>>> US Close Dow+0,09% S&P+0,19% Nasdaq+0,41%

Closing Market Summary: Stocks Post Modest Gains With ECB On Tap

The major averages finished the Wednesday session on a modestly higher note with the Nasdaq Composite (+0.4%) in the lead. Like the Nasdaq, the Russell 2000 (+0.4%) also outperformed the S&P 500 (+0.2%), while the Dow Jones Industrial Average (+0.1%) lagged throughout the session.

For the third day in a row, the stock market maintained a narrow range amid spotty sector leadership. Trading volume remained light with just 579 million shares changing hands at the NYSE versus a long-term average of 700 million.

In all likelihood, the quiet environment was a reflection of a wait-and-see approach that has been employed by investors ahead of tomorrow's policy decision from the European Central Bank and the U.S. Nonfarm Payrolls report, which will be released on Friday at 8:30 ET (consensus 220K).

Tomorrow's ECB announcement has the potential to stir things up a bit as investors are anticipating some sort of action from the central bank. While the general consensus is eyeing an easing announcement, it remains unclear what type of stimulus could be introduced by President Mario Draghi tomorrow. Expectations range from a deposit rate cut to an introduction of a QE-style purchasing program, but ECB watchers are well aware that Mr. Draghi's favorite policy tool has been the threat of easing, rather than actual easing for quite some time now. The ECB decision will cross the wires at 7:45 ET with the press conference set to follow at 8:30 ET.

However, before moving into tomorrow, we would like to take a quick look at today's session, which was anything but thrilling. Seven of ten sectors finished in the green with the three largest cyclical groups—consumer discretionary (+0.4%), financials (+0.3%), and technology (+0.3%)—in the lead.

The top performer of the bunch—consumer discretionary—rallied on the back of retailers with the SPDR S&P Retail ETF (XRT 84.44, +0.64) advancing 0.8%, which pulled it back into the green for the quarter. The retail ETF swung to a quarter-to-date gain of 0.2%, but remained lower by 4.2% year-to-date.

Elsewhere, the financial sector, which has been the top performer of the week, added 0.3% with M&A activity contributing to the relative strength. Specifically, Protective Life (PL 69.36, +10.64) surged 18.1% after agreeing to be acquired by Japan's Dai-ichi Life for $70/share, representing a 19.2% premium to yesterday's closing price.

Also of note, the tech space received significant support from its largest component. Shares of Apple (AAPL 644.82, +7.28) spiked 1.1% on the record date for the upcoming 7:1 stock split. Starting Monday, the largest tech company by market cap will begin trading on a split-adjusted basis.

In addition to boosting the tech sector, Apple contributed to the relative strength of the Nasdaq Composite. However, the Nasdaq also drew strength from biotechnology as the iShares Nasdaq Biotechnology ETF (IBB 243.47, +2.55) regained its 100-day moving average, climbing 1.0%. The health care sector, meanwhile, ended in line with the S&P 500.

On the downside, energy (-0.1%), industrials (-0.1%), and telecom services (-0.3%) posted slim losses.

Treasuries ended flat after erasing their overnight gains. The 10-yr yield settled at 2.60%.

Economic data was plentiful and mostly disappointing:
  • According to the ADP National Employment Report, employment in the nonfarm private business sector rose by 179K in May. That was below the increase of 200K expected by the consensus. Also of note, the April reading was revised down to 215,000 from 220,000. 
  • The trade deficit in April widened appreciably to $47.20 billion from an upwardly revised $44.20 billion (from -$40.40 billion) in March. The April number was worse than the consensus estimate of -$41.30 billion and was the biggest deficit since March 2012. This will be a negative component for Q2 GDP as the real trade deficit in April was 9.2% greater than the first quarter average. 
  • First quarter productivity was revised lower to -3.2% (consensus -2.5%) from -1.7%. That was the largest decrease in productivity since the first quarter of 2008. Hours worked increased 2.2% and output decreased 1.1%. Unit labor costs, in turn, were revised up to 5.7% (consensus 4.8%) from 4.2% due to the decline in productivity and the 2.3% increase in hourly compensation. 
  • The ISM Services report for May checked in at 56.3, which was above the consensus estimate of 55.5 and marked the highest reading for the survey since August 2013. The main takeaway was that the non-manufacturing sector continues to operate comfortably in a state of expansion as May 2014 marked the 52nd consecutive month with a reading above 50.0. 
  • The weekly MBA Mortgage Index fell 3.1% to follow last week's down tick of 1.2%. 
Tomorrow, Challenger Job Cuts for May will be reported at 7:30 ET, while weekly Initial Claims (consensus 310,000) will be released at 8:30 ET.
  • S&P 500 +4.3% YTD 
  • Dow Jones Industrial Average +1.0% YTD 
  • Nasdaq Composite +1.8% YTD 
  • Russell 2000 -2.8% YTD

RTR - Orange hires banks to study Bouygues Telecom purchase - sources


Orange hires banks to study Bouygues Telecom purchase - sources

* Talks at early stage, Orange has not decided on bid

* Third-place Bouygues Tel struggling amid mobile price war

* Telecoms sector awaits EU ruling on Germany deal

By Sophie Sassard and Leila Abboud

LONDON/PARIS, June 4 (Reuters) - French telecoms firm Orange has hired investment banks Lazard and Credit Suisse to assess a potential purchase of rival Bouygues Telecom, a deal that could top 6 billion euros ($8.2 billion), two people close to the situation said.

Market leader Orange has not yet made a firm decision to go ahead with a bid for No.3 operator Bouygues Telecom and discussions that began roughly six weeks ago could still end without a deal, said one of the people.

Orange was encouraged by preliminary talks with Europe's antitrust watchdog last month that a deal would be possible with acceptable conditions, said a third person briefed on the situation but not directly involved.

However, Orange plans to wait for the watchdog's ruling on Spanish telecoms firm Telefonica's acquisition of KPN's E-Plus in Germany, to have a clearer picture of what it might have to do to ease regulators' concerns about a reduction in competition. The ruling is expected by July 10.

Bouygues, which is being advised by Rothschild, has become a takeover target after it was beaten by cable operator Numericable in a bidding war for French No.2 carrier SFR in March.

Low-cost player Iliad - whose arrival to the mobile arena in January 2012 sparked the price war now driving the pressure to consolidate - could also be interested in Bouygues.

The French state, which owns 27 percent of Orange, is pushing for a return to three mobile players in the hope of calming what Industry Minister Arnaud Montebourg has called "destructive competition". He is worried operators will not invest enough in fast broadband networks key to the economy, and about job cuts in the sector.

Although backed by the French government, an Orange-Bouygues tie-up would face several obstacles. It would be scrutinised by European competition regulators because the new group would hold 49 percent of mobile and 48 percent of broadband subscribers.

To win them over, Orange would have to dispose of some customers, sell mobile frequencies and most of Bouygues' network to Iliad, but it does not see such remedies as deal-breakers, said one of the people with direct knowledge of the matter.

"There are remedies; this is not going to prevent the deal from happening", the person said.

If the deal goes ahead, Orange would be the first former state-owned telecom monopoly in Europe to consolidate its domestic market.

Orange has said previously it was "exploring opportunities" and favoured consolidation. A spokeswoman for Lazard declined to comment, as did a spokesman for Credit Suisse in Paris.

NETWORK SHARING

Orange also wants to get Bouygues out of a mobile network sharing deal it signed with SFR in February since that accord would reduce the cost savings it could reap from the acquisition, said a person close to the company.

Orange filed a complaint in April to France's Competition Authority about the network-sharing deal, which regulators are now examining. Orange wants to delay, modify or even annul the accord and clear the way for its dealmaking, added the person.

SFR says the network-sharing accord does not hurt competition, and that Bouygues cannot get out of it since no provision exists in the contract to allows its resolution if one of the parties is taken over.

A Bouygues Telecom spokesman on Tuesday said it continued to work with SFR on the implementation of the network sharing and no talks were underway to end it.

Because of its smaller size, Bouygues has been hardest hit by Iliad's "Free Mobile" service. Its mobile market share declined by three percentage points and its operating margin fell to 15 percent in the first quarter from 22 percent in the same period in 2011, according to Berenberg analysts.

The firm said in May it would cut an additional 300 million euros in annual costs by 2016, partly through job losses, as it seeks to ensure its stand-alone future.

Mobile prices in France fell 27 percent last year and 11 percent in 2012, according to the telecoms regulator.

"Bouygues Telecom needs help," the Berenberg analysts wrote last month. "The company is under pressure and needs to materially reduce its cost base and cut its labour costs."

The analysts put a 50 percent probability on Orange or Iliad buying Bouygues Telecom.

>>> Closing Commodities: Crude Oil Ends Modestly Lower, Gold Flat

Closing Commodities: Crude Oil Ends Modestly Lower, Gold Flat

- Aug gold touched a session high of $1249.40 per ounce in early morning action following a weak ADP National Employment Report that showed employment in the nonfarm private business sector rose by 179K. This was below the consensus that called for an increase of 200K.
- However, the yellow metal gave up the earlier gain as the dollar index recovered into positive territory. It brushed a session low of $1242.80 per ounce and settled at $1244.40 per ounce, or 20 cents below the unchanged line
- July silver brushed a session high of $18.88 per ounce in morning pit trade but pulled back slightly as the session progressed. It eventually settled at $18.80 per ounce, or 0.2% higher.
- July crude oil touched a session high of $103.72 per barrel in morning action but gave up the gain despite better-than-anticipated inventory data. The EIA reported that for the week ending May 30, crude oil inventories had a draw of 3.4 mln barrels when consensus called for a draw of 0.25-0.3 mln barrels. The energy component brushed a session low of $102.51 per barrel moments before settling with a 0.1% loss at $102.62 per barrel.
- July natural gas came off its session low of $4.58 per MMBtu and broke into positive territory in early afternoon floor trade. It settled 0.4% higher at $4.64 per MMBtu, or just below its session high of $4.65 per MMBtu.

(BFW) SocGen Sees Gold Prices Dropping Below $1,000/Oz in 2016

SocGen Sees Gold Prices Dropping Below $1,000/Oz in 2016
2014-06-04 19:21:24.183 GMT


By Millie Munshi
     June 4 (Bloomberg) -- In 2016, “the Fed is likely to hike
rates at a much faster pace than currently discounted by the
market,” analysts led by Michael Haigh, the head of commodities
research, said in a report.
  * Bullion to trade “well below” $1,200 next year
  * “We continue to recommend selling gold rallies as we
    believe that gold is in a multi-year downtrend driven by the
    prospect of US rate hikes”
  * SocGen sees copper falling toward $6,500/mt “over the
    coming months on rising supply and the weakening Chinese
    housing sector”
  * The bank said it raised its outlook for soybean prices on
    “strong demand,” and that coffee prices are “fairly
    valued at current levels, for the remainder of the year”
  * SocGen raised 3Q soybean forecast by 33c to $13.38/bu


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

To contact the editor responsible for this story:
Millie Munshi at +1-212-617-5543 or
mmunshi@bloomberg.net

FT : Twitter weighs online music acquisitions

Twitter weighs online music acquisitions

Twitter has considered buying online music services including Soundcloud and Spotify in recent months – a move that suggests it is willing to attempt its largest acquisition to secure new sources of growth.
The online messaging platform has weighed up deals worth billions of dollars as it seeks to add a music service to its offering, according to three people familiar with the matter.

Twitter has been trying to boost the amount of time people spend on its app, after coming under fire from Wall Street for slowing user growth. Its shares have almost halved in value in the year to date, as investors worry that the social network would get stuck at just a fifth the size of Facebook.
Twitter had experimented with its own music app, Twitter Music, but this failed to catch on and was shut down in March. It had aimed to encourage more conversation about music between Twitter users and to help them discover new tracks. Twitter has since partnered with Billboard to chart the most talked about bands on its network.
Its renewed interest in offering a music service comes as Apple acquires Beats, the headphones and content streaming company founded by Dr Dre and Jimmy Iovine.
Ali Rowghani, Twitter’s chief operating officer, has been the driving force behind its search for a music company, people familiar with the process said. He recently entered talks with Soundcloud, the Berlin-based audio site where musicians can upload their tracks, the people added.
Soundcloud was valued at $700m in a funding round in January. That was more than double the $300m that Twitter spent on its largest acquisition so far, the mobile advertising exchange MoPub, which it bought in September 2013. Soundcloud is backed by venture capital firms including Union Square Ventures, Index Ventures and Kleiner Perkins.

Mr Rowghani also considered bids for Soundcloud’s rivals Spotify, the music streaming service valued at $4bn at the end of last year, as well as Pandora, the New York listed group that has a market capitalisation of almost $5bn. However, people familiar with the process said Twitter did not engage in talks with those companies.
Twitter’s plans to acquire Soundcloud were abandoned after internal disagreements over the profitability of audio advertising and concerns over copyright problems.
Twitter has been one of the most acquisitive technology companies, snapping up start-ups ranging from Vine, the six-second video clip service, to analytics companies that can enhance its offering to advertisers. Most recently, the company bought Gnip, a provider of social data, for an undisclosed sum.
But analysts have noted that Twitter does not have large sums of cash with which to buy a music service. It raised $2.1bn in its initial public offering last year and has secured a $1bn credit line, but remains unprofitable.
Twitter and Soundcloud declined to comment.

>>> Fed Beige Book Excerpts

Fed Beige Book Excerpts
- All twelve Federal Reserve Districts report that economic activity expanded during the current reporting period. The pace of growth was characterized as moderate in the Boston, New York, Richmond, Chicago, Minneapolis, Dallas, and San Francisco Districts, and modest in the remaining regions.
- Compared with the previous report, the pace of growth picked up in the Cleveland and St. Louis Districts but slowed slightly in the Kansas City District.
- Consumer spending expanded across almost all Districts, to varying degrees.
- Although improved weather generally gave a boost to business, lingering wintry weather in the Northeast continued to weigh on sales in parts of the Boston and New York Districts.
- Increasingly strong new vehicle sales were reported by more than half the Districts, with most other regions seeing steady sales; demand was generally reported to be less robust for used vehicles than for new vehicles.
- Manufacturing activity expanded throughout the nation, and at an increasingly strong pace in a number of Districts--notably along the East Coast, as well as in the St. Louis and Kansas City Districts.
- Residential real estate activity was mixed across the country, with some reports of low inventories constraining sales--specifically in the Boston, New York, and Kansas City Districts. Still, home prices continued to increase across most of the country, while the markets for both condos and apartment rentals were mostly robust. Residential construction activity was mixed, with half the Districts reporting increases but a few indicating some weakening in activity; multi-family construction remained particularly robust.
- Both non-residential construction activity and commercial real estate markets were generally steady to stronger since the last report.
- Overall lending activity increased throughout the nation. Credit quality and delinquency rates generally improved, while credit standards were mostly unchanged.Among Districts reporting on agriculture, drought conditions caused problems in the Dallas and San Francisco Districts, and, to a lesser extent, in the Chicago District; conversely, Atlanta and Minneapolis reported that excessive moisture delayed plantings.
- Labor market conditions generally strengthened in the latest reporting period, with hiring activity steady to stronger across most of the country, and several Districts reporting shortages of skilled workers. In most Districts, wage increases have remained generally subdued, though Chicago and Dallas noted increased costs for health benefits. Prices of both inputs and finished goods and services were mostly steady to up slightly.


(BN) Medtronic Said to Evaluate Takeover Bid for Smith & Nephew (1)

Medtronic Said to Evaluate Takeover Bid for Smith & Nephew (1)
2014-06-04 18:09:49.111 GMT


     (Updates with trading in fifth paragraph.)

By Matthew Campbell, Manuel Baigorri and Michelle Fay Cortez
     June 4 (Bloomberg) -- Medtronic Inc., one of the world’s
largest medical-device makers, is evaluating a takeover of
London-based Smith & Nephew Plc that could see the U.S. company
move its tax domicile overseas, people familiar with the matter
said.
     Smith & Nephew, with a market value of about 9.5 billion
pounds ($15.9 billion), is aware of Medtronic’s interest as are
investment banks, said two of the people, asking not to be named
discussing a private matter. Medtronic’s preparations for a bid
are at an early stage and no offer is imminent, the people said.
     Medtronic is a more serious bidder for Smith & Nephew than
Stryker Corp., another U.S. maker of medical devices, said one
of the people. Last week, in response to a Financial Times
report, Stryker Chief Executive Officer Kevin Lobo said the
company was in the early stages of evaluating a bid.
     The largest medical-device companies are banding together
to compete as hospitals cut costs to accommodate price pressure
resulting from the U.S. Affordable Care Act. Medical centers are
looking for only a handful of companies to provide a wide range
of products, and the leaders of both Medtronic and Johnson &
Johnson have said they are looking for scale and planning to
bundle their device offerings.
     Medtronic rose 3.3 percent to $63.03 as of 2:01 p.m. in New
York. Smith & Nephew closed up 3.3 percent in U.K. trading
today. With a market value of more than $61 billion, Medtronic
had $14.2 billion in cash and equivalents at the end of April,
data compiled by Bloomberg show.
     Spokesmen for Medtronic, based in Minneapolis, and Smith &
Nephew declined to comment.

                       Inversion Structure

     The transaction would probably be structured as a tax
inversion, with Medtronic using Smith & Nephew’s corporate shell
to move its legal residence to the U.K., the people said. The
gap between the 35 percent federal tax rate and much lower
levies in some European countries is spurring such deals --
including Pfizer Inc.’s now shelved effort to acquire
AstraZeneca Plc. The U.K. has a 21 percent corporate income tax
rate.
     Medtronic’s Chief Executive Officer Omar Ishrak has said he
wouldn’t rule out a tax-inversion deal.
     “Strategically, we do have this current problem that we
have a lot of cash outside the U.S.,” he said in a May 20
telephone interview. “We encourage some kind of U.S. tax reform
that allows us access to that cash in a more reasonable way.”

                          Domino Effect

     The company is looking to broaden its offerings in its
three key areas -- heart, muscle and skeleton and diabetes
products, Ishrak said.
     “We intend to fill these areas out and we want to
globalize,” he said.
     A purchase of Smith & Nephew, which sells implants for knee
and hip surgeries as well as for repairing traumatic injuries,
would be the latest in the $45 billion orthopedic market. J&J’s
$21.3 billion purchase of Synthes Inc. in 2012  set off a domino
effect among the half-dozen rivals that make devices to replace
hips and knees, treat sports injuries and bolster the spine.
     J&J sold its global trauma business to Biomet Inc. for $280
million to win regulatory approval for the Synthes deal. Zimmer
Holdings Inc. agreed to acquire Biomet, its cross-town rival in
Warsaw, Indiana, for $13.4 billion in April.
     Medtronic’s preparations were complicated by news of
Stryker’s interest, one of the people said. Smith & Nephew’s
shares have gained more than 7 percent since the May 29 report.


For Related News and Information:
Zimmer Buys Biomet for $13.4 Billion to Gain in Orthopedics
NSN N4JXLA6TTDSR <GO>
Smith & Nephew 6% Premium for ArthroCare Lures Rivals: Real M&A
NSN N0JQDV6VDKI5 <GO>
Smith & Nephew to Buy ArthroCare for $1.7 Billion in Cash (4)
NSN N0FUXM6S972M <GO>
Merger analysis: MA <GO>
Top health news: HTOP <GO>

--With assistance from Jeffrey McCracken and David Welch in New
York and Makiko Kitamura in London. 

To contact the reporters on this story:
Matthew Campbell in London at +44-20-3525-8684 or
mcampbell39@bloomberg.net;
Manuel Baigorri in London at +44-20-3525-4457 or
mbaigorri@bloomberg.net;
Michelle Fay Cortez in Minneapolis at +1-612-991-8887 or
mcortez@bloomberg.net
To contact the editors responsible for this story:
Mohammed Hadi at +1-212-617-2914 or
mhadi1@bloomberg.net;
Aaron Kirchfeld at +44-20-3525-8830 or
akirchfeld@bloomberg.net
Elizabeth Wollman

>>> FED Beige Book : manufacturing expanded in all twelve districts; wage increa

Fed Beige Book: manufacturing expanded in all twelve districts; wage increases have remained subdued

Full Document {http://www.federalreserve.gov/monetarypolicy/beigebook/beigebook201406.htm}

FEDERAL RESERVE BEIGE BOOK: ECONOMIC ACTIVITY EXPANDED DURING CURRENT REPORTING PERIOD; GROWTH WAS MODEST TO MODERATE IN MOST REGIONS

All twelve Federal Reserve Districts report that economic activity expanded during the current reporting period. The pace of growth was characterized as moderate in the Boston, New York, Richmond, Chicago, Minneapolis, Dallas, and San Francisco Districts, and modest in the remaining regions. Compared with the previous report, the pace of growth picked up in the Cleveland and St. Louis Districts but slowed slightly in the Kansas City District. 

Consumer spending expanded across almost all Districts, to varying degrees. Non-auto retail sales grew at a moderate pace across most of the country: Although improved weather generally gave a boost to business, lingering wintry weather in the Northeast continued to weigh on sales in parts of the Boston and New York Districts. Increasingly strong new vehicle sales were reported by more than half the Districts, with most other regions seeing steady sales; demand was generally reported to be less robust for used vehicles than for new vehicles. Tourism was steady to stronger across most of the country--particularly in most of the eastern seaboard Districts. 

Activity in the service sector, excluding finance, grew across most reporting Districts, though New York and San Francisco reported a mixed performance. Boston, Kansas City, and San Francisco noted particular strength among technology firms. Transportation activity strengthened in most Districts reporting on that sector, with Richmond and Atlanta observing brisk growth in port activity, and Cleveland noting a rebound from weather-related weakness in the prior report. Manufacturing activity expanded throughout the nation, and at an increasingly strong pace in a number of Districts--notably along the East Coast, as well as in the St. Louis and Kansas City Districts. 

Residential real estate activity was mixed across the country, with some reports of low inventories constraining sales--specifically in the Boston, New York, and Kansas City Districts. Still, home prices continued to increase across most of the country, while the markets for both condos and apartment rentals were mostly robust. Residential construction activity was mixed, with half the Districts reporting increases but a few indicating some weakening in activity; multi-family construction remained particularly robust. Both non-residential construction activity and commercial real estate markets were generally steady to stronger since the last report. 

Overall lending activity increased throughout the nation. Roughly two-thirds of the Districts reported rising loan demand, with particular strength reported in New York and San Francisco. Credit quality and delinquency rates generally improved, while credit standards were mostly unchanged. Among Districts reporting on agriculture, drought conditions caused problems in the Dallas and San Francisco Districts, and, to a lesser extent, in the Chicago District; conversely, Atlanta and Minneapolis reported that excessive moisture delayed plantings. Energy industry activity strengthened in most Districts, though coal production was steady in Cleveland and declined in the Richmond District. 

Labor market conditions generally strengthened in the latest reporting period, with hiring activity steady to stronger across most of the country, and several Districts reporting shortages of skilled workers. In most Districts, wage increases have remained generally subdued, though Chicago and Dallas noted increased costs for health benefits. Prices of both inputs and finished goods and services were mostly steady to up slightly.

- Most Districts reported that wage pressures remained subdued since the previous report, although an increase in the cost of health insurance was noted in Chicago and Dallas. According to reports from the New York, Philadelphia, Richmond, Minneapolis, Kansas City, Dallas, and San Francisco Districts, to the extent that wage increases were observed, they were concentrated among highly skilled workers in information technology, engineering, professional services, and some of the skilled trades. 

- Price pressures were said to be contained, as most Districts reported that both input and finished goods prices were little changed or up only slightly since the previous report. However, high or rising prices for some agricultural commodities, construction materials, energy products, and precious metals were cited by some Districts.