>>> US Close Dow-0,07% S&P-0,13% Nasdaq-0,11% Russell -0,50%

Closing Market Summary: Stocks End Flat After ECB Stands Pat

The stock market ended the Thursday session on a modestly lower note ahead of Friday's Nonfarm Payrolls report for November. The S&P 500 shed 0.1% while the Russell 2000 (-0.5%) underperformed.  

Thursday served as a perfect reminder for how dependent global equity markets have become on central bank stimulus. The first reminder occurred during the Asian session with China's Shanghai Composite soaring 4.3% amid expectations the People's Bank of China will introduce additional stimulus measures. While today's advance was impressive, it pales in comparison with an 18.3% surge in the index since November 20.

Meanwhile, the second reminder manifested itself through volatility in European and U.S. markets in reaction to the European Central Bank's latest policy statement and subsequent press reports.

As expected, the ECB made no changes to its interest rate corridor, but more notably, President Mario Draghi did not call for the start of a sovereign QE program, which had been expected by some. Instead, Mr. Draghi said the economic situation in the eurozone will be reassessed early next year. Furthermore, the ECB lowered its 2015 GDP projection to 1.0% from 1.6% and cut its harmonized inflation forecast for the region to 0.7% from 1.1%.

The absence of a QE announcement gave a boost to the euro while pressuring European and U.S. stocks. However, U.S. equities were able to string together a rebound after markets in Europe closed for the day. That recovery was capped with the S&P 500 spiking into the green just after 12:30 ET when Bloomberg reported the European Central Bank will prepare a broad-based QE package for the January meeting. In a way, preparations for such a program should be expected even if no announcement is made in January and it is worth pointing out that Mr. Draghi was pressed to define ‘early' during his press conference, to which he responded, "Early, it means early, it doesn't mean the next meeting."

The vague report knocked the euro off its high to 1.2380 against the dollar after the single currency tested the 1.2455 level in the morning. Conversely, the Dollar Index (88.62, -0.33) halved its loss to 0.4%.

Although the early afternoon rebound sent the benchmark index back to its flat line, the S&P 500 was unable to extend that move. The index spent the next two hours within a point of unchanged before sliding away from its flat line into the close. Once again, an ECB-related report was cited for the afternoon weakness after Germany's Die Welt reported Mr. Draghi no longer enjoys majority support on the Executive Board.

Eight sectors finished in the red with energy (-0.9%) spending the day at the bottom of the leader board. The sector slumped as crude oil surrendered 0.8% to $66.75/bbl, but despite the decline, the energy sector will enter Friday with a week-to-date gain of 2.4% versus a slim 0.2% uptick for the S&P 500.

Outside of energy, telecom services (-0.2%) and industrials (-0.5%) were the only two groups unable to keep pace with the market. The industrial sector followed its top component—General Electric (GE 26.09, -0.29)—lower, while transport stocks held up relatively well with the Dow Jones Transportation Average ending in-line with the market.

Elsewhere, the consumer discretionary sector also finished in-line with the S&P 500, but retail stocks were pressured after Aeropostale (ARO 2.48, -0.71), Express (EXPR 13.19, -1.30), Guess? (GES 20.07, -2.10), and PVH (PVH 122.68, -1.72) disappointed with their earnings and/or guidance. The four names lost between 1.4% and 22.3% while the SPDR S&P Retail ETF (XRT 92.73, -0.64) fell 0.7%.

On the upside, financials (+0.1%), materials (+0.3%), and technology (+0.1%) registered modest gains. Notably, the tech sector received a measure of support from the PHLX Semiconductor Index, which added 0.1%. Shares of Avago Technologies (AVGO 103.07, +7.94) spiked 8.4% and were responsible for the bulk of the uptick in reaction to strong quarterly results and guidance.

Treasuries ended on their highs with the 10-yr yield sliding four basis points to 2.24%.

Participation was a bit below average with just over 780 million shares changing hands at the NYSE floor.

Economic data was limited to initial claims and the Challenger Job Cuts report:
  • Weekly initial claims fell to 297,000 from an upwardly revised rate of 314,000 (from 313,000) while the consensus expected a decline to 295,000 
    • Continuing claims increased to 2.362 million from an upwardly revised 2.323 million (from 2.316 million) 
  • The Challenger Job Cuts report showed a 21.0% year-over-year decline in planned layoffs to follow the prior increase of 11.9% 
Tomorrow, the November Nonfarm Payrolls report (consensus 230K) will be released at 8:30 ET alongside the October Trade Balance (consensus -$42.00 billion). The Factory Orders report for October (consensus 0.2%) will cross at 10:00 ET and the day's data will be topped off with the 15:00 ET release of the Consumer Credit report for October (consensus $16.50 billion).
  • Nasdaq Composite +14.2% YTD 
  • S&P 500 +12.1% YTD 
  • Dow Jones Industrial Average +8.0% YTD 
  • Russell 2000 +0.8% YTD

>>> Fed watcher Hilsenrath (WSJ): According to research from senior Fed economis

Fed watcher Hilsenrath (WSJ): According to research from senior Fed economists, the "optimal" path for short-term rates is to start raising soon and complete the process quickly 
- The Fed's new "optimal control" study that was conducted in November determined the best time to start raising rates is "right now" in Q4, taking Fed Funds rate to 1.4% by Q4 of 2015, 2.6% by Q4 of 2016, and 3.5% by end of 2017.
- Report adding that Chair Yellen pays attention to the findings of this study.
- Since the 2012 simulations, unemployment rate has come down faster than expected.


WSJ Full Article.

Fed Simulations Call for Rate Hikes Soon By JON HILSENRATH

The optimal path for short-term U.S. interest rates might be to start raising them soon and end the process quickly, according to research conducted by senior Federal Reserve economists.

The Fed’s new “optimal control” study, completed in late November, is akin to putting the whole economy through a flight simulator to estimate how much fuel it needs to ride through a storm. Using a model known as FRB/US, Fed staffers simulate a path for the central bank’s benchmark interest rate – the federal funds rate – that results in the quickest possible return to low unemployment and stable inflation around 2%.

The study finds the best time to start lifting the fed funds rate from near zero is right now, in the fourth quarter of 2014, followed by increases to 1.4% by the fourth quarter of 2015, 2.6% by the fourth quarter of 2016 and 3.5% by the end of 2017. Looking out past 2020, the simulations never result in short-term rates above 4%.

These simulations are noteworthy in part because Fed Chairwoman Janet Yellen pays attention to them. She highlighted earlier versions of optimal control exercises in speeches in 2012, citing the work as evidence the Fed should take its time raising rates.

Those earlier simulations had notably different outcomes than the news ones. They pointed to the optimal time for liftoff as late 2015, followed by a steep path of rate increases that pushed the benchmark to near 5% by 2020.

Several factors have changed since the 2012 simulations. The jobless rate has come down faster than Fed officials expected when the simulations were done two years ago. In mid-2012, the jobless rate exceeded 8% and Fed officials expected it to retreat slowly to between 7% and 7.7% by the end of 2014. Instead it was 5.8% in October. That helps explain the earlier liftoff produced by the model now. (The fact that Fed officials and their models were so wrong about the trajectory of unemployment is one reason to treat all of these model simulations with great caution — more on that below.)

Though the authors don’t specifically cite it, the economic profession’s debate about “secular stagnation” lurks in the changing simulations. The secular stagnation idea, popularized by Harvard University professor Lawrence Summers, holds that the economy doesn’t grow as fast as it used to because of low worker productivity and labor force growth. That in turn means interest rates don’t need to go as high as previously thought once they do start rising. Fed officials have reduced their estimate of how high short-term interest rates need to go in the long-run, from 4.25% in 2012 to 3.75% more recently, which explains the lower amplitude of rates in the new simulations.

Other factors are at play. As noted by the authors — Flint Brayton, Thomas Laubach, and David Reifschneider – the Fed’s views about the causes of inflation and its interplay with the economy and interest rates also have evolved since the 2012 simulations. The Fed’s updated models see inflation as more inertial and less responsive either to slack or to changes in the fed funds rate than previously thought. The simulations suggest that new inflation view should encourage officials to take a slower path of rate increases than thought before. At the same time, it should make them reluctant to allow inflation to overshoot the 2% goal, because it could be hard to get back down.

Ms. Yellen, in her 2012 speeches, warned it would be “imprudent” to put too much weight on these simulation exercises, a view seconded by the Fed researchers, who say the models should be treated with a “high degree of caution” as a guide to actual interest rate policy. As the latest shifts show, the models themselves are imperfect and subject to change. For example, the recent global downdraft in inflation, driven in part by commodity price declines, could change the results again if it persists or deepens. Fed officials are expecting inflation to gradually rise to 2%.

Moreover, the models are sensitive to how much weight officials put on making interest rate changes steady and predictable. The more comfortable they are making swift changes to rates, the longer they can wait before raising them.

Still, the new exercise does provide a window into how thinking at the Fed is evolving as it nears interest rate liftoff, after holding the fed funds rate near zero since December 2008. In comments this week, Fed Vice Chairman Stanley Fischer and New York Fed President William Dudley both strongly suggested the central bank is inclined to start raising rates in the months ahead even though inflation is lower than the central bank’s 2% target. The new simulations support that view. At the same time, the two officials focused a great deal of attention on what happens once the Fed does start raising rates. What is the path of rate hikes going to look like? The new simulations suggest it will be modest indeed.

>>>Potash Corp could increase stakes in four companies to gain control

Potash Corp could increase stakes in four companies to gain control

Potash Corp of Saskatchewan (NYSE, TSE:POT) is weighing the possibility of taking control of four businesses in which it presently holds minority interests, according to CEO Jochen Tilk in a newswire report.

Reuters cited Tilk as saying that Saskatoon, Saskatchewan-based Potash Corp is assessing investments valued at USD 4.5bn in Chile's SQM, Israel's Israel Chemicals, China's Sinofert Holdings and Jordan's Arab Potash.

According to the article, Tilk explained that the goal is to gain "some control or participation in the" businesses. He said that Potash Corp sees "them as opportunities" but knows that it cannot remain "minority" investors "forever unless" it has "a plan going forward."

In the article, Tilk added, however, that he is satisfied with the influence that the company has at Sinofert and Arab Potash.

Tilk said that Potash Corp has not arrived at any decision yet and that it will not move forward without first discussing the matter with the businesses involved.

According to the report, Potash Corp under then CEO Bill Doyle made a failed attempt to acquire control of Israel Chemicals. Israeli government, which owns a golden share in Israel Chemicals, rejected the Canadian company's overtures in 2013, noted the report.

>>> BlackBerry CEO sees deals with Chinese bidders unlikely due to government sc

BlackBerry CEO sees deals with Chinese bidders unlikely due to government scrutiny
BlackBerry Ltd. (NASDAQ:BBRY) will have little success closing a deal with a Chinese entity, the company's chief executive noted, according to a newswire report.

CEO John Chen told Bloomberg that he didn't think Western governments would allow such a deal to go through because they rely on the company's phones. In the interview, Chen downplayed previously reported rumors that Lenovo Group Ltd. would make a bid for the Canada-based mobile phone maker.

"We probably are unable to do that," Chen noted. "One of our biggest install bases is government in the so-called Five Eyes countries where governments share intelligence. I think there will be a lot of regulatory issues and concerns."

Although Chen has publicly mentioned potential deals with Chinese firms in the past, according to the report, no such deals are currently being seriously considered.

(BFW) Oi Poised to Approve Altice’s EU7.4b Offer for Portuguese Assets

Oi Poised to Approve Altice’s EU7.4b Offer for Portuguese Assets
2014-12-04 20:05:27.911 GMT


By Robin Stringer
Dec. 4 (Bloomberg) -- Oi poised to approve offer at board
meeting today, people familiar tell Bloomberg’s Cristiane
Lucchesi, Christiana Sciaudone and Matthew Campbell.
* Announcement could come as soon as today, the people said,
asking not to be named because matter is confidential
* Cos. in exclusive talks Dec. 1 after Altice’s offer was
raised, putting it ahead of a rival bid by Apax Partners
LLP, Bain Capital
* Buy would be 2nd multibillion-dollar deal this yr for
Patrick Drahi
* For Rio de Janeiro-based Oi, sale will give it proceeds to
use to pare its more than $18b in debt, to take part in
consolidating Brazil
* Representative for Oi confirmed board meeting being held
today, declined to comment further

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To contact the editor responsible for this story:
Robin Stringer at +1-212-617-2526 or
rstringer7@bloomberg.net

>>> COV/MDT spoke to COV IR re High Court dates for approval


COV IR saying possible but not assured that they can go into court on January 12th (first day back for high court), may have to wait until 19th and then two week notice period and back again to court. We (OG) are thinking that now that they have gotten the regulatory approvals in hand they can apply to court for the hearing on the 12th, but we will have to see if it is granted, otherwise would probably be on the 19th.

(Fortune) Uber files to sell $1.8 billion of new stock

Uber’s new fundraising goal is is even larger than previously reported.

On-demand car company Uber today filed in Delaware to authorize up to $1.8 billion of new Series E preferred stock. The document was first spotted by VCExperts, which says that Uber’s valuation could hit $40 billion if all of the authorized shares are issued.

This is the same valuation that Bloomberg reported late last month, although that story only said that Uber was seeking to raise “at least $1 billion.” Prior to this new round, the San Francisco-based company had raised around $1.5 billion, including a $1.2 billion round just this past summer led by Fidelity Investments at a $17 billion pre-money valuation.

It is unclear if Uber has finalized the Series E raise, which is separate from a large convertible debt offering that Uber currently is selling to high-net-worth clients of Goldman Sachs (apparently without having to pay normal Wall Street fees). Word is that, if the Series E raise isn’t done, it’s extremely close.

An Uber spokeswoman declined to comment.