics over impact of cuts. A leaked email from an Agriculture Department field officer adds fuel to claims President Obama's political strategy is to make the billions in recent federal budget cuts as painful as possible to win the public opinion battle against Republicans.
- Paul mounts Senate filibuster of Obama's CIA nominee over drone concerns. Business in the Senate ground to a halt Wednesday as Sen. Rand Paul -- aided by colleagues from both parties -- launched into an old-fashioned filibuster, as he tried to hold up the nomination of John Brennan for CIA director over concerns about the president’s authority to kill Americans with drones. Paul's filibuster was shaping up to be among the longest in U.S. history. The late Rep. Strom Thurmond holds the record, at more than 24 hours, but Paul was cruising into his ninth hour -- which is around when most filibusters flame out. As of 8 p.m., Paul was still talking on the Senate floor.
CNBC:
- PetSmart(PETM) Earnings Beat; Revenue Falls Short. PetSmart reported fourth-quarter earnings that beat expectations but revenue fell short. After the earnings announcement, the company's shares skidded in extended-hours trading.
- Google(GOOG) Focuses on Innovation, Not Stock Price: Exec. The company's push into a variety of different ventures have made it a force to be reckoned with in the tech industry," says Nikesh Arora, Google's chief business officer.
- Sorry, Stock Pickers—You're Still Getting Crushed. Just 37 percent are faring better than the basic indexes they compete against, according to data from JPMorgan Chase, while 63 percent are missing. A mere 7 percent are topping benchmarks by more than 2.5 percentage points.
Business Insider:
- John Paulson's Flagship Fund Had An Ugly February. The Paulson Advantage Plus was down 4.7 percent last month, and 3.5 percent Ytd. His gold fund has lost 26 percent since the start of the year, and 18 percent in February.
- The Big Short War. Hedge-fund titan Bill Ackman has vowed to bring down Herbalife, the 33-year-old nutritional-supplement company, which he views as a pyramid scheme. With his massive shorting of Herbalife stock, the price plummeted, prompting two fellow billionaires—Ackman’s former friend Dan Loeb and activist investor Carl Icahn—to take the opposing bet on Herbalife. As the public brawl rivets Wall Street, William D. Cohan learns why, this time, it’s personal.
- Holder: Obama could order lethal force in U.S. President Barack Obama could order the use of deadly force against an American inside the United States, Attorney General Eric Holder said in a letter to Sen. Rand Paul (R-Ky.) released Tuesday. Paul and other senators had asked various administration officials whether deadly drones strikes like the ones the U.S. carries out in Pakistan, Yemen and other foreign countries could ever be used in the U.S. Paul said he would seek to block the confirmation of John Brennan as Central Intelligence Agency director if the question was not answered.
- Leaked email leads traders to fear worst from USDA furloughs. A leaked Agriculture Department email briefly rattled the U.S. livestock market on Wednesday as traders interpreted it as meaning the department might implement mandatory budget cuts in ways that deliberately worsen disruptions at meat-packing plants.
- U.S. economy, world's engine, remains in 'neutral' -Fed's Fisher. Despite the efforts of the U.S. Federal Reserve to use easy monetary policy to boost jobs, the country's economy is stuck in "neutral" more than three years after the end of the recession, a top Fed official said on Wednesday. "It is not possible to create jobs through monetary policy alone," Dallas Fed President Richard Fisher said at a World Affairs Council of San Antonio event. "The U.S. remains the economic engine of the world ... it's not China, it's not Europe, it's the U.S., and the U.S. remains in neutral." Fisher, repeating a well-worn analysis of the limits of the Fed's super-easy monetary policies, said the U.S. central bank did not have the power to pull the economy from its standstill as long as U.S. lawmakers did not do their part. "You know how horrid things are in Washington," Fisher said. "We have provided fuel for an economic recovery because Congress and the executive have not provided the incentives for growth."
- Illinois governor calls budget plan toughest in state's history. Illinois Governor Pat Quinn presented on Wednesday what he called the most difficult budget in the state's history, saying he was slashing spending on programs such as education to pay the skyrocketing costs of public pensions. Democrat Quinn, the most unpopular governor in the nation according to one polling firm, proposed a "balanced" operating budget of $35.6 billion in revenue and spending in the fiscal year starting July 1, up just over 3 percent from fiscal 2013. All of the increased state revenue in fiscal 2014 would be gobbled up by an $929 million increase in pension costs for state workers such as teachers, bringing the cost of pensions to nearly one in every five dollars, according to the budget. Illinois faces a fiscal crisis with the worst funded state pension system in the nation and the lowest debt rating among the states analyzed by major agencies Moody's Investors Service and Standard & Poor's.
- Italy’s Bersani on collision course with Germany and ECB over austerity. Italy’s Pier Luigi Bersani vowed to break free of the country’s austerity regime as he laid out plans for a centre-Left government, risking a serious clash with Germany and the European Central Bank.
- Germany to Lose Supervisory Powers Over Banks. The German govt, parliament to lose authority over the financial system under EU plans due to take effect in 2014. All systemically important banks to be monitored by the ECB. The ECB won't be accountable to the German govt, unlike BaFin. This marks the largest transfer of sovereignty since the creation of the euro, citing Carsten Schneider of SPD. The ECB will have the right to supervise smaller banks as well.
- Liu Mingkang Says U.S. Quantitative Easing "irresponsible'. The expansionary measures are leading to inflation pressures in China, citing the former chairman of the China Banking Regulatory Commission. Current easing in the U.S. and E.U. aren't solving the real economic problems and only creating moral risks, Liu said.
- None of note
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 103.50 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 81.50 -2.5 basis points.
- FTSE-100 futures +.27%.
- S&P 500 futures -.03%.
- NASDAQ 100 futures +.06%.
Earnings of Note
Company/Estimate
- (SFD)/.50
- (CIEN)/-.14
- (COO)/1.19
- (HRB)/-.03
- (NAV)-1.76
8:30 am EST
- Final 4Q Non-farm Productivity is estimated at -1.6% versus a prior estimate of a -2.0% decline.
- Final 4Q Unit Labor Costs are estimated to rise +4.3% versus a prior estimate of a +4.7% gain.
- Initial Jobless Claims are estimated to rise to 355K versus 344K the prior week.
- Continuing Claims are estimated to rise to 3120K versus 3074K prior.
- Consumer Credit for January is estimated to rise to $14.7B versus $14.595B in December.
- None of note
- The Fed's Powell speaking, ECB's Draghi speaking, ECB rate decision, BoJ rate decision, BoE rate decision, Bank CCAR Results/Dodd-Frank tests, Japan gdp report, Challenger Job Cuts for February, RBC Consumer Outlook Index for March, weekly Bloomberg Consumer Comfort Index, 4Q Household Change in Net Worth, weekly EIA natural gas inventory report, BofA Refining Conference, JPM Gaming/Lodging/Restaurant/Leisure Conference, Morgan Stanley Utilities Conference, (TXN) Mid-Quater Update, (FB) Event, (A) analyst meeting and the (MTH) analyst day could also impact trading today.
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