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*ILIAD CEO SAYS SFR SALE PROCESS IS 'WELL ADVANCED' 2014-03-10 07:05:48.929 GMT
--DAVID WHITEHOUSE
-0- Mar/10/2014 07:05 GMT
US Market closed slightly higher on Friday, Financials contiune to OP, investors are trying to evacuate the Ukraine situation, pricing that the worst won't happen...Volume were just below average @ 710mil shares ...VIX @ 14.11 -0.77%...No economic data today...Soft weekend economic data from China have once again put a dent in the
seemingly resilient economic sentiment from last week....seemingly resilient economic sentiment from last week. February terms of trade saw its first contraction in nearly a year and also the biggest deficit in 2 years, as exports surprisingly fell 18.1%. Shipments to US, EU, and Japan were all down double digits despite the expectations of rising demand from improving economic conditions in those markets. Stats bureau was quick to attribute the deficit to the distortions caused by the timing around the Lunar New Year, so the jury on the China trade as a gauge of global demand may still be out until March figures. Meanwhile, China CPI also came in surprisingly tame, with annual CPI hitting a 13-month low of 2.0%. Local press has surmised the February data may force the govt into a fiscal stability policy, and several analysts also hinted that weak economy may persuade the increasingly-hawkish PBoC to decelerate its mopping up of excess liquidity to forestall the risk of deflation...- Japan revised its Q4 GDP to a final figure of 0.2% from 0.3% q/q and 0.7% on annualized basis vs 1.0% prelim...Nikkei -1%....HS-1.75%...Shanghai -2.06%...
Eur$ 1.3878 S&P Fut -0.48%...European Fut -0.23%
Keep an eye on :
- ARYN SW : Aryzta Says Guiding Double Digit Underlying EPS Growth in 2014
- EN FP L Bouygues in Talks to Sell Mobile Network to Free for EU1.8b
- EN FP : Iliad-Bouygues Talks Make Regulator’s Task Simpler, Echos Says
- BP/ LN : BP Goes From Top Pentagon Fuel Supplier to U.S.’s Biggest Loser {NSN N27FSQ6JTSE9 <go>}
- CNA LN : Centrica Reiterates Plan to Double North America Earnings: FT
- DAI GY : Daimler Sells Stake in Toray Carbon Venture, Handelsblatt Says
- GAS SM : Gas Natural to Sell Telecoms Unit to Raise Cash: Confidencial
- GSZ FP : GDF Questioned by French Regulator Over Suez Env. Ties: Echos
- HELN SW : Helvetia 2013 Profit Up 9.9% to CHF363.3M, Est. CFH360M
- HOT GY : Hochtief to Consider Full Leighton Takeover in Future. Leighton +11.4% in Sydney (LEI AU) , to Make A$22.15/Shr Proportional Bid for Leighton
- ILD FP : Iliad 2013 Net Income Misses Estimates
- MS IM : Mediaset in Talks With Telefonica on Digital Plus Stake: Sole
- ONO SM : Ono Shareholders Moving Ahead With Plans for Madrid Listing: WSJ
- SGL GY : SGL Carbon Posts Loss on Impairments, Restructuring
- SU FP : *SCHNEIDER IN EXCLUSIVE TALKS TO SELL CST SENSORS UNIT: ECHOS
- SY1 GY : Symrise 2013 Rev. In Line, Targets Mkt Growth Outperformance
- TDC DC : TDC Buys 50% of Small Danish Competitor Justfone, Borsen Reports
- THR BB : ThromboGenics Awarded EU3m for Diabetic Macular Edema Research
- VIV FP : French Competition Probe of SFR Deal Could Take 9 Months: Figaro
- VOD LN : Vodafone Could Offer as Much as EU7.5b for Ono, Expansion Says
>>> Up
*BANCO POPULAR RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
*BANKIA RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
*BOUYGUES RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT BARCLAYS
*BPOST RAISED TO BUY VS NEUTRAL AT NOMURA
*CENTRICA RAISED TO NEUTRAL VS UNDERPERFORM AT CREDIT SUISSE
*ENEL OGK-5 RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
*MONDI RAISED TO BUY VS NEUTRAL AT CITI
*RANDSTAD RAISED TO NEUTRAL VS SELL AT UBS
*STANDARD CHARTERED KEPT NEUTRAL AT JPMORGAN
*SWEDISH ORPHAN BIOVITRUM RAISED TO NEUTRAL VS SELL AT GOLDMAN
>>> Down
*DEUTSCHE POST CUT TO HOLD VS BUY AT BANKHAUS LAMPE
*DEUTSCHE TELEKOM CUT TO HOLD FROM BUY AT JEFFERIES
*EVONIK CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE
*GETINGE CUT TO NEUTRAL VS BUY AT BOFAML
*INDITEX CUT TO HOLD VS BUY AT JEFFERIES
*SAFILO CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
*TAYLOR WIMPEY CUT TO HOLD VS ADD AT NUMIS
*VOLKSWAGEN AG CUT TO SELL VS HOLD AT BANKHAUS LAMPE
>>> PT Change
*ATLANTIA PT RAISED TO EU21 VS EU20 AT BOFAML; KEPT AT BUY
*LUXOTTICA PT RAISED TO EU43 VS EU42 AT CANTOR; KEPT AT BUY
*MONCLER PT CUT TO EU15 VS EU15.8 AT BOFAML; KEPT AT NEUTRAL
*Pirelli PT Raised to EU14 at Mediobanca; Kept at Outperform
*UniCredit PT Raised to EU7.2 vs EU6.12 at JPMorgan
>>> Initiation
>>> Call
>> Stock
*BRITISH AMERICAN TOBACCO ADDED TO CITI’S FOCUS LIST EUROPE
*SSAB CUT FROM MORGAN STANLEY'S BEST IDEAS LIST
Barrons summary: cautious on 3D printers (DDD, SSYS, XONE, VJET); cautious on SCTY, AOL; positive on MET, DAI.DE, GLDD, 1910.HK
Cover story: Cautious on DDD, SSYS, XONE, VJET: Wall Street has been well ahead of the hype regarding 3-D printing, but shares of the four major players are overpriced; 3-D printing holds vast potential and could eventually reshape U.S. industry, but thats because of its applications in industrial manufacturing, which the publicly traded 3-D outfits dont address as effectively as some private companies; Investors need to look away from pure-play companies for exposure to the 3-D market, to companies such as ADSK, ADBE, DASTY, GE, F.
Features: Positive on MET: Shares are among the cheapest in the industry, and could rise 20% based on rising book value and higher profits; company is also expected to boost its dividend; Positive on Daimler: Popular new models and improving demand for trucks should lead automakers profit growth this year to outstrip rivals Volkswagen and BMW and give share price a 20% boost; Positive on ARCC, CVRR, EPR, HPT, NTI: For investors with an appetite for risk, economically sensitive REITs, MLPs, and BDCs offer outsize payouts and low valuations and should gain value as business conditions continue to improve; Positive on Samsonite: The worlds largest luggage maker is taking advantage of growing middle class prosperity in Asia, Europe, and the U.S., shares could rise 20-30% in the next 12 months.
Tech Trader: Cautious on SCTY: Companys predictions that customers leasing its solar panels will continue to do so after the initial 20-year lease has expired may be too rosy; while a company such as TSLA has delivered terrific innovations, SCTY is basically a specialized finance company.
Trader: Cautious on AOL: Online giant has improved its position from a few years ago, but the stock discounts that and more, and bulls are extrapolating its Network divisions double-digit sales rise far into the futureIt wont take much of a miss in quarterly results for the stock price to suffer; For all the nervousness now, investor sentiment looks complacent by historic measures, and the individual investor is returning to stocks, which suggests more a bull in its later stages than a bubble.
Small Caps: Positive on GLDD: Move by federal government to spend billions of dollars on coastal restoration, along with dredging projects to accommodate larger ships, should bode well for market leader in dredging sector.
Follow-Up: Puerto Rico is expected to come to market with a $3B tax-exempt general obligation bond deal yielding about 9% for which demand will likely be strong, though investors will need patience, as commonwealths economic and financial outlook appear dicey; Russia is likely to remain cautious in its handling of relations with Baltic states, since they need to maintain their market for exports in Europe; Positive on GNW: Shares have made an almost 20-fold gain since 2009, but remain undervalued with plenty of room to climb.
Mutual Funds: Interview with Taizo Ishida and Kenichi Amaki, Portfolio Managers, Matthews Japan, who are betting Japans emergence from its slump will benefit both global giants and smaller companies (top holdings: Toyota Motor, ORIX, Honda Motor, Mitsubishi UFJ Financial, Softbank, Sumitomo Mitsui Financial, Sysmex, Itochu, Hitachi, Fanuc); Interview with Patrick Wolff, Portfolio Manager, Grandmaster Capital Management (picks: AXP, NVR; pans: ADT).
European Trader: A deepening rift between Russia and the West could undermine Europes fragile economic recovery, with investors paying a heavy price; Positive on International Consolidated Airlines Group shares have risen, and could still go higher following restructuring and cost-cutting.
Asian Trader: Positive on SNE: Following strength of new PlayStation 4 console, company has embarked on its own restructuring that looks likely to generate substantially more profit even if it doesnt go as far as Dan Loeb and others would like.
Emerging Markets: Cautious on Gazprom, Sberbank, VTB Bank, Mobile Telesystems, VimpelCom, Mail.ru, Yandex: Russian companies are exposed to Ukraine and could face risk depending on how the current crisis there plays out.
Commodities: Commodities prices have been trading at six-month highs, but analysts expect them to pull back toward the end of the year as U.S. growers harvest a much larger crop.
CEO Spotlight: Profile of FAST chief Willard Oberton, whose focus on frugality has contributed eye-popping gains in revenue, earnings, and shareholder returns.
Streetwise: Though its easy to find tech companies with valuations reminiscent of the dot-com boom such as TSLA, NFLX, and TWTR, overall valuations are far from absurd, and tech giants such as AAPL, GOOG, and FB have more cash than they know what to do with.
Bouygues out a trump card to win the bet on SFR
Link to Translation : {http://bit.ly/PiztgP}
Link to french article : {http://bit.ly/1hZtqXA}
The operator has entered into exclusive negotiations with Free him surrender its network and frequencies. The competition watchdog appreciate.
A turning point in the sales process SFR. In the columns of "Sunday Journal" Olivier Roussat, the CEO of Bouygues Telecom, said his group had entered into exclusive negotiations with Free to sell him a mobile network antennas over 15,000 frequencies, including those of 4G. The amount of the transaction, conditional on successful bid Bouygues Telecom SFR, totaled € 1.8 billion. "This turnkey solution should facilitate marriage with SFR and Vivendi reassure. The sale of our network Free will result in hundreds of millions of euros cost less per year for the new together, "he told the Sunday newspaper.
For three days and three nights, the negotiators on both sides (Maxime Lombardini and Thomas Reynaud side Free, Roussat Olivier, Richard Viel, Human major negotiations, and Jean-Paul Arzel, the boss of the network, on the other side ) discussed intensively to reach an agreement on the night of Friday to Saturday. Through interpersonal banker Rothschild Grégoire Chertok, they were able to discuss intelligently whereas, until now, they did not know when their shareholders superbly respective reference did not hide their mutual hostility.
Proposing to sell its network Free, Bouygues scores face Numericable to win the bet on SFR. The goal for Bouygues, is to show white paw competition watchdog. The group has indeed Wednesday unveiled its plan to buy SFR, which would increase from April to March the number of mobile operators in the French market. One possibility is debated, four years after the decision to bring a new player in this market, and two years after the opening service Free Mobile. "Arguably, this new element, which I was informed by the parties Saturday morning without even having all the details, is likely to encourage an examination may be faster, and everything simpler case, folder" declares the "Echos" Bruno Lasserre , President of the Competition Authority. A message sent directly to Vivendi, parent company of SFR.
"Simple and solid Remedy"
"We're selling the best 4G network in France, it is proof that we offer a very significant remedy. It is a simple and solid remedy - simply because we did not try to redraw a customized network, we preferred ours automatically transfer - and massive because it provides comprehensive coverage of the population. We wanted to ensure that production costs are low enough Free to balance the competition, "says his side Olivier Roussat the" Echos ".
Vivendi will make its choice in the coming days between the draft and the Numericable Bouygues, which is strongly driven by the Minister of Productive Recovery Arnaud Montebourg, but also Free and Orange, all excited to see the competition and reduce back to three operators. "Competition in the destruction will stop if we return to the three mobile operators while maintaining low prices. It does not stop if Numericable conquers SFR, since the concurrency four remain in the mobile, "said Arnaud Montebourg in the columns of" Parisian ".
A scenario that was not the last week. Vivendi, the situation has changed in the space of a few days. There is a week, Numericable was clear favorite in the process of acquisition of SFR. Offering Patrick Drahi was favored by Jean-René Fourtou, Chairman of the Supervisory Board of Vivendi, which had even asked the board to "continue discussions in depth." Timeliness - supposedly - the supply of Numericable, simplicity and complementarity of activities were part of the flagship arguments that had seduced Vivendi. Since Wednesday evening and the official submission of the offer of Bouygues, nothing is the same, and the agreement between Bouygues and Free confirms the deal.
The group led by Martin Bouygues group has done things. It unveiled its offer publicly committed to maintaining employment - as Numericable - and investments in fiber - cheap government - and, more importantly, it now takes the lead on possible competition concerns with this turnkey project resale of its mobile network and some of its frequencies Free. "Bouygues has ticked a lot of boxes, recognize in the entourage of Vivendi. So it is impossible not to consider his offer fairly. The game is rebalanced. The two candidates are at least equal, whereas this was not the case a week ago. "Response in a few days.
Asian Market Update: Soft China CPI and surprise trade deficit weigh on sentiment
***Economic Data*** - (CN) CHINA FEB TRADE BALANCE: -$23.0B V +$14.5BE (first trade deficit in 11 months; largest deficit in 2 years; 2nd largest deficit on record) - (CN) CHINA FEB CONSUMER PRICE INDEX (CPI) Y/Y: 2.0% V 2.1%E (13-month low); M/M: 0.5% v 1.0% prior - (CN) CHINA FEB PRODUCER PRICE INDEX (PPI) Y/Y: -2.0% V -1.9%E (24th month of decline; Biggest decline in 7 months) - (JP) JAPAN Q4 FINAL GDP Q/Q: 0.2% V 0.2%E; NOMINAL GDP Q/Q: 0.3% V 0.4%E; GDP ANNUALIZED Q/Q: 0.7% V 0.9%E - (JP) JAPAN JAN CURRENT ACCOUNT BALANCE: -¥1.59T (record high defict for 3rd straight month) V -¥1.41TE; ADJ CURRENT ACCOUNT: -¥588.3B V -¥549BE; TRADE BALANCE BOP BASIS: -¥2.35T V -¥2.59TE - (JP) JAPAN FEB BANK LENDING INCL TRUSTS Y/Y: 2.2% V 2.4%E; BANK LENDING EX-TRUSTS Y/Y: 2.4% V 2.5% PRIOR - (NZ) NEW ZEALAND Q4 MANUFACTURING ACTIVITY VOLUME Q/Q: 5.7% (biggest gain in 19 years) V 1.3% PRIOR; MANUFACTURING ACTIVITY Q/Q: 6.3% V 6.2% PRIOR (biggest gain in 6years)
Market Snapshot (as of 03:30 GMT): - Nikkei225 -1.0%, S&P/ASX -0.9%, Kospi -0.8%, Shanghai Composite -1.4%, Hang Seng -1.4%, Mar S&P500 -0.3% at 1,872, Apr gold -0.3% at $1,333, Apr crude oil -0.1% at $102.45/brl
***Highlights/Observations/Insights*** - Soft weekend economic data from China have once again put a dent in the seemingly resilient economic sentiment from last week. February terms of trade saw its first contraction in nearly a year and also the biggest deficit in 2 years, as exports surprisingly fell 18.1%. Shipments to US, EU, and Japan were all down double digits despite the expectations of rising demand from improving economic conditions in those markets. Stats bureau was quick to attribute the deficit to the distortions caused by the timing around the Lunar New Year, so the jury on the China trade as a gauge of global demand may still be out until March figures. Meanwhile, China CPI also came in surprisingly tame, with annual CPI hitting a 13-month low of 2.0%. Local press has surmised the February data may force the govt into a fiscal stability policy, and several analysts also hinted that weak economy may persuade the increasingly-hawkish PBoC to decelerate its mopping up of excess liquidity to forestall the risk of deflation.
- Japan revised its Q4 GDP to a final figure of 0.2% from 0.3% q/q and 0.7% on annualized basis vs 1.0% prelim. Corporate CAPEX component saw its biggest change in the revision, slowing to 0.8% q/q growth vs 1.3% initially reported and raising further questions over the efficacy of Abenomics and its glaring need of "3rd arrow" structural reform. HSBC economist interviewed after the release of the final Q4 GDP also expressed concern about Japan's rising trade deficits, potentially forcing the BOJ into action sooner than expected. BOJ concludes its 2-day meeting with a formal statement on monetary policy tomorrow. While no change is expected, traders will tune in for Gov Kuroda's accompanying statement for insight into the latest disappointing round of data. Note that Japan's current account and balance of payments trade also hit record deficit levels.
- Situation in the Crimean peninsula remained tense over the weekend, with reports of another takeover of an airport by unidentified troops. Russian Pres Putin held talks with Chancellor Merkel on Sunday, reiterating the belief that the referendum vote planned for Crimea next Sunday is based on international law and "aimed at guaranteeing the legitimate interests of the peninsula's population," just as Merkel maintained that the vote violates Ukraine constitution and will not be recognized by western powers. US President Obama is welcoming Ukraine PM Yatsenyuk to the White House on Wednesday to help add legitimacy to the new govt in the eyes of the skeptical eastern region, while the US Defense Dept has ordered a dozen F-16 fighter jets and 300 US service personnel to Poland to take part in military exercises amid the apparent escalating tensions with Moscow.
- May copper contract was exceptionally volatile in the early part of electronic trade, briefly falling by over 2.5% below $3.00/lb before recovering much of its lost ground. Copper and iron ore have come under pressure on Friday as well following confirmation of a China corporate default, and sellers re-emerged in the Asia session after the soft China trade components showing large sequential losses in copper shipments.
***Fixed Income/Commodities/Currencies*** - (JP) BOJ offers to buy ¥250B in 1-3yr JGB, ¥250B in 3-5yr JGB and ¥400B in 5-10yr JGB - USD/CNY: (CN) PBoC sets yuan mid point at 6.1312 v 6.1201 prior setting (weakest Yuan setting since Dec 3rd) - (KR) South Korea sells 5-yr govt at 3.215% - GLD: SPDR Gold Trust ETF daily holdings rise 1.5 tonnes to 805.2 tonnes (3-week high)
- Yen pairs are under modest pressure given the overall risk aversion in the equity markets after the soft China data, which is also weighing on the AUD currency. AUD/USD fell about 30pips below $0.9040 and USD/JPY briefly tested below the ¥103 handle, down about 25pips from Friday close. NZD remains resilient and trading flat around $0.8460, as investors brace for RBNZ to become the first central bank from a major developed economy to raise interest rates.
***Equities*** US markets: - URI: To acquire National Pump s for about $780M; Raises FY14 EBITDA to $2.55-2.65B from $2.45-2.55B prior forecast; Rev to $5.45-5.65B v $5.36Be (prior forecast $5.25-5.45B) - BA: Reportedly planning to inspect 787 Dreamliner aircraft wings of planes that have yet to be delivered to clients following a client complaint; May cause some delivery delays but will not impact FY14 revenue and delivery guidance - press; Malaysia Airlines Flight MH370 en route from Kuala Lumpur to Beijing missing and believed to be lost in the South China Sea; Japan Airlines-operated Dreamliner flight from Tokyo to San Francisco made emergency landing in Hawaii due to possible problem with hydraulic system - press
Notable movers by sector: - Consumer Discretionary: Wuliangye Yibin 000858.CN -1.7% (prelim FY13 results); Skyworth Digital 751.HK -3.3% (Feb sales results) - Financials: Poly Real Estate Group 600048.CN -2.8% (Feb sales results) - Materials: Anhui Fangxing Science & Technology 600552.CN +0.8% (FY13 results); Fortescue Metals Group FMG.AU -7.8%, BHP Billiton BHP.AU -3.5%, Rio Tinto RIO.AU -5.1% (commodity futures trade down in China, after first debt default, as well as trade deficit in China) - Industrials: China Southern Airlines 1055.HK -3.9%, Air China 753.HK -1.8%, Cathay Pacific Airways 293.HK -1.6%, China Eastern Airlines 670.HK -1.9% (flight from Malaysia Airlines disappears in the South China Sea); China Rongsheng Heavy Industries Group 1101.HK -2.7% (FY13 results); Leighton Holdings LEI.AU +11.1% (receives proportional bid from Hochtief); Jiangsu WELLE Environmental 300190.CN +10.0% (FY13 results) - Technology: Tencent Holdings 700.HK -1.0% (acquires stake in JD.com)
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Bouygues in Talks to Sell Mobile Network to Free for EU1.8b 2014-03-09 10:59:32.465 GMT
By Andrew Roberts March 9 (Bloomberg) -- Bouygues says in statement seeking as much as EU1.8b for network and portfolio of frequencies. * Bouygues says transaction is conditional on acquisition of Vivendi’s SFR, aims to preserve strong, infrastructure based competition in France * Bouygues says agreement means it can present to French Competition Authority measures designed to maintain competitive market * Bouygues says deals would help restore level playing field in mobile telecoms sector, boost employment, facilitate investment, improve quality of service, innovation * NOTE: Iliad Says Bouygues Acquisition Won’t Require Capital Increase NSN N260TI6JTSE8 <GO>
For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>
To contact the reporter on this story: Andrew Roberts in Paris at +33-1-5365-5015 or aroberts36@bloomberg.net To contact the editors responsible for this story: Celeste Perri at +31-20-589-8505 or cperri@bloomberg.net Mike Harrison, Douglas Lytle
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French Competition Probe of SFR Deal Could Take 9 Months: Figaro 2014-03-08 09:19:40.649 GMT
By Andrew Roberts March 8 (Bloomberg) -- France’s competition authority will take the time needed to examine Vivendi’s sale of SFR to Bouygues or Altice, the regulator’s president Bruno Lasserre says in interview with Le Figaro. * An in-depth review is more likely than a simple 25-day procedure, Lasserre says: Figaro * NOTE: Bouygues said to start regulator talks in SFR race with Drahi NSN N22VSW6KLVSL <GO>
For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>
To contact the reporter on this story: Andrew Roberts in Paris at +33-1-5365-5015 or aroberts36@bloomberg.net To contact the editors responsible for this story: Celeste Perri at +31-20-589-8505 or cperri@bloomberg.net Ross Larsen
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Imerys Won’t Boost Offer Price for Amcol 2014-03-07 21:55:01.134 GMT
By Jeran Wittenstein March 7 (Bloomberg) -- Imerys won’t increase $45.25 cash offer for Amcol International after Amcol said $45.75 Mineral Technologies offer was superior. * Says would not “be able to comply with its long term value creation objectives” at higher price * Says termination fee would apply if Amcol terminates merger agreement with Imerys * NOTE: Yday, ACO calls New Minerals offer superior Statement
For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>
To contact the reporter on this story: Jeran Wittenstein in San Francisco at +1-415-617-7203 or jwittenstei1@bloomberg.net Jeran Wittenstein, Scott Schnipper
Weekly Market Update: Cold Weather, Cold War
- The S&P500 notched new all-time closing highs this week and not even the prospects of war in Ukraine managed to unseat the relentless bid. Ukraine became a central issue after Russian troops occupied Crimea without a shot fired and the Ukrainian province prepared to legitimize the move via referendum. In Europe, ECB President Draghi was more hawkish than expected and resisted calls to offer additional accommodation or even say the word deflation. At China's National People's Congress, Beijing unveiled its official 2014 targets, most notably maintaining the 7.5% GDP objective for the third year in a row and set the inflation target at 3.5%. Meanwhile, China's Feb manufacturing PMI fell to an eight-month low of 50.2, just a hair away from contraction. For the week, the DJIA rose 0.8%, the S&P500 gained 1.0% and the Nasdaq added 0.7%.
- On Monday, Russia's MICEX index fell 11%, the DAX was down as much as 3% and the CAC fell as much as 2.5% as Europe responded to Russian escalation over the weekend. The ruble was in free fall, prompting the Russian central bank to raise its key lending rate to 7% from 5.5%. At its worst, USD/RUB rose as high as 36.6, the ruble's weakest level since the 1998 currency crisis. An air of unreality surrounded Russian statements about the situation, as Putin denied that Russian troops were even participating in the occupation of Crimea (he said the troops were just extraordinarily well-armed local Russians). The Crimean parliament asked Putin to start the procedure of formally allowing Crimea to join the Russian Federation and scheduled a referendum for March 16th. Ukraine called the moves illegal and promised to hold on to the peninsula. Europe responded by threatening to consider sanctions, while the US is actively establishing a limited sanctions regime and sending token military assets to the region.
- The February jobs report took markets by surprise on Friday. After the ADP miss (at +139K jobs v +155Ke) and various weak employment components from February regional Fed reports, many participants were assuming the Labor Department report would be terrible. On Thursday, Fed Governor Lockhart said he did not expect to see an outstanding jobs report. But in the event, the Feb NFPs roundly beat expectations (+175K v +149Ke) and the unemployment rate ticked up one-tenth to 6.7%. The biggest surprise in the data was a 0.4% increase in average hourly earnings, the largest increase since last June, while average hours worked fell, likely due to distortions caused by weather.
- The February ISM manufacturing data was slightly better than expected, rising to 53.2 from January's nine-month low of 51.3. The key new orders component saw solid gains, rising to 54.5 from 51.2 prior. Note that the weakness in December and January was chiefly seen in the new orders component.
- February auto sales numbers are the latest economic data to be impacted by winter weather. Ford and GM both saw sales decline on a y/y basis, although total unit sales were more or less in line with expectations. Sales executives from both firms cited the weather as restraining sales. Chrysler's sales grew 11%, and executives said the weather only helped sales of their Jeep line, which were up 47% y/y. Nissan's sales grew 16% y/y, although this was a bit shy of expectations.
- In earnings news, shares of Radio Shack are down 20% this week after the troubled retailer reported brutally bad fourth quarter results, with losses three times the year ago figure and retail comps down 12%. Homebuilder Hovnanian dragged down the entire sector after it missed revenue expectations and racked up an unexpectedly large quarterly loss. The firm's contract cancellation rate crept up and its net contracts signed metric fell y/y. HOV is down 17% while fellow luxury home builder KBH is down nearly 10% this week. Costco missed top- and bottom-line expectations in its second-quarter report. The price club's same store sales held up well, up 2% overall while US comps were up 4%. Earnings fell y/y, dragged down by weak margins in the holiday season and tough FX conditions.
- Safeway announced a formal merger deal with Cerberus's Albertsons after a long courtship. The $40/share price values Safeway at more than $9 billion. Note that there have been reports that Kroger is still mulling a higher offer. A Deutsche Bank analyst wrote that Kroger should bid and that Safeway could fetch a price above $40.
- The ECB resisted calls to fight disinflation with more easing at its policy meeting on Thursday. EUR/USD was steady after the ECB left rates on hold and refrained from launching any new programs, and then moved sharply higher, testing 1.3850, once it was clear that ECB President Draghi would merely reiterates familiar positions at the post-rate decision press conference. Draghi said that recent improvements in the eurozone obviate the need to halt SMP sterilization. On Friday morning, EUR/USD moved even higher, probing briefly above 1.3920 to its highest level since late 2011. The euro weakened after the US jobs report.
- China has now witnessed its first corporate default in history. Shanghai Chaori Solar Energy is looking to sell overseas assets to make up a missed bond payment and neither banks nor government entities are stepping in to help. Chaori's default took place during the annual People's Congress session, reinforcing the signal that Beijing is letting market forces play a stronger role in the economy. However analysts point out this is only the beginning given that the number of Chinese companies with debt levels double equity has surged since the financial crisis began.