Merrill

• RBA cuts interest rates to record low of 2.25% (SMH)
• RBI keeps rates on hold (Reuters), India allows banks flexibility on big projects to reboot growth (Reuters)
• BP slashes capital spending by 20% (FT)
• Greek Retreat on Writedown May Move Fight to Spending (BBG)
• Rosneft accounting move helps BP beat profit forecast (Reuters)
• Amazon in Talks to Buy Some of RadioShack's Stores (BBG)
• Behind Obama's budget proposals, a gloomy view of the future (Reuters)
• How the Justice Department, S&P Came to Terms (WSJ)
• Staples, Office Depot in Advanced Talks to Merge (WSJ)

What Denmark has just done is "back-door QE", because as some forget, there are two ways to push the price of an asset higher (thus pushing its yield lower in the case of a bond): increase demand, which is what conventional QE does when central banks buy bonds, or reduce supply. Which is what Denmark just did by completely cutting off all Treasury issuance "until further notice". As a result, paradoxically, increasingly more speculators are betting that the "Trade of 2015" could be doing precisely the opposite of what the Danish central bank is hoping will happen: i.e., shorting the EURDKK (or going long the DKKEUR) in hopes that when the Danish peg finally does break, it too will result in long Swiss France-type profits.

• Falling Prices Spread Pain Far Across The Oil Patch (WSJ)
• ISIS Group Claims Responsibility for Attacks That Killed 27 in Egypt (NBC)
• Russia Unexpectedly Cuts Key Rate as Economy Eclipses Ruble (BBG)
• Greece’s Feisty Finance Minister Tries a More Moderate Message (NYT)
• U.S. homeownership hits 20-year low, but new households growing (Reuters)
• Indian Banks’ Shares Plunge as Bad-Loan Provisions Surge (BBG)
• Underground Terror Network Said to Benefit Would-Be Jihadists in Europe (WSJ)
• Russia warns West support for Kiev could lead to 'catastrophe' (Reuters)

• Who Doubts Yellen's Policies? Summers for One (BBG)
• Samsung, Apple Back in Dead Heat for Global Smartphone Dominance (WSJ)
• Islamic State purportedly sets new deadline for hostage swap (Reuters)
• Turkey's $7.9 Billion Mystery Money That's Simply Vanished (BBG)
• How a Two-Tier Economy Is Reshaping the U.S. Marketplace (WSJ)
• U.S. Prisons Grapple With Aging Population (WSJ)
• Hasenstab Sees $3 Billion Vanish in Ukraine as One Big Bet Sours (BBG) - maybe he should BTFD, pardon, "invest" in Belarus next?
• Belarus May Seek Debt Restructuring in 2015, President Says (BBG)

• Saudi Arabia’s New King Probably Will Not Change Current Oil Policy (BBG)
• Saudi King’s Death Clouds Already Tense Relationship With U.S. (WSJ)
• Oil Pares Gains as New Saudi King Says Policies Stable (BBG)
• Kuroda Says BOJ to Mull Fresh Options in Case of More Easing (BBG)
• U.S. pulls more staff from Yemen embassy amid deepening crisis (Reuters)
• Putin Said to Shrink Inner Circle as Hawks Beat Billionaires (BBG)
• A Few Savvy Investors Had Swiss Central Bank Figured Out (WSJ)

• ECB to decide on bond-buying plan to revive euro zone (Reuters)
• Draghi Is Pushing Boundaries of Euro Region with QE Program (BBG)
• Investors Wonder Whether ECB Will Do Enough (WSJ)
• Treasuries Drop With Bunds Before ECB; U.S. Futures Rise (BBG)
• European shares hit seven-year high (Reuters)
• At least eight civilians killed in shelling of Ukrainian trolleybus (Reuters), both sides blame each other
• OPEC Will Blink First in Battle With Shale Drillers, Poll Shows (BBG)
• China Injects $8 Billion Into Banking System (WSJ)
• New York says Barclays not cooperating in 'dark pool' probe (Reuters)

As we detailed previously, the first USD-denominated Chinese corporate bond default last week - of developer Kaisa Group - signals considerably deeper problems in China's economy as one manager noted, "everyone is rethinking risk right now." As Bloomberg reports, Chinese companies comprised 62% of all U.S. dollar bond sales in the Asia-Pacific region ex Japan last year, issuing $244.4 billion and that huge (and illiquid) market "has been too complacent," according to one credit strategist who warned, investors would be “rational to adopt a cautious approach in view of the fact that anything can happen, anywhere, anytime. It would be irrational to continue thinking that after Kaisa none of the companies will see a similar fate."

• Obama Targets Income Gap in Address That Shapes 2016 Election (BBG)
• Republicans Reject Obama’s Main Economic Proposals (WSJ)
• Senate’s Shelby Says White House Bank Tax Is Dead on Arrival (BBG)
• Is Dollar Next? Investors Reassess After Swiss Shock: Currencies (BBG)
• Bank of Japan Cuts Price Forecast, Maintains Record Stimulus (BBG)
• Pound Weakens After BOE Policy Makers Drop Call to Raise Rates (BBG)
• Putin not flinching on Ukraine despite economic crisis (Reuters)
• Indonesia will not make public full preliminary AirAsia crash report (Reuters)
• Party Hasn't Stopped for Russians at Davos Even With Ukraine Sanctions (BBG)

• Obama to focus on middle class in State of Union address (Reuters) - all 4 of them?
• European Stocks Buoyed by ECB Hopes (WSJ)
• China's 2014 economic growth misses target, hits 24-year low (Reuters)
• Federer on Swiss Franc Shock: "Does It Mean I've Got to Win Now?" (BBG)
• First-time buyers help Christie’s reach record sales (FT)
• So it was the NSA? U.S. Spies Tapped North Korean Computers Prior to Sony Hack (BBG)
• Why Chinese Developer Kaisa's Default Risk Has Money Managers Spooked (BBG)
• Morgan Stanley Misses Estimates on Drop in Bond-Trading Revenue (BBG)

• Oil Drops Below $45; U.S. Stockpiles May Speed Collapse (BBG)
• Pound Drops as Traders Write Off Higher Rates on Inflation Slump (BBG)
• Oil prices down again as UAE defends holding production (Reuters)
• The Politics Behind the ECB's Threat to Cut Greece Funding (BBG)
• France dispatched thousands of police and military personnel to protect synagogues and Jewish schools, as the government warned of continued terror threats after three days of deadly violence (WSJ)
• Chinese Car Dealers Find Days of ‘Printing Money’ Ending (BBG)
• Gold Rises to Highest Since October as U.S. Rate Outlook Weighed (BBG)
• Divers retrieve crashed AirAsia jet's cockpit voice recorder (Reuters)

• Earnings Pessimism Jumps as Oil Threatens S&P 500 Growth (BBG)
• It’s Amateur Hour in the Booming Chinese Stock Market (BBG)
• France mobilizes 10,000 troops at home after Paris shootings (Reuters)
• European Stocks Gain With S&P 500 Futures While Oil Drops (BBG)
• Nasdaq Looks to Operate Dark Pools for Banks (WSJ)
• This Guy Called Bonds in ’14. You Listening This Time? (BBG)
• Paris attacks boost support for Dutch anti-Islam populist Wilders (Reuters)
• OPEC price war in Asia intensifies as oil falls below $50 (Reuters)

... things like a 50%+ drop in oil prices happen. Which at some point will lead more people to wonder what the real numbers are. For emerging nations, those numbers will not be pretty for 2015. They’re going to feel like they’re being thrown right back into the Stone Age. And they’re not going to like that one bit, and look for ways to express their frustration. Volatility is not just on the rise in the world of finance. It also is in the real world that finance fails to reflect. At some point, the two will meet again, and Wall Street will mirror Main Street. It will make neither any happier. But it’ll be honest.

• Police Surround Paris Terror Suspects Near CDG Airport (BBG)
• ECB Said to Study Bond-Purchase Models Up to 500 Billion Euros (BBG)
• How OPEC Weaponized the Price of Oil Against U.S. Drillers (BBG)
• German Industrial Production Falls Amid Plunge in Energy Output (BBG)
• Car Loans See Rise In Missed Payments (WSJ)
• Jim O'Neill threatens he will replace BRICs with ICs (BBG)
• Oil heads for seventh weekly loss as supply glut drags (Reuters)
• Armed man takes hostage in kosher grocery in Paris (AFP)
• Janus Chairman Didn’t Know Details of Gross’s Investment (WSJ)
• Kaisa Bondholders Dream of White Knight as Default Becomes Real (BBG)

“You never know where the skeletons in the closet are or what company will be next," warns one Chinese credit analyst and as the CNY30 billion indebted Chinese developer Kaisa Group (that we initially discussed here) admits it can’t say if it plans to meet a bond deadline today as a local news website said lenders took steps to preserve assets. The builder of residential communities and shopping centers must pay about $26 million in interest on its 10.25 percent 2020 debentures today (which appears unlikely) and its bonds have crashed to below 30c. The big question, as Bloomberg notes, is who's next?

• French policewoman killed in shoot-out, hunt deepens for militant killers (Reuters)
• The Bold Charlie Hebdo Covers the Satirical Magazine Was Not Afraid to Run (BBG)
• Evans Says Fed Shouldn’t Rush Rate Rise as Inflation Undershoots (BBG)
• Oil holds above $51 as traders search for floor (Reuters)
• Gross Helps Fuel New Fund With His Own Cash (WSJ)
• ECB warns Greek funding access hinges on keeping bailout (Reuters)
• Greece Jolts QE Juggernaut as ECB Gauges Deflation Risk (BBG)
• Analysts Say There's No Telling How Low Oil Prices Could Go (BBG)
• Scientists find antibiotic that kills bugs without resistance (Reuters)