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Bloomberg:
- Portugal and Greece led a surge in the cost of insuring against losses on sovereign debt to a record as concern that nations will struggle to cut budget deficits deepens a “crisis of confidence” in Europe. The Markit iTraxx SovX Western Europe Index of credit- default swaps on the debt of 15 governments rose 11.5 basis points to 105.5, according to Deutsche Bank AG. Swaps on Portugal soared 27 basis points to 223, according to CMA DataVision, while contracts on Greece jumped 14 basis points to 411.5 and Spain increased 13 to 165. “The key driver for credit risk appetite remains the crisis of confidence in Euroland’s periphery countries,” Stefan Kolek, a Munich-based credit strategist at UniCredit SpA, wrote in a note to investors. Spanish borrowing costs rose at a sale of three-year notes. The government sold 2.5 billion euros of the securities to yield 2.63 percent, compared with 2.14 percent the last time the notes were issued on Dec. 3. Portugal’s public debt will rise to 91 percent of gross domestic product by 2011 from 77 percent last year, according to European Commission forecasts. Greece’s debt will increase to 135 percent of GDP, from 113 percent, and Spain’s will increase to 74 percent from 54 percent. Concern that governments within the euro region may struggle to meet their debt commitments is hurting confidence in companies and banks. The Markit iTraxx Crossover Index of credit-default swaps on 50 European companies climbed 25 basis points to 467, the highest in seven weeks, according to JPMorgan Chase & Co. Swaps on Lisbon-based Banco Espirito Santo SA soared 41.5 basis points to a record 230.5 and contracts on the bank’s subordinated debt were up 56.5 at 318.5. Banco Comercial Portugues SA, Portugal’s second-largest bank, jumped 31 basis points to 206, an all-time high, and contracts on the bank’s junior debt soared 53 basis points to 297.5, CMA prices show. EDP-Energias de Portugal SA increased 30.5 to 145.5 and Portugal Telecom rose 26.5 to 151, both the highest since April. “With sovereign concerns continuing to take center stage, credit will remain under pressure, particularly financials,” Andrea Cicione, a credit strategist at BNP Paribas SA in London, wrote in a note to investors. Swaps on the Markit CDX North America Investment-Grade Index Series 13, which is linked to 125 companies, jumped 4 basis points to 96.25, the biggest rise in two weeks, according to broker Phoenix Partners Group.
- Emerging-market bonds fell, pushing borrowing costs to an eight-week high, and stocks tumbled on concern rising U.S. jobless claims show the world economic recovery is faltering while budget deficits leave developing nations vulnerable. The extra yield investors demand to own emerging-market debt instead of U.S. Treasuries swelled 12 basis points to 3.11 percentage points, the biggest gap since Dec. 9, according to JPMorgan Chase & Co.’s EMBI+ index. Hungary’s bond spread widened 36 basis points, the most in eight months, to 2.66 percentage points. A basis point equals 0.01 percentage point. The MSCI Emerging Markets Index dropped 2.3 percent as Brazil’s Bovespa index sank 2.6 percent at 10:33 a.m. in New York.
- More Americans unexpectedly filed first-time claims for unemployment insurance last week, indicating companies lack confidence the economic recovery will be sustained. Initial jobless applications increased to 480,000 in the week ended Jan. 30, the most in seven weeks, from 472,000 the prior week, Labor Department figures showed today in Washington. The number of people receiving unemployment insurance was little changed and those receiving extended benefits increased. An unemployment rate that’s projected to average 10 percent this year will likely weigh on consumer spending, preventing the biggest part of the economy from accelerating. Without additional gains in sales, companies will be forced to keep cutting costs, limiting staff in order to boost profits. “The pace of improvement has slowed significantly in the last two months,” said Anna Piretti, a senior economist at BNP Paribas in New York. “This points to downside risk for consumption and the rest of the economy.” Labor costs dropped at a 4.4 percent pace last quarter and fell 0.9 percent for all of 2009, the biggest drop in seven years. The four-week moving average of claims increased to 468,750 from 457,000 the prior week.
- President Barack Obama is spending $2.1 million to help Suntech Power Holdings Co. build a solar- panel plant in Arizona. It will hire 70 Americans to assemble components made by Suntech’s 11,000 Chinese workers. That gap shows the challenge Obama faces as he works to create “green” jobs. Asia makes more than half the world’s wind and solar energy equipment, and is gaining ground as U.S. factories lose out to cheaper labor and higher demand for clean energy. China for the first time topped the U.S. in wind-turbine manufacturing and installations last year, the Brussels-based Global Wind Energy Council said yesterday in a report. Obama is giving billions of dollars in tax breaks to the wind and solar industries to create jobs in the U.S. even as production expands faster overseas. “The cost of manufacturing here is too expensive compared to Asia,” said Guy Chaffin, chief executive officer of Elite Search International, a Roseville, California-based executive search firm that has found employees for Tempe, Arizona-based First Solar and Solar Millennium AG. “As far as a flood of good jobs coming to the U.S., we’re not seeing it.”
- Treasury Secretary Timothy F. Geithner pledged to press Congress to enact a “carried interest” tax that could more than double the income taxes of some private-equity and hedge-fund managers. Testifying before the Senate Budget Committee today, Geithner also said he would encourage the U.K. to enact a similar measure. The tax would treat a larger part of fund managers’ income as salary rather than capital gains, which are taxed at a lower rate. The carried-interest tax is included in the Obama administration’s 2011 budget proposal and is estimated to raise $24 billion over a decade. “Even though the measure doesn’t produce a lot of revenue, it’s good economic policy,” Geithner said.
- The cost to protect against a default by Hungary rose to the highest level in five months, according to credit-default swap prices from CMA Datavision in London.
- Commodity prices tumbled the most since August, led by metals and energy, on concern that rising job losses in the U.S. and mounting debt in Europe will slow economic growth and curb demand for raw materials. Copper dropped to the lowest price since October, and oil fell 5 percent, the most in six months. The U.S. said initial filings of first-time claims for unemployment insurance rose to the highest level in seven weeks. Stocks tumbled around the world on concern Greece, Spain and Portugal will have difficulty curbing budget deficits. The Reuters-Jefferies CRB Index of 19 raw materials fell 2.5 percent to 263.78 at 12:22 p.m. in New York, which would be the biggest drop since Aug. 14. “Commodities are getting hammered because we’re starting to see signs that global growth will be much slower than people predicted,” said Michael Pento, who helps oversee $1.5 billion at Delta Global Advisors in Holmdel, New Jersey. “It’s not rocket science. If growth is going to drop, the dollar is going to rise and there are sovereign debt issues, of course commodities are going to fall.” “People were pricing in a V-shaped recovery, but now they’re realizing that’s not likely to happen,” Pento said. “There’s also a flight to safety right now into the dollar, so that means people are selling their riskier assets” including raw materials, he said.
- The euro risks tumbling to $1.3405 should it close tomorrow below a weekly moving average, Commerzbank AG said, citing trading patterns. Euro-dollar is “sitting” on its 200-week moving average, said Karen Jones, head of fixed-income, commodity and currency technical analysis in London. The level is currently at $1.3859, according to prices on Bloomberg. A weekly close below this would be “extremely negative,” Jones said. “That would likely trigger another leg lower,” Jones said today in an interview. The euro would “target initially $1.3735, en route to $1.3405,” she said.
- Seventy-five percent of New York voters support a wage freeze for state workers to help balance the budget, according to a new poll by Quinnipiac University. Voters back layoffs or furloughs for the workers by a smaller amount, 52 percent. A majority of voters say cut services to close New York’s budget deficit instead of raising taxes, while 78 percent oppose cutting state aid to public schools, the poll released today found.
- Gold may fall further as the US dollar strengthens because the US currency has become the biggest influence on the metal’s price, according to Alan Heap, a Citigroup Inc. commodity strategist. Investors and speculators are driving the metal’s price, he wrote. “There is no support at current prices” for the metal from mining and scrap supply, which is rising, or industrial demand, which is tumbling, the report said.
Wall Street Journal:
- A new Senate investigation alleges top African politicians and their families have evaded anti-money-laundering laws to bring hundreds of millions of dollars into the country. The Senate's permanent subcommittee on investigations, in a 330-page report detailing the transfer of funds suspected of being tainted by corruption, calls for tighter anti-money-laundering restrictions on banks and the expansion of the law to cover lawyers and financial professionals such as realtors. The committee will hold a hearing Thursday to seek responses from Treasury, State Department and immigration and customs-enforcement officials, as well as anti-money-laundering officials from Bank of America Corp. and the U.S. unit of HSBC Holdings PLC.
CNBC:
Barron’s:
NY Times:
The Business Insider:
- CHART OF THE DAY: See The Countries Short-Sellers Are Abusing.
- Financial Disaster Looms Larger As Los Angeles City Council Delays Budget Cuts For Another 30 Days.
Smart Money:
SeekingAlpha:
- Important financial metrics, such as the Sharpe Ratio, rely on the availability of a "risk free" interest rate as one of the variables. That is typically a very short-term Treasury. If the US losses its AAA credit rating -- it already has higher credit default swap rates than some other countries -- what becomes the new standard for the "risk free" rate"? We don't have an answer, but we know it will become an important question. We'd like to know what you think would become the new "risk free" rate, or how calculations that call for a "risk free" rate would be used in the absence of a rate that the consensus holds to be "risk free".
Rassmussen:
Politico:
- Rasmussen Reports released a poll Thursday showing GOP Rep. Mark Kirk ahead of Illinois Treasurer Alexi Giannoulias in the race for President Barack Obama's former Senate seat. Kirk leads Giannoulias by six points, 46 percent to 40 percent, in Rasmussen's first poll of the race since Tuesday's Senate primary elections. Ten percent said they were undecided.
Real Clear Politics:
The Detroit News:
NJ.com:
- More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report released Wednesday that marks a swift reversal of fortune for a state once considered the nation’s wealthiest. Conducted by the Center on Wealth and Philanthropy at Boston College, the report found wealthy households in New Jersey were leaving for other states — mainly Florida, Pennsylvania and New York — at a faster rate than they were being replaced. “The wealth is not being replaced,” said John Havens, who directed the study. “It’s above and beyond the general trend that is affecting the rest of the northeast.” “This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth,” said Dennis Bone, chairman of the New Jersey Chamber of Commerce and president of Verizon New Jersey. Wealthy residents are a key driver for everything from job creation and consumer spending to the real estate market and the state budget, said Jim Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. In New Jersey, the top 1 percent of taxpayers pay more than 40 percent of the state’s income tax, he said. “That’s probably why we have these massive income shortfalls in the state budget, especially this year,” he said. Until the tax structure is improved, he said, “we’ll probably see a continuation of the trend, until there are no more high-wealth individuals left.” Those who left were also more likely to be older and more educated, with jobs as entrepreneurs or in the finance and professional industries, the study found. Those replacing them tended to hold management or support jobs in the manufacturing industry. The study analyzed data from three main sources: The Federal Reserve’s Survey on Consumer Finances, the Census Bureau and the Internal Revenue Service. Experts pointed to a wealth of anecdotal evidence to support the numbers. Ken Hydock, a certified public accountant with Sobel and Company in Livingston, said in this 30-year-career he’s never seen so many of his wealthy clients leave for states like Florida, where property taxes are lower and there is no personal income or estate tax. Meanwhile, Gov. Chris Christie’s administration said the report is just another reminder of the difficult tasks ahead. “It’s the consequence that we’ve been talking about for so long, of the spending and taxing habits that we’ve all experienced,” said Mike Drewniak, a spokesman for Christie. “It’s the sort of thing that we feel the need to stop so we can get New Jersey back on a prosperous path.”
USAToday:
Reuters:
Financial Times:
- Portugal and Spain became focuses of concern on Thursday as contagion from Greece’s sovereign difficulties intensified. Credit default swaps were pushed to record highs, while yield spreads between 10-year German Bunds and the bonds of other indebted economies widened further. Greece’s 10-year bond initially steadied on Wednesday after the European Commission endorsed the country’s plans to reduce its debt. As Portugal and Spain both came under fire on Thursday however, the yield on the Greek note rose 6.1 basis points to 6.74 per cent as the price fell. The spread between Greece and the German 10-year Bund widened to 360bp, shy of its record wide of 421bp, while five-year credit default swaps widened 20bp to 410bp, meaning the cost of insuring €10m of Greek sovereign debt rose to €410,000 ($567,825) – off last week’s closing high of €422,500. “The singular concentration on Greece seems to be evolving into a ‘Club Med’ kaleidoscope,” said Sean Maloney at Nomura. “Market focus had moved initially to Portugal, but is also lining up the next domino: Spain. Small irregularities in fiscal or funding spheres are being picked up by the market and magnified in spread moves.” In Portugal, the yield on the 10-year note rose 12.1bp to 4.81 per cent and the spread over the 10-year Bund widened to as high as 175bp, before easing back to 158bp. Spain’s 10-year yield pushed as much as 5.8bp higher to 4.19 per cent, before settling back at 4.14 per cent. Spain’s CDS widened by 13bp to 147bp. The moves on debt markets, coming on the same day as the European Central Bank’s latest monetary policy meeting, undermined Europe’s equity markets, and ensured a weaker euro on currency markets. “There are still lot of uncertainties regarding the Greeks and other indebted European sovereigns over the deficit issue,” said Guillaume Tresca at Calyon. “One day, the issue seems to be contained and the next day the market goes into tail spin. With so many uncertainties, it makes it tough to expect anything else other than a choppy emerging market.”
Financial Post:
- The Buy American provisions, contained in the American Recovery and Reinvestment Act, prohibit foreign-produced iron, steel and other manufactured goods from being used in projects paid for through nearly US$800-billion of stimulus funding. Under the law, all those goods must be sourced through the United States. Because U.S. President Barack Obama cannot rely on Congress to pass legislation exempting Canada from Buy American provisions, sources had said a resolution would be structured so that the President could use his executive power to treat sectors of the Canadian economy as American by claiming supply chains are so integrated they cannot be separated. The concern in Canada was that Buy American might be extended to all state and city level government procurement. At a conference in Ottawa organized by the Canadian Manufacturers & Exporters, firm owners expressed concern that, unless Buy American was dealt with quickly, new stimulus-based initiatives – such as a White House bill aimed at job creation – would include similar protectionist measures.
Merhr:
- China is Iran’s largest trade partner, the head of the Iran-China Chamber of Commerce, Asadollah Asgaroladi said. Tehran-Beijing’s trade volume increase from $400 million in 1994 to $29 billion in 2008, Asgaroladi said. Chinese companies are to develop Iran’s railway system and assist the Persian Gulf sate in its mining and building industries.
Style Underperformer:
Small-Cap Growth (-3.22%)
Sector Underperformers:
Coal (-6.61%), Steel (-5.81%) and Gold (-5.73%)
Stocks Falling on Unusual Volume:
IVN, TIE, STD, SGY, GDP, BCS, VIP, MBT, PBR, REP, AMAG, RNOW, MSTR, CTRN, PENN, BBBB, CNQR, AVAV, NETL, FEIC, NILE, ECOL, POWI, ITMN, CME, GLNG, PSSI, BLKB, CAVM, PNRA, EWN, EWK, EWQ, MA, SPH, EWP, CRR, STD, FEU and BKD
Stocks With Unusual Put Option Activity:
1) CMCSA 2) WHR 3) MA 4) TM 5) SUN
Style Outperformer:
Large-Cap Growth (-1.79%)
Sector Outperformers:
Telecom (-1.07%), Internet (-1.13%) and HMOs (-1.22%)
Stocks Rising on Unusual Volume:
HOT, WSH, VOD, OTEX, MKSI, OPNT, AIPC, PLCE, UIS and ENS
Stocks With Unusual Call Option Activity:
1) GFI 2) AMAG 3) MA 4) M 5) HOT
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