Signals Netflix shares rise on investor optimism

Signals NEW YORK (AP) -- Shares of Netflix Inc. rose Friday on expectations that its shares will get a boost from the upcoming release of its fourth-quarter results. THE SPARK: Netflix shares have risen more than 40 percent in just the past week, prompting investors to wonder just how high they can go. But B. Riley & Co. backed its 'Buy' rating for Los Gatos, Calif.-based Netflix, saying that investors should hold on to their shares until after the company's fourth-quarter conference call on Jan. 25, when it's expected to update its outlook for the year. THE BIG PICTURE: Netflix shares took a beating and subscribers fled after the company said in July that it would increase U.S. prices by as much as 60 percent. Things only got worse two months later when Netflix said it would spin off its DVD-by-mail rental service into a separate website called Qwikster. It scrapped that idea in October. Since peaking in mid-July, Netflix shares have lost about 70 percent of their value. THE ANALYSIS: Analysts for B. Riley noted that Netflix shares are rapidly approaching the firm's $100 price target and said the company will probably post quarterly losses through at least the first half of the year. But they also said that Netflix's customer base appears to be stabilizing, which should reassure investors that the company is holding its own against the competition. 'We continue to believe that Netflix offers consumers the greatest content variety versus price relationship of the various choices,' the analysts wrote in a note to investors. 'And with the surprisingly positive announcement early last week that Netflix streamed more than 2 billion hours of movie and TV show content in the fourth quarter, we believe this is more likely to be the case than not.' In addition, the company should eventually get a boost from the expansion of its steaming services into new international markets. THE SHARES: Up $2.32, or 2.5 percent, to $94.47 in afternoon trading.

Forex Europe hit by downgrade speculation

Forex ROME (AP) -- Europe's ability to fight off its debt crisis was again thrown into doubt Friday when the euro hit its lowest level in over a year and borrowing costs rose on expectations that the debt of several countries would be downgraded by rating agency Standard & Poor's. Stock markets in Europe and the U.S. plunged late Friday when reports of an imminent downgrade first appeared and the euro fell to a 17-month low. The fears of a downgrade brought a sour end to a mildly encouraging week for Europe's heavily indebted nations and were a stark reminder that the 17-country eurozone's debt crisis is far from over. Earlier Friday, Italy had capped a strong week for government debt auctions, seeing its borrowing costs drop for a second day in a row as it successfully raised as much as €4.75 billion ($6.05 billion). Spain and Italy completed successful bond auctions on Thursday, and European Central Bank president Mario Draghi noted 'tentative signs of stabilization' in the region's economy. A credit downgrade would escalate the threats to Europe's fragile financial system, as the costs at which the affected countries — some of which are already struggling with heavy debt loads and low growth — could borrow money would be driven even higher. The downgrade could drive up the cost of European government debt as investors demand more compensation for holding bonds deemed to be riskier than they had been. Higher borrowing costs would put more financial pressure on countries already contending with heavy debt burdens. In Greece, negotiations Friday to get investors to take a voluntary cut on their Greek bond holdings appeared close to collapse, raising the specter of a potentially disastrous default by the country that kicked off Europe's financial troubles more than two years ago. The deal, known as the Private Sector Involvement, aims to reduce Greece's debt by €100 billion ($127.8 billion) by swapping private creditors' bonds with new ones with a lower value, and is a key part of a €130 billion ($166 billion) international bailout. Without it, the country could suffer a catastrophic bankruptcy that would send shock waves through the global economy. Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos met on Thursday and Friday with representatives of the Institute of International Finance, a global body representing the private bondholders. Finance ministry officials from the eurozone also met in Brussels Thursday night. 'Unfortunately, despite the efforts of Greece's leadership, the proposal put forward ... which involves an unprecedented 50 percent nominal reduction of Greece's sovereign bonds in private investors' hands and up to €100 billion of debt forgiveness — has not produced a constructive consolidated response by all parties, consistent with a voluntary exchange of Greek sovereign debt,' the IIF said in a statement. 'Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach,' it said. Friday's Italian auction saw investors demanding an interest rate of 4.83 percent to lend Italy three-year money, down from an average rate of 5.62 percent in the previous auction and far lower than the 7.89 percent in November, when the country's financial crisis was most acute. While Italy paid a slightly higher rate for bonds maturing in 2018, which were also sold in Friday's auction, demand was between 1.2 percent and 2.2 percent higher than what was on offer. The results were not as strong as those of bond auctions the previous day, when Italy raised €12 billion ($15 billion) and Spain saw huge demand for its own debt sale. 'Overall, it underscores that while all the auctions in the eurozone have been battle victories, the war is a long way from being resolved (either way),' said Marc Ostwald, strategist at Monument Securities. 'These euro area auctions will continue to present themselves as market risk events for a very protracted period.' Italy's €1.9 trillion ($2.42 trillion) in government debt and heavy borrowing needs this year have made it a focal point of the European debt crisis. Italy has passed austerity measures and is on a structural reform course that Premier Mario Monti claims should bring down Italy's high bond yields, which he says are no longer warranted. Analysts have said the successful recent bond auctions were at least in part the work of the ECB, which has inundated banks with cheap loans, giving them ready cash that at least some appear to be using to buy higher-yielding short-term government bonds. Some 523 banks took €489 billion in credit for up to three years at a current interest cost of 1 percent.

Signals Is the Euro Decoupling From U.S. Stocks?

Signals Is the Euro Decoupling From U.S. Stocks? Companies: EUR/USD S&P 500 NASDAQ Composite RELATED QUOTES Symbol Price Change EURUSD=X 1.2832 +0.0123 ^GSPC 1,291.87 -0.61 ^IXIC 2,715.73 +4.97 ^DJI 12,432.35 -17.10 FXE 127.78 +1.22 For much of the last 15 years the S&P 500 and euro (the EU currency) have been moving in the same direction. Since its May 4, 2011 high (the euro topped two days after U.S. stocks) the euro has tumbled 15%. Worse yet, the euro has been falling over the past few weeks even though the S&P has remained stable. Will the S&P soon catch up with the euro, or is the euro about to decouple its positive correlation with U.S. equities? Euro Problems Euro problems are the reason for the bad euro season. U.S. stocks got to enjoy the Santa Claus Rally while the euro was stuck with debt concerns that include: - Eurozone governments need to refinance more than $1.3 trillion in debt in 2012. - Yields on Italian bonds crept up about 7% again (above 7% yields send Greece into a tailspin). - Standard & Poor's is expected to strip France of its AAA rating as early as this month. - Spain's banks need to raise an extra $65 billion to cover bad property loans. - In February, Italy needs to sell more debt than could be covered even if investors used all the proceeds of maturing securities to buy the bonds. Euro Hope Things are so bad for the euro (EURUSD=X), they are good. So it seems at least. The chart below shows the euro holdings of the 'smart' and 'dumb' money published by the Commodity Futures Trading Commission. The first gray graph shows total non-reportable short positions. Non-reportable are small traders considered the dumb money. The second gray graph shows reportable commercial short positions. Commercial traders are the 'pros' that actually provide a commodity or instrument and are considered the smart money. The data shows that non-reportable short positions are pretty high right now (data as of Tuesday) while commercial traders have closed nearly all their short positions. Based on COT sentiment data, the euro should be close to a bottom, at least a temporary one. Cause for U.S. Stock Rally? But wouldn't a rising euro translate into rising U.S. stocks? Under normal circumstances, yes it would. A look at the chart below shows that a rising euro usually correlates with a rising S&P 500. The red boxes highlight periods of falling euro and rising S&P (such as lately). The green box identifies a period of time when a rising euro (NYSEArca: FXE - News) coincided with falling (even rapidly falling) U.S. stock prices. This happened from October 2007 - July 2008. Putting Odds in Your Favor It's no secret that I declared the rally from the October lows to be a counter trend rally. Back on October 2, I stated via the ETF Profit Strategy updated that: 'I don't think October will 'kill' this bear market, but it should spur a powerful counter trend rally. Towards the end of this rally Wall Street may applaud the Fed for launching Operation Twist and QE3 may be considered unnecessary. This kind of positive environment would be fertile soil for the next bear market leg (Q1 or Q2 2012). From a technical point of view this counter trend rally should end somewhere around 1,275 - 1,300.' To identify high-probability trade setups, I like to see technicals, sentiment, and seasonality point in the same direction, such as they did in early October. From a seasonal perspective, October has the reputation of a 'bear market killer.' Sentiment polls showed the most bearish readings in over a year and the VIX (Chicago Options: ^VIX) was close to the 2010 high. At the same time, the S&P had reached rock bottom support. Based on the weight of evidence, the October 2 ETF Profit Strategy update also predicted that: 'The ideal market bottom would see the S&P dip below 1,088 intraday followed by a strong recovery and a close above 1,088.' On October 4, the S&P briefly dipped below 1,088 and closed the day at 1,124. A massive counter trend rally was born that day. The Next Setup? Seasonality is once again turning bearish (or at the very least less bullish). Since 2002, the S&P reached a January top followed by a drop greater than 8% five (out of ten) times. 51.1% of all investment advisors and newsletter-writing colleagues (polled by II) are bullish on stocks (the highest reading since May 3) while only 17% of individual investors (polled by AAII) are bearish, the second lowest reading in six years. From a technical point of view, the S&P (SNP: ^GSPC - News) is about to reach a daunting resistance cluster comprised of Fibonacci levels and various long and short-term trend lines. The Dow (DJI: ^DJI - News) is about to encounter two trend lines that go back nearly five years. The resistance clusters for the Nasdaq (Nasdaq: ^IXIC - News), Russell 2000 (NYSEArca: IJR - News), and financials (NYSEArca: XLF - News) are not as glaring but they're there. The only thing that doesn't quite fit into the equation is the euro's sentiment data illustrated above. Nevertheless, the weight of evidence suggests that a turnaround for stocks, and possibly another significant market top, may be just around the corner. The high probability strategy is to short U.S. stocks as soon as the resistance cluster is reached or support is broken. The ETF Profit Strategy Newsletter identifies the target of this rally along with a short, mid and long-term outlook and the corresponding ETF profit strategies.

Forex Obama seeks power to merge agencies

Forex WASHINGTON (AP) -- President Barack Obama on Friday took aim at his government's own messy bureaucracy, prodding Congress to give him greater power to merge agencies and promising he would start by collapsing six major economic departments into one. Pressing Republicans on one of their own political issues, Obama said it was time for an 'effective, lean government.' Obama wants the type of reorganizational authority last held by a president when Ronald Reagan was in office. Obama's version would be a so-called consolidation authority allowing him to propose only mergers that promise to save money and shrink government. The deal would help Obama considerably by entitling him to an up-or-down vote from Congress in 90 days. Still, final say would remain with lawmakers, both on whether to grant Obama this fast-track authority and then in deciding whether to approve any of his specific ideas. 'We can do this better,' Obama declared in an event with business owners at the White House, even presenting slides to help make his case. 'So much of the argument out there all the time is up at 40,000 feet, these abstract arguments about who's conservative or who's liberal,' Obama said. 'Most Americans — and certainly most small business owners — you guys are just trying to figure out how do we make things work, how do we apply common sense. And that's what this is about.' In an election year and a political atmosphere of tighter spending, Obama's move is about more than improving a giant bureaucracy. He is attempting to directly counter Republican arguments that he has presided over the kind of government regulation, spending and debt that can undermine the economy — a dominant theme of the emerging presidential campaign. Republicans have often aligned themselves with smaller government. So politically, Obama is trying to put the onus on Republicans in the House and Senate to show why they would be against the pursuit of leaner government. From Capitol Hill, a spokesman for Sen. Mitch McConnell of Kentucky, the top Republican in the Senate, pledged Obama's plan would get a careful review. But the spokesman, Don Stewart, also said: 'After presiding over one of the largest expansions of government in history, and a year after raising the issue in his last State of the Union, it's interesting to see the president finally acknowledge that Washington is out of control.' Obama has an imperative to deliver. He made the promise to come up with a smart reorganization of the government in his last State of the Union speech last January. At the time, Obama grabbed attention by pointing out the absurdity of government inefficiency. In what he called his favorite example, Obama said: 'The Interior Department is in charge of salmon while they're in fresh water, but the Commerce Department handles them when they're in saltwater. And I hear it gets even more complicated once they're smoked.' The White House said the problem is serious for consumers who turn to their government for help and often do not know where to begin. Not in decades has the government undergone a sustained reorganization of itself. Presidents have tried from time to time, but each part of the bureaucracy has its own defenders inside and outside the government, which can make merger ideas politically impossible. That's particularly true because 'efficiency' is often another way of saying people will lose their jobs. Obama hopes to enhance his chances by getting Congress to give him the assurance of a clean, relatively speedy vote on any of his proposals. There is no clear sign that Obama would get that cooperation. He spent much of 2011 in utter gridlock with Republicans in Congress. In the meantime, Obama announced Friday that Karen Mills, the administrator of the Small Business Administration, would be elevated to Cabinet-level rank. But her job would essentially disappear if Obama has his way. If he gets the new fast-track power to propose legislation, Obama's first project would be to combine six major operations of the government that focus on business and trade. They are: the Commerce Department's core business and trade functions; the Small Business Administration; the Office of the U.S. Trade Representative; the Export-Import Bank; the Overseas Private Investment Corporation; and the Trade and Development Agency. The goal would be one agency designed to help businesses thrive. The White House says 1,000 to 2,000 jobs would be cut, but the administration would do so through attrition; that is, as people routinely leave their jobs over time. The administration said the merger would save $3 billion over 10 years by getting rid of duplicative overhead costs, human resources divisions and programs. The name and potential secretary of the new agency have not been determined. The point, the White House says, is not just making the government smaller but better by saving people time and eliminating bureaucratic nightmares. The idea for the consolidated business agency grew out of discussions with hundreds of business leaders and agency heads over the last several months. Brendan Buck, a spokesman for House Speaker John Boehner, R-Ohio, said streamlining government was always a potentially good idea but expressed wariness about whether Obama's plan would really help business. 'American small businesses are more concerned about this administration's policies than from which building in Washington they originate,' Buck said. 'We hope the president isn't simply proposing new packaging for the same burdensome approach.' According to the White House, presidents held such a reorganizational authority for about 50 years until it ran out during Reagan's presidency in 1984. Obama has a series of other ideas about consolidating departments across the government, to be rolled out later.

Signals Greece, creditors laboriously piece together debt deal

Signals Greece, creditors laboriously piece together debt deal ReutersReuters – 1 hour 26 minutes ago Companies: Thomson Reuters Corporation RELATED QUOTES Symbol Price Change TRI 27.82 -0.10 By Renee Maltezou and Lefteris Papadimas ATHENS (Reuters) - Greece and its private creditors head back to the negotiating table on Saturday to put together the final pieces of a long-awaited debt swap agreement needed to avert an unruly default. After weeks of muddling through round after round of inconclusive talks, the negotiations appear to be in their final phase, with both sides hoping to secure a preliminary deal before Monday's European Union summit. Prime Minister Lucas Papademos was expected to meet bankers' chief negotiator Charles Dallara at around 1330 GMT (8:30 a.m. EST) on Saturday, before meeting inspectors from the 'troika' of foreign lenders pressing Athens to step up painful reforms. 'Today will be another tough day,' said George Karatzaferis, leader of the far-right LAOS party, one of three parties in Papademos's emergency coalition government. 'We will see whether we can bear the burden that lies ahead.' The debt swap, in which private creditors are to take a 50 percent cut in the nominal value of their Greek bond holdings in exchange for cash and new bonds, is a prerequisite for the country to secure a 130-billion-euro rescue package. Papademos told Reuters in an interview on Friday he expected the debt talks to be concluded within days. 'We made significant progress over the last few weeks and in the last few days in particular. We are trying to conclude the discussions as quickly as possible. I am quite optimistic an agreement will be reached in the coming days,' he said. But concern has grown that the deal may not do enough to get the country's debt reduction plan back on track, and that Greece's European partners will be forced to stump up funds to cover the shortfall. The German news magazine Der Spiegel reported on Saturday that Greece's international lenders thought Athens would need 145 billion euros of public money from the euro zone for its second bailout rather than the planned 130 billion euros. The magazine said the extra money was needed because of the deteriorating economic situation in Greece, echoing a Reuters report on Thursday. Athens also faces problematic talks with the 'troika' of foreign lenders - the European Commission, IMF and European Central Bank - who have warned it needs to do more to drive through painful reforms before they dole out any more money. 'It's all very dense, difficult and crucial,' a Greek finance ministry official said. 'There is optimism because the country needs to survive and we need to protect its citizens because they have suffered a lot.' Athens and its creditors have broadly agreed that new bonds under the swap would probably have a 30-year maturity and a progressive interest rate. The deal is aimed at chopping 100 billion euros off Greece's crushing 350-billion-euro debt load. But they have wrangled for weeks over the interest rate Greece must pay on the new bonds and pressure has grown in recent days on the European Central Bank and other public creditors to accept a cut in the value of their Greek bond holdings like the private sector creditors. A debt deal must be sealed in about three weeks as Greece has to repay 14.5 billion euros of debt on March 20. Otherwise Greece will sink into an uncontrolled default that might spread turmoil across the euro zone. Papademos promised on Friday this would not happen. 'Greece will not default,' he said. International Monetary Fund Managing Director Christine Lagarde said on Saturday that euro zone members were making progress to overcome their crisis but must do more to strengthen their financial firewall, adding that the IMF was ready to help. 'There is progress as we see it,' Lagarde told a panel discussion at the World Economic Forum in Davos. 'But it is critical that the euro zone members actually develop a clear, simple, firewall that can operate both to limit the contagion and to provide this sort of act of trust in the euro zone so that the financing needs of that zone can actually be met.' Senior euro zone officials have expressed optimism on the Greek debt deal, though previous predictions of an imminent agreement have failed to become reality. Greece is in its fifth year of recession, and hopes of an end to the crisis in the near term have virtually gone, because of the combination of squabbling politicians, rising social anger and its inability to get its debt load under control. Germany is pushing for Greece to relinquish control over its budget policy to European institutions as part of discussions over a second rescue package, a European source told Reuters on Friday. Greece said such a move was out of the question, adding that a similar proposal had been made in the past by a Dutch minister without getting anywhere. 'There is no way we would accept such a thing,' a Greek government official told Reuters. (Additional reporting by Renee Maltezou, Writing by Deepa Babington; editing by Tim Pearce)

Earn France loses AAA-rating in blow to eurozone

Earn PARIS (AP) -- France's finance ministry says Standard & Poor's has cut the country's credit rating by one notch to AA. France's loss of its AAA-rating deals a heavy blow to the eurozone's ability to fight off its debt crisis. The country is the second-largest contributor to the currency union's bailout fund. S&P in December put 15 eurozone countries on creditwatch and other downgrades were expected later Friday. The cut in France's creditworthiness could also hurt President Nicolas Sarkozy's re-election chances. THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below. ROME (AP) -- Europe's ability to fight off its debt crisis was again thrown into doubt Friday when the euro hit its lowest level in over a year and borrowing costs rose on expectations that the debt of several countries would be downgraded by rating agency Standard & Poor's. Stock markets in Europe and the U.S. plunged late Friday when reports of an imminent downgrade first appeared and the euro fell to a 17-month low. The fears of a downgrade brought a sour end to a mildly encouraging week for Europe's heavily indebted nations and were a stark reminder that the 17-country eurozone's debt crisis is far from over. Earlier Friday, Italy had capped a strong week for government debt auctions, seeing its borrowing costs drop for a second day in a row as it successfully raised as much as euro4.75 billion ($6.05 billion). Spain and Italy completed successful bond auctions on Thursday, and European Central Bank president Mario Draghi noted 'tentative signs of stabilization' in the region's economy. A credit downgrade would escalate the threats to Europe's fragile financial system, as the costs at which the affected countries — some of which are already struggling with heavy debt loads and low growth — could borrow money would be driven even higher. The downgrade could drive up the cost of European government debt as investors demand more compensation for holding bonds deemed to be riskier than they had been. Higher borrowing costs would put more financial pressure on countries already contending with heavy debt burdens. In Greece, negotiations Friday to get investors to take a voluntary cut on their Greek bond holdings appeared close to collapse, raising the specter of a potentially disastrous default by the country that kicked off Europe's financial troubles more than two years ago. The deal, known as the Private Sector Involvement, aims to reduce Greece's debt by euro100 billion ($127.8 billion) by swapping private creditors' bonds with new ones with a lower value, and is a key part of a euro130 billion ($166 billion) international bailout. Without it, the country could suffer a catastrophic bankruptcy that would send shock waves through the global economy. Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos met on Thursday and Friday with representatives of the Institute of International Finance, a global body representing the private bondholders. Finance ministry officials from the eurozone also met in Brussels Thursday night. 'Unfortunately, despite the efforts of Greece's leadership, the proposal put forward ... which involves an unprecedented 50 percent nominal reduction of Greece's sovereign bonds in private investors' hands and up to euro100 billion of debt forgiveness — has not produced a constructive consolidated response by all parties, consistent with a voluntary exchange of Greek sovereign debt,' the IIF said in a statement. 'Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach,' it said. Friday's Italian auction saw investors demanding an interest rate of 4.83 percent to lend Italy three-year money, down from an average rate of 5.62 percent in the previous auction and far lower than the 7.89 percent in November, when the country's financial crisis was most acute. While Italy paid a slightly higher rate for bonds maturing in 2018, which were also sold in Friday's auction, demand was between 1.2 percent and 2.2 percent higher than what was on offer. The results were not as strong as those of bond auctions the previous day, when Italy raised euro12 billion ($15 billion) and Spain saw huge demand for its own debt sale. 'Overall, it underscores that while all the auctions in the eurozone have been battle victories, the war is a long way from being resolved (either way),' said Marc Ostwald, strategist at Monument Securities. 'These euro area auctions will continue to present themselves as market risk events for a very protracted period.' Italy's euro1.9 trillion ($2.42 trillion) in government debt and heavy borrowing needs this year have made it a focal point of the European debt crisis. Italy has passed austerity measures and is on a structural reform course that Premier Mario Monti claims should bring down Italy's high bond yields, which he says are no longer warranted. Analysts have said the successful recent bond auctions were at least in part the work of the ECB, which has inundated banks with cheap loans, giving them ready cash that at least some appear to be using to buy higher-yielding short-term government bonds. Some 523 banks took euro489 billion in credit for up to three years at a current interest cost of 1 percent. ___ Steinhauser contributed from Brussels. AP Business writer David McHugh in Frankfurt contributed.

Oil Airbus expects years of grappling with A380 cracks

Oil Airbus expects years of grappling with A380 cracks Companies: European Aeronautic Defence and Space NV RELATED QUOTES Symbol Price Change EAD.PA 31.10 +0.28 Related Content An A380 aircraft is seen through a window with an Airbus logo during the EADS / Airbus 'New Year Press Conference' in Hamburg January 17, 2012. REUTERS/Morris Mac MatzenView Photo An A380 aircraft is seen through a window with an Airbus logo during the EADS / Airbus 'New Year Press Conference' in Hamburg January 17, 2012. REUTERS/Morris Mac Matzen FRANKFURT (Reuters) - Airbus will need years to get past problems with wing cracks on its flagship A380 passenger jet, the executive vice president of programs at Airbus told a German magazine. 'This problem will keep us busy for years,' weekly Der Spiegel quoted Tom Williams as saying in an article published on Sunday. European air safety regulators last month ordered checks for A380 wing cracks for the entire superjumbo fleet after safety engineers found cracks in almost all planes inspected. Airbus, the plane maker owned by EADS (PAR:EAD.PA - News), has said a combination of design and manufacturing slips put too much stress on a handful of the 2,000 brackets that fix the exterior of each wing to the ribcage beneath. The magazine said Williams aimed to present a solution for the problem in April, and Airbus will start installing new parts in planes by the end of the year.

Earn Global economy on recovery path, risks remain: IMF chief

Earn IMF Managing Director Christine Lagarde attends a Eurogroup meeting ahead of a two-day EU leaders summit in Brussels March 1, 2012. REUTERS/Francois LenoirView Photo IMF Managing Director Christine Lagarde attends a Eurogroup meeting ahead of a two-day EU leaders summit in Brussels March 1, 2012. REUTERS/Francois Lenoir By Nick Edwards and Koh Gui Qing BEIJING (Reuters) - The global economy has stepped back from the brink of danger and signs of stabilization are emerging from the euro zone and the United States, but high debt levels in developed markets and rising oil prices are key risks ahead, the IMF said on Sunday. 'The global economy may be on a path to recovery, but there is not a great deal of room for maneuver and no room for policy mistakes,' International Monetary Fund (IMF) Managing Director, Christine Lagarde, said in a speech in Beijing. In a separate talk on the same day, Lagarde said that China's yuan could become a reserve currency in the future, adding that the country needed a roadmap for a stronger, more flexible exchange rate system. She said signs of stabilization were emerging to show that policy actions taken in the wake of the global financial crisis were paying off, that U.S. economic indicators were looking a little more upbeat and that Europe had taken an important step forward in solving its crisis with the latest efforts on Greece. 'On the back of these collective efforts, the world economy has stepped back from the brink and we have cause to be more optimistic. Still, optimism must not lull us into a false sense of security. There are still major economic and financial vulnerabilities we must confront,' Lagarde said. The IMF chief cited still fragile financial systems burdened by high public and private debt persists advanced economies as the first of three major risks and said euro zone public sector and bank rollover funding needs in 2012 were equivalent total about 23 percent of GDP. 'Second, the rising price of oil is becoming a threat to global growth. And, third, there is a growing risk that activity in emerging economies will slow over the medium term,' she said. Lagarde also said youth unemployment should be tackled and that all countries must persevere with their policy efforts if the progress made in stabilizing the global economy is to pay off with better prospects ahead. She said advanced economies must continue with macroeconomic support and a balanced fiscal policy, together with financial sector reforms and structural and institutional reforms to repair the damage done by the crisis and to improve competitiveness. Meanwhile emerging market economies need to calibrate macroeconomic policies both to guard against fallout from the advanced economies as well as to keep overheating pressures in check. SEES A YUAN 'ON PAR' WITH CHINA'S STATUS Lagarde's comments on the yuan as a reserve currency were the most direct endorsement to date by an IMF official of China's ambitions for its currency. 'What is needed is a roadmap with a stronger and more flexible exchange rate, more effective liquidity and monetary management, with higher quality supervision and regulation, with a more well-developed financial market, with flexible deposit and lending rates, and finally with the opening up of the capital account,' she told a gathering of leading Chinese policymakers and global business leaders. 'If all that happens, there is no reason why the renminbi will not reach the status of a reserve currency occupying a position on par with China's economic status.' Renminbi is another name for the yuan. China operates a closed capital account system and its yuan currency is tightly controlled, although Beijing has said it wants to increase the international use of the yuan to settle cross border trade and has undertaken a series of reforms in recent years to that end. Lagarde said China had showed leadership and adept policy skills when the global financial crisis exploded and which might have been worse but for the impetus it provided to growth and stability. China unveiled a massive 4 trillion yuan ($635 billion) stimulus package for its economy at the end of 2008 as the financial crisis reverberated around the world and global trade -- which China's massive factory sector depends on for growth and jobs -- shuddered to a standstill. Lagarde further praised what she said was China's leadership and influence in global institutions such as the IMF and G20 group of the world's 20 biggest economies. 'China has been instrumental in helping to make the global economic system less prone to damaging crises,' she said, adding that lingering weaknesses in the global outlook reinforced the importance of China maintaining a prominent role in global policy discussions and accelerating reform in its own economy. Lagarde said she saw three priorities for China, the first to support growth; second, to shift its drivers of economic growth away from investment and exports towards domestic consumption; and third, to spread wealth more widely. The IMF chief said it was crucial that the world's major economies were working together with the same objective. 'We are all interconnected and we are all affected by each other's policy actions. We need to prepare for success together. If we stand together, the whole will be more than the sum of the parts,' Lagarde said. (Additional reporting by Kevin Yao; Editing by Don Durfee and Jonathan Thatcher)

Oil JP Morgan Earnings Highlight a Major Challenge for All Big Banks

Oil One of the hottest stocks in the land is limping into a long weekend this morning after earnings failed to impress investors, not only casting a shadow over JP Morgan (JPM), but stoking concerns about the entire Financial sector. Officially, JP Morgan's fourth quarter net income fell 23% to $3.7 billion, or $0.90 per share. While that met expectations, the biggest U.S. bank by assets stumbled on the revenue side, with a 9.6% decline that fell nearly a billion dollars short of estimates. 'They barely got over a very low bar,' says Charles Smith, CIO of Fort Pitt Capital and manager of the Fort Pitt Capital Total Return Fund (FPCGX), pointing out that the EPS estimate had come down about 20% in the past month alone. 'Their revenue growth was very weak,' he says, particularly at the investment bank were the top line shrank 30%. 'The fact that he (CEO Jamie Dimon) said he was proud of an 11% ROE is really telling,' Smith says in the attached clip, adding that revenue growth is going to be tough for all the universal banks. He believes slow revenue growth and shrinking ROE's (Return On Equity) is going to be the theme for the other big banks, many of which report results next week: Citigroup (C) and Wells Fargo (WFC) on Tuesday, Goldman Sachs (GS) on Wednesday, and Bank of America (BAC), Morgan Stanley (MS) and American Express (AXP) on Thursday. Another reason for the poor reaction is simply because JPM and the broader Diversified Financials Industry have become market leaders, after shedding 25% and finishing in the bottom of the pack for 2011. Even though 85% of analysts who follow JP Morgan rate it a ''buy'' with an average price target of $45, Smith is not interested. 'There's going to be a continued opaque nature for these earnings reports going out at least another year,' he says, adding that things like ongoing expenses for mortgage litigation and write downs will continue to muddy up the results. To be fair, while the 4th quarter numbers appear to reflect a ''very weak December,'' the powerful earnings story of the full year cannot be ignored, where JP Morgan netted a record $19 billion profit for 2011. Have the recently re-heated bank stocks gotten ahead of themselves or can they recover and resume their trek higher? Feel free to reach out to us on our Facebook page, on Twitter @MattNesto or @JeffMacke, or in the comment section below. Related Quotes: XLF 13.81 -0.11 -0.75% JPM 35.92 -0.93 -2.52% GS 98.96 -2.25 -2.22% BAC 6.61 -0.18 -2.65% MS 16.63 -0.54 -3.15% C 30.74 -0.86 -2.72% WFC 29.61 0.00 0.00% AXP 49.76 +0.11 +0.22% ^BKX 43.44 -0.17 -0.39%

Earn Europe downgrade fears make Treasurys a hot buy

Earn Investors are snapping up Treasurys and ditching European debt after news reports that France's credit rating could be downgraded on Friday. Several news outlets, citing unnamed sources, said Standard & Poor's was about to cut the credit rating of France and other European countries. In another fretful sign, U.S. exports to Europe plunged nearly 6 percent in November. Traders dumped higher-risk investments such as stocks and debt issued by European nations, causing borrowing costs for Italy and others to rise. If Italy risks defaulting on its debts, the crisis throughout Europe would worsen dramatically. The price of the 10-year Treasury note leaped 66 cents per $100 invested, pushing its yield down to 1.86 percent at 11 a.m. Eastern time. The yield peaked at 1.94 percent earlier Friday.

Earn Japan sees upward pressure on yen waning

Earn Japan sees upward pressure on yen waning Foreign exchange dealers are seen beneath an electronic board displaying the Japanese Yen's exchange rate against the U.S. dollar at a foreign exchange trading company in Tokyo February 22, 2012. REUTERS/Kim Kyung-HoonEnlarge Photo Foreign exchange dealers are seen beneath an electronic board displaying the Japanese Yen's exchange rate against the U.S. dollar at a foreign exchange trading company in Tokyo February 22, 2012. REUTERS/Kim Kyung-Hoon By Tetsushi Kajimoto MEXICO CITY (Reuters) - A senior Japanese Finance Ministry official said the upward pressure on the yen was easing and he saw nothing strange in the currency's movements as it pulls away from record highs below 80 yen versus the dollar. The official, speaking after the first day of the weekend gathering of Group of 20 finance ministers and central bankers, said the yen was not discussed at the meeting which was dominated by talks on the euro-zone sovereign debt crisis. But the G20 did discuss volatility in currencies as well as crude oil prices, the official said, adding that these issues may be mentioned in the communique expected at the end of the meeting on Sunday. Brent crude futures settled near a 10-month high above $125 a barrel on Friday on heightened concerns over tensions with Iran about its nuclear program. Japanese authorities will continue to respond to excess volatility in currencies, he added, signaling readiness to intervene if speculators push up the yen too high again to deal a blow to the export-reliant economy. 'We hear opinions overall, including at deputies' meeting, that volatility exists in the foreign exchange market, so I expect (G20) may mention that volatility warants close monitoring,' the official said. 'We have said that (the yen's) moves have been excessive including before and after (last year's) earthquake, which was not reflecting economic fundamentals. But I see nothing strange in the current movement,' he added. The yen, meanwhile, tumbled across the board, a downtrend that started with the Bank of Japan's recent monetary easing. Japan's trade deficit, widening interest rate differentials with the United States favoring the dollar and rising crude oil prices also have hurt the yen's prospects. The dollar hit a fresh 7-1/2-month high of 81.062 yen on trading platform EBS and was last 80.990, away from 75.31 yen hit last October when Japan intervened heavily to protect exporters and drew criticism from the United States. The Bank of Japan, along with the European Central Bank and the U.S. Federal Reserve, is taking unconventional steps to boost the economy. The BOJ boosted asset purchases by 10 trillion yen on February 14 and pledged to keep ultra-easy policy until a 1 percent inflation goal is in sight. Bank of Japan Governor Masaaki Shirakawa said on Saturday that policymakers were also closely watching the effects of monetary easing on crude prices. But he said he did not see monetary easing as a big factor and the recent spike was more due to geopolitical tensions and some bright spots in advanced economies after the New Year. 'Generally speaking, we'll closely watch effects and side-effects of monetary easing,' he said. (Additional writing by Krista Hughes; Editing by Ed Lane)

Signals Greece sets March 8 deadline for investors in bond swap

Signals Greece sets March 8 deadline for investors in bond swap The Parthenon on the Athens Acropolis is seen behind a Greek and an EU flag atop the Greek ministry of finance February 8, 2012. REUTERS/Yannis BehrakisEnlarge Photo The Parthenon on the Athens Acropolis is seen behind a Greek and an EU flag atop the Greek ministry of finance February 8, 2012. REUTERS/Yannis Behrakis ATHENS (Reuters) - Greece has set a March 8 deadline for investors to participate in its unprecedented bond swap aimed at sharply reducing its debt burden, according to a document outlining the offer. Greece formally launched the bond swap offer to private holders of its bonds on Friday, setting in motion the largest-ever sovereign debt restructuring in the hope of getting its finances back on track. In the document, Greece said the March 8 deadline could be extended if needed. Athens in the past has said it wants to conclude the transaction by March 12. The swap is part of a second, 130 billion euro ($175.02 billion) rescue package to claw Greece back from the brink of a default that had threatened to send shockwaves through the financial system and punish other weak euro zone members. ($1 = 0.7428 euros) (Reporting by George Georgiopoulos, Writing by Deepa Babington; Editing by Elaine Hardcastle)

Signals Quest for the golden cross

Signals Quest for the golden cross RELATED QUOTES Symbol Price Change MA 348.79 +0.96 XOM 85.83 -0.94 PFE 21.48 -0.15 K 49.73 -0.26 TRI 27.82 -0.10 By Rodrigo Campos NEW YORK (Reuters) - January has turned out strong for equities with just two trading days to go. If you're afraid to miss the ride, there's still time to jump in. You just might want to wear a neck brace. The new year lured buyers into growth-related sectors, the ones that were more beaten down last year. The economy is getting better, but not dramatically. Earnings are beating expectations, but at a lower rate than in recent quarters. Nothing too bad is coming out of Europe's debt crisis - and nothing good, either - at least not yet. 'No one item is a major positive, but collectively, it's been enough to tilt it towards net buying,' said John Schlitz, chief market technician at Instinet in New York. Still, relatively weak volume and a six-month high hit this week make some doubt that the gains are sustainable. But then there's the golden cross. Many market skeptics take notice when this technical indicator, a holy grail of sorts for many technicians, shows up on the horizon. As early as Monday, the rising 50-day moving average of the S&P 500 could tick above its rising 200-day moving average. This occurrence - known as a golden cross - means the medium-term momentum is increasingly bullish. You have a good chance of making money in the next six months if you put it to work in large-cap stocks. In the last 50 years, according to data compiled by Birinyi Associates, a golden cross on the S&P 500 has augured further gains six months ahead in eight out of 10 times. The average gain has been 6.6 percent. That means the benchmark is on solid footing to not only hold onto the 14 percent advance over the last nine weeks, but to flirt with 1,400, a level it hasn't hit since mid-2008. The gains, as expected, would not be in a straight line. But any weakness could be used by long-term investors as buying opportunities. 'The cross is an intermediate bullish event,' Schlitz said. 'You have to interpret it as constructive, but I caution people to take a bullish stance, if they have a short-term horizon .' GREECE, U.S. PAYROLLS AND MOMENTUM Less than halfway into the earnings season and with Greek debt talks over the weekend, payrolls data next week and the S&P 500 near its highest since July, there's plenty of room for something to go wrong. If that happens, the market could easily give back some of its recent advance. But the benchmark's recent rally and momentum shift allow for a pullback before the technical picture deteriorates. 'We bounced off 1,325, which is resistance. We're testing 1,310, which should be support. We are stuck in that range,' said Ken Polcari, managing director at ICAP Equities in New York. 'If over the weekend, Greece comes out with another big nothing, then you will see further weakness next week,' he said. 'A 1 (percent) or 2 percent pullback isn't out of the question or out of line.' On Friday, the S&P 500 (Chicago Options:^INX - News) and the Nasdaq Composite (Nasdaq:^IXIC - News) closed their fourth consecutive week of gains, while the Dow Jones industrial average (DJI:^DJI - News) dipped and capped three weeks of gains. For the day, the Dow dropped 74.17 points, or 0.58 percent, to close at 12,660.46. The S&P 500 fell 2.10 points, or 0.16 percent, to 1,316.33. But the Nasdaq gained 11.27 points, or 0.40 percent, to end at 2,816.55. For the week, the Dow slipped 0.47 percent, while the S&P 500 inched up 0.07 percent and the Nasdaq jumped 1.07 percent. A DATA-PACKED EARNINGS WEEK Next week is filled with heavy-hitting data on the housing, manufacturing and employment sectors. Personal income and consumption on Monday will be followed by the S&P/Case-Shiller home prices index, consumer confidence and the Chicago PMI - all on Tuesday. Wednesday will bring the Institute for Supply Management index on U.S. manufacturing and the first of three key readings on the labor market - namely, the ADP private-sector employment report. Jobless claims on Thursday will give way on Friday to the U.S. government's non-farm payrolls report. The forecast calls for a net gain of 150,000 jobs in January, according to economists polled by Reuters. Another hectic earnings week will kick into gear with almost a fifth of the S&P 500 components posting quarterly results. Exxon Mobil (NYSE:XOM - News), Amazon (NasdaqGS:AMZN - News), UPS (NYSE:UPS - News), Pfizer (NYSE:PFE - News), Kellogg (NYSE:K - News) and MasterCard (NYSE:MA - News) are among the names most likely to grab the headlines. With almost 200 companies' reports in so far, about 59 percent have beaten earnings expectations - down from about 70 percent in recent quarters. (Reporting by Rodrigo Campos; Additional reporting by Chuck Mikolajczak and Caroline Valetkevitch; Editing by Jan Paschal)

Forex Why You Shouldn't Manage Your Friends' Money

Forex Why You Shouldn't Manage Your Friends' Money So you put away some nice returns this year - not too shabby. While you can't be blamed for bragging about good performance, it's not uncommon for friends to want a part of the action. What would you do if a friend asked you to make investments on his or her behalf? In this article we'll show you the highs and lows of investing for others. Taking Advantage of Your Financial Knowledge It's no surprise that your pals might want you to manage a couple of bucks for them. If you're pulling down decent returns and talking about your investing strategies, you've now become the go-to guy (or girl). These days, money talks and people who understand the financial world are getting a lot of respect as young people realize there's more to investing than they once thought. If you have financial knowledge, people who know you might view you as a very valuable commodity - a free money manager. All too often, the person asking you to invest his or her money is the person who knows a little something about investing - just enough to get into trouble. If you're nailing double-digit returns this year, why couldn't you repeat the performance year after year, right? The Problems with Investing for Others You may think that investing for someone else is just a way of helping out a friend, but the thing is, when you start investing for other people, particularly your friends, you enter a world of complications that you might not have foreseen when you started out. Unrealistic Expectations That friend of yours, the one who thinks that your 35% returns this year are going to happen next year as well, might be in for a nasty surprise when your picks make next to nothing. When you invest for friends, you have to deal with unrealistic expectations that can really put a damper on a relationship. If your friends wants you to invest for them, they likely don't understand all of the risks involved with investing, including not quite meeting the investment goals that they may have been projecting. Losing a Friend's Money Not meeting a friend's investing expectations could jeopardize your friendship, but falling short of your friend's projected returns could be a best-case scenario. When things go wrong, making some money is a lot better than losing money, which isn't an abstract concept for anyone who invests actively. When you bring money into a relationship, things can get uncomfortable pretty fast, especially when that money is hemorrhaging out of an investment account. Do you tell the friend to suck it up? Do you repay the person out of your pocket? Do you try to make up the difference with new picks? Really, there probably isn't a good way to deal with losing a friend's money and you should consider this risk before you agree to invest for anyone. Legal Matters Managing a friend's money is a sticky business and if you go through with it you may be breaking the law. Investment professionals must be registered with the Securities and Exchange Commission or have a federal license. They are heavily regulated by the government and by trade organizations like the National Association of Securities Dealers, for the protection of consumers. If you invest for a friend for compensation, you could be breaking laws that are in place to protect investors from people who aren't qualified to have discretionary control over others' accounts. Short End of the Stick Despite the drawbacks, investing for friends isn't always doomed to failure. With skill, smarts and a whole lot of luck, you might rake in the cash. If that's the case, you still have to consider whether or not your friend is taking advantage of you. Helping out a friend is nice, but when that help consists of making significant amounts of money for that person and getting little or nothing in return, you might be suffering from an off-balance relationship. What You Can Do for Friends Now that I've taken the wind out of your sails, and your friend's as well, there are things that you can do to help your friends' investments without burdening yourself with the substantial responsibility of investing someone else's money. One of the best ways to lend a hand is to help teach your friend about investing. Help Them Learn There are a lot of pitfalls out there for new investors. If you're lucky, you've been able to avoid quite a few of them or you learned how you should have gone about avoiding them. The benefit of your experience can be one heck of an asset to pass on to a friend and it won't cost either one of you personally or financially. Therefore, if you want to help your friends, work with them; show them how to analyze a financial statement, how to execute a trade online, how to look up business news, or how to find online resources. Investment Clubs Going farther still, there is a popular way to invest hands-on with friends without taking on the responsibility that an investment advisor would feel for a client - the investment club. The investment club consists of a group of people who vote to decide whether or not to buy or sell their group-owned investments. Investment clubs are great, because they allow a more personal approach with actual investments than just helping someone with investing concepts. These clubs will also give you a vested interest in performance of your friend's portfolio. If you're interested in starting an investment club, there are plenty of resources available, ranging from your broker to the internet. It's important to recognize that an investment club isn't just a couple of people who want to invest together - it's a formal (and legally defined) organization with members who have an equitable claim to their assets. This means you should look into the rules and laws that govern investment clubs where you live before joining or starting one yourself. The Bottom Line Investing for a friend usually isn't worth the amount of trouble it can cause. Money just isn't something you want to bring into a good friendship. In the end, by helping your friends invest on their own, you'll be doing them, and yourself, a much bigger favor.

Forex Retail sales weak, jobless claims up last week

Forex Retail sales weak, jobless claims up last week WASHINGTON (Reuters) - Retail sales rose at the weakest pace in seven months in December and first-time claims for jobless benefits moved higher last week, signs the economic recovery remains shaky despite a pick-up in growth. Total retail sales increased 0.1 percent after rising by an upwardly revised 0.4 percent in November, the Commerce Department said on Thursday. 'The retail sales (data) suggests that spending isn't really picking up any momentum,' said Sean Incremona, economist at 4Cast Ltd in New York. Economists polled by Reuters had forecast retail sales climbing 0.3 percent last month. In a separate report, the Labor Department said initial unemployment claims jumped to 399,000 in the first week of 2012, the highest in six weeks. The unemployment rate has fallen sharply in recent months and was 8.5 percent December, putting the economy on better footing as the euro zone grapples with an economic downturn. But some analysts worry the drop in unemployment has been due in part to discouraged workers dropping out of the labor force. 'The jobless claims are certainly not going in the right direction, said Joe Saluzzi, co-head of equity trading at Themis Trading in Chatham, New Jersey. Stocks fell after the data's release, also hurt by a profit warning from energy major Chevron. U.S. Treasury prices were mostly flat. Another report showed business inventories rose 0.3 percent in November, reinforcing the view that fourth-quarter economic growth could get a boost as companies restock their shelves. Some Federal Reserve officials earlier this week signaled more help for the U.S. economy may be necessary despite recent data that suggested the recovery was picking up steam going into 2012. Many economists see the economy growing by at least a 3 percent annual rate during the last quarter of 2011 after growing 1.8 percent during the July-September period. Growth, however, is expected to slow during the first three months of this year. A report from real estate data firm RealtyTrac showed foreclosure activity slowed last year following claims in 2010 that lenders had relied on 'robo-signing' where documents were signed without a review of the case files. A wave of foreclosures has kept downward pressure on home prices, and economists say the market might need to clear before it can mount a convincing recovery and provide a significant boost to the overall economy. The central bank has tried to boost the sector by lowering interest rates and buying mortgage securities, which helped bring the average rate on 30-year fixed rate mortgages down to a record low this week. The U.S. central bank is not expected to take any action at its next meeting on January 24-25. Within the retail report, the upward revision for November sales suggests consumers frontloaded their holiday shopping as retailers discounted heavily and extended store hours in the days following Thanksgiving. By the end of the season, however, consumers cut back, with spending at electronics and appliance stores down 3.9 percent in December. Shopping at department stores slipped 0.2 percent, while receipts at gasoline stations dropped 1.6 percent. The government had initially estimated retail sales gained 0.2 percent in November. Fueling the overall increase in retail sales during December, receipts for motor vehicles and parts increased 1.5 percent. Excluding autos, retail sales fell 0.2 percent, the first decline since May 2010. Core retail sales, which exclude autos, gasoline and building materials, dropped 0.1 percent in December after advancing 0.3 percent the prior month. Core sales correspond most closely with the consumer spending component of the government's gross domestic product report. (Additional reporting by Pedro Nicolaci da Costa in Washington and by Chris Reese and Angela Moon in New York; Editing by Andrea Ricci)

Earn France loses AAA-rating in blow to eurozone

Earn PARIS (AP) -- France's finance ministry says Standard & Poor's has cut the country's credit rating by one notch to AA. France's loss of its AAA-rating deals a heavy blow to the eurozone's ability to fight off its debt crisis. The country is the second-largest contributor to the currency union's bailout fund. S&P in December put 15 eurozone countries on creditwatch and other downgrades were expected later Friday. The cut in France's creditworthiness could also hurt President Nicolas Sarkozy's re-election chances. THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below. ROME (AP) -- Europe's ability to fight off its debt crisis was again thrown into doubt Friday when the euro hit its lowest level in over a year and borrowing costs rose on expectations that the debt of several countries would be downgraded by rating agency Standard & Poor's. Stock markets in Europe and the U.S. plunged late Friday when reports of an imminent downgrade first appeared and the euro fell to a 17-month low. The fears of a downgrade brought a sour end to a mildly encouraging week for Europe's heavily indebted nations and were a stark reminder that the 17-country eurozone's debt crisis is far from over. Earlier Friday, Italy had capped a strong week for government debt auctions, seeing its borrowing costs drop for a second day in a row as it successfully raised as much as euro4.75 billion ($6.05 billion). Spain and Italy completed successful bond auctions on Thursday, and European Central Bank president Mario Draghi noted 'tentative signs of stabilization' in the region's economy. A credit downgrade would escalate the threats to Europe's fragile financial system, as the costs at which the affected countries — some of which are already struggling with heavy debt loads and low growth — could borrow money would be driven even higher. The downgrade could drive up the cost of European government debt as investors demand more compensation for holding bonds deemed to be riskier than they had been. Higher borrowing costs would put more financial pressure on countries already contending with heavy debt burdens. In Greece, negotiations Friday to get investors to take a voluntary cut on their Greek bond holdings appeared close to collapse, raising the specter of a potentially disastrous default by the country that kicked off Europe's financial troubles more than two years ago. The deal, known as the Private Sector Involvement, aims to reduce Greece's debt by euro100 billion ($127.8 billion) by swapping private creditors' bonds with new ones with a lower value, and is a key part of a euro130 billion ($166 billion) international bailout. Without it, the country could suffer a catastrophic bankruptcy that would send shock waves through the global economy. Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos met on Thursday and Friday with representatives of the Institute of International Finance, a global body representing the private bondholders. Finance ministry officials from the eurozone also met in Brussels Thursday night. 'Unfortunately, despite the efforts of Greece's leadership, the proposal put forward ... which involves an unprecedented 50 percent nominal reduction of Greece's sovereign bonds in private investors' hands and up to euro100 billion of debt forgiveness — has not produced a constructive consolidated response by all parties, consistent with a voluntary exchange of Greek sovereign debt,' the IIF said in a statement. 'Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach,' it said. Friday's Italian auction saw investors demanding an interest rate of 4.83 percent to lend Italy three-year money, down from an average rate of 5.62 percent in the previous auction and far lower than the 7.89 percent in November, when the country's financial crisis was most acute. While Italy paid a slightly higher rate for bonds maturing in 2018, which were also sold in Friday's auction, demand was between 1.2 percent and 2.2 percent higher than what was on offer. The results were not as strong as those of bond auctions the previous day, when Italy raised euro12 billion ($15 billion) and Spain saw huge demand for its own debt sale. 'Overall, it underscores that while all the auctions in the eurozone have been battle victories, the war is a long way from being resolved (either way),' said Marc Ostwald, strategist at Monument Securities. 'These euro area auctions will continue to present themselves as market risk events for a very protracted period.' Italy's euro1.9 trillion ($2.42 trillion) in government debt and heavy borrowing needs this year have made it a focal point of the European debt crisis. Italy has passed austerity measures and is on a structural reform course that Premier Mario Monti claims should bring down Italy's high bond yields, which he says are no longer warranted. Analysts have said the successful recent bond auctions were at least in part the work of the ECB, which has inundated banks with cheap loans, giving them ready cash that at least some appear to be using to buy higher-yielding short-term government bonds. Some 523 banks took euro489 billion in credit for up to three years at a current interest cost of 1 percent. ___ Steinhauser contributed from Brussels. AP Business writer David McHugh in Frankfurt contributed.

Earn Lloyds chief executive skips annual bonus

Earn LONDON (AP) -- The chief executive of Lloyds Banking Group, which was rescued by British taxpayers during the credit crisis, says he won't take his annual bonus for 2011. Antonio Horta-Osorio said Friday he's doing that because he took a leave of absence, not specifically in response to Prime Minister David Cameron's recent call for restraint on executive pay. Horta-Osorio took two months off last year as he suffered from sleeping problems. He did not disclose the amount in a bonus that he is turning down, but said future payments should take into account Britain's 'tough financial circumstances.' His pay and bonus entitlement will be disclosed next month in the group's annual report. British taxpayers still hold a 40 percent stake in the bank.

Oil Is the Euro Decoupling From U.S. Stocks?

Oil Is the Euro Decoupling From U.S. Stocks? Companies: EUR/USD S&P 500 NASDAQ Composite RELATED QUOTES Symbol Price Change EURUSD=X 1.2832 +0.0123 ^GSPC 1,291.87 -0.61 ^IXIC 2,715.73 +4.97 ^DJI 12,432.35 -17.10 FXE 127.78 +1.22 For much of the last 15 years the S&P 500 and euro (the EU currency) have been moving in the same direction. Since its May 4, 2011 high (the euro topped two days after U.S. stocks) the euro has tumbled 15%. Worse yet, the euro has been falling over the past few weeks even though the S&P has remained stable. Will the S&P soon catch up with the euro, or is the euro about to decouple its positive correlation with U.S. equities? Euro Problems Euro problems are the reason for the bad euro season. U.S. stocks got to enjoy the Santa Claus Rally while the euro was stuck with debt concerns that include: - Eurozone governments need to refinance more than $1.3 trillion in debt in 2012. - Yields on Italian bonds crept up about 7% again (above 7% yields send Greece into a tailspin). - Standard & Poor's is expected to strip France of its AAA rating as early as this month. - Spain's banks need to raise an extra $65 billion to cover bad property loans. - In February, Italy needs to sell more debt than could be covered even if investors used all the proceeds of maturing securities to buy the bonds. Euro Hope Things are so bad for the euro (EURUSD=X), they are good. So it seems at least. The chart below shows the euro holdings of the 'smart' and 'dumb' money published by the Commodity Futures Trading Commission. The first gray graph shows total non-reportable short positions. Non-reportable are small traders considered the dumb money. The second gray graph shows reportable commercial short positions. Commercial traders are the 'pros' that actually provide a commodity or instrument and are considered the smart money. The data shows that non-reportable short positions are pretty high right now (data as of Tuesday) while commercial traders have closed nearly all their short positions. Based on COT sentiment data, the euro should be close to a bottom, at least a temporary one. Cause for U.S. Stock Rally? But wouldn't a rising euro translate into rising U.S. stocks? Under normal circumstances, yes it would. A look at the chart below shows that a rising euro usually correlates with a rising S&P 500. The red boxes highlight periods of falling euro and rising S&P (such as lately). The green box identifies a period of time when a rising euro (NYSEArca: FXE - News) coincided with falling (even rapidly falling) U.S. stock prices. This happened from October 2007 - July 2008. Putting Odds in Your Favor It's no secret that I declared the rally from the October lows to be a counter trend rally. Back on October 2, I stated via the ETF Profit Strategy updated that: 'I don't think October will 'kill' this bear market, but it should spur a powerful counter trend rally. Towards the end of this rally Wall Street may applaud the Fed for launching Operation Twist and QE3 may be considered unnecessary. This kind of positive environment would be fertile soil for the next bear market leg (Q1 or Q2 2012). From a technical point of view this counter trend rally should end somewhere around 1,275 - 1,300.' To identify high-probability trade setups, I like to see technicals, sentiment, and seasonality point in the same direction, such as they did in early October. From a seasonal perspective, October has the reputation of a 'bear market killer.' Sentiment polls showed the most bearish readings in over a year and the VIX (Chicago Options: ^VIX) was close to the 2010 high. At the same time, the S&P had reached rock bottom support. Based on the weight of evidence, the October 2 ETF Profit Strategy update also predicted that: 'The ideal market bottom would see the S&P dip below 1,088 intraday followed by a strong recovery and a close above 1,088.' On October 4, the S&P briefly dipped below 1,088 and closed the day at 1,124. A massive counter trend rally was born that day. The Next Setup? Seasonality is once again turning bearish (or at the very least less bullish). Since 2002, the S&P reached a January top followed by a drop greater than 8% five (out of ten) times. 51.1% of all investment advisors and newsletter-writing colleagues (polled by II) are bullish on stocks (the highest reading since May 3) while only 17% of individual investors (polled by AAII) are bearish, the second lowest reading in six years. From a technical point of view, the S&P (SNP: ^GSPC - News) is about to reach a daunting resistance cluster comprised of Fibonacci levels and various long and short-term trend lines. The Dow (DJI: ^DJI - News) is about to encounter two trend lines that go back nearly five years. The resistance clusters for the Nasdaq (Nasdaq: ^IXIC - News), Russell 2000 (NYSEArca: IJR - News), and financials (NYSEArca: XLF - News) are not as glaring but they're there. The only thing that doesn't quite fit into the equation is the euro's sentiment data illustrated above. Nevertheless, the weight of evidence suggests that a turnaround for stocks, and possibly another significant market top, may be just around the corner. The high probability strategy is to short U.S. stocks as soon as the resistance cluster is reached or support is broken. The ETF Profit Strategy Newsletter identifies the target of this rally along with a short, mid and long-term outlook and the corresponding ETF profit strategies.

Earn Stocks open mixed; jobs report comes in weak

Earn Stocks open mixed; jobs report comes in weak FILE - In this Jan. 10, 2012 photo, a pair of specialists study a screen as they work on the floor of the New York Stock Exchange. Strong bond auctions in Italy and Spain dramatically drove down their borrowing costs and lifted stocks Thursday, Jan. 12, 2012, providing a reprieve from Europe's relentless debt crisis. (AP Photo/Richard Drew, File) FILE - In this Jan. 10, 2012 photo, a pair of specialists study a screen as they work on the floor of the New York Stock Exchange. Strong bond auctions in Italy and Spain dramatically drove down their borrowing costs and lifted stocks Thursday, Jan. 12, 2012, providing a reprieve from Europe's relentless debt crisis. (AP Photo/Richard Drew, File) NEW YORK (AP) -- Stocks are opening mixed after an increase in unemployment claims dampened optimism about strong bond auctions in Italy and Spain. The Dow Jones industrial average is off 13 points at 12,436 in the opening minutes of trading Thursday. The S&P 500 index is down less than a point at 1,292. Nasdaq composite fell a point to 2,709. The Labor Department said applications for weekly unemployment benefits spiked last week, mostly because companies let go of thousands of holiday hires. Retail sales barely rose in December, but the 8 percent gain in 2011 is the largest percentage increase since 1999. Most markets in Europe are higher after strong bond auctions in Italy and Spain.

Forex Citigroup cut investment bank bonuses by 30 percent: report

Forex Citigroup cut investment bank bonuses by 30 percent: report (Reuters) - Citigroup (NYSE:C - News) has cut bonuses for its investment banking division by about 30 percent on average, Bloomberg said, citing a person briefed on the matter. Some businesses within the securities and banking unit had bonuses reduced by as much as 70 percent, Bloomberg reported. Citigroup was not immediately available for comment. (Reporting by Abhiram Nandakumar in Bangalore; Editing by Steve Orlofsky)

Forex Exiting watchdog sees flaws in SEC's rulewriting

Forex Exiting watchdog sees flaws in SEC's rulewriting WASHINGTON, DC (Reuters) - In his final act before departing the Securities and Exchange Commission on Friday, the agency's inspector general, David Kotz, criticized how the agency analyzes the economic impact of some of its Dodd-Frank rules. Kotz's criticism, contained in a report, could have ramifications for the SEC, which has lost several court battles over the years because of flaws in how it demonstrates that the benefits of a rule outweigh its costs. 'We found that the extent of quantitative discussion of cost-benefit analyses varied among rulemakings,' Kotz wrote in his report. 'Based on our examination of several Dodd-Frank Act rulemakings, the review found that the SEC sometimes used multiple baselines in its cost-benefit analyses that were ambiguous or internally inconsistent.' Last year, U.S. business groups successfully convinced a federal appeals court to overturn one of the SEC's Dodd-Frank rules that aimed to empower shareholders to more easily nominate directors to corporate boards. In rejecting the rule, the court said the agency failed to properly weigh the economic consequences. Some of the business groups, such as the U.S. Chamber of Commerce, have since raised similar concerns with other rulemakings pending before the SEC. Congress passed the Dodd-Frank act in 2010 to more closely police financial markets and institutions after the 2007-2009 financial crisis. The legislation gives the SEC responsibility to write roughly 100 new rules. Although the SEC is not subject to an express statutory requirement to conduct a cost-benefit analysis of its rules, other laws do require the agency to consider the effects of its rules on capital formation, competition and efficiency. In addition, the SEC must also follow federal rulemaking procedures, such as providing the public with an opportunity to comment on its proposals. This is the second report Kotz has issued looking at the quality of the SEC's cost-benefit analysis. Both reports were issued after certain members of the Senate Banking Committee, including ranking Republican Richard Shelby, voiced concerns about whether regulators were adequately examining the economic impact of Dodd-Frank rules. To determine how well the SEC is faring, Kotz's office retained Albert Kyle, a finance professor at the University of Maryland's Robert H. Smith School of Business, to help carry out the review. Friday's report covered a sample of Dodd-Frank rulemakings, including a rule allowing shareholders a non-binding vote on compensation, several asset-backed securities rules and two proposals pertaining to the reporting of security-based swap data. Kotz's report was critical of the agency in a number of areas. In one instance, the report cites a memo in which former General Counsel David Becker gave his opinion that the SEC should do thorough cost-benefit analyses on rules that are not explicitly required by Congress. Rules mandated by Congress, however, generally would not need the same level of cost-benefit research, the memo said. The report suggested that the agency should reconsider these guidelines, or else it risks 'not fulfilling the essential purposes of such analyses.' SEC management, in a written response to the report, disagreed with that point. 'We believe Professor Kyle's opinion fails to appreciate both the practical limitations on the scope of cost-benefit a regulator can conduct, and the distinct roles of Congress and administrative agencies,' they said. 'We think it is entirely sensible ... for the staff to focus its attention and the commission's limited resources on matters that the commission has the authority to decide.' Kotz made other recommendations, including using a single consistent baseline in the cost-benefit analysis process and having economists provide more input. SEC spokesman John Nester declined to comment beyond the SEC comments in the report. (Reporting By Sarah N. Lynch; Editing by Steve Orlofsky, Gary Hill)

Earn JP Morgan Earnings Highlight a Major Challenge for All Big Banks

Earn One of the hottest stocks in the land is limping into a long weekend this morning after earnings failed to impress investors, not only casting a shadow over JP Morgan (JPM), but stoking concerns about the entire Financial sector. Officially, JP Morgan's fourth quarter net income fell 23% to $3.7 billion, or $0.90 per share. While that met expectations, the biggest U.S. bank by assets stumbled on the revenue side, with a 9.6% decline that fell nearly a billion dollars short of estimates. 'They barely got over a very low bar,' says Charles Smith, CIO of Fort Pitt Capital and manager of the Fort Pitt Capital Total Return Fund (FPCGX), pointing out that the EPS estimate had come down about 20% in the past month alone. 'Their revenue growth was very weak,' he says, particularly at the investment bank were the top line shrank 30%. 'The fact that he (CEO Jamie Dimon) said he was proud of an 11% ROE is really telling,' Smith says in the attached clip, adding that revenue growth is going to be tough for all the universal banks. He believes slow revenue growth and shrinking ROE's (Return On Equity) is going to be the theme for the other big banks, many of which report results next week: Citigroup (C) and Wells Fargo (WFC) on Tuesday, Goldman Sachs (GS) on Wednesday, and Bank of America (BAC), Morgan Stanley (MS) and American Express (AXP) on Thursday. Another reason for the poor reaction is simply because JPM and the broader Diversified Financials Industry have become market leaders, after shedding 25% and finishing in the bottom of the pack for 2011. Even though 85% of analysts who follow JP Morgan rate it a ''buy'' with an average price target of $45, Smith is not interested. 'There's going to be a continued opaque nature for these earnings reports going out at least another year,' he says, adding that things like ongoing expenses for mortgage litigation and write downs will continue to muddy up the results. To be fair, while the 4th quarter numbers appear to reflect a ''very weak December,'' the powerful earnings story of the full year cannot be ignored, where JP Morgan netted a record $19 billion profit for 2011. Have the recently re-heated bank stocks gotten ahead of themselves or can they recover and resume their trek higher? Feel free to reach out to us on our Facebook page, on Twitter @MattNesto or @JeffMacke, or in the comment section below. Related Quotes: XLF 13.81 -0.11 -0.75% JPM 35.92 -0.93 -2.52% GS 98.96 -2.25 -2.22% BAC 6.61 -0.18 -2.65% MS 16.63 -0.54 -3.15% C 30.74 -0.86 -2.72% WFC 29.61 0.00 0.00% AXP 49.76 +0.11 +0.22% ^BKX 43.44 -0.17 -0.39%

Earn Europe downgrade fears make Treasurys a hot buy

Earn Investors are snapping up Treasurys and ditching European debt after news reports that France's credit rating could be downgraded on Friday. Several news outlets, citing unnamed sources, said Standard & Poor's was about to cut the credit rating of France and other European countries. In another fretful sign, U.S. exports to Europe plunged nearly 6 percent in November. Traders dumped higher-risk investments such as stocks and debt issued by European nations, causing borrowing costs for Italy and others to rise. If Italy risks defaulting on its debts, the crisis throughout Europe would worsen dramatically. The price of the 10-year Treasury note leaped 66 cents per $100 invested, pushing its yield down to 1.86 percent at 11 a.m. Eastern time. The yield peaked at 1.94 percent earlier Friday.