Today's Headlines

Bloomberg:

• U.S. Slaps New Sanctions on North Korea in Response to Sony Hack. President Barack Obama today tightened U.S. sanctions on North Korea, targeting 10 individuals and three state agencies in response to the hacking of Sony Corp. and threats of violence against theaters and movie-goers. In an executive order, Obama authorized the Treasury Department to block the individuals and agencies from accessing the U.S. financial system and banning U.S. citizens from engaging in business with them. The sanctions represent the first official measures taken by the U.S. government in response to the cyber-assault on Sony Pictures Entertainment’s computer system, an attack that Obama promised last month to address “in a place and time and manner that we choose.”
• Macau Suffers Worst Year for Casinos Amid China Crackdown. Macau’s casinos recorded their worst year, ending a decade of expansion that turned the former Portuguese enclave into the world’s biggest gambling hub. More tough times are ahead. Casino revenue in the city fell 2.6 percent to 351.5 billion patacas ($44 billion) in 2014, after a record 30.4 percent monthly drop in December, according to figures from Macau’s Gaming Inspection and Coordination Bureau today. Analysts projected a 2 percent annual decline, based on the median of nine estimates in a Bloomberg News survey. 
• Russia and Iraq Supply Most Oil In Decades Amid 2015 Glut. Oil supplies in Iraq and Russia surged to the highest level in decades, signaling no respite in early 2015 from the glut that has pushed crude prices to their lowest in five years. Russian oil production rose 0.3 percent in December to a post-Soviet record of 10.667 million barrels a day, according to preliminary data e-mailed today by CDU-TEK, part of the Energy Ministry. Iraq exported 2.94 million barrels a day in December, the most since the 1980s, said Oil Ministry spokesman Asim Jihad. The countries provided 15 percent of the world’s oil in November, according to the International Energy Agency.
• Draghi Prepares to Act Against Risk of Deflation. Mario Draghi gave his strongest signal yet that the European Central Bank is likely to start large-scale government-bond purchases by saying he can’t rule out deflation in the euro area.
• Euro Forecasters See Pain After Worst Year Since 2005. Midway through European Central Bank President Mario Draghi’s May press conference in Brussels, the euro rose to its strongest level during his tenure. Then he said the ECB was ready to introduce more stimulus measures, sending it into a slide that strategists say will extend into 2015. Europe’s common currency, which appreciated to $1.3993 that May day, ended last year down 12 percent against the dollar, its biggest loss since 2005. Strategists, who were too timid with their call for a decline in 2014 to $1.28, now see a slump to $1.18 by the end of this year. The euro set a four-year low of $1.2009 today. 
• Emerging Stocks Drop as Brazil Slump. Emerging-market stocks fell as a probe of Brazil’s state-run oil company pushed the Ibovespa to its steepest drop in three weeks, outweighing a rally in Chinese shares traded in Hong Kong. Petroleo Brasileiro SA plunged 5.9 percent after Brazil’s securities regulator on Dec. 30 opened an inquiry into the company, which is already at the center of the biggest corruption investigation in the country’s history. China Vanke Co. (2202) jumped 11 percent to lead the Hang Seng China Enterprises Index in Hong Kong to a 2011 high. India’s stock gauge advanced 1.4 percent as the government pledged to build more roads. The MSCI Emerging Markets Index fell 0.4 percent to 952.46 at 2:03 p.m. in New York. The Ibovespa tumbled 3.1 percent.
• Europe Stocks Fall After Posting Smallest Year Gain Since 1992. European stocks declined on the first trading day of the year after completing the smallest annual advance since 1992. The Stoxx Europe 600 Index slipped 0.4 percent to 341.33 at the close of trading, paring earlier losses of as much as 0.7 percent. The gauge had earlier risen as much as 0.6 percent before falling as a measure of euro-area manufacturing expanded less in December than initially estimated. The number of shares changing hands in Stoxx 600-listed companies was 36 percent lower than the average of the past 30 days, data compiled by Bloomberg showed. The Swiss market was closed for a holiday.
• Oil Falls to 5 1/2-Year Low as Russia, Iraq Boost Output. Oil dropped to the lowest since May 2009 amid growing supply from Russia and Iraq and signs of manufacturing weakness in Europe and China. Futures headed for a sixth weekly loss in New York and London. Oil output in Russia and Iraq surged to the highest level in decades in December, according to data from both countries’ governments. Euro-area factory output expanded less than initially estimated in December. A manufacturing gauge in China, the world’s second-largest oil consumer, fell to the weakest level in 18 months, government data showed yesterday. Brent for February settlement fell 67 cents, or 1.2 percent, to $56.66 a barrel on the London-based ICE Futures Europe exchange at 1:28 p.m. in New York. It declined to $55.48, the lowest since May 7, 2009.
• Copper Drops to 4-Year Low as China Manufacturing Slows. Copper for delivery in three months dropped 0.7 percent to settle at $6,255 a metric ton ($2.84 a pound) at 5:50 p.m. on the London Metal Exchange. The commodity touched $6,218, the lowest since June 2010. Prices capped a third-straight weekly loss, the longest slump since Oct. 3. 
• Treasuries Climb as Yield Advantage at Almost Highest Since 1999. Treasuries rose, poised for their first weekly gain in three weeks, as U.S. 10-year notes yielded almost the most in 15 years versus their German-government peers. U.S. bonds extended gains after a gauge of American manufacturing fell more than forecast and construction spending unexpectedly dropped. German 10-year bund yields slid to a record after European Central Bank President Mario Draghi said he can’t exclude the risk of deflation, fueling speculation the ECB will soon start buying government bonds. The dollar rose versus all 16 major peers and reached parity with the Swiss franc for the first time since 2010.

ZeroHedge: 

• The Elephant Dragon In The Room: China's Hard Landing, In 21 Charts. (graph)
• Another Shale-Bubble Bursts: Oil's Plunge Is Not 'Unequivocally Good" For This Group. (graph)
• Low Prices Lead To Layoffs In The Oil Patch.
• These 19 States Just Hiked The Minimum Wage: Here Come The "Unintended Consequences".
• Turkmenistan Devalues Currency By 18%, Armstrong Warns Of "Economic Collapse On A Global Scale". (graph)
• Contrarianism And The Danger Of Taking Hugh Hendry's "Blue Pill".
• 5Y German Bond Yield Goes Negative For First Time Ever. (graph)
• ISM Manufacturing & Construction Spending Collapse To 6-Month Lows. (graph)
• Decoupling Just Died: December New Orders Plunge Below Polar Vortex Level, Optimism Plummets To 2012 Levels. (graph)
• Un-Decoupling? US Manufacturing PMI Tumbles To 11-Month Lows. (graph)

Business Insider: 

• Aviation Experts Think The AirAsia Flight Landed Safely In The Sea Before Sinking.
• Greece's Upcoming Election Just Got More More Complicated.
• Greece's Political Crisis Might Force It Out Of The Euro.

Reuters: 

• EMERGING MARKETS-Brazil's real sinks as central bank reduces intervention.

Telegraph: 

• French 'rock star' economist Thomas Piketty refuses highest honour. Author of Capital in the 21st Century says it is not the government's role to "decide who is honourable". 
• House price concerns grow as mortgage approvals hit a 17-month low. Data from the Bank of England is the latest to suggest weakening demand in the property market. 

Deutsche Welle:

• Soaring dollar hurts emerging markets. (video) The US dollar is soaring and that's hurting emerging economies with debt denominated in dollars. At the same time, the global decline in commodities prices means they earn fewer dollars to pay down that debt.