Bloomberg:
- China Savers’ Penchant for Property Magnifies Bust Danger. Chinese households’ concentration of wealth in real estate is magnifying the danger to the world’s second-largest economy of any property bust, as the nation grapples with the consequences of its record credit surge. Some 66.1 percent of family assets were in housing in 2013, a national survey of about 28,000 households shows. Mortgage debt as a share of disposable income rose to 30 percent from 18 percent in 2008, according to estimates by Nicholas Lardy at the Peterson Institute for International Economics in Washington. The buildup raises the stakes for any slide in property prices amid China’s efforts to head off defaults by local governments and developers that propelled a run-up in borrowing that now amounts to more than double the size of the economy, according to Goldman Sachs Group Inc. A hit to household wealth could impair consumer spending, rebuffing policy maker efforts to rebalance the economy toward domestic demand.
- Pimco’s Bill Gross Says He Avoids China ‘Mystery Meat'. Bill Gross, who oversees the world’s biggest bond fund at Pacific Investment Management Co., said the pace of economic growth in China is among the biggest questions in developing nations and the largest risks for markets. “I call China the mystery meat of emerging-market countries,” Gross said yesterday during an interview on Bloomberg Television’s “Market Makers” with Erik Schatzker and Stephanie Ruhle. “Nobody knows what’s there and there’s a little bit of bologna, so we’re just going to have to wonder going forward through this year as to the potential problems in China and other emerging markets.”
- Deadly New Bird Flu Strain Spawned by Virus Behind H5N1. The new bird flu that’s infected two people in China, killing one, was spawned by the same pathogen that produced two other deadly flu strains, a study found. The new H10N8 strain, which hasn’t previously been reported in humans, contains six out of eight genes from the H9N2 virus that also provided the genetic foundation for the H5N1 virus that’s killed 386 people since 2003, and the H7N9 strain that led to at least 70 fatalities, Chinese researchers wrote in The Lancet medical journal today.
- Japan Real Wages Fall to Global Recession Low in Spending Risk. Japan’s base wages adjusted for inflation last year matched a record low in 2009 when the world was gripped by recession, posing a risk to consumer spending as the nation girds for a higher sales tax. Pay excluding bonuses and overtime payments dropped to 98.9 in 2013 on a labor ministry index that takes price changes into account, equaling the level four years earlier. The gauge is based at 100 in 2010 in data dating back to at least 2002.
- Chinese Shares Decline to Six-Month Low in Hong Kong. The Hang Seng China (HSCEI) Enterprises Index dropped to a six-month low as financial companies and energy producers retreated. Ping An Insurance Group Co. slid 1.4 percent, while Huaneng Power International Inc. slumped 2.9 percent. Cheung Kong Holdings Ltd., the Hong Kong developer controlled by billionaire Li Ka-shing, fell 1.5 percent, heading for its lowest close since September. Anhui Conch Cement Co. gained 2.1 percent after Credit Suisse Group AG named the stock as one of its top picks. The Hang Seng China gauge of mainland companies, known as the H-share index, lost 0.3 percent to 9,482.01 at the midday break in Hong Kong, heading for its lowest close since Aug. 7.
- Asian Stocks Follow U.S. Rebound as Earnings Boost Japan. Asian stocks rose, with the regional benchmark index rebounding from its biggest slump since June, after U.S. shares rebounded and Japanese companies posted earnings that cheered investors. Toyota Motor Corp., the world’s largest carmaker, jumped 6.2 percent in Tokyo after forecasting a record profit. Panasonic Corp. surged 21 percent, heading for its largest gain in almost 40 years of trading, after Japan’s biggest consumer-electronics maker posted third-quarter profit that beat analyst estimates. Hyundai Development Co-Engineering & Construction gained 5.7 percent in Seoul after the homebuilder’s rating was raised at KTB Securities Co. The MSCI Asia Pacific Index climbed 0.8 percent to 131.25 as of 11:03 a.m. in Tokyo, after plunging the most since June 20 yesterday.
- Rubber in Tokyo Trades Near 17-Month Low Amid China Holidays. Rubber in Tokyo traded near the lowest level in 17 months as demand from biggest-user China remains subdued during holidays, while output in major producing nations is poised to decline. The contract for delivery in July rose and fell by at least 1.2 percent before trading at 220.6 yen a kilogram ($2,177 a metric ton) by 11:48 a.m. local time on the Tokyo Commodity Exchange. Futures earlier touched 217.8 yen, the lowest intraday level for a most-active contract since Sept. 5, 2012. The commodity entered a bear market last week and has lost 20 percent this year.
- Fed Presidents Say Stock Decline Unlikely to Derail QE Taper. Two Federal Reserve district bank presidents signaled a decline in global stock markets probably won’t deter the Fed from further trimming bond buying that has pushed up central bank assets to $4.1 trillion. “The hurdle ought to remain pretty high for pausing in tapering,” Richmond Fed President Jeffrey Lacker said after a speech today in Winchester, Virginia. Chicago’s Charles Evans said in Detroit that policy makers probably face “a high hurdle to deviate” from $10 billion cuts in monthly bond buying at each of their next several meetings.
- Assault on California Power Station Raises Alarm on Potential for Terrorism. April Sniper Attack Knocked Out Substation, Raises Concern for Country's Power Grid.
The attack began just before 1 a.m. on April 16 last year, when someone slipped into an underground vault not far from a busy freeway and cut telephone cables. Within half an hour, snipers opened fire on a nearby electrical substation. Shooting for 19 minutes, they surgically knocked out 17 giant transformers that funnel power to Silicon Valley. A minute before a police car arrived, the shooters disappeared into the night. To avoid a blackout, electric-grid officials rerouted power around the site and asked power plants in Silicon Valley to produce more electricity. But it took utility workers 27 days to make repairs and bring the substation back to life. Nobody has been arrested or charged in the attack at PG&E Corp.'s Metcalf transmission substation. It is an incident of which few Americans are aware. But one former federal regulator is calling it a terrorist act that, if it were widely replicated across the country, could take down the U.S. electric grid and black out much of the country.
- Steel Scrapyards in U.S. Feel Effects of Turkey's Tarnished Economy. The reach of Turkey's economic turmoil stretches to a sprawling scrapyard in this blue-collar town and to veteran metals trader Ken Puckett. Turkey is the world's largest consumer of scrap steel, meaning strong demand from the country is essential to keeping prices firm for the $20 billion U.S. industry. But with the Turkish economy in crisis, demand is drying up. The country's imports of scrap from the U.S., Turkey's top supplier, fell 18% to 4.9 million tons in the first 11 months of last year. That means that scrap that had been destined to be used in Turkish steel mills remains in the U.S. looking for buyers.
- The Jobless Care Act. Congress's budget office says ObamaCare will increase unemployment. There are 7.8 million Americans working part-time who want full-time work, including a fry cook whose restaurant cut his hours to avoid Affordable Care Act mandates and confronted President Obama in an online Google Q&A last week: "We can't survive. It's not a living." Mr. Obama changed the subject to raising the minimum wage. But he can't dodge reality forever as the evidence piles up that ObamaCare is harming the labor market.
- S&P Cuts Puerto Rico Debt to Junk. Standard & Poor’s on Tuesday cut Puerto Rico’s credit rating to junk status, citing the Caribbean island’s inability to borrow money to cover looming budget deficits. All of Puerto Rico’s general obligation debt was cut one level to BB+, the high level of junk status debt. S&P said all of its ratings on Puerto Rico remain on watch for additional downgrades.
- Top intelligence chiefs warn Syria could become base for attacks against US. For the second time in a week, the nation's top intelligence chiefs Tuesday issued a scathing assessment of the global threats facing the United States, warning that Syria is becoming a base from which extremist, Al Qaeda-linked groups could attack the U.S.
Zero Hedge:
Business Insider:
Forbes:
The Federalist:
Reuters:
- Morgan Stanley(MS) to pay $1.25 bln to resolve mortgage lawsuit. Morgan Stanley said it would pay $1.25 billion to the U.S. regulator for Fannie Mae and Freddie Mac to settle a lawsuit related to the sale of mortgage-backed securities.
- Power off across parts of Brazil; govt dismisses blackout fears. Some of Brazil's most populous regions suffered sporadic power outages on Tuesday, raising election-year fears of shortages in a country with a long history of blackouts.
- Emerging markets more vulnerable than ever to Fed tightening, warns BIS. Bank for International Settlements says there had been a “massive expansion” in borrowing on global bond markets by banks and companies in developing countries.
- None of note
- Asian equity indices are -.75% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 151.0 -6.0 basis points.
- Asia Pacific Sovereign CDS Index 116.75 -2.5 basis points.
- FTSE-100 futures -.38%.
- S&P 500 futures -.22%.
- NASDAQ 100 futures -.20%.
Earnings of Note
Company/Estimate
- (MDC)/.60
- (STE)/.69
- (COCO)/.02
- (HUM))/.92
- (TWX)/1.15
- (NDAQ)/.67
- (MRK)/.89
- (EL)/1.06
- (ADP)/.77
- (RL)/2.51
- (AGN)/1.34
- (GMCR)/.90
- (ALL)/1.37
- (DIS)/.91
- (IACI)/.91
- (AKAM)/.51
- (YELP)/-.02
- (SPF)/.14
- (PRU)/2.23
- (TSO)/.31
- (TWTR)/-.02
8:15 am EST
- The ADP Employment Change for January is estimated to fall to 185K versus 238K in December.
- ISM Non-Manufacturing for January is estimated to rise to 53.7 versus 53.0 in December.
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+2,270,000 barrels versus a +6,421,000 barrel gain the prior week.
Gasoline supplies are estimated to rise by +920,000 barrels versus a
-819,000 barrel decline the prior week. Distillate inventories are
estimated to fall by -2,120,000 barrels versus a -4,584,000 barrel
decline the prior week. Finally, Refinery Utilization is estimated to
fall by -.29% versus a +1.7% gain the prior week.
- None of note
- The Fed's Plosser speaking, Fed's Lockhart speaking, Eurozone Services PMI, Australian Trade Balance report, weekly MBA mortgage applications report and the Cowen Aerospace/Defense Conference could also impact trading today.
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