Evening Headlines
Bloomberg:
- Spain
at 5.4% Risks Debt Snowball as Slump Deepens: Euro Credit. Spain's
10-year bond yields at 5.4% are too high for the nation to curtail its
debts as a deepening recession thwarts attempts to rein in the euro
area's second-largest budget deficit. "There will be a snowball effect
of the debt because the rate isn't low enough to avoid deteriorating" in
the debt-to-gdp ratio, said Axel Botte, a Paris-based strategist at
Natixis Asset Management, which overseas $734 billion. "Spain is
probably going to miss its deficit targets. Yields are still a bit
high."
- Pimco Sees Spanish Bond Risk Rising on Rajoy Graft Allegations. Prime Minister
Mariano Rajoy’s battle to rebut corruption allegations is adding to the
risk of holding Spanish government debt, said Andrew Bosomworth,
managing director at Pacific Investment Management Co. “There is uncertainty as to the continuation of the
government’s policies and its leadership,” said Bosomworth in a
phone interview yesterday. “At least some questions remain
unanswered. That leads to uncertainty in the market.” The risk premium on Spanish 10-year debt jumped 29 basis
points to 382 yesterday, the biggest one-day gain since
September, while the country’s benchmark stock index, the
Ibex-35, dropped 3.8 percent to the lowest close since Dec. 10.
- German Push to Accelerate Bank Bail-Ins Joined by Dutch, Finns. Germany,
the Netherlands and Finland want to speed up European Union plans to
force losses on senior bondholders of failing banks, three European
government officials said. The three AAA rated euro-area states last
week called for regulators across the EU to gain so-called bail-in
powers as soon as 2015, rather than in 2018 as currently proposed, said
the officials, who declined to be identified because the talks are
private. The European Central Bank has warned that 2018 is “far too far
away” for the new rules, which seek to insulate
taxpayers and the euro area’s firewall fund from rescue costs.
- Euro Weakens on Italy, Spain Uncertainty; Aussie Drops After RBA. The euro fell against the yen,
following yesterday’s drop which was the biggest since June,
amid corruption allegations against Spanish Premier Mariano
Rajoy and uncertainty ahead of Italian elections this month. “The
risks are to the downside for euro and a correction back towards $1.34
seems very logical, given the speed with which we’ve moved so far,” said
Robert Rennie, the chief currency strategist at Westpac Banking Corp.
(WBC) in Sydney. Purchasing euro-zone assets becomes difficult “once you
start
to become concerned about the outlook for European politics.”
- Asian Stocks Fall on Europe Concerns. Asian
stocks fell, dragging the regional benchmark equities index down from
an 18-month high, amid renewed concern about Europe’s debt crisis.
Konica Minolta Holdings Inc. (4902), a Japanese maker of imaging
equipment that gets 28 percent of its sales in Europe, dropped 2.2
percent. Macquarie Group Ltd. (MQG) lost 3.2 percent amid concern
full-year earnings may trail the Australian lender’s forecast. China
Petroleum & Chemical Corp. fell 7 percent in Hong Kong after Asia’s
biggest refiner said it plans to sell shares worth HK$24 billion ($3.1
billion) at 9.5 percent below yesterday’s closing price. The MSCI Asia
Pacific Index (MXAP) slid 0.7 percent to 132.72 as of 11:38 a.m. in Hong
Kong, with almost four stocks falling for each that rose. “It’s a return of worries about Europe,” said Shane Oliver, Sydney-based head of strategy at AMP Capital Investors
Ltd., which has about $126 billion under management. “The
market got very stretched and was due for a pullback, it was
just a question of what the trigger would be. We could still see
some further weakness this month.”
- World May Face ‘Perfect Storm’ on Capital Flows, Carstens Says.
A “perfect storm” may be forming in
the world economy as signs of a recovery spur capital flows to emerging
markets and some advanced nations that may lead to asset bubbles, Banco
de Mexico Governor Agustin Carstens said. “Risk appetite among
investors has returned and the search for yield is in full force,”
Carstens said in a speech in Singapore today. “The mood swing has been
so strong that some fears have been expressed about financial markets
being too optimistic, causing mispricing in some asset classes. Concern
of
asset-price bubbles fed by credit booms are starting to appear
in some economies.”
- Bank of America's(BAC) Hedge-Fund
Clients Boost Leverage in Asia. Hedge-fund clients of Bank of America
Corp.'s Asian prime brokerage unit have increased their leverage since
October as the market outlook improved, according to the second-largest
U.S. bank by assets. Gross leverage, which tracks hedge funds' long and
short positions as a multiple of the cash they get after selling all
securities and repaying borrowings, have increased since late October
through Jan. 17, said Ben Williams, Hong Kong-based head of Asia-Pacific
financing sales in the bank's Merrill Lynch unit. "This move has been
more significant than other years," Williams said in an interview.
- House Leaders Weigh U.S. Spending Bill Below $1 Trillion. Republican leaders in the U.S. House
of Representatives are considering a stopgap measure to fund the
government for the rest of the fiscal year that could drop
spending levels below $1 trillion. The measure, known as a continuing resolution, would fund
the government through Sept. 30 at about $974 billion, well
below the current level of $1.043 trillion, Representative James Lankford, an Oklahoma Republican, said yesterday. “It’s a serious cut,” Lankford, a member of the House
Budget Committee said in an interview. “That’s significant.”
Wall Street Journal:
- Turmoil Returns to Europe Markets. Scandals in Spain and Italy Rock Euro as Well as Stocks, Bonds in Southern Section of Continent.
The confluence of a political scandal in Spain and a banking scandal
in Italy sparked a flight from bonds and stocks in Europe's south and
pummeled the euro—a market move reminiscent of the tough days of the
euro crisis that the region's leaders thought were behind them. The
Italian stock market fell 4.5%, beaten down by struggling banks.
Spanish 10-year bonds slumped to a yield of 5.42%, their weakest level
since mid-December. The euro lost more than a penny against the dollar
to $1.3514 late Monday. Most worrying, money moved in a wave from weak European countries to
strong: Bonds of Spain, Italy, Greece, Ireland and Portugal all
weakened. Those of Austria, Germany, Finland and the Netherlands
strengthened.
- Chinese Firms Shrug at Rising Debt. Chen Qiang runs a Chinese shipbuilding company that
expects to post a net loss for 2012 and whose $4.5 billion in debt is
six times what it was three years ago. In the first half of last year it received only two new orders. Mr. Chen is unfazed.
The chief executive of China Rongsheng Heavy Industries Group Holdings
Ltd. 1101.HK -3.40% plans to maintain staffing levels and even start
hiring globally as part of efforts to win orders for ships used in
offshore energy drilling—a new business that he says could generate half
of the
company's new ship orders within three to five years. As for its
heavy debt load, Mr. Chen is confident the company's state-run lenders
are satisfied with the firm's health. "The government supports us
because they see a bright future," he explains.
- EU Targets Money Laundering. Tough rules to combat dirty cash and terrorist money in the European
Union, including scrutiny of online gambling and the setting up of
trusts, will be set out in a European Commission proposal Tuesday.
The draft legislation, seen by the Wall Street Journal, would beef up
EU rules targeting money laundering, which date back to 2005. If
adopted, first by the European Parliament and then by individual
countries in the EU, the proposed legislation would make online-gambling
sites keep records about the identities of individuals betting more
than €2,000, or about $2,700. Similar rules already apply to casinos.
- Crime That No Longer Pays. The recent surge in cybercrime comes with a silver lining: Bank
robberies are plummeting, as criminals seem to wise up to the fact that
heists just don't pay like they used to. Bank holdups have been
nearly cut in half over the past decade—to 5.1 robberies per 100 U.S.
banks in 2011. Though the nationwide crime rate is dropping, the decline
in bank robberies far exceeds the decline in other crimes, according to
Federal Bureau of Investigation data.
- Tangle of Ties Binds SEC's Top Ranks. Enforcement cases at the Securities and Exchange Commission go nowhere
unless approved by a majority of the agency's commissioners. But
conflicts for the possible new chairman and other top officials could
make it harder to get to "yes."
CNBC:
Zero Hedge:
Business Insider:
Washington Post:
- Senators demand secret memos on targeted killing. Eleven senators sent a letter to President Obama on Monday demanding
access to secret legal memos outlining the administration’s case for the
targeted killing of U.S. citizens in counterterrorism operations
overseas. The letter from eight Democrats and three Republicans contained
the most forceful warning to date that lawmakers were considering
blocking Obama’s nominees to run the CIA and Pentagon unless the memos
are turned over.
CNN:
- Texas to California businesses: Move here! Perry has launched a high-profile battle for California companies,
running radio ads in California touting the Lone Star State's low taxes
and favorable business climate. The ads will be heard in San Francisco,
Sacramento, Los Angeles, San Diego and the Inland Empire area east of
Los Angeles.
National Review:
Reuters:
- Yum(YUM) stumbles badly in China, warns on profit. KFC parent Yum Brands Inc warned on Monday that it expects 2013
earnings to shrink rather than grow as it struggles to manage a food
safety scare in China, and sees no return to growth in restaurant sales
there until the fourth quarter. Yum shares fell 5.6
percent in after-hours trading, as Wall Street analysts and investors
digested the disappointing news from the company that is widely seen as a
model for how to do business in the complex Chinese market. "This is going to take all the
experts they have in public relations to stem the tide. I don't think
anyone saw this coming," Edward Jones analyst Jack Russo said. Yum reported a 6 percent drop in fourth-quarter sales at
established restaurants in China due to "adverse publicity" regarding
chemical residue found in some of its chicken supply. Its China business continued to suffer in January, when same-store
sales dropped 37 percent, including a 41 percent fall for KFC and a 15
percent decline for Pizza Hut Casual Dining. Yum
expects China's same-store sales to be down 25 percent for the first
quarter, which includes only the months of January and February.
- Baidu(BIDU) revenue and profit growth rate slow in fourth quarter. Baidu Inc , China's largest search engine company, reported its slowest
profit growth since 2009, as competition in the sector heats up and more
users switch to mobile search. Shares of Baidu were down 6.7 percent at $100.01 in after hours trading on Monday. Baidu had previously warned of a
soft fourth quarter as China's economy slows. Industry analysts warn
that rapidly changing user habits and an increasingly crowded search
market could weigh on revenue in the near future.
- Knight Capital Group(KCG) to cut workforce by 5 pct. Knight Capital Group, which
recently agreed to be bought for $1.4 billion by Getco Holding
Co, will lay off 5 percent of its global workforce as part of
efforts to restructure the automated trading firm, according to
a regulatory filing released on Monday.
Financial Times:
- Brace for a stock market accident. Profits and leverage are locked in a deadly embrace. Leverage
is hence the fly in the ointment, begging the obvious question: when
does the deleveraging take place? Answering this question is tantamount
to timing the next major bear market. It is, of course, futile to
predict a date, but as economist Herbert Stein used to say, if something
cannot go on for ever, it will stop. It is increasingly obvious that governments will take no active step
towards deleveraging unless they are under the gun. But there are
institutions and mechanisms that will trigger deleveraging, namely:
Basel III, the bond market, default and, rarely, courageous politicians.
Inflation can also help delever, except in economies where social
entitlements are inflation-indexed. In the short term, it is clear that central banks need to entertain
the illusion of viable stock market valuations by pulling rabbits from a
hat. But as high-powered money reaches ever higher levels, the
probability of accidents looms large.
- Online sales threat to American malls. Credit
market investors are falling out of love with US shopping malls as up
to 15 per cent of the country’s suburban retail centres are forecast to
close over the next five years in the face of online competition.
- ECB told to double its manpower. The European Central Bank will need to more than double its manpower
and hire around 2,000 bank supervision staff to put the eurozone's
banking union into practice, according to a confidential study for the
ECB. The consultancy report,
commissioned by Mario Draghi and the ECB executive board and submitted
last month, recommends a rapid build-up so Frankfurt has the resources
and clout to fulfil properly its supervision role and protect its
reputation.
Xinhua Weibo:
- China detained a woman with multiple names who owned 41 Beijing properties on Feb. 4, citing local police. The woman is suspected of forging official documents and seals, police in Shenmu city in the northern Chinese province of Shaanxi said.
- China
Banks Should Control Credit Size in January. China's banks should
control credit size in January to "maintain stable lending," according to a commentary on the microblog.
Evening Recommendations
CSFB:
- Rated (ULTA) Outperform, target $120.
- Rated (VSI) Outperform, target $75.
Night Trading
- Asian equity indices are -1.5% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 120.5 +7.5 basis points.
- Asia Pacific Sovereign CDS Index 92.0 +3.75 basis points.
- NASDAQ 100 futures +.08%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- The ISM Non-Manufacturing Composite for January is estimated to fall to 55.0 versus 55.7 in December.
Upcoming Splits
Other Potential Market Movers
- The Eurozone Services PMI data,
Eurozone retail sales data, weekly retail sales reports, IBD/TIPP
Economic Optimism Index for February, Stifel Nicolaus Tech/Telecom
Conference, Canadian Oil Sands Summit and the CSFB Energy Summit could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 125.0 +15.7%
- Total Put/Call 1.05 +16.7%
Credit Investor Angst:
- North American Investment Grade CDS Index 89.19 +3.5%
- European Financial Sector CDS Index 159.0 +9.4%
- Western Europe Sovereign Debt CDS Index 104.9 +2.5%
- Emerging Market CDS Index 231.73 +2.0%
- 2-Year Swap Spread 16.75 +.75 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -17.25 -3.0 bps
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- China Import Iron Ore Spot $154.20/Metric Tonne +.65%
- Citi US Economic Surprise Index -29.3 -1.2 points
- 10-Year TIPS Spread 2.56 unch.
Overseas Futures:
- Nikkei Futures: Indicating -104 open in Japan
- DAX Futures: Indicating +1 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech/medical/retail/biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- European Stocks Retreat Amid Turmoil in Spain, Italy. European
stocks tumbled the most in more than three months as Spanish and
Italian banks retreated with the nations’ government bonds amid signs of
returning political uncertainty in the region’s weakest economies.
Banco Santander SA (SAN), Spain’s largest bank, sank the most in six
months as Prime Minister Mariano Rajoy denied corruption allegations.
UniCredit SpA, the biggest lender in Italy, posted the largest drop
since June as former premier Silvio Berlusconi gained in opinion polls
before elections this month. Julius Baer Group Ltd. (BAER) fell 3.1
percent after the wealth manager reported declining revenue margins. The
Stoxx Europe 600 Index (SXXP) retreated 1.5 percent to 283.9 at the
close of trading, the largest decline since Oct. 23. “Spanish yields
have blown up in the past hour to their
highest levels since December as concerns about the Spanish government
mount,” said Ioan Smith, a strategist at Knight Capital Europe Ltd. in
London. “In addition to the growing corruption scandal in Spanish
politics, the Italian elections towards the end of the month are also a
concern.”
- Commerzbank Reports Quarterly Loss of 720 Million-Euro. Commerzbank AG (CBK), Germany’s second- largest lender, posted its biggest quarterly loss in three years
after taking charges related to the sale of Bank Forum and a tax
asset writedown. The fourth-quarter loss of 720 million euros ($976 million)
compares with a profit of 320 million euros in the year-earlier
period, the Frankfurt-based bank said today in a statement. Bank
Forum charges totaled 185 million euros, while Commerzbank wrote
down 560 million euros on deferred tax accruals.
- Euro Weakens as Spanish, Italian Yields Rise on Political. The euro fell the most in two weeks
against the dollar as Italian and Spanish bonds slumped amid
political turmoil in the euro-area’s third- and fourth-largest
economies, damping demand for the shared currency. The 17-nation euro
dropped versus the majority of its 16 major peers as Spanish Prime
Minister Mariano Rajoy faced calls to resign after newspaper reports
alleged he accepted illegal cash payments. A poll showed former Italy
Premier Silvio Berlusconi closed the gap on front-runner Pier Luigi
Bersani even as he appeals a four-year prison sentence for tax fraud.
- Australian Homebuilders Can’t Give Them Away: Mortgages. Australian housing developers are
resorting to discounts, gift cards and help with mortgage
payments to compete for dwindling buyers as home sales slow.
Stockland (SGP), Australia’s biggest listed home builder, is giving
rebates and gift cards of as much as A$30,000 ($31,300) at projects in
Victoria, Queensland and New South Wales states. Devine Ltd. (DVN) is
matching deposits in South Australia and taking over mortgage payments
for as long as a year in Melbourne. Peet Ltd. (PPC) has been offering
discounts of as much as A$50,000 in
Western Australia, Queensland and Victoria.
- Spring Airlines May Halt Flights to Japan on China Protests. Spring
Airlines Co., China’s biggest carrier outside government control, is
considering ending flights to Japan after a territorial dispute between
the Asian countries last year emptied planes and caused losses.
Spring hasn’t decided on the 12 weekly flights between China and Japan,
Chairman Wang Zhenghua said in an interview in Singapore, adding his
“Japanese friends” are asking him to continue. Shanghai-based Spring has put on hold plans to add more Japan services as it’s filling less than 50 percent of the
seats on those flights, compared with an average 92 percent
occupancy on other sectors.
Wall Street Journal:
- U.S., States Plan to File Civil Charges Against S&P. The Justice Department and state prosecutors intend to file civil
charges alleging wrongdoing by Standard & Poor's Ratings Services in
its rating of mortgage bonds before the financial crisis erupted in 2008, according to people familiar with the matter.
The allegations likely would be made in lawsuits by federal and state
officials that are expected to be filed as soon as this week, the people
said. The alleged wrongdoing by S&P, a unit of McGraw-Hill Cos.,
MHP -6.56% centers on allegations related to the model used by S&P
to rate mortgage bonds. The likely move by U.S. officials would be the
first federal enforcement
action against a credit-rating firm for alleged illegal behavior related
to the crisis. Several state attorneys general are expected to join the
case, making it one of the highest-profile and widest-ranging
enforcement crisis-era crackdowns.
- 'Volcker Rule,' EU-Style. Germany, U.K. Move to Tackle Proprietary Trading by Banks.
Two of Europe's biggest countries moved Monday to beef up laws aimed
at solving the problem of banks that are considered too big to fail, but
the initiatives again highlighted big differences between European
countries' strategies. In the U.K., Chancellor of the Exchequer George Osborne bowed to
pressure from a parliamentary commission and said he would give
regulators powers to break up banks if they try to circumvent a new law
forcing them to separate their retail and commercial banking activities
from their riskier, market-based businesses.
MarketWatch.com:
- Banks keep lending standards tight as demand rises. Banks have kept their lending standards fairly
tight while demand for business loans, mortgages and car loans has
picked up, according to a survey released by the Federal Reserve on
Monday. The January senior loan officer survey found that “generally modest”
fractions of lenders made it easier to get loans over the last three
months. The survey was conducted from officers of 68 domestic banks and
22 foreign ones operating state-side.
CNBC:
- Question of Aiding Cyprus Places Germany in a Bind. When German officials said they would save the euro zone at all costs,
the prospect of bailing out Russian oligarchs was not what they had in
mind. But eight months before a crucial election in Germany, Chancellor Angela
Merkel is facing charges that Europe is doing just that as the tiny
island of Cyprus, a haven for Russian cash, threatens to become the next
point of contention in the euro crisis.
- Obama Questions 'Carried Interest' Tax Break. President Barack Obama said on Sunday more tax revenue would be needed
to reduce the U.S. deficit and signaled he would push hard to get rid of
loopholes such as the "carried interest" tax break enjoyed by private
equity and hedge fund managers.
- Consumers Taking Financial Hit From Rising Fuel Prices. Consumers have been spending more on gasoline than they have in nearly three decades. With
pump prices at their highest level on record for this time of year, the
stage is set for an even greater climb in gasoline prices and
expenditures than in 2012. Retail gasoline prices have surged 17 cents
in a week to top $3.50 a gallon on average, posting the highest prices
on record for the beginning of February. (Read More: Gasoline at Highest Price Ever for This Time of Year.)
Reuters:
- Suicide bomber kills 22 in attack on Iraq militia. A suicide bomber
attacked a government-backed militia in Iraq on Monday, killing at least
22 people in an apparent attempt by Sunni insurgents to provoke unrest
against Shi'ite Prime Minister Nuri al-Maliki. Dressed in civilian clothes,
the bomber infiltrated a meeting of Sahwa tribal fighters and detonated
his explosives as they picked up salaries in Taji, a town 20 km (12
miles) north of the capital Baghdad, police said. It
was the seventh suicide bombing in a month in Iraq, indicating
insurgents are intent on stepping up violence a year after U.S. troops
pulled out of the country, where Shi'ite, Sunni and ethnic Kurdish
factions still struggle over how to share power.
- Fed's Fisher says he would support tapering QE3 when time comes. A top U.S. Federal Reserve
official critical of the central bank's policy of monetary
easing on Monday said he would support tapering, rather than
stopping, the Fed's current bond-buying program once the labor
market improves. St. Louis Federal Reserve President James Bullard last week
advocated such an approach.
Telegraph:
Ansa:
- Italy Prosecutor Probing 5 Foreign Banks on Euribor. The prosecutor in Trani, Italy is probing five banks, seven traders, citing judicial sources.
Style Underperformer:
Sector Underperformers:
- 1) Steel -2.07% 2) Gaming -2.01% 3) Software -1.73%
Stocks Falling on Unusual Volume:
- SNP, VRTU, NXPI, CYOU, BUD, SIMO, RCL, ANW, PT, TI, BAP, IRE, E, TOT, TV, SKYW, ADTN, BVN, WRLS, MCY, CPSI, HLF, INGR, VVI, FTE, SOHU, HTSI, NAP, PRO, PTR, EDW, DRIV, AV, UTEK, CODE, GCI and THO
Stocks With Unusual Put Option Activity:
- 1) RCL 2) ADM 3) YUM 4) EWG 5) HOV
Stocks With Most Negative News Mentions:
- 1) NYT 2) CAB 3) TIF 4) MRK 5) BA
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Networking +.91% 2) Education +.75% 3) Gold & Silver +.39%
Stocks Rising on Unusual Volume:
- APKT, PC, HMY, GOLD, BRO, CYBX, HUM, ALLT and DECK
Stocks With Unusual Call Option Activity:
- 1) MMR 2) APKT 3) HUM 4) UUP 5) CIM
Stocks With Most Positive News Mentions:
- 1) UTX 2) UTHR 3) SOHU 4) TSN 5) CLX
Charts:
Weekend Headlines
Bloomberg:
- Euro Tremors Risk Market Respite on Spain-Italy, Banks. Europe’s political tremors risk spoiling the region’s market calm,
with corruption allegations buffeting Spanish Premier Mariano Rajoy and
Italy’s Silvio Berlusconi narrowing the front-runner’s lead as elections
loom. Rajoy, facing opposition calls to resign amid contested
reports about illegal payments, travels to Berlin today as euro- area
leaders schedule a flurry of meetings this week ahead of a Feb. 7-8
European Union summit. Last week’s nationalization of the Netherlands’
fourth-largest bank and a 2.17 billion-euro ($3 billion) loss at
Deutsche Bank AG underscore the fragile economic health in the region. “The
euro crisis is not over,” German Finance Minister Wolfgang Schaeuble
said Feb. 1 at the Munich Security Conference where fellow panelists
included Deutsche Bank AG co-Chief Executive Officer Anshu Jain. Still,
“we’re in a much better position than we were a year ago,” the minister
said. A sluggish economy, uncertainty over the outcome of this
month’s Italian election and Rajoy’s new troubles threaten to curtail
the time won by politicians with the central-bank bond buying.
- Spain’s Rajoy Fails to Quell Graft Criticism Amid Calls to Quit.
Spanish Prime Minister Mariano Rajoy’s assurance that allegations of
illegal payments are false failed to contain criticism, with the
opposition demanding he step down to restore faith in the political
class. “Rajoy should resign to make way for another prime minister who can re-establish the strength, credibility and
stability that Spain needs,” opposition leader Alfredo Perez Rubalcaba said during a televised press conference yesterday, a
day after Rajoy had faced the public and vowed to carry on.
“Spain needs a strong, credible, and trustworthy government.”
- Europe’s Banks Urged to Cut Down All Capital-Heavy Units. The president of the European Banking
Federation is urging lenders in the region to reinvent
themselves and discard the areas of their business that place
too large a capital burden on their balance sheets. “Banks need to be more efficient, that’s very simple,” EBF President Christian Clausen said in an interview in
Stockholm last week. “Everything that can be done will be done
in terms of moving business.”
- Netanyahu Says Israel Must Stop a Nuclear-Armed Iran. Israeli Prime Minister Benjamin Netanyahu, nominated to form a coalition after winning the most
Knesset seats in elections, said stopping Iran from building
nuclear arms would be the government’s foremost challenge. “We have many missions to deal with,” Netanyahu said in
Jerusalem after being chosen by President Shimon Peres. “But
first we must maintain security, and the first task is to stop
Iran from arming itself with nuclear weapons.”
- Hong Kong’s Debt Load Adds to Property Market Risks, HKMA Says. Hong Kong household debt levels close
to record highs pose a risk as officials seek to limit property
market overheating, said Norman Chan, the head of the city’s
central bank. Debt is “near historic high levels,” Chan, the chief
executive of the Hong Kong Monetary Authority, told lawmakers
today, citing ratios of 58 percent to 59 percent of gross
domestic product in the third and fourth quarters. In a housing
and economic downturn, repayment may become more difficult, the
official said. Overheating in the housing market is the biggest risk to
financial stability, Chan said, echoing a warning in December
from the International Monetary Fund. Home prices have doubled
since the start of 2009, according to a weekly index compiled by
Centaline Property Agency Ltd.
- Fed’s Bullard Urges Cutting QE Pace if Data Stay Strong. Federal Reserve Bank of St. Louis
President James Bullard said he expects U.S. growth to gain
enough momentum to let the central bank reduce the pace of asset
purchases as early as the middle of the year. “We should think about tapering or adjusting the
program,” Bullard said yesterday in an interview in Washington.
“If you get some good data for a couple of months, maybe you’d
say, ‘Okay, we go back to $75 billion per month instead of $85
billion or something like that.’”
- GM(GM) Plans 10-Weeks of Pickup Downtime as Inventories Rise. General
Motors Co. (GM), which saw pickup inventories rise 24 percent last
month, will take out 10 weeks of truck production as it prepares to
introduce a redesigned Chevrolet Silverado and GMC Sierra in the second
quarter. After finishing 2012 with a pickup inventory almost in line
with targets, GM yesterday reported that the number of trucks it has on
hand rose to a 117-day supply at the end of January from 80 a month
earlier. The 10 down weeks are a total for GM’s three pickup plants to
allow for the changeover, Jim Cain, a company
spokesman, said yesterday in a telephone interview.
Wall Street Journal:
- Reid Says New Tax Revenue Vital in a Budget Deal.
Senate Majority Leader Harry Reid drew a red line in the budget
showdown with Republicans, saying Democrats will demand additional
revenue as part of any deal to alter
the mandatory spending cuts set to hit at the beginning of next month. The comments, made in an interview Sunday with ABC's "This Week," come
as Senate Democrats weigh options for averting at least some of the
March 1 cuts, known in Washington as the sequester. One Democratic
proposal would seek to offset some of the roughly $85 billion in cuts
this year with a combination of tax increases and spending cuts.
- Low Rates Force Companies to Pour Cash Into Pensions. Ford Motor Co.(F)
expects to spend $5 billion this year shoring up its pension funds,
almost as much as the auto maker spent last year building plants, buying
equipment and developing new cars. The nation's second-largest auto
maker is one of a who's who of U.S. companies pouring cash into pension
plans now being battered by record low interest rates. Verizon
Communications Inc.(VZ) contributed $1.7 billion to its pension plan in
the fourth quarter and—highlighting companies' sensitivity to this
issue—Boeing Co.(BA) now reports "core earnings" to separate out pension
expenses.
- Bondholders Have a New Worry: LBOs. Corporate-bond investors are facing a new threat: private-equity
firms launching debt-laden takeovers of companies in their portfolios. With buyouts back in vogue, fund managers specializing in highly rated,
or investment-grade, bonds have been scrambling to avoid companies that
might fall prey to private equity.
- Tech Titans Clash in 'Cloud'. Google Inc.(GOOG), Microsoft Corp.(MSFT) and Amazon.com Inc.(AMZN) have fought each other for dominance in mobile gadgets and Web
searches. The latest front in their war is invisible: computing
horsepower. Microsoft and Google are increasingly trying to unseat
Amazon in the lucrative business of renting out computing storage and
number-crunching to thousands of companies.
- Syria Rebels Blame Regime for Civilian Massacre. Syrian opposition activists and rebels said dozens of civilians were
killed and wounded on Sunday in a missile attack by regime forces
against a rebel-controlled neighborhood in the war-ravaged city of
Aleppo. Video footage posted by activists on the Internet and purported to be
of the attack's aftermath showed several residential buildings in a
neighborhood identified as Ansari reduced to heaps of rubble and
engulfed in smoke. Rescuers, many of them appearing to be rebel fighters by their dress
and weapons, could be seen on the video frantically pulling out the dead
and wounded, including children.
- U.K. to Give Regulators Powers to Split Up Banks.
U.K. Treasury chief George Osborne on Monday will announce new powers
for regulators to split up banks that flout rules designed to
ring-fence retail banking from riskier investment-banking activity. In a wide-ranging speech on banking in Bournemouth, England, Mr.
Osborne is expected to say the new powers are needed so that taxpayers
will never again be on the hook when banks fail, as they were during the
financial crisis.
Fox News:
CNBC:
- Gasoline at Highest Price Ever for This Time of Year. U.S.
drivers are now paying more to fill up their gas tanks than they ever
have at this time of year. The national average price of retail gasoline
posted its biggest one-day increase in 23 months on Friday, rising four
cents to $3.46 a gallon, according to AAA. The average price has risen
13 cents -- a 4 percent increase -- in the past week.
Zero Hedge:
Business Insider:
IBD:
Reuters:
Financial Times:
- Foxconn plans Chinese union vote. Foxconn, the contract manufacturer whose biggest customer is Apple, is
preparing genuinely representative labour union elections in its
factories in China for the first time, a powerful sign of the changes in
the workshop of the world demanded by an increasingly restive
workforce.
Telegraph:
MailOnline:
- Tory Party suffers backlash on plans to legalise gay marriage as members resign in mass protest. David Cameron is facing a backlash over his support for gay marriage from within his own party as members desert Tory ranks in droves, it emerged today. Large
numbers of activists are resigning or refusing to renew their
membership in protest at the Government's plans to equalise marriage,
MPs say. It is claimed those quitting range from a handful in some seats to dozens in others and more than a hundred in some.
WirtschaftsWoche:
- Germany in Talks to Send Nuclear Waste to U.S. The German government is negotiating with the American government to send radioactive waste to the U.S., citing a statement fro a German research ministry spokesperson.
Weekend Recommendations
Barron's:
- Bullish commentary on (WMT), (SNDK) and (GLF).
- Bearish commentary on (HES).
Night Trading
- Asian indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 113.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 88.25 -1.75 basis points.
- NASDAQ 100 futures -.11%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:45 am EST
- ISM New York for January is estimated to fall to 52.0 versus 54.3 in December.
10:00 am EST
- Factory Orders for December are estimated to rise +2.3% versus unch. in November.
Upcoming Splits
Other Potential Market Movers
- The Eurozone PPI data, CBO budget review, China HSBC Services PMI and the RBA rate decision could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and consumer shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the week.
