Bloomberg:
- Abenomics at Risk as Workers Struggle to Keep Up With Inflation. For his economic strategy to work, the Prime Minister says earnings at companies like Toyota, where profit is projected to double to a record 1.86 trillion yen ($18.2 billion) this year, must lead to higher pay. Employees like Matsui have yet to see the benefits -- in the 11 months through November, pay for the average Japanese worker rose just 0.2 percent; it’s fallen 15 percent in the past decade and a half. Japan’s unions will begin contract negotiations next month in labor’s biggest bid so far to share in the benefits of Abenomics. “This is a litmus test for whether Abenomics works or falls apart,” said Martin Schulz, an economist at Fujitsu Research Institute in Tokyo. “How can you get growth to go up without getting money into people’s pockets?”
- Emerging Market Rout May Signal ‘Sudden Stop’: Cutting Research. Brazil, South Africa, Turkey and Ukraine are the emerging markets most at risk of a “sudden stop,” in the view of Morgan Stanley. That’s defined as a halt or even a reversal in capital flows into a country, slashing access to international financial markets for an extended period and weakening the economy. The term is often linked to 1995 work by Rudi Dornbusch, the late international economics professor at the Massachusetts Institute of Technology in Cambridge. Mexico, Indonesia, India and Thailand are also in some jeopardy of such a phenomenon as investors turn sour on emerging markets, London-based economists Manoj Pradhan and Patryk Drozdzik said in two reports to clients over the past week. They wrote as central banks in India, Turkey and South Africa raised interest rates to shoreup confidence in their currencies.
- Emerging-Market Shocks Pressure Dormant Volatility: Currencies. Volatility in foreign exchange markets, after falling to some of the lowest levels since before the financial crisis, has nowhere to go but up as emerging economies falter, say the world's biggest dealers. "The market hasn't accepted some of the risk events that are on the horizon," Ian Stannard, the head of Europe currency strategy at Morgan Stanley in London, said in a Jan. 27 phone interview. "Foreign-exchange volatility is still at relatively low levels so there's scope for it to move higher. China still poses the biggest spillover risk from emerging markets."
- China Making Air Force, Navy Upgrades, U.S. Officials Say. China’s air force is fielding new precision-guided cruise missiles, long-range bombers and drones as its Navy expands its long-range punch, according to U.S. military intelligence officials. “While we would not characterize the modernization as accelerated,” it’s “progressing at a steady pace” and is significant, Lee Fuell, a director at the Air Force’s National Air and Space Intelligence Center, said in a presentation released today.
- Rubber Futures in Tokyo Advance, Paring Monthly Loss. Rubber in Tokyo advanced, paring the biggest monthly decline since May 2012, as increased spending by U.S. consumers raised optimism that demand for the commodity used in tires may increase. The contract for delivery in July rose as much as 1.7 percent to 231.8 yen a kilogram ($2,255 a metric ton) on the Tokyo Commodity Exchange, before trading at 230.6 yen at 11:24 a.m. local time. Futures tumbled 16 percent this month and fell into a bear market amid swelling inventories in China, the biggest consumer. Rubber fell 9.3 percent last year.
- Ukraine Warring Factions Trade Barbs With President Sick. Ukraine’s opposition accused Viktor Yanukovych of foul play as the president placed himself on sick leave and said his rivals are escalating the nation’s two-month political crisis. The two sides are in dispute over steps meant to reduce tension in the wake of deadly anti-government clashes last week. While Yanukovych’s cabinet fell with the Jan. 28 resignation of former Prime Minister Mykola Azarov, the opposition rejected an amnesty law for protesters pushed through yesterday and said he may use illness to avoid canceling anti-protest laws.
- Puerto Rico Will Be Cut to Junk Within 30 Days, UBS Says. Puerto Rico’s general-obligation bonds are poised to be cut to junk within the next month, according to UBS AG. “Given the myriad obstacles facing Puerto Rico, we believe that at least one rating agency will take such an action within the next 30 days,” analysts Thomas McLoughlin and Kristin Stephens at UBS Wealth Management in New York wrote in a report dated yesterday.
- ECB Seeking to Unmask Weak Banks Wants Risky Loan Details. The European Central Bank asked Europe’s biggest lenders to disclose loans on their balance sheets that are at risk of default as part of its review of the health of the region’s financial system. Banks also had to provide figures on loans they have restructured for clients, a document distributed to 128 banks taking part in an asset quality review and obtained by Bloomberg showed. The document, in the form of an excel spreadsheet, asked banks to note how many of their loans classified as “performing” have already been restructured, and how many loans that don’t yet meet the standard definition of non-performing -- 90 days past due -- are “unlikely to pay.”
- Bonds Prove Bears Wrong in Best Start Since 2008 as Stocks Tank. Bonds are up, stocks are down and it’s snowing in Atlanta. The start of the year in financial markets has gone as almost no one expected, with fixed-income assets worldwide posting their biggest January returns since 2008 and equity prices falling the most since 2010. Gold, given up for dead in 2013 as prices tumbled 28 percent, is rallying.
- Keystone Report Said Likely to Disappoint Foes on Climate. The U.S. State Department is preparing a report that will probably disappoint environmentalists and opponents of the Keystone pipeline, according to people who have been briefed on the draft of the document.
- Selloff's Spread to Europe Is Sign of Broad Fear. Until This Week, European Emerging Markets Had Largely Dodged Weakness That Hit Peers Elsewhere. Until this week, European emerging markets had largely dodged the vicious selloff that has swept through their peers elsewhere. Now, they are cracking. The Hungarian forint took a heavy blow early Thursday, dropping as much as 1% against the dollar. The Polish zloty and the Czech koruna also stumbled. The currencies clawed back some ground late in the day, but analysts cited Thursday's gyrations as a sign that the market's fear of investments seen as risky is broad. Whether bouts of weakness in such countries persist will be a barometer of wider emerging-market strains.
- House GOP leaders back limited path to legal status for illegal immigrants. House Republican leaders on Thursday endorsed a limited path to legal status for some illegal immigrants, in a move Democrats said could open the door to a deal on comprehensive immigration legislation. The position was included in a document released by party leaders during their annual retreat in Maryland. The "standards for immigration reform" document ruled out a special path to citizenship for illegal immigrants.
- Blankfein’s pay to rise 10% to $23 million for 2013. Lloyd Blankfein, chairman and chief executive of Goldman Sachs, may earn as much as $23 million in 2013 – a 10 percent increase on the previous year – despite the bank's struggle to overcome a slump in fixed income trading.
- Google(GOOG) earnings: adjusted EPS $12.01 on $16.86 bln revenue. (video) Google reported earnings that missed Wall Street expectations on Thursday, though core revenue in its Internet business rose 22 percent.
- Will Argentina’s woes hit this country? (video) Argentina's latest monetary ailment may prove contagious for some of its Latin American neighbors, with Brazil likely to be the first to catch the fever. "What has been happening in Argentina will have a negative impact on the Brazilian economy," Tony Volpon, a strategist for Latin America at Nomura, told CNBC, citing long-standing trade ties. "For example, about 70-80 percent of Brazilian car exports actually go to Argentina. So they are vulnerable."
- Janet Yellen's Impossible Task. (graph)
Quartz:
- Will the emerging market rout get even worse? Watch corporate bonds. Global investors have suddenly remembered that emerging markets have a rich, recent history of florid financial crises. The cracks are starting to emerge everywhere: wobbly “wealth management products” in China, the Turkish lira’s tumble, the selloff in Brazilian bond markets and last summer’s mini-rupee crisis.
- Amazon(AMZN) warns of possible loss, mulls Prime fee-hike. Amazon.com Inc missed Wall Street's estimates for the crucial holiday period and cautioned investors about a possible operating loss this quarter as shipping costs climb, pushing its shares down more than 5 percent.
- Emerging market storm spreads to Russia as rouble wobbles. Russian central bank vowed “unlimited” intervention to defend the rouble after it fell to a record low against a basket of currencies.
- None of note
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 149.25 +1.75 basis points.
- Asia Pacific Sovereign CDS Index 115.0 -.75 basis point.
- FTSE-100 futures -.26%.
- S&P 500 futures -.21%.
- NASDAQ 100 futures +.19%.
Earnings of Note
Company/Estimate
- (CVX)/2.58
- (D)/.88
- (LEA)/1.59
- (LM)/.95
- (LYB)/1.40
- (MA)/.60
- (MAT)/1.20
- (MJN)/.76
- (PCAR)/.93
- (SPG)/2.43
- (TYC)/.45
- (TSN)/.63
- (WY)/.28
8:30 am EST
- The Employment Cost Index for 4Q is estimated to rise +.4% versus a +.4% gain in 3Q.
- Personal Income for December is estimated to rise +.2% versus a +.2% gain in November.
- Personal Spending for December is estimated to rise +.2% versus a +.5% gain in November.
- PCE Core for December is estimated to rise +.1% versus a +.1% gain in November.
- Chicago Purchasing Manager for January is estimated to fall to 59.0 versus a reading of 59.1 in December.
- Final Univ. of Michigan Consumer Confidence for January is estimated to rise to 81.0 versus a prior estimate of 80.4.
- (TD) 2-for-1
- The China Manufacturing PMI, Eurozone CPI and the Eurozone Unemployment rate could also impact trading today.
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