Bloomberg:
- Japan Posts Record Annual Trade Deficit as Import Bill Soars. Japan reported a record annual trade deficit last year as energy shipments and weakness in the yen pumped up the nation’s import bill. The shortfall was 11.5 trillion yen ($113 billion), almost double the previous year’s 6.9 trillion yen, a finance ministry report showed in Tokyo today. Imports rose 25 percent in December from a year earlier and exports gained 15 percent, leaving a monthly deficit of 1.3 trillion yen. A record 18 straight monthly deficits show how nuclear plant shutdowns, higher import costs, and limited gains in export volumes are dragging on Prime Minister Shinzo Abe’s efforts to sustain momentum in the world’s third-biggest economy.
- Default-Swap Bets at 14-Month High on Trust Flops: China Credit. Credit traders have taken out the most protection on China's debt in 14 months just as the world's second-biggest economy faces a default test in its $1.7 trillion market for trust products. The net notional amount of credit-default swaps outstanding on Chinese sovereign bonds totaled $9.125 billion on Jan. 17, the most since November 2012, according to figures published by Depository Trust & Clearing Corp. December's 12% jump to $9.066 billion was the biggest monthly gain since October 2011. The cost of the contracts surged 25 basis points since Dec. 31, poised for the largest monthly increase since a record cash crunch in June. Local-government financing vehicles set coupons of more than 9% in two debt sales last week, levels not seen since at least 2012, according to Nomura Holdings. "If the market sees serious credit risks, local governments' financing channels will be closed," Xu Gao, chief economist at Everbright in Beijing, said in a phone interview. "The consequence is not what top leaders can accept and would lead to a hard landing of the economy."
- Emerging-Market VIX Surges Most in Two Years on Selloff. Equity volatility from India to Brazil and Turkey jumped the most in two years as turmoil spread across global markets amid a selloff in developing-country currencies and growing concern over China’s economy. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index rose 40 percent to 28.26 last week, the biggest increase since September 2011, according to data compiled by Bloomberg.
- Yen Touches 7-Week High as Emerging-Market Rout Fuels Haven Rush. The yen touched a seven-week high versus the dollar after a selloff in emerging-market assets boosted its appeal as a haven. Japan’s currency held its biggest weekly gain since August against its U.S. peer after Treasury yields posted a fourth weekly decline, damping the relative allure of the greenback. The Federal Reserve starts a two-day policy meeting tomorrow. Argentina led a slump in emerging-market currencies last week as the country devalued its peso.
- Chinese Stocks Sink to Five-Month Low as Economic Concern Mounts. Chinese stocks fell, with a gauge of mainland companies traded in Hong Kong headed for a five-month low, amid concern an economic slowdown will hurt earnings. China Coal Energy Co. (601898), the nation’s second-largest coal producer, tumbled 5.2 percent in Hong Kong after saying 2013 profit probably fell as much as 65 percent. Anhui Conch Cement Co., the nation’s biggest coal producer, sank 5.3 percent. Gains in all eight companies trading for the first time in Shenzhen triggered trading halts. The Hang Seng China Enterprises Index (HSCEI) lost 2.5 percent to 9,766.60 at 10:01 a.m. in Hong Kong, taking its decline this year to 9.8 percent. The Shanghai Composite Index (SHCOMP) slid 0.9 percent to 2,036.30.
- Asian Stocks Head for Biggest 3-Day Drop in Seven Months. Asian stocks declined, with the region’s benchmark index heading for its steepest three-day loss since June, as concern that the global economic recovery is faltering spurred investors to sell riskier assets. Samsung Electronics Co., the world’s biggest maker of smartphones, fell 1.3 percent in Seoul, while Honda Motor Co. (7267) slipped 1.9 percent in Tokyo, pacing losses among Japanese exporters amid a stronger yen. GCL-Poly Energy Holdings Ltd., the world’s largest maker of polysilicon, sank 7.8 percent in Hong Kong after China set a lower-than-expected target for installed solar-energy capacity this year. The MSCI Asia Pacific Index dropped 2.1 percent to 134.79 by 11:05 a.m. in Tokyo, extending four straight weekly declines and headed for its lowest close since Sept. 6. Japan’s Topix index sank 2.8 percent as the yen touched a seven-week high versus the greenback.
- Rubber Drops to 6-Month Low on Rising China Supply, Yen Advance. Rubber in Tokyo tumbled to a six-month low as growing stockpiles in China signaled a slowdown in demand from the world’s largest consumer, and a strong Japanese currency weakened the appeal of yen-denominated futures. The contract for delivery in June on the Tokyo Commodity Exchange dropped as much as 3.8 percent to 232.3 yen a kilogram ($2,273 a metric ton), the lowest level for the most-active futures since July 16. It was the biggest daily loss since Jan. 14. Prices dropped 4.6 percent last week, capping a sixth weekly decline in the longest losing streak since October 2008.
- Gold Bulls Boost Bets Amid Longest Rally Since 2012: Commodities. Hedge funds got more bullish on gold for a fourth straight week before prices capped the longest rally in 16 months on mounting global growth concerns. The net-long position in gold climbed 0.2 percent to 43,353 futures and options in the week ended Jan. 21, U.S. Commodity Futures Trading Commission data show. Long wagers declined 0.2 percent, while short bets slid 0.4 percent. Net-bullish holdings across 18 U.S.-traded commodities increased 5.6 percent, led by natural gas and copper.
- Venice Prices Sink in Italian-Style Deflation: Euro Credit. Consumer prices in Venice are following the sinking city’s downward trajectory, and costume maker Stefano Nicolao says it’s just another symptom of the debilitating economic environment. “The truly characteristic activities that defined Venice through the centuries have been absolutely flattened,” said Nicolao. “It’s war among poor people.”
- Lagarde Cautions Davos on Global Deflation Risk. When Christine Lagarde arrived in Davos in 2008 as French finance minister, the battle was just beginning against a financial crisis that would bring the world economy to its knees. Six years later, as head of the International Monetary Fund, she warned the World Economic Forum at the Swiss mountain resort that the fight isn’t over, just before a currency crisis 7,000 miles away in Argentina reinforced her view. She urged policy makers to remain alert for asset bubbles and prevent a looming threat to prosperity: deflation.
- Ukraine Violence Ups Ante at Kiev Camp as Opposition Sway Fades. For demonstrators at Kiev’s Independence Square, the uprising against Ukraine’s rulers has also become a battle for their own freedom. On permanent alert against a police attack and with the threat of years in prison looming over them, protesters carry plastic shields and don green metal army helmets over the woolen hats that stave off temperatures of as low as minus 20 Celsius (minus 4 Fahrenheit). Guards at tent camp entrances wield baseball bats. Car tires burn nearby, creating a thick black smoke that hinders vision and movement for police.
- JPMorgan(JPM) Seen Paying Dimon $34 Million Award This Year. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon, who got a 74 percent raise for his work in 2013, stands to reap a separate and bigger payday within months. The bank’s board of directors, having delayed a decision for more than a year, has yet to say whether Dimon, 57, can collect 2 million stock options originally granted in 2008 and now worth about $34 million. Last week, the board increased his annual pay to $20 million from $11.5 million a year ago, when he was penalized for faulty oversight of botched derivatives bets.
- U.S. East Set for Another Arctic Blast as Snow Heads for Texas. The U.S. East will get another blast of freezing Arctic air this week, with snow and sleet reaching parts of southeast Texas.
- Gold Mint Runs Overtime in Race to Meet World Coin Demand. Austria’s mint is running 24 hours a day as global mints from the U.S. to Australia report climbing demand for gold coin.
- Needed in Europe: More Inflation. Stagnant Prices Restrain Recovery in Weaker 'Peripheral' Countries Such as Spain, Italy. As Europe's economy recovers from its crisis, afflicted countries such as Spain and Italy are trying to pare their debts while also becoming more internationally competitive. The trouble is, it's hard to do both at once. And the euro zone's weak inflation is making it even harder. So, even as the world's economic elite welcomed a strengthening global recovery at last week's gabfest in Davos, Switzerland, the euro zone's wounds are likely to heal only very slowly—and might even reopen.
Marketwatch.com:
- Strange bedfellows no more: Google(GOOG) cozies up to Republicans. Google and other new-age tech firms have cozied up to Republicans in Washington after years of slanting their support toward progressive causes and politicians. In Google’s case, the company found that its conspicuous support of Barack Obama and Democrats gave it little influence with Republicans when agencies run by leaders appointed by the president challenged the firm on antitrust and other regulatory grounds.
Fox News:
- The new face of food stamps: working-age Americans. In a first, working-age people now make up the majority in U.S. households that rely on food stamps -- a switch from a few years ago, when children and the elderly were the main recipients. Some of the change is due to demographics, such as the trend toward having fewer children. But a slow economic recovery with high unemployment, stagnant wages and an increasing gulf between low-wage and high-skill jobs also plays a big role.
- ‘Hard to see long-term solution’ to debt ceiling: Mayer. Negotiations over the U.S. debt ceiling are still one of the biggest risks facing the world, according to Davos delegates including Marissa Mayer, chief executive of Yahoo and Judith Rodin, president of the Rockefeller Foundation.
- A ban on autos? Major cities consider going carless. Germany, home of the high-speed autobahn, is perhaps one of the few countries that has had as intense a love affair with the automobile as the U.S. But in an effort to go green, the country's second-largest city is studying ways to eliminate cars by 2034.
Zero Hedge:
Business Insider:- If The Emerging-Market Sell-Off Is A Bubble Bursting, Then The Fed Failed Again. If this bubble is about to burst, then once again Fed officials didn’t see it coming. They’ve been aware of the possibility, but minimized its likelihood. Obviously, they once again are failing to learn from history, which shows that easy credit conditions always lead to speculative bubbles that inevitably burst. Let’s review what Fed officials said (or did not say) on this subject:
Washington Post:
- NY teachers union pulls its support from Common Core, urges removal of state ed chief. The action is a blow to supporters of the Common Core, which was approved several years ago in 45 states and the District of Columbia but which has become increasingly controversial around the country, with a number of states pulling back from the initiative or changing the standards. Some states, such as Florida, are actually changing the name so as not to be seen as being identified with the Core.
FXStreet:
- Hedge Funds Pessimism Over Emerging Markets Mounts - FT. The Financial Times has published an article raising retail market awareness on the gloomy perspective towards emerging markets by hedge funds, noting the selling seen so far might be only in its early stages.
Financial Times:
Telegraph:- US solar power trade war with China heats up. The escalation of a trade war between the US and China over solar power components threatens to do serious damage to the American industry, its leading association has warned. Hostilities rose with a missive issued by the China’s Ministry of Commerce to the United States on Sunday over its anti-dumping measures and counter investigations on Chinese solar products.
- Optimism there may be, but the road to prosperity is paved with problems. The jobs-rich future we seek cannot be won by monetary policy alone. A hard road of profound structural change lies ahead.
- Despite signs of recovery, the next financial crisis might not be that far off. Financial crises come round every seven years on average. There was the stock market crash of 1987, the emerging market meltdown in the mid-1990s, the popping of the dotcom bubble in 2001 and the collapse of Lehman Brothers in 2008. If history is any guide, the next crisis should be coming along sometime soon. The fact that the financial markets are betting on global recovery becoming more firmly established over the next two years does not really signify much.
- Euro-Zone Recovery to Take Decades W/o Haircut, Rogoff Says. Euro-zone not even close to recovery seen in U.S., citing Harvard University Professor Keneth Rogoff as saying in an interview. Growth in periphery will barely be possible as long as there's bank debt, private and public debt. Without debt haircuts recovery phase will take decades.
- German Minimum Wage Risks Tens of Thousands of Jobs. "Several 100.000" low-paid jobs will be lost or move to black economy if government introduces countrywide minimum wage of EU8.50 per hour, citing Christoph Schmidt, head of German Chancellor Angela Merkel's council of economic advisers, in interview. Minimum wage will hurt lower income workers more than it will benefit them.
- China May Release Policies to Support Chipmakers. China may release policies to support the integrated circuit industry soon, citing a person familiar with the matter. The country will support some chipmakers and projects with a focus on equipment and manufacturing through an industrial investment fund.
Weekend Recommendations
Barron's:- Bullish commentary on (URBN) and (WTR).
- Asian indices are -2.0% to -1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 155.50 +9.5 basis points.
- Asia Pacific Sovereign CDS Index 119.0 +5.5 basis points.
- FTSE-100 futures -1.04%.
- S&P 500 futures +.16%.
- NASDAQ 100 futures +.05%.
Earnings of Note
Company/Estimate
- (NVR)/16.17
- (RYN)/.52
- (RCL)/.18
- (AEP)/.57
- (CAT)/1.27
- (AAPL)/14.07
- (ASH)/1.31
- (STLD)/.25
- (SWFT)/.35
- (PCL)/.28
- (OLN)/.29
- (X)/-.26
10:00 am EST
- New Home Sales for December are estimated to fall to 455K versus 464K in November.
- Dallas Fed Manufacturing Activity for January is estimated to rise to 3.3 versus 3.1 in December.
- None of note
- The Germany IFO index and China industrial profits report could also impact trading today.
1 comment:
AP and Epoch Times report President Barack Obama is prepared to bypass Congress with executive action in 2014 to address economic opportunity, White House Press Secretary, Jay Carney, communicated as the President prepared his State of the Union Address. The White House is eyeing compromise on some priorities, Obama advisers said. But the president is also looking at executive orders that can be enacted without Congress’ approval. “The president sees this as a year of action to work with Congress where he can and to bypass Congress where necessary,” White House press secretary Jay Carney said. The act-or-else posture bristled Republicans.
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