Bloomberg:
- Draghi Commits to Trillion-Euro QE in Deflation Fight. (video)
Mario Draghi led the European Central Bank into a new era, pledging to
buy government bonds in an asset-purchase program worth at least 1.1
trillion euros ($1.3 trillion) to counter the threat of a deflationary
spiral. The ECB president unveiled a quantitative-easing plan of 60
billion euros per month until at least the end of September 2016 in a
once-and-for-all push to put more cash into circulation and revive
inflation. The region’s 19 national central banks were handed
responsibility for 80
percent of the additional purchases and put on the hook for their own
losses, a move intended to assuage critics.
- German Officials at ECB Led Opposition to Draghi’s QE. The two German members of the European
Central Bank’s Governing Council led opposition to the expanded
asset-purchase program that President Mario Draghi announced today, according to euro-area central-bank officials. Bundesbank President Jens Weidmann and Executive Board member Sabine Lautenschlaeger were against implementing the plan now, said the people, who asked not to be identified because the deliberations were private. Klaas
Knot of the Netherlands, Ewald Nowotny of Austria and Estonia’s Ardo
Hansson also expressed reservations against starting the program at this
time, the people said. An ECB spokesman declined to comment.
- Merkel Cool on ECB Plan as Germans Reject ‘Sweet Poison’. Chancellor
Angela Merkel left her allies in Germany to voice outrage over the
European Central Bank’s bond-buying program and instead issued an
indirect warning over its potential risks. “The world is amply supplied
with liquidity right now,” and governments should seize the moment to
reduce debt, Merkel said at the World Economic Forum in Switzerland.
“This liquidity supply is such that you can’t really precisely see who
is competitive or who isn’t quite there yet.” Merkel’s comments
highlighting the risk of undermining
economic reforms were her most detailed critique of the $1.3
trillion asset-buying plan.
- Ukrainian Deaths Surge as Merkel Sharpens Rhetoric on Russia. German
Chancellor Angela Merkel slammed Russia for undermining neighboring
Ukraine’s sovereignty and cited “many setbacks” in peace efforts as the
death toll in the conflict jumped. As Ukraine’s army suffered its worst casualties in two
weeks, an attack Thursday in Donetsk killed eight civilians and the
government accused its pro-Russian adversaries of ignoring a diplomatic
push to withdraw heavy weaponry. Merkel said Russia’s annexation of
Crimea can’t be allowed to pass and sanctions should remain. NATO said
violence is at pre-truce levels.
- Latin American Default Wave Just Getting Started: Credit Markets. Latin America is turning into the world leader in corporate-bond defaults. Four
companies in the region have skipped dollar-denominated debt payments
this month, the most of any other area and almost half the total in all
of 2014. In a sign bond investors are increasingly concerned about Latin American companies’ ability to repay debt, borrowers
led by Mexico’s oil-rig operators have pushed the amount of the
region’s bonds trading at distressed prices to $58 billion, about a
third of all emerging-market debt trading at such levels. The
strains that have investors from Prudential Financial Inc. to Hartford
Investment Management Co. bracing for more defaults are showing few
signs of abating. An oil-led collapse in commodities prices has
persisted, growth is flagging in economies from Mexico to Colombia, and
the biggest corruption scandal in Brazil’s history is spreading. That
raises the risk of even bigger losses for investors saddled with the
worst returns in emerging-markets this year. “The defaults will come in
Latin America,” Jennifer Gorgoll, who helps manage $4.1 billion of
emerging-market debt at Neuberger Berman Group LLC, said by telephone
from Atlanta.
“Some of these are slow-moving train wrecks. You have to be
able to determine which companies are survivors and which are
not.”
- China Provinces Cut 2015 Growth Targets as ‘New Normal’ Spreads.
China’s regions are setting lower economic growth targets as policy
makers adjust to the “new normal” of a slower expansion pace for the
world’s second-largest economy. Of seven provinces, municipalities and regions that have so
far published 2015 growth targets, six have cut the rates.
Economists expect the central government will lower its national
target to about 7 percent from last year’s 7.5 percent at the
People’s Congress in March.
- Euro Falls to 11-Year Low as ECB Expands Bond-Buying. The
euro fell 2.1 percent to $1.1371 at 1:35 p.m. in New York and touched
$1.1363, the weakest level since September 2003. The last time the euro
and dollar traded one for one was
in 2002. The shared currency declined 1.8 percent to 134.44 yen and
touched 134.29, lowest since Oct. 16. The dollar added 0.2
percent to 118.25 yen.
- Europe Stocks Post Biggest Six-Day Gain Since 2011 After Draghi. European stocks rose, posting the biggest six-day gain since December
2011, as ECB President Mario Draghi announced a plan to buy government
bonds. The Stoxx Europe 600 Index climbed 1.7 percent to 364.05
at the close of trading, the highest level since December 2007. The
gauge extended gains after Draghi’s announcement and later briefly
erased them.
- Oil Slips as U.S. Crude Stockpiles Surge Most in 14 Years.
Oil fell after a government report showed that U.S. crude supplies
surged the most in almost 14 years. Inventories rose 10.1 million
barrels in the week ended Jan. 16, the biggest gain since March 2001,
according to the Energy Information Administration. Refineries operated
at 85.5 percent of their capacity, the lowest level since April 2013 as
units were idled for maintenance. “The 10 million-barrel plus increase
was a big surprise,” Gene McGillian, a senior analyst at Tradition
Energy in Stamford, Connecticut, said by phone. “The big drop in
refinery runs left nowhere for the crude to go but storage. This
suggests that we’ll see more big supply
builds in the future with production at such high levels.” West Texas
Intermediate crude for March delivery slipped 85 cents, or 1.8 percent,
to $46.93 a barrel at 12.55 p.m. on the New York Mercantile Exchange.
The volume of all futures traded was 35 percent above the 100-day
average for the time of day.
- Oil Drillers ‘Going to Die’ in 2Q on Crude Price Swoon. Oil drillers will begin collapsing under the weight of lower crude
prices during the second quarter and energy explorers who employ them
will shortly follow, according to Conway Mackenzie Inc., the largest
U.S. restructuring firm. Companies that drill wells and manage
fields on behalf of oil producers will be the first to fall after the
benchmark American crude, West Texas Intermediate, lost 55 percent of
its value in seven months, said John T. Young, whose firm led the city
of Detroit through its 2013 bankruptcy.
- Copper Falls on China Demand Concern, ECB Stimulus.
Copper declined for the first time in three
days as the European Central Bank announced more stimulus and
investors speculated demand is slowing from China. A private
manufacturing Purchasing Managers’ Index due Friday is forecast to show
factory activity contracted for a second month in China, the world’s
biggest metals consumer. Copper for delivery in three months fell 1.5 percent to
$5,685 a metric ton on the London Metal Exchange by 1:59 p.m. in
London. The metal has declined 9.8 percent so far this month.
Futures for March delivery slipped 1.4 percent to $2.575 a pound
on the Comex in New York.
- Iron Ore Declines to 2009-Low as Steel Mills Seen Cutting Output. Iron ore declined to the lowest level in
more than five years amid speculation that mills in China will
reduce steel output in the runup to a holiday next month,
curbing demand from the biggest user and worsening a glut. Ore with 62 percent content delivered to Qingdao, China,
dropped 1.5 percent to $66.79 a dry metric ton, the lowest level
since June 2, 2009, according to Metal Bulletin Ltd. Prices are
headed for a third consecutive weekly loss.
- IGC Raises Corn Outlook, Sees Grains Stockpiles at 30-Year High. World
corn output will beat a November
forecast, the International Grains Council said, lifting the estimate an
eighth time on improved prospects for South America. Bigger corn and
wheat crops will expand world grain output excluding rice to a record
and lift inventories at the end of the season to the highest in about 30
years, the London-based organization wrote in a report today. Corn futures have dropped 9.7 percent in Chicago in the past 12 months as U.S. growers harvested a record crop and the outlook for production in Brazil and Argentina improved, while wheat futures have dropped 4.4 percent. Cheaper grain has contributed to a drop in international food prices.
- Lagarde Sees Fed Starting Rate Increases in Mid-Year. International Monetary Fund Managing
Director Christine Lagarde said the Federal Reserve will probably begin raising interest rates within months in a sign
that the economy is on the mend. “Our expectation is that it’s more likely to happen mid-year than at the end of the year,” Lagarde said on a Bloomberg
Television panel hosted by Francine Lacqua at the World Economic
Forum in Davos. “The fact that the Fed is going to do that is
good news in itself. It shows that things are moving in the
right direction.”
- Lazard’s Gary Parr Sees ‘Darwinian’ Pressure on Banks to Shrink. Banks
will be forced to cut back the number of businesses in which they
operate in the next three years as new regulations make the universal
model untenable, according to Gary Parr, vice chairman of Lazard Ltd.
(LAZ) “In 18 to 36 months, there will be a much more intense
pressure on some number of banks to break up,” Parr said in an interview
with Tom Keene on Bloomberg TV at the World Economic Forum in Davos,
Switzerland on Thursday. “It’s a Darwinian exercise, and what’s
fascinating to me is how slowly it’s going. It seems obvious with
regulators increasing the capital requirements, with the burden of
regulation, with the charges particularly for systemically important
institutions.”
MarketWatch.com:
CNBC:
ZeroHedge:
Business Insider:
Reuters:
- Oil majors seek to claw back costs from service firms. Global oil majors say
they are demanding cheaper but better services from engineering
and service companies, or simply taking work back in-house,
after losing hundreds of billions on cost overruns in the last
five years.
Telegraph:
Boersen-Zeitung:
- ECB's Impact Limited, Goldman's Pill Says. ECB's QE decision
won't have 'dramatic' effect, Goldman's chief European economist, Huw
Pill, says in interview. Bond yields, currency rate indicate that
there's already some easing in place. Bond purchases less effective tool
in Europe as lending is mainly done by banks, less by capital markets.
Style Underperformer:
Sector Underperformers:
- 1) Coal -1.51% 2) Networking -1.42% 3) Oil Service -.94%
Stocks Falling on Unusual Volume:
- RY, FFIV, LE, DFS, DLB, MHG, XLNX, SNDK, TCBI, BMRN, EVEP, AXP, FCS, URI, PBYI, BPFH, ASPX, BMA, ADVS, BGG, MDVN, NVGS, AZPN, FBC, SWN and CAVM
Stocks With Unusual Put Option Activity:
- 1) FFIV 2) LL 3) UTX 4) HON 5) AXP
Stocks With Most Negative News Mentions:
- 1) EMR 2) FLS 3) SNDK 4) XLNX 5) DNR
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Airlines +2.95% 2) Road & Rail +2.51% 3) Banks +2.21%
Stocks Rising on Unusual Volume:
- CYN, EBAY, KEY, BBRY, LUV, JNS, JBLU, LOCO, WBS, FRC and UAL
Stocks With Unusual Call Option Activity:
- 1) MCP 2) FXCM 3) STX 4) FFIV 5) TWX
Stocks With Most Positive News Mentions:
- 1) AGU 2) IHS 3) EBAY 4) SODA 5) CCI
Charts:
Evening Headlines
Bloomberg:
- Revenge of Disaffected Europe Risks New Crisis Sparked in Greece. They
speak different languages, they come from different backgrounds,
yet all have the same message of frustration that’s threatening
to redraw the European political map over the next year. Starting with
elections this Sunday in Greece and heading west to Ireland via Britain
and Spain, polls show Europeans will vent their anger over issues from
widening income disparities and
record unemployment to unprecedented immigration. For Athens
pensioner Irini Smyrni, the moment she’d had enough was when her younger
daughter lost her job with the government last year. For Dublin florist
Nicola Johns, it was when her business fell behind on rent.
- Draghi Is Pushing Boundaries of Euro Region with QE Program. Mario Draghi is about to bring Europe’s integration project across the Rubicon.
At about 2:30 p.m. in Frankfurt, the European Central Bank president
will probably commit to a quantitative-easing program that may exceed 1
trillion euros ($1.2 trillion). While the move comes much later than
that of the Federal Reserve, which ended its own QE three months ago,
the ECB’s arrival at this point still marks a critical juncture in the
history of the currency and
the European unity it embodies.
- Emerging Markets, Currencies Look Ripe to Short Sell: Bloomberg Poll. Emerging-market stocks and currencies are luring global investors for all the wrong reasons right now. A
quarterly Bloomberg Global Poll showed there was a two-fold surge in
the number of respondents who identified developing-nation equities and
currencies as the assets they’d most like to bet against. For
currencies, the percentage jumped to 12 percent from 6 percent in
November while for stocks, it rose to 7 percent from 3 percent.
- Brazil Keeps Pace of Rate Increases by Boosting to 12.25%. Brazilian policy makers raised borrowing
costs for a third straight meeting as analysts forecast they
will miss the country’s inflation target. The central bank’s board, led by bank President Alexandre Tombini, boosted the benchmark rate to 12.25 percent from 11.75
percent, as forecast by 56 of 60 economists surveyed by
Bloomberg. The vote was unanimous and took into consideration
“the macroeconomic scenario and the inflation outlook,”
according to the central bank statement. Four analysts had
forecast a quarter-point increase.
- Japan Margin Traders Record Yen Shorts Facing Swiss, Oil Shocks. (graph)
Margin
traders in Japan raised bets the yen would fall against the dollar to a
record amid their currency’s best start to a year since 2010.
Wagers from individuals for the Japanese currency to decline outnumbered
bets it would gain by 522,856 contracts on Jan. 15, the biggest net
shorts since Tokyo Financial Exchange
Inc.’s Click 365 began collecting the data in 2006. The figure
more than doubled since Sept. 30 as the Bank of Japan’s
unexpected Oct. 31 decision to expand bond purchases, known as
quantitative easing, drove the yen to an 8 1/2-year low in 2014.
- Asian Stocks Fall Before European Central Bank Stimulus Decision.
Asian stocks fell even amid speculation the European Central Bank will
boost stimulus through a sovereign-bond purchase program under the
quantitative-easing strategy. The MSCI Asia Pacific Index (MXAP) lost
0.1 percent to 134.46 as of 9:05 a.m. in Tokyo before markets open in
China and Hong Kong.
- Oil Drops as Iraq Signals Production Boost to Offset Price Slide. Oil
fell as Iraq said it needs to boost crude production and exports to
compensate for lower prices, signaling the global supply glut that
spurred the market’s collapse may persist. Futures dropped as much as
1.2 percent in New York. Iraq has lost about 50 percent of its
revenue because of the price decline, Iraq’s Deputy Prime Minister
Rowsch Nuri Shaways said in Davos, Switzerland. Crude stockpiles in the
U.S., the world’s biggest oil consumer, probably expanded for a second
week, a Bloomberg News survey shows before government data on Thursday.
- Bankruptcy Forecaster Sees Junk-Debt Bubble Bursting Next Year. A bubble in the leveraged-finance market is
growing and may burst in 12 to 18 months, said Edward Altman, a
specialist in credit markets who developed a model for
predicting corporate bankruptcies. “We think it’s building,” Altman told a gathering of
corporate restructuring experts Wednesday in New York. He said
the current “benign credit cycle” encouraged by low interest
rates has been going on for five years and led to a “frothy”
market. “You’ll be busier at this time next year.” A financial crisis isn’t necessarily expected, since few
economists are also predicting a U.S. economic recession, Altman
told the Turnaround Management Association, a group of
consultants, lawyers, liquidators and other professionals who
advise distressed companies. Altman is the director of research in credit and debt
markets at New York University’s Salomon Center for the Study of
Financial Institutions. He developed the “Z-Score,” a method
of predicting a company’s likelihood of bankruptcy.
- AmEx(AXP) to Cut More Than 4,000 Jobs This Year After Unit Sale. American
Express Co. will cut several thousand jobs this year across the company
as part of a restructuring, according a person familiar with the
decision. AmEx, the biggest U.S. credit-card issuer by purchases, will take a $313
million pretax charge in the fourth quarter to “improve operating
efficiencies,” the New York-based company said Wednesday in a statement
as it reported results for the period. The person, who asked not to be
identified because the reductions weren’t publicly disclosed, declined
to elaborate.
Wall Street Journal:
- The World’s Monetary Dead End. The European Central Bank embraces quantitative easing despite the sorry track record of ‘helicopter money.’ Central banks in the U.S., Japan and Europe are trapped in a loop. They
are fully invested in the theory that zero rates and bond buying are
stimulative and add to inflation, yet growth, inflation and median
incomes keep going down.
- Now He’s After Middle-Class Savers. Mr. Obama prepares to wipe out popular vehicles for funding education. President Obama is pitching his new tax plan as a way to help the
middle class at the expense of the rich. But middle-class savers are
bound to notice if he achieves two of the White House’s stated goals—to
“roll back” tax benefits of 529 college savings plans and “repeal tax
incentives going forward” for Coverdell Education Savings Accounts.
Fox News:
Zero Hedge:
NY Times:
- U.S. Not Expected to Fault Officer in Ferguson Case. Justice Department lawyers will recommend that no civil rights charges
be brought against the police officer who fatally shot an unarmed
teenager in Ferguson, Mo., after an F.B.I. investigation found no
evidence to support charges, law enforcement officials said Wednesday.
Reuters:
- F5 Networks(FFIV) revenue misses estimates as big deals slow down. Network equipment maker F5 Networks
Inc reported revenue that missed Wall Street's estimates for the first
time in eight quarters due to "a marked decrease in the number of deals
greater than $1 million".
The company also
forecast current-quarter revenue and profit below market estimates,
sending its shares down nearly 16 percent to $106 in extended trading.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 113.0 -8.0 basis points.
- Asia Pacific Sovereign CDS Index 71.5 -3.25 basis points.
- NASDAQ 100 futures +.10%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 300K versus 316K the prior week.
- Continuing Claims are estimated to fall to 2400K versus 2424K prior.
9:00 am EST
- The FHFA House Price Index for November is estimated to rise +.3% versus a +.6% gain in October.
11:00 am EST
- The Kansas City Fed Manufacturing Activity Index for January is estimated at 8.0 versus 8.0 in December.
- Bloomberg
consensus estimates call for a weekly EIA crude oil inventory build of
+2,670,000 barrels versus a +5,389,000 barrel gain the prior week.
Gasoline supplies are estimated to rise by +1,350,000 barrels versus a
+3,171,000 barrel gain the prior week. Distillate inventories are
estimated to rise by +780,000 barrels versus a +2,925,000 barrel gain
the prior week. Finally, Refinery Utilization is expected to fall by
-.83% versus a -2.9% decline the prior week.
Upcoming Splits
Other Potential Market Movers
- The
ECB rate decision, Draghi press conference, weekly Bloomberg Consumer
Comfort Index, Bloomberg Economic Expectations Index for January,
eco10weekly EIA natural gas inventory report and the (PGH) investor day
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 modestly lower. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Mixed
- Volume: Slightly Below Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 19.47 -2.11%
- Euro/Yen Carry Return Index 142.75 -.37%
- Emerging Markets Currency Volatility(VXY) 10.86 -2.25%
- S&P 500 Implied Correlation 65.44 +1.88%
- ISE Sentiment Index 85.0 +28.79%
- Total Put/Call 1.09 +37.97%
Credit Investor Angst:
- North American Investment Grade CDS Index 70.71 -1.97%
- America Energy Sector High-Yield CDS Index 739.0 -.93%
- European Financial Sector CDS Index 62.58 -2.47%
- Western Europe Sovereign Debt CDS Index 25.97 +4.05%
- Asia Pacific Sovereign Debt CDS Index 71.36 -4.71%
- Emerging Market CDS Index 393.67 +1.12%
- China Blended Corporate Spread Index n/a
- 2-Year Swap Spread 24.25 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -14.75 +1.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .02% +1.0 basis point
- Yield Curve 136.0 +5.0 basis points
- China Import Iron Ore Spot $67.81/Metric Tonne -.51%
- Citi US Economic Surprise Index 5.50 +.7 point
- Citi Eurozone Economic Surprise Index -3.4 -.1 point
- Citi Emerging Markets Economic Surprise Index -12.20 +1.6 points
- 10-Year TIPS Spread 1.61 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +55 open in Japan
- DAX Futures: Indicating +9 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech sector longs and emerging markets shorts
- Market Exposure: 50% Net Long
Bloomberg:
- Poroshenko Sees Grave Danger Ukraine Conflict Will Escalate. Ukraine is in “grave danger” of an escalation in its conflict against
separatists, President Petro Poroshenko said, as diplomats prepare to
revive peace talks and NATO accused Russia of involvement in the
fighting. “The situation can get worse in days,” Poroshenko said on
Wednesday in an interview with Bloomberg TV in Davos, Switzerland.
Additional Russian fighters and equipment crossing the border are
putting pressure on Ukraine’s army, which is “defending democracy and
freedom,” he said. Russian Foreign Minister Sergei Lavrov reiterated
there was no proof that his country is providing military support to
the separatists.
- Swiss Add to Russian Corporate Despair as Debt Costs Jump.
Thomas Jordan just cost some of Russia’s biggest state-run companies
half a billion dollars. The Swiss National Bank president’s surprise
decision to ditch the franc cap last week swelled what Russian
corporates owe through the end of next year on debt denominated in the
currency by 33 billion rubles ($502 million). Since the Jan. 15
change, the extra yield investors demand to hold OAO VTB Bank’s
franc notes due in May 2018 versus its dollar debt jumped 2.70
percentage points. As recently as Dec. 24, the rate was at a
record discount of 2.63 percentage points. Rising costs for the debt is another hurdle for at least
nine companies already reeling from the fallout of sanctions over the war in Ukraine, plunging oil prices, the slumping ruble
and an economy teetering on the edge of a recession.
- ECB Seeks to Inject Up to 1.1 Trillion Euros Into Economy in Deflation Fight. (video) Mario Draghi called on the European Central Bank to make its biggest push yet to fend off deflation and revive the economy by unleashing a debt-buying spree of 1.1 trillion euros ($1.3 trillion). The ECB president and his Executive Board proposed
spending 50 billion euros a month through December 2016, two euro-area
central-bank officials said. The plan still faces a tense debate in the
Governing Council and may change before the final decision on Thursday,
the people said, asking not to be identified as the talks are private.
An ECB spokesman declined to comment.
- Top Concern for Davos Bankers: Credit Disruption After Fed Tightens. Deutsche Bank AG (DBK) co-Chief Executive Officer Anshu Jain’s biggest worry this year?
Unexpected aftershocks when the Federal Reserve starts tightening,
especially in the corporate bond market. “A disruptive credit event following a Fed turn would be at the top of my worry list,” Jain said at a panel discussion at the World Economic Forum in Davos, Switzerland on Wednesday. “Sometime in the next six, max 12
months, we are going to get that Fed turn. That’s going to be very
significant.”
- IMF Says Gulf States Set to Swing Into Deficit as Oil Falls. The
oil-rich nations of the Persian Gulf are set to post budget deficits
this year after a plunge in crude prices, the International Monetary
Fund said. The six nations of the Gulf Cooperation Council will have a
collective fiscal gap of 6.3 percent of gross domestic product,
a swing of about 11 percentage points from last year’s surplus,
the IMF said in a report published in Washington on Wednesday.
While many nations have enough savings to avoid steep cuts and
“limit the drag on growth,” they will need to adjust spending
plans in the longer term, it said.
- Manhattan Luxury Condos Sit on Market While Foreign Buyers
Manhattan real estate agent Lisa Gustin listed a four-bedroom Tribeca
loft for $7.45 million in October, expecting a quick sale. Instead, she
cut the price this month by $550,000. “I thought for sure a
foreign buyer would come in,” said Gustin, a broker at Brown Harris
Stevens who is still marketing the 3,800-square-foot (353-square-meter)
apartment at 195 Hudson St. “So many new condos are coming up right now.
They’ve been building them for the past few years and now they’re
really hurting
the resales.” A flood of new high-priced condominiums and
mansions are coming to market in New York, Miami and Los Angeles just as
international buyers, who helped fuel demand in the three cities, are
seeing their purchasing power wane with the strengthening dollar. Signs
of a pullback may already be showing in Manhattan, where luxury-home
sales have slowed amid a surge in construction of towers aimed at U.S.
millionaires and foreign investors.
- Central Banks Step Up Low-Inflation Fight as Canada Cuts Rate. Global central banks intensified their battle against slowing inflation as the risk of defeat mounts. The
Bank of Canada unexpectedly cut its main interest rate for the first
time since 2009 on Wednesday in Ottawa, saying the oil-price shock will
drag down inflation. The Bank of Japan expanded and extended a
lending program, while two Bank of England policy makers dropped calls
for higher interest rates.
- ECB Proposes QE Stimulus of 50 Billion Euros a Month. (video) European stocks extended a seven-year high as the European Central Bank was said to plan further stimulus measures. The Stoxx Europe 600 Index rose 0.6 percent to 358.12 at the close of trading in London, reversing earlier losses after two euro-area central-bank officials said the ECB Executive Board has recommended asset purchases of 50
billion euros ($58 billion) a month until December 2016.
- Kurd Oil Producers Unrelenting to Boost Supply at low Prices. Oil
producers in Iraqi Kurdistan are unrelenting in their goal to boost
output even after the collapse in international prices to below $50 a
barrel. Genel Energy Plc (GENL), headed by former BP Plc chief Tony
Hayward, is sticking with plans to increase capacity 74 percent to
400,000 barrels a day this year at its Kurdish Taq Taq and Tawke fields.
Norway’s DNO ASA (DNO) owns 55 percent of Tawke.
- Crude Collapse Has Investors Braced for ’80s-Like Oil Casualties. When a glut of crude flooded the market in
the 1980s, scores of energy companies disappeared through almost
five years of depressed prices. Investors are worried history is
repeating itself. The supply overhang led to a 66 percent slide in prices
over four months, starting in November 1985. Bankruptcies and
mergers reduced the number of U.S. producers by 54 percent
before a price rebound took hold in 1990.
- Oil Rebounds From Biggest Drop in Week as Drilling Slows. Oil rebounded from the biggest drop in a week amid signs that prices near a 5 1/2-year low are slowing drilling in the U.S. Futures
rose as much as 3.7 percent in New York and 3.3 percent in London. BHP
Billiton Ltd., the largest overseas investor in U.S. shale, said it will
cut the number of active drill rigs in the country by almost 40
percent. The rapid decline in oil prices may deter investment in all
types of energy needed to meet future demand, the head of the
International Energy Agency said.
- Fat Junk-Bond Fees Are Hard to Get in Latest Wall Street Lament.
Wall Street’s biggest bond brokers just limped through a rough year for
trading revenues. They may be in for more pain as one of their most
lucrative businesses dries up. They’ve shepherded only $9.7 billion of U.S. junk bonds into the hands of investors this year, making 2015 the slowest
start in six years, according to data compiled by Bloomberg. The
fees to underwrite this debt are about three times
those on higher-rated corporate notes -- and will be sorely missed by
the likes of JPMorgan Chase & Co. (JPM), Bank of America Corp. and
Citigroup Inc. (C) The three biggest U.S. banks just
posted their first annual decline in aggregate net income since
the global financial crisis.
Wall Street Journal:
- J.P. Morgan(JPM) Creates Unit to Meet New Bond Trading Patterns. J.P. Morgan Chase, the world’s largest investment bank in fixed income trading
by revenue, has set up a new 12-person unit focused solely on trading
credit index products such as credit default swap benchmarks and
exchange-traded funds. The bank says the Global Credit Index business, which it claims is
the first of its kind at a major investment bank, was established in
response to a boom in customer demand for trading indexes instead of
individual bonds, where investors and bankers complain that liquidity
has been drying up.
Fox News:
ZeroHedge:
Business Insider:
Handelsblatt:
- Rajan Says Capital Flows Threaten Emerging Markets. Global
liquidity flows prompted by central banks in industrial countries could
threaten financial stability in emerging markets if they're not properly
managed, Reserve Bank of India Governor Raghuram Rajan says in opinion
article. "Global growth remains weak. In the U.S., it may look as if the
recovery is strengthening, but the euro area is threatening to follow
Japan into recession. Emerging markets are concerned about suffering,
through their export-oriented strategies, because of stagnation abroad."
