“There are two kinds of people who lose money: those who know nothing and those who know everything” — Henry Kaufman (Economist)

1. Japan’s GDP shrinks less than expected — Japan’s GDP fell an annualized 1.1% in Q4, as exports slowed and government stimulus programs faded. The contraction was less severe than the 2% drop economists had expected, and the pullback may prove to be temporary as foreign demand lifts Japan’s domestic production.
2. 2012 budget skirts big debt decisions — President Obama submitted a $3.7T budget for 2012 that contains spending cuts and increases along with tax cuts and increases intended to trim $1.1T over a decade from projected deficits. But it does not address Social Security nor rising health care costs via Medicare and Medicaid, and proposes only tiny cuts in military spending.
3.China inflation jumps almost 5% as food prices soar — China’s consumer price index rose 4.9% in January from a year ago, vs. a 4.6% gain in December and 5.1% in November.
4. Euro-zone to double its rescue fund to €500B — beginning in 2013, a permanent euro rescue mechanism will total €500B ($675B) as part of a package eurozone finance ministers hope will resolve the area’s debt woes. The European Stability Mechanism (ESM) is intended to replace the temporary euro rescue fund hurriedly set up in May to avert a collapse of the single currency in the wake of the Greek debt crisis.
5. Moody’s places Australia’s big four banks on review — Moody’s Investors Service placed Australia’s four largest banks under review for possible downgrades and reiterated a negative outlook for them Wednesday, warning the proportion of wholesale funding that the banks raise in offshore markets remains high in relation to their size.
6. China hikes reserve requirements — China raised its reserve requirements by 0.5% to 19.5%, the second hike this year. China raised its key interest rate by 0.25% last week, and is trying to tamp down inflation that appears to be accelerating.

The week ahead — Economic data from Econoday.com: