Asia

· Japan Government Approves Record $812b Budget; Deficit-Halving Goal In Sight. Japanese Prime Minister Shinzo Abe's cabinet approved on Wednesday a record $812b budget for the fiscal year starting on April 1, while cutting new borrowing for a third straight year in a bid to balance growth and fiscal reform. The 96.34 trillion yen ($812.45b) general account budget draft, the third since Abe swept to power in late 2012, marks a rise from this fiscal year's initial 95.88 trillion yen, reflecting higher welfare spending and military outlays. A projected rise in tax revenue to a 24-year high of 54.53 trillion yen on an expected economic recovery allows Tokyo to cut new bond issuance to a six-year low of 36.86 trillion yen. That accounts for 38.3% of the budget, a six-year low. (Reuters)

· Shanghai FTZ: Foreigners To 'Fully Own' E-Commerce Firms. China has said that foreign investors will be allowed to "fully own e-commerce companies" in its Shanghai Free Trade Zone (FTZ). The move is part of a pilot scheme, stateowned news agency Xinhua said. The FTZ was set up in September 2013 and has acted as a testing ground for economic reforms by China's government as it seeks to boost growth and productivity. It is widely seen as a crucial part of the country's market-oriented reforms. (BBC)

Americas

· US Retail Sales Fell 0.9% In December. Retail sales in the US fell in December, according to the latest figures from the Commerce Department. Sales fell by 0.9%, which was the biggest monthly decline since January last year. The figures mean that in the past year, sales in the shops, stores and supermarkets of the US have risen by just 4%, which was the lowest growth rate since 2009. Spending by consumers accounts for more than two-thirds of the US economy. In addition, previously published figures for November were revised down. There was an increase in sales that month of just 0.4%, instead of the earlier estimate of an increase of 0.7%. (BBC)

· U.S. Business Inventories Rise, Sales Fall For Second Straight Month. U.S. business inventories rose in November as sales fell for a second straight month, the Commerce Department said on Wednesday. Inventories increased 0.2%. That was in line with economists' expectations and followed a similar gain in October. Inventories are a major component of gross domestic product. Retail inventories excluding autos, which go into the calculation of GDP, edged up 0.1% after rising 0.3% in October. Business sales fell 0.2% in November after slipping 0.3% the prior month. At November's sales pace, it would take 1.31 months for businesses to clear shelves, unchanged from October. (Reuters)

· U.S. Import Prices Post Biggest Drop Since 2008. U.S. import prices recorded their biggest drop in six years in December as the cost of petroleum plunged, keeping imported inflation pressures subdued. The Labor Department said on Wednesday import prices fell 2.5% last month, the largest decline since December 2008, after falling 1.8% in November. It was the sixth straight month of declines in import prices. (Reuters)

· U.S. Mortgage Applications Surge; 30-Year Rate Below 4%: MBA. Applications for U.S. home mortgages surged by the most in more than six years last week as 30-year mortgage rates dropped below 4% for the first time since May 2013 on the back of falling U.S. government bond yields, data from an industry group showed on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, jumped 49.1% in the week ended Jan. 9, its largest weekly percentage gain since late November 2008, in the middle of the U.S. financial crisis. (Reuters)

· Brazil Retail Sales Rise In November As Black Friday Takes Root. Retail sales in Brazil rose in November as consumers pounced on early holiday promotions, reinforcing the rising popularity of the Black Friday shopping trend started in the United States as well as expectations of a softer December. Sales volumes climbed a seasonally adjusted 0.9% in November from October, government statistics agency IBGE said on Wednesday. That was above all estimates in a Reuter’s poll whose median forecast showed 0.2% growth. (Reuters)

Europe

· Profitability Of UK Services Firms Hits Record High In Third-Quarter: Statistics Office. Profits made by British services companies soared in the third quarter to the highest level since records started 18 years ago, but rates of return for North Sea oil and gas companies sank to an all-time low, data showed on Wednesday. The Office for National Statistics said the rate of profit at services companies, which comprise the vast bulk of British businesses, rose to a record high of 16.8% in the third quarter from 14.9% in the previous quarter. (Reuters)

· Draghi Buoyed as EU Court Aide Supports 2012 Bond-Buy Plan. Mario Draghi won a legal endorsement for the bondbuying plan he designed to save the euro, potentially easing resistance to a similar program that could be announced as soon as this month. The Outright Monetary Transactions program that the European Central Bank president pushed through in 2012 won the conditional backing of Advocate General Pedro Cruz Villalon of the EU Court of Justice in Luxembourg, who said the measures are “in principle” in line with the bloc’s law. “The ECB must have a broad discretion when framing and implementing the EU’s monetary policy, and the courts must exercise a considerable degree of caution when reviewing the ECB’s activity,” Cruz Villalon said in a non-binding opinion today. The opinion could ease pressure on ECB President Draghi days before he meets with his Governing Council to consider a separate so-called quantitativeeasing package to quell the threat of deflation in the euro area. (Bloomberg)

· Greek Jan-Dec primary budget surplus at 1.92b euros. Greece's central government posted a primary budget surplus of 1.92b euros ($2.25b) in 2014, the finance ministry said on Wednesday, falling short of the government's projection. Greece was aiming at a central government primary budget surplus of 4.9b euros in its latest budget. The central government surplus excludes the budgets of social security organizations and local administrations and is different from the figure monitored by Athens's EU/IMF lenders, but indicates the country's progress in repairing its finances. Athens has targeted a general government primary budget surplus of 1.8% of gross domestic product in 2014. (Reuters)

· Spain PM Rajoy puts 2014 economic growth at 1.4% y/y. Spanish Prime Minister Mariano Rajoy on Wednesday said his country's economy grew by 1.4% in 2014, slightly above the government's previous projections for a 1.3% annual increase. Rajoy was speaking at a joint news conference with Greek Prime Minister Antonis Samaras on a visit to Athens, ahead of a snap general election there later this month. The Bank of Spain recently raised its 2014 growth forecast to 1.4%, also from 1.3%, and expects the Spanish economy to expand by 2% in 2015, also in line with government predictions. (Reuters)

· World Bank expects Russia's economy to contract by -2.9% in 2015. The World Bank expects Russia's economy to contract by 2.9% in 2015, it said in a report on global economic growth on Wednesday, cutting its forecast from December when it expected a 0.7% contraction. The bank also predicted 0.1% growth in 2016 and 1.1% growth in 2017, following 0.7% growth in 2014. It cut its global growth forecast for 2015 and next year due to poor economic prospects in the euro zone, Japan and some major emerging economies that offset the benefit of lower oil prices. (Reuters)

· Russia To Support Some Top Banks Through Sale Of Treasury Bonds: Finance Ministry. The Russian Finance Ministry is ready to provide funds for some of the country's top banks and will make decisions on supporting other financial institutions later, a senior ministry official said on Wednesday. Alexei Moiseev, a deputy finance minister, said Gazprombank, VTB and Russian Agriculture Bank, or Rosselkhoz bank, will get cash from the sale of ministry's domestic treasury bonds. (Reuters)

Currencies

· Dollar Erases Losses To Trade Flat Against Major Rivals. The U.S. dollar traded flat against the euro, yen and pound Wednesday after dismal December retail-sales data caused investors to second-guess the strength of the U.S. economy, kicking off a session of choppy trade. After hitting a nine-year low early Wednesday, the euro turned positive against the dollar after the Commerce Department said retail sales dropped by a seasonally adjusted 0.9% last month to mark the biggest decline in nearly a year. The ICE U.S. Dollar Index, a measure of the dollar’s strength against a trade-weighted basket of six rival currencies, was down 0.22% to 92.1030. The dollar staged a similar recovery against the yen. It recovered to ¥117.3320, after the buck fell to ¥116.1150, its lowest level since mid-November. The pound traded at $1.5232, off its session high of $1.5270. It traded at $1.52 Tuesday afternoon. (Marketwatch)

Commodities

· Oil Surges 5 Pct On Options Expiry; Bounce Seen Fleeting. World oil prices had their biggest surge in two-and-a-half years on Wednesday, rebounding from a nearly six-year low as traders turned away from the bearish pressures of a worldwide glut to cover themselves on expiring options. U.S. and Brent crude staged blistering $2 rallies in the final halfhour of trade as dealers with options exposure scrambled to square their positions. Oil had earlier traded steady to lower following data showing that U.S. crude oil stockpiles rose far more than expected last week. Brent crude rose $2.10, or 4.5%, to settle at $48.69 a barrel, in its strongest daily percentage gain since June 2012. The benchmark hit a low of $45.19 on Tuesday, the lowest since March 2009, amid increasing U.S. stocks and a continuing global supply glut. U.S. crude oil settled at $48.48 up $2.59, or 5.6%, the biggest gain since August 2012. U.S. gasoline futures lead the charge, rising more than six% due to falling refinery rates. (Reuters)

· Gold Pares Gains After Hitting 12-Week High On Safe-Haven Buying. Gold pared gains after rallying to a 12-week high for the second straight day on Wednesday, as earlier safe-haven buying that was spurred by sharp falls in stock markets and other commodities dried up. Spot gold rose to its highest since mid-October at $1,244 an ounce, paring gains around the 150-day moving average for the second straight day. It was up 0.1% at $1,232.36 an ounce at 3:07 p.m. EST (2007 GMT). Among other precious metals, silver was down 0.6% at $16.90 an ounce. Spot platinum turned lower and was down 0.3% at $1,231.49 an ounce, while spot palladium was down 4.9% at $772.97 an ounce. (Reuters)