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Carlos Slim slams Mexico telecoms bill Billionaire Mexican tycoon Carlos Slim has slammed a new telecoms bill before Congress as "confiscatory" and demanded that lawmakers rethink it. Shares in Mr Slim’s phone empire, América Móvil, have plunged 6.8 per cent this week since Enrique Peña Nieto, Mexico’s president, sent a bill to Congress to implement the congressional reform passed last year, aimed at levelling the playing field. Analysts said it appeared that the government was intent on reining in the telecom giant’s power. Opposition parties have criticised the bill, too, and it was not clear if it would face changes in Congress. Mr Slim has a roughly 80 per cent share of Mexico’s fixed-line market through his Telmex company, and 70 per cent of mobile telephony via Telcel. His firms have been identified as the dominant market player by the telecoms regulator, IFT, which means they face being subjected to asymmetric rules to allow other players catch up. América Móvil said the bill contained "worrying" elements that would "impede or delay" free competition in the television market. It took particular exception to being told it had to provide interconnection services to other phone companies for free, and said the law erected barriers to competition in the TV sector – dominated by Emilio Azcárraga’s Televisa, and from which Mr Slim is barred under the terms of his Telmex concession. However, Mr Slim is widely believed to have ambitions to eventually provide TV services. Referring to the interconnection obligation, América Móvil said: "It is surprising that they are trying, by law, to oblige a company to invest in order later to oblige it to sell its services to its competitors for $0." It added that the "confiscatory proposal rewards the chronic lack of investment on the part of our competitors to the detriment of consumers". América Móvil said aspects of the bill "depart from the guiding principles of the constitutional reform" and overstep constitutional requirements for Telmex to gain access to a so-called single concession that would allow it to provide TV services. "That creates barriers to entry to markets that are highly concentrated, as the broadcast and pay TV markets are, protecting the economic player that is predominant in broadcast and has market power in restricted TV, to the detriment of competition and consumers," Mr Slim said – a pointed reference to Televisa. América Móvil also complained that the bill could delay its application for a TV licence since, in order to be able to apply, "at least 24 months must have passed since the ‘fulfilment’ of several measures established by the IFT, thus prolonging the lack of competition in broadcast markets and restricted television". The company said that "constructive dialogue with the government, Congress and the industry in general is fundamental" as the bill affected legal and economic security, the development of the telecommunications sector, investment in infrastructure and innovation in services and competitiveness.

Asian Market Update: Japan inflation steady as PM Abe continues to press for a timely 2% inflation destination

***Economic Data*** - (JP) JAPAN FEB TOKYO CPI Y/Y: 1.3% V 1.2%E; CPI CORE Y/Y: 1.0% V 0.9%E (5-year high) - (JP) JAPAN FEB NATIONAL CPI Y/Y: 1.5% V 1.5%E; CPI CORE Y/Y: 1.3% V 1.3%E - (JP) JAPAN FEB JOBLESS RATE: 3.6% V 3.7%E (6-year low); JOB-TO-APPLICANT RATIO: 1.05 V 1.05E - (JP) JAPAN FEB OVERALL HOUSEHOLD SPENDING Y/Y: -2.5% V 0.1%E (first decline in 6 months) - (JP) JAPAN FEB RETAIL SALES M/M: +0.3% V -0.1%E; Y/Y: 3.6% V 3.5%E - (KR) SOUTH KOREA FEB CYCLICAL LEADING INDEX CHANGE: -0.1 V 0.1 PRIOR - (KR) SOUTH KOREA FEB INDUSTRIAL PRODUCTION M/M: -1.8% (2nd consecutive decline) V -0.3%E; Y/Y: 4.3% V 3.6%E - (KR) SOUTH KOREA APR MANUFACTURING BUSINESS SURVEY: 86 (23-month high) V 85 PRIOR; NON-MANUFACTURING SURVEY: 73 V 76 PRIOR - (UK) UK GFK CONSUMER CONFIDENCE: -5 V -6E (highest reading since Aug 2007)

Market Snapshot (as of 03:30 GMT): - Nikkei225 flat, S&P/ASX +0.3%, Kospi +0.1%, Shanghai Composite +0.2%, Hang Seng +1.2%, Jun S&P500 +0.2% at 1,844, Jun gold flat at $1,294, May crude oil flat at $101.32/brl

***Highlights/Observations/Insights*** - Despite the down day on Wall St, Asian indices are modestly higher going into the weekend as more soft US data continued to support the case for a longer period of low US rates. Note that the yield on the 10-year was down for the 5th consecutive session at 2.67%. - Nikkei225 is underperforming in the region, as bullish sentiment is not translating into softer JPY. A raft of economic data from Japan - namely steady rise in inflation and further decline in unemployment rate - weighed on USD/JPY due to diminished prospects for further BOJ easing. Subsequent comments by PM Abe urging the BOJ to "swiftly" achieve 2% price target turned the tide before USD/JPY could re-test below the ¥102 handle. - China Premier Li, calling for lower cost of enterprise financing, also helped support bullish flows. Li also said he was still confident the economy is in good shape and that growth can be kept in a reasonable range. Separately, a DBS economist cited in local press warned Q1 GDP could fall to 7.3%. - PBoC renewed its push for weaker currency going into the weekend to compensate for softer exports. After 2 consecutive stronger settings to start the week, PBoC set Yuan weaker for the past 3 sessions - the last taking USD/CNY to its highest fix in 6 months. - Ultra-dovish Chicago Fed Pres Evans (alternate on FOMC) said he would prefer the Fed wait until 2016 for the first rate hike, even though he acknowledged rates may actually begin to rise in H2 of 2015. Evans also said US GDP would grow about 3% for the rest of 2014 and into 2015, although risks remain and the current inflation rate of 1% justifies extended accommodation.

***Fixed Income/Commodities/Currencies*** - (JP) BOJ offers to buy ¥250B in 1-3 yr JGB, ¥250B in 3-5 yr JGB, and ¥170B in JGBs with maturities of over 10 yrs - (AU) Australia MoF (AOFM) sells A$700M in 4.25% 2017 Bonds; avg yield: 3.1050%; bid-to-cover: 4.19x - USD/CNY: (CN) PBoC sets yuan mid point at 6.1490 v 6.1465 prior setting (weakest setting since Sept 27th) - (US) Weekly Fed Balance Sheet Total Assets Week ending Mar 26th: $4.23T v $4.22T prior; Reserve Bank Credit: $4.18T v $4.18T prior; M1: -$54.3B (largest decline in 5 weeks) v -$22.2B prior; M2: +$12.2B v +$23.7B prior; M1 y/y change: 9.9% (6-month high) v 9.7% w/w; M2 y/y change: 5.8% v 5.7% w/w

- In USD majors, AUD/USD hit fresh 4-month highs above $0.9290, while NZD/USD approached $0.87 handle - its highest level since 2011. USD/JPY fell toward 102 after the release of higher CPI / lower unemployment rate but bounced off the figure to trade within a 25pip range on the day. GBP/USD found support at $1.66 ahead of the UK Current Account and GDP release later in the European session.

***Equities*** US markets: - RH: Reports Q4 $0.83 v $0.83e, R$472M v $496Me; +7.1% afterhours - RHT: Reports Q4 $0.39 v $0.37e, R$400M v $399Me; Guides Q1 $0.32-0.33 v $0.37e, R$412-415M v $416Me; Guides initial FY15 $1.54-1.56 v $1.62e, R$1.73-1.755B v $1.76Be - conf call; +0.1% afterhours - RMAX: Reports Q4 $0.32 v $0.27e, R$40.2M v $39.4Me; flat afterhours

Notable movers by sector: - Consumer Discretionary: Lawson 2651.JP +1.6% (press speculation on FY13/14 results); Hongbo Co Ltd 002229.CN -5.4% (FY13 results); Hunan Friendship & Apollo Commercial 002277.CN -3.2% (FY13 results); Guangdong Guangzhou Daily Media 002181.CN -7.7% (FY13 results); Jiangsu Yueda Investment 600805.CN -5.0% (FY13 results) - Financials: ICBC 1398.HK +1.3% (FY13 results); CITIC Securities 600030.CN +1.6% (FY13 results) - Energy: Sinopec Shanghai Petrochemical 338.HK -8.7% (FY13 results) - Industrials: Shanghai International Port Group 600018.CN +1.4% (FY13 results); First Tractor 38.HK -2.4% (FY13 results); SAIC Motor 600104.CN +8.6% (FY13 results); United Co RUSAL 486.HK -0.7% (FY13 results); James Hardie Industries NV JHX.AU +1.1% (BlackRock becomes substantial shareholder); Virgin Australia VAH.AU +1.4% (Singapore Airlines raises state) - Technology: Compal Electronics 2324.TW +6.8% (Q4 results)

H&M's Clothes Deserve Discount

It takes money to make money. That's a line Hennes & Mauritz HM-B.SK -4.31% has sewn up.

The Swedish fashion retailer said Thursday it would invest more in areas such as opening new stores and expanding its e-commerce operations. The company's higher spending has already lopped five percentage points off what would have been 14% year-over-year operating-profit growth in the quarter to February.

For all of H&M's big spending, the retailer could have less to show for it in the long term.

Expansion has become a necessity for H&M. Over the past eight years it has achieved just 0.8% same-store-ales growth on average compared with Inditex's ITX.MC +0.09% 3.3%, estimates Sanford C. Bernstein. Even with expectations of economic recovery in Europe, consensus forecasts are for just 1.8% growth this year.

Fortunately, H&M still has plenty of scope add to its 3,200-store empire. It is half the size of Zara owner Inditex, which is in 34 more countries. H&M plans to open 375 new stores this year, which would be a 12% increase in its store count.

The catch is that more stores in certain markets might not help sales that much. Take China, which is expected to account for one-quarter of H&M's store openings this year. While selling prices in China are about 25% higher than those in Western Europe, sales per store are 37% lower and in decline, reckons Bernstein. That suggests H&M either needs to shift bigger volumes through its existing Chinese stores or risk lower returns on its investment in the country.

H&M could face further margin pressure too. Operating-profit margins have fallen by one-quarter since 2010 to 17.2% last year. The company concedes competition isn't easing up. Given there are lower-priced alternatives to H&M in most of its developed markets, from rivals including Primark and Forever 21, it may need to lower prices, says Bernstein. Wage inflation in Asia, where H&M sources most of its goods, could be another drag on profitability.

At 23 times forecast 2014 earnings, H&M trades at a 12% discount to Inditex based on FactSet estimates. But the Spanish retailer faces fewer margin pressures. Zara's more upmarket position means it avoids some of H&M's most cutthroat rivals and it is less reliant on Asian suppliers. A deeper discount may be warranted.

Closing Market Summary: Nasdaq Leads Stocks Lower

The stock market finished the Thursday session on a lower note with the tech-heavy Nasdaq Composite (-0.5%) trailing the other indices once again. The Nasdaq widened its week-to-date loss to 3.6% while the S&P 500 settled lower by 0.2%, extending its weekly decline to 0.9%.

Equity indices began the trading day on a cautious note despite two upbeat economic data points crossing ahead of the open. Namely, fourth quarter GDP was revised up to 2.6% from 2.4% while weekly initial claims fell to 311,000 from 320,000.

The release of this morning's data coincided with session lows in Treasuries, which rallied into the afternoon. The 10-yr note added three ticks, pressuring its yield down to 2.68% after notching a morning high at 2.71%.

Meanwhile, the early weakness in equities was brought upon by continued volatility in the biotechnology space. The iShares Nasdaq Biotechnology ETF (IBB 236.14, +1.05) was down nearly 3.0% during the initial 30 minutes of action before returning to its flat line, where it traded for the remainder of the trading day.

The early selling in biotechnology pressured the health care sector (-0.1%), but the influential group was able to erase the bulk of its early loss thanks in part to the 3.9% gain in the shares of Baxter (BAX 72.80, +2.72) after the company announced plans to split into two entities.

Even though health care settled in-line with the broader market, other top-weighted sectors were not as fortunate. Financials (-0.6%) ended at the bottom of the leaderboard while consumer discretionary (-0.5%) and technology (-0.6%) were not much stronger.

Notably, the financial sector lagged amid losses in some of its largest components. Citigroup (C 47.45, -2.71) slumped 5.4% after the Federal Reserve objected to the capital plan submitted by the bank.

Elsewhere, the discretionary sector was pressured by the likes of Amazon.com (AMZN 338.47, -4.94), eBay (EBAY 55.18, -0.42), and Netflix (NFLX 364.18, -8.10), while quick-service restaurants also finished mostly lower. Yum! Brands (YUM 73.20, -0.97) was a notable laggard, falling 1.3%.

Although most cyclical groups spent the bulk of the session in the red, that was not the case with the energy space (+0.9%), which outperformed throughout the day while crude oil rose 1.0% to $101.24/bbl.

On the countercyclical side, telecom services (+1.2%) and utilities (+0.8%) posted gains while consumer staples (-0.2%) ended in-line.

Despite the cautious disposition, participants did not show strong demand for volatility protection, sending the CBOE Volatility Index (VIX 14.56, -0.37) lower by 2.5%.

Trading volume was a bit above average as 778 million shares changed hands at the NYSE.

Today's economic data included the final revision to Q4 GDP, weekly initial claims, and the February Pending Home Sales report:

Fourth quarter GDP was revised up to 2.6% in the third estimate from 2.4% in the second estimate. That matched the consensus estimate, but was down from a 4.1% gain in Q3 2013. Real final sales increased 2.7% in the fourth quarter. That was up from a 2.5% gain in Q3 2013 and above the previously reported 2.3% gain. It was also the strongest increase in real final sales since increasing 3.4% in Q2 2012. Looking at real final sales over the last four quarters (0.2%, 2.1%, 2.5%, and 2.7%), there is a definite upward moving trend. The year-over-year averages, however, put it below the 2.0% and 2.6% gains from 2011 and 2012. 

The initial claims level fell to 311,000 for the week ending March 22 from an upwardly revised 321,000 (from 320,000) for the week ending March 15. The consensus expected the initial claims level to increase to 330,000. Over the past several months, excluding some seasonal volatility, the initial claims have been bounded between 330,000 and 340,000. That trend seems to have shifted lower over the past four weeks, with the initial claims level consistently falling below 330,000 and in the range of 310,000--320,000. 

Pending home sales for February fell 0.8%, which was worse than the 0.2% decrease forecast by the consensus. Today's reading followed last month's revised decrease of 0.2% (from +0.1%).  Tomorrow, February Personal Income (consensus +0.2%), Personal Spending (consensus +0.3%), and Core PCE Prices (consensus +0.1%) will be released at 8:30 ET while the final reading of the March Michigan Sentiment survey (consensus 80.0) will cross the wires at 9:55 ET.

* S&P 500 UNCH YTD  * Nasdaq Composite -0.6% YTD  * Russell 2000 -0.8% YTD  * Dow Jones Industrial Average -1.9% YTD

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Shell Cash Flows May Limit Share Upside, BofAML Says; Prefers BP 2014-03-27 16:18:02.604 GMT

By Benjamin Dow March 27 (Bloomberg) -- Some of Shell’s recent disposals have indicated attractive valuations, BofAML says in note; warns against assuming that disposal target will be reached without any oper. cash flow (OCF) dilution. * BofAML re-initiates ratings for Shell (neutral, PT on A shares 2,260p), also BP (buy, 530p) * Says Shell may yet announce more writedowns, which may support returns (ROCE), possibly OCF, not necessarily FCF * Cites Australian downstream disposal as example of deal with good valuation while limiting OCF, earnings dilution * Sees BP’s OCF as most visible among global integrated peers; this drives div. growth covered by FCF * Broker says strong FCF coverage leads to “optionality” in lower gearing, increased shareholder returns * Subtracts 50p/share to discount remaining legal uncertainties from Macondo trial

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To contact the reporter on this story: Benjamin Dow in Moscow at +7-495-771-7735 or bdow2@bloomberg.net

To contact the editor responsible for this story: James Ludden at +44-20-7673-2645 or jludden@bloomberg.net