Kokusai Says Europe Rescue Debt 'Hot' as Asian Funds Follow Central Banks. The pledge by Japan and China to buy European debt is encouraging Asian funds to follow suit as agencies start selling bonds to finance Ireland’s bailout. A 5 billion euro ($6.84 billion) auction yesterday drew 44.5 billion euros in orders as the Japanese government snapped up more than 20 percent of the issue. Asian investors bought about 38 percent and government agencies 43 percent, according to two people familiar with the transaction. State institutions took 38.5 percent of the securities at a similar sale on Jan. 5, according to the European Commission in Brussels. “I heard these issues will be hot,” said Masataka Horii, one of four managers in Tokyo of the $33.9 billion Kokusai Global Sovereign Open Fund, Asia’s largest bond fund. “Investors may see the new bonds as safe because central banks are buying.”
Obama Backs Corporate Rate Cut Only If It Won't Affect Deficit. President Barack Obama will call on Congress to cut the top U.S. corporate tax rate for the first time in 25 years “without adding to our deficit,” signaling that businesses will have to give up cherished tax breaks in exchange for lower rates. The president also will press for simplifying the tax system for individuals, which would restructure how more than $1 trillion in revenue is collected annually. “The best thing we could do on taxes for all Americans is to simplify the individual tax code,” he said in the prepared text of the State of the Union address he gives tonight. “This will be a tough job, but members of both parties have expressed interest in doing this, and I am prepared to join them.”
Bernanke Gets 66% Approval From Investors Disapproving of QE2. Investors love Federal Reserve Chairman Ben S. Bernanke. It’s just his policies they don’t like so much. Sixty-six percent of investors have a favorable view of the 57-year-old former Princeton University economist, compared with 31 percent unfavorable, according to a quarterly global poll of 1,000 Bloomberg customers who are investors, traders or analysts conducted Jan. 21-24. Bernanke is more popular than his European counterpart, Jean-Claude Trichet, and scores higher than all other world political and economic leaders in the poll with the exception of German Chancellor Angela Merkel. Investors don’t have the same positive regard for the Federal Reserve’s actions, particularly the decision in November to inject $600 billion of stimulus into the financial system. A plurality of respondents, 35 percent, say that policy, know as quantitative easing, hasn’t had any significant effect on the economy; another 33 percent say the asset purchases risk a rise in inflation to dangerous levels. Just 27 percent say the plan to buy Treasuries is working as intended to help reduce unemployment and boost growth.
Greece Default With Ireland Breaks Euro by 2016 in Global Poll. Most global investors predict at least one nation will leave the euro-area within five years and that Greece and Ireland will default, sentiment that is intensifying pressure on policy makers to strengthen their response to the debt crisis. As the World Economic Forum’s annual meeting gets underway, 59 percent of respondents in a Bloomberg Global Poll said one or more of the 17 euro nations will quit by 2016, including 11 percent who see an exit within 12 months. Respondents were divided over whether Portugal would default, while a majority expressed confidence in Spain. Such pessimism underscores the urgency German Chancellor Angela Merkel and French President Nicolas Sarkozy face in their hunt for new ways to placate investors after almost $1 trillion in emergency financial support failed to calm markets. Europe’s plight ranks high on the agenda for the conference in the Swiss ski resort of Davos, where Merkel, Sarkozy and European Central Bank President Jean-Claude Trichet are among the 2,500 officials, bankers and economists attending. “The problems in Europe have been addressed, but only with a band aid,” said Ted Jarvis, senior vice president at the Indiana Trust Company in Anderson, Indiana, who participated in the survey. “Several euro members have not followed the correct policies and dug themselves a deep hole.”
Wheat Set for Longest Rally in 14 Months as Protests Spread. Wheat futures gained, heading for the longest winning streak since November 2009, as food protests spread, raising speculation importers will boost purchases to contain food inflation as dry weather threatens global harvests. March-delivery wheat advanced as much as 1.2 percent to $8.4825 a bushel, the highest price for a most-active contract in Chicago since Aug. 6. The contract traded at $8.475 a bushel at 10:38 a.m. Singapore time. Russia’s wheat-growing areas in the Black Sea region, which account for 28 percent of the nation’s output, are “struggling” with dry conditions that may curb yields, Martell Crop Projections said. Russia, the world’s third-largest grower in the 2009-2010 season, banned exports last year after the worst drought in at least half a century slashed grain harvests. “Importers are rushing into the market,” because they expect the U.S. will remain the only reliable supplier as competing exporters struggle to boost output, Ker Chung Yang, an analyst at Phillip Futures Pte., said by phone from Singapore today. “What happened in Egypt, Tunisia and Jordan will prompt neighboring countries to import more wheat to contain food inflation.” In Egypt, the world’s biggest wheat importer, three people set themselves on fire and thousands of Egyptians protesting against President Hosni Mubarak’s government clashed with police in Cairo and other cities, inspired by the revolt that toppled Tunisia’s President Zine El Abidine Ben Ali. The annual inflation rate in Egypt’s urban areas rose 10.3 percent in December, after gaining 10.2 percent a month earlier.
Heroin Use by U.S. Workers Five Times Higher Than Thought, Quest Reports. Heroin use is more widespread among U.S. workers than previously thought, including among pilots and nuclear power plant employees, according a report today from Quest Diagnostics Inc. New testing methods using saliva found heroin use is five times more common in the general workforce than experts thought, according to Quest, the nation’s largest provider of diagnostic testing. Heroin was found in 0.04 percent of 320,000 employees screened with spit tests that are harder to tamper with and easier for companies to collect than the older urine tests, the Madison, New Jersey-based company said. Heroin use is also more prevalent among those with the nation’s most sensitive jobs, according to tests run since the U.S. Department of Transportation introduced stricter rules in October.
Wall Street Journal:
Obama: U.S. Must Compete. President Barack Obama used his State of the Union address Tuesday to ask the nation to meet the challenges of a global economy, framing what he called a competitiveness agenda that includes traditional Democratic proposals like increased education spending, alongside gestures to Republicans seeking deep budget cuts. Mr. Obama said the nation needs to address its rising budget deficit but couldn't afford to back away from new spending on programs that he said would allow the U.S. to compete with rising powers like China and India—an approach Republicans were quick to reject as unaffordable. Mr. Obama also laid out areas of potential cooperation between the parties, such as a call to rewrite the corporate tax code.
Deutsche Bank Economist Hooper Sees Dollar Rebound By Yr End. The euro has more room to rise against the dollar in coming months, but the U.S. currency will rebound by the end of the year, said Peter Hooper, chief economist at Deutsche Bank, the world's biggest currency trading bank by volume. In an interview with Dow Jones Newswires on Tuesday, Hooper also said he doesn't expect the U.S. economy to head into stagflation--a scenario of high inflation and negligible economic growth that roiled the world's biggest economy in the 1970s.
Calpers, After Losses, Plays It Safe. After losing more than $10 billion on real-estate investments, Calpers, the giant California pension fund, is returning to the property market with a new strategy and fewer investment managers, seeking steady, modest gains rather than blockbuster returns. After investing relatively small amounts in real estate during the past two years, the $226 billion California Public Employees' Retirement System is gearing up to commit as much as $2 billion to property deals in 2011, the fund said.
The Great Misallocators. What Barack Obama and General Electric(GE) have in common. President Obama on Tuesday night stressed U.S. economic competitiveness as a new policy theme, accentuating the point he made last week by naming General Electric CEO Jeffrey Immelt to lead his new jobs council. This is welcome, though not solely because it may signal less Administration hostility to business. The pairing is also instructive because both Mr. Obama and GE symbolize a major reason the U.S. has become less competitive—the misallocation of resources.
Bloomberg Businessweek:
Brazil Inflation to Quicken to 6.5% in 2011, Leme Says. Brazil’s annual inflation will quicken to the fastest in seven years and the real will continue to appreciate as the government fails to contain spending and banks boost lending, said Paulo Leme, the chief Latin America economist at Goldman Sachs Group Inc. Inflation will accelerate to 6.5 percent this year, the fastest since 2004, Leme said today at an event in New York. His estimate exceeds the median forecast of 5.53 percent among 100 economists polled for a Jan. 21 central bank survey. President Dilma Rousseff’s planned budget cuts are focused on future spending, not current expenditures, and therefore won’t be enough to cut inflation as public banks lend to promote development, Leme said. Brazil’s central bank last week raised its benchmark overnight rate by half a percentage point to 11.25 percent and signaled it will rely on administrative steps to curb the growth of credit to fight inflation. “Policy tightening will not be enough,” Leme said at a panel held by the Brazilian-American Chamber of Commerce. “Something will have to give. What will give will be inflation.”
Overseas Investors Sell Indonesian Stocks Amid Delay on Rates. Indonesian stocks are posting Southeast Asia’s biggest declines this year as concern the central bank has moved slower than peers in curbing inflation prompts the biggest month of selling by overseas investors since 2005. The Jakarta Composite Index has fallen 7.3 percent since the start of the year, compared with the MSCI Asia Pacific Index’s 0.7 percent advance, led by a drop in PT Astra International and PT Bank Central Asia. The Jakarta gauge, which rose to a record on Dec. 9, may slump 6.8 percent to 3,200 in coming weeks, according to PT Bahana TCW Investment Management, PT Mandiri Manajemen Investasi and PT Manulife Asset Management, which manage a combined $6.7 billion in Jakarta.
'Skins' Slumps Week 2. All that "Skins" contro versy was ratings poison for the controversial MTV show. Monday night's "Skins" episode snared only 1.6 million viewers -- shedding over half of its premiere audience (3.3 million). The news wasn't much better in the show's target audience of 18- to 34-year-olds -- dropping from 1.7 million to 680,000 viewers.
Dirty Little Secrets About Goldman's(GS) Collateral Calls on AIG. When it comes to AIG's liquidity crisis, Wall Street's conventional wisdom absolves Goldman from blame. Goldman's people, so the story goes, were smart and therefore prescient about the declining values of CDOs. So their demands for cash margin from AIG, which insured billions of toxic CDOs for Goldman's benefit, were legitimate. By contrast, AIG's people, the poster boys for financial incompetence, kept flailing about because they were in denial until everything reached a crisis point in September 2008. Yes Goldman was smart, and yes, the people at AIG were clueless, which is why Goldman could pull off such an audacious scam. Goldman's demands for margin were made in bad faith, and possibly under fraudulent pretenses. The conventional wisdom overlooks a critical point: The legal documents had no teeth and might have been impossible to enforce.
Merrill Lynch Is The Real Winner In $10 Million SEC Settlement. Don’t feel bad for Bank of America. Yes, it’s been through a lot this week with the new Countrywide suit, another halt on foreclosure notices and now an SEC settlement- and it’s only Tuesday. But this SEC settlement feels like gift. $10 million dollars. That’s what the SEC is getting from Bank of America/Merrill Lynch on allegations that Merrill misused customer order information to make unlawful gains for the firm. $10 million- that’s it.
CNN Money:
Obama Not Bold Enough on Debt. Last summer President Obama promised to call the bluff of anyone who talks a good game on reducing the national debt but doesn't act. In his State of the Union address on Tuesday, he offered a few ideas, but didn't spell out a comprehensive plan.
TARP Watchdog Blasts Obama's Foreclosure Program. The Obama Administration's main foreclosure-prevention program continues to fall short, and last year's Wall Street reform act does not adequately address the threat that big financial firms pose to the broader economy, the top federal bailout watchdog said Tuesday. In a quarterly report released to Congress, Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, said the program has been a success financially, but that programs "designed to help Main Street rather than Wall Street" have been failures.
AllAboutAlpha.com:
Hedge Funds Coming of Age, According to New Institutional Investor Survey. According to SEI’s annual global study in collaboration with Greenwich Associates, institutional investors are finally looking at hedge funds as having passed the maturity marker and worthy of more serious consideration. The report, entitled “Institutional Hedge Fund Investing Comes of Age: A New Perspective on the Road Ahead” (click hereto download a summary of the report; the complete report can also be downloaded after a brief survey), certainly indicates that the hedge fund industry collectively still has a lot of growing up to do.
Banks Look to Socialize Mortgage Risk. Not to put too crude a point on it, but the willingness of big banks to assume the role of Fannie Mae and Freddie Mac — securitizing residential mortgages, but this time, with an explicit government guarantee — is just the sort of socialist utopia that only Wall Street could invent. While bankers like to espouse their love of the free market, what they are really committed to is making money. And what could be more ideal than a business model in which the profits are private and the risks are socialized among the taxpayers? That is the essence of the plan reported in The New York Times, which says Wells Fargo and other big banks have made clear their desires through the use of lobbying groups.
Rep. Loretta Sanchez Sparks Outrage From Fellow Dems With Proposal to Boot Giffords From Armed Services Committee. Behind closed doors, California Democratic Rep. Loretta Sanchez has proposed removing Arizona Rep. Gabrielle Giffords from the House Armed Services Committee (HASC) until she recovers from injuries sustained after being shot in the head on Jan. 8 in Tucson, The Daily Caller has learned. The proposal sparked an outrage, according to those in the room — including from those in Sanchez’s own party. “It’s not appropriate,” Texas Democratic Rep. Silvestre Reyes told The Daily Caller, adding that there was outrage among some members in the room when Sanchez made the suggestion. “It’s bad for morale during her recovery period.”
IRS Slaps Lien on Goldman(GS) Derivatives Partnership.A Goldman Sachs Group Inc partnership that specializes in selling derivatives to U.S. municipalities owes $1.55 million in unpaid federal taxes. The U.S. Internal Revenue Service filed a federal tax lien against the Goldman partnership earlier this month for an unpaid balance of taxes from 2009. Although the tax assessment is a drop in the bucket for Goldman, which earned $8.35 billion in 2010, it's another dose of unwelcome attention for a partnership that has already attracted unwanted scrutiny over its dealings with municipalities and state agencies.
China Banks Ratchet Up Lending Rates to Ration Credit. Some Chinese banks have drastically raised interest rates on loans to comply with government orders to rein in credit growth after another lending surge at the start of the year, state media reported on Wednesday. Instructions have come down from head offices to some bank branches, saying they must strictly abide by credit quotas this month, the China Securities Journal reported, with regulators keeping a closer eye than normal on lending activity as part of their campaign against inflation. Although consumer price inflation dipped to an annual rate of 4.6 percent in December, many analysts expect it to rebound this month to its fastest in more than two years and warn that excessive lending by banks would compound the problem. The China Business News said that banks had already lent 1.2 trillion yuan ($182 billion) as of January 24, putting them well on track to blow past limits that regulators had wanted to set for the first month of the year. In its front-page article, the China Securities Journal said that banks were now trying to row back from excesses. "To ensure that loan issuance does not overshoot the quota, the head office has now sent out an order that all branches raise lending rates," the newspaper paraphrased an unnamed official at a large state-owned bank as saying. The article did not say whether banks also felt pressure to raise lending rates because of a spike in their own funding costs. The banking system has been bit by an unprecedented liquidity squeeze ahead of the Lunar New Year, driving money market rates skyward and compelling the central bank to inject cash in the economy despite its tightening bias. For less-favoured industries, such as heavy polluters or energy guzzlers, some banks are setting lending rates 45 percent higher than the benchmark, which is now 5.81 percent for one-year loans, the newspaper said. For ordinary industries, lending rates are about 30 percent higher than the benchmark, though top clients can still access loans at a 5 percent discount to the benchmark rate, it added. The newspaper also cited a separate bank official as saying that overall lending in January cannot exceed 12 percent of the full-year target, which is said to be about 7.5 trillion yuan. Yi Gang, deputy governor of the central bank, said that the effectiveness of Chinese monetary policy was increasingly limited, the China Securities Journal reported in a separate article on Wednesday.
Nielsen, Demand Media IPOs Above Targets. Two tech companies raised more than expected in their initial public offerings on Tuesday, in a sign that investors are again paying attention to the market for new issues. Nielsen Holdings, the consumer measurement firm known for its dominance in TV ratings, raised 9.5 percent more than expected, while Demand Media, the online company that relies on an army of freelance writers to churn out search engine-friendly articles, raised 34.5 percent more.
Century Exploration Sues U.S. Over Drill Ban Changes. Century Exploration New Orleans Inc. sued the U.S. over changes in offshore drilling rules that it said made development of its $23 million Gulf of Mexico lease “commercially impractical.” The Louisiana oil company filed suit in the U.S. Court of Federal Claims in Washington today over a series of regulatory changes the Interior Department imposed on offshore exploration after the BP Plc oil spill.
U.S. Construction to Recover in 2012, Led by Hotels - AIA. U.S. nonresidential construction activity will decline this year but recover in 2012, led by hotel and retail sectors, according to a twice-yearly forecast by an architects' trade group. Overall nonresidential construction spending is expected to fall by 2 percent this year before rising by 5 percent in 2012, adjusted for inflation, the American Institute of Architects (AIA) said on Wednesday. The projected decline marks a deteriorating outlook compared to the prior survey in July 2010, when a 2011 recovery was expected.
Yahoo(YHOO) Warns of Weak Q1, More Cost Cuts Planned. Yahoo Inc warned that revenue will again slide this quarter as it bleeds traffic to Google and Facebook and as a much-touted search partnership with Microsoft Corp (MSFT) fails to deliver quick results.
DeVry(DV) Expects Earnings Growth to Slow in H2 2011. DeVry Inc, the second-biggest U.S. for-profit education provider by market value, said it expects earnings growth to ease in the second-half of 2011, especially in the third quarter, hurt by slowing enrollment growth. Shares of DeVry, which closed at $47.38 on the New York Stock Exchange on Tuesday, were up 4 percent in trading after the bell on strong second-quarter results that beat estimates, helped by its diverse program offering.
Keynote's(KEYN) Q1 Earnings Beats Street; Sees Growth in Q2. Keynote Systems posted quarterly earnings that blew past Wall Street estimates, and the internet monitoring systems maker said it expects further growth in the second quarter, sending shares up 21 percent in trading after the bell.
Financial Times:
'Wave and Pay' Technology for iPhone 5. Apple(AAPL) is expected to install “wave and pay” technology for the next version of its iPhone, boosting mobile commerce and potentially giving the company a big piece of the multibillion-dollar transaction industry.
China Business News:
China has set repayment rules for non-bank financial institutions requiring them to make progressive payment on medium to long-term loans, citing a person close to the banking regulator. Non-banking firms include local government financing vehicles, trust firms and financial leasing companies.
The Chinese city of Chongqing's property tax will be split into 10 categories, citing Mayor Huang Qifan. Huang said in general that at a property tax rate of 3%, no one would speculate on real estate.
Shanghai Securities News:
The minimum wages in 30 Chinese provinces were raised last year by an average of 22.8%, citing labor ministry spokesman Yi Chengji.
China Daily:
China will extend a resource tax nationwide over the next five years, citing Finance Minister Xie Xuren. The tax is currently being levied in the country's northwest Xinjiang region.
A property tax trial is an "indispensable" part of China's new round of real estate controls, Jia Kang, head of the Ministry of Finance's research institute, wrote.
Evening Recommendations Citigroup:
Reiterated Buy on (DD), raised target to $65.
Reiterated Buy on (ALK), raised target to $80.
Reiterated Buy on (NSC), target $76.
Reiterated Buy on (DOX), target $35.
RBC Capital:
Rated (SMG) Outperform, target $60.
Night Trading
Asian equity indices are -.50% to +1.0% on average.
Asia Ex-Japan Investment Grade CDS Index 108.0 +2.0 basis points.
Asia Pacific Sovereign CDS Index 120.0 +1.5 basis points.
New Home Sales for December are estimated to rise to 300K versus 290K in November.
10:30 am EST
Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,200,000 barrels versus a +2,617,000 barrel gain the prior week. Distillate inventories are estimated to fall by -500,000 barrels versus a +1,038,000 barrel gain the prior week. Gasoline supplies are expected to rise by +2,300,000 barrels versus a +4,443,000 barrel gain the prior week. Finally, Refinery Utilization is estimated unch. versus a -3.4% decline the prior week.
2:15 pm EST
The FOMC is expected to leave the benchmark fed funds rate unch. at.25%.
Upcoming Splits
None of note
Other Potential Market Movers
The World Economic Forum, $35 Billion Treasury Notes Auction, weekly MBA mortgage applications report and the (MOH) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 83.18 +1.69%
European Financial Sector CDS Index 135.50 bps +5.62%
Western Europe Sovereign Debt CDS Index 177.83 bps +1.52%
Emerging Market CDS Index 202.85 +2.36%
2-Year Swap Spread 22.0 unch.
TED Spread 16.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 274.0 -7 bps
China Import Iron Ore Spot $185.40/Metric Tonne +.22%
Citi US Economic Surprise Index +42.20 +6.5 points
10-Year TIPS Spread 2.23% +5 bps
Overseas Futures:
Nikkei Futures: Indicating -64 open in Japan
DAX Futures: Indicating +17 open in Germany
Portfolio:
Higher: On gains in my Retail, Tech, Biotech and Medical long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades near session highs, despite recent equity gains, rising eurozone debt angst, worries over emerging markets inflation and financial sector weakness. On the positive side, Retail, REIT, HMO, Hospital, Medical, Telecom, Computer Services and Defense shares are especially strong, rising more than .5% today. (IYR) has traded well throughout the day. A number of key tech stocks are also outperforming. The 10-year yield is falling -8 bps to 3.32%. Moreover, the European Investment Grade CDS Index is dropping another -1.15% to 76.99 bps, which is also a large positive. The Citi US Economic Surprise Index is now at the highest level since April 12th of last year. US scrap steel prices are up another +5.7% over the last 5 days. Oil continues to trade very poorly, given recent positive economic data and euro strength. On the negative side, Alt Energy, Disk Drive, Networking, I-Banking, Construction, Gaming and Education shares are under pressure, falling more than 1.0%. (XLF) has underperformed again throughout the day. Copper is falling -2.7% and Lumber is down -2.6%. The Spain sovereign cds is rising +4.18% to 265.94 bps, the Italy sovereign cds is gaining +4.4% to 186.44 bps and the Portugal sovereign cds is rising +3.35% to 446.59 bps. I suspect stocks will build on this afternoon's rally tomorrow morning. The Fed announcement is unlikely to bring any meaningful surprises tomorrow afternoon. I expect US stocks to trade modestly higher into the close from current levels on short-covering, more economic optimism, less real estate sector pessimism, falling long-term rates and technical buying.
Consumer Confidence in U.S. Rose More Than Forecast. Confidence among U.S. consumers rose more than forecast in January to the highest level in eight months as Americans became more optimistic about job prospects. The Conference Board’s index of sentiment increased to 60.6 from a revised 53.3 the prior month that was higher than previously estimated, figures from the New York-based private research group showed today. Economists projected the January gauge would rise to 54, according to the median forecast in a Bloomberg News survey. A pickup in optimism, an improving labor market and tax relief may combine to encourage consumers, whose spending accounts for about 70 percent of the economy. The share of Americans who said jobs were plentiful rose to the highest level since May 2009, while those expecting an increase in incomes climbed to an eight-month high. The Conference Board’s measure of present conditions rose to the highest since November 2008. The index averaged 96.8 during the last economic expansion that ended in December 2007. The Conference Board’s index of present conditions increased to 31 from a revised 24.9. The gauge of expectations for the next six months rose to 80.3 from 72.3. The percent of respondents expecting more jobs available in the next six months rose to 16 from 14.2 the previous month. The proportion who expect their incomes to rise over the next six months increased to 11.4, the highest since May, from 9.9 percent. The share of consumers who said jobs are currently plentiful rose to 5.2 percent from 4.2 percent. Those who said jobs are hard to get decreased to 43.4 percent from 46.0 percent. Confidence rose in all nine U.S. regions, led by a 21.3-point surge in the West South Central area, which includes Texas and Oklahoma.
Commercial Property Debt Soars to Highest Since 2008 on Bet Worst is Over. Debt investors are wagering that the worst is over for commercial real estate, driving prices on mortgage bonds to the highest in more than two years. “Investors have gotten more comfortable and have started putting money back into CMBS,” Chris Callahan, head of commercial-mortgage backed bond trading at Credit Suisse Group AG, said in an interview at the Commercial Real Estate Finance Council’s conference in Washington. “It has gone from being the red-headed stepchild to being a viable asset class again.” Investors are buying bonds tied to hotel, shopping center and skyscraper loans as more financing becomes available to borrowers, helping halt a slide in real-estate values. U.S. commercial property prices, which have declined 42 percent from their peak in 2007, rose for the third consecutive month in November, Moody’s Investors Service said in a statement yesterday. So-called junior AAA commercial-mortgage backed securities, which are less insulated from losses than senior and mezzanine AAA classes, have increased almost 21 percent to 87 cents on the dollar during the past three months, according to data compiled by JPMorgan Chase & Co. The bonds, valued at about 51 cents six months ago, are at the highest levels since June 2008, JPMorgan data show. Sales of commercial-mortgage backed securities are poised to climb to $45 billion this year, according to JPMorgan, after banks arranged $11.5 billion of the debt in 2010. Rising sales make it easier for property owners with maturing loans to refinance.
China to Start Stockpiling Rare Earths, Caijing Says. China will start stockpiling rare earth minerals this year, Caijing magazine reported today, citing an unidentified official at the China Nonferrous Metals Industry Association. The report didn’t say when the stockpiling would begin or give other details.
IMF Raises 2011 Global Growth Forecast to 4.4%, Says Risks Still Elevated. The International Monetary Fund raised its forecast for global economic growth this year, reflecting stronger U.S. output based on tax-cut extensions, while emerging nations lead the recovery. The world economy will grow 4.4 percent, more than the 4.2 percent expected in October. Expansion next year is projected to reach 4.5 percent, unchanged from October, the IMF said today in an update to its World Economic Outlook report.
Oil Drops to Eight-Week Low Ahead of Forecast U.S. Inventory Gain, OPEC. Crude oil fell to its lowest in almost eight weeks amid speculation OPEC may boost output and before a U.S. report that may show supplies in the world’s biggest crude user rose last week. An Energy Department report tomorrow will probably show U.S. crude inventories climbed 1.25 million barrels last week, according to a Bloomberg News survey. Oil for March delivery declined as much as $1.57, or 1.8 percent, to $86.30 a barrel in electronic trading on the New York Mercantile Exchange, its lowest price since Dec. 2, and was at $86.72 at 1:24 p.m. London time. Al-Naimi’s comments “indicate that the Saudis find increasing discomfort as oil approaches triple digits,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “It’s not due to supply tightness that we have $90 to $100 oil. We do have a well-supplied market today, a lot of inventories, a lot of spare OPEC production capacity.” “OPEC’s policy, as is well known, is to meet any increase in oil demand to maintain the supply-demand balance,” al-Naimi said. “Some OPEC countries will increase their production capacities, thus maintaining OPEC’s spare capacity at approximately 6 million barrels per day.”
Apple(AAPL) Plans Service That Lets iPhone Users Pay With Handsets. Apple Inc. plans to introduce services that would let customers use its iPhone and iPad computer to make purchases, said Richard Doherty, director of consulting firm Envisioneering Group. The services are based on “Near-Field Communication,” a technology that can beam and receive information at a distance of up to 4 inches, due to be embedded in the next iteration of the iPhone for AT&T Inc. and the iPad 2, Doherty said. Both products are likely to be introduced this year, he said, citing engineers who are working on hardware for the Apple project. Apple’s service may be able to tap into user information already on file, including credit-card numbers, iTunes gift-card balance and bank data, said Richard Crone, who leads financial industry adviser Crone Consulting LLC in San Carlos, California.
India Raises Benchmark Interest Rate to Two-Year High to Slow Inflation. India’s central bank raised the benchmark interest rate to a two-year high and signaled further increases in borrowing costs as it boosted the country’s inflation forecast. Governor Duvvuri Subbarao lifted the repurchase rate to 6.5 percent from 6.25 percent, according to a statement from the Reserve Bank of India in Mumbai today.
BRIC Inflation Threatens Priciest Consumer Stocks as Food Bills Increase. Emerging-market consumer companies are valued at the most expensive levels on record just as surging food and energy costs curb household spending from Sao Paulo to Shanghai. Shares in the MSCI Emerging Markets Consumer Discretionary Index traded at a 15-year high of 2.6 times net assets last week, data compiled by Bloomberg show.
Google's(GOOG) Schmidt to Stay 'As Long as It's Exciting'. Google Inc.’s Eric Schmidt said he has no plans to leave the owner of the world’s largest search engine, dismissing speculation he’s considering a career in the media or politics.
Goolsbee Says Obama to Focus on Economy in His Speech. President Barack Obama would consider lowering corporate taxes as one of a variety of proposals intended to boost the economy, Austan Goolsbee, chairman of the U.S. Council of Economic Advisers, said today. “The president’s open to all different ways to boost competitiveness,” Goolsbee said on Bloomberg Television. “The president’s focus is how do we win the future and how do we get the economy growing?” In previewing Obama’s State of the Union address, which is scheduled for tonight, Goolsbee said Obama will focus on the economy, the federal budget and the deficit. Goolsbee also cited a U.S. corporate tax code that’s full of “a lot of loopholes and carve-outs,” and said Obama “would be open to broadening the base and lowering the rate to make American companies that are competing with companies from abroad more competitive.”
Harley-Davidson(HOG) Shares Rise Most Since October as Loss Narrows. Harley-Davidson Inc., the biggest U.S. motorcycle maker, rose the most in more than three months after its fourth-quarter loss narrowed and its financial- services unit posted a profit. Harley climbed $2.91, or 8 percent, to $39.40 at 11 a.m. in New York Stock Exchange composite trading.
Christie Says He'll Go to Tax-Raising Illinois to Lure Jobs to New Jersey. New Jersey Governor Chris Christie said he intends to go to Illinois next week to lure jobs from business executives angered about personal income and corporate tax increases its governor and Legislature enacted this month. The trip coincides with advertisements that his administration began running today in publications including the Chicago Tribune and Springfield (Illinois) Journal, encouraging businesses to relocate and invest in New Jersey, Christie said. The first-term New Jersey governor said he sees opportunity in Illinois Governor Pat Quinn’s decision to increase the income tax by two-thirds and corporate taxes to 7 percent from 4.8 percent to help reduce a deficit of at least $13 billion. “If he wants to tank his economy, that’s just fine,” Christie, a 48-year-old Republican, said in an interview at Bloomberg News headquarters in New York today. “I’ll go and try to collect as many businesses as I can, and every job that I create, that I take from Illinois, which comes to New Jersey, will be a net plus for us.” Quinn, 62, a Democrat elected Nov. 2, supported the state’s record tax increase, saying it would help resolve a crisis that had the state “careening toward bankruptcy and fiscal insolvency.”
Wall Street Journal:
Accounting Board Backs Off 'Mark to Market' Push. Accounting rule makers took a key step Tuesday to reverse a proposal that would have required banks to value their loans based on the ups and downs of the market.
A 2nd I.R.S. Amnesty for Offshore Accounts. The Internal Revenue Service said on Monday that it would soon announce a new amnesty program aimed at encouraging wealthy Americans with hidden offshore bank accounts to come forward, declare their money and pay taxes owed.
Investment News:
Can Anybody Fix Goldman's(GS) Brokerage? Despite a parade of new bosses, bank's asset management unit still sputtering; 'butter their own bread and charge huge fees.'
Energy Intelligence Group:
Venezuela will resume gasoline shipments to Iran after a pause of more than two years. State-run Petroleos de Venezuela SA has agreed to supply two 30,000-ton cargoes gasoline cargoes per month to Iran, EIG said in its International Oil Daily newsletter, citing Middle East trading and shipping sources that it did not identify. The first cargo is due to arrive at the port of Bandar Abbas in early February, the report said. The shipments are a gesture of goodwill from Venezuela after U.S. and European sanctions restricted the supply of fuel imports into Iran, EIG said.
Voters Wary of State of the Union Spending Proposals. A new Rasmussen Reports national telephone survey finds that 39% of Likely U.S. Voters favor the federal government spending more money in areas like education, transportation and technological innovation. Forty-five percent (45%) oppose additional government spending like this, while 15% more are not sure about it.
Telegraph:
UK Economy Suffers Shock Contraction.Britain's economy shrank unexpectedly in the final three months of the year as heavy snow compounded a slowdown in growth. Gross domestic product fell 0.5pc in the fourth quarter, the most in more than a year, the Office for National Statistics reported on Tuesday. The decline compared with growth of 0.7pc in the third quarter.
IMF Chides US for Fiscal Folly. The International Monetary Fund (IMF) has issued its clearest warning to date that the latest US fiscal stimulus is ill-judged, unlikely to do much for growth and raises the risk of a bond crisis over the medium term.
Kauppalehti:
Apple Inc.(AAPL) and Google's(GOOG) Android smartphone sales are booming in the Nordic countries, at the expense of Nokia Oyj(NOK) models, citing Fredrik Rudberg, managing director at Swedish handset distributor Mobile 20:20. "Almost all the smartphones we sell nowadays are Apple and Android - Nokia phones just don't sell," Rudberg said.
Xinhua:
China's northern city of Tianjin plans to raise minimum monthly wages by 16% to about 1,070 yuan, citing the city's human resources and social security work meeting.
Chinese farm-produce prices gained in the week ended Jan. 23 from the previous seven days, their fourth consecutive increase, on freezing weather in China's south, citing the Ministry of Commerce. The wholesale price of 18 staple vegetables increased 12.6% and the prices of green peppers, cucumbers, chili peppers and beans gained at least 10%.
Shanghai Daily:
Economists Say Rates Will Rise. CHINA may raise benchmark interest rates next month to tackle inflation and curb liquidity, economists said yesterday. The central government has made inflation a policy priority and another interest rate increase looms, said Lu Zhengwei, an Industrial Bank senior economist. "Another interest rate increase and another reserve requirement ratio increase are both expected in February," Lu said. He forecast an inflation rate of 5.3 percent this month, which he said would push policy makers to increase rates.
CCTV:
China central bank adviser Li Daokui said oil prices at $100 a barrel will have a negative impact on the nation's economy, according to China's state television.
