Tag: news

It took about 10 seconds for our collective brains to spot what is wrong with this picture, courtesy of the Bloomberg media empire…

And zoomed in:

via Zero Hedge http://ift.tt/MfowKL Tyler Durden

It took about 10 seconds for our collective brains to spot what is wrong with this picture, courtesy of the Bloomberg media empire…

And zoomed in:

via Zero Hedge http://ift.tt/MfowKL Tyler Durden

• Obama warns divided Congress that he will act alone (Reuters)
• Fed Decision Day Guide From Emerging Markets to FOMC Voter Shift (BBG)
• Fed poised for $10 billion taper as Bernanke bids adieu (Reuters)
• Bernanke’s Unprecedented Rescue Unlikely to Be Repeated (BBG)
• Argentina Spends $115 Million to Steady Peso (WSJ)
• Billionaires Fuming Over Market Selloff That Sinks Magnit (BBG)
• SAC’s Counsel Testifies at Insider Trading Trial in Unexpected Move by the Defense (NYT)
• Automakers Fuel Japan’s Longest Profit Growth Streak Since 2007 (BBG)
• Turkey Crisis Puts Jailed Millionaire at Heart of Gold Trail (BBG)
• Ukraine expects $2 billion tranche of Russian aid soon (Reuters)
• Poloz in Export Push Has Investors Targeting Canada (BBG)
• EU’s Too-Big-to-Fail Plan Seen Too Late to Win Approval (BBG)
• Yahoo’s fourth-quarter revenue slides as ad prices dip again (Reuters)

 

Overnight Media Digest

WSJ

* President Barack Obama, seeking to restore confidence in his leadership, declared in his State of the Union address Tuesday that he would use executive power to try to narrow the gap between rich and poor and speed the nation’s economic recovery.

* Turkey’s central bank unveiled emergency interest-rate hikes in a move that outstripped market expectations and sent the lira roaring back, in a test case for other emerging markets battling plunging currencies.

* Under fire from several regulators, U.S. banks increasingly are rejecting customers involved in activities that are legal but might attract government scrutiny, according to executives, consultants and lawyers.

* As activist hedge funds step up their hunt for new targets, companies are bolstering their defenses. Some are fortifying their poison-pill provisions – measures that prevent an unwanted shareholder from taking a stake above a certain level. Others are speeding up their acquisition timetables to minimize interference from shareholders. And some are tightening rules for nominating board members to make it harder for activists to get board seats.

* Top Daimler AG executive Andreas Renschler, who ran Mercedes-Benz production and sat on the company’s management board, resigned on Tuesday, saying he would have to wait too long for a shot to become chief executive.

* Marissa Mayer’s attempt to turn around Yahoo Inc is stuck in neutral. Yahoo on Tuesday reported its revenue fell 1.7 percent in the fourth quarter, minus commissions paid to partners for Web traffic, the fourth straight quarter without growth.

* Sprint Corp board members Masayoshi Son and Dan Hesse met recently with Justice Department officials who said they would view a Sprint acquisition of wireless rival T-Mobile US Inc with skepticism, people briefed on the conversation said.

* American Airlines Group Inc has identified $400 million in new annual revenue it expects to gain from changing its schedule, President Scott Kirby said Tuesday, as the carrier reported its first quarterly result since its combination with US Airways last month.

* Abercrombie & Fitch Co stripped Chief Executive Michael Jeffries of his title of chairman and named three new members to its board, steps aimed at improving governance at a teen retailer under pressure from weak sales and an activist investor.

* Google Inc wants to bring Google Glass to the masses. On Tuesday, the search giant announced a deal with vision-care company VSP Global to offer prescription lenses and subsidized frames for Google Glass, its wearable computer hooked onto eyeglass frames.

* Vodafone Group Plc of the UK and U.S. cable firm Liberty Global Plc have separately approached shareholders of Spanish cable operator Ono SA for a possible purchase that may be valued around 7 billion euros ($9.57 billion), a person close to the situation said Tuesday.

* Pfizer Inc said Tuesday that it expects to report clinical trial results early this year for an experimental breast-cancer drug and for the use of its pneumonia vaccine in the elderly, as the company shifts focus from streamlining its commercial operations to launching products.

* DuPont Co said its fourth-quarter earnings doubled, boosted by higher sales of seeds and insecticide in its agricultural division. The chemicals company also unveiled a new $5 billion share-repurchase plan, saying it aimed to buy back $2 billion worth this year.

* Volkswagen AG’s new head of U.S. operations says the German auto maker is trying to make decisions faster and again train its focus on the U.S. market, a push needed for it to attain its goal of becoming the world’s largest auto maker.

* VMware Inc warned it expects its operating margins to decline following its acquisition of AirWatch later this year. Shares slipped about 5 percent in after hours trading as the virtualization-software maker estimated that margins in its second quarter, ending in June, would decline 1.5 percent to 2 percent sequentially.

* Emerson Radio Corp shares jumped in after-hours trading Tuesday as the consumer-electronics distributor said it has allowed a special committee to evaluate possible strategic alternatives to enhance shareholder value.

* AT&T Inc Chief Executive Randall Stephenson did nothing to back investors off the company’s interest in Europe, saying a company’s statement Monday that it doesn’t intend to bid for a major European carrier a “technical requirement.” On Monday, the company filed a regulatory response with the UK Takeover Panel saying it wasn’t planning to bid for Vodafone Group PLC, the company many analysts had assumed would be in AT&T’s crosshairs.

 

FT

Italy’s Intesa Sanpaolo has become the country’s first bank to return a sum of 36 billion euros borrowed from the European Central Bank under the long-term refinancing operation or LTRO. The return of the loan shows early signs of growth in the eurozone countries’ economic recovery.

Vodafone and Liberty Global are competing to buy Spain’s largest cable operator, ONO, from its private equity owners. ONO has been planning an initial public offering this year in a bid to capitalise on a wave of investor interest in the increasingly successful cable sector.

Anglo-Dutch group Royal Dutch Shell wants to sell a stake in a key U.S. Gulf Coast crude oil pipeline for as much as $1 billion and is working with Barclays Plc to solicit offers, according to people familiar with the matter.

British online appliances retailer AO.com is looking at valuing its initial public offering from 1 billion pounds to 1.2 billion pounds in late 2014. Online fashion retailer Boohoo.com is also expected to announce its intention to float on the London Stock Exchange in March for a market value of about 500 million pounds.

Private equity group Permira is said to be in talks to buy a controlling stake in Italian fashion group Roberto Cavalli. However, a deal was not imminent, people with knowledge of the matter said.

 

NYT

* After five years of fractious political combat, President Obama declared independence from Congress on Tuesday as he vowed to tackle economic disparity with a series of limited initiatives on jobs, wages and retirement that he will take without legislative approval.

* Turkey’s central bank aggressively raised rates late Tuesday, in a drastic move aimed at bolstering the currency. But it is unclear whether the move will be enough to satisfy international investors and repair the central bank’s reputation.

* In the middle of political unrest, Ukraine’s opposition appears closer to forcing the rejection of agreements with Russia and turning to the West.

* Under the turnaround plan devised by Yahoo’s chief executive, Marissa Mayer, the company gained traffic and mobile users in 2013 and introduced a bevy of products, like a slick digital food magazine and a mobile weather app. Yet despite Mayer’s labors, Yahoo is still falling further and further behind in the race for Internet advertising.

* AT&T finished 2013 strong despite aggressive moves from T-Mobile US, the smaller wireless carrier. AT&T reported on Tuesday a profit of $6.9 billion for the fourth quarter, compared with a loss of $3.9 billion during the period a year earlier, when earnings were hurt by pension costs and Hurricane Sandy.

* A hearing on the regulatory future of Bitcoin gave advocates the chance to enumerate what they view as the advantages Bitcoin could provide over current monetary systems.

* Two broadcast television stations in Los Angeles will become the first participants in a pilot test of the government’s plans to eventually free up and auction off more airwaves for use in wireless broadband, officials said on Tuesday.

* The Royal Bank of Scotland said on Tuesday that it would reduce the range of foreign exchange benchmarks it offers to clients who trade currency markets.

* Ford Motor, the nation’s No. 2 automaker, said on Tuesday that its fourth-quarter earnings rose 90 percent, to $3 billion, mostly because of favorable tax benefits related to investments in its European operations.

* Martin Marietta Materials has agreed to acquire Texas Industries in an all-stock deal worth more than $2 billion, the companies announced on Tuesday morning.

* An independent report published on Tuesday accused the BBC of significant management failings in connection with an abandoned 126 million pound ($208.97 million) digital project, saying the broadcaster failed to assess the initiative properly or provide adequate oversight of its progress.

* The stock market rose on Tuesday after three days of losses around the world as investors’ worries about slowing growth in China and other emerging markets appeared to fade.

* As hedge funds sniff for even bigger payouts from banks, one hedge fund, Fir Tree Partners, is even trying to coax other investors out of participating in the $4.5 billion JPMorgan Chase settlement with private investors.

* J C Penney altered its poison pill plan on Tuesday as it seeks to defend itself against potential activist investors and preserve a tax benefit. The company lowered the threshold for its poison pill plan to 4.9 percent from 10 percent. It also said it had extended the plan until Jan. 26, 2017. The provisions were originally set to expire this August.

* The Chinese Internet giant Alibaba is looking to join the ranks of Google and Microsoft with an initial public offering that could give it a value of more than $100 billion. But the company’s recent acquisition of the Hong Kong-listed company Citic 21CN shows just how much we still don’t know about Alibaba and its business.

* Comcast Corp, the nation’s largest cable provider and the owner of NBCUniversal, on Tuesday reported a sharp increase in profit for the fourth quarter of 2013, helped by an increase in television subscribers after six years of decline.

* The long-running boom in emerging markets came to be identified, if not propped up, by wide acceptance of the term BRICs, shorthand for the fast-growing countries Brazil, Russia, India and China. Recent turmoil in these and similar markets has produced a rival expression: the Fragile Five

 

Canada

THE GLOBE AND MAIL

* A national Muslim organization is demanding Prime Minister Stephen Harper publish a retraction and apology on his government website for a chief spokesman’s comments that the group says linked it to terrorists. The National Council of Canadian Muslims, which is now challenging Harper to prove this allegation, has filed a notice of libel saying it intends to sue Harper and Prime Minister’s Office director of communications Jason MacDonald for comments made earlier this month.

* Toronto homeowners should expect taxes to rise between 2.23 percent and 2.75 percent, say several city councillors involved in eleventh-hour negotiations to find the 23 votes needed to pass a 2014 budget this week. The final tax hike will be higher than the 1.75 percent recommended by the city’s executive committee, most councillors agree.

Reports in the business section:

* Mobilicity is assessing two “serious” takeover offers as part of its sales process, with Telus Corp and Quebecor Inc emerging as the leading bidders for the struggling wireless carrier.

* BlackBerry Ltd has launched a new feature that it can boast even the latest iPhones don’t have, FM radio. A new version of the BlackBerry 10 operating system, which the Waterloo, Ontario-based company says includes hundreds of enhancements and new features, started being rolled out on Tuesday by mobile carriers in Canada.

NATIONAL POST

* Ontario’s lowest paid workers will get a raise this year when the $10.25 an hour minimum wage is hiked for the first time in four years, government sources said on Monday. A special advisory panel set up to look at ways of adjusting the minimum wage will recommend it be tied to the inflation rate, and that businesses get four months warning of any increases, said various sources.

* Veterans Affairs Minister Julian Fantino appeared to add insult to injury late on Tuesday in firmly rejecting the pleas of ex-soldiers to halt the impending closure of eight of the department’s regional offices.

FINANCIAL POST

* Canadian airline stocks nosedived on Tuesday on fears the rapid decline in the loonie would undercut the earnings of Air Canada and WestJet Airlines Ltd. The Canadian dollar fell below 90 cents against the U.S. dollar on Tuesday as worries about emerging market economies continued.

* The chief executive of Osisko Mining Corp thinks the hostile bid for his company is not only bad for his shareholders, but negative for other investors in the gold mining space. Speaking at the TD Securities Mining Conference in Toronto, Sean Roosen said if offers as low as Goldcorp Inc’s $2.6-billion hostile bid become acceptable in the sector, then it is hard to see how portfolio managers can make money investing in emerging growth stories like Osisko.

 

China

CHINA SECURITIES JOURNAL

– Market-oriented reform of China’s system for initial public offerings (IPOs) can’t be completed all at once, Xiao Gang, chairman of the China Securities Regulatory Commission, said at a Spring Festival “tea chat” with experts and researchers. The need for reform must be balanced with the need to maintain stability, he said.

SHANGHAI SECURITIES NEWS

– New loans from China’s Big 4 commercial banks in January totalled 430 billion yuan through Jan. 26, the paper reported, citing an anonymous source, implying a forecast for total new loans from all banks of 1.1 trillion yuan for the full month.

CHINA BUSINESS NEWS

– Tencent Holdings Ltd’s WeChat mobile app has added a new feature to allow users to send Spring Festival “red envelope” cash gifts to friends via the company’s third-party payments service.

CHINA DAILY

– China’s foreign ministry will set up a 24-hour help hotline this year with worldwide access for Chinese citizens who run into difficulties while travelling abroad, in an effort to strengthen consular assistance, Huang Ping, director of the ministry’s department of consular affairs, told a news briefing.

PEOPLE’S DAILY

– China’s disease control experts say that the H7N9 flu virus can’t spread in crowds, which means that an outbreak of human infections during the Spring Festival is not a major risk.

 

Britain

The Telegraph

EMPHASIS WILL BE ON BRITISH JOBS IN NEW RAIL BIDS, SAYS SIEMENS DIRECTOR

Siemens, the controversial winner of a 1.5 billion pounds contract to make new Thameslink trains, says bidders for UK contracts feel they have to demonstrate how they will generate British manufacturing jobs.

LLOYDS PUSHES BUTTON ON 1.5 BILLION POUNDS-PLUS TSB FLOAT

Lloyds Banking Group has pushed the button on its 1.5 billion pounds-plus float of TSB after rejecting an 11th-hour approach from a group of institutional investors. TSB’s management has begun meeting potential investors to ask them to back the pending flotation of the 631-branch business.

The Guardian

RAIL MINISTER CASTS DOUBT ON FUTURE OF UK MANUFACTURING

The rail minister, Stephen Hammond, has said there is little the Department for Transport can do to help Britain’s recovering manufacturing industry as he unveiled a German-built train commissioned for London’s rail network.

EX-CO-OP BANK CHAIRMAN PAUL FLOWERS ACED PSYCHOMETRIC TESTS- DEPUTY

Paul Flowers, the disgraced former chairman of the Co-Operative Bank, was appointed to the post because he did better than rival candidates in psychometric tests, the Treasury select committee of MPs was told on Tuesday.

The Times

UK INVESTS IN OFFSHORE WINDFARMS DESPITE COST

Britain has more offshore wind turbines than the rest of Europe combined, according to an industry report. More than 200 giant offshore turbines were connected to the grid last year, bringing the total around Britain’s coast to 1,082. There are only 998 offshore turbines in the rest of Europe, according to the report by the European Wind Energy Association.

TREASURY TAKES AIM AT CARBON TAX TO CUT HOUSEHOLD BILLS

Treasury officials are working on plans to hold the rate of the carbon tax, which primarily penalises coal and gas plants and ultimately is paid for by consumers. The move comes in the wake of the government’s decision in December to knock 50 pounds off energy bills after cutting other green levies.

Sky News

ECONOMY GROWS AT FASTEST RATE SINCE CRASH

The British gross domestic product (GDP) figure for the fourth quarter of 2013 stood at 0.7 percent, with growth for the full year reaching 1.9 percent. Output for 2013 reached its fastest annual rate of growth for six years, according to the Office for National Statistics.

LLOYDS CUTS 1,390 JOBS AMID STRATEGIC REVIEW

Lloyds Banking Group is cutting 1,080 jobs and outsourcing another 310 roles, the company has confirmed. It said the losses are part of the strategic review, previously announced in 2011. The company said 90 new roles would be created within the risk, operations and commercial departments.

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic events scheduled for today include:
FOMC Federal Funds Rate announcement scheduled for 2:00 pm ET

ANALYST RESEARCH

Upgrades

Aeropostale (ARO) upgraded to Neutral from Sell at Goldman
American Airlines (AAL) upgraded to Neutral from Underperform at BofA/Merrill
Cameron (CAM) upgraded to Buy from Hold at Societe Generale
Carrizo Oil & Gas (CRZO) upgraded to Neutral from Underperform at Credit Suisse
Electronic Arts (EA) upgraded to Buy from Neutral at BofA/Merrill
Freescale (FSL) upgraded to Strong Buy from Buy at Needham
IBERIABANK (IBKC) upgraded to Outperform from Market Perform at Raymond James
Illinois Tool Works (ITW) upgraded to Outperform from Market Perform at BMO Capital
Interactive Brokers (IBKR) upgraded to Outperform from Market Perform at Keefe Bruyette
Sally Beauty (SBH) upgraded to Outperform from Market Perform at Wells Fargo
Tableau Software (DATA) upgraded to Buy from Neutral at Goldman
Wal-Mart (WMT) upgraded to Outperform from Neutral at Credit Suisse

Downgrades

Alliance Resource (ARLP) downgraded to Outperform from Strong Buy at Raymond James
Apollo Education (APOL) downgraded to Underweight from Equal Weight at Barclays
BJ’s Restaurants (BJRI) downgraded to Underweight from Overweight at Barclays
D.R. Horton (DHI) downgraded to Market Perform from Outperform at Keefe Bruyette
Digital Realty (DLR) downgraded to Underperform from Neutral at Macquarie
Francesca’s (FRAN) downgraded to Sell from Neutral at Goldman
Teradata (TDC) downgraded to Sell from Neutral at Goldman
West Corp. (WSTC) downgraded to Equal Weight from Overweight at Barclays

Initiations

Apollo Global (APO) initiated with a Hold at Deutsche Bank
Blackstone (BX) initiated with a Buy at Deutsche Bank
Carlyle Group (CG) initiated with a Buy at Deutsche Bank
Gap (GPS) initiated with a Buy at Buckingham
KKR (KKR) initiated with a Hold at Deutsche Bank
Oaktree Capital (OAK) initiated with a Buy at Deutsche Bank

HOT STOCKS

Shell (RDS.A) to sell interest in offshore Brazil BC-10 for about $1B
Yahoo (YHOO) CEO said growth trend in mobile revenue ‘promising,’ CFO sees ‘modest’ decline in FY14 EBITDA; says no plans to fill COO position
Emerson Radio (MSN) retained Lazard Middle Market to evaluate strategic alternatives
Owens-Illinois (OI) said not expecting dramatic macro improvement in 2014
AT&T (T) expects Leap Wireless (LEAP) deal to close by end of Q1
WellPoint (WLP) increased quarterly dividend by 17% to 43.75c from 37.5c

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Evercore Partners (EVR), Jones Lang LaSalle (JLL), PolyOne (POL), Albemarle (ALB), Illumina (ILMN), Greenhill & Co. (GHL), Rexnord (RXN), Yahoo (YHOO), Werner (WERN), Amgen (AMGN), VMware (VMW), Electronic Arts (EA), AT&T (T)

Companies that missed consensus earnings expectations include:
WellPoint (WLP), Novartis (NVS), Triumph Group (TGI), RockTenn (RKT), Silgan Holdings (SLGN), Arthur J. Gallagher (AJG),  Owens-Illinois (OI),  Craft Brew (BREW)

Companies that matched consensus earnings expectations include:
Praxair (PX), Pericom (PSEM), RF Micro Devices (RFMD)

NEWSPAPERS/WEBSITES

Facebook’s (FB) open computer project adds Microsoft (MSFT), IBM (IBM), Bloomberg reports
Lenovo (LNVGY) would pay IBM (IBM) an 8% to 9% breakup fee, Bloomberg reports
JPMorgan (JPM) close to sale of commodities unit, Bloomberg reports
Barclays (BCS) plans to close 400 U.K. branches, Independent says
Qualcomm (QCOM) could face significant antitrust fine in China, Reuters reports
FDA: Bayer’s (BAYRY) Aleve may carry lower cardiac risk than others, WSJ reports
Alibaba’s growth concerns weigh on Yahoo (YHOO), WSJ reports   
Sprint (S) meets with DOJ on possible T-Mobile (TMUS) deal, WSJ reports
IBM (IBM) exploring potential sale of SDN business, Re/code says
Yahoo (YHOO) to shut down IntoNow, Anchor apps, TechCrunch reports

SYNDICATE

BankUnited (BKU) files to sell 8M common shares for holders
New Mountain Finance (NMFC) files to sell 2.33M shares for holders
North Atlantic Drilling (NADL) 13.514M share IPO priced at $9.25
Rexnord (RXN) files to sell 14M shares of common stock
TESARO (TSRO) files to sell $100M in common stock

via Zero Hedge http://ift.tt/1fmHjhQ Tyler Durden

via Zero Hedge http://ift.tt/MucZI9 Asia Confidential

The Fed tightens by a little (sorry, tapering – flow – is and always will be tightening): markets soar; Turkey tightens by a lot: markets soar. If only it was that easy everyone would tighten. Only it never is. Which is why as we just reported, the initial euphoria in Turkey is long gone and the Turkish Lira is basically at pre-announcement levels, only now the government has a furious, and loan-challenged population to deal with, not to mention an economy which has just ground to a halt. Anyway, good luck – other EMs already faded, including the ZAR which many are speculating could be the next Turkey, and certainly the USDJPY which sent futures soaring last night, only to fade all gains as well and bring equities down with it.

Following the CBRT’s actions last night, the central bank focus turns to the Fed where the second day of the January FOMC and Bernanke’s final policy meeting, will be held today. The overwhelming consensus is that the Fed will deliver another $10bn taper at this month’s meeting, so any deviation from that view could bring substantial volatility to markets. The turbulence in EM financial markets is probably not seen as widespread or intense enough to warrant special recognition by the Committee. Given that the negative spillover to US financial markets has been relatively modest so far, and given that the dollar overall has actually declined a bit, consensus sees no reason for them to signal any potential change in US policy. Deutsche Bank adds that on the question of forward guidance, with the unemployment rate now sitting just above the 6.5% threshold for considering an increase in short-term rates, the question about reducing that threshold will arise again. There was not much sentiment in favor of such a reduction in December, and it seems unlikely there would be this time either. More likely they will be shifting their focus increasingly toward the low rate of core inflation as a reason to hold off raising rates for some time to come.

Recall that the voting rolls will change at the January meeting, with a shift moderately in a hawkish direction. Presidents Rosengren (dissenting dove), Evans (dove), Bullard (center left) and George (dissenting hawk), will be replaced by Presidents Plossser and Fisher (both potentially dissenting hawks), Pianalto (center right) and Kocherlakota (potentially dissenting dove).

Also of note: today the Treasury sells its first $15 billion in 2 Year Floating Rate Notes, and there is no POMO.

Quick Market from RanSquawk

Focus this morning was yet again on EM after the Turkish central bank hiked rates late yesterday in order to suppress fears of further capital flight from the country. However after opening up over 2%, the domestic Turkish stock index gradually moved into negative territory, while the spot TRY rate has reversed almost half of the aggressive move lower observed following the rate hike, as market participants questioned the implications that higher interest rates will have on future growth prospects.

Nevertheless, heading into the North American open, stocks in Europe have closed the opening gap higher but remain in positive territory, with basic materials outperforming following the release of better than expected earnings by Anglo American and Antofagasta. In terms of other notable equity movers, Fiat shares plunged after the company failed to meet trading profit expectations, while Sainsbury’s shares in London fell over 6% after it was reported that CEO Justin King to step down.

In terms of macroeconomic release, the latest Eurozone M3 data showed that lending to the private sector declined by 2.3% in December, matching November, thus underpinning the view that the ECB will likely need to act in the near future. Going forward, focus will now turn to the FOMC decision at 1900GMT/1300CST, as well as earning by Facebook and Boeing.

US Event Calendar

• 7:00am: MBA Mortgage Applications, Jan. 24 (prior 4.7%) Central Banks
• 2:00pm: FOMC Rate Decision, Jan. 29, est. 0%-0.25% (prior 0%-0.25%); Fed pace of QE, est. $65b/mo. (prior $75b/mo.)
• 3:00pm: Reserve Bank of New Zealand cash rate seen remaining at 2.5%
• Today at 11:30 am, the Treasury sells its first $15b in 2Y FRN

Overnight headline bulletin from Bloomberg and Ran:

• Spot TRY rate reversed over a half of the spike post the rate decision and the Turkish stock market gradually moved into negative territory as questions are raised over growth prospects in EM.
• Bunds reversed the opening gap lower and edged into minor positive territory, supported by touted monthend buying and also the release of the latest Eurozone M3 data.
• Treasuries
  fall for a third day, led by 7Y and 10Y notes, as week’s auctions
  continue with inaugural offering of 2Y FRNs and before Fed meeting
  concludes; FOMC widely expected to reduce asset purchases by another
  $10b.
• Economists remain divided on how the central bank will
  react to any future shocks that threaten financial stability as U.S.
  economy improves
• Turkey’s central bank resisted government pressure and raised all of its main interest rates at an emergency late- night meeting in an effort to shore up the lira; the overnight lending rate went to 12% from 7.75%
• Investors in Asia overseeing more than $650b plan to shun the Treasury’s floater auction today, raising concern that demand  may prove underwhelming
• U.K. house prices rose for a 13th month in January to their highest level in almost six years as the economy gained momentum, Nationwide Building Society said
• German consumer confidence index will rise to 8.2 in February, GfK says in report; sentiment to reach highest level since Aug. 2007
• China Credit Trust Co. has repaid the principal to some investors of its 3b yuan ($496m) high-yield product that faced default, according to investors who accepted the bailout offer
• India central bank Governor Raghuram Rajan signaled he’s preparing to follow through on proposals to make inflation the bank’s top priority even at the risk of friction with Prime Minister Manmohan Singh’s government
• Deutsche Bank AG cut total compensation for employees at its investment bank 23 percent in the fourth quarter as a slide in revenue contributed to a loss for the period
• Ukrainian President Viktor Yanukovych failed to quell nationwide street protests calling for his resignation after days of concessions culminated in the departure of his loyalist prime minister
• Obama’s State of the Union message centered on economic  inequalities, a theme echoed by Democrats on Capitol Hill; political strategists say it may not be as potent as when Obama ran against multimillionaire Mitt Romney
• Edward Snowden was nominated for the Nobel Peace Prize by Norwegian politicians, including a former government minister, for contributing to transparency and global stability by exposing a U.S. surveillance program
• Sovereign yields mostly higher; EU peripheral spreads narrow. Asian and European equity markets, U.S. stock-index futures gain. WTI crude and gold lower, copper higher

Asian Headlines

Asian equity markets settled higher, with the Nikkei 225 gaining over 2%, with sentiment across the region lifted after the Turkish central bank aggressively hiked interest rates to stabilize the domestic currency amid the recent EM worries.

EU & UK Headlines

After gaping lower at the open, Bunds have edged into minor positive territory, supported by touted monthend buying and also the release of the latest Eurozone M3 data.
Eurozone M3 Money Supply (Dec) Y/Y 1.0% vs Exp. 1.7% (Prev. 1.5%)
– Eurozone M3 3-month average (Dec) 3M 1.3% vs Exp. 1.5% (Prev. 1.7%)
– Eurozone (Dec) annual growth loans to private sector at -2.3%, according to the ECB

Barclays preliminary pan-Euro agg month-end extensions: +0.13y (12m avg. +0.07y)

Barclays preliminary Sterling month-end extensions:+0.19y (12m avg. +0.06y)

US Headlines

US President Obama delivered the annual State of the Union Address and urged Congress to raise the national minimum wage to USD 10.10 per hour. Obama reiterated his veto threat on possible new Iranian sanctions if it threatens to derail talks. (BBG)

Barclays preliminary US Tsys month-end extensions:+0.06y (12m avg. +0.07y)

Equities

Stocks in Europe have failed to sustain upward price action observed at the open and have gradually closed the gap as market participants positioned for the release of the FOMC rate decision and also questioned the implications that higher rates will have on growth prospects in Turkey and other EM. Nevertheless, stocks in Europe have managed to hold onto marginal gains, supported by basic materials sector following consensus beating earnings by Anglo American and Antofagasta, while financials also gained on the back of consequent credit and bond yield spread tightening.

FX

The Turkish Central Bank hiked the overnight lending rate by 425bps to 12.00% from 7.75%, raised the overnight borrowing rate by 450bps to 8.00% from 3.50%, and raised the benchmark repurchase rate by 550bps to 10.00% from 4.50%.

Safe haven currencies such as CHF and JPY were supported, as market participants questioned the implications that higher interest rates will have on future growth prospects.

Press conference by the South African central bank due at 1300GMT and the rate decision due shortly at approximately 1320GMT.

Commodities

Libya’s deputy oil minister has said crude exports are down by 60% due to the shutdown of major ports in the country. (MENA)
US API Crude Oil Inventories (Jan 24) W/W 4750k vs. Prev. 4860k
– Cushing Crude Inventories (Jan 24) W/W 221k vs. Prev. 772k
– Gasoline Inventories (Jan 24) W/W 363k vs. Prev. 1110k
– Distillate Inventories (Jan 24) W/W -1790k vs. Prev. -2290k

CME increased NYMEX natural gas margins 20% to USD 3,960 per contract. (BBG)

South African AMCU has said the 3 companies involved with the current strikes at platinum mines have made proposals to resolve the dispute, with talks set to continue today. (BBG)

* * *

Finally, here is Jim Reid’s overnight recap of all the market news that’s fit to highlight

EM investors hoping for the Central Bank of Turkey to deliver “shock and awe” policy were not disappointed after the CBRT delivered a dramatic tightening across all main interest rates at the stroke of midnight local time. At its emergency meeting last night, the CBRT hiked the benchmark one-week repo rate by 550bp from 4.50% to 10%, the overnight lending rate by 425bp from 7.75% to 12% and the overnight borrowing rate by 450bp from 3.5% to 8%. This was against expectations were that the central bank would hike the overnight lending rate by around 225bp, and last night’s announcement has effectively reversed years of policy easing in the CBRT’s bid to ensure price stability and support the lira. In addition to the rate hikes, the central bank also said that markets should treat the one-week repo as the main policy rate with liquidity to be provided via this benchmark, and that it will also seek to simplify the CBRT’s “operational framework”. The announcement saw USDTRY rally back below the 2.20 mark (2.16 as we type), now almost 7% lower since reaching record highs late last week. Meanwhile the Turkish 10yr bond gapped tighter by around 40bp in late European trading.

The CBRT’s policy move adds to the actions from a number of EM central banks over the past few days to shore up sentiment, including the Reserve Bank of India who delivered a surprise 25bp rate hike yesterday to address sticky inflation, the People’s Bank of China who has been active in injecting liquidity into the Chinese banking system over the past week, and the Central bank of Argentina who hiked rates earlier this week. The question remains whether the actions are sufficient enough to stabilize sentiment which has deteriorated sharply in recent weeks. Along the same vein, the South African Reserve Bank meets today, though it can be argued that the CBRT’s decision last night does take some pressure off the SARB to act today. Indeed, the South African rand has rallied 1.2% against the USD already this morning and consensus is that the SARB will hold fire on policy today.

Looking at Asian markets this morning, the CRBT’s decision has provided a timely boost to equity and credit markets across the region particularly for higher beta EMs. In terms of equities, there are sold gains being recorded in a number of EM indices including the HSCEI (+1.8%), Jakarta Composite (+1.8%) and KOSPI (+1.2%). The CBRT’s decision has provided a boost to USDJPY which is up more than 0.5% in the last 24 hours taking it firmly back above the 103 mark. This has buoyed the Nikkei (+2.2%) and the TOPIX (+2.3%) which are both leading the region’s gains. Asian EMFX are about a quarter of a percent firmer against the USD. On the credit side, EM sovereigns are having a strong day highlighted by Indonesia (5yr CDS 12bp tighter) and Philippines (5yr CDS -4bp) though both are off the tights. S&P500 futures gained around 8 points higher following the Turkish announcement and are trading 0.6% firmer as we type. Firmer risk sentiment has seen UST 10yr yields add 3bp to 2.78% in Asian trading.

Following the CBRT’s actions last night, the central bank focus turns to the Fed where the second day of the January FOMC and Bernanke’s final policy meeting, will be held today. The overwhelming consensus is that the Fed will deliver another $10bn taper at this month’s meeting, so any deviation from that view could bring substantial volatility to markets. For the record, our Chief Economist Peter Hooper thinks that the Fed will indeed deliver an uneventful meeting. The turbulence in EM financial markets is probably not seen as widespread or intense enough to warrant special recognition by the Committee. Given that the negative spillover to US financial markets has been relatively modest so far, and given that the dollar overall has actually declined a bit, Peter sees no reason for them to signal any potential change in US policy. And the US economic picture is improving enough to allow them to continue their current pace of tapering—another $10 bn cut in purchases at this meeting with no dissent. On the question of forward guidance, with the unemployment rate now sitting just above the 6.5% threshold for considering an increase in short-term rates, the question about reducing that threshold will arise again. There was not much sentiment in favor of such a reduction in December, and it seems unlikely there would be this time either. More likely they will be shifting their focus increasingly toward the low rate of core inflation as a reason to hold off raising rates for some time to come. Peter also highlights that the voting rolls will change at the January meeting, with a shift moderately in a hawkish direction. Presidents Rosengren (dissenting dove), Evans (dove), Bullard (center left) and George (dissenting hawk), will be replaced by Presidents Plossser and Fisher (both potentially dissenting hawks), Pianalto (center right) and Kocherlakota (potentially dissenting dove). Peter does not expect any dissents at the January meeting.

Even before the Turkish central bank decision, there were signs that sentiment was improving which allowed the S&P500 (+0.61%) and the MSCI EM (+0.26%) indices to record their first gains in four sessions. Yesterday’s US equities performance had a cyclical element to it with financials (+1.4%), industrials (+0.85%) and construction (+1.3%) leading the way higher. We wrote yesterday that Apple’s post-market results on Monday had the potential the weigh on Tuesday’s US market open, but this proved short-lived, with equities soon reaching an intraday high of 1794. Nonetheless, Apple stock did lose 8% yesterday. A couple of solid earnings reports from the likes of Pfizer and Ford helped set a positive tone, and erased any Apple-inspired weakness at the open. Another positive earnings anecdote came from US home-builder D.R. Horton Inc which soared almost 10% after it announced that January home sales were fairly strong and that the Spring selling season had got off to a good start. This helped offset some concern that home sales were slowing following a weaker-than-expected new home sales report on Monday. There was further good housing news with the US Case-Shiller home price index rising 0.9% in November (vs 0.8% expected), which pushed the year-on-year rate of change to a post-recession high of +13.7%. Credit outperformed on both sides of the Atlantic (CDX IG and Eur iTraxx both – 4bp) and the feedback seemed to suggest that long credit positioning had cleared out substantially during the selloff over last week/early this week.

Stocks and treasuries seemed to get another boost following the disappointing durable goods orders print which prompted a 4bp rally in 10yr UST yields. December durable goods declined 4.3% on the headline (+1.8% expected) and the prior month was revised down -0.8% to +2.6%. Ex-transportation orders fell -1.6% (+0.5% exp) after a -1.1% downward revision last month to +0.1%. Additionally, core orders, which consist of non-defence capital goods exaircraft, dropped 1.3% (+0.3% exp) following a -1.9% downward revision to November to +2.6%. DB’s Joe LaVorgna thinks that while durable goods orders were disappointing, more forward looking indicators such as the ISM new orders index remain firmly in positive territory and suggest that business spending will not significantly deteriorate in the current quarter. In other US data, the US consumer confidence index rose to 80.7 (78.0 expected).

Wrapping up some of the headlines, President Obama’s State of the Union address last night focused heavily the economy and income inequality. To that end, the President proposed raising the minimum wage through Executive Order from $7.25 to $10.10 per hour for Federal contract workers by 2015, creating a new government-backed private retirement savings plan and speeding up the implementation of a previously announced program to connect schools to broadband wireless (Washington Post). Obama also reiterated his call for a comprehensive bill that includes a path to citizenship for the country’s 11 to 12 million undocumented immigrants. Elsewhere in Europe the UK Telegraph reported that a verdict from the German Constitutional Court’s decision on the ECB’s OMT program has been delayed until April due to the complexity of the case and “intense differences of opinion” among the eight judges, citing a report in Frankfurter Rundschau newspaper. The Frankfurter Rundschau said it would be a “spectacular” reversal of prior rulings if the court agreed to any arrangement that eroded ECB’s independence, especially its seminal ruling on the Maastricht Treaty in the 1990s (UK Telegraph).

Aside from today’s FOMC, the other interesting macro events to look for today are the Euroarea money supply report and a speech from Mark Carney in Edinburgh. Today’s earnings calendar is highlighted by Dow Chemical and Boeing who report before the opening bell. The always-interesting Facebook earnings will be announced after the US market close. But all eyes will be on Bernanke’s final FOMC.

via Zero Hedge http://ift.tt/1mX1pjq Tyler Durden

The Fed tightens by a little (sorry, tapering – flow – is and always will be tightening): markets soar; Turkey tightens by a lot: markets soar. If only it was that easy everyone would tighten. Only it never is. Which is why as we just reported, the initial euphoria in Turkey is long gone and the Turkish Lira is basically at pre-announcement levels, only now the government has a furious, and loan-challenged population to deal with, not to mention an economy which has just ground to a halt. Anyway, good luck – other EMs already faded, including the ZAR which many are speculating could be the next Turkey, and certainly the USDJPY which sent futures soaring last night, only to fade all gains as well and bring equities down with it.

Following the CBRT’s actions last night, the central bank focus turns to the Fed where the second day of the January FOMC and Bernanke’s final policy meeting, will be held today. The overwhelming consensus is that the Fed will deliver another $10bn taper at this month’s meeting, so any deviation from that view could bring substantial volatility to markets. The turbulence in EM financial markets is probably not seen as widespread or intense enough to warrant special recognition by the Committee. Given that the negative spillover to US financial markets has been relatively modest so far, and given that the dollar overall has actually declined a bit, consensus sees no reason for them to signal any potential change in US policy. Deutsche Bank adds that on the question of forward guidance, with the unemployment rate now sitting just above the 6.5% threshold for considering an increase in short-term rates, the question about reducing that threshold will arise again. There was not much sentiment in favor of such a reduction in December, and it seems unlikely there would be this time either. More likely they will be shifting their focus increasingly toward the low rate of core inflation as a reason to hold off raising rates for some time to come.

Recall that the voting rolls will change at the January meeting, with a shift moderately in a hawkish direction. Presidents Rosengren (dissenting dove), Evans (dove), Bullard (center left) and George (dissenting hawk), will be replaced by Presidents Plossser and Fisher (both potentially dissenting hawks), Pianalto (center right) and Kocherlakota (potentially dissenting dove).

Also of note: today the Treasury sells its first $15 billion in 2 Year Floating Rate Notes, and there is no POMO.

Quick Market from RanSquawk

Focus this morning was yet again on EM after the Turkish central bank hiked rates late yesterday in order to suppress fears of further capital flight from the country. However after opening up over 2%, the domestic Turkish stock index gradually moved into negative territory, while the spot TRY rate has reversed almost half of the aggressive move lower observed following the rate hike, as market participants questioned the implications that higher interest rates will have on future growth prospects.

Nevertheless, heading into the North American open, stocks in Europe have closed the opening gap higher but remain in positive territory, with basic materials outperforming following the release of better than expected earnings by Anglo American and Antofagasta. In terms of other notable equity movers, Fiat shares plunged after the company failed to meet trading profit expectations, while Sainsbury’s shares in London fell over 6% after it was reported that CEO Justin King to step down.

In terms of macroeconomic release, the latest Eurozone M3 data showed that lending to the private sector declined by 2.3% in December, matching November, thus underpinning the view that the ECB will likely need to act in the near future. Going forward, focus will now turn to the FOMC decision at 1900GMT/1300CST, as well as earning by Facebook and Boeing.

US Event Calendar

• 7:00am: MBA Mortgage Applications, Jan. 24 (prior 4.7%) Central Banks
• 2:00pm: FOMC Rate Decision, Jan. 29, est. 0%-0.25% (prior 0%-0.25%); Fed pace of QE, est. $65b/mo. (prior $75b/mo.)
• 3:00pm: Reserve Bank of New Zealand cash rate seen remaining at 2.5%
• Today at 11:30 am, the Treasury sells its first $15b in 2Y FRN

Overnight headline bulletin from Bloomberg and Ran:

• Spot TRY rate reversed over a half of the spike post the rate decision and the Turkish stock market gradually moved into negative territory as questions are raised over growth prospects in EM.
• Bunds reversed the opening gap lower and edged into minor positive territory, supported by touted monthend buying and also the release of the latest Eurozone M3 data.
• Treasuries
  fall for a third day, led by 7Y and 10Y notes, as week’s auctions
  continue with inaugural offering of 2Y FRNs and before Fed meeting
  concludes; FOMC widely expected to reduce asset purchases by another
  $10b.
• Economists remain divided on how the central bank will
  react to any future shocks that threaten financial stability as U.S.
  economy improves
• Turkey’s central bank resisted government pressure and raised all of its main interest rates at an emergency late- night meeting in an effort to shore up the lira; the overnight lending rate went to 12% from 7.75%
• Investors in Asia overseeing more than $650b plan to shun the Treasury’s floater auction today, raising concern that demand  may prove underwhelming
• U.K. house prices rose for a 13th month in January to their highest level in almost six years as the economy gained momentum, Nationwide Building Society said
• German consumer confidence index will rise to 8.2 in February, GfK says in report; sentiment to reach highest level since Aug. 2007
• China Credit Trust Co. has repaid the principal to some investors of its 3b yuan ($496m) high-yield product that faced default, according to investors who accepted the bailout offer
• India central bank Governor Raghuram Rajan signaled he’s preparing to follow through on proposals to make inflation the bank’s top priority even at the risk of friction with Prime Minister Manmohan Singh’s government
• Deutsche Bank AG cut total compensation for employees at its investment bank 23 percent in the fourth quarter as a slide in revenue contributed to a loss for the period
• Ukrainian President Viktor Yanukovych failed to quell nationwide street protests calling for his resignation after days of concessions culminated in the departure of his loyalist prime minister
• Obama’s State of the Union message centered on economic  inequalities, a theme echoed by Democrats on Capitol Hill; political strategists say it may not be as potent as when Obama ran against multimillionaire Mitt Romney
• Edward Snowden was nominated for the Nobel Peace Prize by Norwegian politicians, including a former government minister, for contributing to transparency and global stability by exposing a U.S. surveillance program
• Sovereign yields mostly higher; EU peripheral spreads narrow. Asian and European equity markets, U.S. stock-index futures gain. WTI crude and gold lower, copper higher

Asian Headlines

Asian equity markets settled higher, with the Nikkei 225 gaining over 2%, with sentiment across the region lifted after the Turkish central bank aggressively hiked interest rates to stabilize the domestic currency amid the recent EM worries.

EU & UK Headlines

After gaping lower at the open, Bunds have edged into minor positive territory, supported by touted monthend buying and also the release of the latest Eurozone M3 data.
Eurozone M3 Money Supply (Dec) Y/Y 1.0% vs Exp. 1.7% (Prev. 1.5%)
– Eurozone M3 3-month average (Dec) 3M 1.3% vs Exp. 1.5% (Prev. 1.7%)
– Eurozone (Dec) annual growth loans to priv
ate sector at -2.3%, according to the ECB

Barclays preliminary pan-Euro agg month-end extensions: +0.13y (12m avg. +0.07y)

Barclays preliminary Sterling month-end extensions:+0.19y (12m avg. +0.06y)

US Headlines

US President Obama delivered the annual State of the Union Address and urged Congress to raise the national minimum wage to USD 10.10 per hour. Obama reiterated his veto threat on possible new Iranian sanctions if it threatens to derail talks. (BBG)

Barclays preliminary US Tsys month-end extensions:+0.06y (12m avg. +0.07y)

Equities

Stocks in Europe have failed to sustain upward price action observed at the open and have gradually closed the gap as market participants positioned for the release of the FOMC rate decision and also questioned the implications that higher rates will have on growth prospects in Turkey and other EM. Nevertheless, stocks in Europe have managed to hold onto marginal gains, supported by basic materials sector following consensus beating earnings by Anglo American and Antofagasta, while financials also gained on the back of consequent credit and bond yield spread tightening.

FX

The Turkish Central Bank hiked the overnight lending rate by 425bps to 12.00% from 7.75%, raised the overnight borrowing rate by 450bps to 8.00% from 3.50%, and raised the benchmark repurchase rate by 550bps to 10.00% from 4.50%.

Safe haven currencies such as CHF and JPY were supported, as market participants questioned the implications that higher interest rates will have on future growth prospects.

Press conference by the South African central bank due at 1300GMT and the rate decision due shortly at approximately 1320GMT.

Commodities

Libya’s deputy oil minister has said crude exports are down by 60% due to the shutdown of major ports in the country. (MENA)
US API Crude Oil Inventories (Jan 24) W/W 4750k vs. Prev. 4860k
– Cushing Crude Inventories (Jan 24) W/W 221k vs. Prev. 772k
– Gasoline Inventories (Jan 24) W/W 363k vs. Prev. 1110k
– Distillate Inventories (Jan 24) W/W -1790k vs. Prev. -2290k

CME increased NYMEX natural gas margins 20% to USD 3,960 per contract. (BBG)

South African AMCU has said the 3 companies involved with the current strikes at platinum mines have made proposals to resolve the dispute, with talks set to continue today. (BBG)

* * *

Finally, here is Jim Reid’s overnight recap of all the market news that’s fit to highlight

EM investors hoping for the Central Bank of Turkey to deliver “shock and awe” policy were not disappointed after the CBRT delivered a dramatic tightening across all main interest rates at the stroke of midnight local time. At its emergency meeting last night, the CBRT hiked the benchmark one-week repo rate by 550bp from 4.50% to 10%, the overnight lending rate by 425bp from 7.75% to 12% and the overnight borrowing rate by 450bp from 3.5% to 8%. This was against expectations were that the central bank would hike the overnight lending rate by around 225bp, and last night’s announcement has effectively reversed years of policy easing in the CBRT’s bid to ensure price stability and support the lira. In addition to the rate hikes, the central bank also said that markets should treat the one-week repo as the main policy rate with liquidity to be provided via this benchmark, and that it will also seek to simplify the CBRT’s “operational framework”. The announcement saw USDTRY rally back below the 2.20 mark (2.16 as we type), now almost 7% lower since reaching record highs late last week. Meanwhile the Turkish 10yr bond gapped tighter by around 40bp in late European trading.

The CBRT’s policy move adds to the actions from a number of EM central banks over the past few days to shore up sentiment, including the Reserve Bank of India who delivered a surprise 25bp rate hike yesterday to address sticky inflation, the People’s Bank of China who has been active in injecting liquidity into the Chinese banking system over the past week, and the Central bank of Argentina who hiked rates earlier this week. The question remains whether the actions are sufficient enough to stabilize sentiment which has deteriorated sharply in recent weeks. Along the same vein, the South African Reserve Bank meets today, though it can be argued that the CBRT’s decision last night does take some pressure off the SARB to act today. Indeed, the South African rand has rallied 1.2% against the USD already this morning and consensus is that the SARB will hold fire on policy today.

Looking at Asian markets this morning, the CRBT’s decision has provided a timely boost to equity and credit markets across the region particularly for higher beta EMs. In terms of equities, there are sold gains being recorded in a number of EM indices including the HSCEI (+1.8%), Jakarta Composite (+1.8%) and KOSPI (+1.2%). The CBRT’s decision has provided a boost to USDJPY which is up more than 0.5% in the last 24 hours taking it firmly back above the 103 mark. This has buoyed the Nikkei (+2.2%) and the TOPIX (+2.3%) which are both leading the region’s gains. Asian EMFX are about a quarter of a percent firmer against the USD. On the credit side, EM sovereigns are having a strong day highlighted by Indonesia (5yr CDS 12bp tighter) and Philippines (5yr CDS -4bp) though both are off the tights. S&P500 futures gained around 8 points higher following the Turkish announcement and are trading 0.6% firmer as we type. Firmer risk sentiment has seen UST 10yr yields add 3bp to 2.78% in Asian trading.

Following the CBRT’s actions last night, the central bank focus turns to the Fed where the second day of the January FOMC and Bernanke’s final policy meeting, will be held today. The overwhelming consensus is that the Fed will deliver another $10bn taper at this month’s meeting, so any deviation from that view could bring substantial volatility to markets. For the record, our Chief Economist Peter Hooper thinks that the Fed will indeed deliver an uneventful meeting. The turbulence in EM financial markets is probably not seen as widespread or intense enough to warrant special recognition by the Committee. Given that the negative spillover to US financial markets has been relatively modest so far, and given that the dollar overall has actually declined a bit, Peter sees no reason for them to signal any potential change in US policy. And the US economic picture is improving enough to allow them to continue their current pace of tapering—another $10 bn cut in purchases at this meeting with no dissent. On the question of forward guidance, with the unemployment rate now sitting just above the 6.5% threshold for considering an increase in short-term rates, the question about reducing that threshold will arise again. There was not much sentiment in favor of such a reduction in December, and it seems unlikely there would be this time either. More likely they will be shifting their focus increasingly toward the low rate of core inflation as a reason to hold off raising rates for some time to come. Peter also highlights that the voting rolls will change at the January meeting, with a shift moderately in a hawkish direction. Presidents Rosengren (dissenting dove), Evans (dove), Bullard (center left) and George (dissenting hawk), will be replaced by Presidents Plossser and Fisher (both potentially dissenting hawks), Pianalto (center right) and Kocherlakota (potentially dissenting dove). Peter does not expect any dissents at the January meeting.

Even before the Turkish central bank decision, there were signs that sentiment was improving which allowed the S&P500 (+0.61%) and the MSCI EM (+0.26%) indices to record their first gains in four sessions. Yesterday’s US equities performance had a cyclical element to it with financials (+1.4%), industrials (+0.85%) and construction (+1.3%) leading the way higher. We wrote yesterday that Apple’s post-m
arket results on Monday had the potential the weigh on Tuesday’s US market open, but this proved short-lived, with equities soon reaching an intraday high of 1794. Nonetheless, Apple stock did lose 8% yesterday. A couple of solid earnings reports from the likes of Pfizer and Ford helped set a positive tone, and erased any Apple-inspired weakness at the open. Another positive earnings anecdote came from US home-builder D.R. Horton Inc which soared almost 10% after it announced that January home sales were fairly strong and that the Spring selling season had got off to a good start. This helped offset some concern that home sales were slowing following a weaker-than-expected new home sales report on Monday. There was further good housing news with the US Case-Shiller home price index rising 0.9% in November (vs 0.8% expected), which pushed the year-on-year rate of change to a post-recession high of +13.7%. Credit outperformed on both sides of the Atlantic (CDX IG and Eur iTraxx both – 4bp) and the feedback seemed to suggest that long credit positioning had cleared out substantially during the selloff over last week/early this week.

Stocks and treasuries seemed to get another boost following the disappointing durable goods orders print which prompted a 4bp rally in 10yr UST yields. December durable goods declined 4.3% on the headline (+1.8% expected) and the prior month was revised down -0.8% to +2.6%. Ex-transportation orders fell -1.6% (+0.5% exp) after a -1.1% downward revision last month to +0.1%. Additionally, core orders, which consist of non-defence capital goods exaircraft, dropped 1.3% (+0.3% exp) following a -1.9% downward revision to November to +2.6%. DB’s Joe LaVorgna thinks that while durable goods orders were disappointing, more forward looking indicators such as the ISM new orders index remain firmly in positive territory and suggest that business spending will not significantly deteriorate in the current quarter. In other US data, the US consumer confidence index rose to 80.7 (78.0 expected).

Wrapping up some of the headlines, President Obama’s State of the Union address last night focused heavily the economy and income inequality. To that end, the President proposed raising the minimum wage through Executive Order from $7.25 to $10.10 per hour for Federal contract workers by 2015, creating a new government-backed private retirement savings plan and speeding up the implementation of a previously announced program to connect schools to broadband wireless (Washington Post). Obama also reiterated his call for a comprehensive bill that includes a path to citizenship for the country’s 11 to 12 million undocumented immigrants. Elsewhere in Europe the UK Telegraph reported that a verdict from the German Constitutional Court’s decision on the ECB’s OMT program has been delayed until April due to the complexity of the case and “intense differences of opinion” among the eight judges, citing a report in Frankfurter Rundschau newspaper. The Frankfurter Rundschau said it would be a “spectacular” reversal of prior rulings if the court agreed to any arrangement that eroded ECB’s independence, especially its seminal ruling on the Maastricht Treaty in the 1990s (UK Telegraph).

Aside from today’s FOMC, the other interesting macro events to look for today are the Euroarea money supply report and a speech from Mark Carney in Edinburgh. Today’s earnings calendar is highlighted by Dow Chemical and Boeing who report before the opening bell. The always-interesting Facebook earnings will be announced after the US market close. But all eyes will be on Bernanke’s final FOMC.

via Zero Hedge http://ift.tt/1mX1pjq Tyler Durden

So much for the credibility of the CBRT? After the Lira soared, and the USDTRY plummeted by just under 1000 pips yesterday when the Turkish Central Bank announced its “shock and awe” intervention, it has since pared back virtually all gains, and at last check was just over 2.24 having nearly roundtripped in 12 hours. Why the loss faith? Two reasons: First, as we pointed out yesterday, suddenly the domestic situation in Turkey takes front stage again, with 4.25% added elements of instability, causing the political instability to soar, leading to an even higher probability of a social and political overhaul. Second, as Goldman pointed out overnight, “the CBRT stated that liquidity “… will be provided primarily from one-week repo rate instead of the marginal funding rate in the forthcoming period”. This implies that the effective rate hike is 225bp (to 10.00%; the 1-week repo rate), as the Non-PD lending rate was 7.75% prior to the announcement.”

In other words, when looked at on a corridor basis, the CBRT hiked not by a shocking and awing 425 bps but by precisely the predicted 225 bps! Which means the central bankers merely went along consensus, and not a basis point above it, which is the worst of all worlds – giving the impression of massive tightening (for domestic political purposes), while in reality not doing all that much.

The end result, well – see for yourselves:

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