$C Misses by a Billion in Reserve Releases or $0.25 Per Share

 Source

“Citigroup is reporting earnings that are below Wall Street’s expectations as the bank’s legal expenses climb.

Citi earned $1.2 billion after paying preferred dividends, or 38 cents per share, in the three months ended Dec. 31. That compares with $933 million, or 31 cents per share, in the same period a year earlier.

Excluding one-time costs related to restructuring and accounting for outstanding debt, the bank earned 69 cents per share. That’s well below the 97 cents per share analysts polled by FactSet were expecting.

Revenue rose to $18.7 billion, up 8 percent from the same period a year earlier and slightly below forecasts.

The bank had $1.3 billion in legal and related expenses in the quarter.

Citi’s stock fell $1.46 to $41.02 in pre-market trading Thursday.”

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“Fifth Third Bancorp. (FITB), Ohio’s largest lender, said fourth-quarter profit rose 27 percent as the firm booked a gain on a stake in Vantiv Inc. (VNTV)

Net income jumped to $399 million, or 43 cents a share, from $314 million, or 33 cents, a year earlier, the Cincinnati- based company said today in a statement. That compares with the 41-cent average estimate of 29 analysts surveyed by Bloomberg…”

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“Oil advanced to the highest level in four months in New York as a surprise drop in U.S. crude inventories countered concern that the global economic recovery may falter and curb fuel demand.

West Texas Intermediate advanced as much as 0.7 percent to $94.87 a barrel, its highest intraday price since Sept. 19. WTI’s discount to Brent futures narrowed to less than $15 a barrel for the first time since July after the start of an expanded pipeline that is set to pare a glut in the U.S. Midwest. Crude supplies slid 951,000 barrels last week, Energy Department data showed. They were forecast to increase by 2.2 million, according to a Bloomberg survey.

“We may see oil demand picking up in the U.S. and this could support prices,” said Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, who predicts Brent may rise as high as $120 a barrel this quarter. “But the supply situation is comfortable.”

WTI for February delivery was at $94.76 a barrel, up 52 cents, in electronic trading on the New York Mercantile Exchange as of 12:19 p.m. London time. The contract climbed 96 cents to $94.24 yesterday, the highest close since Sept. 18.

Brent for March settlement on the London-based ICE Futures Europe exchange gained 64 cents to $110.32 a barrel. The European benchmark’s premium to WTI earlier narrowed to $14.98, the smallest gap July 25.

Cushing Glut…”

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Initial Claims: Prior 371k, Market Expects 370k, Actual 335k

Housing starts were up 954k or 12% vs previous report of -4.1%

“Brazil’s central bank signaled it will keep borrowing costs at a record low this year as it tries to manage faster inflation amid a slower than expected recovery.

The central bank board, led by Alexandre Tombini, kept the benchmark interest rate at 7.25 percent for the second straight meeting yesterday, matching the forecast of all 56 analysts surveyed by Bloomberg. In the statement accompanying the unanimous decision, policy makers reiterated that the best strategy is to keep monetary policy conditions unchanged for a “prolonged period.”

While inflation is slowing in Mexico and Chile, price pressures are building in Brazil as the government pumps demand by reducing taxes and expanding credit amid record low unemployment. At the same time, a contraction in investment and industrial output is complicating President Dilma Rousseff’s efforts to revive the slowest growth in three years….”

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“German government debt fell, with two-year yields rising to the highest since June, on speculation financial institutions will begin paying back loans from the European Central Bank, pushing up overnight borrowing rates.

Implied yields on Euribor futures contracts jumped and securities from Austria, France and the Netherlands also slid. French 10-year rates rose to the highest in more than two months as yields increased at an auction. Repayments of loans taken from the ECB’s Longer-Term Refinancing Operation will be possible from the end of this month.

“There is some selling pressure in the short-dated core notes and that’s driven primarily by speculation that banks will pay back LTRO and drive overnight rates higher,” said Soeren Moerch, the head of government-bond trading at Danske Bank A/S (DANSKE) in Copenhagen. “The market is badly positioned for this and that caused a bit of a selloff….”

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“Deutsche Bank AG (DBK) designed a derivative for Banca Monte dei Paschi di Siena SpA at the height of the financial crisis that obscured losses at the world’s oldest lender before it sought a taxpayer bailout.

Germany’s largest bank loaned Monte Paschi about 1.5 billion euros ($2 billion) in December 2008 through the transaction, dubbed Project Santorini, according to more than 70 pages of documents outlining the deal and obtained by Bloomberg News. The trade helped Monte Paschi mitigate a 367 million-euro loss from an older derivative contract with Deutsche Bank. As part of the arrangement, the Italian lender made a losing bet on the value of the country’s government bonds, said six derivatives specialists who reviewed the files….”

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“Deutsche Telekom AG (DTE), Germany’s biggest phone company, is considering a sale this year of its digital classifieds business that may fetch 1.5 billion euros ($2 billion), according to people familiar with the matter.

Deutsche Telekom intends to hire banks as early as this quarter to prepare for a sale or initial public offering of Scout24 Holding GmbH, said two of the people, who asked not to be identified because the discussions are private. The business may attract media companies Axel Springer AG (SPR) and Bertelsmann SE as well as buyout firms, they said. Deutsche Telekom may also look for a partner for Scout24, one of the people said….”

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“OAO Gazprom, the biggest natural-gas producer, said profit doubled in the third quarter, beating analyst estimates, as a foreign exchange gain helped compensate for soaring costs.

Net income climbed to 305 billion rubles ($10.1 billion) from 152 billion rubles a year earlier, Moscow-based Gazprom said today on its website. That compared with an average estimate of 291 billion rubles from 10 analysts surveyed by Bloomberg. Revenue rose 18 percent to 1.12 trillion rubles.

Gazprom, Russia’s monopoly gas exporter, battled weakening European markets last year that forced suppliers to compete to maintain sales. The company offered discounts to some customers and raised the weight of spot market prices in setting rates, which are mainly linked to oil-price indexes. The gas producer raised investments even as demand weakened, saying it needs to ensure production and transport capacity for the future.

“There isn’t much to be positive about, despite the positive market reaction,” Ildar Davletshin, a gas analyst at Renaissance Capital in Moscow, said by phone today. “Costs increased for personnel, transit, oil and gas purchases.”

Gazprom shares rose as much as 1 percent in Moscow and traded up 0.8 percent at 147.50 rubles at 1:30 p.m.

‘Expected Worse’…”

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“Russia’s government clashed with the central bank over its reluctance to stimulate the country’s sagging economy, with President Vladimir Putin urging an evaluation of both fiscal and monetary measures to boost growth.

Bank Rossii has “all the necessary grounds” to signal a future cut in borrowing costs, Finance Minister Anton Siluanov said yesterday and Deputy Economy Minister Andrei Klepach said monetary stimulus was “essential.” Easing policy would be “counterproductive,” said Alexey Ulyukayev, the central bank’s first deputy chairman.

“We should analyze whether we have really exhausted these measures’ potential in this situation, or whether, given the European recession, it still makes sense to keep doing something to stimulate demand using budget or monetary-policy measures,” Putin said in Moscow yesterday.

Economic growth in the largest energy exporter has decelerated to the weakest pace since a recovery began in 2010 as weakening demand from China and Europe hurts exports. The slump is challenging Bank Rossii Chairman Sergey Ignatiev, whose final term expires in June.

The benchmark Micex Index (INDEXCF) traded 0.4 percent higher at 1,521.16 at 2:21 p.m. in Moscow. The ruble was little changed at 30.3005 per dollar against the dollar and slid 0.4 percent to 40.4595 against the euro. Non-deliverable forwards, which provide a guide to expectations of currency movements, showed the ruble at 30.7140 in three months….”

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“China’s economy is set to exit a seven-quarter slowdown as the government rolls out infrastructure projects and limited inflation lets officials hold off from tightening monetary policy.

The National Bureau of Statistics will report tomorrow that gross domestic product expanded 7.8 percent in the fourth quarter from a year earlier, according to the median estimate of 53 economists surveyed by Bloomberg News. That’s up from a three-year low of 7.4 percent in the previous period.

The risk is that the rebound may fade in the second half as the boost from railways and road projects ebbs and the government grapples with rising inflation and the expansion of shadow banking. While the nation is set to reverse its slide in economic growth, the pace remains short of the 10 percent average of the past two decades as higher wages and weakness in global demand limit export gains.

“The current recovery is being driven mostly by monetary and fiscal policy easing,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong. “Once the momentum of policy easing slows, growth may trend down again.”

Tomorrow’s report will also include the latest monthly data. Factory output probably rose 10.2 percent in December from a year earlier, up from 10.1 percent in November, while retail sales advanced 15.1 percent after a 14.9 percent gain the prior month, according to median analyst estimates.

Investment Pace…”

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“Australia’s dollar slid versus all of its 16 major counterparts after a report today showed employers in the country unexpectedly cut payrolls last month, adding to concern the domestic economy is slowing.

The so-called Aussie weakened versus the greenback and dropped for a third day against the yen after the jobless rate rose. New Zealand’s dollar, known as the kiwi, fell as Asian stocks reversed earlier gains, damping demand for higher- yielding assets.

Today’s data “underscores much of the economic weakness from last year,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. (WBC) in Singapore. “I wouldn’t be surprised to see a bit more of a correction in the Aussie toward the $1.05 level, but I still think dips will be well-supported.”

Australia’s dollar lost 0.6 percent to $1.0513 at 5:17 p.m. in Sydney. It dropped 0.3 percent to 93.19 yen, extending its 1.2 percent decline in the previous two days. New Zealand’s currency slid 0.2 percent to 83.96 U.S. cents after rising 0.2 percent yesterday. It was little changed at 74.41 yen.

Ten-year yields in Australia dropped to as low as 3.28 percent, the least since Dec. 31. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to rate expectations, was little changed at 2.78 percent. The MSCI Asia Pacific Index of shares lost 0.1 percent gaining as much as 0.6 percent earlier today.

Australia’s statistics bureau said the number of people employed in the country fell in December by 5,500 after a revised 17,100 gain in the previous month. The jobless rate rose to 5.4 percent from 5.3 percent in November….”

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“Australia’s unemployment rate rose as the nation posted its worst back-to-back years of job growth since the 1997 Asian financial crisis, throwing up an obstacle in Prime Minister Julia Gillard’s re-election bid this year.

Payrolls advanced 148,300 last year after a 49,800 gain in 2011 for a two-year increase that was the weakest since 1996-1997, government data compiled by Bloomberg show. Unemployment rose to 5.4 percent last month as the number of workers fell by 5,500 and may keep climbing after the economy slowed in the second half of 2012….”

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“Thailand joined a growing chorus of developing nations expressing alarm at the rapid appreciation of their currencies as increased monetary easing in the U.S. and Japan spurs demand for higher-yielding assets.

The baht climbed to a 17-month high today, before retreating after Finance Minister Kittiratt Na-Ranong said the exchange rate is “not at a good level” and exporters will face difficulties should it strengthen further. The Bloomberg- JPMorgan Asia Dollar Index is headed for a record eighth monthly gain and currencies in Colombia, Poland and Romania reached their strongest levels this month since at least February 2012….”

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World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …

“The discovery of horse and pig meat in “beef” burger products sold in both Britain and Ireland has sparked widespread outrage, as politicians and religious leaders in both countries wrangle over questions of food safety and misdescription.

UK Prime Minister David Cameron, who called the burger discovery “extremely disturbing” and “completely unacceptable,” announced Wednesday that an “urgent probe” has been launched to thoroughly investigate the claims, the Telegraph reports….”

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“Right-wing television host Glenn Beck last week revealed a personal goal that he hopes to achieve: building his very own self-sustaining community that he will name “Independence, USA”.

On “The Glenn Beck Program” last week, the television host said his free market community will ideally produce its own food and entertainment content and live in a city completely cut off from the rest of the world. Beck described his imaginary community as having its own homes, baseball fields, a theme park, small businesses, news, information and technology, and education system.

Independence, USA would remain distant from outside stores and businesses and would therefore have to produce everything for itself. And in order to ensure sustainability, Beck said his community’s members would have to “be able to produce more than they consume.”

But the conservative network producer and media personality admitted he has a fear of cows and no knowledge on how to grow his own food. Residents in Independence, USA would therefore be required to learn how to produce their own food, as well as start their own businesses.

“There’s not going to be a Gap here. There’s no Ann Taylor. You want Ann Taylor, go someplace else,” Beck said, referring to his imaginary community’s lack of popular clothing stores.

The learning curve to survive in Beck’s village would likely be steep: residents in independence will have nothing handed to them, and be required to produce their own movies, TV shows and documentaries.

The main purpose of this community would be to isolate its residents from the propaganda that Beck believes Americans are exposed to in their current society, as well as provide them with freedom and a place to live that doesn’t discriminate based on income…..”

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“As nations see Japan’s success in weakening the yen (see discussion), some begin to take notice. Emerging markets nations often attempted to devalue their currencies in the past in order to improve competitiveness. But these days developed economies are doing it as well. This morning the Russians called these policies “currency wars”, which is a good way to describe the latest developments. And such policies are not limited to Japan.

Bloomberg: – The alert from the country that chairs the Group of 20 came as Luxembourg Prime Minister Jean-Claude Juncker complained of a “dangerously high” euro and officials in Norway and Sweden expressed exchange-rate concern.

The push for weaker currencies is being driven by a need to find new sources of economic growth as monetary and fiscal policies run out of room. The risk is as each country tries to boost exports, it hurts the competitiveness of other economies and provokes retaliation.

Yesterday “will go down as the first day European policy makers fired a shot in the 2013 currency war,” said Chris Turner, head of foreign-exchange strategy at ING Groep NV in London.

In an environment such as this it is somewhat surprising to see gold treading water.

Gold (spot price, source: Barchart.com)

The key concern on the part of precious metals investors is the risk of rising US dollar – as Europe and Japan focus on pushing their currencies lower. Stronger dollar tends to put downward pressure on commodity prices….”

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Banks win again off your back….how does your back feel ?

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“SAN FRANCISCO (MarketWatch) — Bank of America Corp. on Thursday extends the run of big banks reporting earnings this week. Its biggest challenge will be how it stages a turnaround as it seeks to recover from wounds inflicted by its mortgage business.

Hopes are high for the sector as B. of A. BAC +1.99%  follows stellar earnings from Goldman Sachs Group Inc. GS +4.06%  and J.P. Morgan Chase & Co. JPM +1.01% . J.P. Morgan’s results topped Wall Street earnings estimates even as it continues to deal with its “London Whale” controversy. Read more on financial stocks on Wednesday.

Of 21 analysts surveyed by FactSet, Bank of America is expected to report earnings of 2 cents a share on revenue of $21.19 billion. With that in mind, here are five things to consider before Bank of America reports earnings Thursday morning….”

5 things to know