TheChek News Flow

Weekly Market Update: Janet Yellen's World

- This was the week that Janet Yellen put her stamp on global markets. The Fed tapered again in Wednesday's rate decision and dropped its 6.5% unemployment threshold, surprising nobody. But during the post-decision press conference, Yellen suggested the Fed would consider hiking rates as soon as six months after the end of QE3. Under a strict interpretation, if asset purchases end in November of this year as expected, rate hikes would arrive in the second quarter of 2015. Global markets were very choppy in the remainder of the week as participants recalibrated positions and worked out the implications of Yellen's verbal guidance. In other news, Russia absorbed Crimea and incurred retaliatory sanctions from the US and EU. In China, the PBoC widened the daily yuan trading band to 2% from 1% and appeared to continue its campaign to halt hot money inflows. The impact of data reports was pretty muted overall. For the week, the DJIA gained 1.4%, the Nasdaq rose 0.7%, and the S&P500 added 1.3%, touching a fresh record level on Friday before retreating from highs.

- In the statement accompanying Wednesday's rate decision, the FOMC formally dropped the 6.5% unemployment threshold. In its place, the FOMC said that in determining how long to maintain ultra-low rates, assessment of progress "will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments." Many observers seemed to believe that Yellen's six-month comment was a slip of the tongue and was not intended to reshape forward guidance, especially after the Fed just dropped its quantitative unemployment threshold. Moreover, Yellen was emphatic that markets should not make strict interpretations and reiterated what all of her colleagues and former chair Bernanke have repeated again and again: the first rate hike is highly data-dependent and will reflect a "balanced judgment" about prospects both for labor market slack and inflation pressure.

- Minneapolis Fed President Kocherlakota was the sole dissenter to the FOMC decision. Kocherlakota has tended toward the dovish end of the spectrum and his dissent was rooted in concerns about the labor market. He warned that the new guidance weakened the Fed's commitment to its 2% inflation target and does not provide any information on the speed at which the Fed wants to reach full employment. St. Louis Fed President Bullard said that Yellen's comments on the timing of rate hikes was not a change in policy and was simply referring to market expectations about what was meant by a "considerable period."

- US bond traders reacted to the Fed statement swiftly by aggressively selling the middle and short end of the US curve. Ultimately the Fed offered up very little in the way of new information regardless, expectations have crept in for a little tighter policy next year; 2015 fed fund futures are now fully pricing in at least a 50 basis point rise in rates to begin by mid-summer. Previously traders had seen a greater likelihood of only 25 basis point hike to come sometime in the middle part of the second half. The 5-year/30-year spread has compressed to its flattest level since the summer of 2012. For the week the rate on the 30-year has climbed only marginally and the 10-year continues to hold near 2.75%, backing up a modest 10 basis points, while the 5-year is up some 20 basis points. Supply looms next week: $96B in 2-, 5- and 7-year notes could be challenging and keep pressure on the belly of the curve. Note that spot gold sank in the second half of the week, giving up 3.5% after the FOMC decision.

- The Fed released the first component - stress test results - of its Comprehensive Capital Analysis and Review (CCAR) this week. Twenty nine of 30 banks passed the severely adverse scenario, which included a 4% jump in the unemployment rate, 4.75% negative GDP growth, a 50% decline in equity prices and a 25% decline in real estate prices. Zions Bancorp was the only institution that would not remain well-capitalized with Tier 1 common equity ratios of at least 5.0% under the stress scenario. The second component of CCAR, including the Fed's evaluation of each firm's capital plans, dividends and buybacks, will be disclosed Wednesday, March 26. Thanks to CCAR and higher rate expectations, both regional and tier-one banks saw robust gains this week, with the exception of Zions, whose shares lost nearly 5% on Friday.

- Russia formally absorbed Crimea this week, drawing US sanctions against various high-level Russian officials and a few selected institutions, most notably Bank Rossiya, a key firm used by the Putin regime and Geneva-based Gunvor, the world's No. 4 oil trading company. The European Union discussed possible sanction options but has taken little concrete action against Russia besides freezing military ties and sanctioning a few individuals. The EU also signed the political sections of the association agreement with Ukraine. Both S&P and Fitch have cut their sovereign outlooks on Russia to negative.

- FedEx missed earnings and revenue expectations in its third quarter report, and like so many firms before it blamed the weather. FedEx's CEO stated that "historically severe winter weather significantly affected our third quarter earnings. On days when the weather was closer to normal seasonal conditions, our volumes were solid and service levels were high." Nike reported very good third quarter results, but made troubling comments during its conference call, warning that FX headwinds would continue to reduce EPS in Q4 and into 2015, and would reduce FY15 earnings. Oracle missed top- and bottom-line expectations slightly in its third quarter and its fourth quarter outlook was also a bit soft. Analysts highlight the firm's high spending levels to catch up with a horde of cloud computing rivals.

- Ahead of March quarter earnings season, AK Steel and Nucor both offered their customary pre-earnings guidance statement. Both firms warned that EPS would be well below expectations, citing extreme weather that has disrupted customer demand. AK also cited a planned blast furnace outage and legal settlement charges.

- EUR/USD made a few last stabs at 1.3950 early this week before the FOMC decision reversed sentiment and strengthened the greenback. The pair hit two-week lows around 1.3750 on Thursday. The yen weakened in a more restrained fashion after the FOMC, rising from 101.60 to around 102.60 before strengthening a bit through week's end.

- The Chinese Yuan has now given back all of its 2013 gains as the PBoC lets the currency weaken further to curb hot money inflows. Last weekend, the PBoC widened its daily yuan trading band from 1% to 2%. USD/CNY spent most of the week above 6.20, raising concerns about a specialized financial product, originally used to hedge foreign exchange risk, called a trade redemption forward contract (RFC). The contract pays investors if the yuan remains strong and will start costing dearly as USD/CNY weakens past 6.20. In a report out recently, Morgan Stanley wrote there had been $350 billion RFCs sold since the beginning of 2013 and $150 billion might still be outstanding.

- Japan announced another trade deficit which was wider than expected but still smaller than the past three months on adjusted basis. Both exports and imports were up in high-single digits, for a 12th and 16th consecutive rise, respectively. Trade components also showed some improvement, with double-digit y/y exports increase to Asia, China, and Europe as well as a 6.4% drop in the bill for crude oil imports.

Closing Market Summary: Stocks End Strong Week on Cautious Note

The stock market finished an upbeat week on a lower note with the tech-heavy Nasdaq Composite losing 1.0% while the S&P 500 shed 0.3% with four sectors ending in the red.

Equities began the day on a strong note with no economic data to influence the trading sentiment; however, quadruple witching and index rebalancing contributed to additional volatility and volume. With nearly two billion shares changing hands at the New York Stock Exchange, today's final volume was less than 500 million below the 2.44 billion collective total registered between Monday and Thursday.

The S&P 500 surged out of the gate, notching a fresh intraday record high at 1884.00, but was unable to establish a new closing high above the March 7 settlement of 1878.04. After spiking at the open, the benchmark average spent the rest of the session in a steady retreat.

While the S&P 500 did not slip into the red until just before 14:00 ET, the Nasdaq underperformed from the open, making its first appearance in negative territory around 10:00 ET. Biotechnology pressured the index from the early going with the iShares Nasdaq Biotechnology ETF (IBB 246.01, -12.24) spending the session in a steady slide before settling lower by 4.7% on heaviest volume since October 2005. The ETF ended 9.9% below its February high, trimming its 2014 gain to 8.4%. In addition to pressuring the Nasdaq, biotechnology contributed to considerable weakness in the health care sector (-1.5%), which ended well behind the remaining nine sectors.

Although no other sector posted a loss larger than 0.6%, other top-weighted groups like technology (-0.5%) and consumer discretionary (-0.6%) underperformed while financials (+0.01%) finished a bit ahead of the broader market after being up as much as 1.1% at the start of the session.

Losses in the technology sector were paced by chipmakers with Intel (INTC 25.17, -0.25) falling 1.0% while the broader PHLX Semiconductor Index lost 0.9%. On the software side, shares of Symantec (SYMC 18.20, -2.71) caught a virus, plunging 12.9% after the company unexpectedly terminated Chief Executive Officer Steve Bennett, naming Michael Brown interim president and CEO.

Elsewhere, the discretionary space was pressured by homebuilders and Nike (NKE 75.21, -4.06). Top-weighted homebuilders posted losses across the board with the iShares Dow Jones US Home Construction ETF (ITB 24.17, -0.40) slumping 1.6%. For its part, Nike tumbled 5.1% after its cautious outlook overshadowed above-consensus earnings and revenue.

Even though three of the four largest sectors underperformed notably, the broader market was kept from registering additional losses by the relative strength among the second-tier sectors. Consumer staples (+0.03%), energy (+0.3%), and industrials (+0.1%) all finished ahead of the broader market. Materials (+0.5%), telecom services (-0.03%), and utilities (+0.8%) also ended ahead of the S&P 500, but their impact was limited since three sectors account for just 9.9% of the entire market.

With stocks under pressure, participants displayed demand for volatility protection, sending the CBOE Volatility Index (VIX 15.00, +0.48) higher by 3.3% after the near-term volatility measure tested early March lows at the start of the session.

Treasuries spent the entire day in a steady climb from their morning lows. The benchmark 10-yr yield fell three basis points to 2.74%.

* Russell 2000 +2.8% YTD  * Nasdaq Composite +2.4% YTD  * S&P 500 +1.0% YTD  * Dow Jones Industrial Average -1.7% YTD 

Special Situations: Verifone Systems (PAY US)

trade action flash - HOLD - $35 mid-point tgt reached /+65% PAY US: US$ 34.9 March 21, 2014 We downgrade our recommendation on Verifone (PAY) from buy to hold as the stock has moved from $21 to about $35, our initial target range established a year ago, and thus providing a 65% return. Moreover, the stock now appears expensive vs. Ingenico, its main competitor. FULL REPORT ATTACHED

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BFW 03/21 15:25 *ELLIOTT CAPITAL INCREASES INTEREST IN F&C TO 20.183% BN 03/21 15:22 *ELLIOTT CAPITAL HOLDS 20.183% F&C ASSET MGMT VOTING RIGHTS

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Elliott Capital Advisors, L.P: Form 8.3 - F&C ASSET MANAGEMENT PLC 2014-03-21 15:20:16.327 GMT

Elliott Capital Advisors, L.P: Form 8.3 - F&C ASSET MANAGEMENT PLC

FORM 8.3

PUBLIC OPENING POSITION DISCLOSURE/DEALING DISCLOSURE BY

A PERSON WITH INTERESTS IN RELEVANT SECURITIES REPRESENTING 1% OR MORE

Rule 8.3 of the Takeover Code (the "Code")

1.         KEY INFORMATION

(a) Identity of the person whose Elliott Capital Advisors, L.P. positions/dealings are being disclosed: (for itself and related general partners and investment managers) (b) Owner or controller of interests and Elliott International, L.P. short positions disclosed, if different from Elliott Associates, L.P. 1(a): Liverpool Limited Partnership      The naming of nominee or vehicle companies is insufficient (c) Name of offeror/offeree in relation to F&C ASSET MANAGEMENT PLC whose relevant securities this form relates:      Use a separate form for each offeror/offeree (d) If an exempt fund manager connected with an offeror/offeree, state this and specify identity of offeror/offeree: (e) Date position held/dealing undertaken: 20thMarch 2014 (f)  Has the discloser previously disclosed, Yes or are they today disclosing, under the Code in respect of any other party to this offer?

2.         POSITIONS OF THE PERSON MAKING THE DISCLOSURE

(a)        Interests and short positions in the relevant securities of the offeror or offeree to which the disclosure relates following the dealing (if any)

Class of relevant security: Ordinary shares Interests Short positions Number % Number % (1) Relevant securities owned and/or controlled: (2) Derivatives (other than options): 118,634,818 20.183% (3) Options and agreements to purchase/sell:      TOTAL: 118,634,818 20.183%

Class of relevant security: Interests Short positions Number % Number % (1) Relevant securities owned and/or controlled: (2) Derivatives (other than options): (3) Options and agreements to purchase/sell:      TOTAL:

All interests and all short positions should be disclosed.

Details of any open derivative or option positions, or agreements to purchase or sell relevant securities, should be given on a Supplemental Form 8 (Open Positions).

(b)        Rights to subscribe for new securities (including directors' and other executive options)

Class of relevant security in relation to which subscription right exists: Details, including nature of the rights concerned and relevant percentages:

If there are positions or rights to subscribe to disclose in more than one class of relevant securities of the offeror or offeree named in 1(c), copy table 2(a) or (b) (as appropriate) for each additional class of relevant security.

3.         DEALINGS (IF ANY) BY THE PERSON MAKING THE DISCLOSURE

(a)        Purchases and sales

Class of relevant security Purchase/sale Number of securities Price per unit

(b)        Derivatives transactions (other than options)

Class of Product Nature of dealing Number of Price relevant description e.g. opening/closing a long/short reference per security e.g. CFD position, increasing/reducing a securities unit long/short position Ordinary CFD Increasing a Long Position 2,250,000 GBP Ordinary CFD Increasing a Long Position 1,000,000 120.5 Ordinary CFD Increasing a Long Position 5,000,000 GBP Ordinary CFD Increasing a Long Position 1,500,000 120.5 Ordinary CFD Increasing a Long Position 5,502,810 GBP 120.5 GBP 120.5 GBP 120.5

(c)        Options transactions in respect of existing securities

(i)         Writing, selling, purchasing or varying

Class of Product Writing, Number of Exercise Type Expiry Option relevant description purchasing, securities price e.g. date money security e.g. call selling, to which per unit American, paid/ option varying option European received etc. relates etc. per unit

(ii)        Exercising

Class of relevant Product description Number of Exercise price per security e.g. call option securities unit

(d)        Other dealings (including subscribing for new securities)

Class of relevant Nature of dealing Details Price per unit (if security e.g. subscription, applicable) conversion

The currency of all prices and other monetary amounts should be stated.

Where there have been dealings in more than one class of relevant securities of the offeror or offeree named in 1(c), copy table 3(a), (b), (c) or (d) (as appropriate) for each additional class of relevant security dealt in.

4.         OTHER INFORMATION

(a)        Indemnity and other dealing arrangements

Details of any indemnity or option arrangement, or any agreement or understanding, formal or informal, relating to relevant securities which may be an inducement to deal or refrain from dealing entered into by the person making the disclosure and any party to the offer or any person acting in concert with a party to the offer: If there are no such agreements, arrangements or understandings, state "none" None

(b)        Agreements, arrangements or understandings relating to options or derivatives

Details of any agreement, arrangement or understanding, formal or informal, between the person making the disclosure and any other person relating to: (i)  the voting rights of any relevant securities under any option; or (ii) the voting rights or future acquisition or disposal of any relevant securities to which any derivative is referenced: If there are no such agreements, arrangements or understandings, state "none" None

(c)        Attachments

Is a Supplemental Form 8 (Open Positions) attached? NO

Date of disclosure: 21st March 2014 Contact name: Michael Cross Telephone number: 0203 009 1305

Public disclosures under Rule 8 of the Code must be made to a Regulatory Information Service and must also be emailed to the Takeover Panel at monitoring@disclosure.org.uk.  The Panel's Market Surveillance Unit is available for consultation in relation to the Code's dealing disclosure requirements on +44 (0)20 7638 0129.

The Code can be viewed on the Panel's website at www.thetakeoverpanel.org.uk.