“Any idiot can face a crisis – it’s day to day living that wears you out.” – Anton Chekhov

1. Fed could cut bond-buying even further — Jon Hilsenrath from WSJ, reported that the Federal Reserve could reduce its monthly bond purchases to $65B from $75B at a next FOMC meeting. The Fed cut $10B from the QE program in December. Despite a weak jobs report last month, policy makers still bullish about the U.S.’s economic prospects.
2. Bank of Japan keeps ultra-loose policy unchanged — as expected, the Bank of Japan has left its key interest rate at 0.1%, and maintained its program of expanding the monetary base by ¥60-70T a year. The BOJ expects the economy to continue recovering moderately, although it will be affected by an upcoming hike in sales tax.
3. China (FXI) factory contraction shows weak start for economy in 2014 — Reuters, activity in China’s factory sector contracted in January for the first time in six months. It points to a weak start for the economy in 2014 as policymakers seek to curb high debt levels to head off financial risks. The flash Markit/HSBC Purchasing Managers’ Index (PM) fell to 49.6 in January from December’s final reading of 50.5, dropping below the 50 line which separates expansion of activity from contraction.
4. U.S. has until late February to increase debt limit — Congress has until late February to lift the $16.7T debt ceiling and avert a U.S. default, Treasury Secretary Jacob Lew stated. The cap is suspended until February 7, after which the Treasury can juggle the money about for a bit before running out of cash.
5. China’s Industrial & Commercial Bank of China Ltd concern of a default — Bloomberg, Chinese investors were asked to sink at least 3 million yuan ($496,000) in the 3 billion-yuan Credit Equals Gold No. 1 product amid guarantees that it was “100 percent safe,”. However, the owner was arrested after its coal mining company that collapsed.
6. Emerging-market currencies deepen drop — Marketwatch, Emerging-market currencies such as the Turkish lira, South African rand, Argentina Peso fell further against the dollar. Also, worries about a Chinese slowdown and prospects of rising U.S. rates triggered a broad flight out of emerging-markets assets.

The week ahead — Economic data from Econoday.com:

“Men who can be right and sit tight are uncommon” — Jesse Livermore

1. Google Moves into Home Automation — Google announced a $3.2 billion deal to buy smart thermostat and smoke alarm-maker Nest Labs Inc, led by the “godfather” of the iPod. The Nest acquisition gives Google a stepping stone into an important new market at a time when consumer appliances and Internet services are increasingly merging.
2. World Bank bullish about global prospects — the World Bank expects global economic growth to accelerate to 3.2% in 2014 from 2.4% in 2013, led by advanced economies that seem “to be finally turning the corner” following the financial crisis. In its Global Economic Prospects report, the bank also forecast that the U.S. will expand 2.8% this year vs 1.8% last year.
3. Alaska to provide $5.75B for LNG export project — Bloomberg, Alaska plans to jump-start a $45B natural gas export project by pitching in more than 10% of the cost and joining Exxon Mobil (XOM), BP (BP), ConocoPhillips (COP) and TransCanada (TRP) as an equity partner. The agreement between the state and the four companies outlines a framework in which Alaska would take as much as a 25 percent stake in a proposed gas processing plant, an 800-mile (1,287-kilometer) pipeline from Alaska’s North Slope and a liquefaction facility in the Kenai Peninsula. NatGas tanker Navigator Holdings (NVGS) and GasLog (GLOG) are two of the leaders in LNG shipper.
4. House approves $1.1 trillion measure to fund government through Sept 30, 2014 — Reuters, the U.S. House of Representatives overwhelmingly approved a $1.1 trillion spending bill. As a next step, Congress will need to turn its attention to the $16.7T debt limit.
5. Luxury in China loses luster as the wealthy flee — Bloomberg, wealthy Chinese are likely to buy fewer luxury goods again in 2014 after the steepest cut-back on spending in at least five years. Overall spending by wealthy Chinese fell by 15 percent in 2013, the third consecutive year of decline. The shrinking ranks of wealthy residents in China has also reduced luxury spending. One in three so-called high net worth individuals have already left, or are planning to leave, the country, the report showed, mostly to seek better opportunities for their children’s education.

The week ahead — Economic data from Econoday.com:

“Nothing is perfect. Life is messy. Relationships are complex. Outcomes are uncertain. People are irrational.” – Hugh Mackay

1. Senate confirms Yellen to lead the Federal Reserve — the Senate approved the nomination of Janet Yellen to become the first woman to head the Federal Reserve. The chamber voted 56-26 in favor.
2. Another train carrying oil derails and catches fire in New Brunswick, Canada — A Canadian National Railway train carrying propane and crude oil derailed and caught fire in northwest New Brunswick, Canada in the latest in a string of train accidents that have put the surging crude-by-rail business under heavy scrutiny. A series of disastrous derailments has reignited the push for tougher regulation.
3. Chinese CPI drops more than expected — China’s inflation fell to 2.5% on year in December from 3% in November and came in below forecasts of 2.7%. The PPI dropped for the 22nd month in a row – the longest streak since the 1990s – with a decline of 1.4%.
4. FOMC minutes – QE benefit declining over time — according the latest minutes from the Federal Reserve, the majority of Fed policy makers argued that the marginal efficacy of QE was declining over time at the FOMC’s last meeting in December. Few members want a larger-than-announced taper.
5. China ‘overtakes’ US as world’s largest goods trader — BBC, China appears to have become the world’s largest trading country last year after the value of its imports and exports increased 7.6% to $4.16T. The U.S., which has held the crown until now, hasn’t released its 2013 figures yet, but its trade in January-November totaled $3.5T. In December, China’s export growth slowed to 4.3% from 12.7%; However, there have been concerns in recent months over the speculation that some Chinese exporters may be overstating their shipments in an attempt to bypass restrictions on bringing funds into the country.

The week ahead — Economic data from Econoday.com:

“There’s only one growth strategy: work hard.” – William Hague

1. Masses of healthcare enrollments incomplete — As of last week, only around half of those who had signed up for healthcare coverage offered by over 100 insurers in 17 states under Obamacare had paid for their plans. Uncertainly now focus on whether insurers can process those payments and issue membership when the coverage takes effect in January 2014 .
2. China’s factory activity continues slows — the latest two surveys have indicated that China’s manufacturing sector slowed in December, with the official PMI falling to 51 from 51.4 in November and the HSBC print slipping to 50.5 from 50.8. New export orders disappointed in both readings, while employment contracted further in the official index. “Domestic and overseas demand was weaker than expected,” says economist Li Heng.
3. Improvement in Spanish (EWP) jobs situation better than expected — Spanish jobless claims dropped by 107,600 to 4.7M in December, the second-largest fall ever recorded after the June figure plummeted by over 127,000. The decline in December was far greater than the drop of 2,500 in November and consensus for -24,300. The improvement in unemployment adds to evidence that Spain is slowly digging itself out of its massive recession.
4. Final 2013 Country Stock Market Performance — courtesy of BIG, below is a look at the final stock market performance numbers for 76 countries around the world (% chg in local currencies).

The week ahead — Economic data from Econoday.com: