U.S. economy expanded at a 2.8 percent in the fourth quarter

Gross domestic product expanded at a 2.8 percent annual rate in the fourth quarter, the Commerce Department said on Friday, a sharp acceleration from the 1.8 percent in the prior three months.

Soft underlying demand and a sharp slowing in core inflation supported the Federal Reserve's decision this week to keep in place an ultra easy monetary policy to nurse the recovery.

The economy got a temporary boost from the rebuilding of inventories, which logged the biggest increase since the third quarter of 2010.

Excluding inventories, the economy grew at a tepid 0.8 percent rate, a sharp step-down from the prior period's 3.2 percent pace and a sign of weak domestic demand.

Fed is likely to keep low key interest rate until late 2014

The Federal Reserve says it is unlikely to raise interest rates before late 2014. It means a period of record-low rates would be extended by more than a year. The Fed has kept its key interest rate at a record low near zero for three years.The Fed's decision to keep rates low is to help lift a weak but modestly growing economy.

The new timeframe hints at details in the Fed's quarterly economic forecast, which will be released later. That will show in what year policy members expect the first increase in the Fed's benchmark interest rate.

IMF cuts global economic growth outlook

The International Monetary Fund (IMF) on Tuesday cut its forecast for global economic growth in 2012 and 2013, citing growing financial strains and rising downside risks as Europe's debt crisis entered a "perilous new phase."

The institution said it expects world economic output to grow by 3.3% in 2012, down from 3.8% in 2011 and from a September forecast of 4%. Global output is forecast to expand 3.9% in 2013, down from a previous
forecast of 4.5%.

The IMF expects the 17-nation euro-zone economy to shrink 0.5% in 2012, followed by growth of 0.8% in 2013. The IMF had previously projected growth of 2.1% in 2012 and 1.5% in 2013.

The IMF left its forecast for U.S. economic growth in 2012 unchanged at 1.8%, but pegged 2012 growth at 2.2%, down from an earlier projection of 2.5%.

U.S. Banks' Bad Reports

The worsening investment environment at the end of 2011 took its toll
on the fourth-quarter earnings of America's banks.

JPMorgan Chase and Citigroup did worse than expected, posting declines
in net profit of 23% and 11% respectively, compared with the same
period in 2010.

Goldman Sachs said its net profit was down by 58%.

But Wells Fargo, which has a smaller investment-banking business than
its rivals, saw net income jump by 21%, to $4.1 billion.

30-year mortgage rate fell to record low of 3.88%

The average rate on the 30-year fixed-rate mortgage fell to a record
low of 3.88% in the week ended Jan. 19 from 3.89% in the prior week,
according to Freddie Mac in its weekly report released on Thursday.

A year ago, the 30-year rate was at 4.74%. These data go back to 1971.

To obtain the latest rate, payment of an average 0.8 point was
required, according to Freddie, a buyer of residential mortgages. A
point is 1% of the mortgage amount, charged in prepaid interest.

Meanwhile, the 15-year fixed-rate mortgage ticked higher to 3.17% in
the latest week from a record low of 3.16% in the prior week. These
data go back to 1991.

FBI made arrests for insider trading

The Federal Bureau of Investigation (FBI) on Wednesday arrested Todd
Newman, a former portfolio manager with the Diamondback Capital
Management hedge fund and John Horvath, an employee of Sigma Capital
Management, an affiliate of SAC Capital Advisors, as part of an
insider trading investigation, The Wall Street Journal reported.

The Federal Bureau of Investigation is also expected to arrest Anthony
Chiasson, a former hedge fund manager at Level Global Investors LP,
who was expected to surrender in New York, the newspaper reported.

A fourth person was expected to face charges as well, but the
newspaper article did not provide a name.

China growth is slowing down

China's economy expanded in the fourth quarter at the slowest pace
since the middle of 2009, setting the stage for what could be a
further easing in monetary policy and selective loosening on home
purchase restrictions in some cities, according to analysts.

Gross domestic product between October and December rose 8.9% from the
year-ago quarter, the National Bureau of Statistics reported Tuesday,
with the result beating expectations of 8.6% growth tipped in a Dow
Jones Newswires poll of economists.

When measured against the prior quarter, the data showed a deepening
slowdown, with growth at 8.2%, compared to 9.5% growth in the third
quarter.

S&P to Downgrade France & Austria Credit Rating

Standard & Poor's Ratings Services has notified the French and Austria governments of its decision to downgrade the country's triple-A credit rating one notch to double-A-plus. This move marks the long-awaited blow to France's international standing and knocks the country out of the top financial league of the euro zone. The downgrade further complicates efforts by the euro zone to contain the region's long-running debt crisis.

S&P last month warned that downgrades were possible for 15 euro-zone countries, including triple-A rated France, Germany, Austria and the Netherlands. The Financial Times reported Friday that Germany would escape without a ratings cut.

Still, a downgrade for France would all but ensure that the European Financial Stability Facility, the euro-zone's temporary rescue fund, would also lose its triple-A rating, Lewis and other economists noted.

Treasury Sells 10-Year Notes At Record Low Yield

A new landmark was set Wednesday for U.S. Treasury bond supply. A sale
of $21 billion, 10-year notes were offered at a yield below 2% for the
first time ever.

The auctioned yield, or the rate the U.S. government pays to borrow
cash in capital markets, was 1.9%. That smashed the 2% yield from the
10-year sale in September.

The Treasury received bids totaling $69.04 billion and accepted $21.00
billion. Primary dealers were awarded $9.29 billion, while indirect
bidders--a category that includes foreign central bankers--were
awarded $8.04 billion.

2012 stock markets started strong

Stock markets started the year on a positive note, buoyed by strong
manufacturing data from America, Britain and China. Investors will be
hoping that 2012 proves kinder than last year, when most markets fell.

It was no surprise that the Euro area's benchmark index fared badly in
2011, though the once-hot stock markets of Brazil, Hong Kong, China
and India did even worse. One of the world's best performers, oddly
enough, was Venezuela's main index.

British regulators fine PricewaterhouseCoopers

Britain's regulators said Friday they have fined accounting firm
PricewaterhouseCoopers $2.2 million for turning a blind eye on client
assets at JPMorgan Chase.

The accounting firm failed to inform JPMorgan that more than $8
billion of their clients' funds were mixed up with the bank's own
funds in seven years of reports filed with the Financial Service
Authority, beginning in 2002.

The New York Times reported Friday the fine, imposed by the
Accountancy and Actuarial Discipline Board, was the largest ever meted
out by that regulator.

"The tribunal found that P.W.C. had committed misconduct in respect of
each allegation in the disciplinary complaint before it. The tribunal
found the misconduct in this case to be very serious," the regulator
said in a statement.

However, the disciplinary board also said it had handed out a lower
fine than originally assessed due to the firm's cooperation with the
inquiry.

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