Evening Headlines
Bloomberg:
- Bemoaning
Euro Strength Masks Hollande Export Woes: Euro Credit. President
Francois Hollande's call for a weaker euro masks France's real issue: a
loss of competitiveness against countries that share the currency. With
French labor costs up about 19% in a decade and Germany's almost
unchanged, France's share of euro-area exports dropped by 3.5%, more
than any country in the region, according to a study published earlier
this year by research group Coe-Rexecode in Paris. "France is losing the
competitiveness war not just to the dollar-Asia block but also to
peripheral Europe, Spain in particular," said Lena Komileva, a
strategist at G+ Economics Ltd. in London.
- Italian Vote Seen Inconclusive as Risk of Second Election Grows. Italy’s election in three weeks may
yield a hung parliament, requiring a follow-up vote to establish
a governing majority, a member of poll leader Pier Luigi Bersani’s campaign said for the first time.
“Returning to polls is the answer in a situation of ungovernability,”
Stefano Fassina, Bersani’s head of economic policy, wrote on Twitter
yesterday. Bersani’s lead in opinion polls is shrinking as former
Premier Silvio Berlusconi gains. The difference between their
two blocs nationally was within the 4 percentage point margin of
error for a second day, according to a Tecne poll aired by
SkyTG24 yesterday. The gap fell to less than 5 percentage points
in six key regions that will determine the outcome in the
Senate, Tecne said.
- Draghi Finds Powerful Weapon in Words as Markets Heed His Voice. European
Central Bank President Mario Draghi has found his most effective weapon
is the sound of his own voice. Draghi yesterday caused the euro’s
biggest drop in seven months by suggesting its recent appreciation could
damp inflation, a signal that further interest-rate cuts remain a
possibility. His pledge in July to buy government bonds
precipitated a sea-change in sentiment that helped to shore up
the 17-nation euro area economy, yet the ECB hasn’t spent a cent
so far in its so-called Outright Monetary Transactions program.
- RBA Cuts GDP, Inflation Outlook on Currency, Investment. The Reserve Bank of Australia reduced
its economic growth and inflation forecasts as investment
outside the mining industry remains elusive, the labor market
softens and a high local currency contains prices. “The soft outlook over the next year or so reflects a
number of factors,” the RBA said in its quarterly monetary
policy statement released in Sydney today. “Mining investment
is expected to peak, both fiscal consolidation and the
persistently high level of the Australian dollar will weigh on
growth, and there is little sign of a near-term pick-up in non-
mining business investment.”
- Japan Posts Back-to-Back Current-Account Deficit in December. Japan
posted back-to-back monthly current-account deficits for the first time
since 1981, highlighting challenges for Prime Minister Shinzo Abe’s
campaign to revive the economy. The shortfall in the widest measure of the nation’s trade was 264.1 billion yen ($2.8 billion) in December, the Ministry
of Finance said in Tokyo today. The median estimate of 23
economists surveyed by Bloomberg News was for a deficit of 144.2
billion yen. The last consecutive monthly current-account deficit was in
February 1981, according to the ministry. Exports to China in 2012 fell 10.8 percent from 2011, as
slower Chinese growth and a territorial dispute affected a
merchandise trade relationship worth 26.5 trillion yen in 2012,
according to ministry data.
- Malaysia December Exports Unexpectedly Fall, Output Growth Slows. Malaysia’s
exports unexpectedly
dropped in December amid fewer shipments to the U.S. and China, while
industrial production rose less than economists estimated. Overseas
shipments fell 5.8 percent from a year earlier after rising a revised
2.3 percent in November, the Trade Ministry said today. The median of 17
estimates in a Bloomberg News survey was for a 1.4 percent increase.
- BRICs Fall From Google(GOOG) Favor as Searches Drop With Brazil. The BRICs are falling off the investment map.
The term for Brazil, Russia, India and China, where stocks gained 424
percent during the decade ended 2010, appeared in the fewest news
stories last month since November 2008, according to
data compiled by Bloomberg. BRIC searches on Google Inc.’s
website fell to a seven-year low in December, while mutual funds
that invest in the biggest emerging markets had outflows in 46
of the past 47 weeks.
- Zinc Leads Metals Slump as Europe Crisis Fuels Demand Concerns. Zinc fell to the lowest price this
week, leading a slump for industrial metals, on renewed concern
that Europe’s debt crisis is worsening and will curb demand. Industrial output in Spain dropped for a 16th month in
December, a report showed today. European Central Bank President
Mario Draghi said risks to the region’s economy remain on the
“downside.” The dollar rose against a basket of six currencies
including the euro, reducing the appeal of metals as alternative
assets. Financial markets in China, the world’s biggest metals
user, will be shut next week for Lunar New Year celebrations.
Wall Street Journal:
- Probe Adds to Rating Firms' Woes. New York's top prosecutor has launched a probe into the conduct of
the three major credit-ratings firms, according to a person familiar
with the matter, opening another legal front for an industry that remains in the cross hairs of state and federal investigators.
New York Attorney General Eric Schneiderman this week subpoenaed
Standard & Poor's Ratings Services and formally requested
information from Moody's Investors Service and Fitch Ratings to examine
ratings they issued in the run-up to the financial crisis, the person
said. His office is investigating the
ratings the three firms issued on mortgage-backed deals before the
crisis, the person said.
- Rate-Rig Spotlight Falls on 'Rain Man'.
Many anonymous traders are implicated in the tall stack of documents
regulators published this week detailing Royal Bank of Scotland Group
attempts to rig the lending benchmark known as Libor. But only
one trader is cited by name: a 33-year-old so brainy yet socially
awkward that colleagues nicknamed him "Rain Man."
- Obama Blocked Rebel Arms. White House Opposed Pentagon, CIA, State Plan to Ship Weapons to Syrian Resistance. A proposal to arm Syrian rebels was backed by the Pentagon, the State
Department and the Central Intelligence Agency, but the White House
decided not to act on the plan.
Defense Secretary Leon Panetta and Gen.
Martin Dempsey, the chairman of the Joint Chiefs of Staff, revealed
publicly for the first time at a Senate hearing on Thursday that they
supported the proposal last year by senior officials including
then-Secretary of State Hillary Clinton and then-CIA director David
Petraeus.
- Iran Leader Rebuffs Direct Talks With U.S. Iran's Supreme Leader Ayatollah Ali Khamenei rejected a U.S. proposal
for one-on-one talks, dimming hopes that the two countries would resume
diplomatic relations soon. Mr. Khamenei, who has the final decision
on key state matters, was responding for the first time to an offer
Vice President Joe Biden made last week to hold one-on-one talks with
Iran whenever Mr. Khamenei was ready.
- Scant Pickup in Economic Growth Seen for 2013. Economists are forecasting the same steady, if unspectacular, growth
this year that they were expecting in 2012. Last year's predictions
proved too optimistic, but they say this year the economic fundamentals
are sturdier. At the start of last year, economists surveyed by The Wall Street
Journal were on average predicting 2.4% year-over-year growth in gross
domestic product for 2012. The Commerce Department last week said the
expansion was a more tepid 1.5%. It was the second year in a row that
actual GDP came in below economists' forecasts. For 2013, the economists again expect the economy to grow 2.4%.
- The Real Problem With Obama's Drone Memo. The U.S. has dropped the clarity of the rules of war for the vague balancing tests that govern cops on the beat. President Obama's antiterrorism policies are drawing new fire after this
week's leak of the administration's legal memo defending the targeted
killing of Americans. According to the Justice Department white paper
obtained by NBC News, the U.S. can kill a citizen who is "continually
planning attacks" for al Qaeda when an "informed, high-ranking" official
decides that the target "poses an imminent threat" and capture is
"infeasible."
Barron's:
CNBC:
- Banks Need to Reduce Risk: Krawchek. (video) It's
high time to talk about reducing risk in the banks, former Bank of
America Wealth Management President Sallie Krawcheck said Thursday on
CNBC. On "Fast Money," she said that it was "probably pretty unlikely"
that any of the too-big-to-fail financial institutions would be broken
up. "Heck, we couldn't even do money fund reform, which is pretty clear
we need, given the risk there," she said. Krawcheck said that the
problem was not being addressed. "What
we do really need to have a discussion of – and we're not, as a country
– is reducing the risks in the banks. Is the risk wrung out to good
enough degree? Is there enough capital?" she said. "That's not a discussion we're having head-on right now."
- Just How Skewed Is China's Trade Data? China's
January trade data on Friday appear impressive at first glance, but
beneath the favorable Lunar New Year distortions, the global and
domestic demand picture
remains fragile, economists tell CNBC. "The import data suggests that
underlying demand domestically is not as
strong as we think," Liu Li-gang, chief China economist at ANZ told
CNBC.
Zero Hedge:
Business Insider:
NY Times:
- Hewlett(HPQ). Directs Its Suppliers in China to Limit Student Labor.
Hewlett-Packard, one of the world’s largest makers of computers and
other electronics, is imposing new limits on the employment of students
and temporary agency workers at factories across China. The move,
following recent efforts by Apple to increase scrutiny of
student workers, reflects a significant shift in how electronics
companies view problematic labor practices in China.
The Blaze:
Reuters:
- Justice Department, states weigh action against Moody's(MCO). The
Justice Department and multiple states are discussing also suing
Moody's Corp for defrauding investors, according to people familiar with
the matter, but any such move will likely wait until a similar lawsuit
against rival Standard and Poor's is tested in the courts. Inquiries
into Moody's are in the early stages, largely because state and federal
authorities have dedicated more resources to
the S&P lawsuit, said the sources, who were not authorized to speak
publicly about enforcement discussions.
- Exclusive: Dell(DELL) shareholder Southeastern unhappy with buyout. Dell
Inc's largest independent shareholder, Southeastern Asset Management
Inc, has told the computer maker that a $24.4 billion buyout bid
undervalues it,
adding to a chorus of investor dissatisfaction with the landmark deal
to take it private, two sources close to the situation said.
Southeastern has privately told
the company that it is "disturbed" by a $13.65 per share offer for the
third-largest PC maker by a consortium led by founder and CEO Michael
Dell, and instead believes Dell is worth $20 per share, the sources said
on Thursday.
- FED FOCUS-When time's ripe, Fed officials see tapering bond buying. The U.S. Federal Reserve
should scale back rather than abruptly end its massive
bond-buying stimulus once the labor market gets its legs, a
growing number of Fed policymakers say. Chicago Federal Reserve Bank President Charles Evans, one of
the central bank's most aggressive doves, became the latest top
Fed official to publicly embrace such a strategy.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 115.50 +.5 basis point.
- Asia Pacific Sovereign CDS Index 88.5 -.25 basis point.
- NASDAQ 100 futures +.18%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Trade Deficit for December is estimated at -$46.0B versus -$48.7B in November.
- Wholesale Inventories for December are estimated to rise +.4% versus a +.6% gain in November.
Upcoming Splits
Other Potential Market Movers
- The Fed's Kocherlakota speaking, China inflation/trade data, Eurozone Trade/Production/CPI data, (GLW) investor meeting, USDA crop report and the (MAT) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity 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.
Broad Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 97.0 -16.4%
- Total Put/Call 1.05 +8.25%
Credit Investor Angst:
- North American Investment Grade CDS Index 89.88 +.28%
- European Financial Sector CDS Index 158.50 +.46%
- Western Europe Sovereign Debt CDS Index 106.67 -.11%
- Emerging Market CDS Index 232.93 -1.18%
- 2-Year Swap Spread 15.5 -.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -18.0 -1.25 bps
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- China Import Iron Ore Spot $155.10/Metric Tonne unch.
- Citi US Economic Surprise Index -30.0 -.2 point
- 10-Year TIPS Spread 2.55 unch.
Overseas Futures:
- Nikkei Futures: Indicating -7 open in Japan
- DAX Futures: Indicating +12 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech/retail sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
Bloomberg:
- Draghi Signals Euro Strength May Hurt ECB’s Recovery Efforts. European
Central Bank President Mario Draghi signaled policy makers are
concerned that the euro’s strength will hamper their efforts to pull the
economy out of recession. “The exchange rate is not a policy
target, but it is important for growth and price stability,” Draghi said
at a press conference in Frankfurt today after the ECB kept its
benchmark rate at a record low of 0.75 percent. “We want to see if the appreciation is sustained, and if it alters our assessment of the risks to price stability.” The comments pushed the currency down more than a cent
against the dollar. While latest data show the 17-nation euro
economy is starting to stabilize after the sovereign debt crisis drove
it into recession last year, the euro’s gains could stymie a recovery
before it has begun by curbing exports and pushing inflation too low.
Draghi noted that the ECB will publish new economic projections next
month and stressed that officials will “maintain our accommodative
monetary stance.” “This was a verbal intervention,” said Joerg Kraemer,
chief economist at Commerzbank AG in Frankfurt. “Draghi reinforced
multiple times that the ECB will keep up its accommodative policy stance
and he indirectly suggested that the ECB may revise its inflation
projections downward next month.”
- Spain Borrowing Costs Rise Amid Corruption Allegations. Spain’s borrowing costs rose even as
it beat its maximum target of 4.5 billion euros ($6.11 billion)
at a debt sale today as corruption allegations targeting the
government threaten to reverse last month’s rally. The Madrid-based
Treasury sold a total of 4.61 billion
euros of debt, including a 2.75 percent 2015 note with a yield
of 2.823 percent, compared with 2.476 percent the last time it
was sold on Jan. 10. A 2018 note yielded 4.123 percent, up from
3.770 percent on Jan. 17, and it sold a 2029 bond at 5.787 percent,
compared with 5.555 percent at its last 15-year benchmark bond sale on
Jan. 10.
- Euro Falls Most Since July as Draghi Warns of Slowing Inflation. The euro fell the most since July
against the dollar after European Central Bank President Mario
Draghi said the recent strength of the currency creates a
concern that inflation will slow.
The 17-nation euro declined versus all but two of 16 major
counterparts as Draghi said after a policy meeting in Frankfurt
that the risk to the region’s growth remains on the
“downside.”
- Leverage Comeback in Stocks Seen as Sentiment Improves: EcoPulse. Shares of
companies with high operating or financial leverage are outperforming
the market, as investor sentiment about the economy improves. Two portfolio indexes of such stocks maintained by Goldman Sachs
Group Inc. have outpaced the Standard & Poor’s 500 Index since
October, a sign that riskier investment strategies are gaining favor. As
the expansion strengthens, companies with higher fixed cost structures
or weaker balance sheets are “more likely to benefit from that
recovery,” said Tim Ghriskey, who oversees about $2 billion as chief
investment officer of Solaris Group LLC, based in Bedford Hills, New
York.
- India Predicts Growth at Decade Low as Investment Slows. India forecast the weakest economic
growth in a decade as subdued investment and elevated inflation
add pressure on Prime Minister Manmohan Singh to extend policy
changes and revive his development agenda.
- Brazil’s Prices Rise at Fastest Pace in Almost Eight Years. Brazilian consumer prices rose in
January at the fastest pace since April 2005, raising pressure
on the central bank, which has said it will keep interest rates
at a record low for a prolonged period. Swap rates rose. Prices as measured by the benchmark IPCA index climbed 0.86
percent in the month, marking the fifth-straight acceleration,
the national statistics agency said today in Rio de Janeiro. Annual inflation accelerated to 6.15
percent from 5.84 percent the previous month.
- Worker Productivity in U.S. Declines, Pushing Up Labor Costs. The productivity of U.S. workers fell
more than projected in the fourth quarter as the economy shrank,
pushing labor expenses up and showing companies are approaching
the limit of how much efficiency they can wring from employees. The measure of employee output per hour decreased at a 2
percent annual rate, the worst performance in almost two years,
after a 3.2 percent gain in the prior three months, a Labor
Department report showed today in Washington. The median
forecast in a Bloomberg survey of 63 economists called for a 1.4
percent drop. Expenses per worker increased at a 4.5 percent
rate, more than estimated.
- Fed’s Evans Says QE Could Stop Before Drop to 7% Jobless.
Charles Evans, president of the Federal Reserve Bank of Chicago, said
today the central bank may stop its asset-purchase program before
unemployment falls to 7 percent. “I tend to think it might be
possible to turn off the quantitative easing,” Evans said in a CNBC
interview. “We might be able to stop before 7 percent” assuming momentum
builds and keeps going.
- Einhorn: What Tim Cook Should Do With Apple Cash. (video)
- Obama Administration to Stay Course on Biofuel Law, Vilsack Says. President Barack Obama’s
administration won’t abandon the nation’s ethanol program and
will encourage Congress to maintain it, Agriculture Secretary
Tom Vilsack said. The Renewable Fuels Standard, passed in 2007, requires the
U.S. to use 13.8 billion gallons of renewable fuels such as
ethanol this year and 15 billion gallons by 2015. The
Agriculture Department estimated this month that 42 percent of
this year’s corn crop will go toward making the fuel. Last summer, lawmakers from both parties called for a
temporary suspension or reduction of the ethanol program as a
drought drove up corn prices. The Environmental Protection
Agency declined the requests.
Wall Street Journal:
- Italian Bank Was Aided by Covert Loan. Monte dei Paschi di Siena SpA, the 541-year-old Italian bank at the center of a burgeoning financial
scandal, was so strapped for cash in late 2011 that it negotiated a
covert loan of nearly €2 billion ($2.7 billion) from the Bank of Italy
even as executives were publicly describing the lender's funding
position as comfortable, according to the Bank of Italy and people
familiar with the deal.
- Live Blog: Brennan’s CIA Confirmation Hearing at 2:30 p.m.
- Fed’s Stein: Signs of Overheating in Credit Markets. A top Federal Reserve official in a speech Thursday
said he sees some signs that credit markets may be overheating, although
he said there is not an imminent threat to the wider financial system. Federal Reserve Board governor Jeremy Stein
highlighted developments in several markets, including junk bonds,
mortgage real-estate investment trusts and commercial banks’ securities
holdings, as areas where potentially troubling trends are emerging as a
result of the Fed’s easy-money policies. Mr. Stein made his remarks at a symposium at the Federal Reserve Bank of St. Louis.
Fox News:
- Supermarkets cry foul as FDA proposes new food labeling rule under ObamaCare. If the Food and Drug Administration gets its way, your trip to the grocery store could get a tad pricier.
Supermarket owners argue a pending federal food-labeling rule that
stems from the new health care law would overburden thousands of grocers
and convenience store owners -- to the tune of $1 billion in the first
year alone.
Reuters:
Telegraph:
Xinhua:
- China Bans 'Pompous Speeches' at Advisory-Body Meeting. The
Chinese People's Political Consultative Conference to adopt reasonable
schedule, print fewer documents, simplify conference hall, reception
arrangements, citing rules issued by CPPCC's general office. Delegates
are told to speak "honestly and briefly" on own concrete opinions and
suggestions, not follow scripts. A no-banquet policy is in effect.
Style Underperformer:
Sector Underperformers:
- 1) Coal -2.1% 2) Biotech -1.55% 3) Steel -1.40%
Stocks Falling on Unusual Volume:
- NXST, BBEP, SNI, E, CS, APU, PRU, HK, AKAM, IRBT, IRG, BG, ABCO, KEYW, CPA, THR, GIL, MCO, ANN, SNI, SWM, ODFL, MNTX, TDC, SNY, YELP, GMCR, MHP, NWSA, EFX, TVL, OPEN, PMT, USG, CYS, DRIV, OZM and EFX
Stocks With Unusual Put Option Activity:
- 1) SCHW 2) LO 3) LTD 4) GPS 5) MGM
Stocks With Most Negative News Mentions:
- 1) CATO 2) GRA 3) MWW 4) SYMC 5) CBL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +.59% 2) Defense -.01% 3) Foods -.30%
Stocks Rising on Unusual Volume:
- DV, ESI, NTES, TRLG, AAP, PTEN, CBG, CNW, HOS, DV, ORLY, VSAT, TW, MPWR, BAS and XXIA
Stocks With Unusual Call Option Activity:
- 1) DVAX 2) GPS 3) STSI 4) AKAM 5) NWS
Stocks With Most Positive News Mentions:
- 1) CCE 2) TGT 3) GPS 4) ROST 5) FRED
Charts:
Evening Headlines
Bloomberg:
- Draghi Counts Cost of Euro’s Salvation as Currency Rebound Bites. Mario
Draghi is discovering that confidence in the euro area comes at a cost.
Since the European Central Bank president talked up the economic
outlook last month and signaled that the worst of the debt crisis is
over, the euro has surged to a 14-month high against the dollar.
Banks have fueled the euro’s rally by paying back more emergency loans
than forecast, shrinking the ECB’s balance sheet just as the Federal
Reserve and the Bank of Japan expand theirs. That’s threatening to
stymie Europe’s recovery before it has begun, highlighting the tightrope
Draghi is walking as he seeks to boost confidence without encouraging
euphoria. With looser monetary policy in the U.S. and Japan weakening
the dollar and the yen, the ECB may soon come under pressure to enter
the so-called “currency war” and rein in the euro, economists said.
“The euro-zone economy needs a rising euro like it needs a hole in the
head,” said Nick Kounis, head of macro research at ABN Amro in
Amsterdam. “If verbal intervention does not stem
the euro’s upward trend, the central bank may eventually once
again consider rate cuts.”
- Libor Accords Leave Banks Facing ‘Massive’ State Claims. A
multistate probe of alleged manipulation of interest rates threatens to
leave banks liable for billions of dollars in estimated state and local
losses from the scandal, even as they settle with national regulators.
New York Attorney General Eric Schneiderman is helping lead a probe
into claims that banks rigged global benchmarks for borrowing, adding to
investigations by other authorities, including the U.S. Justice
Department. Royal Bank of Scotland Group Plc agreed yesterday to pay
about $612 million to U.S. and U.K. regulators to resolve their claims. “The damage to public entities is a matter of great concern to state and local governments,” Schneiderman said in
an interview. “These were allegations of really despicable
conduct.” More than 12 states are participating in the probe,
according to a person familiar with the matter who requested
anonymity because he isn’t authorized to speak publicly.
- Monte Paschi Hidden Deals Will Have EU730 Million Impact. Banca
Monte dei Paschi di Siena SpA, engulfed by criminal probes into the
conduct of its former management, said 2012 net assets will take a 730
million-euro ($987 million) hit after accounting for structured deals
that hid earlier losses. Monte Paschi, the subject of investigations spanning from
allegations of market manipulation to false bookkeeping, said
the gross impact on net assets of the trade dubbed Santorini
will be 305.2 million euros, while Alexandria will lead to a
restatement of 272.5 million euros, according to a stock-
exchange statement.
- ECB Dashes Irish Hopes of Quick Decision on Banking Debt Plan. European Central Bank policy makers
sought more time to weigh a proposal presented by Ireland
today to restructure the cost of bailing out former Anglo Irish
Bank Corp., prolonging a saga that began four years ago with the
near-collapse of the lender. A decision is unlikely within the next 24 hours as some
members of the ECB’s governing council want to discuss the
blueprint with their own central banks first, according to a
person familiar with the situation, who asked not to be
identified, as the matter is private.
- Hollande Draws French Industry Ire as Nuclear-Energy Edge Fades. French industrial groups are up in
arms as their once-celebrated nuclear-energy edge evaporates. After decades when their factories churned out everything
from steel, glass and chemicals with one of the cheapest power
prices in Europe thanks to the country’s 58 nuclear reactors,
French companies’ competitive advantage is being whittled away
as the U.S. embrace of shale gas cuts energy prices there and as
Germany gives businesses fiscal breaks against higher
electricity costs.
- Top
Forecaster Westpac Leads Yen Bulls in BOJ Doubts. Westpac Banking Corp.,
the most accurate foreign-exchange forecaster in the fourth quarter is
betting against the consensus trade that made the yen the biggest loser
versus the dollar in the past six months. Westpac, HSBC Holdings Plc and
Royal Bank of Canada are the most bullish of 61 firms surveyed by
Bloomberg, forecasting 80 yen against the dollar by the end of the year,
from 93.64 yesterday.
- PBOC Signals Inflation Concern as Economy Rebounds. China’s
central bank signaled concern
that inflation risks will increase and said that monetary easing
by nations, including the U.S. and Japan, may push up commodity
prices and make global capital flows more volatile. China must be alert
to changes in price-gain expectations and to imported inflation, the People’s Bank of China said yesterday in its fourth-quarter monetary policy report. The costs of labor-intensive products, services and agricultural goods may rise persistently on slowing labor-supply growth, the
PBOC said. “An economic recovery and demand expansion may pass into
CPI in a relatively fast manner,” the central bank said.
- China Stocks Drop; Developers Fall.
China Vanke Co. and Poly Real Estate Group Co., the two biggest
developers, slid at least 1 percent after the China Securities Journal
said some cities may slow approvals of new home sales. China Minsheng
Banking Corp. slumped 5.6 percent after surging 77 percent since Dec. 3
with valuations reaching the highest level since December 2010. Tsingtao
Brewery Co. led gains for consumer-staples producers. The Shanghai Composite Index fell 0.8 percent to 2,414.30 as of 11:01 a.m. local time, the steepest loss since Jan. 17.
- Japan Radar Targeting Protest Is War Signal, Global Times Says. Japan is exploiting an incident in
which a Chinese ship used weapons-targeting radar on a Japanese
naval vessel and helicopter to prepare the people of both
countries for war, China’s state-run Global Times said. “We believe in doing this Japan is at the same time also
sounding a combat alarm among the Chinese and Japanese public,”
the Chinese-language editorial said today. Ordinary people who
don’t understand naval affairs will believe the two countries
are very close to war, it said.
- IMF Says India Should Hold Rates Until Inflation Curbed. India’s central bank should refrain
from cutting interest rates until inflation is contained even as
the nation faces a subdued economic recovery, according to the
International Monetary Fund.
“With policy space strictly circumscribed because of high
fiscal deficit and elevated inflation, the economy is in a
weaker position than before the global financial crisis,” the
IMF said in a statement released yesterday. “It is advisable to
maintain the current level of policy rates until inflation is
clearly on a downward trend.”
- Goldman Sachs’s(GS) Dreyfus, Margiotta Said to Leave Hedge-Fund Unit. Daniel
A. Dreyfus and Paul W. Margiotta are leaving the Goldman Sachs
Investment Partners hedge-fund unit that was established to allow
clients to invest
with some of the firm’s top proprietary traders. Dreyfus, 37, a managing director who ran investments in
natural resources, left last month, according to a person
familiar with the matter who declined to be identified because
the information isn’t public. Margiotta, 41, a vice president
who specialized in credit, will leave the New York-based company
later this month, the person said.
Wall Street Journal:
- Obama Relents on Secret Drone Memo. On
the eve of a battle to confirm his pick for America's CIA chief,
President Barack Obama agreed Wednesday to let a small group of
lawmakers look at a long-sought, classified Justice Department opinion
explaining his administration's legal justification for targeting
killings of American terror suspects in other countries. The secret
legal memo has became a flash point in the nomination of White House
counterterrorism chief John Brennan to become director of
the Central Intelligence Agency. Lawmakers this week wrote to Mr. Obama
demanding the release of Justice Department documents that they first
began seeking soon after a U.S. missile struck the vehicle carrying the
radical, American-born cleric Anwar al-Awlaki in September 2011, killing
him.
- Wave of Large Buyouts Unlikely to Follow Dell. The $24.4 billion deal to take Dell Inc. DELL +0.75% private shows what is possible in the leveraged-buyout market but
doesn't necessarily portend a return of the megadeals popular before the
financial crisis. By far the largest private-equity transaction
since financial markets crashed in 2008, the Dell deal has components
that are unusual and will make its size difficult to replicate, bankers,
private-equity executives and analysts said.
- Vote on Gay Ban Threatened to Split Scouts. The Boy Scouts of America on Wednesday delayed until May a decision on
whether to end the group's ban on gay members, after a planned vote
exposed rifts that threatened to break apart the nearly 103-year-old
group.
- U.S. Coal Finds Warm Embrace Overseas.
For all the troubles of the U.S. coal industry at home, its business
with the rest of the world is brisk. Last year, the U.S. set a record
for coal exports, with the final tally estimated to top 120 million
tons, double what it exported as recently as 2009.
- GE(GE) Bring Engine Work Back. As Boeing Co. pays a price for having farmed out crucial parts on its
new Dreamliner, General Electric Co.'s aviation division is busy
bringing work on its engines back in-house.
- Sex Attacks Fuel Outrage in Egypt. Rash
of Assaults Prompts Advocacy Groups to Publicize Grisly Accounts in an
Often Indifferent Society. Public testimonies from several women who
allege to have been the
victims of sexual assault during recent antigovernment demonstrations in
Cairo have suddenly brought a long-festering issue to the fore of
Egypt's conservative society. On Wednesday, the issue drew fresh attention as hundreds of Egyptian
activists marched in Cairo to demand an end to sexual violence against
women and Amnesty International issued a report urging President
Mohammed Morsi to take action against what the group says is a rampant
and growing problem. Gang rapes and mob attacks against women—particularly in crowded
public spaces—aren't new to Egypt. But several advocacy groups are for
the first time urging women to reveal their allegations to an often
skeptical and indifferent public.
- The Unscary Sequester. Washington is in a fit of collective terror over the "sequester," aka the impending across-the-board spending cuts. Trying
to explain the zero economic growth at the end of 2012, White House
spokesman Jay Carney blamed Republicans for "talk about letting the
sequester kick in as
though that were an acceptable thing." He left out that President Obama
proposed the sequester in 2011.
MarketWatch.com:
CNBC:
- Bond Frenzy Stokes Bubble Fears in China's Real Estate. Chinese property companies are rushing to the dollar bond market, almost
matching last year's sales in the first month of 2013 alone, in a
frenzy that could inflate the sector's gearing and the broader risk of a
housing price bubble.
Zero Hedge:
- Euphoria. (graph) Presented with little comment aside from noting that the only time
stocks have been this 'euphoric' was right before the collapse in 2000
and right before the collapse in 2008.
Business Insider:
Reuters:
- Green Mountain(GMCR) shares fall on weak sales outlook. Green Mountain Coffee Roasters Inc forecast current-quarter sales below Wall Street expectations and said growth would slow in its coffee and espresso maker business, sending its shares down 10 percent in after-market trade.
- Iran's Ahmadinejad seeks strategic axis with Egypt. President
Mahmoud Ahmadinejad, on the first visit to Cairo by an Iranian leader
in more than three decades, called for a strategic alliance with Egypt
and said he had offered the cash-strapped Arab state a loan. In a step by Iran to advance ties that were broken in 1979,
the Iranian foreign minister said Egyptian tourists and
merchants would no longer require visas to visit, Egypt's state
news agency reported.
Financial Times:
- Commodity hedge fund investors seek exit. Some pension funds, therefore, have begun to lose enthusiasm for the hedge fund sector, fund managers report. “There’s some frustration,” one says. A veteran commodity hedge fund
manager adds: “The industry is not what it once was. It’s a contracting
industry. Every dollar is hard won.” The disillusionment with the commodity hedge funds, which typically
charge fees of 2 per cent plus 20 per cent of profits, has made itself
felt in the past six months. Pension funds, insurers, and other hedge
fund investors have pulled a large chunk of their money out of the
sector.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 115.0 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 88.75 -1.75 basis points.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Preliminary 4Q Non-farm Productivity is estimated to fall -1.4% versus a +2.9% gain in 3Q.
- Preliminary 4Q Unit Labor Costs are estimated to rise +3.0% versus a -1.9% decline in 3Q.
- Initial Jobless Claims are estimated to fall to 360K versus 368K the prior week.
- Continuing Claims are estimated at 3197K versus 3197K prior.
3:00 pm EST
- Consumer Credit for December is estimated to fall to $14.0B versus $16.045K in November.
Upcoming Splits
Other Potential Market Movers
- The Fed's Stein speaking, Fed's Evans speaking, ECB's Draghi speaking, EU Finance Leaders Summit, Eurozone Industrial Production data, Spain/France 10Y bond auction, BoE rate decision, ECB rate decision, Japan trade data, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory data could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology 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 50% net long heading into the day.
