WSJ : Germany to Comb Museums for Nazi-Looted Art



Germany to Comb Museums for Nazi-Looted Art

Decision Follows Fresh Revelation of Cache Held by Son of Nazi-Era Dealer
The house of German Cornelius Gurlitt in Salzburg in November. More than 60 additional works have been discovered in Gurlitt's Austrian home. Agence France-Presse/Getty Images
BERLIN—Germany will set up an independent center to comb museum collections for art looted by the Nazis, the country's culture minister said, shortly before representatives for the son of an art dealer tied to Hitler disclosed another hidden cache of paintings.

The discovery of more unrecorded treasures, including paintings by Impressionist masters Monet, Renoir and Manet, was likely to add fuel to the firestorm of criticism over Germany's record in dealing with potentially looted art.

Representatives of Cornelius Gurlitt, whose vast collection was seized in 2012 by Munich prosecutors, revealed that he had dozens more works stashed outside the country in a second home in Salzburg, Austria.

Several families of Holocaust victims have laid claims to some of the 1,400 works seized in Munich as part of a tax investigation. Among them are relatives of Anne Sinclair, the ex-wife of Dominique Strauss-Kahn, who are claiming a Matisse portrait that experts say could fetch up to $20 million at auction.

Unlike the Munich trove, none of the 60 pieces found in Austria appears on databases of Nazi-looted art, according to a person familiar with the situation.

The Munich art consisted largely of works on paper; the Salzburg collection is mainly paintings, as well as one Picasso work on paper, this person said. Paintings typically far outstrip paper works in price.

Culture Minister Monika Grütters, an art historian and parliamentarian, said in an interview with The Wall Street Journal that the Gurlitt case had revealed weaknesses in Germany's restitution system.

The various institutions that share responsibility for art restitution had been "a bit shy in their public relations activities," she said, speaking from her office in Angela Merkel's chancellery, overlooking Berlin's government district.

"These are delicate matters to articulate," she said. Many German museums had underestimated "the emotional components" of the debate, she said. "It's a matter of earning back trust."

Authorities in the German state of Bavaria kept the existence of the Munich collection secret for nearly two years as their investigation progressed, without examining their provenance. That prompted renewed scrutiny of Germany's record in researching and returning looted art.

Bavarian officials have defended their decision to keep the trove secret, despite international guidelines on art restitution that Germany signed in 1998, by saying that the works were part of a confidential tax investigation and their provenance was immaterial to the case.

Lawyers and international art experts as well as U.S. and Israeli diplomats have called the country's procedures to establish ownership of disputed artworks slow and the legal framework governing restitution weak. They also have criticized German museums as being reluctant to open their collections to scrutiny.

The vehemence of the criticism took government officials aback in a country that has won praise for its efforts to compensate Holocaust victims and generally take responsibility for years of Nazi terrors.

The revelations about 60 other works that Mr. Gurlitt had in Salzburg—even though outside Germany—could rekindle the debate.

The legal guardian, lawyer and spokesman for the octogenarian collector went to the house with an insurance agent Sunday and loaded up the artwork, the person familiar with the situation said.

The three representatives are having experts catalog and store the works in an undisclosed facility, light- and temperature-controlled, outside Germany to avoid confiscation by authorities, this person said.

Mr. Gurlitt hasn't lived in the Salzburg house since 2011 and his team hadn't visited it before, this person said. Some of the works they found there were in bad condition while others were "unharmed," this person added.

His representatives declined to comment publicly beyond a statement announcing the discovery.

It is unclear how many lost works from Impressionist and modern masters are still in existence. Many works registered in the artists' records, like the Matisse Ms. Sinclair claims or a Max Liebermann also claimed by Jewish heirs from the Munich trove, were missing and presumed destroyed in the war until the Gurlitt discovery upended that assumption.

Ms. Grütters's proposed provenance research center, the exact blueprint for which is being completed in talks with Germany's 16 state governments, would operate at arm's length from German museums and from the government, she said Monday, in her first interview with an international newspaper since taking office in December.

Her proposal would address what art experts and historians have long seen as a weakness in Germany's restitution policies: The absence of an independent organization with the money and authority to conduct research into museum holdings.

So far, most historians culling state and local museum collections for possibly looted art are employed by the individual museums.

Ms. Grütters said the center's legal and financial structure could be determined as early as March and it could start operating this autumn.

She declined to name the institution's expected budget but said the government's annual spending on provenance research should be doubled from its current €2 million ($2.7 million) a year and some of these activities bundled into the new structure. Including overhead, this could leave the center with an annual budget just shy of €10 million.

Ms. Grütters warned the initiative shouldn't be understood as an attempt to relieve museums of their duty to scour their vaults for loot.

"The museums must take a new approach: Their work will not only be judged by which exhibitions they hold, how many visitors they have and which purchases they make but also by how they handle their own histories," said Ms. Grütters. "We shouldn't make it too easy and say 'The national government should do it.'"

Culture in Germany is largely a regional affair. Currently, 12% of spending on cultural projects, including museums, is paid out of the federal budget, with 43% coming from state—or Länder—governments and 44% from municipalities. Ms. Grütters would like the Länder to participate in the effort to beef up provenance research, including financially.

This federal structure is often invoked as a reason why Germany has lagged behind in its restitution system. But museum directors—who typically refrain from criticizing other countries—were shocked at the extent to which the Gurlitt case highlighted the weaknesses of the country's framework.

"If you had asked me a year ago if a situation like Gurlitt could have happened, I would have said 'absolutely not,'" said Martin Roth, the head of London's Victoria & Albert Museum, who in January digitized all 479 pages of the list of art labeled "degenerate" by the Nazis on the V&A's website.

Ms Grütters said her ministry would also throw its weight behind a recent proposal being heard by the upper house of parliament to change Germany's 30-year statute of limitations as it applies to art looted by individuals from World War II victims.

>>> What to look at today : 12/02/2014

US MArket Closed Higher, Fourth straight day of positive performance (+3,8% in 4days for S&P), Yellen Testimony helped the market showing that mkt was worried about her first appearance...But wrding of FED Chair(wo)man show no real change...S&P regain its 50d MA...House of repres. Passed bill for debt ceiling...Rally happened in low volume again below the 700m shares average...VIX @ 14,51 -4,91%...Today the weekly MBA Mortgage Index will be reported at 7:00 ET while the January Treasury budget will be released at 14:00 ET...China trade surplus defies expectations for weaker terms of trade; Exports
and Imports both rose over 10% on unadjusted and over 9% on holiday-adjusted basis. Iron ore imports and exports to EU particularly impressive, rising 33% and 15.6% respectively. Critics suggest trade data spike may be explained by "overinvoicing" to mask the slowdown...BoJ Kiuchi continue to push quantitative and qualitative easing as an intensive measure with a 2-year time frame"...Nikkei +0,48%...shanghai +0,13%
China's Economy May Grow 7.6% This Year, Goldman Sachs Zhu Says

Eur$ 1,36 S&P Fut +0,2% European Futures +0.36%

Keep an eye on :
- ABG LN : African Barrick FY Net Misses; Sees Higher Gold Output in 2014
- AIR FP : Qatar Air Says First A350 May Be Delivered Earlier Than December, Airbus Gets Order From Amedeo Worth $8.3b
- ALV GY : Allianz to Acquire 8.3% Stake in FC Bayern for EU110m, Bild Says
- ATLN VX : Actelion’s Opsumit May Face Study Comparing Gilead’s Letairis
- AVN LN : Avanti 1H Sales Rise 81%, Says Growth Difficult to Forecast
- BATS LN : Smoking Rate in England Falls to 80-Year Low as More Support Ban
- BAYN GY : Bayer Says There’s Evidence Naproxen Has Low CV Thrombotic Risks
- BB FP : Bic Sees 2014 Consumer Sales Up High-Single-Digit Constant FX
- BN FP : Danone Raises Stake in Mengniu to 9.9% From 4% For EU486m
- BNP FP : BNP Mulls Cutting 40 Branches in France, Les Echos Says
- BPOST BB : Bpost 4Q Adj. Ebitda Beats Ests.; Final Dividend 20 Cents/Shr
- CRA1V FH : Cramo 4Q Earnings Match Ests.; Raises Dividend to EU0.60/Shr
- CSS FP : Vivarte Halts Payments to Creditors, Starts Debt Talks: Figaro
- DAI GY : Daimler May Pursue Cost Cuts Beyond 2b Euros: Reuters, Considering Additional Factory Outside Europe, CEO Says, had very promising discussions with Nissan about compact car cooperation
- DRI GY : Drillisch FY Ebitda EU70.8m; Est. EU70.3m
- EDP PL : Iberdrola to Sell 1.98% Stake in EDP
- EDEN FP : Edenred 2013 Ebit Misses Ests., Confirms Targets
- GLE FP : SocGen 4Q Profit Beats Ests. on French Consumer Banking, 4Q Net Income, Dividend Proposal Beat Estimates
- HEIA NA : Heineken 2013 Oper Profit Ex-Items EU2.94b, Est. EU2.96b
- INGA NA : ING 4Q Net Income Beats Ests; Insurance Preax Loss on Japan, Says Preparations for Insurance IPO on Track
- LOGN SW : Logitech CEO Says Share Buybacks Could Become Topic: FuW
- MRW LN : Wm Morrison Founding Family Said to Gauge Buyout Firms’ Interest
- MSK IM : Moleskine Says 2013 Prelim. Sales EU87m, Est. EU87.9m
- NHY NO : Norsk Hydro 4Q Net Misses Ests. on Lower Hydropower Production
- NK FP : Imerys Agrees to Buy AMCOL for $41/Shr
- ONO SM : Ono Board Didn’t Discuss Vodafone Offer, Dow Jones Says, 
- ONO SM : Ono to submit IPO plans at 13 March general meeting, dismisses Vodafone's bid as insufficient - Expansion
- RB/ LN : Reckitt 4Q LFL Sales Growth Ex-RBP +4%, In Line With Ests.
- RNO FP : Hollande Warns French Carmakers About Iran Accords after meeting with Obama
- SAN FP : Sanofi: Capital Plans Were Not Tied to Potential L’Oreal Sale
- SKG ID : Smurfit Kappa 2013 Revenue Ahead, Ebitda In Line With Estimates
- TEL NO : Telenor Forecasts Low Single Digit Organic Rev. Growth in 2014
- TLW LN : Tullow 2013 Net Attrib. $169m; Says Fregate ‘Opens New Oil Play’
- TRE SM : Tecnicas Reunidas Wins C$580m Contract in Canada
- TUI1 GY TUI AG 1Q Sales Fall, Confirms Forecasts
- FP FP : Total 4Q Adj. Net EU2.47b vs Est. EU2.57b; Dividend EU0.61/Share
- DG FP : Ardian, Credit Agricole In Talks Valuing Vinci Park at EU1.96B
- VOD LN : Vodafone May Target Acquisitions in Australia: Australian, India Cabinet to Consider Ending Tax Negotiations With Vodafone

>>> Brokers Upgrades & Downgrades - 12/02/2014

>>> Up
*AGORA RAISED TO BUY VS HOLD AT ING
*BENI STABILI RAISED TO OUTPERFORM VS NEUTRAL AT MEDIOBANCA
*BELGACOM RAISED TO BUY VS HOLD AT BERENBERG
*BREMBO RAISED TO OUTPERFORM VS NEUTRAL AT MEDIOBANCA
*BUNZL RAISED TO BUY VS UNDERPERFORM AT BOFAML
*KAZMUNAIGAS RAISED TO NEUTRAL VS UNDERPERFORM AT BOFAML
*KAZAKHMYS RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT BARCLAYS
*SEB RAISED TO BUY VS HOLD AT SOCGEN
*BREMBO RAISED TO OUTPERFORM VS NEUTRAL AT MEDIOBANCA
*TVN RAISED TO HOLD VS SELL AT ING

>>> Down
*AIRBUS CUT TO NEUTRAL VS BUY AT UBS
*DRDGOLD CUT TO NEUTRAL VS BUY AT BOFAML

>>> PT change
*Saipem PT Cut to EU15.5 vs EU16.1 at Credit Suisse
*UMICORE PT RAISED TO EU37 FROM EU35 AT ING
*UniCredit PT Raised to EU5.8 at Kepler Cheuvreux; Kept at Hold

>>> Initiation
*INGENICO RATED NEW BUY AT SOCGEN, PT EU75

>>> Call
>> Stock
*ROCHE ADDED TO CITI'S FOCUS LIST EUROPE
*SHIRE REMOVED FROM FOCUS LIST AT CITI, STAYS BUY

>>> Ono to submit IPO plans at 13 March general meeting, dismisses Vodafone's bi

Ono to submit IPO plans at 13 March general meeting, dismisses Vodafone's bid as insufficient

The management board of Cableuropa (Ono) approved the accounts for 2013 on Tuesday (11 February) and agreed to submit IPO plans to shareholders at the next general meeting on 13 March, Expansion reported. The IPO would occur in April or May, the unsourced report said.

This decision implies Ono has rejected Vodafone's reported binding takeover offer worth EUR 6.9bn, the Spanish-language item noted. It will not study Vodafone's bid, given it considers the offer to be too low, it added.

Ono could still receive a higher offer from Vodafone or Liberty Global, which has also been reported to have takeover interest.

Ono's favored banks for coordinating the listing are Deutsche Bank and JPMorgan, Expansion reported.



Source Expansion

FT : India poised to scrap talks on $2.6bn Vodafone tax dispute

India poised to scrap talks on $2.6bn Vodafone tax dispute

India’s government is poised to scrap talks aimed at resolving a $2.6bn tax dispute with UK mobile operator Vodafone, in a move likely to raise fresh concerns about the nation’s investment climate.
Palaniappan Chidambaram, India’s finance minister, said last January that he expected a speedy negotiated solution to the long-running dispute, but talks with the UK-based company have since stalled, according to people familiar with the situation.
Indian media reported on Tuesday that India’s finance ministry had circulated a memorandum arguing that the year-long negotiations should now be scrapped.
The document implies that Vodafone is at fault for the collapse of the talks, given its demands that other unrelated tax disputes be included in any settlement, according to Reuters.
D S Malik, a spokesman for the finance minister, told the Financial Times that a final decision on the talks would now be referred to India’s cabinet, but declined to comment on the process itself.
Vodafone also declined to comment, although people familiar with the process said the talks had failed to achieve anything close to a breakthrough.
A definitive move to scrap the reconciliation discussions would mark a further twist in what has become India’s most celebrated and closely watched foreign business dispute, raising accusations of changeable regulation and capricious treatment by policymakers.
The development also comes at a delicate time for India’s economy as many global businesses await the outcome of national elections in May, in the hope that a change of government could improve India’s dented position as a friendly investment destination.
An end to the present process would leave Vodafone in limbo until after the elections, and raise the risks that India’s tax department would begin proceedings anew to recover tax that it believes to be due in the case.
Vodafone’s dispute relates to capital gains tax allegedly due on the company’s purchase of Hutchison Essar for $10.9bn in 2007, a claim the British group disputes, and upon which it is supported by most independent tax experts.
The reconciliation process has been led by the chairman of Vodafone’s Indian division, Analjit Singh, alongside visiting executives from the UK including chief executive Vittorio Colao.
The process foundered early, however, partly because a binding settlement required politically controversial legislative changes – in effect to stop any future government from re-opening the case.
The case has been especially controversial because of legal changes allowing India’s tax department to re-open tax cases retrospectively even if the company involved had won a victory in front of India’s Supreme Court, as Vodafone did in 2012.
Melissa Frakman, director of financial policy at the US-India Business Council, a trade group, said the development was likely to be greeting with apprehension by international companies.
“Tax uncertainty remains a fundamental concern for global companies invested in India,” she said. “The implications of this case are far-reaching and as foreign investors are watching closely for any signals of a policy turnround away from the retrospective tax concerns that arose partly from Vodafone’s case.”
The retrospective ruling has been attacked by foreign companies and Indian business figures alike, including Raghuram Rajan, head of the Reserve Bank of India, who condemned the ruling prior to taking over at the central bank in September.
“A government that changes the law retrospectively at will to fit its interpretation introduces tremendous uncertainty into business decisions,” he said in 2012.
“India has missed a golden opportunity to show its respect for the rule of law. . . That is far more damaging than any tax revenues it could obtain by being capricious.”

FT : Nestlé sells €6bn L’Oréal stake back to cosmetics group

Nestlé sells €6bn L’Oréal stake back to cosmetics group

Nestlé is stepping back from its 40-year relationship with L’Oréal by selling a €6bn stake in the cosmetics maker back to the French group.
The Swiss group’s relationship with L’Oréal was formed at the behest of Liliane Bettencourt, L’Oréal’s biggest shareholder and the world’s richest woman, in 1974 due to fears that France’s Socialists would nationalise the company her father founded in 1909.


The stake has proved financially lucrative for Nestlé, the world’s largest food group by sales, yielding a return of more than 15 per cent a year on average. The decision to sell, announced jointly by the two companies on Tuesday, will see Nestle’s investment fall from 29.4 per cent to 23.3 per cent.
Peter Brabeck, Nestle’s chairman, stressed that his company was not pulling away from the accord, which has bound Nestle’s fortunes with those of 91-year-old Ms Bettencourt.
“It’s not a sign of disengagement or a strategic change and we’re integral to L’Oréal’s future,” he said at a press conference. “We are in here for the long haul.”
But speculation over Nestle’s long-term interests has been mounting ever since Mr Brabeck made it clear last year that he would not renew a clause in an agreement with the Bettencourts that forbids each of the parties from selling their cross-holdings without first offering them to the other. That clause expires in April.
Jean-Paul Agon, L’Oréal’s chairman and chief executive, told the FT that the deal was “great . . . it’s hard to find a deal that is good for everyone – this is one of them”.
Under the terms of the transaction, L’Oréal will buy 8 per cent of its shares held by Nestlé, in return ceding its 50 per cent stake in Galderma, a jointly-owned skin pharmaceuticals company, and €3.4bn in cash. Nestlé has also agreed to reduce the number its representatives on the board of the French company from three to two.
That prices the Galderma pharmaceutical joint venture at what RBC described as a “punchy” 26.5 times last year’s earnings before interest and tax. Nestlé will rename the entity Nestlé Skin Health.
Lazard advised L’Oréal on the deal while Rothschild acted for Nestlé. L’Oréal also turned to Michael Zaoui, the veteran rainmaker and former head of European M&A, at Morgan Stanley for advice on the deal, according to people close to the situation
L’Oréal said that it would cancel the repurchased shares following the transaction. That would increase recurring earnings per share 5 per cent on a full year basis.
The reduced share base also means that the Bettencourt stake increases from 30.6 per cent to 33.31 per cent – just under the 33.33 per cent ceiling over which French law obliges the shareholder to make a full offer.
Fear of nationalisation cemented four-decade bond

Mrs Bettencourt’s shareholding has been under the guardianship of family members since 2011, when a court concluded that she was unfit to look after it herself.
Not everyone was happy, though. Pierre-Henry Leroy, who heads the Proxinvest, which provides governance advice to big and small shareholders, said he was yet convinced that L’Oréal was getting the right price for its share of Galderma. “Until we have seen the figures on the Galderma shares and at which price those shares are sold, it will be difficult to have a positive vision of the transaction,” he said.
L’Oréal shares closed 3.3 per cent down at euros 124.80 on Tuesday after climbing sharply on Monday on building expectation.
Meanwhile, analysts pointed out that the announcement still left Nestlé open to further disposals later on – even though the Swiss company suggested that it would hold on to its investment.
In a research note, Toby McCullagh, an analyst at Citi Research, said that the deal only partially addressed the months of speculation. “There remains the big question of when Nestlé expects to dispose of its remaining holding,” he wrote.
Jean-Paul Agon, chairman and chief executive of L’Oréal, said the size of the deal with Nestlé was partly determined by ensuring the threshold of 33.33 per cent was not exceeded.
Mr Brabeck said Nestlé would “continue to act in concert with the Bettencourt Meyers family and the existing agreements, adapted to the new situation, will remain in place”.
Mr Agon said L’Oréal would also benefit from “a significant and reinforced presence from the founding Bettencourt Meyers family, who will continue to fully support the company as it always did in the past”.
He acknowledged that there was potential for some L’Oréal products to be in competition with those made by Nestlé Skin Health, but said the two companies’ strategic directions would “be parallel and not converge”.
“We have an excellent relationship and this type of problem will not arise,” he said at the press conference.
L’Oréal remains French drugmaker Sanofi’s core shareholder and is “very happy” with that situation, Mr Agon said. L’Oréal said the deal with Nestlé would not require the disposal of its 8.9 per cent stake in Sanofi, whose shares fell 1.9 per cent.
RBC Capital Markets wrote before the deal was announced that “for Nestlé, this would be the most demonstrable illustration of its commitment to capital discipline and shareholder value that we can imagine”.
“For L’Oréal we believe such a transaction would make sense, but this is already largely captured in L’Oréal’s share price,” he added.

(BFW) Wm Morrison Founding Family Said to Gauge Buyout Firms’ Interest


Wm Morrison Founding Family Said to Gauge Buyout Firms’ Interest
2014-02-12 05:48:13.954 GMT


By Billy Chan
     Feb. 12 (Bloomberg) -- The founding family of U.K. grocer
Wm Morrison Supermarkets has contacted PE funds such as CVC
Capital Partners and Carlyle Group to weigh interest in taking
co. private, people with knowledge of the matter told
Bloomberg’s Jeffrey McCracken, Aaron Kirchfeld and Kiel Porter.
  * Family has so far been unable to find buyout partner due to
    concerns about co.’s slow sales growth, deal size
  * The Morrisons hold ~9%-10% of co.
  * Family also approached other PE funds incl. Apax Partners;
    Apax decided not to pursue
  * A buyout of Morrison would exceed 7b pounds, require group
    of funds to work together
  * Carlyle, CVC discussed working together on joint bid; no
    certainty deal can be reached
  * At that price, deal would be biggest purchase of U.K.
    retailer since acquisition of Alliance Boots in 2007


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

--With assistance from Gabi Thesing in London. Editor: Jan
Dahinten

To contact the reporter on this story:
Billy Chan in Hong Kong at +852-2977-6114 or
bchan101@bloomberg.net

To contact the editor responsible for this story:
Jan Dahinten at +65-6212-1164 or
jdahinten@bloomberg.net

RTR - Daimler says to pursue cost cuts beyond 2 billion euro initial goal

(Reuters) - Germany's luxury auto maker Daimler (DAIGn.DE) will pursue deeper cost cuts than an initially targeted 2 billion euro in savings by 2014 as a way to raise profits at its Mercedes car division, Chief Executive Dieter Zetsche said on Tuesday.

The cost cut effort will help Daimler reach an average annual return on sales of 10 percent for its Mercedes-Benz Cars division in the medium term, Zetsche said at a presentation of the Mercedes-Benz compact Sports utility vehicle, the GLA.

The rise in sales of lower-margin compact cars like the A-Class and B-Class vehicles make additional costs cuts necessary to ensure the Stuttgart-based auto maker can reach its profit goal, Zetsche said.

Separately, Zetsche reiterated the auto maker was on the lookout for a new factory to build small cars.

"We are thinking about an additional factory, which in all likelihood will not be in Germany," Zetsche said.

Last month Zetsche said the Germany-based auto maker may build another factory in North America as a way to ramp up global production capacity for compact cars.

>>> Asian Update

Asian Market Update: Strong China data adds to upbeat sentiment

***Economic Data*** - (CN) CHINA JAN TRADE BALANCE: $31.9B V $23.8BE; Exports Y/Y: 10.6%; Adjusted* 9.4% v 0.6%e; Imports Y/Y: 10.0%; Adjusted* 9.3% v 4.0%e - (AU) AUSTRALIA FEB WESTPAC CONSUMER CONFIDENCE INDEX M/M: 100.2 V 103.3 PRIOR; M/M: -3.0% V -1.7% PRIOR (3rd straight decline) - (AU) AUSTRALIA DEC CREDIT CARD BALANCES (A$): 50.1B V 49.7B PRIOR; CREDIT CARD PURCHASES: 24.8B V 22.4B PRIOR - (NZ) NEW ZEALAND JAN RETAIL CARD SPENDING M/M: -0.5% V +0.6%E; TOTAL CARD SPENDING M/M: -0.1% V +1.0% PRIOR - (JP) JAPAN DEC CORE MACHINE ORDERS M/M: -15.7% V -4.0%E (largest decline since 1992); Y/Y: 6.7% V 17.4%E - (JP) JAPAN DEC TERTIARY INDUSTRY INDEX M/M: -0.4% V -0.3%E - (JP) JAPAN JAN MONEY STOCK M2 Y/Y: 4.4% (multi-year high) V 4.2%E; M3 Y/Y: 3.5% V 3.4%E - (KR) SOUTH KOREA JAN UNEMPLOYMENT RATE: 3.2% V 3.0%E (6-month high) - (KR) SOUTH KOREA JAN BANK LENDING TO HOUSEHOLD (KRW): 477.8T V 480.4T PRIOR - (KR) SOUTH KOREA DEC MONEY SUPPLY L M/M: 0.2% V 0.3% PRIOR; M2 M/M: 0.4% V 0.4% PRIOR; M2 Y/Y: 5.3% (10-month high) v 5.1% prior - (KR) SOUTH KOREA JAN EXPORT PRICE INDEX M/M: +0.2% V -0.3% PRIOR; Y/Y: -1.9% V -2.1% PRIOR; IMPORT PRICE INDEX M/M: -0.3% V +0.4% PRIOR; Y/Y: -3.0% V -3.5% PRIOR

***Highlights/Observations/Insights*** - As expected, US House of Reps passes the clean debt ceiling bill in a 221-201 vote with about two dozen Republicans crossing the isle; Democrat-controlled Senate expected to pass the bill on Wednesday. - Canada FY14/15 deficit seen narrower than previously forecasted; Canada expects return to surplus in FY15/16, with GDP growing to 2.5% for the next 2 years. - BOJ's Kiuchi concerned the side-effects from policy easing would outweigh the benefits and only condition the markets to expect more; NOTE Kiuchi is a regular dissenter to the policy statement, calling for BOJ to to aim to achieve price stability target of 2% in medium-long term and designate quantitative and qualitative easing as an intensive measure with a 2-year time frame" - Australia consumer confidence for February fell for the 3rd straight month; Households increasingly more worried about higher interest rates after the latest RBA decision to drop its easing bias, while the index for unemployment expectation is at its 2nd highest level since 2009 ahead of tomorrow's jobs data. - China trade surplus defies expectations for weaker terms of trade; Exports and Imports both rose over 10% on unadjusted and over 9% on holiday-adjusted basis. Iron ore imports and exports to EU particularly impressive, rising 33% and 15.6% respectively. Critics suggest trade data spike may be explained by "overinvoicing" to mask the slowdown.

***Fixed Income/Commodities/Currencies*** - (CN) China MOF sells CNY28B in 5-yr bonds; avg yield 4.1028% - (AU) Australia MoF (AOFM) sells A$800M in 2.75% 2024 Bonds; avg yield: 4.2041%; bid-to-cover: 4.41x - GLD: SPDR Gold Trust ETF daily holdings rise 1.8 tonnes to 798.9 tonnes (3-week high) - SLV: iShares Silver Trust ETF daily holdings rise to 10,090.7 tonnes from 10,045.8 tonnes - (US) API PETROLEUM INVENTORIES: CRUDE: +2.1M (4th consecutive build) v +2.5Me; GASOLINE: -480K v -0.5Me; Cushing inventory -2.5M v +1.56M w/w

- AUD hit 1-month high above $0.9060 and NZD reached 4-week highs above $0.8350 against the greenback in the wake of much better than expected China trade data, both rising about 50pips off their session lows. USD/JPY struggled to extend above 102.60 in spite of the modest risk-on sentiment that tracked US market rally, while GBP/USD was supported by US session lows just below $1.6440 ahead of the critical BOE inflation report in the European session. EUR/USD consolidated some of the late US-session weakness, trading in a 15-pip range below $1.3640.

***Speakers/Political/In the Papers*** - (CN) RBS economist: Concerned the latest China trade data suggests "overinvoicing" will sharply intensify this year - financial press - (CN) Goldman Sachs chief China strategist: sees China 2014 GDP target 7.6% v 7.7% prior; buying opportunity for Chinese stocks - financial press - (JP) BOJ Board member Kiuchi: Additional policy easing may do more harm than good - Japanese press - (JP) IMF dep director of Asia-Pacific Schiff: Does not see the need for further easing from BOJ as long as inflation and inflation expectations head toward 2% target - (JP) BOJ Gov Kuroda: Fiscal discipline needed for sustainable growth; BOJ needs to take action if inflation shows signs of stalling, especially in light of recent global market turbulence - addressing parliament - (KR) South Korea Fin Min Hyun: service industry to be major factor for economic growth

- (US) House of Representatives passes "clean" debt ceiling bill, raising the debt limit through March 15, 2015 with no conditions (passed as expected) - (US) Fed's Fisher (hawk, FOMC voter): Reiterates would see little efficacy from more QE - (CA) Canada Finance Ministry presents FY14/15 budget: Sees deficit C$2.9B vs prior forecast of deficit C$5.5B vs expected deficit of C$16.6B in FY13/14; To consider issue of 50-year bonds - (CA) Moody's: Canada planned fiscal consolidation supports Aaa rating, Stable Outlook

***Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 +0.7%, S&P/ASX +0.9%, Kospi +0.4%, Shanghai Composite +0.1%, Hang Seng +1.1%, Mar S&P500 +0.1% at 1,814, Apr gold -0.4% at $1,285, Mar crude oil +0.1% at $100.37/brl

US markets: - DVA: Reports Q4 $1.10 (adj) v $0.98e, R$3.06B v $3.05Be; +8.0% afterhours - TRMB: Reports Q4 $0.43 v $0.37e, R$599.2M v $565Me; +6.7% afterhours - FOSL: Reports Q4 $2.68 v $2.44e, R$1.06B v $1.02Be; +3.4% afterhours - WU: Reports Q4 $0.31 v $0.32e, R$1.42B v $1.43Be; Approves $500M share repurchase program (5.7% of market cap); +0.1% afterhours - CLF: Cuts FY14 Capex to $375-425M vs $862M prior year; -1.0% afterhours

Notable movers by sector: - Consumer Discretionary: VODone 82.HK -13.3% (profit warning); Beijing Wangfujing Department Store Group 600859.CN +10.0% (strategic alliance with Tencent) - Consumer staples: Mengniu Dairy 2319.HK +1.8% (Danone raises stake) - Financials: Commonwealth Bank of Australia CBA.AU +0.1% (H1 results); Collection House CLH.AU +1.2% (H1 results); China Overseas Land 688.HK +6.0% (Jan results); Sunac China Holdings 1918.HK +4.0% (Jan results) - Materials: OZ Minerals OZL.AU +12.7% (FY13 results) - Industrials: Boral Ltd BLD.AU +9.3% (H1 results); Nissan Motor 7201.JP +2.6% (9M results); JGC Corp 1963.JP +0.4% (9M results) - Technology: MediaTek 2454.TW +4.1% (unveils new chip); Hikari Tsushin 9435.JP -2.8% (9M results)

FT : Strong China trade growth confounds economists

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/71bbac12-938c-11e3-b07c-00144feab7de.html#ixzz2t5CXkzDl

Strong China trade growth confounds economists

Officials from China and Taiwan attend meeting in Nanjing©Getty
Chinese exports and imports rose sharply in January, confounding expectations for a weak start to the year.
Exports increased 10.6 per cent from a year earlier, while imports were up 10 per cent. Analysts had forecast flat growth or even declines for both because the base of comparison – January of last year – had been distorted upwards by rampant over-invoicing, eliciting a crackdown from the Chinese government.

On the surface, the robust Chinese trade numbers paint a very positive picture of both Chinese demand and the global economy. Investors in Asia took heart at the figures, pushing up stocks across the region and buying currencies such as the Australian dollar that are linked to Chinese growth.
But the chasm between the reported reality and the more sluggish expectations sowed doubts in the minds of some analysts. The Chinese figures also bucked the trend of more subdued January trade figures reported around Asia.
“We are left with a nagging feeling that perhaps issues such as over-invoicing have risen sharply in intensity early this year,” said Louis Kuijs, an economist with RBS.
Over-invoicing on trade has been regularly used by Chinese companies in the past as a way to avoid capital controls and bring extra cash into the country to take advantage of high onshore interest rates and steady, if gradual, renminbi appreciation.
In recent months, interest rates available to investors in China have climbed sharply. Although the higher cost of financing has fuelled concerns about the country’s growth prospects, it has also created further temptation for investors to channel money into high-yielding Chinese assets.
Analysts with ANZ said that they had detected an increase in “the round-tripping trade” between Hong Kong and China. A simple way to breach China’s capital controls, round-tripping occurs when made-in-China goods are exported to Chinese companies’ subsidiaries in Hong Kong and then imported again by the original companies at marked-up prices.

September 2013: The Chinese government is trying to increase trade with southeast Asia to boost the economies of poorer southwestern regions such as Guangxi province
It reflects “the incentives to take advantage of the onshore high interest rates and renminbi appreciation opportunities,” the ANZ analysts wrote in a note.
The renminbi gained 3 per cent against the dollar last year and it has remained steady against it this year even as other emerging market currencies have sold off.
Adding to the uncertainty about the Chinese trade data was the timing of the Chinese new year, which began on the last day of January in 2014 but fell in-mid February in 2013. That eliminated one working day this January, potentially depressing trade flows, but it may also have had the off-setting result of encouraging companies to front-load their business.
Chinese economic data in January and February has long been plagued with distortions because of the timing of the new year holiday, which leads many of the country’s factories to halt or slow production for several weeks. A clearer read on the country’s growth trajectory will emerge in March when the government publish a wider range of data that combine the first two months of the year to take account of the holiday effect.