>>> Wells Fargo upgrades Materials Sector to Overweight from Market Weight, Ener


Wells Fargo upgrades Materials Sector to Overweight from Market Weight, Energy Sector to Market Weight from Underweight; Downgrades Consumer Discretionary and Financials Sectors to Underweight from Market Weight

- Firm upgraded their expectations for materials sector EPS growth in March, primarily due to improving chemicals production and buyback acceleration, and they continue to expect materials sector earnings growth to exceed S&P 500 growth, matching consensus expectations. They continue to recommend an overweight on chemicals and underweight on metals and mining. 
- Firm notes Energy sector top-line pressures appear to be easing with the bounceback in commodity prices so far this year. Meanwhile, production growth is expanding as capital spending growth is finally slowing down a bit. Their 2014 estimate for energy sector EPS growth is now 3%, up from their former estimate of 0%, and their 2015 estimate of 5% energy sector EPS growth is now near consensus expectations for 7%. 
- A slower pace of housing activity will likely result in a slower pace of broader discretionary spending this year. As a result, they expect just 5% EPS growth for the discretionary sector this year and 6% EPS growth for the sector next year, versus the consensus expectation for 9% growth in 2014 and 15% growth in 2015. At the industry level, they prefer services (such as media and hotels) over goods industries (such as retail), consistent with a shift toward later cycle exposure in the index. 
- Consistent with a flattening yield curve and dampened trading activity, they reduce their expectation for financials sector 2014 EPS growth from 10% to 6% and their 2015 EPS growth estimate from 8% to 5%. With consensus expectations for sector EPS growth at 9% and 12%, respectively, estimate achievability for financials appears rather low. Consumer finance is the only industry they recommend as an overweight, and they suggest underweighting capital markets and thrifts & mortgages. > 
- While we are edging into commodity-sensitive segments, they are not fully embracing a late-cycle positioning, as an inflation breakout still seems distant. Instead, they are generally focused on midcycle, quasi-defensive segments of the market with high estimate achievability, steady price momentum, and relatively strong estimate revisions. Their overweight sectors are now technology, health care, and materials.

>>> US Early premarket gappers

Early premarket gappers
Gapping up: SPEX +12.7%, HSH +8.1%, GWRE +3.2%, FBHS +2.5%, NVTL +2.4%, HLF +1.9%, RAD +1.6%, SUNE +1.1%, GIII +0.8%

Gapping down: ZQK -33.2%, KKD -11.6%, COMM -5.6%, WAIR -3.9%, GOOD -3.1%, CLVS -2.8%, YGE -2.5%, DRL -1.7%, NPSP -1.5%, ALU -1.5%, BHP -1.5%, RIO -1.5%, DG -1.5%, NOK -1.4%, DB -1.4%, NLSN -1.3%, CMCM -1.2%, HSBC -1%, BTH -0.9%, BCS -0.8%, MT -0.7%

>>> AT&T Corp Raises FY14 Rev guidance --> T US +0.90% in Pre market


AT&T Corp Raises FY14 Rev guidance to +5% y/y implies $135B v $133.6Be(prior +4% or greater)

- AT&T Inc. (NYSE:T) reported continued progress in the second full year of its Project VIP network investment plan, strong second-quarter wireless trends and an increase in its full-year 2014 revenue guidance, while reaffirming its full-year guidance for consolidated margins, EPS growth, capital spending and free cash flow. 

- AT&Ts Project VIP network transformation plan, announced in 2012, is ahead of schedule: AT&Ts 4G LTE network now covers nearly 290 million people; and 

The companys Project VIP broadband build is expected to take fiber to more than 400,000 new business customer locations by the end of the second quarter. In Mobility, AT&T expects to report second-quarter results that include: 

Postpaid subscriber net adds exceeding 800,000; 

Postpaid churn of 0.95 percent or lower; 

Approximately 3.2 million AT&T Next smartphone sales, which have risen throughout the quarter and now are expected to be approximately 50 percent of total sales; and 

Approximately one-half of the companys postpaid smartphone customer base on no-device-subsidy Mobile Share Value pricing plans, growing to approximately two-thirds by year-end. 

AT&T Next and Mobile Share Value plans are driving a shift in the companys wireless revenue components resulting in higher equipment revenues and lower service revenues and ARPU, with no service revenue growth expected in the second quarter. The company expects second-quarter wireless service EBITDA margins to be pressured year over year due to the increased sales activity and strong customer movement to the no-device-subsidy Mobile Share Value plans. Wireless service EBITDA margins are expected to be over 40 percent in each of the three remaining quarters of 2014. 

Wireline expectations for the second quarter include: 
U-verse video additions bundled with broadband will continue to perform well. U-verse broadband to be solid even with second-quarter seasonality and fewer migrations from DSL. Growing consumer preference for buying broadband and pay TV services bundled together reinforces the strategic rationale of AT&Ts proposed acquisition of DIRECTV. 

Continued growth in business high speed broadband adds; 
Strategic business services revenue growth in the mid-teens, with continued economic pressures; and Wireline margins continue under pressure, reflecting content cost increases, fiber expansion and high-speed broadband subscriber growth. Based on all of these trends, the company raised its full-year 2014 guidance for revenue growth to be in the 5 percent range and reaffirmed its full-year 2014 guidance for stable consolidated margins, adjusted earnings per share growth at the low-end of the mid-single digit range, capital expenditures in the $21 billion range and free cash flow in the $11 billion range. AT&T is scheduled to release its full second-quarter 2014 financial results after market close on July 23, 2014.

>>> Hillshire Brands Board Authorizes Discussions with Pilgrim’s Pride and Tyson

Hillshire Brands Board Authorizes Discussions with Pilgrim’s Pride and Tyson Foods; Confirms Pilgrim's Pride increased its offer to $55.00 per share in cash

- Announced that its Board of Directors, after consultation with its independent legal and financial advisors, has made the requisite determination under Hillshire Brands merger agreement with Pinnacle Foods Inc. (NYSE: PF) to provide information to, and conduct separate discussions with Pilgrims Pride Corporation (NASDAQ: PPC) and Tyson Foods, Inc. (NYSE: TSN) with regard to their recent unsolicited proposals. 
- As announced on Tuesday May 27, Pilgrims Pride proposed to acquire all of Hillshire Brands outstanding common stock for $45.00 per share in cash. On June 1, Pilgrim's Pride increased its offer to $55.00 per share in cash. On May 29, Tyson Foods announced its proposal to acquire Hillshire Brands for $50.00 per share in cash. Hillshire Brands is party to a merger agreement with Pinnacle Foods pursuant to which Hillshire Brands agreed to acquire Pinnacle Foods for per share consideration of $18.00 in cash and 0.5 shares of Hillshire Brands common stock. Both the Pilgrims Pride and Tyson Foods proposals are conditioned on the termination of the Pinnacle Foods merger agreement. Hillshire Brands does not have the right to terminate the Pinnacle Foods merger agreement on the basis of either of these proposals or enter into an alternative acquisition agreement with either of these parties prior to termination. There can be no assurance that any transaction will result from these proposals. 
- The Hillshire Brands Board of Directors is not withdrawing, modifying, withholding or qualifying its recommendation with respect to the Pinnacle merger agreement and the merger, or proposing to do so, and is not making any recommendation with respect to either the Pilgrims Pride or Tyson Foods proposals.
- Centerview Partners and Goldman, Sachs & Co. are acting as financial advisors to Hillshire Brands, and Skadden, Arps, Slate, Meagher & Flom LLP is acting as its legal advisor.

(BFW) Sanofi’s Viehbacher Has Relocated to Boston, Le Monde Says


 BN 06/03 09:33 *SANOFI'S VIEHBACHER HAS RELOCATED TO BOSTON, LE MONDE SAYS

Sanofi’s Viehbacher Has Relocated to Boston, Le Monde Says
2014-06-03 09:36:39.419 GMT


By Steve Rhinds
     June 3 (Bloomberg) -- The Sanofi CEO has moved “close to
Boston” in the U.S., French daily newspaper Le Monde reports,
without saying where it got the information.


Link to Company News:{SAN FP <Equity> CN <GO>}

For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}

To contact the editor responsible for this story:
Steve Rhinds at +33-1-5365-5072 or
srhinds@bloomberg.net

(BFW) Swatch Kept at Outperform at Credit Suisse After Watch Survey


Swatch Kept at Outperform at Credit Suisse After Watch Survey
2014-06-03 07:10:10.209 GMT


By Heather Burke
     June 3 (Bloomberg) -- Swatch’s recent weakness is an
attractive entry point as investors should have factored in
lower margin ests. for this yr, Credit Suisse says in note.
  * Reiterates outperform on Swatch, Richemont
  * Cites its 8th global survey of 20 luxury watch retailers,
    distributors in U.S., Europe, Asia:
    * Those interviewed don’t see growth accelerating in 2H
      after Swiss watch exports rose 4% in Jan.-April
    * Trade stock levels generally enough
    * Mid-price watches ($1k-$5k) may continue to outperform
      in 2H
    * High-end watches (>$5k) to have better European growth
      in 2H
    * Uncertainty over effect on Swiss watch industry from
      smartwatches
  * Uncertainty over smartwatch impact doesn’t help Swatch shrs
  * Positive on Swatch on mid-price watch strength, Richemont on
    jewelry
  * NOTE: Swatch shrs down 10% YTD vs Richemont +5.4%, SMI +5.9%
  * NOTE May 28: Swatch 2014 Ebit Margins May Drop, SocGen Says,
    Cuts to Hold


For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

To contact the reporter on this story:
Heather Burke in London at +44-20-7673-2044 or
hburke2@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net

(BFW) Abertis Selling 5.01% of Eutelsat in Accelerated Bookbuilding

--> Books are closed, deal priced @€24.95 / share

Abertis Selling 5.01% of Eutelsat in Accelerated Bookbuilding
2014-06-02 17:41:15.282 GMT


By Jim Silver and Ruth David
     June 2 (Bloomberg) -- Abertis selling its entire Eutelsat
stake, co. says in statement.
  * Price guidance EU24.95/shr
  * UBS, Barclays are joint bookrunners

Link to Company News:ABE SM <Equity> CN <GO>
Link to Company News:ETL FP <Equity> CN <GO>

For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

To contact the reporters on this story:
Jim Silver in New York at +1-212-617-7342 or
jsilver@bloomberg.net;
Ruth David in London at +44-20-3525-8095 or
rdavid9@bloomberg.net
To contact the editors responsible for this story:
Andrea Snyder at +1-202-624-1831 or
asnyder5@bloomberg.net
Jay Miller

RTR - Japan's GPIF could raise domestic stock allocation to 20 pct-Nikkei

Japan's GPIF could raise domestic stock allocation to 20 pct-Nikkei

* 20 pct in Japanese stocks wouldn't be too high hurdle

* GPIF's portfolio larger than Mexico's economy

* GPIF may pour 1 trln yen in alternative assets

TOKYO, June 3 (Reuters) - Japan's public pension fund, the world's biggest, could raise its investment in domestic stocks to 20 percent of its portfolio from the current 12 percent, a top official with the fund was quoted as saying on Tuesday.

Yasuhiro Yonezawa, the recently appointed head of the investment committee of the $1.26 trillion Government Pension Investment Fund, said: "Twenty percent would not necessarily be too high a hurdle" for the GPIF's weighting of Japanese stocks, the Nikkei financial daily reported.

Global financial markets are keenly watching the GPIF's investment strategy as the fund, bigger than Mexico's economy, is a huge investor and a bellwether for other Japanese institutional investors.

The government overhauled the GPIF's structure in late April, appointing new committee members in a push towards Prime Minister Shinzo Abe's goal of a more aggressive investment strategy.

GPIF now targets 12 percent of its investments in Japanese stocks, 60 percent in domestic bonds, 11 percent in foreign bonds, 12 percent in foreign stocks and 5 percent in short-term assets.

GPIF could lower its weighting in Japanese government bonds and shift the proceeds into Japanese stocks, foreign bonds, U.S. and emerging markets equities, the Nikkei quoted Yonezawa as saying.

The public fund could expand its assets from the current conventional asset classes and pour into alternative assets, he said.

"We would like to set up a new asset class category which would invest in non-conventional assets such as real estate investment trusts (REITs) and infrastructure. We would want to invest about 1 trillion yen ($9.79 billion) in the category," the daily quoted Yonezawa as saying.

In April, Tokihiko Shimizu, director-general of GPIF's research department, said the establishment of the alternative asset category would be decided by the investment committee.

GPIF said in February it had reached an agreement with Canada's Ontario Municipal Employees Retirement System and Development Bank of Japan to invest in infrastructure projects through an investment trust fund.

NYT : French Officials Twist U.S. Arms in Bank Inquiry

French Officials Twist U.S. Arms in Bank Inquiry

Facing the prospect of a guilty plea in the United States, the giant French bank BNP Paribas has enlisted the support of a powerful ally: its own government, including top regulators and even the French president.

President François Hollande recently reached out to the White House to raise concerns about a plea deal, according to people briefed on the matter, injecting a political undercurrent into a law enforcement investigation. French officials have also contacted the State Department and Treasury Department, the people said, and made direct appeals to the authorities investigating BNP. The bank is suspected of doing business with Sudan and other countries blacklisted by the United States.

At a meeting last month in New York, state and federal prosecutors discussed the potential fallout from the BNP case with Edouard Fernandez-Bollo, a senior French banking regulator, according to the people briefed on the matter who were not authorized to discuss the private talks. The prosecutors — Cyrus Vance Jr., the Manhattan district attorney; Preet Bharara, the United States attorney in Manhattan; and David O’Neil, then the head of the Justice Department’s criminal division — appeared to resist the overtures.

Undeterred, Mr. Fernandez-Bollo returned to New York last Tuesday with the governor of the Bank of France, Christian Noyer, arguably the country’s highest-ranking financial authority. At Mr. Vance’s offices in Lower Manhattan, Mr. Noyer reiterated that the criminal case could have dire repercussions for BNP and the broader global economy, according to the people briefed on the matter.

The French campaign has focused largely on the concern that BNP, unlike other big banks accused of doing business with Sudan and Iran, might be forced to suspend a core business operation in New York as a result of the guilty plea. French officials have complained that such a penalty, proposed by New York State’s top financial regulator, Benjamin M. Lawsky, could erode some of the bank’s bottom line.

The behind-the-scenes arm twisting — the equivalent of, say, Janet L. Yellen, the chairwoman of the Federal Reserve, intervening in a foreign investigation of an American bank — underscores the international implications of the BNP case. Unlike cases that focus solely on the letter of the law and the extent of wrongdoing, the BNP investigation has inflamed diplomatic tensions and pitted the French government against American authorities.

The pushback from France reflects a cultural and legal divide with the United States, where political intervention in law enforcement is typically taboo. While the White House will coordinate with its allies on terrorism cases, and President Obama routinely discusses matters like trade and climate change with his foreign counterparts, it is rare that foreign leaders weigh in on behalf of specific banks or corporations ensnared in a criminal investigation.

For now, in the case of BNP, the French government has little to show for its effort. The White House did not intervene in the investigation, which began in 2007 with a tip to the Manhattan district attorney’s office. And BNP is still hurtling toward at least an $8 billion fine and a guilty plea for its parent company, according to the people briefed on the matter.

French officials are hardly the first foreign leaders to lean on the Justice Department — Credit Suisse recently dispatched the Swiss finance minister to Washington on the eve of the bank’s pleading guilty to enabling tax evasion — but the effort has coincided with an unusual public outcry in France. One French official recently complained that “the United States can’t treat its allies like this.” And the National Front, the largest far-right party in France, accused American prosecutors of operating a “racket.”

Representatives for Mr. Hollande did not respond to requests for comment. A spokeswoman for the Bank of France said she could not confirm the meetings with Mr. Noyer and Mr. Fernandez-Bollo, and declined to comment further.

Christian Noyer, the Bank of France governor, said BNP Paribas did not violate French or European rules.
Chris Kleponis/European Pressphoto Agency
Christian Noyer, the Bank of France governor, said BNP Paribas did not violate French or European rules.
The two French officials also took up BNP’s cause with Mr. Lawsky, who has the authority to revoke the bank’s license to operate in the state, the Wall Street equivalent of the death penalty. In recent meetings, Mr. Lawsky suggested that he would not withdraw BNP’s license but might temporarily suspend the bank from processing transactions through its New York branch on behalf of foreign clients, a process known as dollar clearing.

The United States investigation into BNP has centered on the bank’s role, from 2002 to 2009, in processing transactions through its American operations for companies and countries that the United States government has hit with sanctions. Prosecutors suspect that BNP, aiming to flout those sanctions, purposely omitted the names of Sudanese clients from paperwork to transfer money so as to not sound alarm bells with bank employees in New York. In some transactions, according to the people briefed on the matter, BNP employees stripped away any information that could tie the payments to entities under sanctions.

Mr. Noyer recently remarked publicly that BNP’s conduct “conformed with European and French rules, laws and regulations.”

At the heart of the French government’s campaign is the concern that American prosecutors have created a two-tiered system of justice: one in which American and British banks escape criminal charges and the other that forces BNP to plead guilty to sanctions violations and pay a record fine.

Hoping to whittle down the financial penalty — prosecutors and regulators initially sought about $10 billion — French officials have contrasted BNP’s case with the fate of other big banks. The British bank HSBC, for example, paid $1.9 billion to settle money laundering and sanctions violations. Credit Suisse paid about $2.6 billion when it recently entered a guilty plea.

For BNP, a bank deemed too big to fail in France, the French officials warned that such a huge settlement could eat into the bank’s capital, according to the people briefed on the matter. The bank’s capital levels, the officials complained, could drop below an important threshold for financial strength.

One French official, speaking on the condition of anonymity, said that any discussions were intended to highlight the potential dangers to the financial industry as a whole, and were not meant as direct advocacy for BNP.

At first, the entreaties appeared to give American authorities some pause, the people briefed on the matter said. But when prosecutors discussed the bank’s capital levels with regulators, they concluded that the concerns were overblown.

BNP’s concerns also lost some momentum after the Credit Suisse guilty plea. The Swiss bank’s American chief executive, Brady Dougan, said the case would not cause “any material impact on our operational or business capabilities.”

Now that a guilty plea is no longer seen as a death sentence for banks, the dollar-clearing suspension has emerged as the biggest threat to BNP, according to the people briefed on the matter. In the meetings last month with Mr. Lawsky, the French officials detailed the potential impact.

With BNP unable to handle any dollar-clearing in New York, clients could flee to competitors, the officials argued. The blow to the bank, the French officials warned, would only add to turmoil in the European financial system.


Mr. Lawsky has yet to budge. To be a credible deterrent, a guilty plea has to carry real repercussions, Mr. Lawsky explained in his meetings with the French officials, the people said. Mr. Lawsky added that the bank would receive time to prepare for a temporary suspension, allowing BNP to alert its clients and make other arrangements.

Fearing the sanctions violations at BNP were pervasive, according to two people briefed on the investigation, Mr. Lawsky installed a monitor at the bank’s offices in New York. The monitor has been quietly examining the bank’s operations and record-keeping since October. Mr. Lawsky, the people said, plans to install a monitor on a more permanent basis as part of the settlement with BNP.

In the series of meetings with the bank last month, Mr. Lawsky also reiterated his plans to penalize more than a dozen BNP employees for their role in the suspected scheme, the people said. Of the dozen or so employees, at least two are senior BNP executives.

The employees, however, will not face criminal charges for now. The improper dealings with Sudan and Iran appeared to stop in 2009, putting it just past a five-year legal deadline for prosecuting individuals. The aggressive stance toward BNP traces partly to a concern that the bank was slow to flag wrongdoing to authorities, according to the people briefed on the matter, undercutting their opportunity to charge individuals.

Yet prosecutors from the Justice Department and Mr. Vance’s office have not ruled out charges, the people said. The investigation could benefit from a legal provision that gives Mr. Vance five extra years to pursue cases against individuals based overseas.