“It’s allright to have butterflies in your stomach, just set them to fly in formation” — Colin Powell

1. IMF Seeks $500B Boost to Lending Resources — The International Monetary Fund is proposing to raise its lending capacity by as much as $500 billion to insulate the global economy against any worsening of Europe’s debt crisis. The IMF is pushing China, Brazil, Russia, India, Japan and oil-exporting nations to be the top contributors, according to a G-20 official, who spoke on condition of anonymity because the talks are private. The fund wants a deal struck at the Feb. 25- 26 meeting of G-20 finance ministers and central bankers in Mexico City, the official said.
2. China’s economy slows — China’s GDP growth slowed to an annualized 8.9%, the lowest expansion since mid-2009, but ahead of expectations of +8.7%.
3. Feds step up S&P mortgage ratings probe — Federal prosecutors are pushing forward with their probe of S&P’s (MHP) ratings of troubled mortgage securities, sources say, after a delay that led many to believe the investigation had been all but abandoned.
4. France, Spain hold strong bond auctions— France has passed its first test following S&P’s downgrade last week, attracting strong demand and obtaining lower yields in an auction of €7.965B ($10.28B) of medium-term bonds. Meanwhile, Spain sold over €6.6B ($8.46B) of bonds with maturities of up to 10 years, with demand beating forecast and yields roughly in line with expectations.
5. Greek Debt-Swap Talks Set for Second Day in Push for Accord — Greece’s government heads into a second day of talks with private creditors in a push to reach an accord that would slash the nation’s debt and avert a collapse of the economy. Greece needs to seal the agreement in time to meet a debt repayment of €14.5B ($18.5B) in March.

The week ahead — Economic data from Econoday.com:

“I made my money by selling too soon.” – Bernard Baruch

1. German economy shrank in Q4 as crisis weighs — according to Reuter, Germany showed first signs of feeling the pain from the euro zone’s debt crisis as the economy shrank in the last three month of 2011, despite outperforming its peers for main part of the year thanks to strong domestic demand and exports.
2. Saudis may not be able to counter effect of Iran sanctions — Saudi Arabia is reportedly nearing its oil output capacity limit and may have little room to respond to potential shortages caused by sanctions on Iran. Currently pumping just under a record 10M bpd, the country has an on-paper capacity of up to 12.5M bpd.
3. Romney gains momentum with New Hampshire win — Mitt Romney has taken another important step in gaining the GOP nomination for the presidency, comfortably winning the New Hampshire primary ahead of a crucial test in South Carolina next week.
4. S&P500 Approaching Technical Resistance — view the chart listed below

5. Sears loses source of ready cash flow — Sears (SHLD) has taken another hit after CIT Group said it will stop factoring accounts payable for it – cutting off a source of ready cash flow for the embattled retailer.
6. Yields fall sharply at Spanish, Italian debt sales — according to Reuter, The Spanish Treasury raised 10 billion euros ($12.7 billion) from the auction of three bonds, doubling its target of up to five billion, and yields dropped by about 1 percentage point. Italy also fared well, paying less than half what it did a month ago to sell one-year bills at its first auction of the year. A major reason for the success was that local banks used the ECB’s ultra-cheap lending to support the sale.
7. European Central Bank holds rates steady — The ECB Governing Council left its key lending rate at 1%, matching its historic low. The central bank also left the interest rate on its marginal lending facility unchanged at 1.75% and maintained the interest rate on its overnight deposit facility at 0.25%.
8. Hedge funds hunker down for Greek debt — according to Reuter, The deal asks creditors to voluntarily write down 50 percent of the notional value of their bond holdings. Hedge funds may opt out. The stakes for Greece are high. Without the deal, the international lenders will not bail Athens out a second time, which means it will likely default around March 20, when a 14.5 billion euro (12.1 billion pounds) bond falls due.
9. S&P hits euro zone with downgrades — late Friday (1/13/2012), Ratings agency Standard & Poor’s (S&P) cut France, Austria, Malta, Slovakia and Slovenia by one notch, stripping France and Austria of rare triple-A ratings that were key to their ability to support efforts to rescue struggling euro zone members. The ratings agency also downgraded by two notches Italy, Spain, Portugal and Cyprus. Portugal and Cyprus were cut to junk status.

The week ahead — Economic data from Econoday.com:

HAPPY NEW YEAR!!

1. Greece must clinch bailout deal or face euro exit-spokesman — Greece faces an exit from Europe’s common currency bloc unless it clinches a deal on a second, 130 billion euro bailout with its international lenders. EU, IMF and ECB inspectors are expected in Athens mid-January to flesh out the new bailout plan agreed in principle by EU leaders in October.
2. Tensions rise in Persian Gulf — Iran threatened Tuesday to take action if the U.S. Navy moves an aircraft carrier into the Gulf, Tehran’s most aggressive statement yet after weeks of saber-rattling as new U.S. and EU financial sanctions take a toll on its economy.
3. World’s Biggest Economies Face $7.6T Debt — Governments of the world’s leading economies have more than $7.6 trillion of debt maturing this year, with most facing a rise in borrowing costs. Japan leads the way with $3T, followed by the U.S. with $2.8T. Crucially, Italy will need to raise $428B and pay another $70B in interest.
4. Romney Wins Iowa — Romney edged out Rick Santorum, a conservative former Pennsylvania senator, by only eight votes in Iowa’s caucuses, the first presidential nominating contest of 2012, as each received about 25 percent of the vote.
5. France sells 8B euros of debt, 10-year yield rises — Marketwatch, The French government sold 8 billion euros ($10.3 billion) of various government bonds, including 4.02 billion euros of 10-year bonds. France’s debt agency said the 10-year auction attracted 6.61 billion euros of bids, producing a yield of 3.29%. That’s up from 3.18% in a December sale. Bids exceeded the amount sold 1.6 times, down from a bid-to-cover ratio of 3.1 in December.
6. Kodak faces Chapter 11 — Eastman Kodak (EK) plans to file for bankruptcy protection if efforts in the next few weeks to sell a horde of digital patents fall flat, The Wall Street Journal reports.
7. German industrial orders plummet — German new industrial orders for November have indicated more woe for the eurozone’s economic engine with a monthly fall of 4.8%, well below a rise of 5% in October and a forecast of -1.7%.
8. Iran to hold new naval exercises — Iran’s Revolutionary Guards will hold new naval exercises in the strategic Strait of Hormuz in February, the semiofficial Fars news agency reported.

The week ahead — Economic data from Econoday.com:

Get inside information from the president and you will probably lose half your money. If you get it from the chairman of the board, you will lose all of your money. Jim Rogers

1. DoJ reverses on Web gambling — the Justice Department has reversed its long-standing opposition to many forms of online gambling, a potential boon to states that view online gambling as a good way to raise tax revenue.
2. Italian borrowing costs fall — Italy sold €9B worth of 6-month bills at 3.251%, a huge improvement from 6.504% on November 25. The ten-year yield dipped back below 7%, and was around 6.78%.
3. China unveils new list of Investment Likes and Dislikes — China no longer wants foreign-funded automobile factories or polysilicon plants, but would welcome overseas investment in hospitals and financial leasing firms, according to updated inward investment guidelines.
4. Mosaic cuts production — Mosaic (MOS) will cut its quarterly finished phosphate production by up to 250,0000 tons, or ~10%, until the end of March as excess supply weighs on market prices. “The current spot prices in this market do not reflect our outlook for the business, nor do we think they are sustainable,” CEO Jim Prokopanko said.
5. China Contraction in Manufacturing for the Second Month — China’s manufacturing (EC11CHPM) contracted for a second month in December as Europe’s debt crisis cut export demand, fueling speculation that the central bank may cut lenders’ reserve requirements within days.
A purchasing managers’ index was at 48.7 in December from 47.7 in November, according to HSBC Holdings Plc and Markit Economics. A reading below 50 indicates a contraction.
6. Bank of America (BAC) Posts Worst Showing in Dow Average — The 59 percent decline in 2011 erased almost $80 billion of shareholder value at Charlotte, North Carolina- based Bank of America. It’s the firm’s largest drop since a 66 percent plunge in 2008, when a U.S. bailout staved off a collapse.

The week ahead — Economic data from Econoday.com: