Today's Headlines

Bloomberg:

• Gross Says Brazil No Longer Pimco Emerging-Market Favorite. Pacific Investment Management Co.’s Bill Gross said Brazil is no longer a preferred emerging-market country for the world’s largest fixed-income manager. 

• Bailed-Out Euro Nations See Painful Economic Challenges Remain. Bailed-out euro-area countries are facing “painful” challenges with worse-than-anticipated consequences of economic adjustment, including high unemployment and slow growth, central banks and finance ministries said.

• ECB Said to Favor 6% Capital Requirement in Stress Test. The European Central Bank favors requiring banks to show their capital won’t fall below 6 percent of their assets when it puts them through a simulated recession later this year, said two euro-area officials with knowledge of the matter. 

• Europe Stocks Advance for Fourth Day; Burberry Increases. European stocks rose, with the benchmark Stoxx Europe 600 Index reaching a six-year high, after the World Bank raised its global growth forecast. Burberry Group Plc gained 4.6 percent after the U.K.’s largest luxury-goods maker reported quarterly revenue that topped analysts’ estimates. Peugeot SA and Daimler AG gained as a gauge of European carmakers posted the best performance of 19 industry groups in the Stoxx 600. Chr. Hansen A/S declined 4.8 percent after it said net income missed projections. The Stoxx 600 climbed 1 percent to 334.51 at the close of trading in London.

• Dollar Climbs to Highest in 4 Months as Growth Boosts Taper Bets. The dollar rose to the highest in four months as signs the world’s biggest economy is recovering fueled speculation the Federal Reserve will keep monetary cutting stimulus. The Bloomberg Dollar Spot Index (SAPMI), which measures the currency’s value against 10 major counterparts, gained 0.5 percent to 1,030.03 at 1:18 p.m. New York time and touched 1,030.54, the strongest since Sept. 9. It jumped 0.4 percent yesterday. The dollar rose 0.6 percent to $1.3592 per euro after sliding to $1.3699 yesterday, the weakest since Jan. 2. The U.S. currency gained 0.4 percent to 104.64 yen after jumping 1.2 percent yesterday. The euro dropped 0.2 percent to 142.22 yen.

• WTI Crude Climbs After U.S. Inventories Tumble to 22-Month Low. West Texas Intermediate crude advanced after a government report showed that U.S. inventories tumbled to the lowest level in almost 22 months. Futures rose as much as 2.1 percent. WTI for February delivery climbed $1.82, or 2 percent, to $94.41 a barrel at 12:34 p.m. on the New York Mercantile Exchange. The contract traded at $93.46 before the release of the report at 10:30 a.m. in Washington. The volume of all futures traded was 27 percent above the 100-day average.

• Artic Cold Begins to Sweep Into the U.S. Next Week. Lows of zero degrees Fahrenheit (minus 18 Celsius) for Chicago and single-digit readings from Washington to Boston are possible by next week, said Matt Rogers, president of Commodity Weather Group LLC. Average temperatures in the eastern U.S. are expected to be at least 3 degrees below normal from Minnesota to Alabama and across the East from Jan. 20 to 24, said Rogers, based in Bethesda, Maryland. That would be followed by a more widespread and intense outbreak of cold from Jan. 25 to 29.

• CLOs Should Be Exempt From Volcker Rule Clause, LSTA's Ganz Says. The Loan Syndications and Trading Association is warning regulators that the Volcker Rule may force U.S. banks to sell their holding of collateralized loan obligations and reduce credit to U.S. companies. "The final rule as written would cause banks to recognize significant losses on otherwise safe, high-quality assets, which furthers no regulatory objective," Elliot Ganz, general counsel at the NY-based trade group, said today. The LSTA is asking regulators to modify parts of the rule so CLOs aren't treated as equity securities, which would make them ineligible to be held by banks.

Wall Street Journal: 

• IMF Chief Warns on Rising Risks of Deflation. Lagarde Says 'Growth Stuck in Low Gear', Too Fragile. The head of the International Monetary Fund Wednesday warned that deflation in advanced economies threatens to derail a strengthening, but still fragile global recovery this year, requiring central banks in the U.S. and Europe to keep easy money flowing. "With inflation running below many central banks' targets, we see rising risks of deflation, which could prove disastrous for the recovery," IMF Managing Director Christine Lagarde said in a speech at the National Press Club. "If inflation is the genie, then deflation is the ogre that must be fought decisively," she said.

• Iraq Bombings Kill 41. Explosions Strike Busy Markets and Funeral North of Baghdad.

• Which Countries Are Most at Risk from a Fed Exit? 

• Netflix(NFLX), YouTube Could Feel Effects of 'Open Internet' Ruling. Bandwidth Hogs May Have to Pay Broadband Tolls.

Fox News:

• Senate report: Benghazi attackers tied to Al Qaeda groups. A comprehensive report by the Senate Intelligence Committee definitively declared that individuals tied to Al Qaeda groups were involved in the Benghazi attack, challenging recent claims that the terror network was not a factor. The report was released Monday, nearly one year after then-Secretary of State Hillary Clinton, under congressional questioning over the nature of the attack, shouted at lawmakers: “What difference, at this point, does it make?” 

• Senate Intelligence Committee review of terror attacks on US facilities in Benghazi. (read)

MarketWatch:

• A serious emerging-markets selloff is underway.

• Fitch Solutions: Sears(SHLD) CDS Climb 39%, Now Lag JC Penney(JCP).

• Bank of America's(BAC) 4Q net surges as credit improves. Bank of America Corp.'s fourth-quarter profit surged sharply, beating analyst estimates, as the banking giant bounced back from a year-ago weighed down by one-time charges, while also benefiting from stronger credit quality.

CNBC:

• Jim O’Neill: Global income redistribution could be coming. (video) "I wonder if we could be in the very early stages of a redistribution of wealth from capital back to mass income through government policies, whether it be from taxes or things being done to boost minimum wages," O'Neill told CNBC's "Squawk on the Street" on Wednesday. "But obviously this is something else just as human beings, nevermind investors, that we all have to watch closely." 

• Byron Wien: 10 percent correction looms–here’s why. (video)

ZeroHedge: 

• Confused By The "Artificial Market"? Deutsche Bank(DB) Explains It All.

• This Trend Is Not Your Friend. (graph)

• The Sheer Idiocy Of The Markets In One Chart... Is Back. (graph)

• CB Eases European Bank Stress Test By 25%, Lowers Capital Ratio Requirement From 8% to 6%.

• San Francisco Home Sales Plunge To 6-Year Lows.

• Tell The Fed How You Really Feel About Banks Trading Physical Commodities. (comment form)

• Beige Book Saw "Moderate" Expansion Despite "Harsh Weather", Ongoing Obamacare Concerns.

• Puerto Rico Default "Likely", FT Reports.

ValueWalk:

• ‘Double Irish’ Tax Crackdown On Google(GOOG) – Apple(AAPL), Amazon(AMZN) To Follow? 

Business Insider:

• Netflix(NFLX) Is Sliding.

• BP(BP): The Great American Shale Boom Has At Least Another Decade Before It Peaks.

• Bank Of America Just Confirmed The Fed's Fears About The US Mortgage Market.

• How The Fed Prints Money.

Reuters: 

• Fed's Evans: reasonable to continue to taper unless get 'really offbeat' data. Chicago Federal Reserve Bank president Charles Evans, one of the Fed's most dovish policymakers, told reporters he expects the U.S. central bank to continue to taper its massive bond-buying at a measured pace of perhaps $10 billion at each meeting, unless data comes in unexpectedly weak. "At the moment the plan seems quite reasonable," he told reporters after a speech here. Bond-buying will likely continue until after the first half of the year, he said, although if data comes in better than expected, the Fed could taper the program more aggressively. Asked if the Fed could pause its program of tapering should data weaken, Evans suggested that was unlikely, because the Fed has determined to move away from bond-buying and toward forward guidance on rate policy as its main tool.

Financial Times:

• China’s shadow banking loans leap. Funding from trust companies and other entities in the shadow sector rose to its highest level on record and accounted for 30 per cent of the Rmb17.3tn ($2.9tn) in total credit issued last year, the People’s Bank of China said, up from a 23 per cent share of aggregate financing in 2012.