>>> US Close Dow+0,39% S&P+0,54% Nasdaq+0,54%

Closing Market Summary: Stocks Climb Despite Dismal Q1 GDP Report

The stock market ended the Thursday session on an upbeat note despite receiving some disappointing data ahead of the open. The S&P 500 settled higher by 0.5% with nine sectors registering gains, while the Dow Jones Industrial Average (+0.4%) underperformed throughout the trading day.

Shortly before the open, the second revision to Q1 GDP revealed a 1.0% contraction, while the Briefing.com consensus expected a smaller decline of 0.5%. Interestingly, the subpar report led to just a brief stumble in the futures market, which recovered swiftly. That recovery may have been aided by today's initial claims report, which suggested the labor market remains on solid ground.

Even though almost all sectors finished in the green, there was no concerted leadership among the top-weighted sectors. Of the four largest groups, health care (+0.8%) and technology (+0.7%) displayed strength throughout the session, while consumer discretionary (+0.4%) and financials (+0.2%) joined the party in the late afternoon.

Most notably, the technology sector drew significant strength from the shares of Apple (AAPL 635.38, +11.37), which gained 1.8%. The largest tech stock extended its May advance to 7.7%, while also giving a major boost to the Nasdaq Composite. Interestingly, Apple's strength had little impact on the performance of other large cap tech names as Cisco Systems (CSCO 24.68, -0.14), Google (GOOG 560.08, -1.60), and Qualcomm (QCOM 80.19, -0.03) posted slim losses.

Elsewhere, the health care sector ended among the leaders even as biotechnology had a tough time keeping up with the sector. The iShares Nasdaq Biotechnology ETF (IBB 240.96, +1.37) added 0.6% versus a 0.8% gain for the countercyclical sector.

Staying on the countercyclical side, the consumer staples sector (+0.8%) benefitted from a broad rally, while ignoring below-consensus quarterly results from Costco (COST 114.14, -0.10). Shares of the wholesale retailer finished the session with a slim loss of just 0.1%.

Meanwhile, the other two defensive sectors—utilities (+0.1%) and telecom services (unch)—spent the entire session near their flat lines.

Like the two countercyclical sectors, Treasuries also settled in the neighborhood of their flat lines, but not before seeing intraday strength. Treasuries rallied through the first two hours of action, but spent the remainder of the day in a steady retreat. As a result, the 10-yr note slipped four ticks, sending the benchmark yield higher by one basis point to 2.46%.

Participation remained light as only 532 million shares changed hands at the floor of the New York Stock Exchange. In fact, the final tally represented the lowest volume of the year with the count coming in just below the previous 2014 low of 533.3 million that was registered on January 3.

Reviewing today's data:
  • First quarter GDP was revised down to -1.0% in the second estimate from a 0.1% gain in the advance estimate. GDP increased 2.6% in Q4 2013. The consensus expected GDP to be revised down to -0.5%. The revisions brought GDP down into negative territory for the first time since falling 1.3% in Q1 2011. Almost the entire revision was due to weaker inventory data. Inventory growth, which was down $24.30 billion from fourth quarter levels in the advance estimate, was revised to -$62.70 billion. That reduced GDP growth by an additional 1.1 percentage points (1.62 percentage points in total). Excluding inventories, real final sales were virtually unchanged in the second estimate, up 0.6% vs. a 0.7% gain in the advance estimate. Real final sales are still well below 2013 levels. 
  • The initial claims level fell to 300,000 for the week ending May 24 from a slightly upwardly revised 327,000 (from 326,000) for the week ending May 17. The consensus expected the initial claims level to fall to 318,000. Layoff levels are showing no signs of stability. After weeks of biases from likely seasonal adjustment problems, it looked like claims were stabilizing in the 320,000 to 330,000 range. However, over the past few weeks, claims have flirted with 300,000 a couple of times before retreating back toward 325,000. 
  • Pending home sales for April rose 0.4%, which was worse than the 1.0% increase forecast by the consensus. Today's reading followed last month's unrevised increase of 3.4%. 
Tomorrow, Personal Income (consensus 0.3%), Personal Spending (consensus 0.2%), and Core PCE Prices (expected 0.2%) will all be released at 8:30 ET, while the Chicago PMI report for May (consensus 60.3) will cross the wires at 9:45 ET. The day's data will be topped off with the final reading of the May Michigan Consumer Sentiment Survey (expected 81.4), which will be released at 9:55 ET.
  • S&P 500 +3.9% YTD 
  • Dow Jones Industrial Average +0.7% YTD 
  • Nasdaq Composite +1.7% YTD 
  • Russell 2000 -1.7% YTD

(BFW) U.S. Said to Seek More Than $10 Billion Settlement From BNP

Official now after WSJ Article
U.S. Said to Seek More Than $10 Billion Settlement From BNP
2014-05-29 19:55:14.562 GMT


By Jeremy R. Cooke
     May 29 (Bloomberg) -- BNP settlement talks involve alleged
U.S. sanctions violations; settlement with U.S. said to be weeks
away from completion.
  * NOTE: Earlier, BNP Paribas Pushed to Pay $10 Billion to
    Resolve Probe, WSJ Says {NSN N6COX26S972U<Go>}

Link to Company News:{BNP FP <Equity> CN <GO>}

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:
Jeremy R. Cooke at +1-617-210-4654 or
jcooke8@bloomberg.net

>>> Japan govt to support domestic efforts to launch 5G mobile network service b

Japan govt to support domestic efforts to launch 5G mobile network service by 2020, ahead of other countries - Nikkei
- Japan Communications Ministry to meet with major telecom companies as well as handset manufacturers as early as this year to discuss development of 5G technologies. 
- Report further noting that carriers are seen beginning to offer 4G service around 2016 using spectrum to be allocated later this year.

FT : Activist hedge fund calls on IHG to consider takeover bid

Activist hedge fund calls on IHG to consider takeover bid

Activist hedge fund Marcato Capital Management has revealed itself as one of InterContinental Hotels Group’s biggest shareholders and called on the group’s management to seriously consider a takeover bid.
Marcato, a San Francisco-based activist fund that owns about 3.8 per cent of IHG, called on management to appoint advisers to look at a tie-up with a larger rival.

The move by Marcato makes it the fifth-largest shareholder in IHG and comes after reports that the hotel group spurned a £6bn approach earlier this year.
The takeover speculation has left the group’s shares trading at an all-time high. Thursday’s statement pushed shares another 1 per cent higher to £23.31, giving the Holiday Inn owner a market capitalisation of just under £6bn.
Marcato founder and managing partner Mick McGuire said: “We believe that a combination with a larger hotel operator would have compelling strategic and financial merit and represents a unique opportunity to reshape the global hospitality industry.”
“We strongly encourage InterContinental Hotels Group’s board of directors to explore such a combination and engage advisers to conduct a formal process to ensure it evaluates the full range of opportunities available to maximise value.”
Marcato is a “relatively new” shareholder and gave IHG’s management just a few minutes notice before putting out the plea on Thursday, said one person familiar with the situation.
Mr McGuire set up Mercato in 2010 after working with Bill Ackman at Pershing Square. Marcato came to prominence when it took a large stake in auction house Sotheby’s – alongside Third Point, the hedge fund run by activist investor Dan Loeb – and pressed it to return more cash to shareholders.
IHG has maintained a policy of giving cash back to shareholders through share buybacks and both regular and special dividends, helping it to return more than $10bn over the past decade.
Under the leadership of chief executive Richard Solomons, IHG has gone for an “asset light” strategy – selling the hotels it owns in return for long-term management contracts and returning the proceeds to shareholders.
IHG stepped up cash returns earlier this month, with a $750m special dividend after the sale of Mark Hopkins hotel in San Francisco and the InterContinental New York.
Mr Solomons was finance director at the group before becoming chief executive. He is seen as a “safe pair of hands”, whose lack of ego would be conducive to reaching a deal if it benefited shareholders, said one person familiar with the company.
IHG declined to comment, while Marcato could not be reached for further comment.

FT : Big investors replace banks in $4.2tn repo market

Big investors replace banks in $4.2tn repo market

Big investors, including hedge funds, mutual funds and real estate trusts, are replacing banks as the biggest users of the overnight funding market that played a key role in the financial crisis.
The repo market, in which borrowers pledge securities as collateral against very short-term loans, was once a popular method for banks to source cheap financing. But the strategy proved destabilising in 2008, when lenders in the repo market lost confidence in mortgage-backed collateral and pulled back on funding.

Since 2008, the repo market has been shrinking as banks have shifted to longer-term financing in response to new regulatory capital rules and other post-crisis pressures. What remains of the $4.2tn market is increasingly being taken up by non-bank entities such as real estate investment trusts (Reits), mutual funds and hedge funds.
These investors are turning to repo to boost returns during an era of low rates. By using more borrowed money, or leverage, they can take larger positions, but they are also taking a bet that markets will remain stable.
Janet Yellen, Federal Reserve chairman, has stressed that rates in the US could stay low even if unemployment and inflation return to more normal levels.
The growing use of repo has been particularly marked among Reits, which have overtaken banks and broker-dealers as the largest borrowers in the market, according to Federal Reserve data. To purchase long-term mortgage assets, Reits have increased their repo borrowings to $281bn, up from $90.4bn in 2009.
Closed-end funds, which invest in assets ranging from corporate bonds to municipal debt, also have increased their borrowing in the repo market, from $2.74bn at the end of 2007 to almost $8bn now, according to Fitch Ratings data.
Industry participants say there is ample anecdotal evidence that other types of big investors are lending out more of their assets to generate greater returns.
“It’s becoming more of a popular strategy,” said one repo specialist at a large bank. “It’s an opportunity to enhance yield and hit the return hurdles that investors are looking for.”


Repo financing is also playing a new role in the marketing of collateralised loan obligations, or CLOs, which are bonds backed by loans to companies. Investors have in recent months rushed to buy the riskiest slices of these bonds thanks to their higher yields, but have been reluctant to purchase highly rated senior slices since returns on them are much smaller.
Some large banks including Société Générale and RBC Capital Markets are now offering repo financing to buyers of the most senior slices of CLOs in the hopes of increasing investors’ potential returns.
“The only topic worth mentioning right now is the search for yield,” said one senior banker involved in the trades. “With that, a lot of hedge funds have been looking to invest higher up in the CLO capital structure while putting leverage on.”
By lending against the CLOs, banks can make money from assets they would not be able to own under incoming new rules. Said the banker: “Since we can’t hold the assets on balance sheet, it is a good way to get exposure.”
Closed-end funds have historically used leverage to help increase their returns. But repo use has been increasing since the market for a type of debt issued by such funds – auction market preferred stock – collapsed in 2008.
“In the low interest rate environment, repo is very attractive,” said Yuriy Layvand, who analyses closed-end funds at Fitch. “They’re taking that money and investing it further out in the yield curve in fixed income assets.”

WSJ : Justice Dept. Seeks More Than $10 Billion Penalty From BNP Paribas

Justice Dept. Seeks More Than $10 Billion Penalty From BNP Paribas
French Bank Faces Criminal Probe of Alleged Sanctions Violations

The U.S. Justice Department is pushing BNP Paribas SA BNP.FR -0.77% to pay more than $10 billion to resolve a criminal probe into allegations it evaded U.S. sanctions against Iran and other countries for years, which would represent one of the largest penalties ever imposed on a bank, according to people familiar with the negotiations.

A final resolution of the yearslong investigation of the French bank is likely weeks away, and it's possible the ultimate settlement amount could total far less than $10 billion. BNP is looking to pay less than $8 billion, according to the people familiar with the settlement discussions, although a person close to the bank said its negotiators have never mentioned the $8 billion figure in talks with U.S. authorities.

BNP and the U.S. authorities also remain locked in negotiations over whether the bank will temporarily lose the ability to transfer money into and out of the U.S., the people said.

Prosecutors are continuing to try and extract a guilty plea from the bank and, in recent negotiations, have pointed to the muted market reaction in the wake of Credit Suisse AG CSGN.VX +0.22% 's admission to conspiring to aid tax evasion as evidence that a guilty plea by BNP would not be disastrous, according to a person familiar with prosecutors' thinking.

But the bank's ability to process dollar transactions has emerged as a sticking point in recent days, according to several people familiar with the discussions. Benjamin Lawsky, who heads New York's Department of Financial Services, has suggested a temporary suspension of its ability to clear U.S. dollar transactions be included in a final settlement, a person familiar with the matter has said.

BNP executives are concerned over the possibility the U.S. will temporarily restrict the bank's ability to transact in U.S. dollars, according to a person familiar with the bank's thinking. BNP has multiple businesses—including its investment bank, a corporate-finance unit and a trade-finance operation—that do many of their transactions in dollars.

In negotiations with the U.S., BNP executives and their lawyers have warned that their corporate clients and Wall Street trading partners have expressed anxiety to BNP about the possible dollar-transacting restrictions, according to people familiar with the discussions. BNP officials have warned the U.S. authorities that imposing such restrictions, even temporarily, could potentially destabilize the bank, these people said.

Officials from the Justice Department, the Manhattan U.S. Attorney's office and the Manhattan District Attorney have all participated in the negotiations.

BNP and prosecutors haven't come to terms on the size of the financial penalties the bank will ultimately pay. Prosecutors are pushing BNP to pay more than $10 billion and have expressed the view that the volume of the transactions BNP allegedly processed in violation of U.S. sanctions against Iran and other countries could actually warrant an even larger penalty and that the bank is already, in effect, getting a discount.

The tab for settling the case has rapidly ballooned. In February, BNP announced that it was setting aside $1.1 billion to cover the expected settlement. At the time, analysts regarded it as a surprisingly large sum. Two months later, BNP warned that "there is the possibility that the amount of the fines could be far in excess" of what the bank previously had set aside.

BNP has previously said that its internal investigation into the matter uncovered "a significant volume of transactions" from 2002 to 2009 that could be "considered impermissible under U.S. laws and regulations" related to sanctions.

In recent conversations with investors and clients, BNP Paribas officials have tried to assuage their concerns about a potentially large financial penalty, according to the person familiar with the bank's thinking.

They have pointed out that BNP had about €90 billion (about $122.5 billion) of shareholders' equity at the end of March, so it could easily absorb a multibillion-dollar legal settlement, this person said. The bank's ratio of equity capital to risk-adjusted assets, a key measure of its ability to absorb future losses, stood at 10.6% on March 31, well above regulatory minimums.

In addition, BNP officials have told investors and clients that as soon as the settlement is completed, the bank can raise billions of dollars in debt via a public bond offering, this person said. BNP executives were heartened by Credit Suisse's ability earlier this month to issue about $5 billion of debt a few days after pleading guilty to U.S. tax-evasion charges and paying $2.6 billion to settle the case.

FT : Smith & Nephew pushed into deal frenzy

Smith & Nephew pushed into deal frenzy

Smith & Nephew was pushed firmly into the deal frenzy gripping the healthcare industry on Thursday after its US rival Stryker said it had been evaluating a takeover bid for the UK medical device maker.
The confirmation that a potential deal had been under consideration caused Smith & Nephew shares to rise 3.6 per cent in London, adding to gains made on Wednesday.

Stryker’s decision to make public its interest marked an unusual twist at the end of a day in which the company had responded to a report in the Financial Times by issuing a statement ruling out making an unsolicited bid in the next six months.
Smith & Nephew’s stock had surged more than 17 per cent to £11.20 on Wednesday after the FT published a story saying Stryker had hired banks and was working on arranging finance for a possible bid. Stryker’s statement sent the shares back to £10.29.
However, in an interview with Fox Business late on Wednesday, Kevin Lobo, Stryker’s chief executive, said: “We were actually in preliminary evaluations about considering a transaction.”
He added that following Smith & Nephew’s price rise, Stryker was contacted by the UK Takeover Panel and under its rules had to make a statement about its intentions.
“It was [at an] early [stage], but based on the price spike of Smith & Nephew we were called by the panel and we had to make this public statement.”
An acquisition of Smith & Nephew would cut Stryker’s tax bill using a so-called inversion, under which a US company uses a foreign takeover to relocate its headquarters, thus sheltering overseas revenues from US taxation.
To qualify for the inversion, at least 20 per of the shares in the combined company would need to be held outside the US, meaning Stryker, which makes hip and spine implants, would need to fund a large proportion of any bid with its own stock.
Smith & Nephew would be the second big UK healthcare company to face takeover interest from a US rival within weeks, after Pfizer’s failed £69.4bn offer for AstraZeneca – another deal that was driven in part by potential tax savings.
Smith & Nephew has declined to comment on the process.
A bid by Stryker would have added to the wave of dealmaking in the healthcare sector, with more than $150bn of mergers and acquisitions proposed so far this year.

>>> Thermo Fisher looking to shed Cole-Parmer Instrument

Thermo Fisher looking to shed Cole-Parmer Instrument
Thermo Fisher Scientific Inc. is looking to divest its lab equipment manufacturing asset, Cole-Parmer Instrument Co., according to a newswire report.

Bloomberg, citing people with knowledge of the matter, said that the unit could have a price tag of as much as USD 500m - USD 700m. According to the report, typical multiples in the sector have hovered around 10x EBITDA in recent years, leading the people with knowledge to ballpark the value of Cole-Parmer Instrument - with EBITDA of around USD 50m - at the aforementioned price.

A spokesperson for Thermo Fisher did not reply to calls seeking comment, the report said.


Source Newswire Round-up