Today's Headlines

Bloomberg:

• Ukrainian Separatists Attack Airport as Kiev Sends Troops. Pro-Russian militants resumed their assault on Ukrainian government soldiers at Donetsk airport as President Petro Poroshenko sent more troops to the country’s eastern conflict zone. Ukrainian soldiers were holding their positions at the airport, repelling a “full-scale storm” from the separatists, Yuriy Biryukov, a military adviser to Poroshenko, said on his Facebook page today. Separatist leader Oleksandr Zakharchenko said yesterday his forces control 95 percent of the airport, which has become a focal point of the fighting. 

• FXCM Said in Talks With Jefferies for $200 Million Rescue. Jefferies Group is in talks to give FXCM Inc. (FXCM) a cash infusion of about $200 million, people with knowledge of the matter said, extending a lifeline to the currency brokerage hobbled by the Swiss central bank’s decision to let the franc trade freely against the euro. FXCM warned Thursday that client losses due to the Swiss National Bank’s action threatened the broker’s compliance with capital rules. The largest U.S. retail foreign-exchange broker, which handled $1.4 trillion of trades for individuals last quarter, said it was owed $225 million by clients.

• Short Sellers Now Taking Aim at Emerging-Market Bonds. The combination of plunging commodity prices and a soaring dollar is drawing short sellers to emerging-market debt. The two trends are battering the finances of many developing nations, squeezing export revenue and forcing them to rustle up more local currency to repay foreign debt denominated in dollars. Growing numbers of short sellers are betting this squeeze will keep driving down emerging-market bonds: Short interest on the $4.1 billion iShares J.P. Morgan USD Emerging Markets Bond ETF has almost tripled since November to 21 percent of shares outstanding, according to data compiled by Bloomberg and Markit Group Ltd. The fund has lost 2.2 percent since the end of October as developing-nation sovereign yields increased an average 0.45 percentage point. “Widening credit spreads in general and the continued plunge in oil prices are inducing people to want to take more short positions in EMB,” Peter Lannigan, a Stamford, Connecticut-based emerging markets strategist at CRT Capital Group LLC, said in a telephone interview this week. “Investors have traditionally looked at emerging markets as a commodity play.” 

• UBS’s Richest Clients Seen Flocking to Dollars After Swiss Franc Shock. (video) UBS Group AG (UBSG), the largest Swiss bank, said its wealthiest clients will be attracted to U.S. dollars after Switzerland roiled markets by scrapping the franc’s cap. Private-banking customers are concerned a stronger franc will hurt Switzerland’s economy and the businesses they own, Simon Smiles, Zurich-based chief investment officer for ultra-high-net-worth individuals at UBS, said on Friday in an interview. Clients worldwide have yet to decide on whether to change currency allocations, he said. The bank cut its growth forecast for Switzerland and predicts the country will slip into deflation this year.

• ECB Weighing QE Through National Central Banks, Spiegel Says. The plan, which tries to avoid a transfer of risk between member states, envisages purchases in line with the ECB’s capital key, with a limit of 20 percent to 25 percent on each country’s debt, Spiegel said in an article published today, without saying where it got the information. Greece will be excluded from the program because its bonds don’t fulfill the necessary quality criteria, the magazine said.

• Deutsche Bank, Barclays Seen Losing Millions Amid Swiss Rout. Deutsche Bank AG and Barclays Plc (BARC), two of the world’s largest currency dealers, were among the first banks to suffer losses after the Swiss central bank’s surprise decision to abandon a cap on the franc, people with knowledge of the matter said. Deutsche Bank lost $150 million on Thursday amid an unexpected surge in the Swiss franc, said one of the people, who asked not to be identified because the figure hasn’t been made public. Barclays’s losses were less than $100 million, another person said. The losses are still being calculated, and may spread to other asset classes, including equities, one of the people said. 

• The Swiss Just Made Things Worse for the Euro. The euro is shaping to be the biggest casualty of Switzerland’s decision to scrap its currency cap. Soon after the Swiss National Bank unexpectedly ended its three-year policy of keeping the franc weaker than 1.20 per euro, bearish bets on Europe’s common currency soared. While setting a record low versus the franc yesterday, the euro also plunged 3.5 percent against a basket of 10 developed-nation peers, the most since its 1999 debut, and reached an 11-year low against the dollar today.

• Europe Stocks Rise to Highest Since 2008 as Energy Shares Climb. European stocks rose to their highest level since 2008 as gains by oil producers outweighed a slump in Swiss shares. The Stoxx Europe 600 Index climbed 1.1 percent to 352.4 at the close of trading, after earlier losing as much as 0.9 percent.

• Oil Heads for Longest Weekly Losing Streak Since 1986. Oil advanced, paring an eighth weekly decline, as the International Energy Agency lowered forecasts for supplies from outside OPEC and said prices could recover. West Texas Intermediate crude rose as much as 4.7 percent in New York. The U.S. benchmark crude grade is heading for a loss of 0.6 percent this week, capping the longest run of weekly declines since March 1986. Non-OPEC oil producers will boost output this year at a slower rate than previously forecast, aiding a recovery in crude prices, the IEA said in its monthly market report.

• Citigroup(C) Said to Lose More Than $150 Million on Currency Swings. Citigroup Inc., the world’s biggest currencies dealer, lost more than $150 million after the Swiss central bank decided to let the franc trade freely against the euro, according to a person briefed on the matter. The losses occurred on the New York-based bank’s trading desks and aren’t tied to its relationships with FXCM Inc. and other retail trading platforms, said the person, who asked for anonymity because the information hasn’t been disclosed publicly. 

• Venture Funding of U.S. Startups Last Year Was Most Since 2000. The money spigots for U.S. startups opened last year to their widest since the peak of the dot-com boom in 2000. Venture capitalists pumped $48.3 billion into U.S. startups in 2014, according to data today from the National Venture Capital Association and PricewaterhouseCoopers, the most since investors piled $105 billion into closely held companies in 2000. The 2014 total was up 61 percent from $30 billion in 2013 and was more than double the $20.4 billion invested in 2009.

MarketWatch.com:

• Broker reassurances about Swiss exposure may be a red flag for the rest of us. 

• Jim Chanos downbeat on Exxon(XOM), Caterpillar(CAT), Intel(INTC).

Fox News:

• Police in Belgium, France, and Germany make arrests in latest anti-terror raids. (video)
  Dozens of terror suspects were arrested in Belgium, France, and Germany early Friday, a day after Belgian authorities said that they halted a plot to attack police officers by mere hours.
  Eric Van der Sypt, a Belgian federal magistrate, told a news conference Friday in Brussels that 13 people had been detained in Belgium in connection with the plot, with another two arrested in neighboring France. He added that a dozen searches had led to the discovery of four military-style weapons including Kalashnikov assault rifles.

CNBC:

• China shadow banking chills stimulus hopes. "A surge in shadow bank credit – entrusted loans, trust loans, banker's acceptances, corporate bonds and non-financial enterprises' domestic equity – was responsible for December's considerably larger than expected increase in aggregate financing," said Tim Condon, head of Asia research at ING in a note on Friday, noting that shadow bank credit exceeded new yuan-denominated loans for the first time in 2014.

• Market cools for million-dollar homes. Sales of homes for $1 million or more fell 20 percent in the fourth quarter compared with those in the third quarter and posted their worst year-on-year growth since 2011, according to the CNBC Luxury Real-Estate Report, conducted by Redfin, a real-estate brokerage and research firm.

ZeroHedge:

• What Really Happened At The SNB Yesterday: One Person's Take.

• US Oil Rig Count Collapses To Over 4 Year Low (as Production Hits Record High). (graph)

• Greek Debt Will Not Be Included In Bond-Buying Plan; ECB's Knot Warns QE "Distorts Markets"

• Swiss Stocks Slump For Worst Week Since Lehman, Bond Yields Negative To 12 Years. (graph)

• EURUSD Tumbles Below 1.15, Near 12-Year Lows. (graph)

• "Some Folks Were Lying?" Medicaid Chief Tavenner 'Steps Down' After Obamacare "Error".

• Goldman(GS) Tumbles On Worst FICC Revenue Since Lehman, Average Employee Comp Drops To 2012 Levels. (graph)

• Consumer Prices Tumble Most In 6 Years, Core Inflation Misses. (graph)

• Industrial Production Drops By Most In 11 Months (After Biggest Surge Since 2010). (graph)

• Gold Hits $1270 - 4 Month Highs. (graph)

• Despite Dismal Retail Sales, US Consumer Are The Most Exuberant In 10 Years. (graph)

Business Insider: 

• Foreign-Exchange Brokers Are Going Bankrupt In The Swiss Franc's Surge.

• The Head Of Russia's Largest Private Oil Company Thinks Oil Could Go To $25.

Reuters:

• ECB's Coeure says QE must be big to be efficient -paper. Any programme of quantitative easing must be big to be efficient, European Central Bank Executive Board member Benoit Coeure said on Friday in a newspaper interview. "For it to be efficient, it has to be big," Coeure told the Irish Times newspaper. "How big is big enough? This has to be an informed decision based on what we know are the transmission channels."

Financial Times: 

• ECB set to bow to German pressure over QE. The European Central Bank is set to unveil a programme of mass bond buying next week to save the eurozone from deflation, but has bowed to German pressure to ensure that its taxpayers are not liable for any losses incurred on other countries’ debt.