>>> US Early premarket gappers

Early premarket gappers

Gapping up: FEYE +22.8%, GGS +14.9%, PLUG +9.4%, JRJC +8.5%, RECN +5.3%, EJ +4.3%, ORMP +3.3%, FNSR +3.2%, ARIA +1.9%, NEM +1.4%, DDD +1.2%, BP +1.1%, GTAT +1.1%, SLV +1.1%, ONVO +1%, PANW +1%, ABX +1%, FTNT +0.9%, CHKP +0.9%, RDS.A +0.9%, BHP +0.8%, TWTR +0.7%, TSLA +0.6%, GDX +0.5%

Gapping down: GYRO -11.7%, LNDC -3.5%, SAP -1%, GLPI -0.9%, GE -0.7%, BBRY -0.7%, GRPN -0.5%

(BFW) Belarus to Keep Zero Tax on Potash Exports Until April

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Belarus to Keep Zero Tax on Potash Exports Until April 2014-01-03 10:03:17.255 GMT

By Aliaksandr Kudrytski Jan. 3 (Bloomberg) -- Belarus reverses earlier decision to scrap zero tax, will prolong tax-free exports of soil nutrient until March 31, amended decree from President Aleksandr Lukashenko published on government website shows. * NOTE: Belarus planned tax of EU60/t, Dep. Finance Min. Maksim Emolovich said Dec. 12. * NOTE: State-owned potash producer Belaruskali had export tax scrapped in Sept.-Dec. by presidential decree * NOTE: Belaruskali paid tax of EU75/t-EU85/t ($103-$117) before Sept. 1

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To contact the reporter on this story: Aliaksandr Kudrytski in Minsk, Belarus at +7-495-771-7706 or akudrytski@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at +36-1-475-1191 or bpenz@bloomberg.net

(Barron's) 2014 Earnings Outlook....is market over optimistic ?

Analysts are predicting a 10.6% jump in profits, which seems too optimistic. Three sectors look promising: tech, materials, and financials.

When Wall Street analysts put on their goofy plastic glasses to welcome the new year, the digits said 2014, but the lenses were the same shade as last year: rose colored. Consensus earnings estimates suggest that corporate America will deliver double-digit profit over the next 12 months, even though that same prediction turned out to be far too bullish in 2013.

Once again, consensus estimates seem overly optimistic.

Consensus bottom-up forecasts see earnings generated by companies in the Standard & Poor's 500 index expanding 10.6% in 2014 to a new record high of almost $120 per share. That would mark a big improvement over 2013, which is on track for a 4%-5% gain.

To be sure, investors have good reason to expect better profit growth next year. The U.S. economy is strengthening, and even Europe, long the scapegoat for weak earnings by U.S. multinationals, seems to be on the upswing.

Still, forecasts require tempering. Wall Street analysts often set the bar too high when predicting outcomes far in the future, and there is much to suggest that 10% bottom-line growth is unachievable. For starters, revenue growth looks to be anemic.

"There could be double-digit profit growth in 2014, but at this point, it looks like a bit of a stretch to get there," says Tobias Levkovich, chief U.S. equities strategist at Citigroup's CitiResearch.

The unofficial start of the fourth-quarter earnings season is Jan. 9, when Alcoa (ticker: AA) releases its financial results. Wall Street's (lowered) expectations call for the S&P 500 to close the books on the 2013 calendar year with earnings of nearly $109 a share, a 4.7% rise over 2012. A year ago, full-year estimates called for 10% profit growth by the S&P 500 in 2013.

The recent earnings trend has not been positive. Since Sept. 30, a record-high 94 members of the S&P 500, including Target (TGT), Starbucks (SBUX), Cisco Systems (CSCO), and Honeywell (HON) have unveiled fourth-quarter earnings forecasts that missed sell-side estimates. A record-low 13 firms have issued positive guidance, according to FactSet Research.

China's slowing economy, as well as dim prospects from retailers and the government shutdown in October are partly to blame.

Looking ahead, there are some positive developments. Europe's recession ended last year and a recovery is underway. The budget deal passed by Congress will loosen government purse strings a bit. Bulls expect a recent pickup in both hiring and capital spending by corporations to continue into next year. And rising stock prices and higher home prices have fueled spending by some consumers and boosted confidence that the U.S. economy will continue to improve.

Corporate America, however, has relied heavily on share buybacks and cost cuts, rather than revenue gains, to fuel profit growth. Profit margins are already at record highs, having edged up to 9.7% during the third quarter of 2013. Increased hiring and more capital spending aren't the stuff of expanding profitability.

Revenue growth, meanwhile, isn't going to save the day. At 4%, it's picking up steam compared to the 2% that 2013 is on track to deliver. But far faster revenue growth is needed for the S&P 500 to expand its bottom line at a 10% pace, says Howard Silverblatt, chief statistician at S&P Dow Jones Indices.

None of this stopped the U.S. equity gauges from ending 2013 at record highs. The S&P 500 posted its biggest annual advance since 1997, with a total return of 32.4%. It now trades at 15.4 times (rosy) 2014 earnings estimates.

Whether the market is cheap, expensive, or fairly valued is a topic of considerable debate. Market strategists—the top-down thinkers on Wall Street—surveyed by Barron's (see "Bullish on 2014," Dec. 14) expect far more muted gains for stocks this year, with targets that range from 1,900 to 2,100 for the S&P 500.

Meanwhile, strategists surveyed by FactSet Research expect roughly 8% profit growth next year, which would take the S&P's per-share earnings to $118.

"The margin expansion story is done, but I do see a better year ahead for the economy, which should translate into earnings growth" says David Rosenberg, chief economist and strategist at Gluskin, Sheff & Associates. "Earnings should do the heavy lifting for the market."

Among stock sectors, technology is favored by many investment pros.

Already pressured by falling demand for laptops and personal computers, profits for many companies were hit hard by China's slowing economy. But those earnings are expected to turnaround in 2014, climbing more than 9% compared to last year's 2% rise.

Granted, a slowing China remains a concern. Still, analysts see corporations spending more on information technology and expect PC sales to rebound in 2014, as Microsoft (MSFT) ends its official support of Windows XP, which could prod corporations to upgrade to machines running Windows 8.

Analysts have high hopes for the materials sector—the mean estimate is that earnings will climb 15% this year, according to FactSet. Telecom services could rise almost 13%, fueled in part by rising popularity of "cloud" technology, as more enterprises outsource some functions of their data centers to be run by Verizon (VZ) and other cloud-computing operators.

And in the financial sector, the Street sees profits rising roughly 11% this year, boosted by rising prospects for property and casualty insurance companies.

Opinions on consumer discretionary stocks remain mixed despite the Street's forecast for almost 16% growth this year. The sector delivered among the strongest returns last year, fueled by media companies, a rebounding housing market and automobile sales. But Citigroup's Levkovich says the stocks look expensive.

Or as Brian Belski, chief investment strategist at BMO Capital markets, puts it, "too many people who are too bullish and looking for too much."

Still, more than a few pundits argue that profit margins have room to edge a bit higher this year, perhaps to 10.4%. And share repurchase programs are expected to remain a tailwind for earnings this year, especially as activist shareholders increasingly flex their muscles, says S&P Dow Jones Indices Silverblatt.

Still, investors should not count on a rapid ramp up in earnings this year. "Slow and steady works pretty well," says Silverblatt. "It's boring, but it works."

(BFW) Sell Fiat After Share Gain; Buy Renault, Daimler: Macquarie

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Sell Fiat After Share Gain; Buy Renault, Daimler: Macquarie 2014-01-03 07:54:38.579 GMT

By Brian Lysaght Jan. 3 (Bloomberg) -- Fiat’s Chrysler buyout is attractive deal, is priced in after yday’s gain, is last positive news for Fiat in “forseeable future,” Macquarie says in note. * Reiterates underperform, raises PT to EU5.5 (20% downside) from previous EU4.8, raises EPS ests. * Fiat core markets to be challenging, co. debt is rising issue * Says buy Daimler and Renault (both outperform); Renault/Nissan alliance is proven success, Renault product pipeline superior to Fiat’s: Macquarie * Exane (underperform) says in note that deal funding isn’t positive surprise, Fiat needs “major capital hike” * Fiat has 6 buys, 8 holds, 13 sells: Bloomberg data * See earlier: Fiat-Chrysler May Issue Convertible Bond, List on NYSE, FT Reports * Marchionne Caps Fiat-Chrysler Mission on a Florida Beach * Yday: Fiat Surges After Buying Rest of Chrysler

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--Editor: Gaurav Panchal

To contact the reporter on this story: Brian Lysaght in London at +44-20-7330-7908 or blysaght@bloomberg.net

To contact the editor responsible for this story: James Ludden at +44-20-7673-2645 or jludden@bloomberg.net

FT :2014 outlook: Market melt-up

2014 outlook: Market melt-up

US stocks may be overpriced and profit margins at a high but even bears say the rally has room to run

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American stocks look very expensive. Are they in a bubble? The S&P 500 has gained almost two-thirds since September 2011, a period in which its companies’ earnings have risen just 18 per cent. It is easy to see why many fear the bull market has gone too far.
Will the S&P 500 be higher or lower one year from today?

Make your case in the comment box below
But few believe that a market fall is imminent. Instead, the talk is of a potential “melt-up” in which shares build into a bubble that eventually bursts. Jeremy Grantham, founder of the GMO fund management group in Boston, says: “My guess is that the US market, especially the non-blue-chips, will work its way higher, perhaps by 20-30 per cent in the next year or, more likely, two years, with the rest of the world, including emerging market equities, covering even more ground in at least a partial catch-up. And then we will have the third in the series of serious market busts since 1999.”

Why is there such belief in a long-lived bull market? First, bond yields remain historically low, with 10-year Treasury bills yielding barely 3 per cent. When yields are low it is justifiable to pay a higher multiple for stocks because cheaper credit makes it easier for companies to make profits. Paying more for stocks also seems more palatable when bond yields are low.
Further, there is no evidence that investors are growing overexcited, as they usually do towards the end of a bubble. The American Association of Individual Investors’ weekly poll of its members has long been a reliable contrarian indicator. When large numbers say they are bullish it is generally a good time to sell. When the majority are bearish (the record for this indicator came in the second week of March 2009 when despair was total and the current bull market began) it is a good time to buy. Today, 47 per cent consider themselves bulls and 25 per cent bears, numbers a long way from an extreme of optimism.
However, stocks are unquestionably overpriced. Robert Shiller’s cyclically adjusted price/earnings multiple (Cape), long regarded as a reliable indicator of long-term value, is now at a level at which the market peaked before bear markets several times in the past. However, it remains below the levels it reached during true “bubbles” such as the dotcom mania. The same is true of “Tobin’s q”, which compares share prices with the total replacement value of corporate assets.
Further, profit margins are at a historic high and over time have shown a strong tendency to revert to the historic mean. The combination of high valuations being put on profits benefiting from cyclically high margins suggests markets are overvalued.
Why, then, are brokers calling for rising prices in 2014 or even a melt-up?
First, markets have their own momentum. On all previous occasions when earnings multiples have expanded this far this quickly, research by Morgan Stanley’s Adam Parker shows that they have carried on expanding for at least another year. And while the extent of US stocks’ rise since March 2009 is impressive, the duration of this rally is not unusual. Typically, bull markets carry on for longer. Also, this market has low levels of volatility and has not had a correction in a while. The approaching end of a bull market is generally marked by corrections and rising volatility.
Another reason to believe the bull market could eventually become a bubble lies in the record amounts of cash resting in money market funds, even though these funds pay negligible interest. The bull run is unlikely to peak until some of this money has found its way into stocks.
Finally, and most importantly, there is the role of monetary policy. The Federal Reserve’s programme of “quantitative easing” , in which it has bought mortgage-backed and government bonds in an attempt to force up asset values and push down yields, has had a huge impact on market sentiment.
Although the Fed said in December it would start tapering off its monthly bond purchases, it also says interest rates will stay at virtually zero until well into 2015. The S&P hit a record after the taper announcement.
Mr Grantham believes “excessive stimulus” will continue under Janet Yellen, the incoming Fed chair, and “that the path of least resistance for the market will be up”.
Hugh Hendry of London’s Eclectica Asset Management, a renowned “bear” on the stock market, takes a similar view and caused a stir late last year when he announced that he was converting to bullishness. As China slows down and in effect exports deflation to the west, he wrote in the Financial Times that there would be “a reflexive cycle that creates an unstoppable bull market: every bit of deflation coming from a frantically oversupplied China makes monetary policy looser in the west and sends asset prices higher”.


How can a “melt-up” be averted? Mr Parker of Morgan Stanley suggests that a significant correction would require fear that earnings will come in well below current projections – so the season when companies announce their earnings for the full year, which starts late in January, could be important. But with the US economy exceeding recent forecasts for growth, a serious earnings disappointment seems unlikely without a catalyst from outside the US – such as a big slowdown in China or a renewed crisis in Europe.
Failing these things, it could be left to the Fed itself to do the job by raising rates or removing stimulus faster than the market had expected.
Chris Watling of Longview Economics in London says US equity valuations are undoubtedly “full” – but are no more expensive than when Alan Greenspan, then Fed chairman, tried to talk down the stock market by warning of “irrational exuberance” in December 1996. On that occasion the bull market carried on for three more years and turned into an epic bubble before finally going into reverse.
“They’ll become more expensive,” says Mr Watling. “It’s not until we see tight money that we talk about the end of this valuation uplift in the US.”