>>> What to look at today - 04/02/2014

US Market closed lower, continue to trade in line with JPY(101), Russel was down more than 3%, ISM Manuf. Put some pressure on the market after disap. Chineses data too, VIX is up over 72% on the last 2 weeks, VIX @ 21,12 +14,72%...Utilities was the best perfoming sectr (-0,8%)...Heavy volume were traded today with more than 900mil shares
With today performance, Dow is -7,26%, S&P-5,76% Nasdaq-4,30% Russel -5,93%... Nikkei225 leading the steep selloff in Asia, tracking more pronounced correction in the US and sharp gains in the funding Japanese Yen currency; Hang
Seng is back after holidays with catch-up selling sending the index to a 5-month low...Nikkei -4.40% HS-2.73%...BOJ Gov Kuroda affirms commitment to achieve 2% inflation by the 1st half of 2015, having first set out on course toward that target within a 2-year timeframe in April of 2013; Speaking to Parliament, Kuroda also said the easing has produced smooth progress, with domestic economy recovering moderately.

Eur$ 1,3530 S&P Fut+0.39% European Future -0.68%

>>> Keep an eye on :
- AZA IM : Alitalia Signs Financing Deal With Banks for EU165m, Ansa Says
- BARC LN : Barclays CEO Jenkins Declines Bonus for 2013: Barclays Link
- BP/ LN : BP 4Q Adj. Net $2.81b In Line vs Est. $2.8b; Div. 9.5c/Share
- COL SM : Fidelity Holds 2.7% Stake in Spain’s Colonial, Filing Shows
- FER SM : Ferragamo Set to Re-Rate vs Tod's, BofAML Sees Pair Trade Opp.
- FUM1V FH : Fortum to Reorganize Business Structure as of 1 March
- KN FP : BPCE Chairman Perol Could be Questioned by Judge, Parisien Says
- KPN NA : KPN Sees Financials Stabilizing Near End 2014; 4Q Ebitda Misses, Plans to Recommence Dividend
- LI FP : Klepierre Proposes To Pay 2013 Div. of EU1.55-Shr, up 3.3%, plans to sell assets valued at e600m
- LLOY LN : Lloyds Share Sale May Be Held in Early April, Times Reports
- MUV2 GY : Munich Re 4Q Net Income Beats Ests, Div Plan Matches Forecast
- UG FP : Peugeot Minority Holders Want Full Takeover Bid: Les Echos {NSN N0GHYK6JTSE8 <go>}
- NESN VX : Nestle Said to Explore Sale of Frozen-Food Unit Davigel: Reuters
- ONO SM : Ono Board to Meet Early Before Possible IPO, Sale, Cinco Says
- 1913 HK : Prada Snaps Four-day Drop, Jumps Most in Four Months
- PTI PL : Portucel Says CEO Honorio Resigned, to Be Replaced by Deslandes
- RWE GY : RWE Plans to Link Manager Pay to Debt Levels: WSJ Deutschland
- ROG VX : Roche’s Cobimetinib Gets FDA Orphan Status for Type of Melanoma
- SOLB SS : Solvay Plans to Boost Natural Soda Ash Output Capacity in U.S.
- FP FP : Total Gas Exploration Ship Expelled by Turkey: Reuters Link
- FP FP : Total Sells Stake in Offshore Angola Block to Sonangol For $750M
- UBSN VX : UBS 4Q Net Beats Est, Div. Proposal Exceeds BDVD Forecast
- WFT SW : Weatherford to Pay $52.5m in Settlement
- WPP LN : WPP’s Weak Start to 2014 Offers Good Entry Point, JPMorgan Says

>>> Brokers Upgrades & Downgrades - 04/02/2014

>>> Up
*BBA AVIATION RAISED TO OVERWEIGHT AT MORGAN STANLEY
*BERENDSEN RAISED TO OUTPERFORM AT RBC CAPITAL
*BMW RAISED TO OVERWEIGHT AT HSBC
*LANXESS RAISED TO BUY VS HOLD AT BERENBERG
*LEGRAND RAISED TO HOLD VS SELL AT BERENBERG
*ROSNEFT RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
*SAINSBURY’S RAISED TO OUTPERFORM VS MARKET PERFORM AT BERNSTEIN
*SKY DEUTSCHLAND RAISED TO BUY VS HOLD AT BERENBERG


>>> Down
*ANGLO AMERICAN PLATINUM CUT TO SELL VS NEUTRAL AT CITI
*AURUBIS CUT TO HOLD VS BUY AT SOCGEN
*BASHNEFT PREF CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
*BASHNEFT CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
*BERKELEY GROUP CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*ENI CUT TO UNDERWEIGHT VS OVERWEIGHT AT JPMORGAN
*GARANTI CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
*GURIT CUT TO SELL VS NEUTRAL AT UBS
*LLOYDS BANKING GROUP CUT TO NEUTRAL VS OUTPERFORM AT MEDIOBANCA
*PREMIER FARNELL CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
*REPSOL CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN
*VW CUT TO NEUTRAL AT HSBC

>>> PT Change
*COLRUYT PT CUT TO EU38.50 FROM EU39.50 AT ING
*FERRAGAMO PT CUT TO EU33 VS EU34.3 AT GOLDMAN; KEPT AT BUY
*Julius Baer PT Cut to CHF41.9 at Mediobanca; Kept at Neutral
*PREMIER FARNELL PT CUT TO 250P FROM 275P AT CANTOR; KEPT AT BUY
*Tod’s PT Cut to EU125 vs EU140 at Credit Suisse

>>> Initiation
*INNATE PHARMA INITIATED AT CONVICTION BUY AT GOLDMAN; PT EU18
*PORSCHE SE RATED NEW BUY AT BERENBERG; PT EU100

>>> Call
>> Stock
*BRITVIC ADDED TO CITI UK SMALL & MID-CAP KEY BUY LIST
*MONEYSUPERMARKET EXITS CITI UK SMALL & MID-CAP KEY BUY LIST
*SIBANYE GOLD ADDED TO CEEMEA FOCUS LIST AT GOLDMAN

(Les Echos) PSA: minority soar forehead requiring OPA

Link to Google Translation : {http://bit.ly/1fDezl6}
Link to Original Article : {http://bit.ly/1aYjRIX}

PSA: minority soar forehead requiring OPA

The proposed alliance with Dongfeng will collect two-thirds of votes in the assembly.

After colliding with dissension within the Peugeot family , the project of alliance between PSA and Dongfeng faced resistance from some minority shareholders. In a letter to the chairman of the supervisory board, Thierry Peugeot , the Association for the Defence of Minority Shareholders (Adam) defends a scenario recapitalization without the help of the French State and Dongfeng, "when banks are actually ready to ensure success to the required height. "" Such a solution would avoid all the disadvantages of each other, while being fully compatible with the need to develop relations with the Chinese manufacturer, "says its president Colette Neuville.
The Adam points out several weaknesses in terms of the capital increase that would see the French State and Dongfeng return both to 14% of the capital, alongside the Peugeot family. These three shareholders are they agree on the business plan? "They should then be regarded as acting in concert" and then launch a takeover bid , says. "Association Either they do not intend to support a common strategy [...]. There would be every reason to question the merits of capital proposed scheme would give the power - up nearly half of the capital - three shareholders may disagree. "
Magnitude of the discount
The Adam is also concerned about the extent of the discount and how it will be offset by share warrants ( BSA ). Finally, the association highlights a risk of blocking in general meeting . "The important state participation in the venture capital company set aside a number of investors, as well as making it more difficult for alliances with other manufacturers, which are necessary for the company to reach an adequate size, "says Colette Neuville.
Even PSA décrocherait an agreement with Dongfeng by its results on February 19, the project will have to collect two-thirds of the votes cast at a general meeting. The support of the Peugeot family, it is now accepted, will not be enough to get the project. The family has in fact 38% of the voting rights, knowing that all shareholders do not vote AG. Last year, only 77% of shareholders had expressed.
However, the protest movement does not seem solid. According to several analysts , the capital increase will be better understood by shareholders if done with Dongfeng, the idea to build an industrial partnership, rather than only if PSA launches an appeal to the market. "We talk about the future of a company, said one analyst in London. Blocking a capital increase is wearing a big responsibility. "

>>> Asian Update

Asian Market Update: RBA abandons easing bias, sending AUD sharply higher

***Economic Data*** - (AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 2.50% (AS EXPECTED); DROPS EASING BIAS; Sees most prudent course being a period of stable rates - (NZ) NEW ZEALAND JAN ANZ COMMODITY PRICE M/M: 1.2% V 1.0% PRIOR (3-month high) - (KR) SOUTH KOREA JAN CPI M/M: 0.5% V 0.5%E; Y/Y: 1.1% V 1.1%E; CORE CPI Y/Y: 1.7% V 1.9% PRIOR - (JP) JAPAN JAN MONETARY BASE Y/Y: 51.9% V 46.6% PRIOR; MONETARY BASE END OF PERIOD: ¥200.9T V ¥201.9T PRIOR

***Observations/Insights*** - Yum Brands looks to get past its troubles in China; Shares rise over 4% in extended session after earnings and commentary that bird flu will not be an issue. - Nikkei225 leading the steep selloff in Asia, tracking more pronounced correction in the US and sharp gains in the funding Japanese Yen currency; Hang Seng is back after holidays with catch-up selling sending the index to a 5-month low. - RBA policy statement marks an abrupt shift away from an open-ended dovish bias after most recent rise in Q4 CPI; Sees monetary policy "appropriately configured" and most prudent course being "a period of stability" in interest rates; RBA also drops the language referring to AUD as "uncomfortably high", sending the currency sharply higher across the board. - BOJ Gov Kuroda affirms commitment to achieve 2% inflation by the 1st half of 2015, having first set out on course toward that target within a 2-year timeframe in April of 2013; Speaking to Parliament, Kuroda also said the easing has produced smooth progress, with domestic economy recovering moderately.

***Fixed Income/Commodities/Currencies*** - (JP) Japan MoF sells ¥2.19T in 0.6% (0.6% prior) 10-yr notes; Avg yield: 0.596% v 0.719% prior; Bid to cover: 3.21x v 3.84x prior - SLV: iShares Silver Trust ETF daily holdings rise to 10,095.1 tonnes from 10,029 tonnes (first rise since Jan 18th, highest level since Dec 20th) - USD/KRW: Rises to KRW1,090; Highest level since Sept

- The spike in AUD is all the rage in the currency markets following a far less dovish RBA policy statement. AUD/USD is up over 130pips above $0.8880, AUD/NZD hit 7-week highs above NZ$1.0930, and AUD/JPY is reversing the risk-off flows with 180pip move higher toward the ¥90 handle. NZD/USD was up after the RBA as well in sympathy with AUD, rising over 70pips from its lows above $0.8120. USD/JPY is off the low of the US session, rising about 50pips above ¥101.30.

***Speakers/Political/In the Papers*** - (AU) JPMorgan economist: RBA has "clearly moved towards a more neutral stance of monetary policy; It's going to put the burden on the data over the next few months for the RBA to ease policy any further" - SMH - (AU) Moody's: Australian prime mortgage arrears remain stable in November 2013 - (NZ) New Zealand Fin Min English: Higher rates to not have major impact on economic growth; Not comfortable with level of NZD, prefers to see it lower - (NZ) ANZ chief economist Bagrie: 6% or 10% growth in China matters little to New Zealand economy - NZ Herald - (JP) Japan BOJ gov Kuroda: Japan likely to eye 2% inflation around latter half of FY14 through early FY15; Japan making progress to achieve BOJ's 2% target - addressing parliament - (JP) Japan PM Abe: BOJ will make appropriate decision on exit strategy from current easing policy - (JP) Japan Chief Cabinet Sec Suga: To continue to closely watch financial markets - (JP) Japan Econ Min Amari: US stock market reaction overdone; Japan economy seems very favorable - financial press - (JP) Nikkei comments on proposals for Japan govt to consider a wider tax base as an offset to implementing lower corporate taxes - (JP) Japan Center for Economic Research (JCER): Japan's Real Dec GDP estimated at +0.2% m/m; Rising for 5th consecutive month - Nikkei - (HK) Hong Kong Jan existing home listings +4.4% m/m - Hong Kong press - (HK) According to Centaline Property Agency, Hong Kong property experienced 10-yr low New Year sales - financial press - (CN) China City of Shenzhen, Guangdong Province raises minimum wage to CNY1,808/month from CNY1,600/month - Chinese press - (US) Fed's Fisher (hawk, FOMC voter): Current decline in the equity markets should not deter the Fed from the taper of asset purchases

***Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 -3.1%, S&P/ASX -1.8%, Kospi -1.6%, Shanghai Composite closes, Hang Seng -2.4%, Mar S&P500 +0.4% at 1,739, Apr gold -0.3% at $1,256, Mar crude oil +0.1% at $96.52/brl

US markets: - YUM: Reports Q4 $0.86 v $0.80e, R$4.18B v $4.24Be; +4.2% afterhours - HOLX: Reports Q1 $0.34 adj v $0.31e, R$612M v $612Me; +3.1% afterhours - HIG: Reports Q4 $0.94 v $0.90e, R$2.97B v $2.79Be; +1.7% afterhours - APC: Reports Q4 $0.74 (adj) v $0.93e, R$3.34B v $3.76Be; +0.5% afterhours - CHD: Reports Q4 $0.65 v $0.67e, R$822.6M v $822Me; Raises quarterly dividend 11% from $0.28 to $0.31; Announces repurchase program; -0.9% afterhours - TTWO: Reports Q3 $1.70 v $1.41e, R$767.7M v $711Me; -3.4% afterhours - EW: Reports Q4 $0.91 v $0.83e, R$536M v $536Me; -3.7% afterhours - DNB: Reports Q4 $2.75 adj v $2.85e, R$476.7M v $468Me; raises quarterly dividend by 10% to $0.44/shr from $0.40 prior; announces management changes; -15.2% afterhours - GOOG: Chairman Schmidt expects US approval on Lenovo deal - financial press

Notable movers by sector: - Consumer Discretionary: Wynn Macau 1128.HK -0.3% (Q4 results); Clarion Co 6796.JP -4.9% (9M results) - Financials: REA Group REA.AU +4.2% (H1 results); Sumitomo Corp 8053.JP -4.4% (9M results) - Materials: Mitsubishi Corp 8058.JP -4.2% (9M results); Jiangxi Copper 358.HK -2.6% (LME copper fell to 2-month low); 8001.JP -4.7% (9M results) - Energy: Shandong Molong Petroleum Machinery 568.HK -4.1% (FY13 guidance) - Industrials: Nissan Chemical Industries 4021.JP -0.1% (9M results); Fuji Heavy Industries 7270.JP -3.7% (9M results); Downer EDI DOW.AU -2.1% (H1 results); Mitsubishi Motors 7211.JP -3.6% (Jan US sales results); Mazda Motor 7261.JP -5.4% (Jan US sales results); Honda Motor 7267.JP -5.1% (Jan US sales results) - Technology: Lenovo Group 992.HK -14.3% (JV with Sony)

Nikkei 225 May Drop 25% From December Peak, Schroeders Says

+------------------------------------------------------------------------------+

Nikkei 225 May Drop 25% From December Peak, Schroeders Says 2014-02-04 05:17:00.645 GMT

By Jonathan Burgos Feb. 4 (Bloomberg) -- A 20-25% drop in the Nikkei 225 Stock Average from its Dec. 30 peak isn’t unreasonable, Tim Schroeders, who helps oversee about $1 billion as a money manager at Pengana Capital in Melbourne, says by phone today. * Nikkei 225 -3.5% to 14,112.71 at 2:11 p.m. in Tokyo, poised for a 13% decline from the Dec. high; Topix slumped 4.1%, set for a 12% drop from Jan. 8 high * “Expectations on how quickly the Japanese economy can recover are probably too high,” Schroeders says. “It’s going to be a harder task to make the economy sustainably competitive given issues on demographics and labor productivity.”

NOTE: Japan Sees Worst Developed-Stock Rout as Nikkei 225 Sinks NSN N0GDWZ6TTDS4 <GO> NOTE: Yen’s Role in Abenomics Threatened by Tokyo Vote: Currencies NSN N0G2YR6KLVRN <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: Jonathan Burgos in Singapore at +65-6212-1156 or jburgos4@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at +61-2-9777-8684 or smcdonald23@bloomberg.net

>>> US After Hours

After Hours Summary: NLST +16.9%, POWI +6.4%, YUM +4.4%, DNB -15.2%, AFOP -9.9%, EW -4.2% following earnings/guidance

After Hours Gainers: Companies trading higher in after hours in reaction to earnings: NLST +16.9%, POWI +6.4%, WSTL +5.8%, RTEC +4.6%, YUM +4.4%, HOLX +3.1%, CFN +2%, APU +1.7%, HIG +1.5%, UNIS +1.4%, PSEC +1.2%, AEIS +0.5%, PFG +0.2%, BRO +0.2%, GGP +0.2%

Companies trading higher in after hours in reaction to news: - DXCM +5.8% (confirmed G4 PLATINUM Continuous Glucose Monitor (CGM) received FDA approval for use in children ages 2 to 17 years), - RTEC +4.6% (received two orders for its lithography systems totaling more than $11 mln), - FTR +2.9% (co announced it has began regulatory approval process to acquire AT&T (T) wireline, broadband and video operations in Connecticut), - LL +2.6% (S.A.C. Capital discloses 5.0% passive stake in 13G filing), - ILMN +0.8% (disclosed its Board of Directors authorized up to $250.0 mln to repurchase shares)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: DNB -15.2%, AFOP -9.9%, PSMI -9.5%, FN -7.7%, EW -4.2%, TTWO -3.7%, AGNC-0.8%, APC -0.2%, CCK -0.1%

Companies trading lower in after hours in reaction to news: - ABIO -11.7% (announced proposed public offering of common stock and warrants), - HALO -5.3% (announced public offering of $100 mln of its common stock), - CPHD -5.0% (to offer $250 mln principal amount of Convertible Senior Notes due 2021), - PACD -1.0% (announced availability of fleet status report and revenue efficiency guidance; sees FY14 Operating Fleet Average Revenue Efficiency of 90-94%)

Barron's Michael Kors: What to Expect When You’re Expecting Earnings

Michael Kors: What to Expect When You’re Expecting Earnings

Two popular retailers–Michael Kors Holdings (KORS) and Ralph Lauren (RL)–have had a tough time in 2014, and both will report earnings this week. Will the results be enough to turn their years around?

We took a look at a note from Deutsche Bank analyst Dave Weiner, who was chock full of slightly positive yet unchanged sentiments on them both, for guidance.

For Michael Kors, which will report earnings tomorrow, Weiner maintained his rating and price target and accentuated some of the positive, writing “While many retailers and brands have reported disappointing holiday results, we are optimistic about the quarter and believe that Kors could deliver comp upside.”

Weiner expects third-quarter EPS of 84 cents, in-line with the forecast of 83 cents to 85 cents and a penny shy of consensus. Weiner expects EPS of $2.78 in fiscal 2014, below the Street’s estimates of $2.83. Finally, for fiscal 2015, Weiner is looking for $3.49 in EPS ahead of the consensus estimate of $3.48.

Still, Weiner sees upside for Kors. Citing a strong quarter that started out with a lot of momentum, he writes, “While the stock had a strong 2013 (up 59%), we believe that the current multiple should trend higher to fully value Kors’ significant long-term prospects.”

Weiner is more lukewarm on Ralph Lauren, which reports on Wednesday. He expects an in line third quarter while the fourth quarter “may see some modest plan downside.”

For the third quarter, Weiner expects 9% revenue growth, 16.5% operating margin and earnings-per-share of $2.53 in EPS compared to the consensus, which expects revenue to grow 9.8% and operating margin to come in at 16.7%, driving $2.51 in EPS.

FT : The future still belongs to the emerging markets

The future still belongs to the emerging markets

Just as the west has emerged from crisis before, the newcomer economies will return to growth

In 1996 a friend of mine called Jim Rohwer published a book called Asia Rising. A few months later, Asia crashed. The financial crisis of 1997 made my colleague’s book look foolish. I thought of Jim Rohwer (who died prematurely in 2001) last week as a I listened to another Jim – Jim O’Neill, formerly of Goldman Sachs – defending his bullish views on emerging markets in a radio interview.
Mr O’Neill coined the term Brics for Brazil, Russia, India and China, just before the emerging market boom of the past decade really got going. He was rewarded for his prescience, and his ability to coin a good acronym, with guru status. Now Mr O’Neill is back, talking up the delicious-sounding Mints (Mexico, Indonesia, Nigeria, Turkey) as the next group of rising economic powers. But this year his timing is a bit off. Investors are panicking about emerging markets and Turkey – the pay-off in the Mint – is at the forefront of the crisis.

One moral of these stories is that in punditry, as in investment, timing is everything. It is possible to be right at the wrong time – and that is what happened to Rohwer. His bullishness about Asia was fully vindicated in the 17 years after the appearance of his book. It just looked badly wrong in the crucial months after publication, as the International Monetary Fund was forced to bail out South Korea, Thailand and Indonesia.
The speed of the recovery in Asia was just as startling as the speed of the collapse. South Korea is once again regarded as a model economy, and its per capita gross domestic product has almost tripled since the near disaster of 1997. Thailand and Indonesia also bounced back.
Those stories are worth remembering amid the current panic. The next year could make boosters of emerging markets, such as Mr O’Neill, look like false prophets. But over the course of the next decade, they will be proved right – again.
The reason for this is that the factors that have propelled the rise of non-western economies in the past 40 years still apply. These include lower labour costs, rising productivity, huge improvements in the communications and transport that connect them to global markets, a rising middle class, a boom in world trade as tariffs have fallen and the spread of best practice in everything from management techniques to macroeconomic policy. Added to this is the drive of people all over the world – from factory hands to entrepreneurs – who have realised that they are not condemned to poverty, and that a better life is there for the taking.
The rise of non-western economies is a deeply rooted historic shift that can survive any number of shocks
In the past half century, these powerful forces have allowed emerging markets (or developing nations or rising powers, if you prefer) to grow much faster than the developed world. In their recent book, Emerging Markets, Ayhan Kose and Eswar Prasad show that the economies of a group of the most prominent emerging markets (including China, India and Brazil) have grown by about 600 per cent since 1960 – compared with 300 per cent for the richer, industrialised nations. Even over the past 20 years, they write, “emerging markets’ share of world GDP, private consumption, investment and trade nearly doubled”.
The effect has been to transform the global economy. Michael Spence, a Nobel Prize-winning economist, writes that in 1950 only about 15 per cent of the world’s population lived in developed economies. In the intervening 65 years, the benefits of industrialisation, trade and rapid economic growth have spread to large parts of Asia, Latin America – and now Africa.
The story is far from over. Professor Spence argues that we are in the midst of a “century-long journey in the global economy. The end point is likely to be a world in which perhaps 75 per cent or more of the world’s people live in advanced countries.” If anything, the pace is likely to increase as the implications of the communications revolution become clearer and more entrenched.
The rise of the emerging markets will, however, be punctuated by crises such as the one we are experiencing today. These, too, have been part of the story all along. The Asian financial crisis of 1997 was not an isolated event. There was the tequila crisis in Mexico in 1994 and the Indian financial crisis of 1991. If you enter the words “Latin American financial crisis” into Google, it helpfully offers to complete the phrase with the dates – 1980, 1990s, 1998 and 2002. Yet despite all this, most of the leading economies of Latin America – Brazil, Mexico, Chile and others – have experienced real improvements in living standards and reductions in poverty.
The emerging markets have also sometimes been rocked by political crises that led investors to panic. Most dramatically of all, there were the protests in Beijing’s Tiananmen Square and subsequent massacre in 1989. Who at the time would have predicted that – in spite of all this political turmoil – the Chinese economy would more than double in size over the next decade, and then do the same again in the decade after that?
The moral of the story is that the rise of non-western economies is a deeply rooted historic shift that can survive any number of economic and political shocks. It would be a big mistake to confuse a temporary crisis with a change to this powerful trend. The bursting of the dotcom bubble in 2001 did not mean that the internet was massively overhyped, even though some people jumped to that conclusion at the time. In the same way, today’s turmoil will not change the fact that emerging markets will grow faster than the developed world for decades to come.

>>>US Close Dow-2,08% S&P-2,28% Nasdaq-2,61%

Closing Market Summary: Stocks Slump Amid Continued Yen Strength

The stock market began February on a sharply lower note after enduring a rough month of January. Small caps paced the Monday retreat as the Russell 2000 tumbled 3.1% while the S&P 500 fell 2.3%. For its part, the Dow Jones Industrial Average lost 2.1%, ending below its 200-day moving average (15470).

Despite the sharply lower finish, today's session actually started in the green. However, sellers emerged during the opening minutes and intensified their efforts after the January ISM Manufacturing Index registered a large decline (to 51.3 from 56.6).

Although the ISM report itself did not cause the aggressive selloff, it added to global growth concerns that have been percolating under the surface after China's Manufacturing PMI (50.5) fell to a six-month low while the Non-Manufacturing reading (53.4) registered an 11-month low.

Furthermore, the selloff was accompanied by another wave of yen strength. Dollar/yen traded right above the 102.00 level at the start of the session, but retreated along with equities. The pair finished the trading day right under 101.00 while yen futures added 1.4%, extending their 2014 gain to 4.3%.

The daylong pressure that was exerted on equities translated into strength for the bond market. The 10-yr note ended on its high with its yield down seven basis points at 2.59%. Gold futures also garnered interest, climbing 1.6% to $1259.50 per troy ounce.

Also of note, the retreat invited strong demand for volatility protection, sending the CBOE Volatility Index (VIX 21.12, +2.71) to its highest level since late June. Over the past two weeks, the near-term volatility gauge has added more than 72.0%.

All ten sectors finished in the red with the lowest-weighted group—telecom services (-3.7%)—ending at the bottom of the leaderboard. The remaining nine sectors fared a bit better, posting losses between 0.8% and 2.7%.

The discretionary sector (-2.7%) was the weakest performer among cyclical groups as retailers continued their recent weakness. The SPDR S&P Retail ETF (XRT 77.47, -2.38) lost 3.0%, sliding to levels not seen since late August. Today's loss widened the retail ETF's 2014 decline to 12.1%.

Automakers also pressured the discretionary space after Ford (F 14.55,-0.41) reported a 7.0% decline in January sales while General Motors (GM 35.25, -0.83) announced an 11.9% decrease in sales. The two names settled lower by 2.7% and 2.3%, respectively.

Elsewhere, other influential sectors like financials (-2.5%) and industrials (-2.7%) lagged while health care (-2.0%) and technology (-2.2%) ended just ahead of the S&P 500.

The utilities sector (-0.8%) was the only group that avoided losing 1.0% or more. The rate-sensitive sector is the only group that remains in positive territory for the year with a gain of 2.1%.

The selloff was accompanied by heavy volume as more than 900 million shares changed hands on the floor of the New York Stock Exchange.

Today's data was limited to just a pair of reports:

* The ISM Manufacturing Index for January dropped to 51.3 from 56.5 while the consensus expected the reading to fall to 56.0. That tied the largest one-month decline since October 2008. The sharp decline in the national index did not correlate with the regional surveys from Federal Reserve banks. They showed modest improvements in manufacturing activity throughout the country. According to the ISM report, some of the weakness may have been due to the extreme winter weather conditions that occurred in January. If this is true, then the ISM Index should bounce back rather significantly in February.  * Total construction spending increased 0.1% in December after increasing a downwardly revised 0.8% (from 1.0%) in November. The consensus expected construction spending to increase 0.1%. The residential construction spending data does not line up with the contraction reported in the advance estimate for fourth quarter GDP growth. The downturn in fourth quarter residential investment spending could have only occurred if spending fell in December or if there were large revisions to the November and/or October data. According to the Census data, that did not happen. 

Tomorrow, December factory orders will be announced at 10:00 ET.

* Nasdaq Composite -4.3% YTD  * S&P 500 -5.8% YTD  * Russell 2000 -5.8% YTD  * Dow Jones Industrial Average -7.3% YTD

>>> Nikkei comments on proposals for Japan govt to consider a wider tax base as

Nikkei comments on proposals for Japan govt to consider a wider tax base as an offset to implementing lower corporate taxes
- Effective FY14/15, Japan corporate tax rate will be 35.64%. 
- Non-govt researchers/academics have suggested lower the rate to 25% to match some of its neighbors 
- According to Japan Fin Min, each 1pct cut would represent about ¥470B less in tax revenue, prompting talks of "tightening exemptions for dividend income and restricting the use of losses to offset future profits" to make up for the shortfall.