Today's Headlines

Bloomberg:    

• Euro-Region Industrial Output Drops as Slump Persists: Economy. Euro-area industrial output fell more than economists forecast in January, adding to signs that the region’s recession extended into the first quarter. Factory production in the 17-nation euro zone dropped 0.4 percent from December, when it rose a revised 0.9 percent, the European Union’s statistics office in Luxembourg said today. The median forecast in a Bloomberg News survey of 32 economists was for a 0.1 percent decline. Production fell 1.3 percent in January from a year earlier.
• Italian Bonds Decline as Borrowing Costs Climb at Debt Auction. Italian bonds fell, with two-year yields rising the most in two weeks, as borrowing costs increased at an auction amid concern a political deadlock will derail plans to fix the nation’s finances. Shorter-maturity notes led declines as the country sold 3.32 billion euros ($4.3 billion) of securities due in December 2015 at an average yield of 2.48 percent versus 2.30 percent at the previous offering last month. “The market is a bit complacent about the risks that can happen in Italy,” said Mohit Kumar, head of Europe and U.K. rates strategy at Deutsche Bank AG in London. “If you have a government that is unable to pursue structural reforms, it will have an impact on economic growth in Italy.” 
• Europe to Contract as Much as 1.5%, El-Erian Says: Tom Keene.
• PBOC Chief Says China Should Be on ‘High Alert’ on Inflation. China should be on “high alert” over inflation after February’s figures exceeded forecasts, central bank Governor Zhou Xiaochuan said, signaling a heightened focus on controlling prices. Monetary policy is “no longer relaxed” and is “relatively neutral” as demonstrated by a 13 percent target for money-supply growth that’s tighter than expansion in the last two years, Zhou, head of the People’s Bank of China, said at a press conference today during the annual gathering of China’s National People’s Congress. Zhou’s comments add to signs that officials are tightening policies even as the recovery in the world’s second-biggest economy shows signs of weakness.
• China’s Stocks Slump to Two-Month Low on Property Curbs. Chinese stocks fell, dragging the benchmark index to a two-month low, as real estate and construction companies tumbled on concern policy makers will step up property curbs. Sina.com reported the southern city of Shenzhen banned developers from raising home prices, citing discussions with property companies. Poly Real Estate Group Co. and Gemdale Corp. declined more than 3 percent. Sany Heavy Industry Co. (600031), the nation’s biggest maker of construction machinery, lost 2.1 percent. CSR Corp. (601766) and China CNR Corp., the nation’s top train makers, slumped at least 3.7 percent on concern the dismantling of the rail ministry will curb state spending. “Property curbs and the central bank’s possible attitude towards tightening liquidity make investors nervous,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “There’s concern the economic recovery will falter.” The Shanghai Composite Index (SHCOMP) dropped 1 percent to 2,263.97 at the close, capping a five-day, 3.6 percent losing streak that’s the longest in four months. The gauge also erased its gain for the year.
• Copper Falls on Concern China Housing Curbs Will Sap Demand. Copper fell the most in a week amid concern that policy makers will expand efforts to cool the housing market in China, the world’s biggest consumer. Chinese stocks fell, dragging the benchmark index to a two- month low, as real estate and construction companies tumbled. Sina.com reported the southern city of Shenzhen banned developers from raising home prices. Accelerating inflation means the country should be on “high alert,” Zhou Xiaochuan, head of the People’s Bank of China, said today, signaling a heightened focus on controlling prices. On the Comex in New York, copper futures for delivery in May slid 0.7 percent to $3.5285 a pound at 12:01 p.m., heading for the biggest decline since March 1. 
• Iron Ore Falls Most Since January Amid China Property Concerns. Iron ore fell the most since January amid concern curbs on construction in China will reduce demand for the commodity used to make steel. Imported ore with 62 percent iron content at the Chinese port of Tianjin dropped 3.1 percent to $139 a dry metric ton today, the most since Jan. 16, according to The Steel Index Ltd. The global benchmark fell 13 percent from a 16-month high reached Feb. 20. Sentiment is deteriorating because of concerns about demand from real estate in China, Oscar Tarneberg, an analyst at The Steel Index, said by e-mail today. “China’s panicked basic-material destock continues, with construction and real-estate firms caught up in a severe economic slump, caused by tightening liquidity and the ongoing threat of negative property policies,” Melinda Moore, an analyst at Standard Bank Plc, said in an e-mailed report today.
• Import Prices in U.S. Climbed in February as Energy Costs Jumped. The cost of goods imported into the U.S. climbed in February by the most in six months, reflecting a jump in energy expenses that is now receding. The 1.1 percent increase in the import-price index followed a 0.6 percent gain in the prior month, Labor Department figures showed today in Washington. The median forecast of 43 economists in a Bloomberg survey called for a 0.6 percent advance. Prices dropped 0.3 percent over the past 12 months.
• Business Inventories in U.S. Increase by Most Since May 2011. Inventories in the U.S. rose in January by the most since May 2011 as companies replenished warehouses and shelves amid signs demand will pick up. The 1 percent increase in goods on hand exceeded the highest forecast in a Bloomberg survey and followed a 0.3 percent gain in December that was more than previously estimated, Commerce Department figures showed today in Washington. The median estimate was for a 0.5 percent advance. At the January sales pace, businesses had enough goods on hand to last 1.29 months, up from 1.28 months in the prior month and the highest since August. Business sales dropped 0.3 percent in January, reflecting declines at factories and wholesalers.

Wall Street Journal:

• New Pope: Live Updates.
• The Resilient Consumer? Not Quite. Resilient? That’s not exactly the word we’d use to describe it. The bulk of the gain came courtesy of auto sales and rising gas prices. Excluding those two items, and building materials, sales were up a far less impressive 0.36%. Sales were down at department stores, restaurants and furniture stores. “That indicates consumers may have cut their spending on non-essentials,” Dow Jones’ Sarah Portlock and Jeffrey Sparshott wrote this morning.

CNBC: 

• Crumbling BRICs: Why You're Better Off Elsewhere. The BRIC nations increasingly look like they will no longer be the building blocks of international investing. As a group, Brazil, Russia, India and China have been seen as the collective pillar of emerging market growth, leading to an exodus of money from U.S. stocks and into global equities. But signs indicate that trade has begun to run its course, and investors are looking for opportunity elsewhere.

Zero Hedge: 

• Chart Of The Day: Chinese Stocks Turn Red For The Year. 
• NFIB: "No Sign Of A Surge In Confidence". 
• Dash For Absolute Trash Outperforms Everything In 2013. (graphs) 
• Has the European Spring Started?
• Farage Slams Eurozone As "Complete Economic Disaster". (video)

Business Insider:

• The Chinese Central Bank Is Finding Itself In An Increasingly Difficult Position. 
• Europe Hasn't Even Done The Most Painful Part Of The Recovery. (graphs)

NYPost:

• Goldman’s(GS) Blankfein on trader talent hunt at Morgan Stanley(MS). Lloyd Blankfein smells blood in the water. The Goldman Sachs CEO is taking dead aim at Morgan Stanley’s most prized assets — its best and brightest employees — after his rival decided to defer pay for senior bankers. Blankfein, as a big game hunter, recently landed 13-year Morgan Stanley veteran Kate Richdale, head of its Asia Pacific investment banking business. The CEO’s talent hunt is continuing, sources said. Goldman currently is in selective talks with other Morgan Stanley bankers and has also lured a handful of traders from the bank. The classic Wall Street maneuvering comes months after Morgan Stanley told some execs it would defer pay, including their cash bonuses, over three years — a move that caused some bankers to grouse.

c/net:

• Paris court to Apple Stores: No more breaking 9 p.m. curfew. The court prohibits late-night work at the retail outlets and orders Apple to pay damages to the unions that filed suit against the company.

Reuters: 

• Exclusive: Obama administration to let spy agencies scour Americans' finances. The Obama administration is drawing up plans to give all U.S. spy agencies full access to a massive database that contains financial data on American citizens and others who bank in the country, according to a Treasury Department document seen by Reuters. The proposed plan represents a major step by U.S. intelligence agencies to spot and track down terrorist networks and crime syndicates by bringing together financial databanks, criminal records and military intelligence. The plan, which legal experts say is permissible under U.S. law, is nonetheless likely to trigger intense criticism from privacy advocates.
• Italy's Berlusconi promises parliamentary battle against magistrates. Italy's former prime minister, Silvio Berlusconi, facing trial on tax fraud and sex charges and under investigation for suspected political bribery, promised to take on prosecutors after parliament opens this week. 
• Russia risks billions of dollars if Cyprus defaults - Moody's.

Telegraph:

• MEPs reject EU spending cuts and demand extra £1.7bn from British taxpayers. MEPs have rejected cuts to European Union budgets agreed at an all-night summit last month and have demanded that national governments pay an extra £14 billion in spending for this year.
• BoE's Bailey warns bailed-out banks need more capital. Andrew Bailey, incoming deputy governor of the Bank of England, has said some of Britain's bailed-out banks need more capital to achieve financial stability.

Bear Radar

Style Underperformer:

• Large-Cap Value +.03%

Sector Underperformers:

• 1) Gold & Silver -2.03% 2) Steel -1.94% 3) Telecom -.75%
  

Stocks Falling on Unusual Volume:

• AMX, CVI, NGD, RY, MLNX, FN, NTWK, CYOU, CLMS, ESC, BNNY, PAMT, EXPR, DOLE, JIVE, CLMS, VLO, PBF, SLCA, FN, HFC, IOC, TLLP, EPB, RGLD, STLD, SA, ASR, EBAY, NUE, KRO and NTWK

Stocks With Unusual Put Option Activity:

• 1) ETFC 2) EA 3) ARO 4) SMH 5) CTSH
  

Stocks With Most Negative News Mentions:

• 1) VLO 2) CVI 3) WMT 4) EPB 5) DKS
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.25%

Sector Outperformers:

• 1) Airlines +1.65% 2) Homebuilders +.66% 3) Defense +.62%
  

Stocks Rising on Unusual Volume:

• VMW, YNDX, NFP, JBHT, DWA, CZR and WAG

Stocks With Unusual Call Option Activity:

• 1) WFR 2) SPPI 3) IAU 4) UUP 5) WAG
  

Stocks With Most Positive News Mentions:

• 1) PBR 2) COH 3) DFS 4) MRK 5) DPZ

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg: 

• EU Closes German-Designed Fiscal Straitjacket for Region. The European Union completed a framework for tougher controls on spending by euro-area governments in a German-led bid to prevent a repeat of the debt crisis that has threatened to break apart the single currency. The European Parliament voted to let the EU screen the budgets of euro nations earlier and more closely monitor countries where rising borrowing costs pose risks to financial stability. The assembly also approved tighter EU fiscal surveillance of nations after they exit rescue programs. 

• Italian Billionaire Says Bankers Must Follow Lawmakers Out Door. Italian billionaire Diego Della Valle, head of shoemaker Tod’s SpA (TOD), welcomed the wave of public disgust that swept established politicians from parliament last month and said it’s time to dislodge some top bankers as well. “It’s clear that people said, ‘That’s enough, it’s time to change, show us a decent country,’” Della Valle said March 6 in a Bloomberg Television interview. “That also has to happen in the world that we represent, finance and business and the civil society that guides the country.” Della Valle, 59, is picking fights with finance executives as banks curb lending and Italy slides deeper into recession.

• IMF’s Lipton Urges Officials to Redouble Bank Oversight Reform.  The International Monetary Fund’s No. 2 official urged policy makers to clean up banks and strengthen oversight of their financial systems or risk stalling a recent rally in global markets. With the world economy still subdued, further repair of banks’ balance sheets is necessary, which may require more capital for some lenders and closure for others, David Lipton, the fund’s first deputy managing director, said in a speech in Washington today. He also called for unwinding of excessive public and private debt.

• U.S. Intelligence Chief ‘Very Concerned’ on North Korea. North Korea’s nuclear weapons and missile programs pose a “serious threat” to the U.S. and its allies in Asia, according to U.S. intelligence agencies in an unclassified worldwide threat assessment. Presenting the report to the Senate intelligence committee yesterday, Director of National IntelligenceJames Clapper said he is “very concerned” about the actions of North Korea’s leader Kim Jong Un and the “very belligerent” rhetoric that has been emanating from his regime. His testimony comes as tensions on the Korean peninsula are at the highest since at least 2010, with North Korea threatening nuclear strikes and withdrawing from the 1953 armistice ending the Korean War. “The rhetoric, while it is propaganda laced, is also an indicator of their attitude and perhaps their intent,” Clapper told the committee. “So, for my part, I am very concerned about what they might do.” The North is capable of initiating “a provocative action against the South,” he said. 

• China’s Stocks Drop for Fifth Day as Industrial Companies Slump. Chinese stocks fell for a fifth day, dragging the benchmark index to its longest losing streak in four months, as industrial and financial companies slid amid concern the government will take steps to avert asset bubbles. Sany Heavy Industry Co. lost 2.1 percent, while Gemdale Corp paced declines by property developers, after news portal Sina.com reported the southern city of Shenzhen banned developers from raising prices of new residential properties. “Property curbs and the central bank’s possible attitude towards tightening liquidity make investors nervous,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “There’s concern the economic recovery will falter.” The Shanghai Composite Index (SHCOMP) dropped 0.5 percent to 2,274.07 at 9:46 a.m. local time, adding to a four-day, 2.6 percent slump. The Shanghai gauge has declined 6.5 percent since its high on Feb. 6 amid concern the government will tighten monetary policy at the same time as economic expansion slows. Data over the weekend showed inflation accelerated in February, while industrial output had the weakest start to a year since 2009 and lending and retail sales growth slowed. 

• Stranded Hotel in Australia Emblem of Mining Bust: Commodities. Global capital spending by mining companies is set to drop by a third next year to $96 billion, from a record $141 billion last year, according to UBS AG estimates. Producers have slowed expansions and delayed projects on expectations that commodities prices have passed their highs, after economic growth began slowing in China, the biggest buyer of metals. 

• Rubber Declines Amid Yen’s Advance, Rising Stockpiles in China. Rubber dropped for a second day to the lowest level in more than a week as Japan’s currency climbed, reducing the appeal of yen-denominated contracts, and on concern that reserves in China are increasing. The contract for delivery in August fell as much as 2.7 percent to 284.5 yen a kilogram ($2,967 a metric ton) on the Tokyo Commodity Exchange, the lowest most-active price since March 5. It traded at 285.1 yen at 10:51 a.m. in Tokyo after losing 2.9 percent yesterday. 

• Rebar Falls to Lowest Level This Year on Inventory, Production. Steel reinforcement-bar futures declined for a sixth day to the lowest level this year as swelling inventory and record output in China increased concern that the market is oversupplied. Rebar for delivery in October on the Shanghai Futures Exchange fell as much as 1 percent to 3,853 yuan ($620) a metric ton, the lowest level for a most-active contract since Dec. 25, before trading at 3,862 at 9:59 a.m. local time. Inventory jumped 86 percent this year through March 8, according to Shanghai Steelhome Information. Total crude-steel production in China gained 9.8 percent in February from a year ago to 61.83 million tons, the statistics bureau said yesterday. Average daily crude-steel output rose to 2.2 million tons last month, a record high, according to a report by Wanda Futures Co. 

• OPEC Producers Said to Be in Talks to Replace Iran Oil for India. OPEC’s biggest oil producers are in talks to supply extra crude to India as the nation prepares to halt purchases from Iran because of global sanctions, four people with knowledge of the matter said.

Wall Street Journal: 

• Big Sugar Is Set for a Sweet Bailout. Candy makers will suffer if the U.S. government buys sugar. The U.S. Department of Agriculture is considering buying 400,000 tons of sugar—enough for 142 billion Hershey's Kisses—to stave off a wave of defaults by sugar processors that borrowed $862 million under a government price-support program. The action aims to prop up tumbling U.S. sugar prices, which have fallen 18% since the USDA made the nine-month operations-financing loans beginning in October. The purchases could leave the price-support program with an $80 million loss, its biggest in 13 years, said Barbara Fecso, an economist at the USDA, in an interview.

• White Pressed on Past Representing Banks. Mary Jo White, in a Senate hearing Tuesday, fended off pointed questions from lawmakers about whether her time spent defending Wall Street banks would impinge on her ability to police Wall Street.

• U.S. Steps Up Alarm Over Cyberattacks. The nation's top spies warned Tuesday of the rising threat of cyberattacks to national and economic security, comparing the concern more directly than before to the dangers posed by global terrorism. U.S. intelligence officials told a Senate hearing that the nation is vulnerable to cyberespionage, cybercrime and outright destruction of computer networks, both from sophisticated, government-sponsored assault as well as criminal hacker groups and cyberterrorists.

• A Ryan Reboot. The budget will never balance without faster economic growth.

Fox News: 

• Former administration insider skewers Obama national security team.

MarketWatch.com:

• H&R Block(HRB) snafu delays refunds. Mandatory field on tax form left blank, IRS says. A tax-preparation software glitch caused more than 600,000 returns to be filed incorrectly, delaying refunds by as much as six weeks, the IRS says. 

• Equifax(EFX), others admit to being hacked: reports. Credit reporting agencies Equifax Inc., Experian PLC, and TransUnion Corp. have said their credit reports have been breached by computer hackers, according to media reports Tuesday. The confirmation comes after reports from TMZ.com Monday that several celebrities ranging from Michelle Obama to Paris Hilton had their financial information posted online.

CNBC: 

• Defunding Obamacare in Budget Right Thing to Do: Paul Ryan.

Zero Hedge: 

• Surge In Trading Leverage Triggers Bank Of America(BAC) Contrarian Sell Signal. (graphs)

• The 14 Steps From Credit Expansion To Speculative Bust.

• Swirlogram Shows Slowdown Is Here.

• When HFT Steals Liquidity - Exploratory Trading In The eMini.

• Let's Stop Fooling Ourselves: Americans Can't Afford the Future. (graphs)

Business Insider: 

• Republicans Ramp Up Demands To Access Americans Wounded In The Benghazi Attack.

• A Major Consumer Protection Organization Wants The FTC To Check Out Herbalife(HLF).

• Don't Forget The Devastating Capability Of North Korea's Massive Artillery Armada.

• Our Ridiculous Nanny-State Government Now Says Tweets Have To Include 'The Fine Print'.

• The Top Story On The Financial Times Front Page Says The UK Faces One Of The Scariest Situations In Economics.

• The Dow's Record High Is Distracting Everyone From The Huge Story Developing In Italy.

• The Number Of Dead Pigs Found In Shanghai River Doubles In Fewer Than 24 Hours.

Reuters: 

• Italy's debt costs to rise at auction in wake of Fitch downgrade. Italy's borrowing costs will climb on Wednesday at its first sale of long-term debt since Fitch cut its credit rating, but demand for high yields and European Central Bank protection will temper the rise, analysts said.

Sina.com:

• China's southern city of Shenzhen banned developers from raising prices of new residential properties, citing officials with developers including Vanke, Merchants Property and Gemdale. Developers are ordered to have "zero-price-increase" for new homes on a monthly basis, the report said.

Shanghai Securities News:

• Shanghai Futures Exchange will try to start futures trading at night time from this year, citing the exchange's chairman Yang Maijun.

21st Century Business Herald:

• The China Banking Regulatory Commission warned financial institutions to be cautious of their local government financing vehicle bond holdings, citing a person familiar with draft guidelines. This is the first time the CBRC has issued a warning on LGFV bonds. CBRC reiterated that "total amount" of LGFV lending should be controlled. CBRC ordered banks to centralize approval of all LGFV bond transactions at their head offices, citing the draft rules.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.0% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 103.0 +3.0 basis points.

• Asia Pacific Sovereign CDS Index 80.5 +.75 basis point.

• FTSE-100 futures -.26%.

• S&P 500 futures -.02%.

• NASDAQ 100 futures unch.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MW)/-.05

• (VRA)/.57

• (MRX)/.71

Economic Releases
8:30 am EST

• The Import Price Index for February is estimated to rise +.6% versus a +.6% gain in January.

• Advance Retail Seals for February are estimated to rise +.5% versus a +.1% gain in January. 

• Retail Sales Less Autos for February are estimated to rise +.5% versus a +2% gain in January.

• Retail Sales Ex Auto & Gas for February are estimated to rise +.2% versus a +.2% gain in January.

10:00 am EST

• Business Inventories for January are estimated to rise +.5% versus a +.1% gain in December.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +2,300,000 barrels versus a +3,833,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,200,000 barrels versus a -616,000 barrel decline the prior week. Distillate inventories are estimated to fall by -2,000,000 barrels versus a -3,830,000 barrel decline the prior week. Finally, Refinery Utilization is estimated unch. versus a -2.9% decline the prior week.

2:00 pm EST

• The Monthly Budget Deficit for February is estimated at -$205.0B versus -$231.68B in January.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Italy 10Y bond auction, 10Y T-Note auction, Basal Committee meeting, Australia unemployment report, (LYB) investor day, (CAB) investor day, weekly MBA mortgage applications report and the UBS Consumer Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by commodity and financial 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.

Stocks Slightly Lower into Final Hour on Rising Eurozone Debt Angst, Global Growth Fears, Technical Selling, Homebuilder/Financial Sector Weakness

Broad Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• VIX 12.69 +9.78%

• ISE Sentiment Index 115.0 -8.73%

• Total Put/Call .97 +6.59%

• NYSE Arms .93 +26.94%

Credit Investor Angst:

• North American Investment Grade CDS Index 79.86 +.48%

• European Financial Sector CDS Index 143.82 +3.48%

• Western Europe Sovereign Debt CDS Index 96.50 -1.12%

• Emerging Market CDS Index 237.22 -.43%

• 2-Year Swap Spread 13.5 -.75 bp

• TED Spread 19.0 +.25 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -16.75 -.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.

• Yield Curve 177.0 -3 bps

• China Import Iron Ore Spot $143.40/Metric Tonne -.49%

• Citi US Economic Surprise Index 21.1 +.1 point

• 10-Year TIPS Spread 2.56 -2 bps

Overseas Futures:

• Nikkei Futures: Indicating -94 open in Japan

• DAX Futures: Indicating -11 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech sector longs, index hedges and emerging markets shorts
• Disclosed Trades: Added to my (IWM), (QQQ) hedges, then covered some of them
• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Italy Rates Rise in Auction Amid Vote Concern, Fitch Downgrade. Italian borrowing costs rose today in the first auction since Fitch Ratings downgraded the nation, saying inconclusive elections threatened its ability to respond to the fourth recession since 2001. The Rome-based Treasury auctioned 7.75 billion euros ($10.1 billion) of one-year bills today at 1.28 percent, the highest since December and up from 1.094 percent at an auction of similar maturity debt Feb. 12. Attracted by higher rates, investors bid for 1.50 times the amount offered, up from 1.38 times last month. Today’s sale was probably helped by 8.69 billion euros in bill redemptions this week.

• Bundesbank Almost Doubles Risk Provisions on ECB Measures. Germany’s Bundesbank almost doubled its risk provisions in 2012, citing increased potential for losses stemming from the European Central Bank’s monetary policy. The Frankfurt-based central bank increased provisions for general risks by 6.7 billion euros ($8.7 billion) to 14.4 billion euros, it said in an e-mailed statement today when releasing its 2012 annual report. 

• U.K. Industrial Output Unexpectedly Falls on Oil, Gas. U.K. industrial production unexpectedly fell in January as factory output slumped, fueling concerns that Britain may slip into a triple-dip recession. Production dropped 1.2 percent from December, when it jumped 1.1 percent, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 29 economists was for a 0.1 percent increase. Manufacturing declined 1.5 percent. The pound fell.

• Banks’ Debt Addiction Said to Face Scrutiny at Basel Group. A planned international limit on bank indebtedness will be on the agenda of every meeting of the Basel Committee on Banking Supervision this year as regulators seek to wean lenders off their addiction to debt, according to three people familiar with the talks. Regulators are preparing to fight lenders over the details of the so-called leverage ratio as they seek to toughen rules on the minimum amount of capital they must use to back their investments. The Basel group, which brings together supervisors from 27 nations, will meet in the Swiss city tomorrow, according to the people, who asked not to be identified because the meetings are confidential. 

• Junk Bond Puts Jump on Record-Low Yield. (video) 
• Beijing’s Rising Rents Squeeze Newcomers Barred From Home Buying. Beijing’s strictest-in-the-nation property curbs are forcing up rents for about 7.7 million residents originally from outside of the city who are blocked from buying a home. The Chinese capital requires new arrivals to wait five years before purchasing a house, while cities including Shanghai permit ownership after one year of residency. Beijing introduced restrictions on non-locals in 2011, followed by about 40 other cities, part of a three-year, largely unsuccessful campaign by the central government to contain the growth of property prices. 

• China Aluminum Output at Record in January on Capacity Additions. Aluminum production in China, the biggest producer and user, climbed to a record in January on capacity additions, data from the National Bureau of Statistics showed today. Production was 1.78 million metric tons in January, according to Bloomberg calculations based on the data. The figure exceeded the previous record of 1.75 million tons in August, said Zhang Chenguang, an analyst at SMM Information & Technology Co. The bureau doesn’t release January output data alone and may revise previous data without disclosure.

Wall Street Journal: 

• GOP Budget Establishes Contrast With Democrats. Republican budget standard-bearer Paul Ryan on Tuesday offered his party's most provocative fiscal framework in years, calling for Medicare and Medicaid overhauls and new limits on defense spending not previously endorsed by party leaders. 

• North Korea Ratchets Up Tension. North Korea moved to further stoke tensions with South Korea, as state media reported that Kim Jong Eun instructed his military to be ready to deal "deadly strikes" while visiting an artillery unit near the Yellow Sea border that has been the scene of several clashes between the nations.

• OPEC: U.S. Shale Oil to Cut Into Demand. The Organization of the Petroleum Exporting Countries cut its forecast of demand for its oil this year, citing growing production from U.S. shale deposits. If the scaled-back forecast proves correct, OPEC could be on track to have its lowest share of the global oil market in more than 10 years. OPEC's move comes as industry experts increasingly question whether the producers' group, which has had a decisive influence on the oil market since the 1970s, can maintain its position amid a boom in U.S. oil production resulting from shale- rock drilling technology.

MarketWatch:

• Charting the S&P’s test of record territory.

Fox News:

• Amid rising tensions, China says it will send a survey team to disputed islands held by Japan. A Chinese official says Beijing plans eventually to land a survey team on uninhabited islands at the heart of an increasingly dangerous territorial dispute with Japan. It was China's clearest expression yet of an intention to set foot on the islands, adding to the sharpening rhetoric between the two sides over the islands, which are controlled by Japan but also claimed by China.

CNBC: 

• Small Business Confidence Edges Up Slightly in February. Small-business owners' confidence improved a bit in February, but entrepreneurs still aren't feeling a surge of optimism — or hiring. That's the finding of a monthly survey by the National Federation of Independent Business. The group said Tuesday that its small-business optimism index edged up 1.9 points to 90.8 points from 88.9 points in January. "While the Fortune 500 are enjoying record high earnings, Main Street earnings remain depressed," said NFIB chief economist Bill Dunkelberg in a prepared statement. "Far more firms report sales down quarter over quarter than up." "Until owners' forecast for the economy improves substantially, there will be little boost to hiring and spending from the small business half of the economy," he said. 

• 'Dr. Copper' Has Raised Doubts About Recovery. Both the stock market rally and economic recovery are missing what historically has been a key element - a house call from "Dr. Copper."

• El-Erian: Fed Now Facing One of Its Toughest Jobs Ever. (video) "This exit going to be one of the most challenging issues facing any central bank," he said.

• Watch Out! Reversal of the 'Great Rotation' Coming : Study. Talk of a "great rotation" out of bonds and into equities is misleading according to investment strategy group Lombard Odier, which argues that 2013 could see the reverse happen.

Zero Hedge:

• Japan To Hike Utility Prices By 14-19% As Inflation Surges In All The Wrong Places. 

• The Scariest Charts From Paul Ryan's Proposed Budget. 

• The Great Disconnect. 

• Mark-To-Market Manipulation Hides $90 Billion Losses For UK Banks. 

• David Stockman On "The Great Deformation" And The US Treasury As "The M&A Department Of Goldman Sachs".

Business Insider:

• Incredible Images From The Chinese Village That Violently Rebelled Against Developer's Land Grab. 

• BofA: 'Hedge Funds Are Fully Invested'. (graph) 

• Elizabeth Warren Skewered The SEC's Record For The Past Two Years. 

• JEFFERIES: No Apple(AAPL) TV This Year.

Reuters:

• Euro woes not over, says crisis-wary Bundesbank. A wary German central bank said on Tuesday it had set aside billions more euros against what it deems risky European Central Bank moves, and criticized France directly for "floundering" in its reform drives. Presenting Bundesbank 2012 results, Jens Weidmann, the bank's chief, said the euro zone crisis, which has eased as a result of ECB funding promises, was not over. He urged governments to tackle the roots of their troubles with reforms. Weidmann, a member of the ECB's Governing Council, opposed the bank's yet-to-be-used bond-buy plan agreed last September and believes euro zone governments must shape up their economies to exit the crisis rather than looking to the ECB for help. "The crisis that we are facing is a crisis of confidence, and this confidence cannot be gained if we postpone the tackling of the root causes of the crisis," he told Reuters in a television interview. Stressing that "the crisis is not over despite the recent calm on financial markets," Weidmann earlier told a news conference there was uncertainty about the reform course in France, Italy and Cyprus. "The reform course in France seems to have floundered, in Italy it has been brought into question by the elections and in Cyprus (which is struggling to get a bailout) the situation is especially unclear."

• SEC asked Goldman(GS) to disclose more about illiquid assets-filings. Goldman Sachs Group Inc began disclosing more information about the way it values illiquid assets after staff from the U.S. Securities and Exchange Commission pressured the bank to do so, according to documents released on Tuesday. 

• Wal-Mart(WMT) CFO says still seeing effect of delayed tax refunds. Wal-Mart Stores Inc's U.S. customers are still contending with delays in getting their tax refunds this year, with volume running about a third lower than normal, the discount chain's finance chief said on Tuesday. 

• China's Suntech(STP) to close its only US solar panel plant. China-based Suntech Power Holdings Co Ltd said it would close its only solar panel-making plant in the United States to cut costs, two years after opening the facility that never reached full production. Shares of the company, struggling to cover a convertible bond due this Friday, fell 9 percent to $1.05, their lowest in more than two months.

• U.S. Jan steel exports fall on year on low international demand. January steel exports from the United States fell by 14.6 percent from the same month last year due to a decline in international steel demand, an industry body said on Tuesday. "Steel exports declined to all regions in the year-to-year comparison as international economic conditions and steel-related demand sagged," said David Phelps, president of the steel trade association American Institute for International Steel. "We are concerned about the direction of the international marketplace at this point."  

• Brazil says subsalt oil finds could triple total reserves. Brazil's giant subsalt oil and gas region could yield 35 billion barrels of recoverable oil equivalent, more than double Brazil's existing reserves, an energy ministry representative said on Tuesday.

Telegraph:

• UK on track for triple dip - NIESR. Britain is on track for a triple dip recession, one of the nation’s leading forecasters has signalled, as new figures on the UK’s manufacturing industry dealt a blow to recovery hopes and sent sterling crashing to a fresh two-and-a-half year low.

The Indian Express:

• Consumer price inflation accelerates to 11% in February. India's annual consumer price inflation (CPI) accelerated to 10.91 percent in February from the previous month, government data showed on Tuesday. Consumer prices rose an annual 10.79 percent in January. India's retail inflation is the highest among the BRICS group of emerging economies - Brazil, Russia, China, and South Africa. Food prices for consumers rose 13.73 percent in February from 13.36 percent in January.