TheChek News Flow

Norilsk Nickel not likely to rescue Talvivaara

Norilsk Nickel, the Russian mining company, is not likely to rescue the troubled Finnish mining company Talvivaara, according to Kauppalehti Online. In an unsourced Finnish language analysis about Talvivaara, the paper wrote that Norilsk Nickel is Talvivaara’s fifth largest owner but the company did not take part in Talvivaara’s most recent share issue.

The Russian company is currently in a process of selling some of its overseas assets and Harjavalta, the mine it owns in Finland, which Talvivaara supplies nickel to, is on the sale list. Therefore, it looks unlikely Norilsk Nickel is keen to throw its money in Talvivaara, it wrote. There has been some speculation in the Finnish press recently that Norilsk Nickel would be interested in investing in Talvivaara.

Source Kauppalehti Online

US Market closed slightly higher but in low volume, with small caps still underperforming big caps, stronger USD continue to weight on market sentiment, today we will have Ayg. & Sept Factory orders in the same report...VIX @1 3.28 -3.42%...China non-Man. PMI out on Saturdday rising to 14month high...China premier Li cautions on the risk of slowing economy to the labor sector while Pres Xi is more upbeat, noting domestic conditions are sufficient in sustaining economic growth...Nikkei -0.88%...Shanghai -0.14%...

Eur$ 1.3494 S&P fut +0.15% European Fut +0.43%

Keep an eye on : - AC FP : Accor Sells Stake in Australia Hotel Unit to Abu Dhabi - ANA SM : Acciona Is Sounding Out Sale of Polish Mostostal Unit: Dziennik - BBRY US : Lazaridis st to firm bid team including Qualcomm & Cerberus - BSLN VX : Basilea Pharmaceutica Names Donato Spota CFO From Today - COL SM : OHL Owner Has EU300Mln to Invest in Colonial, Expansion Says - DUFN VX : Dufry 9-Month Sales, Ebitda Rise - FER SM : Ferrovial considers buying Heathrow Airport Holdings out of Glasgow, Aberdeen and Southampton - FPE3 GY : Fuchs Petrolub 9-Month Ebit Rises, Confirms 2013 Forecast - GAS SM : Repsol Not Selling Gas Natural Stake to Sinopec, Economista Says - JYSK DC : Jyske Bank Says Not Advising on Tax Evasion, Politiken Reports - KER FP : La Redoute sale likely within fortnight - LISP SW : Lindt & Spruengli Starts Share Buyback - PNL NA : PostNL Ups Underlying Operating Profit Guidance to EU130m-EU160m - ROG VX : Roche Holding AG Said to be in plans to acquire Polyphor (private), Licenses Investigational Antibiotic Pol7080 From Polyphor - RYA LN : Ryanair Lowers FY Profit Target, Says Pricing Remains Weak - SIE GY : Siemens May Pull Out of French Offshore Wind Tenders: Echos - SPAIN : Outlook chnaged to Stable from Negative by Fitch - SOW GY : Software AG seen as potential take over candidate - TEC FP : Technip CEO Sees ‘Transition’ for Subsea Unit in 2014: Investir - TEF SM : Telefonica may announce Czech unit sale today or tomorrow - TIT IM : Fossati rumoured to have tried to sell stake to Telefonica - VIV FP : CFO P.Capron leaving for VEolia - VOD LN : CEO not opposed at AT&T Deal, will do what is the best interest of shareholders

Anadarko eyes $1 bln sale of China oil and gas project stakes-sources

* CNOOC widely seen as potential buyer

* Anadarko joins Newfield, Hess to sell Asian fields

* Some of the sales driven by shareholder activism

Anadarko Petroleum Corp is considering the sale of its holdings in oil and gas projects in China in a deal that could be valued at about $1 billion, sources familiar with the matter said, as it eyes plouging money back into the U.S. market.

Houston-based Anadarko, which owns about a 35 percent interest in production and development projects in China's Bohai Bay, joins a list of U.S. oil companies seeking to raise cash to invest back home.

CNOOC is seen a potential buyer of Anadarko's interests, one of the sources told Reuters. CNOOC was not immediately available for comment.

Anadarko declined to comment. The sources declined to be identified as they were not authorised to speak to media.

Last year, Anadarko transferred day-to-day operations of the projects to its joint venture partner CNOOC Ltd as part of an earlier agreement.

The company's Chinese fields produced about 32,300 BOPD (barrels of oil per day) in the second quarter and is expected to average between 32,000 to 35,000 BOPD for the remainder of 2013, according to the company's second-quarter production report. China has the smallest producing fields among Anadarko's international operations.

At least two other U.S. oil companies, including Newfield Exploration Co Ltd and Hess Corp, have put part of their Asian oil and gas fields on the block this year.

The retreat is not limited to independent oil and gas producers, as even some of the world's top five integrated oil companies are cutting back on expensive projects. Some of the sales are in part driven by activist shareholders, who are agitating for more returns.

ANADARKO EXITS

Anadarko also has a 50 percent interest in the South China Sea exploration acreage and it was not clear if the company was weighing a sale of that asset.

In August, Anadarko sold down a 10 percent interest in a gas field offshore Mozambique for $2.64 billion. Anadarko will remain the operator of the block, located in Mozambique's deepwater Rovuma Basin, with a working interest of 26.5 percent.

In December last year, Anadarko sold its three Indonesia units to PT Pertamina, Indonesia' state-controlled oil and gas company.

Spurred on by historically high oil prices in the past few years, integrated oil companies have increased exploration work in areas once deemed too risky. But last week as the top global oil companies posted third-quarter results, they vowed to control spending and to put cash in the pockets of investors through asset sales, share buybacks or dividends. .

The top five have all badly underperformed the global MSCI World index this year, which is up 19.5 percent for the year to date, even with share buybacks already under way.

In October, Newfield sold its Malaysian oil and gas assets to SapuraKencana Bhd for $898 million. Newfield is exploring the sale of its China assets, while Hess is in advanced talks to sell its Indonesian and Thailand assets.

Thailand's top oil and gas explorer PTT Exploration and Production Pcl is eyeing stakes in Hess's Thailand and Indonesian assets.

Billionaire Petr Kellner’s PPF Group is poised to acquire a controlling stake in the largest Czech telecoms group from Spain’s Telefónica in a deal valued at about €2.5bn. The deal could be finalised as early as Monday, according to two people familiar with the details, with an announcement expected early this week. PPF is then expected to launch a tender offer for the remaining 31 per cent listed on the Czech stock exchange, potentially adding €1bn to the enterprise value of the deal to take the group private.

Telefónica has been in talks to sell its operations in the Czech Republic for the past two months, although it has been speaking exclusively with PPF for several weeks. PPF is a Czech investment group founded by Mr Kellner, an entrepreneur who remains the majority shareholder. It invests in a broad range of sectors from retail banking to agriculture across central and eastern Europe. Even so, the deal is a significant investment for a group with assets valued at about €22bn. Telefónica has owned the 66 per cent stake in the Czech Republic’s biggest telephone group since acquiring control of Cesky Telecom eight years ago from the government. However, the group has been selling non-core assets as it looks to bolster a balance sheet carrying heavy debts, in part to allow flexibility to invest when opportunities arise in its core southern European and Latin American markets. Telefónica is in the process of selling its Irish business to Hutchison Whampoa, and has sold other operations such as its call-centre business. Meanwhile, Telefónica has increased its stake in the controlling shareholder group in Telecom Italia, and has been linked with a potential move on its rival Italian group’s Brazilian business. It is also finalising a deal to buy KPN’s German business to merge with its own. The Czech sale, at an enterprise value of €2.5bn, reflects a multiple of about six times earnings before interest, taxes, depreciation and amortisation, broadly in line with sector average. Telefónica had confirmed that it was exploring strategic options in the Czech Republic. Other groups in the country were expected to be prevented from bidding by local competition law, which has made PPF the most likely buyer. Telefónica Czech Republic has suffered as rivals such as Vodafone have become more aggressive, while the government appears keen to introduce competition to the market. PPF previously owned a telecoms business, and considered participating in an aborted auction of 4G spectrum, but sold out of the operation given the difficulties of merging with other groups in the country. Telefónica and PPF declined to comment.

Up

*ALCATEL RAISED TO BUY VS NEUTRAL AT UBS *BP RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT MORGAN STANLEY *DCC RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN *GAMESA RAISED TO NEUTRAL VS UNDERPERFORM AT MACQUARIE *RBS RAISED TO HOLD VS SELL AT SOCGEN

Down

*ASTRAZENECA CUT TO NEUTRAL VS BUY AT UBS *CTS EVENTIM CUT TO HOLD VS BUY AT DEUTSCHE BANK *DANONE CUT TO NEUTRAL VS BUY AT GOLDMAN *DRAEGERWERK CUT TO HOLD VS BUY AT BERENBERG *ENI CUT TO EQUALWEIGHT VS OVERWEIGHT AT MORGAN STANLEY *JAZZTEL CUT TO HOLD VS BUY AT BERENBERG *NOBEL BIOCARE CUT TO HOLD VS BUY AT BERENBERG *OUTOKUMPU CUT TO SELL VS HOLD AT NORDEA *RENAULT CUT TO NEUTRAL VS BUY AT UBS *STADA ARZNEIMITTEL CUT TO HOLD VS BUY AT DEUTSCHE BANK *STRAUMANN HOLDING CUT TO HOLD VS BUY AT BERENBERG *TEVA PHARMA CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN *UBI CUT TO UNDERPERFORM VS NEUTRAL AT EXANE

PT Changes

*Banco Popolare PT Raised to EU1.3 vs EU1 at SocGen *Daimler PT Raised to EU51 vs EU39 at Barclays *INTESA PT RAISED TO EU1.85 VS EU1.6 AT SOCGEN; KEPT AT HOLD *Pop. Milano PT Raised to EU0.5 vs EU0.42 at SocGen *RBS PT CUT TO 380P FROM 400P AT BARCLAYS; KEPT AT OVERWEIGHT *RBS PT Cut to 340p vs 348p at Mediobanca; Kept at Neutral *RECORDATI PT RAISED TO EU9 VS EU8 AT JEFFERIES; KEPT AT HOLD *UBI PT RAISED TO EU5.1 VS EU3.7 AT SOCGEN; KEPT AT HOLD *UNICREDIT PT RAISED TO EU6.2 VS EU5.3 AT SOCGEN; KEPT AT BUY *YOOX PT RAISED 36% TO EU34 AT BOFAML; KEPT AT BUY *YOOX PT RAISED TO EU30 VS EU20 AT DEUTSCHE BANK; KEPT AT BUY

Initiations

*CA IMMO RATED NEW BUY AT DEUTSCHE BANK; PT EU14

Country Sector Market Call

*GN STORE NORD ADDED TO UBS’S MOST PREFERRED LIST *GRIFOLS ADDED TO BOFA’S EUROPE 1 LIST *G4S REMOVED FROM UBS’S LEAST PREFERRED LIST *SMITH & NEPHEW REMOVED FROM UBS’S MOST PREFERRED LIST *SONOVA REMOVED FROM UBS’S MOST PREFERRED LIST *STRAUMANN REMOVED FROM UBS’S LEAST PREFERRED LIST

Asian Market Update: Rising China non-manufacturing PMI and strong Australia retail sales boost AUD ahead of tomorrow's RBA decision

***Observations/Insights*** - China non-manufacturing PMI out on Saturday rising to 14-month high. - China premier Li cautions on the risk of slowing economy to the labor sector, while Pres Xi is more upbeat, noting domestic conditions are sufficient in sustaining economic growth. - Australia retail sales top estimates, sending AUD up 60pips against USD and JPY. Analysts are torn whether the improvement in the retail data is indication of a sustainable upturn or merely a reflection of low base effects from weak environment in July, but few expect the RBA to back away from its firmly neutral stance at its policy meeting tomorrow despite the recent uptick in the Aussie. - Westpac the next of Australia's top banks to report FY results - profits and revenue up slightly from year-ago level, impairment charges are down, and tier1 ratio is up, while interest margins are down 2bps to 2.14%. Shares are down over 1%, tracking the reversal in the broader ASX index.

***Economic Data*** - (CN) CHINA OCT NON-MANUFACTURING PMI: 56.3 V 55.4 PRIOR (14-month high) - (AU) AUSTRALIA SEPT RETAIL SALES M/M: 0.8% V 0.4%E (7-month high); Q3 Retail sales ex-inflation: 0.7% v 0.2%e - (AU) AUSTRALIA OCT TD SECURITIES INFLATION M/M: 0.1% V 0.2% PRIOR; Y/Y: 2.1% V 2.1% PRIOR - (AU) AUSTRALIA OCT ANZ JOB ADVERTISEMENTS M/M: -0.1% V +0.2% PRIOR - (AU) AUSTRALIA Q3 HOUSE PRICE INDEX Q/Q: 1.9% V 2.2%E (4th consecutive increase); Y/Y: 7.6% V 7.6%E

***Fixed Income/Commodities/Currencies*** - (KR) South Korea sells 30-yr govt Bonds; avg yield 3.850% - (KR) South Korea sells 3-yr govt Bonds; avg yield 2.870% - GLD: SPDR Gold Trust ETF daily holdings fall 5.7 tonnes to 866.3 tonnes (lowest since Feb 2009) - (CN) China Statistics Bureau: China pork price falling in late Oct

- (CN) PBoC sets yuan mid point at 6.1482 v 6.1452 prior setting (weakest Yuan setting since Sept 27th)

- USD majors are little changed from Friday's levels with the exception of the Aussie dollar. AUD opened up over 20pips in the wake of the China non-manuf PMI released over the weekend and extended those gains following a much better than expected Sept retail sales report, rising as high as 0.9490s against USD and 93.70 against the Yen, up some 60pips from Friday. EUR/USD briefly dove below 1.3450, falling by about 50pips before returning to 1.3480s, as investors position for the possibility of a more dovish ECB stance following last week's low inflation figures.

***Speakers/Political/In the Papers*** - (CN) China President Xi Jinping: "Domestic elements supporting China's economic growth are sufficient" - (CN) China Premier Li Keqiang: Job growth threatened by slowing economy in China; To find an equilibrium in between reform and economic growth - financial press - (CN) Shanghai new home sales +5.1% w/w at 376K sqm; Avg new home price +2.06% w/w at CNY25.5K/sqm - Uwin - (CN) Beijing Oct second-hand housing sales 107.9K units, -16.03% m/m, -5.7% y/y; Avg price +0.3% m/m, +27.46% y/y at CNY29.7K/sqm - China press - (CN) China Fin Min Lou Jiwei: China economic policy aim for long-term effect instead of short-term - financial press - (CN) China Securities Regulatory Commission (CSRC) Chairman Xiao Gang: Planning to simplify approvals for M&A activity - Chinese press - (CN) A bubble in the China property market poses a threat to the overall economy - Chinese press

- (JP) BOJ seen approaching its limit for ETF purchases, weakening its impact on the stock market - Nikkei News - (JP) Japan plans to remove import tariffs of up to 95% of goods - Japanese press - (JP) Japan and Russia hold their first joint defense and foreign ministers' meeting this weekend to discuss regional security and China-related concerns - financial press

- (AU) Australia Treasurer Hockey: Confidence is returning to Australian economy - (NZ) New Zealand Treasury: sees stronger growth outlook in following quarter; RBNZ may have more flexibility on rate rises - (NZ) According to the latest Nielsen survey, New Zealand consumer confidence is at a 2-year high - NZ press

- (KR) South Korea Ministry of Land, Transport and Maritime Affairs: Q3 building permits fell 16% y/y to 57.1K units - Korean press - (KR) South Korea may start to raise power prices by at least 3% in Jan - financial press

- (UK) Confederation of British Industry (CBI) raises its projections for UK 2013 GDP to 1.4% from 1.2% and 2014 GDP to 2.4% from 2.3% forecasts made in Aug - financial press - (US) Fed's Fisher (hawk, non-voter): govt has played a suppressive role in the recovery; Worried about the political consequences if the Fed suffers losses on its bond holdings

***Equities*** Market Snapshot (as of 03:30 GMT): - Nikkei225 closed, S&P/ASX -0.3%, Kospi -0.6%, Shanghai Composite flat, Hang Seng -0.1%, Dec S&P500 +0.2% at 1,759, Dec gold flat at $1,313, Dec crude oil -0.2% at $94.47/brl

US markets: - BRK.B: Reports Q3 Net EPS attributable to shareholders (Class A shares) $3,074 v $2,373 y/y; R$46.5B v $41.1B y/y - WY (reports of possible $2.7B deal with TRI Pointe)

Notable movers by sector (**NOTE: Japan's Nikkei225 closed for holiday): - Consumer discretionary: Hunan Friendship & Apollo Commercial Co Ltd 002277.CN +3.8% (plans for private bank); Harvey Norman HVN.AU +1.2% (Q3 results); Billabong BBG.AU +1.8% (funding update) - Financials: Westpac Banking Corp WBC.AU -1.1% (FY13 results) - Consumer staples: Anhui Gujing Distillery Co Ltd 000596.CN -1.7% (clarifies press speculation) - Materials: Whitehaven Coal WHC.AU -3.6% (CEO provides FY14 guidance) - Technology: AAC Tech 2018.HK -3.3% (9-month results) - Energy: Shunfeng Photovoltaic International Ltd 1165.HK +16.5% (acquires Suntech); Shandong Molong Petroleum Machinery Co Ltd 568.HK +2.8%, Yantai Jereh Oilfield Services Group Co Ltd 002353.CN +2.0%, Zhangjiagang Furui Special Equipment Co Ltd 300228.CN +2.8%, Kingdream PLC 000852.CN +4.1% (momentum from previous shale gas report) - Telecom: ZTE Corp 763.HK +3.1% (contributes to 4G in Belgium) - Industrials: Virgin Australia VAH.AU flat (Sept metrics), Leighton Holdings LEI.AU +0.6% (JV deal)

€1bn of art looted by the Nazis found in Munich

Looted art including works from Picasso and Matisse with a value of around €1bn has been found hidden in an apartment in Munich after being seized by the Nazis during the second world war, according to a German magazine.  Around 1,500 paintings were found by customs officials in the apartment of the son of an art dealer who collected the works of art in the 1930s and 1940s, according to German magazine Focus.  The paintings were discovered two years ago, but the find had previously been kept secret.  The works were bought by art historian and collector Hildebrandt Gurlitt while the Nazis were in power, but were previously believed to have been destroyed during the bombing of Dresden. Instead, he passed them on to his son, who kept them in his apartment until they were discovered following an investigation in 2011. According to Focus, there are international warrants for at least 200 of the pieces. Art historians have been consulted to try and trace some of the works, the magazine reported.  Thousands of art works were either stolen or acquired through forced sales – sometimes as bribes when trying to flee the country – from Jews during the Nazi regime between 1933-1945.  Some art works were seized for the Nazi party’s notorious exhibition of "degenerate" art in 1937 in Munich, featuring art the Nazis deemed to be anti-German, including works by artists such as Marc Chagall, Wassily Kandinsky and Paul Klee.  The US Holocaust Memorial Museum has estimated that more than 16,000 modern art works were seized by the Nazis.  Looted art is still being discovered more than 60 years after the end of the war, with descendants of owners trying to trace pieces that once belonged to their family.  Last week, a consortium of museums in Holland said they had identified 139 works of art in their collections that could have been forcibly taken from Jewish owners. The Dutch museums have set up a website for descendants to identify the pieces and make a claim.

The Versace family has taken a step forward to sell a stake in the fashion house, inviting private equity investors to make a second round of competitive bids at the end of this month. The bidders for 20 to 30 per cent of Versace include former Gucci owner Investcorp, the Bahrain-based investment firm, as well as fund manager Blackstone and London-based Permira, the private equity group that owns Hugo Boss and sold Valentino last year, people with knowledge of the talks said. They also include the Italian strategic fund FSI and Paris-based group Ardian. At the end of last month, those interested parties were asked to give an indicative offer price and detail how they viewed governance with the founding family. They will next meet the management of the company before handing over fresh bids on November 25. Offers for what is one of the last independent Italian luxury brands were expected to exceed €850m, or more than 12 times the level of earnings before interest, tax, depreciation and amortisation, according to one of the people. Versace appointed Goldman Sachs and Intesa Sanpaolo in April to look for new shareholders to inject capital into the business to fund a push into Asia and Latin America. The family, including Donatella Versace, the designer behind the brand since the death of her brother Gianni Versace in 1997, has said the company is looking to sell less than a third of its shares. The family is seeking to raise about €150m to fund expansion, and is also considering selling some of its shares for €50m to €150m, according to people with knowledge of the talks. It is committed to listing the company publicly in about three years. Private equity groups, which typically seek to sell their holdings within three to five years, see potential for the Italian brand as one of the world’s most established on the fashion scene but which lags behind its peers in terms of sales, profit and geographical reach. Luca Solca, an analyst at Exane BNP Paribas, has noted that Versace had a limited international presence compared with rivals, was overexposed to the ready-to-wear market, and had a "maximalist identity" which runs counter to a trend for "austerity minimalism." Private equity investors observed that the financial recovery of the family-owned company over recent years, under the guidance of chief executive Giangiacomo Ferraris, had been remarkable. The fashion house, which was losing money when Mr Ferraris joined from Jil Sander in 2009, generates ebitda of about €70m. Overall revenues were €408.7m last year, up by a fifth from the previous year, while global sales rose almost two-fifths to €224.5m, after doubling in North America.

US public investment at lowest since 1947

Public investment in the US has hit its lowest level since demobilisation after the second world war because of Republican success in stymieing President Barack Obama’s push for more spending on infrastructure, science and education. Gross capital investment by the public sector has dropped to just 3.6 per cent of US output compared with a postwar average of 5 per cent, according to figures compiled by the Financial Times, as austerity bites in the world’s largest economy. Republicans in the House of Representatives have managed to shrink the US state with their constant demands for spending cuts, even though their uncompromising tactics have exacted a political price, with their approval ratings in Congress at record lows. Democrats control the White House and the Senate and made no substantial concessions in October’s battle over the government shutdown but Mr Obama is still far from one of the main economic goals of his presidency. The figures underline how across-the-board budget cuts are threatening future growth, as the axe falls heavily on federal investments that boost output, rather than transfers such as pensions and healthcare for the elderly. "This is the motivation for the president’s desire to significantly increase public investment," said Jason Furman, chairman of Mr Obama’s council of economic advisers, and a close aide since the days of his 2008 presidential campaign. "New authority for federal investment in the 2012 fiscal year was $475bn; you look at our proposal for 2014 and it’s $624.8bn. We are proposing a very large increase and that’s because the country is not investing enough in its infrastructure and it’s not investing enough in R&D." The figures come as Republicans and Democrats begin new budget talks on tax and spending plans for the rest of 2014 once a short-term deal expires in mid-January. Democrats will push for relief from across-the-board cuts in public spending, known as sequestration, but most analysts expect a modest deal at best. Kirk Dale, the township supervisor of Marlette, Michigan, has first-hand experience of what it means to spend less on infrastructure. Thirty years ago, he felt his small town was on the rise when Cooper Road, a local residential street, was first paved. But today, Marlette cannot afford the maintenance and has joined a number of small communities that have pulverised their streets and gone back to gravel. "You make a calculated, rational decision on which mile to do," said Mr Dale, the township supervisor. "And then you look long-term down the line saying ‘Hey, even if we were to pave this, how are we going to repave this 10 or 15 years down the line?’" It can cost $60,000 a mile to pave a road and the bill repeats itself every 10 years, said Dale Stolicker of the Sanilac County Road Commission, which approved Marlette’s unpaving contract. It costs between $10,000-$20,000 per mile to tear up a road but maintenance fees fall to $300 a year for dust control. Pressure on infrastructure budgets has become acute since the Great Recession of 2008-09 but public investment in the US has been weak since the late 1960s. Highways spending, for example, has fallen steadily since 2000 because the main sources of revenue for it – fuel taxes – are not linked to inflation while cars have become steadily more fuel-efficient. Reversing such trends was part of Barack Obama’s economic pitch from the moment he started campaigning for the US presidency. In a June 2008 speech at Kettering University in Flint, Michigan, he made investment in innovation, education and infrastructure the main answer to the economic challenges of technology and globalisation. "Entitlement spending is bound to increase as the Baby Boom generation retires," said Mr Obama back then. "But the answer to our fiscal problems is not to continue to short-change investments in education, energy, innovation and infrastructure – investments that are vital to long-term growth." Public investment picked up at the start of Mr Obama’s term – temporarily rising to its highest level since the early 1990s – because of his fiscal stimulus. But that has been more than reversed by subsequent cuts. The biggest falls are in infrastructure, especially construction of schools and highways by states and municipalities. Federal funding for research and development has only fallen modestly so far but will decline much further under any budget path that continues sequestration. That threatens a fundamental source of productivity growth for the whole global economy because so many scientific breakthroughs are funded by US bodies such as the National Institutes of Health. Although the intuition of most economists and businesspeople is that failure to invest in infrastructure will be bad for growth, the evidence is quite mixed, and it is hard to pin down what the "correct" level of public investment should be. Michael Leachman, director of state fiscal research at the Centre on Budget and Policy Priorities said: "Schools and transportation networks – these things are fundamental building blocks of a state’s economy. If a state’s unable to make investments in these things then its long-term growth will suffer." Douglas Holtz-Eakin contributed to the academic debate on public investment in the 1990s and is now president of the centre-right American Action Forum in Washington. He noted that studies on the US find growth and public investment were both high in the 1950s and 60s but low in the 1970s and 80s. "The question is which way you draw the causality," he says. Infrastructure came to seem less important during the internet boom of the late 1990s when the economy grew rapidly despite low public investment. But Josh Bivens, at the left-leaning Economic Policy Institute, argues that the 1990s now look like a one-off and says recent research implies the US public sector is investing less than it should. "I think the consequence of low public investment is lower productivity growth going forward unless it is reversed," says Mr Bivens. He argues it should be a high priority even amid other things that the left wants to spend money on. "It’s good near-term stimulus, but we should commit to a higher level of public investment even if we return to full employment," he says, arguing that the benefits of infrastructure-led growth would be widely shared. Mr Holtz-Eakin agrees that it makes little sense to cut public investment when the main driver of long-run deficits in the US is increasing spending on pensions, healthcare and other entitlements. He argues that the way to win Republican support is with reforms to make sure funds are spent efficiently. Most researchers find big variations in returns on public investment depending on when, where and what the money goes to. "One thing we’ve learned is there’s no automatic, disproportionate return from public investments that mean they should get a pass from scrutiny," says Mr Holtz-Eakin. "The second lesson is that we should probably think as much about reforming public investments in the US as increasing them." For example, he said there should be fewer individual pots of money for infrastructure, which require spending on particular kinds of transportation rather than those that are most valuable. But there is broad consensus that some kinds of public investment bring very high returns for the rest of the economy – such as spending on basic scientific research or fixing infrastructure bottlenecks – and they are under grave threat from today’s swingeing spending cuts in the US. That just adds to the frustration of the Obama administration. "You are missing an opportunity to both create jobs in the short-run and have a stronger basis for productivity growth in the long-run," Mr Furman said.

The top 1 percenters aren’t buying Bentleys, Lamborghinis or Ferraris. Instead, the country’s most affluent car buyers are driving off in a Tesla or a Jeep. Two of the five most popular cars among residents in 15 of the 25 wealthiest US zip codes — where median home prices range from $3.4 million to $6.7 million — include those typically associated with middle-income buyers. Even buyers with plenty of disposable income to spare — think Silicon Valley — are opting for a luxury car that’s more of a social statement than a financial one. The Tesla Model S, the first luxury all-electric vehicle, accounted for the most car sales in eight of the 25 most expensive zip codes, according to the latest Edmunds report. The Jeep Grand Cherokee, with a sticker price of $28,690, came in third place, behind Mercedes, Edmunds said.