Tag: news

In what is sure to be met with cries of derision across the European Union, in line with what the IMF had previously recommended (and we had previously warned as inevitable), the Bundesbank said on Monday that countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help. As Reuters reports, the Bundesbank states, "(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government's obligations before solidarity of other states is required." However, they note that they will not support an implementation of a recurrent wealth tax in Germany, saying it would harm growth. We await the refutation (or Draghi's jawbone solution to this line in the sand.)

 

Via Reuters,

Germany's Bundesbank said on Monday that countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help.

 

The Bundesbank's tough stance comes after years of euro zone crisis that saw five government bailouts. There have also bond market interventions by the European Central Bank in, for example, Italy where households' average net wealth is higher than in Germany.

 

"(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government's obligations before solidarity of other states is required," the Bundesbank said in its monthly report.

 

It warned that such a levy carried significant risks and its implementation would not be easy, adding it should only be considered in absolute exceptional cases, for example to avert a looming sovereign insolvency.

 

…

 

The German Institute for Economic Research calculated in 2012 that in Germany a 10-percent levy on a tax base derived from a personal allowance of 250,000 euros would add up to around 230 billion euros. It did not give a figure for crisis countries due to lack of sufficient data.

 

Greece has been granted bailout funds of 240 billion euros from the euro area, its national central banks and IMF to protect it from a chaotic default and possible exit from the euro zone. Not all funds have been paid out yet.

 

In Germany, however, the Bundesbank said it would not support an implementation of a recurrent wealth tax, saying it would harm growth.

 

…

 

"It is not the purpose of European monetary policy to ensure solvency of national banking systems or governments and it cannot replace necessary economic adjustments or bank balance sheet clean ups," the Bundesbank said.

 

As BCG concluded previously:

In considering some of the potential measures likely to be required, the reader may be struck by the essential problem facing politicians: there may be only painful ways out of the crisis.

 

…

 

There is one thing we would like to bring to our readers' attention because we are confident, that one way or another, sooner or later, it will be implemented. Namely a one-time wealth tax: in other words, instead of stealth inflation, the government will be forced to proceed with over transfer of wealth. According to BCG, the amount of developed world debt between household, corporate and government that needs to be eliminated is just over $21 trillion. Which unfortunately means that there is an equity shortfall that will have to be funded with incremental cash which will have to come from somewhere. That somewhere is tax of the middle and upper classes, which are in possession of $74 trillion in financial assets, which in turn will have to be taxed at a blended rate of 28.7%.

 

The programs BCG (and the Bundesbank) described would be drastic. They would not be popular, and they would require broad political coordinate and leadership – something that politicians have replaced up til now with playing for time, in spite of a deteriorating outlook. Acknowledgment of the facts may be the biggest hurdle. Politicians and central bankers still do not agree on the full scale of the crisis and are therefore placing too much hope on easy solutions. We need to understand that balance sheet recessions are very different from normal recessions.  The longer the politicians and bankers wait, the more necessary will be the response outlined in this paper.  Unfortunately, reaching consensus on such tough action might requiring an environment last seen in the 1930s

 

 

via Zero Hedge http://ift.tt/1es8rrR Tyler Durden

In what is sure to be met with cries of derision across the European Union, in line with what the IMF had previously recommended (and we had previously warned as inevitable), the Bundesbank said on Monday that countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help. As Reuters reports, the Bundesbank states, "(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government's obligations before solidarity of other states is required." However, they note that they will not support an implementation of a recurrent wealth tax in Germany, saying it would harm growth. We await the refutation (or Draghi's jawbone solution to this line in the sand.)

 

Via Reuters,

Germany's Bundesbank said on Monday that countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help.

 

The Bundesbank's tough stance comes after years of euro zone crisis that saw five government bailouts. There have also bond market interventions by the European Central Bank in, for example, Italy where households' average net wealth is higher than in Germany.

 

"(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government's obligations before solidarity of other states is required," the Bundesbank said in its monthly report.

 

It warned that such a levy carried significant risks and its implementation would not be easy, adding it should only be considered in absolute exceptional cases, for example to avert a looming sovereign insolvency.

 

…

 

The German Institute for Economic Research calculated in 2012 that in Germany a 10-percent levy on a tax base derived from a personal allowance of 250,000 euros would add up to around 230 billion euros. It did not give a figure for crisis countries due to lack of sufficient data.

 

Greece has been granted bailout funds of 240 billion euros from the euro area, its national central banks and IMF to protect it from a chaotic default and possible exit from the euro zone. Not all funds have been paid out yet.

 

In Germany, however, the Bundesbank said it would not support an implementation of a recurrent wealth tax, saying it would harm growth.

 

…

 

"It is not the purpose of European monetary policy to ensure solvency of national banking systems or governments and it cannot replace necessary economic adjustments or bank balance sheet clean ups," the Bundesbank said.

 

As BCG concluded previously:

In considering some of the potential measures likely to be required, the reader may be struck by the essential problem facing politicians: there may be only painful ways out of the crisis.

 

…

 

There is one thing we would like to bring to our readers' attention because we are confident, that one way or another, sooner or later, it will be implemented. Namely a one-time wealth tax: in other words, instead of stealth inflation, the government will be forced to proceed with over transfer of wealth. According to BCG, the amount of developed world debt between household, corporate and government that needs to be eliminated is just over $21 trillion. Which unfortunately means that there is an equity shortfall that will have to be funded with incremental cash which will have to come from somewhere. That somewhere is tax of the middle and upper classes, which are in possession of $74 trillion in financial assets, which in turn will have to be taxed at a blended rate of 28.7%.

 

The programs BCG (and the Bundesbank) described would be drastic. They would not be popular, and they would require broad political coordinate and leadership – something that politicians have replaced up til now with playing for time, in spite of a deteriorating outlook. Acknowledgment of the facts may be the biggest hurdle. Politicians and central bankers still do not agree on the full scale of the crisis and are therefore placing too much hope on easy solutions. We need to understand that balance sheet recessions are very different from normal recessions.  The longer the politicians and bankers wait, the more necessary will be the response outlined in this paper.  Unfortunately, reaching consensus on such tough action might requiring an environment last seen in the 1930s

 

 

via Zero Hedge http://ift.tt/1es8rrR Tyler Durden

Define irony: literally hours after one of the world’s most renowned bears says it is “not yet bear o’clock“, markets have their worst daily crash in months. So what is Bob to do? Why issue a follow up opinion of course…

Bob’s World: Is it bear o’clock now?

It’s funny how – after not writing for over two months – I put a note out last week (highlighting some key levels) and within hours of publishing we have gone on to test and break some of these key levels. So in the spirit of the ongoing narrative:

1 – I remain firmly and resolutely structurally BEARISH the post-2008/09 QE driven rally in risk assets. So no change there. As the year unfolds in both EM and DM we will I think see that most major and relevant data (economic) and earnings trends will be weak or deflationary. QE has so far failed to create the broad-based real economy inflation in incomes, earnings and productivity needed to get growth going again and thus has largely failed to achieve its primary objective, which was to drive the much-needed post-2008/09 debt deleveraging – heavy indebtedness, now also including the EM bloc, still dominates.

2 – Of course QE has been a friend for the paper wealth of the top 1%, at the expense of the many, through boosting speculation and financial engineering. But as we can all see, QE stopped being a friend of commodities in 2010/11, it stopped being a positive for EM around late 2012/13, has I think stopped being a positive for housing assets from around mid-2013/early 2014, and in 2014/15 the ‘last man standing’ in the QE fan club – equities – will also fall out of love with QE. Why? Because as 2014 unwinds the data will I think expose policymakers as falling far behind the curve, persisting with a policy tool, whose ‘success’ is increasingly narrowly based and which is failing to deliver broad-based inflation, growth or any other meaningful positives to the real economy, whose incomes, earnings and cashflows must ultimately validate all financial market asset valuations. I think later in 2014 the themes of deflation and recession will dominate, and in the middle of this it will I think be painful to watch Ms Janet Yellen and other policymakers flip flop and attempt to extract themselves from their policy errors.

3 – Focusing on the shorter term we think that weak Chinese data are just an excuse for last week’s price action. The reality is that the pressure behind the dam had been building for weeks – there was excessively bullish positioning and sentiment coming into 2014. Fear and greed was at work again. Investors were too hopeful coming into 2014, and last week fear dominated as, so far in 2014, the global data points to very mediocre global growth at best, mediocre earnings, and generally deflationary economic data. The important thing for me now is that after failing to see a weekly close above 1850 on the S&P500, last week there was a weekly close below 1800, which forces me to rethink my timing. My best guess from here now is:

A – Using the S&P500 as a risk proxy, 1800 and 1770 as weekly closes are now key levels. Intra-week we can bounce around, but we need to see – this week or next week latest, a weekly close above 1800 if we are going to see a quick turnaround and rally back to 1850. In such a case, and as per my note from last week, once we see a weekly close above 1850, then 1950 S&P by April remains the target.

B – If we cannot recapture 1800 this week or next, then a weekly close below 1770 points to a much more bearish picture for February. A weekly close below 1770 this week or next tells me that the risk/rewards favour a meaningful risk-off move to the low-1700s in the S&P during February, with even 1650 and 1600 possible. In this more bearish short-term scenario I’d expect Ms Yellen and her late February testimony on the Hill to be a catalyst for a bullish turnaround – if the S&P drops 100/150 points in the next 2-3 weeks I suspect that she will then send out extremely dovish signals, which the market will not be able to resist responding to! At this point in time, if this is indeed how it plays out, then from late February through to April I’d look to recapture 1800 and then aim for a weekly S&P close above 1850 into end Q1 2013 or April.

C – As per 3A above, upon a weekly close above 1850, then 1950 still attracts. But clearly 1950 is more likely under scenario 3A rather than under scenario 3B – under scenario 3B 1850 may act like a major double top. Based on last week’s closes I am now 60/40 in favour of scenario 3B.

Let’s see, but either way 2014 is already proving to be more challenging, more volatile, more illiquid and more bearish than the significantly bullish positioning and sentiment indicators warranted as we came into this year, and way more bearish than the enormously bullish consensus emanating from the sell-side. We will see painful counter-trend rallies, perhaps even to marginal new highs (3A above) – never underestimate the willingness and ability of central bankers to persist with flawed policies – but overall I think the end of the post-2009 QE-driven bull is at hand (or very soon to be at hand) and the onset of the next significant (post-QE) deflationary bear market, which I think will run deep into 2015, should now begin to guide all investment decisions.
 
Regards

Bob

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

Define irony: literally hours after one of the world’s most renowned bears says it is “not yet bear o’clock“, markets have their worst daily crash in months. So what is Bob to do? Why issue a follow up opinion of course…

Bob’s World: Is it bear o’clock now?

It’s funny how – after not writing for over two months – I put a note out last week (highlighting some key levels) and within hours of publishing we have gone on to test and break some of these key levels. So in the spirit of the ongoing narrative:

1 – I remain firmly and resolutely structurally BEARISH the post-2008/09 QE driven rally in risk assets. So no change there. As the year unfolds in both EM and DM we will I think see that most major and relevant data (economic) and earnings trends will be weak or deflationary. QE has so far failed to create the broad-based real economy inflation in incomes, earnings and productivity needed to get growth going again and thus has largely failed to achieve its primary objective, which was to drive the much-needed post-2008/09 debt deleveraging – heavy indebtedness, now also including the EM bloc, still dominates.

2 – Of course QE has been a friend for the paper wealth of the top 1%, at the expense of the many, through boosting speculation and financial engineering. But as we can all see, QE stopped being a friend of commodities in 2010/11, it stopped being a positive for EM around late 2012/13, has I think stopped being a positive for housing assets from around mid-2013/early 2014, and in 2014/15 the ‘last man standing’ in the QE fan club – equities – will also fall out of love with QE. Why? Because as 2014 unwinds the data will I think expose policymakers as falling far behind the curve, persisting with a policy tool, whose ‘success’ is increasingly narrowly based and which is failing to deliver broad-based inflation, growth or any other meaningful positives to the real economy, whose incomes, earnings and cashflows must ultimately validate all financial market asset valuations. I think later in 2014 the themes of deflation and recession will dominate, and in the middle of this it will I think be painful to watch Ms Janet Yellen and other policymakers flip flop and attempt to extract themselves from their policy errors.

3 – Focusing on the shorter term we think that weak Chinese data are just an excuse for last week’s price action. The reality is that the pressure behind the dam had been building for weeks – there was excessively bullish positioning and sentiment coming into 2014. Fear and greed was at work again. Investors were too hopeful coming into 2014, and last week fear dominated as, so far in 2014, the global data points to very mediocre global growth at best, mediocre earnings, and generally deflationary economic data. The important thing for me now is that after failing to see a weekly close above 1850 on the S&P500, last week there was a weekly close below 1800, which forces me to rethink my timing. My best guess from here now is:

A – Using the S&P500 as a risk proxy, 1800 and 1770 as weekly closes are now key levels. Intra-week we can bounce around, but we need to see – this week or next week latest, a weekly close above 1800 if we are going to see a quick turnaround and rally back to 1850. In such a case, and as per my note from last week, once we see a weekly close above 1850, then 1950 S&P by April remains the target.

B – If we cannot recapture 1800 this week or next, then a weekly close below 1770 points to a much more bearish picture for February. A weekly close below 1770 this week or next tells me that the risk/rewards favour a meaningful risk-off move to the low-1700s in the S&P during February, with even 1650 and 1600 possible. In this more bearish short-term scenario I’d expect Ms Yellen and her late February testimony on the Hill to be a catalyst for a bullish turnaround – if the S&P drops 100/150 points in the next 2-3 weeks I suspect that she will then send out extremely dovish signals, which the market will not be able to resist responding to! At this point in time, if this is indeed how it plays out, then from late February through to April I’d look to recapture 1800 and then aim for a weekly S&P close above 1850 into end Q1 2013 or April.

C – As per 3A above, upon a weekly close above 1850, then 1950 still attracts. But clearly 1950 is more likely under scenario 3A rather than under scenario 3B – under scenario 3B 1850 may act like a major double top. Based on last week’s closes I am now 60/40 in favour of scenario 3B.

Let’s see, but either way 2014 is already proving to be more challenging, more volatile, more illiquid and more bearish than the significantly bullish positioning and sentiment indicators warranted as we came into this year, and way more bearish than the enormously bullish consensus emanating from the sell-side. We will see painful counter-trend rallies, perhaps even to marginal new highs (3A above) – never underestimate the willingness and ability of central bankers to persist with flawed policies – but overall I think the end of the post-2009 QE-driven bull is at hand (or very soon to be at hand) and the onset of the next significant (post-QE) deflationary bear market, which I think will run deep into 2015, should now begin to guide all investment decisions.
 
Regards

Bob

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

While HSBC itself may be having some rather substantial capital outflow issues, that does not prevent its head of EM research, Pablo Goldberg, to list four reasons why the current series of “painful though unrelated flare-ups” in key markets may last. To wit:

1) Reinforcement of preference for DM vs EM

    –  While EM have cheapened vs DM, value might not be enough as long as the flow continues to favor DM

2) Potential short-term solutions leading to longer-term problems

3) FX depreciation leading to outflows from local markets

4) Due to decentralized nature of these shocks, no silver bullet can restore appetite for risk

Of course, he saved the best for last: “Unlike the market shocks of recent years, QE or IMF bailouts unlikely to come to rescue this time.” Which really is all that matters in a time when the Fed has begun tapering and any market not economy data-driven untapering, will merely serve to kill its credibility that much faster.1

Finally, in order to assess EM demand, Goldberg recommends tracking 1Y/1Y swaps, China PMIs and EPFR flows data to see when/if the capital outflow trend will reverse.

Source: Bloomberg

via Zero Hedge http://ift.tt/1mNJ8Fa Tyler Durden

While HSBC itself may be having some rather substantial capital outflow issues, that does not prevent its head of EM research, Pablo Goldberg, to list four reasons why the current series of “painful though unrelated flare-ups” in key markets may last. To wit:

1) Reinforcement of preference for DM vs EM

    –  While EM have cheapened vs DM, value might not be enough as long as the flow continues to favor DM

2) Potential short-term solutions leading to longer-term problems

3) FX depreciation leading to outflows from local markets

4) Due to decentralized nature of these shocks, no silver bullet can restore appetite for risk

Of course, he saved the best for last: “Unlike the market shocks of recent years, QE or IMF bailouts unlikely to come to rescue this time.” Which really is all that matters in a time when the Fed has begun tapering and any market not economy data-driven untapering, will merely serve to kill its credibility that much faster.1

Finally, in order to assess EM demand, Goldberg recommends tracking 1Y/1Y swaps, China PMIs and EPFR flows data to see when/if the capital outflow trend will reverse.

Source: Bloomberg

via Zero Hedge http://ift.tt/1mNJ8Fa Tyler Durden

• Emerging sell-off hits European shares, lifts yen (Reuters) – but not really if you hit refresh since the latest central bank bailout announcement
• Apple’s Holiday Results to Show Whether Growth Is Back (BBG)
• Israel attacked Syrian base in Latakia, Lebanese media reports (Haaretz)
• Abenomics FTW: Japan Posts Record Annual Trade Deficit as Import Bill Soars (BBG)
• When all else fails, Spain’s hope lie in a 16th century saint: Saint “might help Spain out of crisis,” says interior minister (El Pais)
• Global Woes Fail to Send Cash Into U.S. Stocks (WSJ)
• IMF’s Lagarde sees eurozone inflation “way below target” (Reuters)
• Minimum wage bills pushed in at least 30 states (AP)
• AT&T Gives Up Right to Offer to Buy Vodafone Within 6 Months (BBG)
• Greece faces new black hole in finances amid rising tensions with creditors (Guardian)
• Politics, legacy loom over Obama decision on Keystone XL pipeline (Reuters)
• London Afternoon Currency Spikes Subside Under Regulators’ Glare  (BBG)
• China’s moon rover monitored with abnormity (Xinhua)

 

Overnight Media Digest

WSJ

* Governors across the U.S. are proposing tax cuts, increases in school spending and college-tuition freezes as growing revenue and mounting surpluses have states putting the recession behind them.

* President Obama’s State of the Union address Tuesday will seek to shift the public’s souring view of his leadership by proposing executive actions on infrastructure, job training, climate change and education.

* JPMorgan Chase Chief Executive James Dimon and Frank Bisignano, a former top lieutenant, recently agreed to a multimillion-dollar resolution of a hiring dispute that entangled the largest U.S. lender, a giant private-equity firm and two longtime fixtures on Wall Street.

* The euro zone’s weak inflation is making it difficult for “peripheral” countries such as Spain and Italy to cut debt and become more competitive internationally.

* Many professional investors are acknowledging, sometimes grudgingly, that Ben Bernanke has gone a long way toward achieving the main goal he set in 2008: He has stabilized markets and restored a large measure of investor and public confidence.

* Michaels Stores Inc said it may have been the victim of an attack on its data security, making it the third major chain in a rash of assaults aimed at U.S. retailers.

* U.S. corporations have worked for two decades to fend off securities class-action lawsuits. But new figures show that such cases have not abated.

Stockholders filed 234 federal securities class-action suits against U.S. companies last year, the most since 2008, according to a report by NERA Economic Consulting.

 

FT

ECB President Mario Draghi has hinted at buying bank loans to households and companies in an attempt to fight deflation in Europe. Speaking at the World Economic Forum in Davos, Draghi said ECB will leave its interest rates low for a long time and will act if situation warrants.

A research shows 31 companies of the FTSE-350 list warned of lower profits for the quarter ended December. Professional services firm EY said the same number of profit warnings was issued during the fourth quarter of 2008, the year of the financial crisis.

The UK car industry is set to see a 1 percent rise in new car sales in 2014 as fears of a saturated market disappear. UK’s biggest car manufacturers told FT that they are expecting a more than 10 percent growth from last year.

U.S. private-equity firm Warburg Pincus has appointed Peter Kukielski, ArcelorMittal’s former mining head, as “executive in residence” to aid its plan to buy non-core assets from natural resource groups.

A group of 22 insurers is preparing to launch a system to model natural disasters which would help them curb excessive exposure to heavy costs for calamities. Allianz, Zurich and the Lloyd’s of London are part of this group.

 

NYT

* Federal prosecutors are trying to thwart the easy access that predatory lenders and dubious online merchants have to Americans’ bank accounts by going after banks that fail to meet their obligations as gatekeepers to the U.S. financial system.

* There will be enough money to recapitalize banks that fail a review by the European Central Bank later this year, top European leaders said on Saturday, seeking to assuage lingering doubts whether policy makers will succeed in cleaning up the financial system and restoring the flow of credit.

* The British bank HSBC has apologised after reports that some customers were prevented from withdrawing large sums of cash from their accounts. HSBC said as part of a policy change put into effect in November, it began asking customers in some instances to show evidence of what they planned to do with large cash withdrawals.

* Uber, the hot start-up whose software allows anyone with a smartphone to get a cab ride, is suddenly facing trouble.

* NBCUniversal, a division of Comcast Corp, said it has extended the contract of Donna Langley, chairwoman of Universal Pictures, through 2017 and handed her oversight of worldwide marketing and overseas production.

* Google and Samsung Electronics Co Ltd , which are frequently involved in patent infringement lawsuits but not against each other, said on Sunday that they had reached a global patent cross-licensing agreement.

* Martin Marietta Materials Inc, a big producer of sand and gravel, is in late-stage talks to acquire Texas Industries Inc, according to people briefed on the matter. A deal for Texas Industries, a construction supplies company, could be announced early next week, these people said.

* Residents of Casselton, N.D., are concerned about the crude oil convoys that roll through their town, as what was once a stopgap becomes commonplace and safety standards lag.

* The bursting of the housing bubble didn’t deter affluent buyers for long. They are pouring back into the market, and adding options galore to their new homes.

* The Australia and New Zealand Banking Group is making big bets to court China, including Chinese-language signage and displays at the Australian Open tournament.

* In what may be the latest in a continuing spate of cyberattacks on American retailers, Michaels Stores said Saturday that it was investigating a potential security breach involving customers’ credit card information.

* After a week of speculation, it turns out that Ezra Klein, the prolific creator of The Washington Post’s Wonkblog, will be going to Vox Media, the online home of SB Nation, a sports site, and The Verge, a fast-growing technology site.

* The attendees at this year’s World Economic Forum have been hearing a consistent message, share your riches.

* Arianna Huffington and Nicolas Berggruen, a billionaire investor, announced the creation of WorldPost, a new website under the Huffington Post umbrella aimed at international issues.

 

Canada

THE GLOBE AND MAIL

* More than a million people across Canada worked for minimum wages or less last year, the fourth year in a row that number has been above the one million mark, according to Statistics Canada data. Since 2000, their numbers have nearly doubled.

* Worried Canadian pork producers are stepping up measures to fend off a potentially devastating virus that has cut a deadly swath across the United States and is showing its first signs of life across the border.

Reports in the business section:

* Cash offers have been skyrocketing, as much as seven-fold, for holdout Nebraska landowners who are willing to sign quickly to allow the Keystone XL pipeline onto their property.

NATIONAL POST

* As the world outside sought to identify who or what is to blame for the fire that claimed the lives of 32 nursing-home residents, people of the village took refuge in their 158-year-old church Sunday for a remarkable display of solidarity and compassion.

* A California company is claiming a world first with a Canadian-invented product that pumps contaminated hospital rooms full of antiseptic vapour, theoretically reaching every nook and cranny and letting no bacteria live. The product is a possible solution for “terminal clean,” the exhaustive disinfection of a hospital room tainted by drug-resistant superbugs or other dangerous microbes.

FINANCIAL POST

* A weak January doesn’t necessarily mean tech stocks are bound to underperform this year, and analysts and fund managers think they are well positioned to benefit from a rebounding global economy. But following a year of outsized returns, valuations, a perennial concern in the tech sector, have once again become a source of worry.

* A majority of Canadian investors don’t realize how damaging rising interest rates can be to their retirement portfolios, a new poll from CIBC Asset Management has found.

 

Britain

Sky News

LLOYDS AND TSB HIT BY CARD AND ATM PROBLEMS

Lloyds Banking Group has apologised after customers were unable to withdraw money from cashpoints or pay for goods with their debit cards. The group became aware of the difficulties on Sunday afternoon and later said the problems which lasted for several hours had been fixed.

VIRGIN MONEY SPEARS NEW DIRECTOR BEFORE FLOAT

Sky News understands that Virgin Money will this week name former Deutsche Bank executive Marilyn Spearing as a non-executive director, who joins a board populated by heavyweight City figures such as Sir David Clementi, the bank’s chairman.

The Telegraph

OFWAT TO HOLD BACK BIG WATER BILL RISES

Ofwat is expected on Monday morning to announce it has blocked the planned increases in water costs for the years 2015-2020 in effort to call time on the industry’s debt-driven business model.

SENIOR BUSINESS FIGURES HIT OUT AT LABOUR’S 50 PENCE TAX RATE PLAN

In the strongest criticism so far, the heads of 24 of Britain’s most successful companies warned in a letter to The Telegraph that Ed Miliband’s policy would threaten the recovery and cost jobs.

The Times

VODAFONE TO SPLASH CASH ON SPANISH ACQUISITION

Vodafone has approached the private equity owners of a Spanish broadband operator Grupo Corporativo ONO SA about a potential 7 billion pound offer as part of its efforts to expand across Europe. The British company is understood to have entered into talks with the shareholders of Ono.

NETWORK RAIL PRESSED TO CUT BOSSES’ BONUSES

Network Rail is under pressure from its members to cut bonuses after scathing criticism of executive pay at the company by the leading judge in England and Wales.

The Guardian

DAVID CAMERON PLEDGES TO RIP UP GREEN REGULATIONS David Cameron will on Monday boast of tearing up 80,000 pages of environmental protections and building guidelines as part of a new push to build more houses and cut costs for businesses. Addressing the Federation of Small Businesses conference, Cameron will argue that the new rules will make it “vastly cheaper” for businesses to comply with their environmental obligations.

FRACKING FIRMS SHOULD PAY 6 BLN POUND A YEAR TAX TO COMPENSATE FOR CLIMATE CHANGE -STUDY

Shale frackers operating in Britain should be paying 6 billion pounds a year in taxes by the middle of the 2020s to compensate for the damage wreaked on the environment, according to a study from Cambridge University.

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
New home sales for December will be reported at 10:00–Current consensus 450K
Dallas Fed manufacturing activity index will be reported at 10:30–Current consensus 3.3

ANALYST RESEARCH

Upgrades

Alamos Gold (AGI) upgraded to Outperform from Sector Perform at RBC Capital
Atlas Energy (ATLS) upgraded to Outperform from Neutral at RW Baird
E-Trade (ETFC) upgraded to Outperform from Market Perform at JMP Securities
Edison International (EIX) upgraded to Hold from Underperform at Jefferies
Honeywell (HON) upgraded to Buy from Hold at Lagenberg
MGIC Investment (MTG) upgraded to Outperform from Market Perform at JMP Securities
Merck (MRK) upgraded to Overweight from Underweight at Morgan Stanley
Meritage Homes (MTH) upgraded to Overweight from Equal Weight at Barclays
Mohawk (MHK) upgraded to Overweight from Neutral at JPMorgan
Peabody (BTU) upgraded to Neutral from Underperform at BofA/Merrill
Potash (POT) upgraded to Outperform from Market Perform at Raymond James
Prosperity Bancshares (PB) upgraded to Outperform from Market Perform at BMO Capital
RetailMeNot (SALE) upgraded to Buy from Neutral at Goldman
Xoom (XOOM) upgraded to Strong Buy from Market Perform at Raymond James

Downgrades

Ann Inc. (ANN) downgraded to Neutral from Buy at Janney Capital
BioCryst (BCRX) downgraded to Market Perform from Outperform at Wells Fargo
Cisco (CSCO) downgraded to Underweight from Neutral at JPMorgan
First Niagara (FNFG) downgraded to Hold from Buy at Jefferies
First Niagara (FNFG) downgraded to Market Perform from Outperform at Keefe Bruyette
Idenix (IDIX) downgraded to Underperform from Market Perform at JMP Securities
Integrated Device (IDTI) downgraded to Underweight from Equal Weight at Barclays
KB Home (KBH) downgraded to Underweight from Equal Weight at Barclays
Kansas City Southern (KSU) downgraded to Outperform from Strong Buy at Raymond James
Mallinckrodt (MNK) downgraded to Sell from Neutral at UBS
Manchester United (MANU) downgraded to Hold from Buy at Deutsche Bank
MercadoLibre (MELI) downgraded to Underperform from Neutral at BofA/Merrill
Mosaic (MOS) downgraded to Equal Weight from Overweight at Barclays
Sarepta (SRPT) downgraded to Market Perform from Outperform at JMP Securities
Toll Brothers (TOL) downgraded to Equal Weight from Overweight at Barclays
Xerox (XRX) downgraded to Market Perform from Outperform at BMO Capital
lululemon (LULU) downgraded to Neutral from Buy at Janney Capital

Initiations

AMC Entertainment (AMC) initiated with a Buy at Citigroup
AMC Entertainment (AMC) initiated with a Neutral at BofA/Merrill
AMC Entertainment (AMC) initiated with an Outperform at FBR Capital
AMC Entertainment (AMC) initiated with an Overweight at Piper Jaffray
AMC Entertainment (AMC) initiated with an Outperform at Credit Suisse
Clearwater Paper (CLW) initiated with an Outperform at RBC Capital
GAIN Capital (GCAP) initiated with a Buy at Jefferies
Layne Christensen (LAYN) initiated with a Hold at Jefferies
Mohawk (MHK) initiated with a Strong Buy at ISI Group
Preferred Apartment (APTS) initiated with an Outperform at Oppenheimer
RAIT Financial (RAS) initiated with a Buy at Deutsche Bank
Seaspan (SSW) initiated with a Neutral at Citigroup
Standard Pacific (SPF) initiated with a Neutral at ISI Group
Taylor Morrison (TMHC) initiated with a Neutral at ISI Group

HOT STOCKS

Liberty Global (LBTYA) to acquire Ziggo for $9.44B in cash, stock
Liberty Global (LBTYA, LBTYK) raised share buyback program by $1B, extended program completion
AT&T (T) doesn’t intend to bid on Vodafone (VOD)
Yahoo (YHOO) acquired Cloud Party, terms not disclosed
Samsung (SSNLF), Google (GOOG) signed global patent license agreement
21st Century Fox (FOXA) acquired majority stake in YES Network
Education Management (EDMC) received inquires on business practices from 12 states
Third Point liquidated stake in Herbalife (HLF)
Teva (TEVA), Active Biotech (ACTI) remain committed to Nerventra following CHMP negative opinion

EARNINGS
Companies that beat consensus earnings expectations last night and today include:
Haemonetics (HAE)

Companies that missed consensus earnings expectations include:
Regis (RGS), Home Federal Bancorp (HOME)

NEWSPAPERS/WEBSITES

• Comcast (CMCSA) not likely to make sole bid for Time Warner Cable (TWC), WSJ reports
• Apple (AAPL) looks to expand mobile payments business, WSJ reports 
• BlackRock’s (BLK) Fink warns of too much market optimism, Bloomberg reports
• Wal-Mart (WMT) to eliminate 2,300 Sam’s Club employees, WSJ reports
• Samsung (SSNLF) cut 2014 notebook shipments target to 7M, DigiTimes reports
• Google (GOOG) to acquire DeepMind for $400M, Re/code reports
• Large banks probed over payday lender fees, NY Times reports
• ICE (ICE) CEO Sprecher: Regulators need to look at ‘maker-taker’ trading, Reuters reports
• ESPN (DIS) looks to profit from online video, WSJ reports
• Alibaba moves into mobile games (YHOO), WSJ reports
• Foxconn weighs plans for U.S. panel manufacturing plant (AAPL), WSJ reports  

 
BARRON’S

Urban Outfitters (URBN) could rise over 30% in FY14
Hyundai (HYMTF) trades at a ‘steep discount’
AZZ (AZZ) shares could rise almost 20%
Aqua America’s (WTR) price could be an opportunity for a ‘buy and hold’
Deutsche Bank (DB) has ‘plenty of upside’
Bulls will continue to bet on Netflix (NFLX)
Microsoft (MSFT) is inexpensive but leadership questions linger

SYNDICATE

Ceres (CERE) files to sell $20M of common stock
TherapeuticsMD (TXMD) files to sell 12M shares for holders
Wheeler REIT (WHLR) files to sell 1.83M shares for holders

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

The last time the Turkish Central Bank announced, after the fact, it has failed to intervene decisevely in FX markets, the country’s currency collapse became a vivid example of what happens when monetary collapse looms and the monetary authority is unable to do anything about it. This morning, things got even more surreal after the Turkish lira cratered from 2.32 to a record low against the dollar, just shy of 2.39, when at 5:30 Eastern time, the Turkish CB decided to do what Draghi, Bernanke et al are so good at doing: threaten with some unknown future action, in the process spooking everyone into covering shorts. To wit:

• TURKEY CENTRAL BANK TO ANNOUNCE DECISION MIDNIGHT TOMORROW
• TURKEY CENTRAL BANK TO HOLD EXTRAORDINARY MEETING TOMORROW 
• TURKEY CENTRAL BANK MONETARY POLICY COMMITTEE TO MEET TOMORROW

What happened next was the most dramatic ramp in the USDJPY since December 30 for sure, and perhaps in history, when the pair plunged by 800 pips in the matter of hours.

Here is some more from the WSJ:

The Turkish lira rebounded strongly Monday after the central bank said it would schedule an extraordinary policy meeting on Tuesday to evaluate recent developments and take necessary measures to ensure price stability.

 

In a statement, the central bank said the decision would be published midnight local time (2200 GMT) on Tuesday. The news appeared to be interpret as a signal that Ankara would raise interest rates aggressively, sending the lira 2% higher at 1100 GMT.

 

Analysts said that failure to deliver significant increase in interest rates could spark a broad selloff. “They have to hike…and aggressively,” said Tim Ash, emerging markets economist at Standard Bank in London.

…

Last week, the central bank intervened directly in the currency markets for the first time in two years in an attempt to shore up the lira by spending precious foreign currency reserves.

Well, the hopes and prayers of the entire EM and DM world are now in the hands of Turkey. Make us proud, oh not quite European nation’s central bank and part with some more of your USD reserves in a way that would make Argentina proud. Hopefully in the process PM Erdogan does not do to you what he has so far done to anyone who has questioned his authority or inquired into corruption charges involving the Turkish oligarch: hand them a pink slip.

via Zero Hedge http://ift.tt/L1G3VF Tyler Durden

The last time the Turkish Central Bank announced, after the fact, it has failed to intervene decisevely in FX markets, the country’s currency collapse became a vivid example of what happens when monetary collapse looms and the monetary authority is unable to do anything about it. This morning, things got even more surreal after the Turkish lira cratered from 2.32 to a record low against the dollar, just shy of 2.39, when at 5:30 Eastern time, the Turkish CB decided to do what Draghi, Bernanke et al are so good at doing: threaten with some unknown future action, in the process spooking everyone into covering shorts. To wit:

• TURKEY CENTRAL BANK TO ANNOUNCE DECISION MIDNIGHT TOMORROW
• TURKEY CENTRAL BANK TO HOLD EXTRAORDINARY MEETING TOMORROW 
• TURKEY CENTRAL BANK MONETARY POLICY COMMITTEE TO MEET TOMORROW

What happened next was the most dramatic ramp in the USDJPY since December 30 for sure, and perhaps in history, when the pair plunged by 800 pips in the matter of hours.

Here is some more from the WSJ:

The Turkish lira rebounded strongly Monday after the central bank said it would schedule an extraordinary policy meeting on Tuesday to evaluate recent developments and take necessary measures to ensure price stability.

 

In a statement, the central bank said the decision would be published midnight local time (2200 GMT) on Tuesday. The news appeared to be interpret as a signal that Ankara would raise interest rates aggressively, sending the lira 2% higher at 1100 GMT.

 

Analysts said that failure to deliver significant increase in interest rates could spark a broad selloff. “They have to hike…and aggressively,” said Tim Ash, emerging markets economist at Standard Bank in London.

…

Last week, the central bank intervened directly in the currency markets for the first time in two years in an attempt to shore up the lira by spending precious foreign currency reserves.

Well, the hopes and prayers of the entire EM and DM world are now in the hands of Turkey. Make us proud, oh not quite European nation’s central bank and part with some more of your USD reserves in a way that would make Argentina proud. Hopefully in the process PM Erdogan does not do to you what he has so far done to anyone who has questioned his authority or inquired into corruption charges involving the Turkish oligarch: hand them a pink slip.

via Zero Hedge http://ift.tt/L1G3VF Tyler Durden

A slew of favorable overnight news, including a stronger than expected German IFO business climate print, reports that Draghi has signalled he would be prepared for the ECB to buy packages of bank loans to households and companies, when he said “the ECB might be able to buy securitised bank loans if they could be packaged as asset-backed securities in a transparent manner” (a QE-lite will hardly make the market happy), a largely expected bail out of the Chinese Trust Equals Gold imminent default (more in a subsequent post), as well as the announcement of Argentina’s new liberalized dollar purchase capital controls (which have a monthly purchase limit as well as a minimum income threshold), not to mention the traditional USDJPY levitation which drags all risk along with it, were unable to put an end to the ongoing rout in emerging markets, which saw the Turkish Lira collapse to fresh record lows before it jumped on news the Turkish Central Bank would hold an extraordinary meeting tomorrow (if the recent intervention by the CB is any indication, watch out), not to mention the Ruble, Zloty and even the Ukraine Hryvna dump as the outflows from EMs continued over a mixture of tapering fears as well as concern that the one way fund flow would accelerate creating its own positive feedback loop.

Is today the day the fund flow exodus will finally be halted? Stay tuned to find out and keep a close eye on the USDJPY – the most manipulated, confiduing-boosting “asset” in the world right now, more so than gold even.

Overnight headline bulletin

• Treasuries decline to start the week in partial reversal of last week’s haven flows that sent 10Y yields to lowest since mid-Nov.; first U.S. auction of floating- rate notes tomorrow, Fed decision Wednesday amid expectations QE will be pared by another $10b.
• Industrial & Commercial Bank of China Ltd. said investors in a troubled high-yield trust can recoup their funds, averting a threatened default that underscored concern over the shadow- banking system and helped spur a selloff in emerging-market currencies and stocks
• China’s trade numbers, distorted by fake exports last year, are set to come under renewed scrutiny after a discrepancy between Hong Kong and Chinese figures for bilateral trade widened to the largest in eight months
• China’s one-year interest-rate swap fell to the lowest level in more than a month on speculation the central bank will seek to bring down funding costs to support a slowing economy and curb the risk of defaults
• German business confidence as measured by the Ifo institute rose to the highest level in more than two years, reaching 110.6 in January from 109.5 in December
• U.K. business leaders attacked the opposition Labour Party’s plan to raise the top rate of income tax to 50% as a “backward step” that would damage the economy and put jobs at risk
• Ukraine’s political crisis deepened over the weekend as President Viktor Yanukovych’s offer to share power with the opposition failed to end anti-government unrest, raising the stakes for a special parliament session tomorrow
• Republican lawmakers said Obama risks antagonizing an already polarized Congress by threatening to use executive authority to make good on the policy agenda he will outline in his State of the Union address
• Sovereign yields mixed; Greek yield surge while U.K. 10Y yields decline; EU peripheral spreads narrow. Asian equity markets slide, Nikkei -2.5%, Shanghai -1%; European markets lower, U.S. equity-index futures post slight gains. WTI crude, copper higher; gold falls

More on what has transpired in global capital markets overnight from RanSquawk:

The release of better than expected German IFO survey, together with reports that ECB’s Draghi has signalled that he would be prepared for the ECB to buy packages of bank loans to households and companies failed to support stocks this morning, which traded lower since the get-go after BG Group (-15%) cut forecast and AT&T declared that it does not intend to make an offer for Vodafone (-5%). As a result, the FTSE-100 index underperformed its peers, with telecoms as the worst performing sector in Europe, closely followed by oil & gas. Also of note, Banca Popolare di Milano shares came under significant selling pressure this morning, which consequently weighed on other small Italian banking names after the bank approved capital hike of up to EUR 1.5bln.

Looking elsewhere, despite the risk averse sentiment, Bunds traded lower, as the looming supply, together with lack of any meaningful credit spread widening weighed on prices. At the same time, EM markets remained in focus, with pressure on TRY and others amid concerns over capital outflow.

Going forward, market participants will get to digest earnings by tech giant Apple and industrial heavy weight Caterpillar, as well as the release of the latest US New Home Sales report.

Asian Headlines

China credit trust have reached a pact to sell trust assets. China Credit Trust previously told investors it is in talks to raise the funds to pay off debts prior to maturity, which would otherwise lead to a landmark default in China’s shadow-banking sector. It was then later reported investors in Chinese trust marketed by ICBC are to get repayment offer. (BBG)

EU & UK Headlines

German IFO Business Climate (Jan) M/M 110.6 vs. Exp. 110.0 (Prev. 109.5)
– German IFO Current Assessment (Jan) M/M 112.4 vs. Exp. 112.4 (Prev. 111.6)
– German IFO Expectations (Jan) M/M 108.9 vs. Exp. 108.0 (Prev. 107.4)

ECB President Draghi signalled that he would be prepared for ECB to fight deflation in Europe by buying packages of bank loans to households and companies. (FT) When asked on QE, Draghi said “I’m not saying it should or it should not be done, but the ECB might be able to buy securitised bank loans if they could be packaged as asset backed securities in a transparent manner. (BBG/RTRS)

Barclays preliminary pan-Euro agg month-end extensions: +0.12y (12m avg. +0.07y)
Barclays preliminary Sterling month-end extensions:+0.19y

US Headlines

Going forward, market participants will get to digest earnings by tech giant Apple and industrial heavy weight Caterpillar, as well as the release of the latest US New Home Sales report.

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

Equities

The FTSE-100 index underperformed its peers since the open this morning, with Vodafone and BG Group under heavy
selling pressure. At the same time, financials remained out of favour amid the ongoing concerns over EM markets, together with reports that Italian listed Banca Popolare di Milano approved capital hike of up to EUR 1.5bln.

However, unlike last week, this failed to lead to aggressive credit spread widening and instead spreads remained tighter, likely supported by reports citing Draghi who said that the ECB is ready to buy packages of bank loans to households and companies.

FX

EM currencies remained under pressure this morning, with the spot TRY rate advancing to a fresh record high before reports that the Turkish central bank to hold an extraordinary meeting tomorrow sent the pair lower. However, other EM currencies such ZAR continued to weaken against the USD, rising to its highest level since October 2008 this morning.

Elsewhere, despite the ongoing concerns over EM outflows, USD/JPY remained bid, with the 1-month implied vol rate also better bid as the pair traded in close proximity to what is said to be a large option expiry level at 102.50.

The Turkish economy minister has said an economic crisis in the country is impossible, adding that the central bank has sufficient reserves to serve the market. (BBG)

Commodities

Morgan Stanley sceptical ‘blow-out’ in WTI-Brent is imminent and sees narrowing of WTI-Brent instead of widening. (BBG)

Indian government officials, Chidambaram and Bose, have said gold smuggling has risen in India and that India can revisit gold import curbs by end of this fiscal year, once current account deficit is controlled. (BBG)

Deutsche Bank wants to sell its place in the global gold and silver setting process, and is talking to prospective buyers, sources familiar with the situation said on Friday. (RTRS)

Fitch said Chinese aluminium prices are to remain low for the next 2 years. (BBG)

via Zero Hedge http://ift.tt/1clb7ef Tyler Durden