Today's Headlines

Bloomberg:

• German Government Cuts 2013 Growth Forecast on Euro Woes. German Chancellor Angela Merkel’s government cut its growth forecast for Europe’s biggest economy as austerity policies in cash-strapped euro-region countries and cooling world trade damp exports. German gross domestic product growth will slow to 0.4 percent this year from 0.7 percent in 2012, the Economy Ministry said in its annual report today. That compares with a previous forecast for 1 percent expansion.  
• European December Car Sales Fall 16% on U.S. Producers. European car sales in December plunged the most in more than two years as recessions in the southern part of the region cut demand at Ford Motor Co. (F), General Motors Co. (GM) and Renault SA. (RNO) Registrations fell 16 percent to 838,428 vehicles from 997,842 a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. Full-year sales declined 7.8 percent to 12.5 million cars, with the slump in the European Union the worst in 19 years. “The concern is that German, Spanish and U.K. consumer confidence is slipping away,” Michael Tyndall, an analyst at Barclays Plc, said by phone. “Before we get too excited about stabilization in demand, we need to see consumers in those key markets to start to feel a bit happier.” GM slid 4.1 percent to $29.35 at 9:43 a.m. New York time, after earlier declining as much as 5 percent to $29.07, the biggest intraday decline since June 4. The ACEA compiles figures from the 27-nation EU, Switzerland, Norway and Iceland. The drop in December was the biggest since October 2010, when demand declined as government incentives to trade in older vehicles expired, and 2012 was the fifth consecutive year of declining registrations. “The actual decline is much worse than the statistics would have us believe, as sales figures for the year were artificially inflated as a result of self-registrations by dealers and automakers, especially in the region’s biggest market, Germany,” Peter Fuss, senior advisory partner at Ernst & Young’s Global Automotive Center, said today in a report.
• In China, Slowdown Is a Bigger Danger Than Growth. The bigger danger over the medium term, however, may be a slowdown in Chinese growth -- which appears to be more likely than most U.S.-based commentators seem to realize.
• Default Alarm Rings as Trust Loans Jump Sevenfold: China Credit. A seven-fold jump in last month's lending by China's trust companies is setting off alarm bells for regulators to guard against the risk of default. So-called trust loans rose 679% to 264 billion yuan from a year earlier, central bank data showed. That accounted for 16% of aggregate financing, which includes bond and stock sales. The amount of loans in China due to mature within 12 months doubled in four years to 24.8 trillion yuan, equivalent to more than half of gdp in 2011, and the People's Bank of China has set itself a new goal of limiting risks in the financial system. "Short-term financing instruments such as trust loans have been rising really quickly," said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong. "Quite a number of companies resort to trust loans when they face financing troubles. A breakdown in this financing chain will eventually lead to a default on debt this year."
• U.S. Industrial Production Rises 0.3% on Equipment Demand. Production at U.S. factories climbed more than forecast in December and the cost of living was little changed, showing the economy gained momentum entering 2013 while inflation remained at bay. Manufacturing output advanced 0.8 percent after jumping 1.3 percent in November, the strongest back-to-back reading in almost a year, Federal Reserve figures showed today. The Labor Department said its consumer-price index was unchanged last month, capping the third-smallest annual gain in a decade. 
• OPEC Cuts Oil Output to 14-Month Low Amid Economic Uncertainty. OPEC reduced its production to the lowest level in 14 months as budget wrangles in the U.S., uncertain impact of stimulus measures in Japan and Europe’s struggle to boost growth cloud outlook for fuel demand. The Organization of Petroleum Exporting Countries cut output by 465,000 barrels a day in December to 30.4 million, the lowest since October 2011, led by a reduction in Saudi Arabia, the group said today in its monthly report,citing secondary sources. That’s 800,000 a day more than the average 29.6 million the group estimates it will need to provide this year. OPEC kept is 2013 global demand forecast unchanged.
• Goldman(GS), Morgan Stanley(MS) Set $557 Million Fed Mortgage Accord. Goldman Sachs Group Inc. and Morgan Stanley agreed to offer a $557 million package of cash and other assistance for mortgage borrowers to settle a federal probe into allegations that the banks improperly seized homes.

Wall Street Journal: 

• Americans Among Hostages Seized in Algeria. Militants seized an unconfirmed number of foreign hostages, including some Americans, at a Western-operated energy field in Algeria, fanning fears of spreading violence amid France's efforts to uproot an al Qaeda-linked insurgency in Mali. France's main target in Mali, al Qaeda in the Islamic Maghreb, claimed responsibility for the attack, calling it a retaliation for the French intervention. The claim of responsibility couldn't be verified, as a standoff continued on Wednesday between the militants and the Algerian army.

MarketWatch.com:  

• Economy held back by fiscal concerns, Fed finds. The U.S. economy expanded at either a modest or moderate pace across the country into early January, as spending and hiring were held down by concerns over fiscal policy, according to the latest Federal Reserve Beige Book survey released Wednesday. 
• Four leading indicators of a market top. 

Fox News:

• Obama urges new restrictions on assault weapons, magazines as part of gun control plan. President Obama called Wednesday for a new and tougher assault-weapons ban and a 10-round limit on magazines, as part of a comprehensive plan to curb gun violence that includes 23 steps he took without congressional action. Already facing stiff opposition from gun-rights advocates and Republican lawmakers, the president called on Congress to pass several major changes to the country's current gun laws -- some of which are already being considered like the restrictions on semi-automatic weapons and high-capacity magazines. Obama called as well for legislation to bar the possession and importation of armor-piercing bullets and to require criminal background checks for nearly all gun sales. The president, speaking at the White House, said he would use "whatever weight this office holds" to get the proposals passed. 
• Kansas governor wants to get rid of a popular mortgage deduction.

CNBC: 

• The China Beige Book Has Some 'Shocking' Data. China's growth is expected to have re-accelerated to near 8 percent in the fourth quarter of last year, but there are some troubling inconsistencies in the economy, according to the China Beige Book released on Wednesday. The latest survey by the U.S. based China Beige Book (CBB) International has found "shocking" evidence of falling loan demand in the world's second-largest economy. "In the fourth quarter, we're seeing corporate loans decline significantly, very shockingly most of our bankers say less than 20 percent of their lending goes to new loans. Most of its going to debt rollovers or increases, they are not funding expansion. That indicates that this is not a period of strong expansion," Leland Miller, president at CBB told CNBC on Wednesday. 
• Dem Elder Statesman: We Spend Too Much. (video) The government has a "spending problem" and that needs to change, former House Majority Leader Richard Gephardt told CNBC on Wednesday. "We're spending 24 percent of GDP and we're taking in 16 percent," the Missouri Democrat said in a "Squawk Box" interview.
• After an Eight-Month Ride, Home Builder Confidence Stalls.

Zero Hedge:

• JPM(JPM) Beats Thanks To Ongoing Loan Loss Reserve Releases; NIM And Trading Revenues Decline, CIO Posts Loss.
• Goldman(GS) Beats On Solid Top Line Results; Average 2012 Employee Pay Rises To $399,506. 
• World War Is Coming, Currency War That Is - Russia Warns.
• NYSE Short Interest Plunges To March 2012 Levels. (graph)
• Citi(C) On The Debt Ceiling: "First Complacency, Then Horror".

Business Insider:

• Here's The White House's Full Gun Control Proposal.
• Facebook(FB) Has A Bad Habit Of Coming Out With Half-Baked Products. 
• Facebook's(FB) 'Graph Search' Might Start An Un-Liking Rebellion. 
• TOM DEMARK: Apple's Stock Has Bottomed And Should Rally 22% From Here.

SanDiego6.com:

• White House, Congress Create Gun-Buying Frenzy After Newtown. While constructive dialogue should be the first course of action when it comes to discussing America’s pressing issues, the White House and congressional members insistence on politicizing everything, including banning assault rifles and large capacity ammunition magazines, their efforts have produced the opposite result and created a firearms buying frenzy.

Bear Radar

Style Underperformer:

• Mid-Cap Growth -.37%

Sector Underperformers:

• 1) Steel -1.86% 2) Alt Energy -1.11% 3) Gaming -1.02%
  

Stocks Falling on Unusual Volume:

• CIE, CBB, NTRS, HDB, LFC, DELL, PTEN, ARRS, IRWD, ONXX, CRS, RNF, CMG, ANN, BA, GM, SPLK, ENOC, CROX, XXIA, ARNA, BCO and GDOT

Stocks With Unusual Put Option Activity:

• 1) ANN 2) CRM 3) HYG 4) GM 5) DELL
  

Stocks With Most Negative News Mentions:

• 1) CHRW 2) FRX 3) GM 4) BA 5) CRM
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth +.04%

Sector Outperformers:

• 1) Oil Tankers +.69% 2) Oil Service +.67% 3) Semis +.64%
  

Stocks Rising on Unusual Volume:

• SGI, ALNY, CAB, RIMM and STZ

Stocks With Unusual Call Option Activity:

• 1) KKR 2) ETFC 3) JBLU 4) ZQK 5) LF
  

Stocks With Most Positive News Mentions:

• 1) RRC 2) VNO 3) BBY 4) RTN 5) CMA

Charts:

• ETFs Rising on Unusual Volume 
• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg: 

• Hollande Seen Unlikely Following Schroeder in Overhaul. “We were sure that nationalization would happen,” said Martin, a representative at the Florange plant for CFDT union, which will lead a protest at the presidential palace on Jan. 23. “We were promised a law to prevent Mittal from shutting the site. Today there’s no law and the blast furnaces are shut. The government’s decision was a slap in the face.” Hollande’s equivocation illustrates the conflicting pressures in restoring his nation’s competitiveness and closing the gap with Germany.
• Telefonica(TEF) Debt Cuts Don’t Fix Spanish Pain. Just before Christmas, top managers of Telefonica SA (TEF) gathering in a Madrid cinema tried to remain upbeat after a year in which the company had scrapped its dividend and sold off assets. While they were quick to point out that those steps had stabilized the company’s finances, they couldn’t avoid the bad news in their biggest market, Spain.
• East European Bankers Warn Bad Debt Is Hampering Credit Recovery. Bad debt in eastern Europe, already exceeding a third of all lending in several countries, will stay at high levels and cast a pall over hopes of restoring credit growth, according to the region’s leading bankers.
• China FDI Shows Full-Year Decline as Economic Expansion Slows. China’s foreign direct investment declined for the first full year since 2009 as economic growth slowed and manufacturers relocated to markets with cheaper labor, contrasting with outbound spending that surged to a record. Inbound FDI dropped 4.5 percent in December from a year earlier to $11.7 billion, the 13th decline in 14 months, according to Ministry of Commerce data released in Beijing today. For the full year, inflows fell 3.7 percent to $111.7 billion, while China’s non-financial investment abroad increased 28.6 percent to $77.2 billion. China is gradually losing its advantages as a destination for workshops and plants as land and labor costs rise, while deploying some of its $3.3 trillion in foreign-exchange reserves in growth opportunities abroad. “It’s an inevitable trend that labor costs will keep rising in China -- not only in coastal areas but also in inland regions,” Shi Lei, a Beijing-based analyst with broker Founder Securities Co., said before the report. “The country will not be an ideal place for low-end manufacturing.” 
• Asian Stocks Drop on Overheating Signs; Nikkei 225 Falls. Asian stocks fell, with the regional benchmark index heading for its first loss in three days, amid signs markets are overbought and as Japanese shares retreated as a stronger yen dimmed the outlook for export earnings. Honda Motor Co. (7267), which gets 81 percent of its auto sales overseas, slipped 2.1 percent in Tokyo. Industrial & Commercial Bank Ltd., the world’s biggest lender by market value, fell 1.2 percent in Hong Kong after Premier Wen Jiabao said China should “gradually” establish a property tax system.
• India Banks System Face Worsening Asset Quality, IMF Says. India’s financial system has been made vulnerable by a deterioration in bank assets and a lack of capital as the economy slowed, according to the International Monetary Fund. “The main near-term risks to the financial system are a worsening of bank asset quality and renewed pressures on systemic liquidity,” the Washington-based lender said in a statement today. Stress tests have shown the risks are “manageable” for now, according to the IMF, which concluded its assessment of India’s financial stability in February 2012. Increasing involvement of the state in the financial industry leaves the government exposed to losses at banks and is acting as a brake on economic growth, the IMF said.
• Apple(AAPL) Lets Buyers on China Web Pay in 2-Year Installments. Apple Inc. (AAPL) began allowing users of its Chinese website to pay in installments as the company looks for ways to make iPhones and MacBook laptops more affordable in the world’s largest computer and mobile-phone market.

Wall Street Journal: 

• Banks Seek Help on Iran Cyberattacks. Major U.S. banks are pressing for government action to block or squelch what Washington officials say is an intensifying Iranian campaign of cyberattacks against American financial institutions. Financial firms have spent millions of dollars responding to the attacks, according to bank officials, who add that they can't be expected to fend off attacks from a foreign government. Defense officials have said Iran's government is behind the assault. Officials from several affected banks, including PNC Financial Services Group Inc., SunTrust Banks Inc. and BB&T Corp., are urging the U.S. government to stop or mitigate the attacks, according to investigators.
• Beyond Herbalife(HLF): The War Between Direct Sellers And Short Sellers. Hedge-fund manager William Ackman’s $1 billion bet against nutritional-products maker Herbalife Ltd. is again shining a light on direct-selling companies, prompting investors to evaluate investing in an industry that seems a magnet for controversy.
• Jeffrey Scott Shapiro: A Gun Ban That Misfired. What I saw as a prosecutor in Washington, D.C., makes me wary of strict firearms laws.
• Richard Vedder: The Wages of Unemployment. Labor-force participation has declined since 2000, and among the reasons are soaring government benefits.

Fox News:

• NY approves sweeping gun control package, owners worry about new rules. New York on Tuesday became the first state to approve a comprehensive set of gun control laws in response to last month’s mass shooting at a Connecticut elementary school, amid concerns among gun owners that the spate of changes to local and state gun laws could make them targets of overzealous politicians and prosecutors.

CNBC: 

• Financials Report as Stocks Stall on Key Pivot Point. There's a lot at stake this earnings season, and the financial sector, the biggest stock market winner of the past year, will be put to the test Wednesday.

Zero Hedge: 

• Bill Gross Gets It.
• One Year Of Tax Hikes On The Rich Is Promptly Spent As $60 Billion Sandy Relief Aid Bill Passes.
• Exposing Europe's "Syphilitic Structural Core" With MEP Daniel Hannan. (video)
• Presenting The Working Poor Of America.
• Deutsche's Bullish For 2013 Despite These 6 Huge Downside Risks.

Business Insider: 

• 8 Government Conspiracy Theories That Turned Out To Be Right.
• Rand Paul To Hammer Hillary Clinton On Benghazi: 'It Was A Career-Ending Mistake'.
• Refugees Are Fleeing Mass Rapes In Syria.
• Facebook's(FB) Graph Search Is Awesome For Stalkers And Hookups.

Washington Post:  

• U.S. weighs military support for France’s campaign against Mali militants. The Obama administration is considering significant military backing for France’s drive against al-Qaeda-linked militants in Mali, but its support for a major ally could test U.S. legal boundaries and stretch counterterrorism resources in a murky new conflict. The United States is already providing surveillance and other intelligence help to France and may soon offer military support such as transport or refueling planes, according to U.S. officials, who stressed that any assistance would stop short of sending American combat forces to the volatile West African nation.

Read more here: http://blogs.sacbee.com/capitolalertlatest/2012/08/fiscal-analyst-hundreds-of-millions-at-risk-from-facebook-slide.html#storylink=cpy

Chicago Tribune:

• Republicans push alternative to default in debt-ceiling battle. Republican lawmakers are preparing to introduce legislation to direct the U.S. Treasury to make interest payments on U.S. bonds first and then prioritize other government outlays in case Congress does not raise the debt ceiling. Supporters of the idea see it as a politically palatable alternative to default, which could rattle markets as occurred in the summer of 2011. The likelihood of another market-unsettling event is challenging Republicans to find another idea as they use the debt ceiling as leverage to extract spending cuts from President Barack Obama.

Reuters: 

• World Bank cuts growth outlook as advanced nations drag. A frustratingly slow economic recovery in developed nations is holding back the global economy, the World Bank said on Tuesday, as it sharply cut its outlook for world growth in 2013. The World Bank forecast that global gross domestic product will inch up 2.4 percent this year, from 2.3 percent in 2012. In its last forecast in June, the bank projected global growth would reach 3.0 percent in 2013. The World Bank also cut its forecast for developing countries, which last year grew at their slowest pace in a decade, to 5.5 percent in 2013 from 5.9 percent in the June forecast. It said growth in these countries should slowly pick up, reaching 5.7 percent next year and 5.8 percent in 2015. 
• ANA grounds all Boeing 787s for inspections after emergency landing. All Nippon Airways Co is grounding all 17 of its Boeing 787 planes for inspection after one of its Dreamliners made an emergency landing in western Japan on Wednesday, the Japanese air carrier told Reuters. ANA said instruments on a domestic flight early Wednesday indicated a battery error, but all passengers and crew evacuated safely by using the plane's inflatable slides, ANA said.
• Japan's Abe turns to SE Asia to counter China. The last time he was prime minister of Japan, Shinzo Abe's inaugural foreign trip was to China. In the job again 7 years later and relations with Beijing now chilly, Abe is turning first this time to the rising economic stars of Southeast Asia. 
• Japan's growth hurt by row with China - World Bank. Japan's economy contracted in the second half of 2012 and is on track for lackluster growth of 0.8 percent this year, hurt in part by a territorial row with China, the World Bank said in a report on Tuesday. Relations between China and Japan, the world's biggest economies after the United States, have deteriorated sharply since September, when the Japanese government purchased islands that China claims in the East China Sea.
• U.S. plays down media report that Syria used chemical weapons.
• US cities short billions for public pensions-Pew. States are not alone in racking up massive public pension bills: U.S. cities need hundreds of billions of dollars to make good on their promises of retirement healthcare and income to workers.

Telegraph:

• It is those in love with EU regulations who are destroying UK jobs. By rights, this should have been the time when those who spent the past few years campaigning against the European Union's economic follies were enjoying the bittersweet smell of political vindication. 
• Greek opposition warns bail outs are a 'bottomless pit'. Greece's left wing opposition leader has warned Germany that his country is a “bottomless pit” for European taxpayers and claimed Berlin’s austerity drive was “inhuman”. 

Mainichi:

• Japan May Deploy Jets to Area Near Disputed Islands. Japan Self-Defense Forces consider deploying fighter jets to Sakishima islands, west of Okinawa's main island. The location is closer to the disputed islands than the current air base in Naha.

Nikkei:

• The U.S. govt. asked Japan's Self-Defense Force to refrain from firing warning shots if it encounters Chinese surveillance planes over the disputed islands, citing a meeting between U.S. and Japan top govt. officials earlier this month.

Kyodo:

• Japan's Transport Ministry recognizes today's emergency landing of ANA B787 as a serious incident that could have led to an accident.

South China Morning Post: 

• Shenzhen Sets 2013 Growth Target of 9%, Lowest in Decades. Growth last year was 10%, unchanged from 2011 and lowest since city became a special economic zone in 1979, citing Mayor Xu Qin's remarks to municipal legislators. The city had >27% average annual growth in 1980-2006 period.

China Securities Journal:

• China may ask tier-1 cities to increase land supply this year to stabilize land prices, citing a person from the industry.

Ming Pao Daily:

• President Hu Jintao expressed support for Hong Kong Chief Executive Leung Chun-ying's measures to curb the rise in housing prices, citing people with knowledge of a meeting between the two.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.0% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 108.0 +4.0 basis points.

• Asia Pacific Sovereign CDS Index 86.0 +2.5 basis points.

• FTSE-100 futures +.13%.

• S&P 500 futures -.03%.

• NASDAQ 100 futures +.15%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SCHW)/.15
• (CMA)/.65
• (USB)/.75
• (NTRS)/.75
• (MTB)/1.17
• (BK)/.54
• (JPM)/1.22
• (GS)/3.66
• (FUL)/.56
• (KMI)/.35
• (EBAY)/.69 

Economic Releases
8:30 am EST

• The Consumer Price index for December is estimated unch. versus a -.3% decline in November.
• The CPI Ex Food & Energy for December is estimated to rise +.2% versus a +.1% gain in November.

 9:00 am EST

• Net Long-term TIC Flows for November are estimated to rise to $25.0B versus a $1.3B in October.

 9:15 am EST

•  Industrial Production for December is estimated to rise +.3% versus a +1.1% gain in November.
•  Capacity Utilization for December is estimated to rise to 78.5% versus 78.4% in November.

 10:00 am EST

•  The NAHB Housing Market for January is estimated to rise to 48.0 versus 47.0 in December.

 10:30 am EST

•  Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,200,000 barrels versus a +1,314,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +2,700,000 barrels versus a +7,412,000 barrel gain the prior week. Distillate Inventories are estimated to rise by +1,500,000 barrels versus a +6,777,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.75% versus a -1.3% decline the prior week.

 2:00 pm EST

•  Fed Beige Book

Upcoming Splits

• (HEP) 2-for-1
• (SGA) 4-for-3
  

Other Potential Market Movers

• The Fed's Fisher speaking, Fed's Kocherlakota speaking, Eurozone CPI data, Australia unemployment data, Iran/IAEA Talks, weekly MBA mortgage applications report and the  (SE) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Slightly Higher into Final Hour on Debt Ceiling Hopes, Short-Covering, Retail/Homebuilding Sector Strength

Broad Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 13.43 -.67%

• ISE Sentiment Index 89.0 -16.82%

• Total Put/Call 1.05 +31.25%

• NYSE Arms .70 -42.26%

Credit Investor Angst:

• North American Investment Grade CDS Index 88.80 -.85%

• European Financial Sector CDS Index 134.33 +2.15%

• Western Europe Sovereign Debt CDS Index 100.0 +1.11%

• Emerging Market CDS Index 212.72 -1.25%

• 2-Year Swap Spread 12.75 -.5 bp

• TED Spread 22.25 -1.5 bps

• 3-Month EUR/USD Cross-Currency Basis Swap -17.75 -.75 bp

Economic Gauges:

• 3-Month T-Bill Yield .08% +2 bps

• Yield Curve 159.0 -3 bps

• China Import Iron Ore Spot $152.90/Metric Tonne -1.10%

• Citi US Economic Surprise Index 7.90 -1.0 point

• 10-Year TIPS Spread 2.53 unch.

Overseas Futures:

• Nikkei Futures: Indicating +19 open in Japan

• DAX Futures: Indicating +18 open in Germany

Portfolio:

• Slightly Higher: On gains in my biotech/retail sector longs and emerging markets shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg: 

• Fitch Says Top AAA Sovereign Ratings Under Pressure in 2013. Fitch Ratings said its AAA credit rankings on France, the U.S. and the U.K. are likely to come under pressure this year due to slow economic growth and high debt levels. The three nations, which all have a negative outlook from the company, have seen gross domestic product struggle to recover from the global financial crisis while debt levels have increased amid efforts to spur growth. A failure of U.S. lawmakers to raise the nation’s debt ceiling would prompt a “formal review” of its credit rating, Fitch said in a press release today. “Triple A sovereigns are under threat,” Ian Linnell, Fitch’s analytical group manager, said at a briefing in London as the company published its European Credit Outlook. “Debt-to- GDP ratios are significantly high,” compared with previous periods, he said. “In particular the U.S., France and the U.K. all have negative outlooks, reflecting a combination of a challenging fiscal position and low-to-negligible growth." 
• Euro Extends Losses as Juncker Says Currency ‘Dangerously High’. The euro extended losses against the dollar and yen as Luxembourg Prime Minister Jean-Claude Juncker said the shared currency’s foreign-exchange rate is “dangerously high.” Juncker, who leads the group of euro-area finance ministers, spoke at an event in Luxembourg. Japan’s currency gained earlier for the first time in five days against the dollar and the yen on bets its drops were excessive. The Swiss franc slid to a 13-month low versus the euro as signs Europe’s debt crisis is easing cut demand for the currency as a haven. “If the exchange rate is very high, that’s going to hurt trade and weigh on growth in the euro zone through trade channels,” Sireen Harajli, a foreign-exchange strategist in New York at Credit Agricole SA, said in a telephone interview. 
• German Economy Probably Contracted 0.5% in Fourth Quarter. Germany’s economy, Europe’s largest, probably shrank in the final quarter of 2012 as the sovereign debt crisis and weaker global growth damped exports and company investment. Gross domestic product may have dropped as much as 0.5 percent from the third quarter, the Federal Statistics Office in Wiesbaden said today in a preliminary estimate.
• Renault to Cut 17% of French Jobs on European Car Market. Renault SA (RNO), the automaker whose sales in Europe dropped the most in 2012, will cut 17 percent of its French workforce in the next four years to reduce costs as the region’s market sinks for a sixth straight year in 2013.
• Manufacturing in New York Region Contracts for Sixth Month. Manufacturing in the New York region contracted in January for the sixth straight month as the industry continued to face the effects of fiscal uncertainty in the U.S. and lackluster demand overseas. The Federal Reserve Bank of New York’s general economic index fell to minus 7.8 from a revised minus 7.3 in December. The median forecast of 54 economists in a Bloomberg survey called for a reading of zero, which signals no change in conditions.
• Copper Falls to 2-Week Low After Rio’s Beats Forecasts. Copper dropped to a two-week low as Germany’s economy slowed and U.S. lawmakers struggled to reach an agreement to raise the nation’s borrowing limit. Manufacturing in the New York region contracted for a sixth straight month in January and German growth slowed more than expected last year, separate reports today showed. President Barack Obama said at a White House news conference yesterday that he won’t negotiate over raising the debt ceiling, warning of economic calamity if Congress fails to increase the $16.4 trillion limit. 
• Lennar(LEN) Earnings Beat Analysts’ Estimates as Revenue Jumps. Lennar Corp. (LEN), the largest U.S. homebuilder by market value, reported fiscal fourth-quarter earnings that beat analysts’ estimates as revenue jumped 42 percent and profit margins climbed. Net income for the three months through Nov. 30 rose to $124.3 million, or 56 cents a share, from $30.3 million, or 16 cents, a year earlier, the Miami-based company said today in a statement.
• Intel(INTC) to GE(GE) Stuck in Earnings Slump as U.S. Rebound Stalls. U.S. companies from Intel Corp. to General Electric Co. are caught in an earnings slump that shows few signs of improving until midyear as a weak global economy and gridlock in Congress weigh on profits. Intel, the world’s largest semiconductor maker, is poised to report its biggest quarterly earnings drop in 3 1/2 years this week, based on analysts’ estimates compiled by Bloomberg. GE, the maker of jet engines and electrical generation equipment, may post its slowest profit growth in three quarters.
• India Says ‘No Business as Usual’ With Pakistan After Clash. Indian Foreign Minister Salman Khurshid said Pakistan’s failure to investigate the killing of Indian troops in Kashmir meant an end to “business as usual,” sharpening the country’s diplomatic offensive against its long- time rival. The two governments and their militaries have for more than a week traded accusations of deadly raids across the de facto frontier in the disputed Himalayan region, skirmishes that have become the biggest threat to normalizing ties since peace talks resumed two years ago.
• China Will ‘Gradually’ Implement Property Tax System, Wen Says. China should “gradually” establish a property taxation system that covers trading and ownership, Premier Wen Jiabao said during a visit to the finance ministry today. The comments were published in a statement posted on the central government’s website. In its more than two-year effort to curb the property market, the government has raised down- payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing, increased building of low-cost social housing, and placed home-purchase restrictions in about 40 cities. Many Chinese cities are preparing to introduce property tax trials, the China Securities Journal reported on Nov. 16, citing unidentified people.

Wall Street Journal:

• IEA Head: Decline in Crude Production Unlikely. The head of the International Energy Agency Maria Van der Hoeven said Monday she doesn't see a further decline in global crude production in 2013, after top oil exporter Saudi Arabia made its deepest cut in almost three years. Saudi Arabia cut its oil production by close to 5% to 9.025 million barrels a day in December in response to lower demand chiefly from Asian customers, and comes amid expectations for lower demand for crude oil from the Organization of the Petroleum Exporting Countries this year. Asked by Dow Jones Newswires in an interview if the market is likely to see further production cuts this year, Mrs. Van der Hoeven said: "I don't think so." 
• Fed’s Plosser Thinks Policy Will Need to Be Curtailed Sooner Than Anticipated. Federal Reserve Bank of Philadelphia President Charles Plosser held firm in his view that the central bank’s loose monetary policy will need to be reined in sooner than anticipated to prevent an acceleration of inflation in the coming years. Mr. Plosser maintained his view that inflation would remain close to the Fed’s 2% target over the medium to long term, but added that “this expectation is based on my assessment that the appropriate monetary policy is likely to tighten more quickly” than the Federal Reserve Open Market Committee indicated in its latest statement.

MarketWatch.com: 

• Facebook(FB) loses 1.4 million active users in U.S. The social network may be reaching a saturation point. 
• ‘Animal spirits’ in full stride: investor appetite for risk rises to 9-year high, survey finds.

CNBC: 

• Why Debt Ceiling Is Far Scarier Than the 'Fiscal Cliff'. 
• First Shots Are Fired in Global 'Currency War'.

Zero Hedge: 

• Core Retail Sales Beat Despite Electronics And Appliance Sales Drop.
• Bridgewater AUM Rises To $142 Billion: Best And Worst Firm Trades Revealed. 
• Forget Previous Bubbles, This Is The Big Lebowski. 
• The Golden Age Of US Corporations Is Ending: S&P 500 Cash Has Peaked And Is Now Declining. (graph)
• Pictet's Four Horsemen Of The Euro-pocalypse. (graphs)

Business Insider: 

• LIVE: Facebook's Big Announcement. 
• REPORT: Obama Will Announce His New Gun Control Proposals Wednesday, And He Already Has A Plan To Get Around Congress. 
• Flailing French Government Is 'Wagging The Dog' In Mali. Normally, the media would have given it priority: French President François Hollande and Prime Minister Jean-Marc Ayrault have become more unpopular than ever before. But the poll was shoved into the background by France’s bombing campaign in Mali—which released an avalanche of positive comments and support from all sides, at least in France.
• America Is Being Directed By Self-Absorbed Single People Who Don't Care About The Next Generation.
• Facebook(FB) Isn't Cool Anymore (And That's What It Has To Fix Today).

Reuters:

• Exclusive: Morgan Stanley to defer bonuses for top earners - sources. Morgan Stanley is deferring 100 percent of bonuses for top-earning employees, according to three sources familiar with the situation. The deferral applies to all employees, except for financial advisers, making more than $350,000 and whose bonuses are at least $50,000 over a three-year period, one source said.
• SAP(SAP) falls short of expectations as Oracle makes running. Quarterly earnings from SAP AG fell short of expectations on Tuesday, showing the German business software maker failed to keep up with arch-rival Oracle Corp and sending its shares sharply lower. SAP's results, released more than a week before they had been scheduled, showed group revenue rose 12 percent to 5.06 billion euros ($6.8 billion), below an average analyst forecast of 5.17 billion, according to Reuters data. Operating profit rose more slowly than revenue, gaining 10 percent to 1.96 billion euros, resulting in SAP's operating margin narrowing by 0.8 percentage points to 38.8 percent in the three months through December.  
• U.S. taxes will rise for more than just the ultra-wealthy. The big numbers under discussion following the American Taxpayer Relief Act of 2012 have been $400,000, the income level where new marginal rates kick in for singles, and $450,000, for married couples filing jointly. But two limitations on tax breaks for high-income earners are returning at much lower income thresholds, amounting to something of a stealth increase. And there are few ways to get around them.
• US condemns comments by Egypt's Mursi in 2010 as Islamist leader. White House spokesman Jay Carney told reporters that the language Mursi had used was "deeply offensive" and that U.S. officials raised concerns with the Egyptian government on the matter. Nearly three years ago, Mursi, as an Islamist political leader, delivered a speech urging Egyptians to "nurse our children and our grandchildren on hatred" for Jews and Zionists, the New York Times reported. In a television interview months later, he described Zionists as "these bloodsuckers who attack the Palestinians, these warmongers, the descendants of apes and pigs," the newspaper said.

Telegraph:

• Fiat boss warns European car industry could 'unravel' unless EU co-ordinates capacity cuts. The boss of Italian carmaker Fiat has warned that Europe's embattled car industry will 'unravel' unless the European Union steps into co-ordinate urgent cuts in capacity across the continent.

DigiTimes: 

• Entry-level iPhone reportedly may adopt plastic chassis. Apple's(AAPL) rumored entry-level iPhone reportedly may adopt plastic for its chassis instead of reinforced glass or unibody metal as in the company's standard iPhone models, to save cost, according to sources from the upstream supply chain.