By Paddy Power Trader

Economists have cast doubt on whether the Bank of England’s GBP 200bln Quantitative Easing (QE) programme is working. Members of the Bank’s Monetary Policy Committee have said there are increasing signs that QE is working, although its precise impact may never be known.

UK

Economists question success of Bank of England’s GBP 200bln money-printing plan. (Telegraph)

Tories will start cutting spending on day one, says Osborne. (Telegraph)

The Conservatives dramatically revealed that they would start cutting Whitehall spending plans from day one of a David Cameron government.

Three British banks may have to pay more than USD 10bln (GBP 6bln) to the US Government as part of its crackdown on financial institutions bailed out by taxpayers. Royal bank of Scotland may be on the hook for almost USD 1bln to the US over the next decade under a stringent new levy announced by the Obama administration yesterday. Barclays could face a total bill of about USD 5.6bln over ten years, while HSBC may have to handover over USD 3.8bln. (Times)

US

T-notes trended higher on Thursday after weak US economic data which put equities under pressure. Treasurys were given a further lift after strong demand for the USD 13bln 30y note auction which thus sent yields tumbling. There was talk of an unknown large direct bidder who was also present at the 10yr auction, further market talk indicated a stealth bid in Treasurys from housing agencies Fannie Mae and Freddie Mac. The talk on the floor is of undercover QE from the Fed. At the pit close, t-notes finished up 11 ticks at 116.24. At 0636 GMT UST’s were trading up 3 ticks to 116.27 in part relief having cleared this week’s Treasury issuance and ahead a raft of economic data scheduled for later today.

Fed’s Fisher says recovery is underway but will be tepid and unemployment will be a problem for the future. (CNBC)

Fisher says doesn’t see any price pressures and says the Fed needs to complete mortgage purchases before deciding on the next step.

The US Federal Reserve’s balance sheet rose to a record level in the latest week. The Fed’s balance sheet rose to USD 2.274trl in the week ended January 13 from USD 2.216trl in the prior week. (RTRS)

US economists believe American economic growth will be muted in 2010 with unemployment hovering above 9% for the year, the Wall Street Journal reported, citing its own forecast survey of 56 economists. (WSJ)

USD 13bln (Act) 30y Note Auction drew yield of 4.640% vs. Exp. 4.689%, b/c of 2.68 vs. Avg. 2.56 (Prev. 2.45) and Indirects of 40.7% vs. Avg. 43.98% (Prev. 40.0%). 27.21% of the issuance was allotted at high.

The United States will press other countries to copy its proposals for a levy on banks to repay taxpayers for the financial bailout. (FT)

Investors must steel themselves for the possibility of a second leg to the financial crisis, and should be equally prepared for a fiscal crisis, in which a major economy faces either default or a “sudden stop” in financing themselves on capital markets, according to the World Economic Forum. (Telegraph)

US increases airline security amid Al-Qaeda threat according to an official. (Sources)

Asia

JGBs rose as investors bought long-dated bonds a day after a smooth 40-year debt auction pointed to strong demand for the sector, while a rally in US Treasuries also lent support. But firmness in Tokyo shares kept made investors hesitate to pick up shorter-maturity bonds, capping gains in the overall JGB market and causing the yield-curve to flatten. JGBs were trading at 139.11 (+0.14) at 0615 GMT. (RTRS)

The Bank of Japan’s chief economist said the country’s economic recovery is likely to slow down in the first quarter of this year. But he said the risk of Japan slipping into a double-dip recession was not big. (RTRS)

China’s exports will make a slow recovery in 2010, a government spokesman said, trying to cool expectations about the economy’s prospects after robust December trade figures this week ignited fears of overheating. (RTRS)

Forex

EUR/USD trading at 1.4429 (-0.70) weighed by a rumour in Asia that German Chancellor Merkel might resign, may be based on Time piece suggesting she was losing support of coalition partners. (IFR) However, a German Government spokesman said that market rumours about Merkel’s resignation are completely without foundation. (RTRS)

Commodities

Oil fell below USD 79 a barrel overnight and was set for its first weekly drop in more than a month, as disappointing economic data added to expectations for reduced heating demand in the United States. WTI crude futures were trading at USD 79.02, down USD 0.37, at 0613 GMT. (RTRS)

Commodity Futures Trading Commission (CFTC) unveiled its long-awaited proposal to curb speculation in oil and gas markets, setting position limits so high they would affect only a handful of the most massive players, to the relief of edgy traders. (RTRS)

Company News

Three British banks may have to pay more than $10bn to the US Government as part of its crackdown on financial institutions bailed out by taxpayers. Royal bank of Scotland may be on the hook for almost $1bn to the US over the next decade under a stringent new levy announced by the Obama administration yesterday. Barclays could face a total bill of about $5.6bn over ten years, while HSBC may have to handover over $3.8bn. (Times)

UK

BP – Co. is to invest USD 400mln in upgrading units at Toledo, Ohio refinery. (RTRS)

Cadbury – Co. reiterated rejection of Kraft offer and says it is fundamentally undervaluing. Furthermore, co. reported ‘09 5% base business revenue growth and H2 ‘09 growth of 6% in base business revenue. Co.’s board is planning for a 10% increase in full year dividend to GBP 0.18. Co. says full year revenue up 11% on an actual currency basis. Furthermore, Hershey declined to comment on a report that its board authorised a bid for co., however co. chairman Carr said Hershey has reaffirmed interest but no formal bid has been made yet. (BBG/Sources)

Man Group – Co. says momentum continues to build across the business and activity levels with investors and distributors remain high. Says remains very well placed to grow assets. (RTRS)

Prudential – Co. will exit the Japanese life insurance market by ending policy sales at its subsidiary PCA Life Insurance as early as month’s end. (Sources)

BT – Telefonica is to challenge co. in the fixed-line telecommunications market through its UK mobile-phone arm O2. (TIMES)

Experian – Co. says on track to grow FY profits at constant currency and deliver strong free cash flow. (RTRS)

Centrica – Co. has denied as ‘untrue’ claims by the GMB union that is plans to shed 5,000 jobs at its British Gas subsidiary. (Telegraph)

Companies paying Dividends: Land Securities Group (GBP 0.0700), Severn Trent (GBP 0.2671)

Balfour Beatty – Co. trading is in line with prior statement and is ‘confident’ about prospects. (BBG)

Bovis Homes – Co. expects FY profits in line with expectations. (S&P)

US

Equities finished higher after paring back earlier losses due to weak US economic data in the form of retail sales and jobless claims. The technology sector outperformed, however basic materials capped further gains. The healthcare sector was the second best performing in the S&P 500 after an agreement was reached between the Democrats and unions over taxing high-end health plans. After decent gains in the previous session, the NASDAQ 100 lagged its peers with Apple (-0.58%) and Amazon (-1.36) weighing whilst the S&P 500 closed at a 15-month high. At the closing bell; the S&P 500 closed up 0.24% at 1148.46, the DJIA closed up 0.28% at 10710.55 and the NASDAQ 100 closed up 0.02% at 1886.52.

Intel – Q4 EPS USD 0.40 vs. Exp. USD 0.31, Q4 revenue USD 10.6bln vs. Exp. USD 10.15bln. Q1 revenue USD 9.7bln +/- USD 400mln vs. Exp. USD 9.34bln. Co. says Q4 ASP for microprocessors was up sequentially. Co.’s CFO says Q4 was a strong finish to what turned out to be a good year and expects modest recovery of sales of corporate PCs in 2010. (BBG/RTRS)

Google – China sought to play down a threat by co. to quit the country on hacking and censorship concerns, saying any decision by the internet search giant would not affect US trade ties. (RTRS)

Boeing – Co.’s test manager says is ‘almost giddy’ after month of 787 flights and says 787 in ‘tremendously good condition.’ Says 787 has ‘exceeded my expectations but has seen ‘really minor things’ like a windshield crack. (BBG)

Yahoo – Co. should acquire WPP, according to a blog posting on PaidContent.org by games2win.com CEO Alok Kejriwal. (Sources)

Verizon – Co. is cutting the prices of its calling plans and data plans on January 18, including a 30% drop in unlimited calling plans according to a Boy Genius report. (theflyonthewall.com)

Pfizer – Co. and Boehringer Ingelheim’s Spiriva can’t be linked to serious side effects, the US FDA said doctors can continue to recommend the project. (BBG)

Hershey – Co. declined to comment on a report that its board authorised a bid for Cadbury and could make a formal offer before Jan. 23 deadline. ‘As a matter of policy, we do not comment on Acquisitions-explained/’ title=’Spread Bet Merger’>Merger and Acquisition issues,’ said a co. spokesman in an email. However Cadbury chairman Carr said co. has reaffirmed interest but no formal bid has been made yet. (BBG/Sources)

Motorola – Co. reconsiders break-up plan and has paused the auction of Networks, mobility unit. Latest bids have been in the USD 3-4bln range which is lower than expected. Co. says co. board will meet in coming days to discuss future of all its business lines. (WSJ)

Europe

Carrefour – Q4 revenue EUR 26bln vs. Exp. EUR 26.1bln and full year revenue EUR 96.2bln. Co. sees ‘09 operating profit at EUR 2.78bln and co. says sales growth in difficult environment. Co.’s CFO says may be signs that we have now hit the bottom. (BBG/RTRS)

Pernod Ricard – Co. says H1 FY 09-10 sales in line with expectations but H1 sales fell 3% on like-for-like basis. Co. confirms FY earnings guidance. Says US sales haven’t seen recovery set and business remained difficult in Europe. (BBG/RTRS)

Renault – French Industry minister says government is considering potentially raising stake in co. (RTRS)

Lagardere – Co. denies rumours of sale of Canal Plus and EADS stakes. (L’agefi)

Telefonica – Co. is to challenge BT in the fixed-line telecommunications market through its UK mobile-phone arm O2. (TIMES)

UBS/ Julius Baer – Morgan Stanley said, “We think the Italian tax amnesty has been slightly more successful than the market first thought. Whilst we think this is priced in at Baer, we think higher outflows are less so at UBS WM, which is likely to miss Q4 expectations for net new money and have worse outflows than Q3.” (Sources)