TheChek News Flow

* Global Economics: We now expect global growth of 2.9% in 2013, a touch lower than in 2012. The outlook for 2014 is cheerier. We expect the global economy to achieve above-trend growth (3.7%), supported by a rebound in developed markets (led by the US and the euro area). The spread between EM and DM growth rates is expected to be the smallest since 2002. For additional details on Emerging Markets, please see the EM Quarterly.

* US Economics: Our base case remains for the FOMC to announce a modest $10bn taper on January 29. However, the strong October nonfarm payrolls report boosted the risk of an initial tapering move in December.

* Global Equity Strategy: We stick to our long-standing overweight of equities and our end-2014 target of 1,900 on the S&P 500 but we see a heightened risk of near-term consolidation. Within a European portfolio, we believe investors should be overweight peripheral Europe.

* Technical Analysis: Japan resumes its core bull trend, and we look for the Nikkei to retest its year high and secular downtrend at 15945/16155, and USDJPY to retest 103.10/74. Copper looks to be resuming its core bear trend. We stay bearish Gold for $1157/54. We look for 10yr US/Germany to test the 2005/2006 wides.

* FX Strategy: We have been bullish on the dollar and now believe that the long-anticipated USD rally could be about to commence. With the ECB likely to have been shocked by the further disinflation in Europe over recent months, we also downgraded our forecasts for EURUSD.

* European Rates: We were neutral on outright duration but the surprise rate cut from the ECB has changed this view – we are now modestly bullish.

* US HY Credit Strategy: We had been overweight HY cash in 4Q but with the Liquid U.S. High Yield Index (LUHY) rallying 2% in October and spreads at post crisis tights, we move to a more neutral stance in HY cash.

The unstinting demand for retail properties in Europe’s prime luxury locations, coupled with the limited availability of top retail spots, has helped boost rents on a number of luxury streets over the past year.

According to research from global real estate advisor Cushman & Wakefield, while retail rents in prime luxury areas across Europe rose a healthy 5.7 percent in the year to June 2013, a number of streets notched up major gains. Paris’ Avenue des Champs-Élysées saw rents rocket 38.5 percent to $1,601 a square foot annually, making it the most expensive retail location on the continent. Meanwhile, rental levels on Paris’ Rue du Faubourg Saint-Honoré and Avenue Montaigne surged 25 percent to $889 a square foot, while levels on London’s New Bond Street gained 15.6 percent to $1,047 a square foot.

Peter Mace, head of central London retail at Cushman & Wakefield, offered some insight into luxury retail property’s robust performance.

• As retailers tend to hold on to property in prime luxury areas, a lack of liquidity in the market makes the demand for rarely available properties intense. One jewelry house Mace is representing has been “waiting for two years” to get a spot on New Bond Street. As a consequence, retailers who want to gain representation on prime retail streets will pay tens of millions of pounds in key money — a onetime payment to an existing tenant — to take over its lease. On top of this, rental costs rise as 10 brands compete for each property that becomes available on New Bond Street. “There’s a complete imbalance of supply and demand,” said Mace.

• The popularity of Europe’s prime luxury areas among international tourists means a presence there is a must for top labels.

“Most of these luxury brands rely on international tourism [for sales],” said Mace. “And it’s not just in the summer months, it’s all the time.” That means rents in prime luxury areas outpace those in locations slightly off the tourist track, such as London’s King’s Road and Kensington High Street, which rely on spending by locals. “There, you’ve seen rents stagnate.”

• There’s increasing hunger for large “maison”-style stores in prime locations, encouraging retailers to expand their existing stores or secure bigger spaces, thereby fueling demand. Christian Dubois, managing director of Cushman & Wakefield in Paris, noted that “established players inaugurating refurbished formats to face increasing competition” is one of the factors driving rents in Paris’ luxury areas.

Meanwhile, in London, Chanel and Belstaff both opened large-scale stores on New Bond Street this year, joining Louis Vuitton’s maison, which bowed on the street in 2010. Mace said that facing competition from online retail, retailers are “trying to reinvent themselves and [make shopping] more of an experience.” Landlords are also driving this trend — Mace noted that London’s Crown Estate is striving to reduce the number of stores on Regent Street but make each unit larger, encouraging brands to carry their full product range in those stores, thereby being more of a draw to shoppers.

• Mace believes rents will continue to make steady progress in prime luxury areas, with bigger gains ahead for pockets of streets that are undeveloped. The north end of New Bond Street, for example, is being redeveloped as part of Transport for London’s Crossrail project. While rents in that area are relatively low, in 2017, when the Crossrail project is completed, Mace predicts the rents will “shoot up.”

Airlines -1% Brent back above Fridays close (sector was strong yday) Algeta +15-20% Bayer in prelim talks with Board for t/over @ NOK 306/sh Bayer unch In prelim talks to acquire Algeta (NOK 306/sh, 27% prem) Britvic +2% Stmnt reads well (mgns improving). New contract w/ Pepsico Diageo -1% Negative read from RCO FP warning (poor EU, China weakness) Genmab +1% Raising revenue guidance but still not where consensus is Greencore +1% OP inline but EPS 5% on lower interest / tax charges Hugo Boss -1-2% Negative comments from Inv Day (slower pace of mgn impvt) LVMH -1% Negative read from poor China commments from RCO FP M&B unch Net a small beat - outlook still cautious Miners unch China unch, Copper +0.4%, OZ miners -0.5% Pernod -1% Negative read from RCO FP warning (poor EU, China weakness) Peugeot +2% Confirms Carlos Tavares as new CEO (was specualted yday) R.Cointreau -5% Warning. OP to fall dble digits (vs ~7.5%) on China wkness Repsol +3-5% Spec Argentian Gvt may offer comp for REP's stake in YPF Sacyr +5% Positive read from Repsol news (Sacyr own ~ 9.4% REP SM) Sev Trent unch H1 inline and reit FY outlooks Yara +1% CMD comments small +ve (To buy OFD Holdings for $425m)

Carlyle to Buy Firm That Invests in Hedge Funds Deal Continues Firm's Expansion Into Private Equity

Carlyle Group CG +1.08% LP said it will acquire Diversified Global Asset Management Corp., a Toronto-based investor in hedge funds, as the firm continues to expand from private equity.

The deal is valued at $33 million, plus a possible $70 million if the hedge-fund firm achieves a certain level of performance.

Carlyle is a private-equity powerhouse but until recently hadn't developed a big presence in other businesses as some rivals have, including Blackstone Group BX +2.86% LP, which runs a large real-estate operation. In 2011, Carlyle began to focus on advising intuitional investors on so-called alternative investments, which include everything from real estate to timber. That year, Carlyle purchased AlpInvest Partners, an adviser to investors on private equity.

Earlier this month, Carlyle acquired Metropolitan Real Estate Equity Management LLC, which invests in global real estate.

The deal for DGAM gets Carlyle into the business of investing in hedge funds. Carlyle already owns large stakes in several hedge funds, though it hasn't had a presence in the business of investing in groups of hedge funds for clients.

This industry, called the fund-of-funds business because these firms handle matters such as developing funds of hedge funds for big investors, has been under pressure in recent years. More investors are investing directly in hedge funds and resisting the fees that fund-of-funds firms charge, especially since hedge-fund returns have been poor relative to the overall market since 2009.

Still, DGAM has been able to double assets under management to about $6.7 billion in the past three years, executives of the firm say, by searching for funds with niche investment strategies, tailoring customized products for clients and embracing unconventional moves, such as investing in reinsurance and buying protection ahead of the 2008 market collapse. The firm's clients include pension funds, endowments and sovereign-wealth funds.

DGAM Chief Executive George Main said his firm has grown and generated strong performance, but still was "a relatively unknown brand from Canada."

He said he expects the Carlyle deal to allow his firm to expand is client base.

Carlyle is using its own cash for the investment, rather than money from one of its funds.

"Increasingly, investors don't want to be approached with products, they want help from an organization to think through the different options available to them," including hedge funds, private equity and other kinds of investments, said Jacques Chappuis, who runs Carlyle's Solutions group, which works with institutions investing in alternative investments.

Other private-equity firms also have moved into the hedge-fund business. Last year, KKR KKR +1.72% & Co. bought Prisma, for example.

DM growth inflection, EM reforms to drive equities higher in 2014

*The DM growth inflection to finally aid EM in 2014 We expect EM GDP growth to rise slightly to 5.3%, and earnings to grow 8% in 2014. With some valuation expansion in China and Russia, we expect 18% price returns in 2014 (vs. 0% in 2013) similar to DM on a volatilityadjusted basis. US tapering and regional elections could be destabilizing in 1H, but EM should rebound as the DM recovery becomes more evident.

* Countries: DM-facing, C/A surpluses, and reform We upgrade China and Russia to Overweight, both of which have embarked on reform processes and are working more closely together in energy. We keep Korea and Mexico Overweight on DM growth acceleration. Sector P/E dispersion is wide but should decline: low-multiple areas (SOEs, Exporters) may re-rate on better DM growth and EM reforms. High-multiple sectors (Defensives, Domestics Cyclicals) may de-rate due to macro rebalancing.

* Themes we’re watching: Tapering, BRICs, flows US tapering and regional C/A deficits remain an issue for EM but the delay in tapering has allowed some countries to move closer to stability, reducing the magnitude of EM vulnerability. The 5-yr underperformance of BRICs vs. EM may finally reverse mid-year. EM bond flows may slow more than equity, which could drive continued divergence between EM equity & currency.

* What to do: Buy EWY FXI EWW RSX; exporters Given a more upbeat outlook, we would focus on long-exposure in our overweight countries, as well as Exporters, while fading Domestic Cyclicals and Financials especially in C/A deficit countries.

The shift to fourth-generation networks will be faster than the take-up of previous generations of mobile technology in most parts of the world, marking an unprecedented shift in mobile communications. The number of superfast mobile internet connections worldwide is forecast to pass 1bn by 2017, according to the GSMA, the organisation that represents the interest of mobile operators worldwide.

The rapid take-up means that more than one in eight mobile connections will use superfast 4G networks within the next four years, up from just 176m connections at the end of 2013. The technology, also known as LTE, offers rapid internet speeds rivalling fixed-line broadband networks, opening up a host of new applications and services for smartphone providers. Almost 500 LTE networks are forecast to be in service across 128 countries by 2017, roughly double the number of LTE networks today. The GSMA said the shift to 4G networks will be faster than the corresponding move from 2G to 3G technology over the past decade. Networks using 3G technology were initially slow to be adopted, in part owing to the expense of the spectrum acquired to use the networks in regions such as Europe and lack of smartphones and other connected devices. The GSMA highlighted a number of factors driving the growth of 4G, such as the more efficient allocation of spectrum to mobile operators, the availability of affordable suitable devices and the implementation of tariffs designed to encourage adoption of high-speed data services. The study calculates that about a fifth of the global population is within 4G network coverage range, which will rise to about half of the world’s population by 2017. In the US, LTE networks already cover more than 90 per cent of the population and account for almost half of global connections. However, Asia will grow to account for almost half of all LTE connections by 2017 as networks are rolled out in major markets such as China and India. China, the world’s largest mobile telecoms market, will be officially open to superfast mobile services next month when China Mobile begins selling 4G tariffs in Beijing, Guangzhou and Chongqing. China Mobile, the country’s largest mobile group with about 750m mobile subscribers, is expected to be granted a 4G licence in December. The state-backed group has been running trial services in cities in China. China’s government wants to catch up with the advances seen in countries such as South Korea, which is the most advanced mobile market in the world given half of total mobile connections are running on LTE networks. The GSMA study also found that LTE users consume 1.5GB of data a month on average, almost twice the average amount consumed by non-LTE users. In developed markets, operators have found that LTE can generate an average revenue per user uplift of between 10 and 40 per cent. “Since the launch of the first commercial 4G-LTE networks in late 2009 we are seeing deployments accelerate across the globe,” said Hyunmi Yang, chief strategy officer at the GSMA. “Our findings show that the global LTE market is at a tipping point.”

Argentina is close to striking a deal with Spanish oil group Repsol to compensate the company for the nationalisation of its YPF unit last year which prompted a diplomatic crisis between Buenos Aires and Madrid. A delegation from Spain, including José Manuel Soria, industry minister, and several executives from Repsol, met Argentine officials in Buenos Aires on Monday to reach a preliminary agreement over compensation for the Spanish company, people close to the talks said.

Repsol said in a statement on Monday night that it had noted the agreement between the governments and would consider its value to its shareholders ahead of a board meeting scheduled for Wednesday. Argentina, led by president Cristina Fernández, expropriated Repsol’s majority stake in YPF, its former state oil company, last year after accusing the company of failing to invest sufficiently in the country’s energy sector, a charge Repsol vehemently denied. Repsol was seeking at least $10.5bn in compensation from Buenos Aires and had filed international arbitration claims to block further development of YPF’s assets, which included one of the world’s largest recent discoveries of shale gas, the Vaca Muerta field. No figure for any compensation was mentioned in an official announcement from the Argentine government, which was represented at the meeting by Miguel Galuccio, YPF president, and Axel Kicillof, the recently appointed minister of economy and close Fernández ally, said people briefed on the talks. Spain’s El Mundo newspaper reported that the Argentine government had offered Repsol up to $5bn in debt backed by the country’s government. Repsol declined to comment on what the possible value of any agreement might be. Argentina’s government said an agreement had been reached as to how much Repsol would be compensated in liquid assets and that both parties would drop legal action under way. YPF said Mr Galuccio was “very happy” with the agreement, describing it as the best possible scenario as it could clear the way for YPF, Repsol and Mexican state oil company Pemex to develop Argentina’s shale reserves in the Patagonian Vaca Muerta field. Asked whether Pemex may now participate in the development of Vaca Muerta, a spokesman said: “That’s one of the things that is being negotiated.” The possible agreement comes as Repsol’s management has come under pressure from Pemex, its second-largest shareholder, to strike a settlement with Buenos Aires. Emilio Lozoya, Pemex director-general – who was present at the meeting on Monday, people briefed on the talks said – had in the past month attacked the pay levels of Antonio Brufau, Repsol’s executive chairman.

President Barack Obama will face a decisive test of his influence over Senate Democrats in December when he tries to fend off sanctions legislation that he believes could scupper nuclear negotiations with Iran. Senior members of both parties have called for new sanctions after rushing to criticise the historic interim agreement that was reached with Iran at the weekend, however some of the proposals might not clash with the next round of nuclear talks.

At a time when his credibility has been badly damaged by the healthcare debacle, the president will need to secure the support of Democratic leaders in the Senate, especially majority leader Harry Reid, if he is to avoid an embarrassing congressional rebuff to his efforts to negotiate a longer-term agreement with Iran over its nuclear programme. Mr Obama used a speech on Monday to take on the domestic critics of his Iran policy who are calling for new sanctions. “Tough talk and bluster may be the easy thing to do politically,” Mr. Obama said. “But it’s not the right thing to do for our security.” The deal signed on Sunday places caps on most of the central parts of Iran’s nuclear infrastructure, in return for sanctions relief the US calculates at $6-7bn. The agreement gives negotiators six months to try and reach a final agreement that would require Iran to roll back its nuclear programme in exchange for lifting more sanctions. The interim agreement also says that the US will “refrain from imposing new nuclear-related sanctions” during the six months of the final talks. Mr Obama and secretary of state John Kerry are expected to begin lobbying against new sanctions this week, despite the Thanksgiving break. Congress is in recess until December 9. “The early read from Congress is that even some hawks are predisposed to giving the interim deal a chance,” said Cliff Kupchan, an analyst at the Eurasia Group. However, he said that it was still possible that Congress could become a major complicating factor in the next stage of the talks. The central figure in the forthcoming sanctions debate in Congress is likely to be Mr Reid. Last week, he signalled that he would support new sanctions legislation, however he adopted a more nuanced position on Monday. “When we come back [from recess], we’ll take a look at this to see if we need stronger sanctions,” he said in an interview on NPR. Mr Reid said that he had discussed the interim deal with Israeli prime minister Benjamin Netanyahu, who called it a “historic mistake”. However, he added: “We all have to acknowledge that it’s an important first step.” Among Democrats, the sharpest criticism has come from Charles Schumer, the New York senator, who said that the “disproportionality of this agreement makes it more likely that Democrats and Republicans will join together and pass additional sanctions when we return in December”. However, the deal was also warmly welcomed by other leading Democrats, including California senator Dianne Feinstein, who called it a “significant step toward solving one of the most difficult security challenges facing the world today.” Tim Kaine, the Virginia senator, said that “this deal could bring us closer to a world less threatened by weapons of mass destruction.” The first priority for the administration will be to prevent any sanctions legislation that seeks to impose preconditions on the final-stage negotiations with the Iranians. A bill proposed last week by Bob Corker, a leading Republican senator, would set a strict timeframe for the next round of talks and would establish demands for what should be in the final agreement. Other senators have proposed bills that would insist Iran could not conduct any uranium enrichment under a final agreement – a condition US diplomats believe the Iranians would never accept. Beyond that, the administration will also try to finesse proposals that impose new sanctions if a final agreement is not reached – an option that is now being pushed by the powerful American Israel Public Affairs Committee. Although the White House has said that Iran will face new sanctions if the talks collapse, a US official said on Monday that it would be “unhelpful” to pass such a measure during the negotiations. “Even if the sanctions do not kick in until the talks fail, it would still anger the Iranians,” said Mr Kupchan. “The last thing [Iran President Hassan] Rouhani needs is for his hardliners to come out and start saying ‘look what the Americans are trying to do to us’”. Administration officials argue that it would be simple to pass new sanctions if the talks fail, so while legislation can be prepared at the moment, there was no need to actually approve a bill. European officials said on Monday that the talks could potentially extend into a second six month period if a deal is not reached by May, however such a proposal is likely to be met with stiff resistance in the US Congress.

European Equity Markets to Rise by 14% in 2014, Nomura Says

--> Sees total return of 17%. * Driving force likely to switch to earnings growth rather than multiple expansion * Says earnings growth can come from continued external demand, early signs of some domestic recovery and margin expansion greater than consensus expectations * Over longer horizons, says falling risk premium and flows back into asset class likely to add support; within mkt, retains a pro-Risk and anti-Quality stance * Within Europe, remains Overweight Spain, Italy, Germany, Sweden, and Underweight U.K., Switzerland, Belgium * “Selectively” buys more cyclicals, specifically Airlines, Logistics and selected Capital Goods to be Overweight those sectors * Cuts Insurance, Telecoms to Neutral vs Overweight * Reduces size of Underweight on Healthcare * Main portfolio Overweights in Banks, Asset Managers, Industrials, Airlines, Logistics, Media, Tech * Has zero positions in Mining, Consumer Staples, Utilities * Additions to European Recommended Portfolio: Lufthansa, Ryanair, Deutsche Post, DSV, HeidelbergCement, SKF, Schneider Electric, Novartis, Sanofi, Alcatel-Lucent, WPP * GlaxoSmithKline, Ericsson, Hochtief, Legal & General, TeliaSonera, Reed, ArcelorMittal removed

US Market closed on weaker note before thanksgiving break, sell off on last hour pushed S&P on lows, trading voluems were low at 620m shares ...VIX @ 12.79 +4.32%...BRazil-1.02%...BOJ released the minutes of its Oct 31st meeting, containing no less than 3 dissenting voices out of 9 board members with a minority view. While themajority said the BOJ 2% inflation target can still be achieved toward the latter half of the 2-year timeframe, the dissenters said it may be difficult to reach the target. One member said inflation already peaked and noted Yen weakness would be temporary. Another member said BOJ credibility may be undermined if the time frame is not met, requiring a more formal warning. All 3 members' requests for language changes were voted down by the majority...PBoC Gov Zhou reiterated China central bank will preserve "prudent" monetary policy but also expressed some further support on widening the yuan band. Euro currency rose against the dollar and on the crosses after the PBoC said EUR is an important part of China's FX reserve management system. PBoC was also positive on French govt debt...Nikkei -0.67%...Shanghai -0.25%

Eur$ 1.3530 S&P Fut +0.15% European Fut -0.05%

Keep an eye on :

- ALGETA NO : Bayer Proposes Preliminary Offer for Algeta at NOK336/Shr - BNP FP : Galeries Lafayette and BNP Paribas locking horns on valuation of LaSer Cofinoga - ESSR LN : Essar Energy to sell majority of non-performing or non-core E&P assets overseas, India to raise money for growth  - FCC SM : Spain's FCC May Sell 51% of Renewable Power Unit, Expansion Says - G IM : Generali Lack of Capital Slows Down Recovery, Bernstein Says - GEN DC : Genmab Reaches First Daratumumab Milestone, Boosts Forecasts - GOGL NO : Reports Q3 EBITDA $31.9M v $22Me, R$78.8M v $56.5M y/y, Guides Q4 underlying operational results to be in line with or better than Q3. - OR FP : L'Occitane -2% on numbers in HK... - ORC FP : Orco: Radovan Vitek likely to gain full control of company and subsequently to sell several Orco’s assets - RCO FP : Remy Sees ‘Substantial’ Fall in FY Current Oper. Profit - RXL FP : Rexel Says Organic Sales Growth Will Outperform in Medium Term - TIT IM : Telecom Italia Investor Findim Lacks Votes to Revoke Board: Sole - TNET BB : Telenet in Talks to Buy Brutele Cable in Brussels, L’Echo Says - YARA NO : Yara Agrees to Buy OFD Holding for Enterprise Value of $425m - YARA NO : Yara Sees EPS of NOK19 in Supply-Driven Market Scenario