Today's Headlines

Bloomberg:

• Putin Goes All In as Ukraine Fights for Funding. Vladimir Putin is playing for keeps in Ukraine and he might bankrupt the country to get what he wants. As fighting flares anew in the 10-month-old conflict and the death toll mounts, that’s the assessment of analysts in Ukraine and New York, as well as Moscow. While Kremlin-backed rebels pressure the Ukrainian government, the U.S. and the European Union are contemplating tighter economic sanctions on Russia. Putin, however, seems emboldened in his belief that this is a showdown he must not and will not lose. “Putin realized that he will never be in the West’s good graces and this makes him act more decisively,” Igor Bunin, director of the Center for Political Technologies in Moscow, with ties to the Kremlin, said Tuesday by phone. “He started playing all in.”  
• U.S. Ready to Push Russia on Ukraine as EU Wrangles on Sanctions. The U.S. said it’s ready to intensify pressure against Russia for supporting rebels who’ve stepped up attacks on Ukrainian troops as the European Union tussled over new sanctions in the face of opposition from Greece. EU states will discuss adding names to and extending the duration of a black list of Russian and separatist individuals and companies linked to the conflict at a meeting minister of the bloc’s foreign ministers on Thursday. U.S. Treasury Secretary Jacob J. Lew said President Barack Obama’s administration was prepared to raise pressure on Russia to use its influence over the separatists to stop the conflict.
• Greece's looming clash in Europe starts with sanctions on Russia. Greece’s new government questioned moves to impose more sanctions on Russia, adding a foreign-policy angle to its challenge to the status quo in Europe. Prime Minister Alexis Tsipras’s SYRIZA-led coalition said it opposed a European Union statement issued in Brussels Tuesday paving the way to additional curbs on the Kremlin over the conflict in Ukraine, and complained it hadn’t been consulted. “Greece doesn’t consent,” the government said in a statement. It added that the announcement violated “proper procedure” by not first securing Greece’s agreement. 
• Greek Bonds, Stocks Decline as New Government Takes Charge. Greek bonds and stocks slumped for a third day on concern the nation’s new government will backtrack on austerity. The yield on three-year notes jumped 268 basis points to 16.71 percent at 5:47 p.m. in Athens and reached its highest level since Greece completed the biggest-ever debt restructuring in 2012. The ASE Index fell 9.2 percent to its lowest level since September of that year, taking its three-day drop to 15 percent as a gauge of lenders extended a record low. Greek sovereign-bond risk jumped, with credit-default swaps signaling a 70 percent probability the government will fail to meet its obligations within five years, up from 59 percent on Jan. 23.  
• European Stocks Are Little Changed Amid Earnings as ASE Declines. European stocks were little changed as Nordea Bank AB and Electrolux AB advanced on earnings, while Greek equities tumbled. The Stoxx Europe 600 Index added 0.1 percent to 369.08 at the close of trading, having swung between gains and losses more than 10 times.
• Iraq Oil Surge to Fan OPEC Rivalry That Triggered Slump. The battle for customers among OPEC members that helped trigger oil’s collapse is about to escalate. Iraqi crude production is climbing from a 35-year high as it adds growing Kurdish supplies to its exports, while southern oilfields remain unscathed by Islamic State militants. Finding buyers for the new output means offering more attractive terms than rivals in the Organization of Petroleum Exporting Countries, say Citigroup Inc., DNB ASA and Barclays Plc.
• Bloomberg Brief: Introducing the 'Fed Spectrometer'. 
• Fed Stays Patient on Rates Amid Strong Job Gains, Low Inflation. The Federal Reserve maintained its pledge to be “patient” on raising interest rates and boosted its assessment of the economy and labor market, even as it expects inflation to decline further. “Economic activity has been expanding at a solid pace,” the Federal Open Market Committee said today in a statement in Washington. “Labor market conditions have improved further, with strong job gains and a lower unemployment rate.”
• Treasuries Gain as Oil Stockpiles Lower Prices, Growth Outlook. Treasuries rose as a report showing record U.S. crude inventories damped inflation projections amid signs the global economic slowdown is catching up with the U.S. The 30-year bond yield approached record lows before the Federal Reserve ends a policy meeting and provides an update on plans to raise interest rates later this year. Greek stocks and bonds slumped on concern the nation’s newly elected government will seek to overturn austerity measures, fueling haven demand. The Treasury’s auction of $26 billion of two-year notes attracted a lower-than-forecast yield.

ZeroHedge:

• QE Is Not A Solution: "It's A Marker Of All That Is Wrong".
• "Patient" Fed's Other Problem: A Third Of Traders Today Have Never Witnessed A Rate Hike.
• "The Barricades Are Down" Syriza Is Already Rolling Back Austerity "Reforms".
• Russia May Condemn "Annexation" Of East Germany.
• Crude Supplies Surge To Highest Since At Least 1982. (graph)
• US-Ally Jordan To Breach Western Protocol, Will Exchange Hostages With ISIS.
• Baltic Dry Index: 666. (graph)
• US Inflation Expectations Hit Post-Lehman Lows Ahead Of FOMC. (graph)

Business Insider:

• GREEK BANKS ARE GETTING SHATTERED.
• ANALYST: China's 'Long-Awaited Day Of Reckoning' Is Almost Here.
• S&P To Greece: We're Watching You.
• The Obama Administration Is Not Concerned That Iran Continues Key Nuclear Research.
• The EU May Designate Pro-Russian Separatists In Ukraine As 'Terrorists'.
• Copper Got Crushed After Chinese Industrial Profits Tanked.
• Russia's Central Bank Is Encouraging Banks To Accept Losses As Crisis Deepens.

Reuters:

• China to relaunch probe into margin trading, bank lending for stock speculation - sources. Chinese regulators will relaunch an investigation into stock margin trading, and have been given notice banks to tighten supervision of their lending practices to ensure loans aren't funnelled into stock markets, sources with direct knowledge of the matter told Reuters. The China Securities Regulatory Commission and the China Banking Regulatory Commission did not respond to request from Reuters seeking comment. The news comes as Beijing moves cautiously to suppress the excessive use of leverage to make aggressive bets on Chinese stock markets, which have gained around 40 percent since November. Reports of previous investigations and regulatory clamp downs caused a dramatic collapse in stocks on Jan. 19, and regulators followed up by reassuring the market that they were not trying to suppress the rally.
• EMERGING MARKETS-Brazil's Bovespa dragged down by Petrobras plunge. Brazil's main stock index sank on Wednesday as shares of state-run oil company Petrobras plunged on concerns over potential losses stemming from a multibillion-dollar corruption scandal. The benchmark Bovespa index dropped about 1.4 percent and was on track for its weakest closing level in over three weeks, while the broader MSCI Latin American stock index erased the previous session's gains.
• EXCLUSIVE-EU mulls capital markets restrictions among new Russia sanctions. Union sanctions against Russia could include further capital markets restrictions, making it harder for Russian companies to refinance themselves and possibly affecting Russian sovereign bonds and access to advanced technology for the oil and gas sectors, EU officials said on Wednesday.EU foreign ministers are set to ask the executive European Commission on Thursday to prepare a new round of sanctions over Moscow's role in eastern Ukraine, however officials said the measures may not be adopted by EU leaders until late March.
• Oil drops on record-high U.S. crude stocks as pressure mounts. Oil prices fell on Wednesday after the U.S. government reported record-high crude inventories, adding to anxieties about the global glut that has pressured the market since last summer. The U.S. Energy Information Administration (EIA) said domestic crude oil stocks rose by almost 9 million barrels last week to reach nearly 407 million, their highest since the government began keeping records in 1982.

Telegraph:

• Markets tumble as Greek government begins to backtrack on austerity. Greek borrowing costs jump and markets tumble as Alexis Tsipras, Greece's new prime minister, vows never to blindly submit to European creditors and government blocks sale of state assets. 
• Europe hardens stance on Greek debt relief. French finance minister says Greek debt relief is not an option as countries line up to say Syriza leader's suggestion of 1953-style "debt conference" to write-off loans is out of the question.   
• Commodities collapse could wipe out entire year's profits at Standard Chartered. Macquarie analysis predicts that 1980s-style oil price slump and default spike will mean huge losses at under-pressure bank.  

Macau Business Daily:

• Macau Official Sees 1H Gaming Revenue Falling. Macau's 1H gaming revenue is likely to follow the 2H of 2014 and continue to decline, citing Secretary for Economy and Finance Lionel Leong.

National Business Daily:

• Shanghai Will Continue Home Purchase Restrictions. The city will continue to implement existing home purchase restrictions "strictly," citing Liu Haisheng, head of Shanghai's housing regulatory authority as saying during a recent political consultative meeting.

Bear Radar

Style Underperformer:

• Small-Cap Value -.71%

Sector Underperformers:

• 1) Oil Service -4.52% 2) Oil Tankers -2.51% 3) Energy -1.88%

Stocks Falling on Unusual Volume:

• ETH, OTEX, IRE, SYRG, RDWR, ACAT, VMW, EZPW, GNTX, INFA, RMAS, EAT, FTK, CVLT, PPC, LXK, COG, AOL, FGP, MBLY, NOAH, WWE, ZU, IMO, RYAM, CRS, DVAX, NOV, MTOR, FTK and PPC

Stocks With Unusual Put Option Activity:

• 1) OAS 2) BRK/B 3) MA 4) VMW 5) HOG

Stocks With Most Negative News Mentions:

• 1) FCX 2) PBR 3) GT 4) AOL 5) NOV
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth -.02%

Sector Outperformers:

• 1) Networking +.79% 2) Computer Hardware +.69% 3) Defense +.38%
  

Stocks Rising on Unusual Volume:

• ABMD, FSL, COMM, TUP, X, EA, AAPL, TSS, BA and JNPR

Stocks With Unusual Call Option Activity:

• 1) IDTI 2) HRB 3) EPI 4) OPK 5) LOCK
  

Stocks With Most Positive News Mentions:

• 1) ABMD 2) FSL 3) LUV 4) AAPL 5) X
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg: 

• Sanctions Aren't Enough to Stop Putin, and He Knows It. The European Union wants to tighten sanctions on Russia again, as renewed fighting in eastern Ukraine causes heavy casualties and raises fears that Russian-backed separatists will seize control of more territory. The EU, in a statement issued today, said it saw "evidence of continued and growing support given to the separatists by Russia, which underlines Russia's responsibility" for the bloodshed. On Jan. 29, EU foreign ministers are expected to consider widening a list of Russians and separatist leaders facing visa bans and asset freezes.  

• Russia at Junk Risks $42 Billion Company Debt: Chart of the Day.

• Banks Decline as Stress Tests Heighten Concern: China Overnight. Chinese banks retreated in New York amid concern credit risks may increase for lenders as a housing market slowdown in the Asian nation constrains their ability to recover their advances. Industrial and Commercial Bank of China Ltd., the world’s largest lender by assets, fell 2.7 percent to $14.66 in over-the-counter trading, the biggest drop in seven weeks. China Construction Bank Corp. (939) and Bank of China Ltd. each slipped at least 2 percent. The Bloomberg China-US Equity Index declined 1.7 percent to 113.70 after four days of gains.   

• China Accuses Alibaba(BABA) of Lax Oversight of Merchants. Alibaba Group Holding Ltd. failed to properly oversee merchants and allowed the sale of counterfeit products on its e-commerce platforms, according to a Chinese government report. Many merchants didn’t apply for a business license and misled consumers during holiday promotions, including the Nov. 11 Singles’ Day, according to a document published by a media outlet run by the State Administration for Industry & Commerce. A meeting was held in July, though the report wasn’t published until now to avoid affecting Alibaba’s initial public offering, it said.

• Singapore Dollar Is Weakest Since 2010 on Monetary Policy Shift. Singapore’s central bank unexpectedly eased monetary policy, sending the currency to the weakest since 2010 as the country joined global policy makers in shoring up growth amid dwindling inflation. The Monetary Authority of Singapore, which uses the currency as its main policy tool, said it will reduce the slope of the policy band for the island’s dollar in an unscheduled policy statement Wednesday. It also cut the inflation forecast for 2015, predicting prices may fall as much as 0.5 percent.  

• Asian Stocks Slide From Four-Month High as Japan Retreats on Yen. Asian stocks fell, with the regional benchmark index retreating from a four-month high, as Japanese shares slid on a stronger yen and U.S. earnings and durable-goods orders disappointed investors. The MSCI Asia Pacific Index declined 0.4 percent to 141.81 as of 9:00 a.m. in Tokyo after climbing yesterday to its highest close since Sept. 25. Japan’s Topix index slid 0.7 percent.

• Goldman(GS) Downgrades Commodity Outlook as Energy, Metals Tumble. Goldman Sachs Group Inc. downgraded its three-month commodity outlook to underweight as mounting global supply gluts sent energy and metals prices tumbling this year. There is a greater risk that raw material prices may drop in the near term than rise, Goldman strategists and analysts including Christian Mueller-Glissmann, Peter Oppenheimer and Jeffrey Currie wrote in a research report. The Bloomberg Commodity Index of 22 components reached a 12-year low this week, with crude oil, hogs and copper leading losses in 2015.

• Crude at $49 Sinks Big Oil Growth Prospects as Profits Falter. Financial results from a fourth quarter that saw the collapse of the crude market will provide a window into how the world’s biggest oil companies are adjusting to a new reality of slowing growth and low prices. Oil that topped $115 a barrel as recently as June has been trading below $50 a barrel since the first week of the year, portending a bleak 2015 for the world’s five so-called supermajors -- Exxon Mobil Corp., Royal Dutch Shell Plc (RDSA), Chevron Corp., Total SA (FP) and BP Plc. (BP/) The companies, whose businesses combine oil and natural gas exploration with refining and chemical manufacturing, have historically been among the most resilient players during down cycles. This could be the oil bust that breaks that pattern.

• Fed Decision Day Guide: From Rate Patience to Too-Low Inflation. Here’s what to look for when the Federal Open Market Committee releases its policy statement at 2 p.m. on Wednesday in Washington. There will be no press conference and no new economic projections.

• Get Ready for the Return of Risky-Mortgage Bonds: Credit Markets. The business of bundling riskier U.S. mortgages into bonds without government backing is gearing up for a comeback. Just don’t call it subprime. Hedge fund Seer Capital Management, money manager Angel Oak Capital and Sydney-based bank Macquarie Group Ltd. are among firms buying up loans to borrowers who can’t qualify for conventional mortgages because of issues such as low credit scores, foreclosures or hard-to-document income. They each plan to pool the mortgages into securities of varying risk and sell some to investors this year. JPMorgan Chase & Co. analysts predict as much as $5 billion of deals could get done, while Nomura Holdings Inc. forecasts $1 billion to $2 billion.

Wall Street Journal:

• Overseas Forex Trades Laid FXCM Low. Big Bets by Customers Who Aren’t Subject to U.S. Rules Stung Firm. Retail foreign-exchange broker FXCM Inc. was nearly felled by outsize bets made by foreign customers who aren’t subject to U.S. regulations, according to people familiar with regulators’ review of the firm.

• Hard Choices on Easy Money Lie Ahead for Fed Chief. In Year 2 at Helm, Yellen Must Map Course for Higher Rates, a Trickier Policy Path Than Ending Bond-Buying Program.

• Investors Rethink Taking a Leap Into Junk Bin. Slowdown in Debt Sales Comes Amid Concerns About Pace of Economic Growth. U.S. junk-bond investors are showing fresh caution, renewing concerns of a wholesale retreat that could hobble financing for low-rated companies and hamstring the economic recovery.

• President Costanza’s Jobs Boom. A new study shows that Mr. Obama needs a ‘Seinfeld’ epiphany. In a 1994 “Seinfeld” episode, George realizes that “every decision that I have ever made in my entire life has been wrong. My life is the complete opposite of everything I want it to be.” Jerry replies: “If every instinct you have is wrong, then the opposite would have to be right.”

Fox News: 

• Obama drops plan to end tax breaks for popular college savings accounts. (video) President Obama has dropped his plan to end tax breaks for popular college savings accounts known as 529s, sources told Fox News on Tuesday. The decision comes in the wake of stern criticism from Republicans and pleas from top Democrats, including House Minority Leader Nancy Pelosi, to drop the plan.

CNBC:

• Apple(AAPL) just a bit of a respite from currency concerns.

• Apple(AAPL) posts blowout quarter, will ship Watch in April. (video) Apple reported a blockbuster quarter on Tuesday, blowing past Wall Street's most optimistic expectations. The company sold almost 9 million more iPhones than expected, while its cash pile ballooned to the point that it could buy about 480 of the S&P 500 companies outright. Apple also revealed during a conference call with analysts that it plans to ship its new Apple Watch wearable device in April of this year. Shares rose 5 percent in after-hours trading.

• Yahoo(YHOO) to spin off its remaining Alibaba stake. Yahoo on Tuesday said it would spin off its remaining Alibaba stake in a tax-free deal. The stock jumped more than 7 percent after the announcement. Yahoo's 384 million shares of Alibaba, valued at $40 billion, will be wrapped into a newly formed independent entity, SpinCo.

Zero Hedge:

• Is The BLS Overstating Jobs? (graph)

• Medvedev Warns Of "Unlimited Reaction" If Russia Cut From SWIFT.

• Bonds & Bullion Best Since The Fed 'Spice' Stopped Flowing. (graph)

• King Dollar CATastrophe: Currency War Drags Dow Down Almost 300 Points.

• Cleanest Dirty Shirt? US Macro Data Worst Start To A Year In Over A Decade.

• How Much More GDP "Growth" Will Be Due To Obamacare? (graph)

• Singapore Enters The Currency Wars: Weakens SGD By Most In 3 Years. (graph)

• Greece Begins The Great Pivot Toward Russia.

• Failing Stimulus And The IMF's New 'Multilateral' World Order.

• "New Normal" Fundamentals Hit Chinese Stocks. (graph)

Business Insider:

• The QE-Fueled Euphoria In Europe Won't Last.

• Juniper(JNPR) Shares Jump More Than 5% On Earnings Surprise.

Financial Times:

• Russia’s downgrade deepens political crisis with Europe. Country will run out of cash if oil prices do not rise and sanctions remain, writes Sergei Guriev.

Telegraph:

• Things could get ugly if Greece's never-never actually means never. Saying you won’t reduce Greece’s debts but are prepared to increase the repayment period is sophistry; they’re the same thing.

• Germany's top institutes push 'Grexit' plans as showdown escalates. Germany’s Wolfgang Schäuble is 'relaxed' about Greek exit from the euro.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 110.0 +2.0 basis points.

• Asia Pacific Sovereign CDS Index 70.5 +1.75 basis points.

• S&P 500 futures +.72%.

• NASDAQ 100 futures +1.17%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ADT)/.49

• (AEP)/.51

• (ABC)/.97

• (BA)/2.10

• (EAT)/.68

• (ENR)/2.15

• (GD)/2.13

• GNTX)/.25

• (HES)/.26

• (IP).48

• (KLIC)/-.02

• (MKC)/1.5

• (MDC)/.6

• (PX)/1.56

• (PGR)/.45

• (STJ)/1.03

• (TUP/13

• (ATK)/2.89

• (AVB)/1.77

• (CRUS)/.75

• (FB)/.48

• (LRCX)/1.13

• (LVS)/.78

• (MUR)/.27

• (QCOM)/1.25

• (STLD)/.41

• (TSCO)/.76

• (VAR)/.86

Economic Releases 
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +4,000,000 barrels versus a +10,071,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +610,000 barrels versus a +588,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,530,000 barrels versus a -3,272,000 barrel gain the prior week.

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds rate at .25%.

Upcoming Splits

• None of note

Other Potential Market Movers

• The German Consumer Confidence Index, $26B 2Y T-Note auction, weekly MBA Mortgage Applications report and the (KMI) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 50% net long heading into the day.

Stocks Falling into Final Hour on Global Growth Fears, Rising Eurozone Debt Angst, Earnings Worries, Tech/Financial Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most sectors declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 17.19 +10.79%

• Euro/Yen Carry Return Index 139.78 +.57%

• Emerging Markets Currency Volatility(VXY) 10.07 -.20%

• S&P 500 Implied Correlation 66.82 +2.34%

• ISE Sentiment Index 106.0 +45.21%

• Total Put/Call 1.05 +16.67%

• NYSE Arms 1.32 +43.80% 

Credit Investor Angst:

• North American Investment Grade CDS Index 66.97 +1.80%
• America Energy Sector High-Yield CDS Index 739.0 +1.84%

• European Financial Sector CDS Index 59.78 +4.03%

• Western Europe Sovereign Debt CDS Index 23.67 +.38%
• Asia Pacific Sovereign Debt CDS Index 70.51 +1.13%

• Emerging Market CDS Index 392.78 +.33%

• iBoxx Offshore RMB China Corporates High Yield Index 112.29 +.46%
• 2-Year Swap Spread 25.0 -.25 basis point

• TED Spread 24.0 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -11.75 -1.0 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% +1.0 basis point

• Yield Curve 131.0 unch.

• China Import Iron Ore Spot $63.50/Metric Tonne -.06%

• Citi US Economic Surprise Index -3.70 unch.
• Citi Eurozone Economic Surprise Index 0.0 +.4 point

• Citi Emerging Markets Economic Surprise Index -11.0 -.5 point

• 10-Year TIPS Spread 1.65 +4.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating -123 open in Japan

• DAX Futures: Indicating +43 open in Germany

Portfolio: 

• Slightly Lower: On losses in my tech/medical sector longs 

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• EU Renews Push for Russian Sanctions; Putin Blames Ukraine. European Union leaders threatened to tighten sanctions on Russia as soon as Thursday over its support for pro-Kremlin rebels in eastern Ukraine, who are engaged in the worst clashes with government troops since a September truce. The leaders condemned the killing of dozens of civilians in “indiscriminate shelling” of the Ukrainian port city of Mariupol and said EU foreign ministers meeting on Jan. 29 will “consider any appropriate action, in particular on further restrictive measures,” EU President Donald Tusk said in an e-mailed statement in Brussels. 

• Putin Needles Ukraine as He Shuns Wartime Allies at Auschwitz. As European leaders and U.S. representatives gathered in Poland to mark the 70th anniversary of the liberation of the Auschwitz concentration camp by the Soviet Red Army, Russian President Vladimir Putin skipped the ceremony to visit the Jewish Museum in Moscow. “The Russian people bore the main burden of the fight against Nazism on their shoulders,” Putin said Tuesday in a speech at the Jewish Museum and Center of Tolerance in Moscow that included an historical dig at Ukraine. 

• Russian Corporate Bonds Fall After S&P Cuts Nation to Junk. Russian companies led declines in European corporate bonds after Standard & Poor’s cut the nation’s credit rating to junk for the first time in a decade. Bonds sold by OAO Russian Railways and OAO Gazprom were the worst performing among 1,925 investment-grade securities in Bank of America Merrill Lynch’s Euro Corporate Index. The state-owned rail operator’s 1 billion euros ($1.1 billion) of 3.3744 percent bonds due May 2021 fell 2.1 cents to 70.8 cents while the natural gas provider’s 1 billion euros of 3.389 percent bonds due March 2020 dropped 1.7 cents to 84.2 cents.

• Tsipras Names Cabinet Heading for Clash Over Bailout and Russia. Greek Prime Minister Alexis Tsipras unveiled a cabinet that threatens to maximize friction with other European Union governments on issues ranging from the country’s bailout agreement to sanctions on Russia. Yanis Varoufakis, a 53-year-old economics professor, will handle negotiations with the euro region and International Monetary Fund over the country’s 240 billion-euro ($273 billion) bailout, after being appointed finance minister. He has called it a “trap” that was destructive for Greece. Foreign Minister Nikos Kotzias is due in Brussels on Thursday to discuss possible additional sanctions on Russia over the conflict in Ukraine. Before the cabinet even meets for the first time tomorrow, the Greek government said that it disagreed with an EU statement in which President Donald Tusk raised the prospect of “further restrictive measures” on Russia.

• China Private Bond Faces Stress as LGFV Says No Pledge. China’s private bond market is facing increased scrutiny after a local-government financing vehicle in the eastern province of Jiangsu said it has no obligation to guarantee notes sold by a manufacturer. Dongfei Mazuoli Textile Machinery Co., based in the city of Dongtai, can’t pay principal and interest on the securities as of Jan. 25, according to a report today on Tencent Holdings Ltd.’s QQ.com. The LGFV had signed a contract with the manufacturer in 2012 to guarantee its bond credit ratings, but doesn’t guarantee the note payments themselves, according to a statement from the financing unit dated Jan. 26. 

• What Clampdown? China Margin Traders Boost Debt to Record. It didn’t take long for the flood of borrowed money to come pouring back into Chinese stocks. After a two-day decline spurred by regulatory efforts to curb margin lending on Jan. 16, the value of shares purchased with borrowed cash has rebounded to an all-time high. The outstanding balance of margin debt on the Shanghai Stock Exchange climbed to a record 771.4 billion yuan ($123 billion) yesterday, up from about 751 billion yuan on Jan. 20. China’s suspension of new margin accounts at three of the nation’s biggest brokerages and notice to ban loans to traders with less than 500,000 yuan has done little to damp the enthusiasm of leveraged investors.

• Greek Bonds, Stocks Drop as Leaders to Spar on Writedown. Greece’s bonds and stocks plunged for a second day as the nation’s newly named cabinet looked set to clash with euro-area finance ministers over its funding needs. While finance chiefs from the 19-nation euro area on Monday signaled their willingness to do a deal with Greek Prime Minister Alexis Tsipras, it’s on the condition he drops his demand for a debt writedown. Representing the Greek side in negotiations with their international creditors will be finance minister Yanis Varoufakis, who has argued that Greece should default while staying a member of the euro area. Greek three-year yields rose 198 basis points, or 1.98 percentage point, to 14.03 percent at 5 p.m. London time, after jumping 197 basis points the previous day. The 3.375 percent notes due in July 2017 fell 3.38, or 33.80 euros per 1,000-euro ($1,132) face amount, to 78.975. The nation’s 10-year yield increased 38 basis points to 9.48 percent. 

• Boko Haram Attacks Leave at Least 30 Dead in Nigeria’s Northeast. Boko Haram Islamists in Nigeria attacked two northeastern towns leaving at least 30 people dead and many injured, a lawmaker said. “They attacked our people in Madagali, Michika and surrounding villages” yesterday, Adamu Kamale, a member of the Adamawa state legislature representing the area, said by phone today from Yola, the state capital. “They destroyed houses and shops and killed a lot of people.” 

• Islamic State to Kill Hostages If Jordan Prisoner Not Freed. A Japanese war journalist held by Islamic State said in a video released Tuesday that he and a Jordanian hostage will be executed if Jordan doesn’t release a convicted jihadist within 24 hours, according to SITE Intelligence Group. 

• Why Fink Says Swiss Avoiding Recession May Be Bad News for Euro. Larry Fink says he’s worried about a recession in Switzerland. That there won’t be one. If the export-dependent Swiss avoid a slump after a surge in the franc it would make the idea of surviving an overvalued currency -- and leaving the euro -- a little more conceivable in Germany, according to Fink, the co-founder and chief executive officer of BlackRock Inc. Think Gerexit.

• European Stocks Fall as Siemens Disappoints, Greek Banks Slide. European stocks declined from a seven-year high, snapping their longest winning streak since April, as Siemens AG and Royal Philips NV posted disappointing earnings, and Greek stocks tumbled. Siemens slid 3 percent, contributing the most to a drop in a gauge of industrial companies, after Europe’s largest engineering firm reported a decline in first-quarter profit. Philips lost 5.9 percent after saying it is behind on its 2016 financial targets. Greek banks dragged a gauge of lenders down. The Stoxx Europe 600 Index slipped 1 percent to 368.7 at the close of trading, after earlier falling as much as 1.4 percent.

• Stronger Dollar Punishes U.S. Earnings From P&G(PG) to DuPont(DD). The dollar’s surge is reducing earnings at American companies from Procter & Gamble Co. (PG) to Pfizer Inc. (PFE) and DuPont Co. that make a large portion of their revenue abroad. P&G, the world’s biggest consumer-products maker, today reported profit that missed analysts’ estimates in the quarter ended Dec. 31 after what Chief Executive Officer A.G. Lafley called “unprecedented” foreign-exchange rate fluctuations reduced sales by 5 percentage points. DuPont and drugmakers Pfizer and Bristol-Myers Squibb Co. (BMY) all posted annual forecasts that trailed predictions, in part because of the dollar.

• Caterpillar(CAT) Forecast Disappoints as Oil Hits Orders. Caterpillar Inc. (CAT), the world’s largest mining and construction equipment maker, forecast 2015 sales and earnings that trailed analysts’ estimates as plunging oil prices signal lower demand from energy companies. 

• Oil Drop Hits Private Equity as Carlyle Seen Leading Decline. Private equity firms, which made record profits in the past two years, are preparing to share the cost of their forays into the U.S. oil business. Combined earnings per share at the four largest firms, which start reporting fourth-quarter results this week, probably fell 58 percent from a year ago, according to 13 analysts surveyed by Bloomberg. Carlyle Group LP (CG) is expected to lead the decline with a 73 percent drop, driven by its energy holdings, and Apollo Global Management LLC (APO) is expected to report a 63 percent drop in earnings. Blackstone Group LP (BX), the most diversified of the buyout firms, should be least affected, with an estimated 32 percent slide. 

• Copper Falls Near 5-Year Low as China Seen Slowing Down. Copper futures approached a five-year low as industrial profit last year posted the smallest gain in data that started in 2000 in China (CNPRTTLY), the world’s largest metal consumer. Earnings in 2014 increased 3.3 percent, Chinese government data showed. In December, profit contracted 8 percent, falling for the third straight month. Copper prices declined as orders for business equipment dropped for the fourth consecutive month in the U.S., the second-biggest user. On the Comex in New York, copper futures for March delivery fell 3.2 percent to settle at $2.4625 a pound at 1:13 p.m. Earlier, the price touched $2.446. On Monday, the metal dropped to $2.419, the lowest for a most-active contract since 2009. Copper is piling up in London Metal Exchange warehouses with inventories climbing for 11 straight sessions, the longest run since April 2013. They have increased to 238,225 metric tons, the highest since April.

CNBC:

• The weird market fact that has investors on edge.

• El-Erian: These are 2 big market risks. (video)

ZeroHedge:

• Greece's New FinMin Explains "This Is What Happens When You Humiliate A Nation & Give It No Hope". (video)

• France 'Proves' Q€ Is Entirely Useless. (graph)

• WTI Crude Jumps As Saudi Oil Minister Meets With Russian, Finnish, And Norwegian Ambassadors. (graph)

• The Bonds Of The Third Largest Austrian Bank Are Crashing. (graph)

• EURUSD Surges Above 1.14 As EU Inflation Expectations Tumble To Lowest Since Q€. (graph).

• Seven Consecutive Downward Reivisions To New Home Sales Data Place Serious Doubts On Report Accuracy. (graph)

• Consumer Confidence Surges To Highest Since The Last Time Markets Crashed. (graph)

• US Services PMI Improves But New Orders Drop To Post-Recession Low. (graph)

• China Leading Index Plunges To 6 Year Lows. (graph)

• "Paid To Wait"? Microsoft(MSFT) Tumbles 10%, Destroys 4 Years Of Dividend Gains. (graph)

• "Prospects For A Home Run In 2015 Aren’t Good" - November Case-Shiller Confirms Ongoing Housing Market Slowdown. (graph)

• "Shadow Of The Crisis Has Not Passed": Durables Goods Orders Collapse. (graph)

David Stockman's Contra Corner:

• The Central Banks’ Cheap Money Deflation Cycle: Iron Ore Supply Soaring, China Demand Faltering, Prices &Profits Collapsing. Economists may teach that low prices and declining demand encourage producers to decrease supply, but the iron ore industry appears to have skipped class that day. “The combination of a further increase in global iron ore supply this year and only subdued demand growth suggests iron ore prices will continue to drift lower,” said Caroline Bain, an analyst at Capital Economics, in a note Monday.

Reuters:

• Exclusive - Apple(AAPL) supplier Foxconn to shrink workforce as sales growth stalls. Taiwan's Foxconn Technology Group, the world's largest contract electronics manufacturer, will cut its massive workforce, the company told Reuters, as the Apple Inc supplier faces declining revenue growth and rising wages in China. Under its flagship unit Hon Hai Precision Industry Co Ltd, the group currently employs about 1.3 million people during peak production times, making it one of the largest private employers in the world. Special assistant to the chairman and group spokesman Louis Woo did not specify a timeframe or target for the reduction, but noted that labour costs had more than doubled since 2010, when the company faced intense media scrutiny following a spate of worker suicides. Revenue growth at the conglomerate tumbled to 1.3 percent in 2013 and only partially recovered to 6.5 percent last year after a long string of double-digit increases from 2003 to 2012. That decade saw the firm ride an explosion of popularity in PCs, smartphones and tablets, largely driven by its main client Apple, but now it is feeling the effects of falling growth and prices in the gadget markets it supplies, a trend that is expected to continue. Growth in smartphone sales will halve this year from 26 percent in 2014, according to researcher IDC, while PC sales will contract by 3 percent. Similarly, the average smartphone will sell for 19 percent less in 2018 than last year's $297. "Even if technology is improving, the price will still come down," Woo said. "We've come to accept that, our customers have come to accept that." Automation will be key to keeping labour costs under control in the long-term, Woo said, as the company pushes to have robotic arms complete mundane tasks currently done by workers.

Telegraph: 

• Sadly for all our futures, cheap money is here to stay. Just get used to it. Central banks have been struggling to normalise interest rate policy. Increasingly, there is reason to doubt they ever will be able to. In the meantime debtors are accommodated at the detriment of creditors, borrowers are favoured at the expense of savers, and the holders of assets are further boosted to the growing exclusion of those who have none. It’s ever harder to believe in a happy ending.

la Repubblica:

• IMF Lagarde Rules Out Greek Debt Cancellation. IMF will restart dialogue with Greece to implement planned structural reforms, IMF Managing Director Christine Lagarde says in an interview. Europe has internal rules that must be respected.