Today's Headlines

Bloomberg:

• Islamic State Plans Attacks From Camps in Europe, Europol Says. Islamic State has set up a special operations command to mastermind more terrorist attacks on “soft targets” in Europe, drawing on training camps on European soil and with France as the most at-risk country, the European Union’s crime-fighting agency said. The model is the simultaneous shootings at several locations in Paris in November which killed 130, with most of the bloodshed at a concert hall in eastern Paris, said the agency, known as Europol. It is possible that similar operations “are currently being planned and prepared,” Europol said in a report released on Monday during a meeting of EU interior ministers in Amsterdam. “The wide range of possible targets in combination with an opportunistic approach of locally based groups creates a huge variety of possible scenarios for future terrorist events.” While Syria remains the hub, Islamic State has set up “smaller scale” training camps in the 28-nation EU and in the Balkans, granting local operatives greater tactical freedom to strike at will, Europol said.

• EU to Extend Border Checks Amid Refugee Crisis, Terror Fears. European Union governments prepared to prolong passport checks at some internal borders for up to two more years, as the unrelenting inflow of refugees overwhelms countries from debt-stressed Greece to economically mighty Germany. Extended controls at borders in northern and western Europe would come as the 28-nation bloc fails to get to grips with the more than 1 million migrants who have flooded in over the past year. Near-permanent alerts of further terrorism after November’s Paris attacks add to the close-the-borders mood.

• It's the Cross-Border Deleveraging, Stupid. Foreign borrowing comes home to roost.

• Russian Economy Shrinks Most Since 2009 as Oil Prices Sink. Russia’s economy, facing renewed pressure from plunges in energy prices and the ruble, contracted the most since 2009 last year on oil’s decline and sanctions over the conflict in Ukraine that curbed access to international financing. Gross domestic product fell 3.7 percent after growth of 0.6 percent in 2014, the Federal Statistics Service said Monday on its website, citing preliminary estimates. Economists in a Bloomberg survey forecast a 3.8 percent drop. A separate release of consumer data for December showed spending continued to decline as real wages and disposable incomes fell further. Russian consumers are suffering amid the recession, with retail sales diving 15.3 percent from a year earlier in December, matching the median forecast in a survey of economists. Wages adjusted for inflation plummeted 10 percent, more than analysts predicted, while disposable incomes fell 0.7 percent, less than the 5.6 percent decline seen by economists. 

• Record Cash Shows Emerging-Market Firms Going Into Cocoon. (video) Cash is king in developing nations these days. The 838 companies in the MSCI Emerging Markets Index on average had a record $608 per share in cash or short-term investments at the end of last year, according to data compiled by Bloomberg. That’s up 34 percent from the previous year, the biggest annual jump in a decade. The extra cash typically comes from postponed spending, according to Simon Quijano-Evans, the chief emerging-market strategist at Commerzbank AG.

• Brazil Price Outlook Surges as Analysts Forecast Lower Key Rate. Brazil analysts raised inflation forecasts and pared estimates for the benchmark interest rate, after the central bank last week unexpectedly balked at increasing borrowing costs. Analysts surveyed by the central bank expect the so-called Selic rate to reach 14.64 percent by year-end, down from last week’s forecast of 15.25 percent. They also increased their 2016 inflation estimate to 7.23 percent from 7 percent.

• 90% Chance of a 'Bumpy Landing' in China: Xingtai Capital. (video)

• Hong Kong Feels the Squeeze of a Slowing China and Rising Rates. As a premier Asian financial center parked at the doorstep of one of the fastest-growing economies on the planet, Hong Kong has long lived a charmed life. The former British colony’s Western-style legal and regulatory system made it a magnet for global investors interested in buying listed Chinese stocks on the Hong Kong Stock Exchange. Its banks, insurance companies, ports and cargo carriers have made a nice living off their powerful neighbor. An added bonus: Since 2008, low global interest rates in the post-financial crisis era have powered a property market that has kept the $300 billion economy humming. Yet now China’s economy is decelerating and just turned in its weakest full-year economic growth since 1990. Global investors are no longer gravitating to Hong Kong-- they’re scrambling for the exits.

• Emerging Market ETFs Lose More Than $1 Billion Led by China Flow. Investors pulled more than $1 billion out of U.S. exchange-traded funds that invest in emerging-markets as a third week of outflows left the ETFs down $3.9 billion this month. Redemptions from emerging-market ETFs that invest across developing nations as well as those that target specific countries totaled $1.17 billion in the week ended Jan. 22, according to data compiled by Bloomberg. While losses narrowed from $2.12 billion the previous week, the outflows so far this month are the most since August, when they reached $6.1 billion.

• German Business Sentiment Falls as Market Woes Cloud Outlook. German business confidence fell for a second month in January in a sign that companies in Europe’s largest economy are increasingly worried about slowing global growth. The Ifo institute’s business climate index dropped to 107.3 from a revised 108.6 in December. The median estimate in a Bloomberg survey of economists was for a decline to 108.4.

• Ford(F) Shutting Operations in Japan, Indonesia on Lack of Profit. Ford Motor Co. will close down all operations by the end of this year in Japan and Indonesia, where the U.S. automaker says it has no path to boost sales or earn profits. The step is being taken “after pursuing every possible option,” Karen Hampton, Ford’s Asia Pacific spokeswoman, said in an e-mailed statement. The company will provide ongoing support to customers for service, spare parts and warranties, she said.

• European Stocks Halt Rebound as Banks, Commodity Producers Slide. (video) Declines in commodity shares and lenders put an end to a rally in European stocks. The Stoxx Europe 600 Index fell 0.6 percent at the close of trading in London. Seadrill Ltd. led the slide, tumbling 8.9 percent as oil fell after the world’s biggest crude exporter said it’s keeping up investments in energy projects. A gauge of miners also dropped, while lenders slid the most among industry groups.

• Oil Drops as Saudis to Maintain Spending, China Diesel Use Falls. Oil dropped after Saudi Arabia, the world’s biggest crude exporter, said low prices won’t reduce its spending on energy projects and China’s diesel consumption dropped for a fourth consecutive month. Futures dropped as much as 5.3 percent in New York. Saudi Arabian Oil Co., also known as Saudi Aramco, is maintaining its investment plans despite the rout in the crude market, Chairman Khalid Al-Falih said Monday. Diesel use in China dropped 5.6 percent in December compared with a year earlier and gasoline consumption grew at the slowest pace in more than two years. 

• Bets on WTI Oil Slumping Below $25 Rise to a Record: Chart. Bets that crude oil will retreat below $25 a barrel have reached an all-time high as stockpiles continue to grow. Open interest, or the amount of total contracts outstanding, for March West Texas Intermediate crude $25 put options rose to 29,023 on Jan. 22, the highest among all March WTI options. The puts expire on Feb. 17. 

• So Yes, the Oil Crash Looks a Lot Like Subprime. The price of crude has been tracking an infamous subprime mortgage index.

• Hedge Funds Had Worst Year Since 2008 Betting on Commodities. Hedge funds betting on raw materials had the worst performance since the global financial crisis of 2008 as everything went wrong for commodities. The funds lost 5.2 percent in 2015 and recorded losses in 10 out of 12 months, based on an index compiled by Societe Generale SA that tracks the performance of commodity trading strategies including equities and physical products.

• Potash Corp.(POT) Falls Amid Speculation Dividend Will Be Reduced. Potash Corp. of Saskatchewan Inc., the largest supplier of its namesake fertilizer in North America, fell the most in more than two years after analysts at JPMorgan Chase & Co. said lower nutrient prices probably will prompt management to cut payments to shareholders. Potash Corp. fell 7.9 percent to $14.82 at 11:57 a.m. in New York. The shares slide earlier as much as 9 percent, the largest intraday decline since July 2013.

• Chances of a Fed Rate Increase Fall After Market Selloff.

CNBC:

• Morgan Stanley(MS) sees big plunge in Treasury yields. (video)

Zero Hedge: 

• China Warns "Social Stability Threatened" As 400,000 Steel Workers Are About To Lose Their Jobs.

• WalMart(WMT) Store Closures Leave Elderly Villagers With No Grocery Stores, Pharmacies. Last week, WalMart doubled down on the wage hike debacle when the world’s largest retailer decided to give everyone a raise in February. The all-in cost will be around $2.7 billion. While some were surprised at the move, it was easy to see coming. Indeed, we’ve long said that the company’s decision to hike wages for its lowest-paid employees would eventually necessitate similar raises for workers higher up the corporate ladder. 

• When The Fed Put Fails.

• What Buyback Slowdown: "Our Buyback Desk Is Very Busy" Admits Credit Suisse. (graph)

• Bad Loans Pile Up In Alberta, As Oil Bust Weighs On State Lender. (graph)

• ...Until The Bubble Bursts. (graph)

• Which Italian Banks Are Most Exposed To Soaring NPLs: Citi Crunches The Numbers. (graph)

• Texas Economy Collapses - Dallas Fed Survey Crashes To 6-Year Lows As "D" Word Is Uttered. (graph)

• Spain's Election Quagmire: What Wall Street Thinks.

• Ray Dalio Admits QE Won't Work, Asks For More Anyway.

• Why Junk Bonds Will Sink Stocks. (graph)

Business Insider:

• McDonald's(MCD) fixed customers' top complaint — and sales are soaring.

• Jony Ive is reportedly not happy with the Apple(AAPL) Car and there's a hiring freeze in place.

• The Obama administration just 'made a scary retreat' in its Syria policy — and negotiations are quickly unraveling.

USA Today: 

• Islamic State releases video of Paris attackers. (video) The Islamic State released a video purporting to show nine Paris attackers before they launched their assaults on the French capital. The video was released Sunday by the extremist group’s media center and shows militants training, beheading and shooting captives in its territory.