>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: KMX +14.5%, JRJC +10%.

M&A news: SHPG +14.6% (confirms rejection of AbbVie (ABBV) proposal), APP +5.9% (Bloomberg discusses that APP may be a possible takeover target), ABBV +2.4% (confirms merger proposal for Shire (SHPG), later rejected b SHPG), S +1.4% (nearing $40 bln financing for TMUS deal, according to reports), TMUS +0.8% (Sprint (S) nearing $40 bln financing for TMUS deal, according to reports).

Other news: DEJ +20% (to own 99% of Woodrush Production; co announced that, subject to final approval from the TSX, it will acquire a further 24% Working Interest in its legacy Woodrush oil and gas production project), COCO +17.9% (rebounding modestly from yesterday's 66% decline), LOGI +2.4% (still checking), FDO +2.1% (Carl Icahn sends letter to FDO urging co be put up for sale immediately), CBST +2.1% (announced acceptance of Ceftolozane/Tazobactam New Drug Application with priority review), DEO +0.8% (plans to increase stake in United Spirits to 55%, according to reports).

Analyst comments: AN +4.4% (upgraded to Buy from Neutral at Goldman), ENTG +2.2% (target raised to $15 at Stifel), BBRY +1% (target raised to $12 at RBC Capital Mkts)

>>> Oracle: Color on Quarter --> -6.2% Pre-Market 800k sh. traded

Oracle: Color on Quarter

  • FBR Capital would characterize as a disappointing performance across the board in the co's seasonally strong fiscal year-end. Although the co clearly still has more "wood to chop" given the F4Q performance, they believe Oracle is headed in the right direction (generally in-line August guide) thanks to a strong product cycle and healthy secular trends for cloud/engineered systems spend. While no acquisition was announced (potential acquisition of MCRS recently reported), they believe Mr. Ellison & Co. will be aggressive on M&A over the coming year as it is clear, in their opinion, that Oracle needs to go on the "deal warpath" to bulk up its product portfolio (e.g., cloud, big data, and cybersecurity).
  • Oppenheimer notes ORCL reported soft 4Q results for the second straight year partially owing to delayed revenue recognition from selling more cloud software than licenses. This trend aligns with our view that market fundamentals for SaaS adoption have never been better from business desires to replatform apps. Additionally, FY EPS growth came in below 10% for the second straight year, a key growth target for investors, despite easier comparisons and better macro. This result pushes ORCL's 3-year EPS CAGR also below 10%. They maintain Perform rating on ORCL on concerns Oracle maybe challenged to consistently expand margins to reach and sustain a 10%+ earnings growth-trajectory that's needed to justify multiple expansion over the near-and-intermediate terms, given current model transition.
  • Stifel notes Oracle delivered a messier-than-expected F4Q14 print. Oracle is laser focused on growing its cloud business and is seeing healthy gains across its SaaS/PaaS/IaaS cloud assets. As the cloud shift becomes more pronounced, they expect license revenue growth to remain somewhat muted, but overall believe this is a healthy long-term move. They also think much of the heavy lifting in-terms of cloud-buildout is in the rearview-mirror and, as a result, think it can scale without significantly affecting profitability. The bottom line is they believe Oracle can sustain mid-single digit growth, rapidly grow its cloud business, and deliver strong free cash flow (~9% FCF yield) in coming years. Coupled with an attractive valuation, they remain buyers.
  • BMO notes Q4 softness appears to be the result of thousands cuts. However, mgmt remains bullish on cloud transition progress and bookings and new customer metrics remains very good. The stock will likely give back some, given improving sentiment headed into the call. However, they expect investor focus to continue to shift away from the perception of Oracle as a secular loser to one that will be able to participate in the shift to the cloud. Valuation has expanded in line with peers'; however, accelerating revenue growth and below-trend valuation leave them positive on the shares and make ORCL the name to own in mega-cap software; $45 tgt.
  • Citigroup downgraded the stock to Neutral
  • ORCL is down 6%; while the quarter was disappointing, the Street seems to be encouraged by the co's direction and progress in the cloud; the stock has a lot of support at the $40 level and is still in a clear uptrend after breaking out in December of last year; its closest peer SAP is down 0.8% in Germany.

>>> Owens Corning down 8% pre-market at $38/share after lowering guidance

Owens Corning lowered 2014 EBIT guidance ~17% due to continued volume weakness in its roofing business, with 1H14 volume down as much as 20%

Co lowered its 2014 full-year earnings outlook [FY14 EBIT to greater than FY13 ($416 mln) from $500 mln] due to continued volume weakness in its roofing business.
  • In its first-quarter 2014 earnings release, the co stated that it expected to deliver $500 million in adjusted EBIT for full-year 2014 and noted that first-quarter volume weakness in its roofing business added risk to the company's financial outlook.
  • The weakness in roofing volumes experienced in the first quarter continued through April and May, and the co now estimates that roofing volumes for 1H14 may be as much as 20 percent lower than first-half 2013 volumes. The co expects to recover a portion of this volume shortfall in the second half of the year. However, continued weakness in the second quarter has introduced further uncertainty in the full-year financial outlook for the co's roofing business.
  • The co continues to see improvement in the year-over-year performance of both its insulation and composites businesses. Earnings growth in these two businesses is expected to more than offset the weaker financial performance in the roofing business year over year.
  • The company now expects to deliver full-year 2014 adjusted EBIT that will be greater than the prior year result of $416 million.

>>> Early premarket gappers

Early premarket gappers

Gapping up: DEJ +15%, SHPG +10.9%, JRJC +6.4%, FDO +2.6%, LOGI +2.5%, PLUG +2.3%, CBST +1.4%, RHT +1.4%, FEYE +1.1%, ETE +1%, MJNA +0.5%

Gapping down: SWHC -12.6%, MACK -10.8%, EMES -5.7%, ORCL -5.7%, EXL -5%, RIBT -4.6%, DB -3.1%, AKS -2.6%, DRI -2.5%, MCP -2%, KND -1.8%, COH -1.5%, TIBX -1.5%, GOLD -1.1%, GDX -1.1%, ABX -0.9%, MT -0.9%, NEM -0.8%, GLD -0.6%, BHP -0.6%

FT : Luxury retail slowdown brings Hong Kong landlords back to earth

If megadeals often signal the peak of a market, then Hong Kong landlords may soon be in for a shock.
Spanish fashion brand Zara opened a new flagship store on Friday in Hong Kong’s city centre, in what will be one of the largest single brand shops in the city.

But the timing could prove precarious, with recent data showing that the decade-long boom in the city’s retail sector – driven by fervent demand from visitors from the mainland – may be coming to an end with a thud.
Last year, Chinese tourists accounted for more than a third of total retail sales, and helped make the former colony home to the world’s most expensive shop space.
Noodle joints and barber shops in prime locations were evicted by landlords, who were happy to leave plots empty – thanks largely to record low interest rates – while they waited for rival luxury brands to bid prices higher.
However, signs are growing that the high-end retail market, which drove rental costs up across the city, has turned decisively. In April – the most recent month for which data are available – overall retail sales sank almost 10 per cent in Hong Kong from the previous year, the steepest decline since the depths of the financial crisis in early 2009.
The main culprit was a near 40 per cent year-on-year fall in sales of watches and jewellery, a sign that China’s crackdown on corruption and lavish spending dented demand for luxury goods – the mainstay of Hong Kong’s retail industry – is biting hard.
Retailers on average sold more than $40m of watches and jewellery per day in Hong Kong last year, accounting for 24 per cent of total retail spending.
While some of the April fall is due to a high base figure from the previous year, when many rushed to buy gold as global prices tumbled, it marks the third successive month in which overall retail sales have dropped.
The slowdown has so far been largely confined to the luxury sector, with shopping centres and mid-range stores continuing to see healthy growth. But analysts say many retailers have overexpanded in the city on expectations that sales would continue to increase rapidly, and are now tempering their plans.
“The days of 25 per cent a year sales growth are probably behind us,” says Paul Louie at Barclays.
The fall in spending dovetails with a slowdown in the number of Chinese tourist arrivals, amid rising tensions between Hong Kong and the mainland. Arrivals from the mainland fell 1.5 per cent year-on-year during the recent May holiday break, the first such decline since the Sars epidemic in 2003.
Chinese visitors have been the target of various grievances in recent years, from a shortage of hospital beds and school places in the territory, to a rise in housing costs.
Relations have hit such a low that the Hong Kong government recently proposed cutting the number of mainland Chinese allowed to visit the city each day by 20 per cent, something that is “weighing on the minds of retailers”, says Denis Ma, head of Hong Kong research at JLL.
While Hong Kong’s retail boom has been a bonus for many global brands and local landlords, it has caused a spike in commercial rents that has hit small business owners across the territory.

FT : UK recovery fails to boost public finances

Britain’s recovering economy failed to boost the public finances in May as income tax receipts remained weak.
The government had to borrow £13.3bn in May to bridge the gap between its spending and its revenues, about £700m more than in the same month last year.

Britain’s official fiscal watchdog is expecting borrowing to fall about 10 per cent this year as the economy recovers and the government ploughs ahead with its austerity programme. However, during the first two months of the fiscal year, borrowing was 8.7 per cent higher than a year ago.
The monthly increase in the size of the deficit in May was partly explained by a £900m payment in May last year from a Swiss tax agreement, which was not repeated this year.
However, income tax receipts and national insurance contributions were also unexpectedly weak – down 1.4 per cent and up 1 per cent respectively.
But corporation and VAT and stamp duty taxes rose strongly and public spending remained under control, up just 0.3 per cent from a year ago.
Public sector net debt rose to £1,284bn, equivalent to 76.1 per cent of gross domestic product.
A Treasury spokesman said: “The government’s long term economic plan is working, delivering economic security for hardworking people . . . But the job is not yet done which is why we must continue to work through the plan that is building a resilient economy.”
“May’s public borrowing figures contain tentative signs that the coalition may be beginning to struggle to bring down the deficit in line with the fiscal plans,” said Samuel Tombs, an economist at Capital Economics.

(BFW) Novartis Manager Under Probe in H1N1 Investigation: Ansa

Novartis Manager Under Probe in H1N1 Investigation: Ansa
2014-06-20 10:08:04.344 GMT


By Marco Bertacche
     June 20 (Bloomberg) -- Searches under way at Novartis’s
offices in Siena and Origgio in Italy in probe related to H1N1
flu vaccines, Ansa reported, without saying where it got the
information.
  * Novartis spokesman Dermot Doherty didn’t immediately respond
to a request for comment.


Link to Ansa: {NSN N7GN143PWT1C <GO>}

Link to Company News:{NOVN VX <Equity> CN <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:
Marco Bertacche in Milan at +39-02-8064-4233 or
mbertacche@bloomberg.net

To contact the editor responsible for this story:
Dan Liefgreen at +39-02-8064-4204 or
dliefgreen@bloomberg.net

(BFW) Gulf Keystone Holding Talks With CEO on Terms to Step Down: Sky

Gulf Keystone Holding Talks With CEO on Terms to Step Down: Sky
2014-06-20 09:19:47.207 GMT


By Christopher Kingdon
     June 20 (Bloomberg) -- Gulf Keystone directors have been
holding talks this week on terms of CEO Todd Kozel stepping
down, Sky reports, without citing anyone.
  * Announcement of Kozel departue may come as soon as Friday;
    may still fall apart: Sky
  * “Todd is the CEO. At this point there is no deal for him to
    step down,” Sky quotes Gulf Keystone spokesman as saying
  * Shrs (+4.5%) up as much as 5.1% today; volume <25% of 3-
    month daily average
  * NOTE: See story from June 16: Gulf Keystone Says FD Ewen
    Ainsworth to Leave June 17


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

To contact the reporter on this story:
Christopher Kingdon in London at +44-203-525-0872 or
ckingdon@bloomberg.net
To contact the editor responsible for this story:
Clyde Eltzroth at +1-212-617-1879 or
celtzroth1@bloomberg.net