>>> Italy centre-left leader Renzi called for swift reform of an electoral syste

Italy centre-left leader Renzi called for swift reform of an electoral system - financial press
- Proposed three different models for changing the electoral law
- Believes a deal could be reached in weeks
- Says EU may allow Italy to break deficit limits if ambitious reforms were announced

Proposal:
1) One model would divide the country into 118 constituencies each electing four to five deputies, with the largest party taking a premium of 15 percent.
2) A second would be based on a reworked version of the previous electoral law, with three quarters of deputies elected directly and the remainder divided between the largest party, which would take a 15 percent winner's bonus, and a 10 percent slice reserved for some smaller parties.
3) Third version would include a French-style two round system with a run-off vote, along the lines of the model already used in mayoral elections in large Italian towns.

>>> What to look at today

US Market start the year on a weak note, Three cyclical sectors—energy (-1.3%), industrials (-1.3%), and technology
(-1.1%)—slipped behind the broader market at the open and their underperformance weighed for the remainder of the session, Energy was helped by crude trading 3% lower...AAPL loste 1.41%, Financials was the only sector whicvh managed to outperformed...Volume were on the light side @ 610mil shares...VIX @ 14.23 + 3.72%....Brazil -2.26%...No econimic data in the US today...Nikkei still close today...- China services PMI for December slipped to 4 month lows, giving the bears even more fodder after the overnight slide in twin manufacturing PMIs as well as the tough start for 2014 evident in the US session. Analysts have attributed...Shnaghai -1.2%....
Eur$ 1.3650 S&P Fut @ -0.18% European Fut -0.13%

Keep an eye on :
- BEI GY : Beiersdorf, Henkel, L’Oreal May Gain Most From Buybacks: Liberum
- BP/ LN : BP Wins Expedited Appeal of Bid to Stop Spill Pact Payments
- CDR SM : Codere Says to Seek Preliminary Creditor Protection
- DBK GY : Former Merkel Chief of Staff to Join Deutsche Bahn: Saarbruecker
- DBK GY : Deutsche Bank Settles U.S. Lawsuit Over Mortgages: Reuters
- DTE GY : Sell Deutsche Telekom, Potential M&A Gains Priced in: Goldman
- DIE BB : D’Ieteren 4Q Car Registrations Drop 12% as Market Share Shrinks
- F IM : Could issue €1/€1.5bil Conv Bonds whe it lists on NYSE - FT (article attached)
- FNC IM : AgustaWestland Committed to Working With Indian Govt
- GLJ GY : Grenkeleasing 2013 New Business Rises 16%, Considers Stock Div.
- HEN3 GY : Beiersdorf, Henkel, L’Oreal May Gain Most From Buybacks: Liberum
- KPN NA : KPN Exercises Option to Increase Reggefiber Stake to 60%
- NXT LN : Next Brand Total Sales Nov.1-Dec.24 Rise 11.9%, Est. Up 3.8%
- OR FP : Beiersdorf, Henkel, L’Oreal May Gain Most From Buybacks: Liberum
- RCO FP : Remy Cointreau CEO Frederic Pflanz Resigns
- SY1 GY : Symrise Says Sun Life Financial Increased Stake Above 10%
- TEF SM : Telefonica Reviews Telecom Italia Brazil Unit Breakup, Sole Says
- VOD LN : Tata Tele Jumps After Report Vodafone in Stake Purchase Talks

>>> Brokers Upgrades & Downgrades

>>> Up
*SCHRODERS RAISED TO OVERWEIGHT VS UNDERWEIGHT AT BARCLAYS

>>> Down
*JUPITER FUND MANAGEMENT CUT TO EQUALWEIGHT AT BARCLAYS
*SOLOCAL GROUP CUT TO SELL VS NEUTRAL AT GOLDMAN

>>> PT Changes
*Saipem PT Raised to EU14 vs EU13 at BofAML

>>> Initiation
*VALMET RATED NEW BUY AT BERENBERG; PT EU7.6

>>> Country Sector Stock Call
none

FT : Fiat-Chrysler to seek NYSE listing this year

Carmaker Fiat-Chrysler is aiming to list in New York within the year, underlining the group’s emergence as a US-centric organisation following chief executive Sergio Marchionne’s successful broker of a full merger of the US group with its Italian partner.
In a long-awaited deal, Fiat announced on New Year’s day it would buy the 41.5 per cent of Chrysler that it does not already own from the Veba union healthcare trust for a total of $4.35bn.

The completion of the deal by January 20 will be followed by a shake up of the merged group’s corporate structure in line with its global footprint, banking sources said. Half of Fiat-Chrysler’s combined volumes come from North America.
Banking sources said CNH Industrial, a sister company to Fiat-Chrysler, is a template for the governance and corporate structure of a fully integrated Fiat-Chrysler. Born out of Fiat, the industrial goods group is a Netherlands-registered company, listed in New York, with a secondary listing in Milan and tax domicile in the UK.
Fiat shares rose 16 per cent on news of the deal to €6.92, the biggest intraday gain since 2009. The stock had risen 57 per cent in 2013.
Max Warburton, an analyst at Bernstein Research, said the costs and financing of the deal were more favourable to Fiat than the market expected. “The deal successfully secures Fiat’s operational and financial future,” he added.
Fiat, which already owns 58.5 per cent of Chrysler, will pay the trust $1.75bn in cash when the deal closes. Chrysler will contribute $1.9bn through a special dividend to complete the transaction for the 41.5 per cent stake.
Chrysler will also pay the trust $700m in four annual instalments, with the first to be made when the deal closes. Fiat said it would not need to raise cash to complete the deal. Fiat-Chrysler’s net debt will rise to about €10bn excluding pension contributions, said Philip Watkins, car analyst at Citigroup.
People familiar with Mr Marchionne’s thinking say a fully merged Fiat-Chrysler could issue a convertible bond in the region of €1bn to €1.5bn in tandem with its launch on the New York Stock Exchange to help ease that debt load.
The full merger of Fiat and Chrysler crowns Mr Marchionne’s decade-long turnround of the Italian and US carmakers and underlines his reputation as a consummate dealmaker. It also shifts focus sharply on to succession planning at the group.
People close to Mr Marchionne, one of the longest running car industry chief executives, expect the three-year business plan due to be presented in the spring to be his last triennial plan for the group.

(NYT) Hezbollah Moving Long-Range Missiles From Syria to Leb

Hezbollah Moving Long-Range Missiles From Syria to Lebanon, an Analyst Says

BEIRUT, Lebanon — Amid the chaos of Syria’s civil war, Hezbollah has been moving long-range missiles to Lebanon from bases where it had stored them inside Syria, including long-range Scud D missiles that can strike deep into Israel, according to an Israeli national security analyst.

The analyst, Ronen Bergman, who has close contacts with Israeli intelligence officials, said Thursday that despite Israel’s undeclared campaign of airstrikes in Syria to stop new deliveries, most of the long-range surface-to-surface missiles given to Hezbollah by its allies Iran and Syria have been disassembled and moved to Lebanon.

American intelligence analysts have also concluded that members of Hezbollah, the Lebanese Shiite militia, are smuggling components of advanced Russian-made antiship missile systems piecemeal into Lebanon from war-stricken Syria to avoid an Israeli air campaign, a United States official said Thursday.

As many as 12 Russian-made antiship cruise missile systems may now be in Hezbollah’s possession inside Syria, according to the American official, who said that the organization had smuggled at least some components from those systems into Lebanon within the past year, but that it did not yet have all the parts needed there. The transfers were first reported Thursday night by The Wall Street Journal.

Hezbollah, which is also Lebanon’s strongest political party, has a network of bases that were built inside Syria, near the border with Lebanon, to give the group strategic depth and to store the missiles, Mr. Bergman said. But with a nearly three-year insurgency threatening President Bashar al-Assad of Syria, an ally of Hezbollah, keeping the missiles in Syria is no longer as secure, Mr. Bergman said.

The missiles being moved, he said, include Scud D’s, shorter-range Scud C’s, medium-range Fateh rockets that were made in Iran, Fajr rockets and antiaircraft weapons that are fired from the shoulder.

Israel has struck inside Syria at least five times in 2013, seeking to destroy weapons systems bound for Hezbollah.

Israel carried out an air attack in Syria in July that targeted advanced Yakhont antiship cruise missiles, which could threaten Israeli naval forces. American analysts later determined that the strikes did not destroy all the missiles systems.

In addition to targeting the Yakhont missiles, Israel carried out an airstrike in late January 2013 aimed at another system provided by Russia: a convoy of SA-17 surface-to-air missiles that Israeli officials believed were destined for Hezbollah.

In May 2013, Israeli warplanes conducted two days of airstrikes that targeted, among other things, a shipment of Fateh-110 missiles — mobile surface-to-surface missiles that had been provided by Iran and flown to Damascus, Syria, on transport planes that passed through Iraqi airspace.

Israel is concerned that Hezbollah not acquire what it considers game-changing strategic weapons during the Syria chaos.

Mr. Bergman said that on the first day of the war between Hezbollah and Israel in 2006, the chief of the intelligence agency Mossad at the time, Meir Dagan, advised the government not to start an attack on Hezbollah in Lebanon without first hitting the militia’s bases in Syria, which were built on the strategy that Israel would not dare to strike Syria. The bases were believed to contain much of Hezbollah’s long-range missile capability, Mr. Bergman said.

Mr. Bergman’s account corroborated one given by a Syrian military officer in December 2012, at a time when rebels seemed to have momentum in their advances on Damascus.

The officer, who spoke over Skype from Damascus, said he no longer supported the government and wanted to defect but was waiting for the right moment, in the meantime acting as an informant for the rebels. He said government forces were dismantling strategic weapons and sending them to two locations "for safekeeping": the coastal province of Tartus that the government holds and south Lebanon, where Hezbollah holds sway.

The weapons, he said, were being sent in tractor-trailers with special coolers. The officer said his information came from another officer who was loyal to the government and with whom he had close relations, and from his own limited observations of the trucks being used to move the weapons.

After several contacts, the officer could no longer be reached, and the information could not be verified.

Anne Barnard reported from Beirut, and Eric Schmitt from Washington. Hwaida Saad contributed reporting.

FT : Return of inflation is inevitable

Return of inflation is inevitable

Markets are underestimating a coming rout in bond prices, and missing early signs of the return of inflation, according to the US mutual fund manager who has raised more money than any other in the past year. Investors have put billions of dollars behind Michael Aronstein and his bets that central banks will wait too long to end their crisis-era monetary expansion, triggering inflation spikes and a long bear market in bonds that might already be more than a year old. "They never fail to make that error," he says, "because they’re structured as bureaucracies and they have to wait until they have enough evidence to convince everybody in the room. "The only period that may be comparable to this is after the discovery of the New World, when all the Europeans looted all the gold and silver, new money out of the sky, a la the Bernanke Doctrine. You had, basically, a century of inflation in Europe. The tulip bubble didn’t come out of nowhere; that wasn’t just people’s appetite for flowers." Mr Aronstein’s Mainstay Marketfield fund, distributed by New York Life Investments, has been the talk of the industry. In 12 months, the fund has quadrupled in size to $18bn, giving him more firepower than many more famous hedge fund managers. Inflows had totalled $12.4bn by the end of November, according to data from Morningstar, more than any other actively managed mutual fund. Only a trio of index trackers from Vanguard attracted more cash last year. In part this is a legacy of how Mr Aronstein insulated investors from the worst of the financial crisis, losing 13 per cent in 2008 versus 37 per cent for the S&P 500, without foregoing any of the upside when markets rebounded over the next four years. The fund is also riding a wave of interest in so-called alternative mutual funds, which mimic hedge funds in giving their managers wide latitude to invest as they see fit, including by taking negative bets as well as positive ones – something that is instrumental in surviving a bear market. The Mainstay Marketfield fund can take positions in equities, bonds, commodities, exchange traded funds and derivatives. Financial advisers and asset management groups are pushing alternative mutual funds as a way for investors to diversify their portfolios away from traditional equity and bond funds, since equities are volatile and bonds could tumble in price as rates rise. Assets in US alternative funds jumped to $247.6bn at the end of November from $157.6bn at the end of 2012, Morningstar calculates. Mr Aronstein is not betting it will last. "We’ll start hearing complaints about how poorly we’re doing," he says, pointing out that 2013 was a year when simply following the US S&P 500 generated a total return of 32 per cent. The Mainstay Marketfield fund returned just under 17 per cent, held back by its geographical diversity and short positions. "It was a very simple year. And, as you can see, I’m drawn more to complexity than simplicity," he says. While his fund is relatively new – it was set up in 2007 – Mr Aronstein is a late bloomer when it comes to star fund managers. He began his career in 1979 at Merrill Lynch, where he was an investment strategist, and has worked at a string of boutique firms over the years. He has blotted out the modernity of Marketfield’s Midtown Manhattan headquarters by furnishing his office with a leather couch, dark bookshelves and antique porcelain trays, and his macroeconomically driven investment philosophy is unabashedly influenced by history. "All grand excesses have the same form, with different content," he says. "Japan was no different, in concept, than the ‘Nifty 50’ in 1972. We’ve got bonds now," Mr Aronstein says. He and his team pore over price data from hundreds upon hundreds of commodities and manufactured goods, and he highlights proteins – shrimp, beef, chicken – and US lumber among the areas where price spikes are already developing. It is outwards from these pressure points, he says, that the world will finally move from asset price inflation to real consumer price rises. And as that happens, bonds will tumble and investors will reassess the safety of emerging markets that till now have been fuelled by unprecedentedly cheap money. There are profits to be made buying the companies with pricing power and betting against those without, he says, and from concentrating investment in developed economies and staying cautious beyond. This year there are many billions more dollars hoping Mr Aronstein is right.

>>> Asian Update : Nikkei Closed HS-1,93% Sh.Comp-1,43%

Asian Market Update: China services PMI tracks the slowdown in the manufacturing sector; Risk aversion hits yen pairs

***Observations/Insights*** - China services PMI for December slipped to 4 month lows, giving the bears even more fodder after the overnight slide in twin manufacturing PMIs as well as the tough start for 2014 evident in the US session. Analysts have attributed the apparent malaise to the fading impact from the fiscal mini-stimulus on the mainland, while others will undoubtedly point to the start of the Fed taper this month. Incidentally, the latest Fed balance sheet data saw the first sequential decline in reserve bank credit in 4 months. Shanghai Composite and Hong Kong Hang Seng are leading the regional sell-off, down well over 1% in the morning session. Korea's Kospi is down by just over 1%, while the Nikkei is still closed for holiday.

***Economic Data*** - (CN) CHINA DEC NON-MANUFACTURING PMI: 54.6 V 56.0 PRIOR (2nd consecutive decline, 4-month low)

***Fixed Income/Commodities/Currencies*** - (CN) Daily Shibor fixings: O/N: 3.0060% v 3.1310% prior (8th consecutive decline, lowest since Sep 12th ); 1-week: 4.7110% v 4.9810% prior (2nd consecutive decline) - GLD: SPDR Gold Trust ETF daily holdings fall 3.6 tonnes to 794.6 tonnes (lowest since Jan 2009) - (US) Weekly Fed Balance Sheet Total Assets Week ending Jan 1st: $4.02T v $4.03T prior; Reserve Bank Credit: $3.980T (first decline since late August) v $3.989T prior; M1 y/y change: 8.6% v 8.6% w/w; M2 y/y change: 6.3% v 6.3% w/w - USD/CNY: (CN) PBoC sets yuan mid point at 6.1039 v 6.0990 prior setting (weakest Yuan setting since Dec 26th)

- Short squeeze in the Aussie and Yen pairs tested the patience of the momentum traders, with rare outsized rallies in those seemingly oversold currencies coming in the absence of meaningful regional news. AUD/USD hit 3-week highs above $0.8970, up over 80 pips on the day, despite the initial decline following China Services PMI data. USD/JPY fell some 70pips below ¥104.20, a 1-week low, also weighing on the yen crosses - EUR/JPY fell over 100pips below ¥142.30, CHF/JPY down 90pips below ¥115.80, and GBP/JPY saw the biggest drop of over 140pips toward ¥171 handle. NZD was also up on the greenback, rising over 50pips above $0.8230. EUR/USD and GBP/USD traded in relatively narrow 30pip ranges around $1.3660 and $1.6440 respectively.

***Speakers/Political/In the Papers*** - (CN) According to PricewaterhouseCoopers (PwC), China may see a record number of IPOs in 2014 after regulators allowed listings to resume - China Daily - (CN) Thailand imposes 0-33.32% dumping duties on China stainless steel - financial press - (CN) China issues additional IPO approvals for 5 companies - Chinese press - (CN) China State Council approves to form rare earth groups - Chinese press - (JP) According to a Kyodo survey, only 17% of major Japanese companies will authorize wage hikes in FY14/15 - (JP) Japan IPO activity expected to increase in 2014 for the 5th consecutive year - Nikkei - (IN) India Central Bank (RBI) Dep Gov Chakrabarty: India interest rates to remain elevated on inflation risk - (AU) According to UBS, Australia's latest monthly credit data showing banks lent A$6.4B to property investors in Nov vs A$6.2B for owner-occupiers; Concerned over fuelling a property bubble - Australian press - (KR) South Korea Pres Park's chief of staff: Pres Park is not considering reshuffling cabinet - Korean press - (KR) South Korea Finance Ministry: South Korea to allocate 65% of 2014 budget to H1 - (KR) South Korea Fin Min Hyun: closely monitoring KRW exchange rate movements; Need to monitor JPY rates

***Equities*** Market Snapshot - Nikkei225 closed, S&P/ASX -0.4%, Kospi -1.1%, Shanghai Composite -1.4%, Hang Seng -1.93%, Mar S&P500 flat at 1,826, Feb gold +0.4% at $1,230, Feb crude oil -0.5% at $95.42/brl

US markets: - FEYE: Announces Acquisition of Mandiant; To issue to 21.5M shares and options to purchase shares of FireEye stock and pay ~$106.5M in cash; Raises Q4 Rev guidance to $55-57M v $54Me (guided $52-54M prior); Guides FY14 Rev $400-410M following Mandiant acquisition; +22.7% afterhours - GGS: Announces the Sale of a 20,000 Channel Recording System for $9.5M; +14.9% afterhours - RECN: Reports Q2 $0.18 v $0.15e, R$146M v $142Me; +5.3% afterhours

Notable movers by sector: - Consumer discretionary: Jiangling Motors 000550.CN -1.3% (Dec sales result); Chongqing Changan Automobile 000625.CN +2.6% (FY13 guidance) - Industrials: Hyundai Mipo Dockyard 010620.KR -4.5% (sets targets for 2014) - Financials: Kowloon Development 34.HK -3.8% (issues profit warning) - Materials: Inner Mongolia Baotou Steel Rare Earth 600111.CN +3.1%, Rising Nonferrous Metals Share 600259.CN +1.0%, China Minmetals Rare Earth 000831.CN +1.9% (China approves to form rare earth groups) - Healthcare: North China Pharmaceutical 600812.CN +4.6%, North China Pharmaceutical 002007.CN +1.4% (top 3 Hepatitis B vaccine producers confirm to halt production) - Energy: China Oil HBP Science & Technology 002554.CN +4.1% (awarded orders) - Technology: Eternal Asia Supply Chain Management 002183.CN +4.0% (to further invest in supply chain management); Guangzhou KingTeller Technology 002177.CN +10.0% (named as ICBC supplier); Shanghai Kingstar Winning Software 300253.CN +4.5% (plans acquisition)

>>> US Close : Dow-0,82% S&P-0,89% Nasdaq-0,80%

Closing Market Summary: Stocks Begin 2014 on Lower Note

After gaining nearly 30.0% in 2013, the S&P 500 exhibited a bit of a hangover in its first session of 2014. The benchmark index fell 0.9% as all ten sectors registered losses. Stocks were pressured from the opening bell as cautious action in Europe weighed on the early sentiment. In all likelihood, the slide caught a number of participants off guard given the understanding that the first few days of a new year are known to have a favorable bias with inflows into IRA accounts,bonus money being put to work, and new money coming off the sidelines. That did not happen today as sellers maintained control throughout the trading day.

Three cyclical sectors—energy (-1.3%), industrials (-1.3%), and technology (-1.1%)—slipped behind the broader market at the open and their underperformance weighed for the remainder of the session.

The energy sector followed in the lead of crude oil as the energy component tumbled 3.0% to $95.49/bbl. Meanwhile, industrials were pressured by defense contractors and transports. The PHLX Defense Index lost 1.3% while The Dow Jones Industrial Average fell 1.5%. Elsewhere, the technology sector struggled to gain traction as its largest component, Apple (AAPL 553.13, -7.89), weighed after Wells Fargo downgraded the stock to ‘Market Perform' from ‘Outperform.' Chipmakers also lagged, sending the PHLX Semiconductor Index lower by 1.4%. Even though three large sectors pressured the broader market throughout the day, there was some relative strength in other heavily-weighted groups. On that note, consumer discretionary (-0.5%), financials (-0.6%), and health care (-0.6%) outperformed. Notably, the financial sector owed some its outperformance to Bank of America (BAC 16.10, +0.53), which gained 3.4% after Citigroup upgraded the stock to ‘Buy' from ‘Neutral.' JPMorgan Chase (JPM 58.21, +0.11) also bucked the downtrend, climbing 0.2%. Treasuries rallied throughout the day as the benchmark 10-yr yield slid from 3.04% to 2.99%. Trading volume was on the light side as just over 610 million shares changed hands on the floor of the New York Stock Exchange. Today's economic data was limited to three reports, but neither had much of a trading impact: o Weekly initial claims dipped to 339,000 from an upwardly revised 341,000 (from 338,000) while the consensus estimate was pegged at 333,000. Notably, there was no indication from the Department of Labor that seasonal adjustments continued creating difficulties.

o Construction spending in November rose 1.0% while the consensus expected an increase of 0.8%. The November gain followed an upwardly revised 0.9% increase (from 0.8%) in October. Total private construction, paced by a 1.9% increase in residential spending, was up 2.2% and led the overall advance. Nonresidential private spending jumped 2.7%, paced by gains in the commercial (+4.7%), office (+4.6%), power (+3.3%), and manufacturing (+1.2%) spaces. o The December ISM Index checked in at 57.0, which was pretty much in-line with the consensus estimate of 56.9. The December reading was the second highest reading for the year, trailing only the 57.3 reading seen in November. o There is no economic data on tomorrow's schedule.