Bloomberg:
- China’s Rescue of Troubled Trust May Stoke Risk-Taking. China’s eleventh-hour rescue of wealthy investors in a
high-yield trust threatens to drive more money into the nation’s $6
trillion shadow-banking industry, undermining regulators’ efforts to
deter excessive risk-taking. Industrial & Commercial Bank of
China Ltd., the nation’s largest lender, yesterday told customers who
had invested in the 3 billion-yuan ($496 million) trust product that
they can sell their rights to unidentified buyers to recoup the
principal. Some clients plan to visit ICBC branches to demand more
interest ahead of tomorrow’s 5 p.m. deadline for accepting the offer,
according to Du Ronghai, a Guangzhou-based investor. Averting the
nation’s biggest trust default may reinforce investors’ belief in
implicit guarantees and the government’s backing of such risky products,
stoking their appetite for products in the $1.67 trillion trust market.
The bailout underscores the pressure on authorities to maintain
financial and social stability even as they aim to prune the
government’s role in the world’s second-largest economy and curtail
debt.
- Santander, BBVA Face Profit Drain on Emerging Currencies. Banco Santander
SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s biggest
banks, face a fresh risk to earnings as the slump in emerging market
currencies threatens to slow growth from Brazil to Turkey. Santander
relies on consumer banking in Latin America for more than a third of
profit, while BBVA has made Turkey, whose lira is the second-worst
performer against the euro over the last three months, a centerpiece of
growth plans. Santander reports fourth-quarter results on Jan. 30
and BBVA a day later. Rio Olympic Infrastructure Costs of $2.3 Billion
Are Set to Rise.
- Rio Olympic Infrastructure Costs of $2.3 Billion Are Set to Rise. Brazilian
authorities today
announced 5.6 billion reais ($2.3 billion) will be spent on
infrastructure directly related to the 2016 Rio de Janeiro Olympic Games
and those costs will rise as projects are added. The announcement
comes months behind schedule, and after pressure on public bodies to
reveal exactly how much it will cost for Rio to be the first South
American city to host the
quadrennial showpiece. Delays and cost overruns to several
projects related to this year’s soccer World Cup have sharpened
the focus on the Olympics.
- European Stocks Rise as Siemens Advances on Profitability.
European stocks advanced, following their largest three-day slump in
seven months, as mining companies climbed and banks rebounded from a
three-week low. BHP Billiton Ltd. and Rio Tinto Group both rose more
than 1 percent. Banco Santander SA, which generates most of its sales
from Latin America, gained 1.6 percent to halt an eight-day losing
streak. F&C Asset Management Plc (FCAM) jumped 6.1 percent after
Bank of Montreal agreed to buy the owner of the U.K.’s oldest investment
fund for 708 million pounds ($1.2 billion). The Stoxx Europe 600 Index increased 0.7 percent to 324.22
at the close of trading.
- WTI Rises for First Time in Three Days on U.S. Weather.
WTI for March delivery rose as much as 69 cents to $96.41 a
barrel and was at $96.28 as of 1:20 p.m. London time in electronic
trading on the New York Mercantile Exchange. The contract fell 1 percent
to $95.72 yesterday, the lowest price since Jan. 21. The volume of all
futures traded was about 42
percent below the 100-day average.
- Yellen Faces Test Bernanke Failed: Ease Bubbles. Janet Yellen probably will confront a test during her tenure as Federal Reserve
chairman that both of her predecessors flunked: defusing asset bubbles
without doing damage to the economy. The central bank’s easy money
policies already have led to pockets of frothiness in corporate debt and
emerging markets. The danger is that unwinding such speculative
excesses will end up shaking the financial system and hurting growth.
- Deep South Set for Rare Winter Storm Amid U.S. Frigid Front. A rare winter storm is forecast to bring heavy snow
and icing to parts of the Deep South today as temperatures continue to
drop across the U.S. behind an Arctic front sweeping the country.
The storm will extend from the central Gulf Coast to the southern
Mid-Atlantic coast today, the National Weather Service said in a
bulletin at 3:16 a.m. New York time. A wintry mix is possible as far as
southern Los Angeles.
- DuPont(DD) Sales Forecast Trails Estimates as Currency Costs Climb. DuPont
Co. (DD:US), the biggest U.S. chemical maker by market value, forecast
2014 earnings that missed analysts’ estimates as the company predicted
higher costs
from foreign currency exchange. Sales this year will climb 4 percent to about $37 billion,
Wilmington, Delaware-based DuPont said today in a statement,
trailing the $38.1 billion average of 17 estimates compiled by
Bloomberg.
Wall Street Journal:
Fox News:
MarketWatch:
CNBC:
ZeroHedge:
Business Insider:
CNN:
- Ukraine government resigns, parliament scraps anti-protest laws amid crisis. (video)
Ukrainian President Viktor Yanukovych accepted the resignation of
Prime Minister Mykola Azarov and his government Tuesday, amid a
political crisis fired by violent protests on the country's streets.
Azarov and his Cabinet will continue in their roles until a new
government is formed, a notice on the presidential website said.
Yanukovych's announcement
comes only hours after Azarov submitted his resignation and as the
national parliament met in an emergency session aimed at ending the
crisis.
Reuters:
- Corning(GLW) warns of further fall in LCD glass prices. Specialty glass
maker Corning Inc warned that prices of LCD glass would decline further
in the current quarter, raising concerns about growth in its display
business. Corning shares fell as much as 9 percent on Tuesday.
Financial Times:
- China is biggest risk to emerging markets. Tight credit and slowing growth create ripple effect across EMs. Debt markets have now seen 17 straight weeks of outflows and equities 13
weeks, the latter the longest streak in 11 years, according to data
from BofA Merrill Lynch.
Telegraph:
FAZ:
- Germany
Sheds One Third of Solar Jobs in 1 Year. Number of people employed in
solar-cell and solar-module production fell to 4,800 in thr yr through
November, citing data from Germany's Federal Statistics Office. The
industry is suffering from Chinese manufacturer pricing, according to
the report.
The Economic Times:
- RBI's Rate Hike Leaves India Inc Disappointed.
India Inc. today expressed disappointment over the Reserve Bank
increasing the key rate by .25% and hoped that banks would refrain from
hiking lending rates as such a move will scuttle economic recovery. "The
monetary policy statement of the RBI has disappointed the industry.
Growth has been anemic and investments have been hit hard over the last
two years and there are signs of contraction in employment opportunities
across industries," Ficci said in a statement. The
Reserve Bank of India today raised key policy rate by .25 per cent to 8%
in a bid to curb inflation, a move that may translate into higher EMIs
and push up the cost of borrowing for corporates.
The
Reserve Bank today raised key policy rate by 0.25 per cent to 8 per
cent in a bid to curb inflation, a move that may translate into higher
EMIs and push up the cost of borrowing for corporates.
NEW
DELHI: India Inc today expressed disappointment over the Reserve Bank
increasing the key rate by 0.25 per cent and hoped that banks would
refrain from hiking lending rates as such a move will scuttle economic
recovery.
"The monetary policy statement of the RBI has
disappointed the industry. Growth has been anaemic and investments have
been hit hard over the last two years and there are clear signs of
contraction in employment opportunities across industries," Ficci said
in a ..
India's
statistics office is likely to say in two weeks that growth this year
will slump further to an 11-year low, undermining the government's
optimism that it would at least be flat at 5% on the back of a recovery
in the second half.
The advanced estimate for FY14 is set to come in below that level, said an official who didn't want to be named.
The economy expanded 4.6% in the first half and would need to rise
5.4% in the second for growth to come in at 5%, which doesn't lo ..
Gloomy outlook: India's GDP may sink below 5% to an 11-year low
Xinhua:
Style Underperformer:
Sector Underperformers:
- 1) Disk Drives -1.34% 2) Oil Service -.32% 3) Computer Services -.27%
Stocks Falling on Unusual Volume:
- CHEF, RCII, AOS, VIP, STX, PII, HDS, SCBT, MX, SRCL, GLW, AAPL, LIVE, FCFS, OCN, DWCH, FEIC, OLN, POST, MONT, MBT, SWKS, TTS, XPO, X and ESI
Stocks With Unusual Put Option Activity:
- 1) SYMC 2) AOL 3) LOW 4) KBH 5) XLF
Stocks With Most Negative News Mentions:
- 1) VIP 2) QCOM 3) MMM 4) JPM 5) CHEF
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +4.12% 2) Airlines +2.28% 3) Gaming +2.09%
Stocks Rising on Unusual Volume:
- TXI, SIMO, MLM, LXK, KLIC, OSK, DHI, MXIM, TROW, SANM, OSK, PDCE, SWFT, CLF, JAZZ, WAT, ANF, VMC, LEN, ISIS, KBH and AAL
Stocks With Unusual Call Option Activity:
- 1) LXK 2) AEO 3) UPL 4) CHRW 5) CPWR
Stocks With Most Positive News Mentions:
- 1) LMT 2) PG 3) AAPL 4) CMCSA 5) PFE
Charts:
Evening Headlines
Bloomberg:
- China Local-Government Borrowing Costs Drop After Trust Bailout.
Borrowing costs for China’s financiers of roads, subways and sewage
plants dropped after a troubled trust product was bailed out, averting a
threatened default that added to concern about record local debt. The
average yield on five-year notes rated AA, the most common grade for
the so-called local-government financing vehicles, dropped two basis
points yesterday to 7.58 percent, thebiggest decline in more than two weeks. “The news is good for all high-yield bonds,
including LGFVs. The positive sentiment may last until the next
repayment problem arises.”
- China's Trade Data Under Scrutiny as Hong Kong Imports Diverge. China's trade numbers, distorted by fake
exports last year, are set to come under renewed scrutiny after a
discrepancy between Hong Kong and Chinese figures for bilateral trade
widened to the largest in eight months. Hong Kong's December imports
from China fell 1.9% from a year earlier to HK$176 billion($22.7
billion). the city's statistics department said today. That compares
with $38.5 billion in exports to Hong Kong reported earlier this month
by China's customs administration, up 2.3%, based on data compiled by
Bloomberg.
- Asian Stocks Swing Between Gains, Losses on China, Fed.
Asian stocks swung between gains and losses before the Federal Reserve
meets to discuss a further reduction in stimulus and as profit growth at
China’s industrial companies slowed. BHP Billiton Ltd., the world’s
biggest mining company that counts China as its No. 1 market, fell 1.9
percent to be the biggest drag on the index as Australian markets opened
after a holiday. LG Display Co. (034220) lost 4.4 percent in Seoul
after customer Apple Inc. forecast sales that trailed analyst estimates.
Komatsu Ltd., the world’s second-largest maker of construction
equipment, gained 2.2 percent in Tokyo after bigger rival
Caterpillar Inc. projected earnings that topped expectations.
The MSCI Asia Pacific Index was little changed at 134.76 as
of 12:22 p.m. in Tokyo, having swung between a gain of 0.2
percent and a loss of 0.3 percent.
- Rebar Drops in Shanghai as Demand Slows Before Lunar New Year.
Steel reinforcement-bar futures in Shanghai declined for a second day
as physical demand slowed before the Lunar New Year holiday. Rebar
for May delivery fell as much as 1 percent to 3,437 yuan ($568) a metric
ton on the Shanghai Futures Exchange and traded at 3,451 yuan at 10:44
a.m. local time. Most-active
prices, which declined on Jan. 22 to the lowest level since
June, are heading for a second monthly drop.
- Rubber Futures Poised for Bear Market as China’s Inventory Rises. Rubber futures in Tokyo headed
toward a bear market as stockpiles in China swelled to a nine-year high, signaling weakening demand from the largest consumer
of the commodity used in tires. Rubber for delivery in June on the Tokyo Commodity Exchange
fell as much as 1.2 percent to 226.5 yen a kilogram ($2,207 a
metric ton) before trading at 227.3 yen at 9:13 a.m. local time.
A close at or below 228.8 yen would be 20 percent decline from
the Sept. 9 settlement for a most-active contract, meeting the
common definition of a bear market. That would mark the end of bull run that started on Aug. 26
and stalled as stockpiles monitored by the Shanghai Futures
Exchange climbed, advancing for eight straight weeks to 204,451
tons, the largest amount since October 2004.
- STMicro(STM) Posts $36 Million Fourth-Quarter Loss, Trails Estimates.
STMicroelectronics NV (STM) reported fourth-quarter results that trailed
analysts’ estimates as Europe’s largest semiconductor maker works to
restructure plants and revamp its offerings. The net loss narrowed
to $36 million, or 4 cents a share, from $428 million, or 48 cents, a
year earlier, the Geneva-based company said in a statement yesterday.
The loss excluding impairment and restructuring charges totaled 1 cent a
share. Analysts projected profit of 2 cents, the average of estimates
compiled by Bloomberg.
Wall Street Journal:
- Request to SEC for AIG Files Nets Heavily Redacted Documents. Regulator Keeps Details—and Much More—Secret Despite Request for Info on AIG Probe.
The Securities and Exchange Commission recently released documents
related to its probe into the near-collapse of American International
Group Inc. with hundreds of redactions to keep information secret. SEC
officials blacked out information more than 800 separate times in one
transcript of a witness interview that lasted less than three hours. On
one page, redactions left just four words remaining: "okay," "by," "in"
and "did." On another page, "um hmm" is one of three short phrases left
untouched. Among the blacked-out
details: the names of witnesses, their lawyers, the SEC enforcement
officials and even the proofreaders who checked the transcripts.
- Government Reaches Deal With Tech Firms on Data Requests. Deal Would Allow Internet Companies to Tell Public More Details About Requests. The Obama administration agreed Monday to let technology companies make
more information public about how often the government monitors Internet
use, a move that aims to ease public distrust and corporate complaints
about snooping.
Fox News:
MarketWatch.com:
CNBC:
- Emerging markets are still vulnerable to panic. Emerging markets may be unrecognizable from the small and fragile
economies that fell like dominoes 15 years ago, but they are just as
vulnerable today to the same sort of indiscriminate selling when
investor panic sets in. As even the relatively robust
economies of Mexico and Poland now feel the heat from disparate
flashpoints from Turkey to Argentina, there are growing doubts that
emerging markets have built any immunity to such contagion. The
wildfire engulfing the developing world is starting to look very like
the currency runs of the past, such as the Asian, Russian and Latin
American collapses that began in 1997. Dominic Rossi, Global
CIO for equities at fund manager Fidelity, likens the current wave of
plunging currencies, equities and bonds to watching an old film—one in
which some of the biggest emerging markets could feature.
- Apple(AAPL) drops 5% on weak iPhone sales, revenue outlook. Apple
posted quarterly results that beat estimates Monday, but reported weak
iPhone sales and handed in a current-quarter revenue forecast that
underwhelmed, sending shares lower in extended-hours trading. The
company posted earnings of $14.50 a share on sales of $57.59
billion, surpassing expectations for $14.07 a share on sales of $57.46
billion, according to a consensus estimate from Thomson Reuters.
Shares dropped more than 5 percent in extended-hours trading.
- America’s recovery a 'false dawn,' says Stephen Roach. Despite signs that the U.S. economy is gaining traction, Stephen
Roach, former chairman of Morgan Stanley Asia, says the recovery appears
to be a "false dawn." "Financial markets and the so-called
Davos consensus are in broad agreement that something close to a classic
cyclical revival may finally be at hand for the U.S. But is it?" Roach,
a senior fellow at Yale University, wrote in an op-ed published on the
Project Syndicate website on Monday.
Zero Hedge:
Business Insider:
Washington Post:
- The lie that hangs over the State of the Union. Today,
a record 72 percent of Americans say big government is the biggest
threat to our country — the highest that number has been in 50 years of
polling. Concern with
big government is so bad, even a majority of Democrats — 56 percent —
consider it the biggest threat the nation faces. So not only do
Americans not trust Obama, they also have never been more skeptical of
bi -government solutions to our nation’s problems. So the president can
talk all he wants about income inequality, but it’s unlikely anyone will
trust him with a solution. That is Obama’s dilemma as he delivers his State of the Union address tomorrow night.
Reuters:
- China details $3-trillion local public debt risk. China's local
governments have published separate audit reports detailing their
combined public debt of $3 trillion for the first time ever, to increase
transparency and quell investor concerns.
The audits showed China's
wealthiest eastern provinces are the most indebted, though repayment
burdens are more onerous in poorer areas such as the southwestern
province of Guizhou, where the ratio of debt to GDP is the highest, at
79 percent. Most governments were
shown repaying the vast majority of their debt on time, though a
handful, such as Inner Mongolia, have fallen behind, with the portion of
loans due but unpaid running as high as 28 percent.
- U.S. Steel(X) loss widens as steel shipments fall. United States Steel Corp. reported a
wider fourth quarter loss as total steel shipments declined compared to last year. The Pittsburgh-based steelmaker had a net loss of $122
million, or 84 cents per share, compared to a loss of $50
million, or 35 cents per share, a year earlier.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 150.0 -5.5 basis points.
- Asia Pacific Sovereign CDS Index 117.50 -1.5 basis points.
- NASDAQ 100 futures -.66%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Durable Goods Orders for December are estimated to rise +1.8% versus a +3.5% gain in November.
- Durables Ex Transports for December are estimated to rise +.5% versus a +1.2% gain in November.
- Cap Goods Orders Non-Defense Ex Air for December are estimated to rise +.3% versus a +4.5% gain in November.
9:00 am EST
- The S&P/CaseShiller Home Price Index for November is estimated to fall to 165.72 versus 165.91 in October.
10:00 am EST
- Consumer Confidence for January is estimated to fall to 78.0 versus 78.1 in December.
- The Richmond Fed Manufacturing Index for January is estimated at 13.0 versus 13.0 in December.
Upcoming Splits
Other Potential Market Movers
- The
State of the Unions, German Retail Sales, UK GDP, 2Y $32B T-Note
auction, weekly retail sales report, TD Securities Mining Conference and
the (VIP) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 17.10 -5.73%
- Euro/Yen Carry Return Index 146.49 +.36%
- Emerging Markets Currency Volatility(VXY) 9.93 +1.43%
- S&P 500 Implied Correlation 57.41 +.07%
- ISE Sentiment Index 141.0 +78.48%
- Total Put/Call .86 -4.44%
Credit Investor Angst:
- North American Investment Grade CDS Index 71.72 -1.58%
- European Financial Sector CDS Index 104.88 +.83%
- Western Europe Sovereign Debt CDS Index 55.0 +3.13%
- Asia Pacific Sovereign Debt CDS Index 117.95 -.85%
- Emerging Market CDS Index 334.63 -.82%
- 2-Year Swap Spread 15.0 unch.
- TED Spread 19.0 -1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -3.25 +.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .05% +1.0 basis point
- Yield Curve 241.0 +2.0 basis points
- China Import Iron Ore Spot $124.30/Metric Tonne unch.
- Citi US Economic Surprise Index 59.0 -3.6 points
- Citi Emerging Markets Economic Surprise Index 7.1 +.4 point
- 10-Year TIPS Spread 2.14 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +25 open in Japan
- DAX Futures: Indicating +27 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Emerging-Market Stocks Decline as Ruble Breaches Band. Emerging-market stocks dropped the
most in almost seven months amid concern a slowdown in the
Chinese economy will curb global growth. Russia’s ruble breached the upper boundary of Bank Rossii’s target corridor. The MSCI Emerging Markets Index fell 1.9 percent to 931.61 at 2:31 p.m. in New York, set for the biggest slump since July
3. Benchmark gauges from China to India and South Africa
decreased at least 1 percent. The ruble sank to lowest level on
a closing basis since 2009 against its dollar-euro basket,
before paring declines. Turkey’s lira snapped a 10-day slide on
speculation the central bank will raise interest rates tomorrow. “The sluggish growth we see in China underscores the
general concern that the economy is a lot weaker than it
seemed,” Bruce McCain, who helps oversee more than $25 billion
as chief investment strategist at the private-banking unit of
KeyCorp in Cleveland, said in a telephone interview. “If you
look at economic data from China, you see that there are few
chances things are going to get better, more likely things are
going to get worse.”
- China's Trade Data Under Scrutiny
as Hong Kong Imports Diverge. China's trade numbers, distorted by fake
exports last year, are set to come under renewed scrutiny after a
discrepancy between Hong Kong and Chinese figures for bilateral trade
widened to the largest in eight months. Hong Kong's December imports
from China fell 1.9% from a year earlier to HK$176 billion($22.7
billion). the city's statistics department said today. That compares
with $38.5 billion in exports to Hong Kong reported earlier this month
by China's customs administration, up 2.3%, based on data compiled by
Bloomberg.
- China Deepens Crackdown on Dissent With Jail Term for Xu. China’s ruling Communist Party
intensified its crackdown on dissent with the jailing of legal
scholar Xu Zhiyong and another prominent dissident saying on
Twitter that he was taken away by police. Xu, the most prominent activist jailed since Nobel Peace
Prize winner Liu Xiaobo in 2009, was sentenced by a Beijing
court yesterday to four years in prison on charges of gathering
a crowd to disturb public order. While he was not given a formal
opportunity to respond, Xu, 40, told the court that “the last
dignity of Chinese law has been destroyed,” his lawyer Zhang
Qingfang said by telephone.
- Top Trades in Disarray Amid Emerging-Market Rout: Currencies. It’s less than a month into 2014 and
already currency strategists are seeing their top trade
recommendations for the year upended by the rout in emerging markets.
Buying Mexico’s peso versus the yen has lost about 1 percent since Bank
of America Corp. named the trade one of its top picks in November, with
a targeted return of 9.4 percent. Danske Bank A/S exited a trade this
month buying Turkey’s lira versus Denmark’s krone at a loss of 2.9
percent. Of 31 major emerging-market currencies, 13 have already
weakened beyond
their median year-end forecasts in Bloomberg analyst surveys.
- LG Electronics Posts Surprise Quarterly Loss on Currency. LG Electronics Inc. (066570), the world’s second-largest maker of televisions, posted an unexpected loss
as a stronger South Korean won curbed the value of overseas
sales and the company boosted promotion of the G2 smartphone.
- Sony Cut to Junk by Moody’s as Mobile Devices Lure Buyers. Sony
Corp. (6758) had its credit rating cut to junk by Moody’s Investors
Service as Japan’s biggest television maker struggles to capture
consumer demand for smartphones and tablet computers. The rating was
lowered to Ba1, one level below investment grade, from Baa3 and the
outlook is stable, Moody’s said in an e-mailed statement today. Sony is
also rated junk at Fitch Ratings, while Standard & Poor’s has
the company on the second-lowest investment grade.
- Euro Jobless Record Not Whole Story as Italians Give Up. Euro-area data this week will probably show the region ended 2013
with a record jobless rate that reveals only part of the social legacy of the debt crisis. While
economists predict unemployment in December stayed at an all-time high
of 12.1 percent, with about 19 million jobless, that tally excludes
legions of adults who would also work if they could. Bloomberg
calculations for the third quarter show a wider total of 31.2 million
people of all ages are either looking for jobs, willing to do so though
unavailable, or else have given up.
- Italy Banks Tumble as Banco Popolare Spreads Concerns on Capital. Banco Popolare SC led a decline in Italian bank shares after
announcing an unexpected loss and plans for a capital increase, fueling
doubts about the quality of assets at the country’s lenders. Banco
Popolare, Italy’s fourth-biggest bank, dropped as much as 16 percent,
the most since December 2008, and was 13 percent lower at 1.31 euros by
12:23 p.m. in Milan. Banca Popolare dell’Emilia Romagna SC, Italy’s No. 7
bank by assets, declined 9 percent, while Banca Popolare di Milano
Scarl, the eighth-biggest lender, fell 8 percent.“Banco Popolare’s capital hike raises additional questions over Italian banks’
asset quality,” analysts at Goldman Sachs Group Inc., including
Jean-Francois Neuez, wrote in a note to clients today.
- RBS Set for Biggest Loss Since 2008 After $5.1 Billion Provision. Royal
Bank of Scotland Group Plc set aside a further 3.1 billion pounds ($5.1
billion) to cover legal and compensation claims, putting Britain’s
biggest bailed-out lender on track to post its largest pretax loss since
2008. The provision includes 1.9 billion pounds for lawsuits and
fines tied mostly to the sale of $91 billion of mortgage-backed
securities from 2005 to 2007, according to the lender. It follows
agreements Deutsche Bank AG, JPMorgan Chase & Co. and UBS AG (UBSN)
struck with U.S. regulators to settle claims they didn’t
provide adequate disclosure about mortgage-backed debt sold in
the housing bubble that preceded the 2008 financial crisis.
- ECB Confronted by Banks Testing Exit, Threat to Recovery. Rising market rates are posing a
dilemma for European Central Bank officials trying to keep their
ultra-expansive monetary policy in place. Overnight borrowing costs for banks have surged above the
ECB’s benchmark rate even as policy makers argue that it’s not yet time to exit emergency stimulus.
When officials meet in Frankfurt on Feb. 6 they’ll have to assess
whether the tighter financing conditions show a resurgence of tensions
that warrant
a policy response or simply increased confidence in the region’s
economic recovery.
- Europe Stocks Drop for Third Day; BG Group, Vodafone Fall. European stocks fell for a third day, sending the Stoxx Europe 600 Index to its lowest level in a
month, with BG Group Plc and Vodafone Group Plc tumbling. BG Group plunged 14 percent after the U.K. oil and gas
producer said 2013 earnings would be lower than forecast.
Vodafone lost 3.9 percent after AT&T Inc. said it doesn’t intend
to make an offer for Europe’s largest mobile-phone operator.
Lanxess AG climbed 8.2 percent after the chemical maker named
Merck KGaA finance chief Matthias Zachert as its chief executive
officer. Merck tumbled 10 percent.
The Stoxx 600 dropped 0.8 percent to 322.02 at the close of
trading in London, sending its three-day decline to 4.2 percent.
- Fed Would Need to Reveal More on Bank Oversight Under New Bill. The Federal Reserve would have to
disclose more about supervision of the biggest, riskiest banks
under legislation aimed at increasing Fed accountability
introduced by Representative Scott Garrett, a New Jersey Republican on the House panel overseeing the central bank.
The bill would require the Fed (FDTR) to perform a cost-benefit
analysis of any new banking rule and disclose more about bank stress
tests. The Fed vice chairman would have to testify on financial
rulemaking if the post of vice chairman for
supervision remains unfilled, and the Fed Board would need to
release to Congress its internal audit of supervision and
regulation.
- Obama’s Plan to Use Executive Action Triggers Criticism.
Republican lawmakers said President Barack Obama risks antagonizing an
already polarized Congress by threatening to use executive authority to
make good on the policy agenda he will outline in his State of the Union
address. Senate Republican Leader Mitch McConnell of Kentucky said
Obama is wrong to think he can bypass lawmakers if they don’t make
legislative progress this year. “Ronald Reagan didn’t think that and Bill Clinton didn’t think that,”
McConnell said yesterday on Fox’s “Fox News Sunday” program.
“Frequently, times of divided government are quite good times in terms
of achieving things for the American people.”
Wall Street Journal:
CNBC:
ZeroHedge:
Wall Street All-Stars:
Business Insider:
The Atlantic:
- Is China's Historic Credit Bubble About to Pop? What happens if the shadow-bank boom turns to bust? Bad, bad things.
The Chinese government would presumably bail out any state-owned
banks and companies that got into trouble, but not the shadow banks. It
would leave them to die. In fact, the central bank has been trying to
kill—or at least rein in—the riskiest of these underground lenders by engineering three credit crunches the past half-year.
SafeHaven:
- What Blows Up First? Part 3: Subprime Countries.
The crucial point here is that this crisis is not a case of one or two
little countries screwing up. It's everywhere, from Latin America to
Asia to Eastern Europe. Each country's problems are unique, but
virtually all can be traced back to the destabilizing effects of hot
money created by rich countries attempting to export their debt
problems to the rest of the world. ZIRP, QE and all the rest
succeeded for a while in creating the illusion of recovery in the US,
Europe and Japan, but now it's blow-back time. The mess we've made in
the subprime countries will, like rising defaults on liar loans and
interest-only mortgages in 2007, start moving from periphery to core.
Reuters:
Financial Times:
- Emerging markets will have to tighten, says Brazil’s Tombini. Emerging
market countries faced fresh pressure on Monday to hike interest rates
as Brazil warned that others would need to follow its lead in tightening
monetary policy and Turkey’s central bank convened an emergency
rate-setting meeting. Alexandre Tombini, Brazil’s central bank governor, said the “vacuum
cleaner” of rising interest rates in the developed world would continue
to suck money out of emerging markets and force other central banks to
tighten policy to beat inflation.
Xinhua:
- China to Cut Number of Counties Getting Poverty Aid. China will
reduce the number of key counties that need poverty-alleviation aid,
citing Wang Guoliang, deputy director of the State Council Leading Group
Office of Poverty Alleviation and Development.
Style Underperformer:
Sector Underperformers:
- 1) Airlines -2.77% 2) I-Banks -2.43% 3) Biotech -2.42%
Stocks Falling on Unusual Volume:
- RGS, BIB, LBTYK, VOD, PNQI, CEMP, LBTYA, VIV, XRS, DL, CEO, ZIV, EOPN, WETF, JAZZ, IRE, ALGN, HQH, BNS, SNE, IBB, CE, GLNG, GOOG, OTEX, IGT, WAB, SF, OII, TRW, BX, CELG, NKTR, CEQP, CAMP, ANN, YELP, SPLK, N, RLYP, ALKS, KERX, EVR, MOD, KBH, BABY, SSYS, PGR, DDD, ANIK, RGS and EPZM
Stocks With Unusual Put Option Activity:
- 1) SPLS 2) XLF 3) KRE 4) IWO 5) IBB
Stocks With Most Negative News Mentions:
- 1) UNG 2) C 3) TOL 4) MS 5) BIDU
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Computer Hardware +.32% 2) Telecom +.29% 3) Utilities -.06%
Stocks Rising on Unusual Volume:
- CAT, RYN, ORMP, SIG, LIVE, CSTM and HIMX
Stocks With Unusual Call Option Activity:
- 1) TWX 2) RHT 3) SWK 4) MO 5) GTAT
Stocks With Most Positive News Mentions:
- 1) GOOG 2) ADBE 3) AAPL 4) CB 5) SBUX
Charts:
