Netanyahu Says Islamists May Exploit Egyptian 'Chaos'. Israeli Prime Minister Benjamin Netanyahu said he’s concerned that radical Islamic groups will seek to take advantage of the mass demonstrations rocking Egypt in order to seize control of the country. “The sources of the instability, the central source, does not stem from radical Islam, not in Tunisia or Egypt,” Netanyahu said today in Jerusalem at a joint press conference with German Chancellor Angela Merkel. “But it is true that in a situation of chaos, an organized Islamist entity can take over a country. It’s happened in Iran, and at other places as well.” Israel is watching closely as the protests against Egyptian President Hosni Mubarak show no sign of waning.
Fitch's Fox Tells Sky Egypt Turmoil Could Deteriorate Further. Fitch Ratings Ltd.’s Senior Director Richard Fox told Sky News in an interview the longer the political turmoil in Egypt goes on, the more likely it is that the country’s economy is damaged, which could affect its ability to pay its debts. Today, the ratings service downgraded Egypt’s outlook to “negative” from “stable” because of the uncertainty caused by the political protests in the country’s main cities.
China's Housing Market Nears U.S., Japan Bubble Levels: Chart of the Day. China’s property market may be heading into a bubble as the economy’s reliance on real estate reaches a level close to the housing peaks in the U.S. and Japan, according to Citigroup Inc. The CHART OF THE DAY shows investment in residential property accounted for 6.1 percent of China’s gross domestic product last year, the same level as the record in the U.S. in 2005 that was followed by the subprime crisis, said Shen Minggao, Citigroup’s China research head. It’s also about 2 percentage points away from Japan’s 1970s housing boom, he said. “China’s property market is entering into a bubble stage,” Shen said in a phone interview. “It’s evident that property prices are no longer sustainable once the residential investments achieve above 8 percent of nominal GDP, and China may not be an exception.” A 10 percent drop in China’s property investment translates to a 1 percentage point decline in nominal GDP, Shen said. Adding investments indirectly related to the real estate industry, nominal GDP will fall 2 percentage points to 2.5 percentage points, he said. China’s property prices will fluctuate within a 10 percent range this year, Shen said, adding that the country “may only avoid the bubble burst if current property tightening is effective.”
East Europe Slows Rate Increases as Russia Shows Growth Concern. Central banks in eastern Europe, the region hardest hit by the global financial crisis, will raise interest rates less than other emerging markets as policy makers signal greater concern about growth, economists said.
Copper, Tin Surge to Records on Outlook for Supply Shortages. Copper and tin jumped to records as as a drop in global stockpiles signaled demand is improving amid expectations for a shortage in supplies. Nickel climbed to a nine-month high. Three-month copper on the London Metal Exchange gained as much as 0.8 percent to $9,823.50 a metric ton, surpassing the previous peak of $9,782 reached yesterday, and was at $9,816 at 9:44 a.m. in Singapore. The metal capped a seventh monthly gain in January, the best run since the eight months to August 2009.
Europe has been buying crude from Iran at a record rate, even as it imposes sanctions against the Middle East country for its nuclear program. Iranian crude imports by developed economies in Europe jumped 39% in the first nine months of last year compared with 2009's total, according to the IEA. Purchases were 1 million barrels a day in the third quarter, the highest quarterly average since at least 2005.
Bank of America(BAC) Gives Moynihan $9.05 Million 2010 Stock Bonus. Bank of America Corp. gave Chief Executive Officer Brian T. Moynihan a $9.05 million bonus for his first year as leader of the largest U.S. lender by assets, less than the company awarded to its investment banking head. Moynihan, 51, received the bonus in restricted stock, the Charlotte, North-Carolina based bank said today in a regulatory filing. Thomas K. Montag, who leads global banking and markets, got $14.3 million in restricted stock and $900,000 in cash awards. Bank of America earned $6.3 billion from Montag’s division last year while the parent company was unprofitable as Moynihan took $12.4 billion in impairments at operations purchased by his predecessor, Kenneth D. Lewis. The bank’s shares “did underperform” in 2010, when they dropped 11 percent amid losses tied to repurchasing faulty mortgages from investors including Fannie Mae and Freddie Mac, Moynihan told analysts Jan. 21.
One in Five Mortgages Default Against After Modification. One in five U.S. homeowners whose loans were modified under a federal government program to help reduce foreclosures were at least 60 days late in their payments a year after their mortgages were reworked. The re-default rate for the Making Home Affordable Program averaged 20.4 percent after 12 months, 15.9 percent after nine months, 10.7 percent after six months and 4.6 percent after three months, according to a report released today by the Treasury Department. The program has been criticized by housing advocates, lawmakers and watchdog groups.
U.S. Issues Travel Warning on U.K. Public Transport. The U.S. State Department issued a travel warning for the U.K. today, citing “the continuing high level of terrorist threat.” The alert followed the State Department’s release today of an updated “worldwide caution” to add new information about the “continuing threat” of terrorist attacks against U.S. citizens and interests throughout the world. The caution says that current information “suggests” that al-Qaeda and its affiliates continue to plan attacks against U.S. interests in multiple regions, including Europe, Asia, Africa and the Middle East. Attacks could come in the form of suicide bombs, hijackings, bombings and assassinations, the warning said.
Rockefeller Seeks to Suspend EPA Carbon Regulations. Democrat, introduced legislation that suspends for two years U.S. carbon-dioxide regulations for power plants and other industrial polluters. The bill is aimed at stopping the Senator Jay Rockefeller, a West VirginiaEnvironmental Protection Agency rules that took effect on Jan. 2, Rockefeller said today in an e-mailed statement. Co-sponsors of the EPA Stationary Source Regulations Delay Act include Democratic Senators Jim Webb of Virginia and Claire McCaskill of Missouri. Rockefeller has led an effort among Senate Democrats to suspend EPA rules that he said will burden businesses and hurt the economy. The Democrat has said the two-year delay is needed to give Congress time to craft a new energy bill. President Barack Obama will veto any attempt to block rules to regulate carbon, EPA Administrator Lisa Jackson has said. “Many of us agree that Congress, not the EPA, must be the decision-maker on such a challenging issue,” Rockefeller said in the statement.
Queensland Braces for 'Huge, Life-Threatening' Cyclone. Australia’s Queensland state, already recovering from its worst floods on record, is preparing for a tropical cyclone expected to disrupt mining, tourism and the sugar industry and bring destructive winds.
Wall Street Journal:
Mubarak Offers to Negotiate. Egyptian President Hosni Mubarak, seeking to salvage his 29-year rule, made his first offer to discuss reforms with opposition groups, as protesters gathered for a massive march to force him to resign and his Western allies discussed plans for his exit. Opposition parties said they wouldn't negotiate as long as Mr. Mubarak remains in office. Mr. Mubarak's army, long the final arbiter of power in Egypt, vowed not to harm protesters descending on central Cairo for what they billed as a "million-man march" on his palace.
Judge Rejects Health Law. A federal judge ruled that Congress violated the Constitution by requiring Americans to buy insurance as part of the health overhaul passed last year, and said the entire law "must be declared void." With his ruling, U.S. District Judge Roger Vinson set up a clash over whether the Obama administration still has the authority to carry out the law designed to expand insurance to 32 million Americans. David Rivkin, an attorney for the plaintiffs, said the ruling meant the 26 states challenging the law must halt implementation of pieces that apply to states and certain small businesses represented by plaintiffs.
The Constitutional Moment. Federal Judge Roger Vinson opens his decision declaring ObamaCare unconstitutional with that citation from Federalist No. 51, written by James Madison in 1788. His exhaustive and erudite opinion is an important moment for American liberty, and yesterday may well stand as the moment the political branches were obliged to return to the government of limited and enumerated powers that the framers envisioned.
Even the Rothschilds Are Weather Obsessed. Evelyn de Rothschild and Lynn Forester de Rothschild said they are buying a majority stake in weather-data service Weather Central L.P., marking a significant expansion of the Rothschilds’ investments into media and information.
SEC Probes Harrisburg's Muni Disclosures. The Securities and Exchange Commission is examining whether officials in Pennsylvania's cash-strapped capital city, Harrisburg, provided enough information to bond investors. While the SEC doesn't have the authority to regulate issuers directly, it requires securities dealers marketing issues of $1 million or more to review and disseminate official statements prepared by issuers for new offerings.
CNBC:
China PMI Points to Slowing Growth, Rising Inflation. The official purchasing managers' index fell to 52.9 in January from 53.9 in December, the China Federation of Logistics and Purchasing said on Tuesday. The reading was the lowest in five months and below a median forecast of 53.5 in a Reuters poll. Input prices jumped to 69.3 from 66.7 in December, suggesting that inflationary pressure was still on the rise.
Arab Anger Triggers Asian Angst. Turmoil in the Arab world equals an inflationary spike in oil prices equals the risk of social unrest. That is the unappetizing political economy equation facing governments across Asia, including China, as they seek lessons from a popular uprising in Tunisia and deadly clashes in Egypt. "What you will have is a greater focus on social and political risk in the coming year," said Bob Broadfoot of Political & Economic Risk Consultancy in Hong Kong.
Business Insider:
The Financial Crisis of 2015. Oliver Wyman Group has released a very interesting piece about the potential for a future financial crisis (thanks to the FT). They make the case that the next great financial crisis will occur around 2015 and will be the result of a massive bubble in commodity markets that results in widespread economic collapse and sovereign defaults.
How a Hedge Fund Can Land a Whale. Ash Williams, the hedge fund manager turned pension titan, has a host of suggestions for those firms hoping to land some big pension money. His most important advice: do your homework.
New Suspect Emerges in Insider Trading Inquiry. A New York hedge fund manager has emerged as a suspected co-conspirator in the government’s widening investigation of insider trading. Samir Barai, who runs Barai Capital Management, is thought to have received illegal tips about publicly traded companies from a technology-industry consultant, according to people with knowledge of the investigation who were not authorized to speak about it publicly.
Gas Drilling Technique Is Labeled Violation. Oil and gas service companies injected tens of millions of gallons of diesel fuel into onshore wells in more than a dozen states from 2005 to 2009, Congressional investigators have charged. Those injections appear to have violated the Safe Water Drinking Act, the investigators said in a letter to the Environmental Protection Agency on Monday.
Bonus Watch '11: Citi(C) to Pay Cash at Some Point in Future. Charlie Gasparino is hearing that senior bonuses at Citi this year will be paid out half in stock that vests in five years and half in cash that only 20 percent of which is immediately available (30% of the cash portion will supposedly be awarded in two years). For those who don’t know you’re supposed to stop pushing the Q-tip when there’s resistance who may be having trouble figuring out why some people wouldn’t be so happy about being paid in such a structure, Chaz’s source explains: “Just do the math,” this person said. “You get a bonus of $1 million, just 20% of it you receive on the pay date. You’re left with $200,000 cash and half of that is taken in taxes. That’s why these guys are so pissed.”
Politico:
Florida Health Ruling Gives Republicans Firepower. A Florida federal court ruling against the health care law gave renewed life Monday to Republican efforts to repeal President Barack Obama’s signature domestic achievement — a campaign stalled by the Democratic-controlled Senate. But even with the sweeping ruling, there’s no sign that Senate Majority Leader Harry Reid (D-Nev.) is going to allow a repeal vote on the floor — and no Democrats have committed to joining the full slate of Senate Republicans who now back the repeal. Still, Judge Roger Vinson’s opinion, which rejected the entire health care law as unconstitutional, gave Republicans an unmistakable feeling of political momentum. Within minutes of the ruling, House and Senate Republicans called once again on Senate Democrats to grant an up-or-down vote on the repeal bill that passed the House earlier this month. Senate Minority Leader Mitch McConnell (R-Ky.) had already vowed to press for a vote — and the legal opinion Monday only boosted that push — but privately, Republicans said it would force some moderate Democrats, including those in tough reelection fights, to join their cause. “It’s a very serious event,” said Alabama Sen. Jeff Sessions, a former ranking member of the Senate Judiciary Committee. “It’s going to give further momentum to a challenge to this bill.”
Reuters:
CFTC Rules to Add to Dodd-Frank Cost Burden - Funds. Hedge funds are concerned that compliance with reporting regulations proposed by the U.S. futures regulator last week will require too much time and money, creating an unnecessary cost burden for the industry.
Novellus(NVLS) Q4 Beats Wall Street as Shipments Rise. Chip-gear maker Novellus Systems Inc posted a quarterly profit that handily beat expectations, as shipments jumped 15 percent sequentially and revenue surged. Shares of the San Jose, California-based company that closed at $36.07 on Monday on Nasdaq, were up 4.4 percent at $37.66 in trading after the bell.
Mid-East Contagion Fears for Saudi Oil Fields. Risk analysts and intelligence agencies fear that Egypt's uprising may set off escalating protests in the tense Shia region of Saudi Arabia, home to the world's richest oilfields.
China Securities Journal:
China new loans may be from 2.6 trillion yuan to 3 trillion yuan in the first quarter, accounting for 35% to 40% of the full-year target, citing analysts.
Shanghai Daily:
Industrial & Commercial Bank of China Ltd. has stopped offering discounted mortgage rates for first-time homebuyers, citing a credit officer in the city. The bank stopped offering the 15% discount on Jan. 31, on orders from the Beijing head office.
Evening Recommendations Citigroup:
Reiterated Buy on (ITW), target $65.
Downgraded (MASI) to Sell, target lowered to $28.
Night Trading
Asian equity indices are -.25% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 109.50 -7.5 basis points.
Asia Pacific Sovereign CDS Index 124.0 -.75 basis point.
Construction Spending for December is estimated to rise +.1% versus a +.4% gain in November.
ISM Manufacturing for January is estimated to rise to 58.0 versus 57.0 in December.
ISM Prices Paid for January is estimated to rise to 73.5 versus 72.5 in December.
Total Vehicle Sales for January are estimated to rise to 12.6M versus 12.53M in December.
Upcoming Splits
(FCX) 2-for-1
Other Potential Market Movers
The weekly retail sales reports, weekly ABC consumer confidence reading and the Morgan Stanley Financials Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
North American Investment Grade CDS Index 84.34 +.49%
European Financial Sector CDS Index 141.37 bps -4.89%
Western Europe Sovereign Debt CDS Index 177.17 bps -3.97%
Emerging Market CDS Index 223.83 -.79%
2-Year Swap Spread 23.0 +1 bp
TED Spread 16.0 unch.
Economic Gauges:
3-Month T-Bill Yield .14% unch.
Yield Curve 282.0 +4 bps
China Import Iron Ore Spot $185.60/Metric Tonne +.16%
Citi US Economic Surprise Index +28.70 +.5 point
10-Year TIPS Spread 2.32% +6 bps
Overseas Futures:
Nikkei Futures: Indicating +8 open in Japan
DAX Futures: Indicating +23 open in Germany
Portfolio:
Slightly Higher: On gains in my Ag, Biotech and Tech long positions
Disclosed Trades: None
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades higher, despite rising Mideast tensions, higher energy prices, emerging markets inflation worries and rising long-term rates. On the positive side, Road&Rail, Gaming, REIT, Construction, Steel, Oil Service, Energy and Coal shares are especially strong, rising more than 1.0%. (XLF)/(IYR) have traded well throughout the day. Copper is rising +1.83%. The Spain sovereign cds is falling -6.36% to 248.93 bps, the Italy sovereign cds is dropping -3.40% to 180.09 bps, the Portugal sovereign cds is falling -4.91% to 433.37 bps and the Ireland sovereign cds is falling -3.43% to 597.67 bps. Gold is -.37% lower on the day. On the negative side, Airline, Retail, Homebuilding and Oil Tanker shares are under pressure, falling more than -.5%. Tech shares are underperforming. Emerging market stocks(EEM) continue to trade poorly. The Japan sovereign cds is rising +2.17% to 84.21 bps, the Saudi sovereign cds is gaining +28.1% to 119.70 bps and the Egypt sovereign cds is climbing +7.8% to 421.27 bps. The UBS-Bloomberg Ag Spot Index is rising +1.22% to another new record high. Oil surged into the close of floor-trading and is up about +3% today. The 10-Year yield is rising +6 bps to 3.38%. The major averages are displaying exceptional resiliency again. If oil stays below $100/bbl., the major averages will likely test recent highs over the coming days. Any convincing break above $100/bbl. would likely result in a meaningful pullback in the major averages from current levels. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, rising long-term rates, more shorting, emerging markets inflation fears, rising Mideast social unrest and surging oil prices.
French, British Banks Have Most Exposure to Egyptian Loans, BIS Data Show. International banks have lent $49.3 billion to Egyptian borrowers, with French and U.K. banks having the most exposure to the country torn by anti-government protests, data from the Bank for International Settlements show. French banks’ claims on Egyptian borrowers stood at $17.6 billion at the end of September, BIS statistics released Jan. 27 show. U.K. banks’ exposure was $10.7 billion and Italian banks had $6.3 billion in claims, the data show. European banks’ total claims amounted to $40.3 billion.
Purchasing Managers Index Rises as Business Expands. Businesses in the U.S. expanded in January at the fastest pace since July 1988, indicating the world’s largest economy has momentum at the start of the year. The Institute for Supply Management-Chicago Inc. said today its business barometer rose this month to 68.8 from 66.8 in December. “This fortifies the stability of the recovery,” said Maxwell Clarke, chief U.S. economist at IDEAglobal in New York. “You definitely see traction from manufacturing going forward.” The Chicago group’s production gauge rose to 73.7 from December’s reading of 72.2. The gauge of new orders increased to 75.7, the highest since December 1983, from 71.3. The employment measure rose to 64.1, the strongest since May 1984, from 58.4 the prior month.
Fed's Lockhart Says Unemployment 'Nowhere Near Acceptable,' Sees Recovery. Federal Reserve Bank of Atlanta President Dennis Lockhart said policy makers should continue with record monetary stimulus and try to bring down unemployment that’s persisting at an unacceptably high level. “There are definitely hopeful signs of sustained recovery in 2011,” Lockhart said today in the text of a speech in Miami. “That said, I believe it is a bit early to declare victory, and, to be sure, employment is nowhere near acceptable levels.” The Fed last week reaffirmed its plan to buy $600 billion in Treasuries through June, pressing on with stimulus aimed at reducing the 9.4 percent unemployment rate and keeping inflation from slowing.
ECB Must Monitor Prices More Closely, Wellink Tells Dow Jones. European Central Bank Governing Council member Nout Wellink said the bank should watch price developments more closely than before, Dow Jones reported, citing an interview. “Rising global commodity prices are putting pressure on inflation, that’s quite clear,” Wellink, who also heads the Dutch central bank, was quoted as saying on Sunday in Kyoto, Japan. “It’s a reason to monitor even more closely than before the inflation developments in Europe,” Wellink said, according to the report.
Barai Capital Winds Down Funds After FBI Raid, Investor Says. Barai Capital Management LP, the New York-based hedge fund run by Samir Barai, is liquidating its funds after being raided by the Federal Bureau of Investigation as part of the government’s insider-trading probe, according to a memo from the firm that seeded the manager. “BCM has informed us that they are cooperating fully with the government’s investigation. The firm also has informed its investors that it commenced an orderly wind down of the BCM funds," Protege Partners LP co-founders Jeff Tarrant and Ted Seides said in an e-mail sent today to investors, a copy of which was obtained by Bloomberg.
The Baltic Dry Index, a measure of commodity-shipping costs, fell to the lowest in almost two years as new vessels joined the fleet. The index fell 30 Points, or 2.6%, to 1,107 points, the lowest since February, 2009. Rates dropped 38% this month, and 17% last week alone.
Record Cotton Prices May Curb China Textile Growth, Planer Says. Record gains in prices of cotton and rising labor rates may limit the expansion of China’s textile industry and reduce export competitiveness, according to the National Development & Reform Commission. In 2010, prices surged to 30,000 yuan ($4,551) per metric ton from 14,000 yuan at the beginning of the year, while labor costs gained as much as 20 percent, the top economic planner said in a report on its website yesterday. “Raw material and labor shortages are the industry’s bottleneck,” the report said. A slower rate of recovery of the global economy and world consumer demand, as well as a stronger yuan, will reduce the competitiveness of China’s textile products, the report said.
Tiger Woods Dubai Gulf Resort Halted as Luxury Market Struggles. Work on a Tiger Woods branded golf resort in Dubai has been halted by developer Dubai Properties Group, which cited a struggling luxury property market. “The decision was based on current market conditions that do not support high-end luxury real estate,” Dubai Properties, a unit of Dubai Holding, said in a statement via mobile-phone text message today. “These conditions will continue to be monitored and a decision will be made in the future when to restart the project.”
Organized Crime Blamed for Roiling $110 Billion Carbon Market. Organized criminals are being blamed for stealing European Union pollution permits and sparking a police hunt across the continent, battering confidence in an 80 billion-euro ($110 billion) market. Thieves who steal CO2 permits try to sell them in the market before owners realize they are missing, according to Czech trader Nikos Tornikidis. The criminals may have exploited “negligent” security standards in some EU nations that participate in the world’s largest system for trading rights to discharge greenhouse gases, Jos Delbeke, director general for climate at the European Commission, said in an interview.
Intel(INTC) Reduces First-Quarter Forecast Due to Cougar Point Chip-Design Error. Intel Corp., the world’s largest maker of semiconductors, said a design error in one of its chips will reduce sales and profit margins as it spends $700 million to repair and replace affected products. The flaw will cut first-quarter revenue by $300 million and gross-profit margin by 2 percentage points, Santa Clara, California-based Intel said in a statement today. Intel shares fell and rival Advanced Micro Devices Inc. climbed.
Huntsman Said to Be Planning to Resign as Ambassador to China. Jon Huntsman, the U.S. ambassador to China, has told the Obama administration he plans to resign, an administration official said, a sign the former Utah governor may bid for the 2012 Republican presidential nomination. Obama has been informed that Huntsman intends to leave in May, according to the official, who spoke on condition of anonymity.
Bearish Dell(DELL) Options Bets Surge to 12-Year High Before Earnings. Dell Inc. options traders are making the most bearish bets in 12 years before the world’s second- biggest maker of personal computers reports fourth-quarter earnings results next month. The ratio of outstanding puts to sell Dell stock versus calls to buy reached 1.1-to-1 last week after January contracts expired, rising to the highest level since November 1998.
Irish Central Bank Lowers Growth Forecast for 2011. Ireland’s central bank cut its forecast for economic growth this year by more than half as the government steps up budget cuts and consumers trim spending. Gross domestic product will probably rise by 1 percent this year instead of the 2.4 percent forecast in October, after falling an estimated 0.3 percent in 2010, the Dublin-based bank said today in its quarterly bulletin.
Calls for Change Intensify in Cairo. Egyptian protest organizers are calling for one million people to march Tuesday to demand the ouster of President Hosni Mubarak, a new sign that the calls for regime change in the Arab world's most populous country could be reaching a crescendo. On the seventh consecutive day of demonstrations, Mr. Mubarak overhauled the government in his latest attempt to defuse unprecedented public anger at his 30-year rule. His new ministers include stalwarts from his ruling party and security apparatus, which is widely reviled for its brutal intelligence and police networks. He also kicked out his longtime finance minister who is highly regarded among financial institutions but disliked within Egypt and blamed for the lack of jobs and high unemployment. Egypt's fragmented opposition groups Monday were lining up behind Nobel Peace laureate Mohamed ElBaradei as their best chance to oust Mr. Mubarak, while the nation's military closed ranks with the government leadership but allowed protesters to continue mass demonstrations.
Hedge-Fund Group Asked SEC About Expert Networks. A hedge-fund industry group has asked the Securities and Exchange Commission for guidelines on the use of expert networks, which have been under scrutiny in a federal insider-trading probe, the organization's chief executive said on Monday.
Oil Trading Hits Record Levels. Trading volumes in oil-futures contracts rose to the highest level on record Friday, spurred by unrest in Egypt that could threaten key oil shipments. A record 1,472,088 contracts changed hands for light, sweet crude-oil futures on the New York Mercantile Exchange, surpassing the previous record of 1,423,536 contracts set in April 2010. On the ICE Futures Exchange, the comparable contract for West Texas Intermediate futures reached a record 496,165 contracts, surpassing its April 2010 high. On Monday, Brent crude prices hit $100 a barrel for the first time in more than two years amid the tensions in the Middle East. The records came amid a turnaround rally in crude Friday, with oil futures surging 4.3% to $89.34 a barrel after antigovernment protests intensified in Egypt and investors worried that unrest across the Middle East in recent weeks could spread to major oil-producing states. The rise in trading volumes underscores the surging investor interest in commodities, particularly crude oil. The price increase to $147 a barrel in 2008 created a wider following of the oil markets, drawing retail investors as well as new institutional money managers into a market dominated for decades by global trading firms, major banks and dedicated specialists. Rising energy prices and oil's potential hedge against political upheaval in the Middle East have turned crude oil into a key asset for many investors' portfolios. A string of financial products, including exchange-traded funds, have made it easier for retail investors to enter the market. The U.S. Oil Fund, the world's largest commodity ETF, has grown to $1.7 billion.
Bloomberg Businessweek:
Fed Says Banks 'Significantly More Upbeat' on Delinquencies. Most banks in the U.S. expect loan delinquencies and charge-off rates to improve in 2011, a Federal Reserve survey showed, as standards eased and demand increased for business lending. “Expectations were significantly more upbeat than in past years,” the central bank said today in its quarterly survey of senior loan officers. “Banks reported that they expected improvements in delinquency and charge-off rates during 2011 in every major loan category.”
CNBC:
Egypt Sends Message to Leaders, and Markets: El-Erian. Turmoil in Egypt has sent a message to rulers through the region that they need to get "ahead of the curve" or face similar destabilizing problems, Pimco's Mohamed El-Erian told CNBC.
Business Insider:
Mind of a Hedge Fund Manager: Inside Hugh Hendry's Head. When it comes to media appearances, major hedge fund managers can be a rather reclusive lot. Unless your name happens to be Hugh Hendry. During this week's Alternative Investment Conference in London, the iconoclastic speculator waxed philosophical about his own "self loathing" and the "voices inside his head", described indirect ways to play the Chinese property bubble, and explained how desperate he is to "see inside the envelope waiting in the future which contains my 10-15-20 year performance results."
Wal-Markdown Inventory Glut Cuts Giant Retailer Down to Size. Wal-Mart is coping with a bad case of post-holiday indigestion. After binging on Christmas inventory, the world's biggest retailer has been forced to take drastic steps in recent weeks to clear stores and warehouses of excess goods, according to sources close to the company. The culprit: disappointing December sales. "It looks like they are in danger of heading into another negative 'comp' for the quarter," according to an executive at a major Wal-Mart supplier, referring to the retailer's fourth-quarter comparable-store sales, or sales at stores open at least a year -- a key measure of performance.
New Estimates Put Pakistan's Nuclear Arsenal At More Than 100. Pakistan's nuclear arsenal now totals more than 100 deployed weapons, a doubling of its stockpile over the past several years in one of the world's most unstable regions, according to estimates by nongovernment analysts. The Pakistanis have significantly accelerated production of uranium and plutonium for bombs and developed new weapons to deliver them. After years of approximate weapons parity, experts said, Pakistan has now edged ahead ofIndia, its nuclear-armed rival. An escalation of the arms race in South Asia poses a dilemma for the Obama administration, which has worked to improve its economic, political and defense ties with India while seeking to deepen its relationship with Pakistan as a crucial component of its Afghanistan war strategy.
Opalesque:
Hedge Fund Managers' Confidence in US Equities Falters Slightly, But They Remain Bullish Overall - Baryclays TrimTabs. Hedge fund managers are upbeat on U.S. equities but less bullish than a month ago, according to the TrimTabs/BarclayHedge Survey of Hedge Fund Managers for January. About 37% of the 91 hedge fund managers the firms surveyed in the past week are bullish on the S&P 500, down from 46% in January, while 26% are bearish, up from 19%. “Less upbeat forecasts are somewhat surprising in that hedge fund managers performed exceptionally well in the final four months of 2010,” said Sol Waksman, founder and President of BarclayHedge. “Nevertheless,the January bullish reading is the second-highest since the inception of our survey in May 2010, while the bearish reading is the second-lowest. Hedge fund managers still have plenty of skin in the game.”
US Muni Rating Cuts to Outpace Upgrades - Fitch.Ratings on bonds sold by hard-pressed U.S. states and local governments will continue to be downgraded more frequently than upgraded, as was the case during 2009 and 2010, Fitch Ratings said on Monday.
Guardian:
Middle Eastern Debt Costs Rise Sharply.Gavan Nolan of Markit believes that that the latest scenes from Cairo are making traders fear regional contagion. The cost of insuring Egyptian government debt increased sharply today, in a sign that investors have grown more nervous about the ongoing crisis. Other Middle Eastern government debt also came under pressure, as the protests against president Hosni Mubarak entered a seventh day. The five-year Egypt credit default swap rose by 17 basis points to 445bps, according to data from Markit. This is close to its highest level since April 2009. This means it costs £445,000 to insure £10m of Egyptian debt. In comparison, the UK five-year credit default swap trades around 60bps, while Ireland's CDS hit 600bps recently. Elsewhere, the Saudi Arabia CDS jumped by 29bps to 120bps, Bahrain rose by 28bps to 220bps, and Qatar gained 17bps to 110bps. The only faller in the region was Israel, down 1bps at 145bps. Gavan Nolan of Markit believes that the latest scenes from Cairo are making traders more risk averse. "Fears of contagion are increasing, as investors wonder if the events in Egypt will spread across the Arabian peninsula," said Nolan.
Xinhua:
China enacted a regulation today requiring reporters to be "prudent" when reporting securities and futures news that may affect investors' prospects or market stability. The rule was issued by the General Administration of Press and Publication and the China Securities Regulatory Commission, Xinhua said.
Iran to Display New Satellites, Rockets in Early February. Defense Minister Ahmad Vahidi has said new range of rockets and satellites will be showcased during the Ten-Day Dawn celebrations which will start on February 1. The Ten-Day Dawn celebrations are held across the country to commemorate the anniversary of the victory of Islamic Revolution in 1979.
