>>> Brokers Upgrades & Downgrades - 26/06/2014

>>> Up
*BANCO SABADELL RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
*CAPITAL & REGIONAL RAISED TO BUY FROM HOLD AT PEEL HUNT
*DEUTSCHE POST RAISED TO BUY FROM HOLD AT CANTOR FITZGERALD
*FERRAGAMO RAISED TO NEUTRAL VS UNDERPERFORM AT CREDIT SUISSE
*FRESENIUS MED RAISED TO OUTPERFORM VS NEUTRAL: CREDIT SUISSE
*HAMBURGER HAFEN RAISED TO BUY VS NEUTRAL AT CITI
*OPERA SOFTWARE RAISED TO BUY VS HOLD AT NORDEA
*VODAFONE RAISED TO OUTPERFORM AT MACQUARIE
*ZUMTOBEL RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN

>>> Down
*AKER SOLUTIONS CUT TO HOLD VS STRONG BUY AT NORDEA
*ENDESA CUT TO HOLD VS BUY AT BERENBERG
*G4S CUT TO HOLD VS BUY AT SEB
*IMAGINATION CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS

>>> PT Changes
Dialog Considering SF4.2b Merger With AMS: Financial Times

>>> Initiation
*BAXTER INTERNATIONAL REINSTATED NEUTRAL AT GOLDMAN, PT $80
*INCHCAPE RATED NEW OVERWEIGHT AT JPMORGAN, PT 735P

>>> Call
>> Stock
*BT GROUP ADDED TO EUROPE FOCUS LIST AT CREDIT SUISSE
*HOLCIM, LAFARGE ADDED TO JPMORGAN ANALYST FOCUS LIST
*INTERSERVE ADDED TO JPMORGAN ANALYST FOCUS LIST

>>> Realia auction attracts new suitor: Inmobiliaria Colonial

Realia auction attracts new suitor: Inmobiliaria Colonial 

The auction for the Spanish property company Realia Business [MCE:RLIA] has a new and unexpected bidder: its rival Inmobiliaria Colonial, according to a report in El Confidencial. Colonial has offered around EUR 600m to Realia's main owners Spanish construction group FCC (36%) and the Spanish nationalised bank Bankia (24%), the Spanish-language item said, citing sources close to the process.

Realia had attracted offers from the hedge funds Orion, AEW, Fortress in partnership with King Street. Goldman Sachs is handling the sale.

Realia sale document states that if the sale is closed at less than EUR 450m, 90% of the total will be used to pay creditor banks and the other 10% will be shared among shareholders. If Realia fetches more than EUR 450m, the proceeds will be shared between the creditors (30%) and the shareholders (70%), the report added.


Source El Confidencial

(BN) Paulson’s Puerto Rico Paradise Lures Hedge Funds Fleeing Taxes


Paulson’s Puerto Rico Paradise Lures Hedge Funds Fleeing Taxes
2014-06-26 04:00:01.6 GMT


By Katherine Burton
     June 26 (Bloomberg) -- It’s 2 a.m. at La Factoria in Puerto
Rico’s Old San Juan, a hipster joint with a sagging couch, tile
floors and Christmas lights that wouldn’t be out of place in
Brooklyn’s Williamsburg. While “Get Lucky” plays, tipsy
couples slink out the doors onto the colonial city’s cobblestone
streets into this warm April night.
     At the bar, a 28-year-old hedge fund trader -- the type of
person who posts his SAT results on his LinkedIn page -- is
ranting about the tax code. He’s obsessed with it, complaining
that the U.S. is the only major country taxing citizens on their
worldwide income, no matter where they reside. That’s why he
moved here.
     Struggling to emerge from an almost decade-long economic
slump, the Puerto Rican government signed a law 18 months ago
that creates a tax haven for U.S. citizens. If they live on the
island for at least 183 days a year, they pay minimal or no
taxes, and unlike Singapore or Bermuda, Americans don’t have to
turn in their passports. About 200 traders, private-equity
moguls and entrepreneurs have already moved or committed to
moving, according to Puerto Rico’s Department of Economic
Development and Commerce, and billionaire John Paulson is
spearheading a drive to entice others to join them.
     Puerto Rico’s low-tax welcome mat comes as some of the
wealthiest Americans grow more anxious about tax increases and
rhetoric directed at the rich. Tax bills have risen after a 10-
year break under President George W. Bush that
disproportionately favored the rich. The 2008 global financial
crisis and the recession that followed also unleashed movements
such as Occupy Wall Street that focused attention on growing
inequality and the responsibility of large financial
institutions in helping to create the mess.

                       Protesters Marching

     In October 2011, protesters marched by the homes of
Manhattan’s billionaires, including Paulson’s. A little more
than a year later, President Barack Obama beat Mitt Romney in an
election that highlighted the latter’s wealth and private-equity
background.
     “I’m worried about the shifting mentality among the
electorate, people blaming problems on the rich, on business and
on capitalism,” says Peter Schiff, a onetime candidate for the
U.S. Senate from Connecticut and a former economic adviser to
libertarian presidential hopeful Ron Paul. “I’m afraid that the
tax rates that are already high will get higher in the years
ahead,” maybe up to 60 percent or 70 percent, he adds.
     Schiff, who runs Westport, Connecticut-based brokerage Euro
Pacific Capital Inc., relocated his $900 million asset
management arm from Newport Beach, California, to San Juan in
2013. He plans to move to the island within the next several
years. For now, a son from a first marriage is keeping him in
Connecticut.

                            New Rules

     Under Puerto Rico’s new rules, an individual who moves to
the island pays no local or federal capital-gains tax -- capital
gains are charged based on your tax home rather than where you
earn them -- and no local taxes on dividend or interest income
for 20 years. Even someone working for a mainland company who is
a resident of the island would be exempt from paying U.S.
federal taxes on his salary.
     Moving to the island won’t kill all taxes: U.S. citizens
still have to pay federal taxes on dividend or interest income
from stateside companies. But the savings can be extraordinary,
especially given the effects of compounding, says Alex Daley,
chief technology investment strategist at Casey Research, a firm
that publishes reports for investors. Late last year, Daley
moved from Stowe, Vermont, to Palmas del Mar, about 45 minutes
from San Juan.

                           Tax Savings

     Say you put $100,000 in a 5 percent certificate of deposit
that compounds annually and reinvest the proceeds every year. If
you lived in Puerto Rico, you’d earn $165,000 in interest over
two decades, Daley calculates. If you lived in California, your
state and federal taxes could reduce that to as little as
$64,000.
     Paulson, who made $15 billion for himself and his investors
betting against U.S. mortgages during the financial crisis,
helped start the wave of transplants last year, when he
considered moving to the island. Paulson, 58, cited excessive
media attention as his reason for staying put in the States. The
press reports had an unintended consequence, though: Word
quickly spread to other wealthy individuals that Puerto Rico
wanted them.
     Like the tax refugee at La Factoria, who asked that I not
divulge his identity because his boss wouldn’t want to see his
name in print, almost all say the incentive to move to a cash-
strapped Caribbean island plagued by violent crime is simple:
Pay Uncle Sam less.

                        Educating Expats

     Robb Rill, 43, managing director of private-equity firm
Strategic Group PR, relocated with his wife to Puerto Rico from
Florida in February 2013. He started the 20/22 Act Society,
named for the tax laws designed to encourage people and
businesses to set up shop here, to help educate fellow
expatriates and serve as a networking group.
     “I’m talking to people every day who are moving here, and
their No. 1 motivation is taxes,” he says.
     Margaret Peña Juvelier, who grew up in New York City, the
daughter of Puerto Rican immigrants, moved to San Juan in 2012
to open a Sotheby’s real estate office. Driving around, she
shows me a few of San Juan’s top apartments. We cross a small
bridge to a six-block area surrounded by water.
     “This is Waco,” Juvelier says, pointing out the window.
     “Sorry?” I ask, thinking of the Branch Davidians.
     “WeCo -- West Condado,” Juvelier says, pointing out the
window and explaining that she and her daughter, also a
Sotheby’s broker, have decided to give some of the neighborhoods
catchy names, such as New York’s SoHo and Tribeca.

                        Relatively Cheap

     By New York standards, prices are cheap: A 3,800-square-
foot penthouse with water views from every room is listed for
$1.99 million; and a four-bedroom duplex with two terraces in
the city’s financial district is on sale for $900,000. Yet the
housing isn’t enough to lure potential converts.
     The real challenge, she says, is convincing people they can
replicate their life. Will they have well-traveled, well-
educated friends? Are there decent schools for their kids? Are
there charities that wives can join? Is crime an issue? She
takes her clients to dinner at outdoor cafes to show them it’s
safe at night, and she organizes luncheons to introduce
newcomers to native Puerto Ricans.
     In late April, Puerto Rican officials helped set up a
conference in San Juan to educate potential residents about the
new laws and tell the world that Puerto Rico is a fine place to
live -- at least if you’ve got dough.

                      Beaches, Restaurants

     The conference was the brainchild of Alberto Bacó Bagué,
secretary of economic development and commerce, and Paulson, who
the territory’s government says plans to invest about $1 billion
in real estate this year and next. Two hundred people showed up
for panels, tours and information sessions with private schools,
real estate brokers and a tax expert.
     The message from every speaker was the same: Puerto Rico
isn’t just about low taxes. It has white-sand beaches and
temperatures in the 80s year-round. There’s an art museum with a
world-renowned pre-Raphaelite collection. It has luxury
apartment buildings, over-the-top resorts such as Dorado Beach,
and a handful of private international schools that send their
graduates to Ivy League colleges. It has restaurants with award-
winning chefs. It’s a four-hour flight to New York. And the
island operates under U.S. law.

                          Paulson Plan

     Paulson is betting that millionaires will come in droves.
In his presentation, in which he forecast that Puerto Rico would
become “the Singapore of the Caribbean,” he said he plans to
develop residential and office properties to go beyond the
current high-end offerings.
     The government gives a tax break for businesses that move
to Puerto Rico and provide services outside the country, perfect
for a hedge fund with clients in New York and London. These
firms pay only a 4 percent corporate tax, compared with 35
percent on the mainland. About 270 companies have applied for
this incentive, according to officials.
     Governor Alejandro García Padilla, elected in November 2012
by a margin of 11,000 votes -- he likes to joke that he should
have asked for a recount -- is promoting the laws in the hope
they will help spur an economy that’s barely seen any growth
since 2007. The statistics are grim. The territory of 3.7
million people has $73 billion of debt and a median income of
$19,429, about half that of Mississippi, the poorest state in
the union. Unemployment is 13.8 percent, compared with 6.3
percent stateside; and income inequality, as measured by the
Gini index, is higher than in any of the 50 states.

                          Island Exodus

     Puerto Ricans were given U.S. citizenship in 1917, meaning
they can easily leave the island for better jobs stateside. And
they have. A net 280,000 engineers, doctors and other citizens
emigrated from 2005 to 2012, according to the Puerto Rico
Institute of Statistics. The government is hoping the campaign
to lure the rich from the mainland will bring more jobs to the
island and raise GDP.
     “Our plan is not just about keeping government spending in
line, but it is about generating wealth in Puerto Rico -- jobs,
investment and trade,” García Padilla said at the April
conference. The government estimates that the two tax laws could
create 90,000 jobs and add $7 billion to the economy by 2016.
     One hedge-fund manager, who requested I not use his name,
gave a less-than-rosy view as he drove around the narrow streets
of Santurce in San Juan. He’d moved from New York a few months
ago, and although he likes living in San Juan, he calls it a
bombed-out version of Miami.

                          Worst Aspects

     In many respects, he says, Puerto Rico is the worst of the
mainland and the Caribbean. There are more Walmarts and
Walgreens per square mile than in any other place in the U.S.,
according to the Puerto Rico Center for Investigative
Journalism, and it has the inefficiencies of most Caribbean
islands, including power outages and quirky laws. Married
couples must buy property together unless they have a prenuptial
agreement. He complains that it takes 20 minutes to get a
Quiznos sandwich. Service is often on “island time.”
     The hedge fund manager brings me to Santaella restaurant,
where we join a table of 10 or so newcomers eating the island’s
comida criolla and drinking cocktails and beer. No one wants to
speak on the record. They aren’t much different from any group
of young traders -- cracking jokes and checking out women at the
bar -- except for their obsession for minimizing taxes.

                      Downplaying Problems

     One considered giving up his citizenship to move to
Singapore, where the government has also lured hedge funds with
low taxes. Another trader, who hasn’t been in town long enough
to acquire a decent tan, says that from a tax perspective he was
embarrassed to have lived in New York City, where the marginal
rate for affluent New Yorkers can exceed 50 percent on ordinary
income.
     Most of the new arrivals downplay Puerto Rico’s fiscal
problems, which include runaway pension obligations and an
underground economy that leads to low tax collection rates.
They’re also convinced their 20-year contracts with the
government guaranteeing the tax benefits are sacrosanct. They
will survive the inevitable Internal Revenue Service audits,
they say, as long as they follow the residency rules.
     But there may also be financial drawbacks to moving to the
island. Brad Alford, who runs Atlanta-based Alpha Capital
Management LLC, which farms out more than $200 million to
alternative mutual funds, was all set to invest $10 million with
portfolio manager Randy Swan until he learned that Swan was
moving to Puerto Rico to cut his tax bill.

                          ‘Deal Killer’

     “I told Swan’s sales guy that was a deal killer,” Alford
says. “It’s morally wrong and un-American not to pay your fair
share of taxes.”
     Swan says taxes were only one of the reasons he moved and
that he’s received no complaints from any current or potential
clients.
     Not every émigré from the states is motivated solely by tax
savings. One of the wealthiest recent arrivals is Toby
Neugebauer, co-founder of Quantum Energy Partners, a Houston
private-equity firm that oversees more than $7 billion. He’s
opening a family office and recently bought a house at Dorado
Beach, where he lives with his wife and two teenage sons. The
Ritz-Carlton resort there boasts rooms that start at $800 a
night and a plantation house where Amelia Earhart stayed that
goes for $30,000 a day.
     Neugebauer, who arrived in March, cited the chance for his
sons to learn Spanish and attend a top school, along with
better-priced investment opportunities than in Texas as his main
incentives.
     “I wouldn’t have moved for the taxes, but it is an
interesting proposition,” he says.

                         Cool Adventure

     John Helmers, a hedge-fund manager who spent time at
Citadel LLC and Tudor Investment Corp., says he would never have
moved from Greenville, South Carolina to San Juan with his wife,
Glenn, and three of his five children, if they hadn’t all been
on board.
     “When my wife said this could be a cool adventure for the
family, that was the go switch,” he says. Helmers is setting up
Long Focus Capital Partners LLC, a macro fund that also trades
individual stocks. “Before I spent 30 percent of my time
thinking about taxes, and now I don’t have to do that.”
     Yet Helmers, a fit 49-year-old with close-cropped hair and
a slight Southern drawl, is now spending time thinking about
Puerto Rico’s poor. He’s interested in following the lead of his
former boss, Paul Tudor Jones, who created the Robin Hood
Foundation to fight poverty in New York City. Helmers’s wife is
involved with the Foundation for Puerto Rico, an organization
focused on economic development.

                         Real Difference

     “You don’t have the same support network here as you have
in the greater New York area,” Helmers says. “There’s an
opportunity to make a real difference.” Yet not all the new
residents have the same reflex to give back, he says. “It’s our
job to get the opportunists over to our side.”
     The biggest question is whether Puerto Rico’s plan will
improve its economy.
     “This place is in dire straits,” says Rill of Strategic
Group PR. He calls the tax laws a glimmer of hope for the
island. “We’re buying cars and getting office space and
contributing to the economy.”
     He spent about $1 million, on top of his house purchase to
relocate, he says.
     “It’s a slightly disturbing way to pursue economic
development,” says Kim Reuben, a senior fellow at the Urban
Institute in Washington, who has spent 10 years studying policy
and spending by state and local governments. “There can be a
multiplier effect, but you are dealing with one of the lowest-
income populations in the U.S. on a per-capita basis. How much
does it really help to import billionaires?”

                           No-Brainer

     Denver Dale, who runs private-equity firm On-Point Capital
in Monterey, California, ponders the same question in April as
he sips a drink at a preconference cocktail party held at the
Condado Vanderbilt Hotel, one of Paulson’s recent acquisitions.
     Dale, a Goldman Sachs Group Inc. alum, says he and his
wife, a gynecologist, are seriously considering relocating,
calling it a no-brainer as long as he could ensure that his
business would be eligible for the island’s tax breaks. He
wasn’t so sure whether it was a no-brainer for Puerto Ricans:
“We’ll know in five years if you end up with a couple of areas
of haves amid a whole bunch of have-nots.”

For Related News and Information:
Puerto Rico Plan Would Allow Agencies to Restructure Debt NSN
N7QGYK6TTDSS <GO>
John Paulson Says Puerto Rico Will Be Singapore of Caribbean NSN
N4K0LV6KLVRZ <GO>
Paulson Said to Explore Puerto Rico as Home With Lower Taxes
NSN MJI1HT6TTDV3 <GO>

--With assistance from Michelle Kaske in New York. 

To contact the reporter on this story:
Katherine Burton in New York at +1-212-617-2335 or
kburton@bloomberg.net
To contact the editors responsible for this story:
Christian Baumgaertel at +1-617-210-4624 or
cbaumgaertel@bloomberg.net;
Robert Friedman at +1-212-617-1479 or
rfriedman5@bloomberg.net
Pierre Paulden, Emily Biuso

>>> OMV on radar of Gazprom as IPIC seeks exit

OMV on radar of Gazprom as IPIC seeks exit 

Gazprom, the Russian oil giant, is considering a takeover of Austrian rival OMV, Der Kurier reported. Peter Pilz, a member of the Austrian parliament representing the Green Party, told the newspaper that he has concrete evidence that Abu Dhabi-based oil fund IPIC wants to sell its 24.9% stake in OMV and that Gazprom is evaluating a possible takeover of OMV.

The article pointed out that IPIC is in a shareholder syndicate with Austrian state investment agency OIAG, which owns a 31.5% stake in OMV. Bernhard Nagiller, a spokesman for OMV, told Der Kurier that there are no indicators that IPIC is planning to exit the aforementioned shareholder syndicate.

OMV has a market cap of EUR 10.525bn.


Source Der Kurier

>>> Kenmare Resources said to have received 20p per share bid approach from Iluk

Kenmare Resources said to have received 20p per share bid approach from Iluka Resources 

Kenmare Resources shares gained yesterday, 25 June, on talk that it had received a bid approach from Iluka Resources, The Times reported. The newspaper’s market report section mentioned market gossip that Kenmare managing director Michael Carvill, had recently been sounded out about a potential 20p per share bid for the listed Anglo-Irish mining company from Australian rival Iluka, but did not cite a source for the rumour.

Traders did not know whether Iluka’s approach remains active, but did not believe that Kenmare had consulted with the company’s biggest shareholder M&G about the approach, the item continued. M&G holds a stake just short of 17.5% in Kenmare Resources, the article added.

Kenmare Resources’ share price closed up at in London yesterday, giving the company a market capitalisation of GBP 333m (EUR 414m).


Source The Times

Reuters - BNP may face one-year ban on processing some dollar pa

BNP may face one-year ban on processing some dollar payments - Link {http://reut.rs/1lfeenN}

(Reuters) - BNP Paribas (BNPP.PA) is likely to be suspended from converting foreign currencies to dollars on behalf of clients in some businesses for as long as a year, according to sources familiar with the matter, an untested and severe penalty for the French bank accused of persistently violating U.S. sanctions laws.

The New York State Department of Financial Services, headed by Benjamin Lawsky, is near a deal with Paribas on the ban on currency conversions, known as dollar clearing, people said. The bar would be the first of its kind for a global bank.

The temporary ban is expected to be limited to certain business lines related to the underlying transactions in question, and it would span various geographic regions, one of the sources said on Wednesday. Business lines that have come under scrutiny include oil trade financing.

"It won't be a death mallet, but it's a serious hit," the source said.

BNP clears hundreds of billions of dollars through New York every day, according to sources, serving customers in trade finance and commodities businesses, custodian accounts and foreign exchange.

Much business worldwide is done in dollars, and dollar clearing is a key banking activity.

It is unclear when the ban would take effect. It may be phased in, another source said on Wednesday.

It's also not clear if Paribas has found a workaround to soften the blow, such as identifying another bank to temporarily meet clients' needs.

Lawsky's office proposed the suspension as one condition for not revoking Paribas's license to operate in New York in light of the lengthy alleged violations, Reuters reported last month. At that time the length of the possible ban was not clear.

The bank is also expected to plead guilty to a federal criminal charge and pay nearly $9 billion as part of a larger settlement with multiple enforcement authorities that could be announced as early as next week, sources said.

Spokespeople for the bank, federal prosecutors and New York's banking regulator declined comment. The bank's chief executive, Jean-Laurent Bonnafe, told shareholders in May that the bank had improved its control operations to avoid sanctions-related failures in the future, without providing specifics.

U.S. authorities are probing whether BNP evaded U.S. sanctions relating primarily to Sudan, Iran and Cuba between 2002 and 2009.

The investigation has turned up some $100 billion in transactions processed by BNP that disguised identifying information in order to pass through the U.S. financial system without raising red flags, Reuters has reported. Around $30 billion of the transfers specifically violated U.S. sanctions, one of the sources has said.


SOFTENING THE BLOW?

Bank of France Governor Christian Noyer warned earlier this month that a threat to BNP's dollar-clearing operation "could put the smooth functioning of the international financial system in danger."

The bank is one of 50 participants in the Clearing House Interbank Payments System (CHIPS), the largest private-sector U.S.-dollar funds-transfer system in the world, which clears an average of $1.5 trillion in payments every day.

Banking experts have said it's hard to quantify the impact of a temporary dollar-clearing ban. The experts note that it could be hard to win customers back after they have turned to other banks to meet their dollar-clearing needs.

BNP could ask another institution to take on its dollar clearing temporarily as a so-called correspondent bank. But doing so might still result in an exodus of clients and additional headaches for those clients who do stay, according to industry experts.

Clients who stick with BNP may face additional costs and prolonged transaction times, as the correspondent bank will likely subject them to greater scrutiny, said George Thomas, principal of Radix Consulting, which advises financial services firms on payments issues.

Standard & Poor's earlier this month said it may lower BNP's long-term credit rating because the potential penalties could hurt the bank's capitalization and "disrupt some of its banking activities."

Reuters - Brunello Cucinelli transfers whole company stake to trust

Link to article : {http://reut.rs/1v81AN0}

(Reuters) - Brunello Cucinelli, founder of the Italian luxury clothier of the same name, has transferred his entire stake in the firm to a trust - a relative uncommon structure in Italy - to benefit his daughters and ensure the continuation of his philantrophic work.

Over 90 percent of Italian companies are family-owned. But only one in five survives until the third generation, making the need of careful wealth transfer planning crucial.

In a statement, the 60-year-old entrepreneur said he had transferred the ownership of Fedone S.r.l, the holding through which he controls 61.56 percent of Brunello Cucinelli SpA (BCU.MI) to the Esperia Trust Company S.r.l.

His daughters Camilla and Carolina will be beneficiaries of the trust. Camilla who sits on the board of the listed company.

Cucinelli said the trust had been established to ensure unified management of his company but also to support the Brunello Cucinelli foundation in its effort to work towards the "embellishment of mankind".

Beyond his cashmere sweaters, Cucinelli is a philanthropist who has spent much effort and money to restore the centuries-old Italian town of Solomeo, home to its company's headquarters.

He routinely donates a portion of his profits to the Brunello Cucinelli Foundation, which is involved in cultural and arts projects. In 2011, he spent over 1 million euros ($1.4 million) to restore the Etruscan Arch, one of the artistic treasures of Perugia.

The company Brunello Cucinelli SpA will continue to be subject to Italy's fiscal regime.

>>> Asian Update

Asian Market Update: PBoC skips daily liquidity drain for the first time in about 4 months


***Notable Economic Data***
- (AU) AUSTRALIA MAR-MAY JOB VACANCIES Q/Q: 2.5% V 2.6% PRIOR
- (KR) SOUTH KOREA MAY DEPT STORE SALES Y/Y: +0.8% V -1.4% PRIOR; DISCOUNT STORE SALES Y/Y: +1.2% V -4.1% PRIOR

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +0.3%, S&P/ASX +0.8%, Kospi +0.4%, Shanghai Composite +0.6%, Hang Seng +1.0%, Sept S&P500 flat at 1,949

***Commodities/Fixed Income/Currencies***
- Aug gold -0.3% at $1,318, Aug crude oil +0.1% at $106.62/brl, Jul copper +0.1% at $3.17/lb

- JGB: (JP) Japan MoF sells ¥2.49T in 0.1% 2-yr notes, Avg Yield: 0.084% v 0.086% prior; bid to cover: 4.83x v 6.2x prior
- USD/CNY: (CN) PBoC sets yuan mid point at 6.1538 v 6.1555 prior setting (strongest Yuan setting since June 20th)
- (JP) Japan investors bought net ¥1.5T in foreign bonds last week (3rd consecutive week of net bond purchases) vs bought net ¥638.2B prior week; Foreign Investors bought net ¥295.6B in Japan stocks last week vs bought net ¥238.1B in prior week

- USD is mixed in the major pairs during Asian hours, after a unanimous slide in the US trading following wider than expected Q1 GDP contraction. USD/JPY is down about 20pips below ¥101.70 at the lows, EUR/USD is bid about 10pips to $1.3635, while AUD/USD is trading in a 20pip range below $0.9420. NZD outperformed, jumping against the dollar on technical buying to a session-high of $0.8770, also a 7-week high.

***Market Focal Points/Key Themes***
- PBoC is taking a break in draining liquidity through its twice-weekly open market operations for the first time in 37 sessions. For the week, net of maturing issues, PBoC is still injecting CNY12B, which is down from CNY15B in the prior week. Note that the move by the PBoC comes amid concerns that liquidity could tighten into month and quarter end. Some CNY30B of repos are also set to mature this week, thus adding liquidity.

- Separately, a quarterly survey from the PBoC saw some 63% of respondents state housing prices in China are still too high, down from 64% last quarter. 50% expect prices remaining unchanged and only 21% expect prices to rise.

- Overnight, Beijing formally announced the start of major infrastructure projects in central and western China, shifting the focus of "targeted stimulus" to an area where wage costs are lower.

- Bed Bath Beyond hit fresh 52-week lows afterhours following a disappointing set of Q1 results and a 70bp drop in gross margins. Q2 guidance on top and bottom line was also below estimates, even as the company affirmed its outlook for FY14.


***Equities***
US markets:
- IRM: Board approves REIT conversion following receipt of favorable IRS letter; updates guidance; +23.2% afterhours
- NBR: Completion, production businesses to merge with C&J in deal valued at $2.86B; accretive to C&J's cash EPS during 1st full year of combined operations; +4.6% afterhours
- GM: Informs North American auto dealers to halt sales of the 2013/14 Chevrolet Cruze model due to airbag issues; some cars may have an incorrect part installed - Automotive News; - 0.5% afterhours
- BBBY: Reports Q1 $0.93 v $0.95e, R$2.66B v $2.69Be; Guides Q2 Rev 1-3% y/y (implies $2.85-2.90B v $2.93Be); Affirms FY14 Rev +4% (implies $12.0B v $12.0Be), SSS +3%; -7.1% afterhours
- GPRO: Prices 17.8M share IPO at $24.00/shr; expected price range seen $21-24/shr

Notable movers by sector:
- Materials: Paladin Energy Limited PDN.AU +8.0% (provides update on uranium mine)
- Technology: Feitian Technologies 300386.CN +44.0%, Shandong Longda Meat Foodstuff 002726.CN +44.0%, Wuxi Xuelang Environmental Technology 300385.CN +44.0% (China IPOs start to trade)
- Utilities: Korea Electric Power Corp 015760.KR -6.2% (possible delay in power price hike)

>>> US After Hours

After Hours Summary: CIDM -20.7%, BBBY -7.2%, MLHR -4.6%, FUL -1.7%, CWST -0.4% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to news: IRM +22.6% (reported that the co is electing REIT status effective January 1, 2014), CJES +20.4% (entered into agreement to merge with Nabors Industries' (NBR) completion and production business in transaction valued at $2.86 bln), UNXL +17.7% (achieved roll-to-roll pilot production of InTouch Sensors), NBR +6.2% (confirmed agreement to combine its completion and production services business with C&J Energy Services (CJES)), WOR +1.4% (increased quarterly dividend 20% to $0.18 from $0.15 per share; Board authorized repurchase of up to an additional 10 mln common shares), MDT +1.2% (announced study results showing that continuous cardiac monitoring with the Reveal XT Insertable Cardiac Monitor was superior to standard of care)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: CIDM -20.7%, BBBY -7.2%, MLHR -4.6%, FUL -1.7%, CWST -0.4%

Companies trading lower in after hours in reaction to news: FUL -1.7% (signed agreement to acquire 95% of the equity of Tonsan for RMB 1.4 bln (~$230 mln); co also reported earnings), MRD -1.0% (priced private placement to eligible purchasers of $600 mln in aggregate principal amount of 5.875% senior unsecured notes due 2022 at par), GM -0.6% (seeing reports that co has told dealers to stop sales of Chevy Cruze due to potential problem with airbags)

>>> US Close Dow+0,29% S&P+0,49% Nasdaq+0,68%

Closing Market Summary: Stocks Climb Despite Disappointing Q1 GDP Revision

The stock market registered modest gains on Wednesday as participants looked past a pair of disappointing economic reports. The S&P 500 rose 0.5% with nine sectors ending higher, while the Nasdaq Composite (+0.7%) outperformed.

Prior to the open, the S&P 500 appeared to be on track for its third consecutive decline after first quarter GDP was revised down to -2.9% from -1.0% (Briefing.com consensus -1.8%). In addition, a more recent report—May Durable Orders—also surprised to the downside. Despite starting on a lower note, the major averages were able to rebound swiftly with the move likely supported by some short covering.

The health care sector (+1.1%) ended in the lead after showing relative strength throughout the session. The third-largest group was underpinned by solid gains in the shares of AbbVie (ABBV 54.97, +1.38) and Shire (SHPG 231.14, +7.87) amid reports AbbVie may submit an improved takeover proposal to Shire. However, Shire commented intraday, saying no changes have been made to the offer from May 30.

Even though the health care sector ended in the lead, biotechnology could not keep up. The iShares Nasdaq Biotechnology ETF (IBB 255.88, +0.79) added 0.3%.

Elsewhere, the consumer discretionary sector (+0.8%) lagged in the early going, but elbowed its way to the top of the leaderboard with help from media names after the Supreme Court ruled that start-up streaming service Aereo violated broadcaster copyright laws. CBS (CBS 62.48, +3.64) surged 6.2%, while Comcast (CMCSA 53.21, +0.57) and Disney (DIS 83.90, +1.22) advanced 1.1% and 1.5%, respectively.

Similar to the two top-weighted groups, the largest S&P 500 sector—technology (+0.6%)—also finished among the leaders. Google (GOOGL 585.93, +13.39) played a big part in the outperformance, rallying 2.3% as the company held its developers conference in San Francisco. Chipmakers, meanwhile, settled a bit behind the broader market (PHLX Semiconductor Index +0.4%).

One influential sector that could not finish among the other outperformers was the financial space (+0.1%). The sector underperformed for the second session in a row, but managed to narrow its week-to-date loss to 0.3%.

On the downside, the consumer staples sector spent the entire session climbing off lows, but still ended in the red (-0.1%) as General Mills (GIS 51.76, -1.94) weighed after reporting disappointing earnings.

Treasuries surged in reaction to this morning's data before erasing some of their gains in the afternoon. The 10-yr note added five ticks with its yield slipping two basis points to 2.56%.

Participation remained in line with recent averages as less than 650 million shares changed hands at the NYSE floor.

Economic data included Q1 GDP, May Durable Orders, and the weekly MBA Mortgage Index:
  • First quarter GDP growth was revised down from -1.0% in the second estimate to -2.9% in the third estimate. GDP increased 2.6% in Q4 2013. The consensus expected GDP to be revised down to -1.8%. 
    • In all likelihood that economic activity weakened because it was never on that strong of a footing to begin with. We've seen this play out over the past few years where growth in the first half of the year is much slower than expected. 
    • Real final sales were revised down to -1.3% from 0.6%. That was the first decline in real final sales since Q1 2011. 
  • Durable goods orders declined 1.0% in May after increasing an upwardly revised 0.8% (from 0.6%) in April. The consensus expected durable goods orders to increase 0.4%. 
    • Transportation orders fell 3.0% in May as orders of nondefense aircraft and parts fell 4.0%. The drop was unusual and can be blamed on seasonal adjustments. Boeing (BA 127.06, -2.09), which is heavily represented in the transportation data, reported solid gains in orders for May. 
    • Excluding transportation, durable goods orders declined 0.1% in May following a 0.4% increase in April, while the consensus expected these orders to increase 0.4%. 
  • The weekly MBA Mortgage Index fell 1.0% to follow last week's 9.2% decline. 
Tomorrow, weekly initial claims (consensus 310K), May Personal Income (consensus 0.4%), Personal Spending (consensus 0.4%), and Core PCE Prices (consensus 0.2%) will all be announced at 8:30 ET.
  • S&P 500 +6.0% YTD 
  • Nasdaq Composite +4.9% YTD 
  • Dow Jones Industrial Average +1.8% YTD 
  • Russell 2000 +1.7% YTD