Today's Headlines

Bloomberg:

• UBS Tells Davos Leverage Ratio Over-Reliance Threatens Stability. UBS AG (UBSN), Switzerland’s biggest bank, said a shift in emphasis to leverage ratios from risk-based capital measures could endanger financial stability. “We caution against over-reliance on leverage ratios as a regulatory tool,” UBS said in a report, which the Zurich-based bank prepared for release at the World Economic Forum in Davos, Switzerland, and made available to Bloomberg. Such a focus “could lead to further deleveraging by banks and pose risks for financial stability.” 

• German ZEW Investor Confidence Unexpectedly Fell in January. German investor confidence unexpectedly fell for the first time in six months, signaling caution over the outlook for the euro area’s economic recovery. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, slid to 61.7 in January from a seven-year high of 62 in December. Economists predicted an increase to 64, according to the median of 40 estimates in a Bloomberg News survey.

• Russia Mounts Security Sweeps to Choke Insurgency Near Sochi. Russia sent troops across Dagestan today as the government pressed an offensive against insurgents and new threats emerged weeks before the Winter Olympics kick off in the Black Sea resort of Sochi. Two counter-terrorism operations were under way in Dagestan, a Muslim-majority region on the Caspian, east of Sochi, said Alexander Polyakov, a spokesman for the National Anti-Terrorist Committee. Security forces also embarked on a third mission, surrounding a group of suspected militants in a house, Interfax reported, citing an unidentified local official.

• Alstom Cuts Margin and Cash Flow Outlook as Demand Falls. Alstom SA (ALO), the French maker of trains and power equipment, cut its forecast for operating margins for the second time in nine months because of weaker-than-expected sales of thermal-power equipment. The operating margin will remain at about 7 percent this fiscal year ending March, and “may slightly decline next year,” the company based near Paris said in a statement today. Alstom previously forecast this year’s margin to be little changed from fiscal 2013’s 7.2 percent, before gradually rising over the next two to three years to about 8 percent of sales. Alstom shares fell as much as 14 percent. “Confidence is broken,” said Gael de Bray, an analyst at Societe Generale. (GLE) He cut his target price for Alstom shares to 26 euros from 32 euros. “The expected deleveraging process was the main support to the shares but is further postponed.” 

• EU Must Contain Energy Costs or Risk ‘Deindustrialization’: EU. Europe must get a grip on energy prices to protect growth and stop its industry from fleeing abroad, according to two top policy makers. The region needs to reduce the cost gap with the U.S., where a shale-gas revolution has slashed prices, European Union Energy Commissioner Guenther Oettinger told a conference in Berlin via a video link from Brussels.

• SAP Falls on Delayed Profitability Target From Cloud Push. SAP AG (SAP) pushed back its profitability target by two years as it shifts sales efforts from traditional business software licenses to programs delivered over the Internet. The shares fell the most in six months.

• European Shares Are Little Changed as Unilever Advances. European stocks were little changed, erasing earlier gains, as a rally in food and beverage makers offset a decline in mining stocks. Unilever gained 2.3 percent after the maker of Magnum ice cream and TRESemme shampoo reported fourth-quarter sales growth that exceeded estimates. Rio Tinto Group and BHP Billiton Ltd., the world’s biggest miners, each declined at least 1.7 percent. Alstom SA (ALO) tumbled 14 percent after the French maker of trains and power equipment reduced its operating-margin outlook. The Stoxx Europe 600 Index climbed less than 0.1 percent to 335.76 at the close of trading, paring an earlier rally of as much as 0.6 percent.

• Rebar in Shanghai Drops as Iron Ore, Coke Prices Slump. Steel reinforcement-bar futures in Shanghai fell to a 16-month low as prices of steel-making materials slumped. Rebar for May delivery on the Shanghai Futures Exchange retreated by 1.2 percent to 3,410 yuan ($564) a metric ton. That’s the lowest closing price for a most-active contract since Sept. 7, 2012.

• Brent Crude Rises First Time in Four Days on IEA Forecast. Brent for March settlement climbed 66 cents, or 0.6 percent, to $107.01 a barrel on the London-based ICE Futures Europe exchange at 12:22 p.m. The volume of all contracts traded was 17 percent more than the 100-day average.

• Syria Uses War Crimes to Crush Rebels, Human Rights Watch Says. The Syrian regime has been using a “strategy of war crimes” that’s killing 5,000 people a month to crush the armed opposition and peace negotiators must focus more attention on the deaths, Human Rights Watch said. Roth also upbraided U.S. Secretary of State John Kerry for not wanting to “rock the boat” in his effort to bring both sides to the negotiating table in Switzerland tomorrow. “You don’t even see the U.S. government speaking about the mass atrocities.”

• Global Hedge Funds Assets Climb 17% to a Record $2.63 Trillion. Global assets rose by $376 billion, including $63.7 billion in net inflows from investors and $312 billion in investment gains, the Chicago-based data provider said in a report today. The fourth quarter was the sixth in a row that the industry saw a growth in assets, it said.

• Is S&P Being Sued Because It Downgraded the U.S.?

Barron's:

• Goldman Sachs(GS) Predicts Lower Metal Prices, Cliffs Natural Resources(CLF), Rio Tinto(RIO) Fall.

MarketWatch:

• The market is at a major inflection point.

CNBC: 

• Winter storm set to 'go bananas' across Northeast.

• China's unwelcome export to the US: Air pollution.

ZeroHedge: 

• A Comedy Of IMF Forecasting Errors: Global Trade Growth Tumbles More Than 50% From IMF's 2012 Prediction. (graph)

• Turkish Lira Crumbles To New Record Low As Erdogan Blames Fed Not Politics. (graph)

• Goldman Defends Its "Stocks Are Overvalued" Call From Angry Clients. (graph)

• The First Domino to Fall: Retail-CRE (Commercial Real Estate). (graph)

• Iran Naval Flotilla Makes History, Will Enter Atlantic For First Time.

Business Insider:

• RICHARD RUSSELL: I Believe 2014 Will Be The Year When 'The Excrement Hits The Fan'.

• 3 Big Dow Stocks Are Tumbling After Announcing Earnings.

• Jon Stewart Skewers Obama's Sneaky NSA Speech.

NY Times:

• Deutsche Bank(DB) Loss Underlines European Economy’s Dependence on Banks.

Real Clear Politics:

• Millennials Unhappy With Obama's War on the Young.

Reuters:

• Illinois budget gap to grow despite pension reform -study. A reform package passed late last year will make improvements to Illinois' woefully underfunded public pension system, but the state's budget gap still will increase to $13 billion by 2025 if current policies remain in place, according to an independent analysis released on Tuesday.

• Gold falls about 1 pct on Fed tapering speculation. 

• EMERGING MARKETS-Brazil stocks erase early gains as CSN weighs.

• Loeb's Third Point takes Dow Chemical(DOW) stake, urges spinoff.

• IMF sees up to 20 pct chance of prices falling in Europe.

Financial Times:

• IMF warns on emerging market exposure to capital flight. Weaker emerging economies are exposed to sudden capital flight as the global economy is on course to strengthen as expected this year, the International Monetary Fund said on Tuesday.

Telegraph:

• Euro 'increasing unemployment and social hardship', says EC. Deepening economic divisions between North and South, rich and poor eurozone countries threaten to undermine the European Union itself, report states.