>>> Further heavy snow, strong winds expected to continue Monday following recor

Further heavy snow, strong winds expected to continue Monday following record snowfall over the weekend - Kyodo News
- The Japan Meteorological Agency warned of heavy snow and severe winter conditions to continue in northern, eastern Japan as low pressure system noves to the northeastern Pacific coast. 
- Over the weekend, the severe low pressure system caused widespread air/rail transportation disruption, power outages, 12 deaths and over 1,650 injuries. 
- Several cities experienced record snowfall. 
- Up to 246,000 households were without electricity on Saturday.

>>> ECB's Coeure (France): ECB remains "very vigilant" on downside risks to pric

ECB's Coeure (France): ECB remains "very vigilant" on downside risks to price stability - press
- Says: "We are closer to the area where inflation expectations could be altered and create downside risks to price stability... We remain firmly determined to maintain the high degree of monetary accommodation that is appropriate for the euro area economy, and will not hesitate to take further decisive action if required."

WSJ : Ghosn Says Renault Would Face Problems if Rival Was in Trouble

Ghosn Says Renault Would Face Problems if Rival Was in Trouble
Supply Chains of Renault, PSA Peugeot Often Overlap

PARIS— Renault SA RNO.FR +3.80% would face problems of its own if French rival car maker PSA Peugeot Citroën UG.FR +2.31% got into serious difficulty, chief executive Carlos Ghosn said Sunday, as the supply chains of both companies often overlap.

"We have absolutely no interest in our French competitor getting into serious difficulty, for the simple reason that we share lots of suppliers," said Mr. Ghosn in an interview with the RTL radio station.

If these suppliers were themselves to get into difficulty because PSA or another automobile manufacturer were in a situation of falling sales and production "we would also be in difficulty," he said.

Automotive groups that have often adopted just-in-time supply chain systems to trim the cost of inventories have in the past found themselves in situations where their production lines came to a halt when one or more suppliers were prevented from manufacturing parts. That was notably the case when Japanese parts suppliers were forced to halt production in the aftermath of the earthquake and tsunami in 2011.

That and other events have prompted car makers to draw contingency plans to allow them to find alternative sourcing to keep producing.

Cash-burning Peugeot's board meets on Feb. 18 to decide on a plan that foresees the entry of the French state and Chinese automotive group Dongfeng Motor Co. into its capital for the first time, via a 3 billion-euro capital increase. That will give them equal shareholdings in the car maker's capital alongside the Peugeot family, which currently controls the company.

Peugeot needs to shore up its balance sheet with Dongfeng's help to expand its industrial and commercial presence in China and southeast Asia.

Mr. Ghosn, who also heads Japanese auto maker Nissan Motor Co, said he doesn't see a risk to Renault from a deeper alliance between Peugeot and Donfeng, noting that when Nissan created a joint-venture with Dongfeng in 2003, the Chinese company already had a partnership with Honda, another Japanese auto maker, and that Dongfeng had been exemplary in keeping Nissan's interests separate from those of Honda.

Barron's : How HSBC Could Gain from Higher Interest Rates

How HSBC Could Gain from Higher Interest Rates

If the U.S. Fed tightens, the global bank would be the biggest beneficiary among the world's major banks.

With its roots in Asia, stock listings in London and Hong Kong, and a strong emerging market franchise, HSBC Holdings is both well diversified—and easily misunderstood. In Asia, it's seen as an old colonial bank and a powerhouse in trade finance and cash management. In London, it's viewed as a bank that makes most of its money from Asia and emerging markets but retains a lucrative British base. Amid the financial crisis, HSBC's shares took a hit because of its European holdings and its exposure—since jettisoned—to subprime U.S. consumer finance. More recently, the emerging market business has made it unpopular with investors. The stock is down 9.5% in the past 12 months.

In reality, HSBC's (ticker: 005.Hong Kong) diversity is a key source of strength, says Christopher Wheeler of Mediobanca in London, adding, "If things are not doing well in Asia, their business in the United Kingdom is doing well." HSBC gets roughly 30% of its earnings from Europe and North America, 57% from Asia, and the rest from emerging markets elsewhere in the world.

Because it's a large player in global trade finance, HSBC is leveraged to a worldwide economic rebound, says James Chappell, an analyst for Berenberg in London. The difference between HSBC and Standard Chartered (STAN.UK), HSBC's main Pan-Asia and emerging market rival, is risk appetite. "While Standard Chartered has been adding risks in an effort to grow faster, HSBC has spent the last six years derisking," says Chappell.

The bank's profitability would gain from any U.S. Federal Reserve move beyond tapering and toward tightening over the next year. "No large bank in the world benefits more from the rise in interest rates than HSBC—not JPMorgan Chase (JPM) or Wells Fargo (WFC) or Deutsche Bank (DBK.Germany), or large Chinese or Japanese banks," says Chirantan Barua, an analyst for Sanford C. Bernstein in London. "If your bet is that the Fed won't allow rates to rise for the next five years, maybe you should stay away. But if you think that U.S. growth will be stronger than expected, and the Fed will be forced to raise rates early next year, now is the time to buy HSBC," he says.

Owing to its low loan-to-deposit ratio in key markets like Hong Kong and the U.K., close to 25% of HSBC assets are in cash or short-term bonds yielding no more than 40 basis points (0.4%), says Barua. Higher rates would mean a higher yield on those deposits.

The irony is that Fed tapering has led to emerging market stresses that have undercut HSBC shares because of its perceived emerging market footprint. In fact, more than half of HSBC's capital is in developed markets; more than 90% of StanChart's capital is in emerging markets. "When [Fed Chair] Janet Yellen finally moves on rates, HSBC stock will do very, very well," says Barua.

As attractive as these facets are, investors shouldn't buy HSBC just for its 6% dividend yield, 10% return on equity, cheap 1.1 times book valuation, or its 10.5 times earnings multiple, says Barua. They should buy it "because when the Fed finally moves next, there will massive earnings expansion," says Barua.

Barclays' Rohith Chandra-Rajan sees HSBC profits growing 30% over the next two years, to $1.29 in 2015. He believes that HSBC stock has a 20% upside from last week's 82 Hong Kong dollars (US$10.57). He also expects HSBC to keep paying out more of its earnings, pushing the dividend yield to 7.1% in 2014. If there's another big selloff in emerging markets, investors should take advantage of others' misunderstanding and snap up more HSBC shares.

Barron's : Nestlé Trims L'Oréal Stake, Sweetens Prospects

Nestlé Trims L'Oréal Stake, Sweetens Prospects

After the sale, it still owns some 23%, or €27 billion, of the beauty and cosmetics giant's shares.
Nestlé is beginning to look appetizing, so investors should consider adding the Swiss consumer-goods giant's stock to their shopping carts.

The maker of Nescafé coffee, Kit Kat chocolate bars, and Dreyer's ice cream last week signaled that a share buyback is in the cards following the sale of part of its stake in French cosmetics company L'Oréal, and the deliverance of full-year earnings showing that profit margins are improving even though top-line growth was below expectations.

Investors were unimpressed: The stock (ticker: NESN.Switzerland) closed Friday at 65.95 Swiss francs (almost $74), down almost 2.5% on the week. Its American depositary receipts ( NSRGY ) were trading Friday afternoon at $74.11.

The weakness looks like a buying opportunity. Nestlé's shares can return as much as 20% over the next 12 months, boosted by divestitures. The stock, which trades at 17 times estimated 2015 earnings, can climb as high as 78 Swiss francs, according to some analysts, for an upside of about 18%. A generous dividend could bump up the potential payout to investors.

That may be hard to digest for some investors; consumer-goods stocks have been out of favor in the past year. Nestlé has edged up about 2.5% in the past 12 months, a period in which the Stoxx Europe 600 consumer-goods sector has been roughly flat. The Stoxx Europe 600 index, a broader measure of European equities, has climbed 15% in that time.

Vevey, Switzerland-based Nestlé is a lumbering behemoth, with a stable of some 2,000 global and local brands in segments that range from baby foods and bottled water to cereals and pet foods. It has 465 factories worldwide, a workforce approaching 340,000, and a market value in excess of $230 billion. Perhaps unsurprisingly, it isn't exactly nimble.

In recent years, Nestlé has looked to profit from innovation and premium products in its core areas of nutrition, health, and wellness. Cost savings contributed more than 1.5 billion Swiss francs to earnings last year, too. But divestitures could be the key to outsize returns for shareholders.

Nestlé's sale of 8% of its stake in L'Oréal (OR.France) will lead to a buyback that will increase the intrinsic value of the Swiss company's remaining shares. Nestlé received 6.5 billion euros ($8.90 billion) for its L'Oréal shares, €3.4 billion in cash. The cash alone is enough to purchase almost 2% of its outstanding shares. The L'Oréal move wasn't exactly a surprise, although it came a couple of months sooner than expected. "This is a positive thing," says Matthew Beesley, head of global equities at Henderson Global Investors in London. "It makes the business more focused."

There should be more to come. After completion of the transaction, Nestlé will still own a 23.3% stake in L'Oréal, worth more than €17 billion, which it plans to wind down further. The timing of future sales could be determined by Nestlé's need for cash to fund acquisitions and fuel growth, rather than a desire to reward investors.

In addition to reducing financial investments, management hasn't been afraid to dispose of mature brands. It sold sports nutrition brand PowerBar earlier this month and diet business Jenny Craig in November. It could offload one of its water brands; sales growth in the water division was a tepid 2% last year.

AS PART OF THE L'ORÉAL DEAL, Nestlé received the French cosmetic company's stake in Galderma, a 50/50 joint venture in dermatology pharmaceuticals that will form the basis for a skin health unit. It's an indication of Nestlé management's determination to concentrate its product portfolio on faster-growing businesses.

Nestlé's sales in 2013 increased 2.7% to 92.2 billion Swiss francs, hurt by the strength of the Swiss currency. On an organic basis, sales were up 4.6%, below a targeted range of 5% to 6%.

Nestlé's businesses in emerging markets performed well, producing organic sales growth of 9.3% and accounting for 44% of total sales. With investors worrying about growth in emerging markets, however, that could be perceived as an Achilles' heel for the company. However, Nestlé's geographic diversification and the strength of its brands can counter any weakness.

Sales in developed markets inched up 1%, but the company should be able to perform better in 2014 as the economic environment improves. The profit margin again edged ahead, up 20 basis points (0.2 percentage point), to 15.2%.

Nestlé earned an estimated 3.44 Swiss francs per share in 2013, which is expected to rise to 3.54 Swiss francs in 2014 and 3.80 Swiss francs in 2015. It proposed a 5% increase in dividend to 2.15 Swiss francs per share, which would produce a yield of about 3.3%. That certainly represents a steady performance, though the return of cash to shareholders via buybacks could well be the icing on Nestlé's cake.

>>> Barron's Summary: Positive on CVS, Nestle, HSBC, AAL, EPL, NPO

Barron's Summary: Positive on CVS, Nestle, HSBC, AAL, EPL, NPO

Cover Story: Applied Global Macro Research takes contrarian view in light of tough winter weather in the US; forecasting growth near 4% in what they feel may be the strongest economy since the latter part of 1990s. 

Features: Calls for caution in the MLP craze. Following a rush for energy firms to convert, the asset class' performance has waned recently. Investors may want to consider being firm selective. 
2) Positive on CVS decision to halt tobacco sales. Sees the move as potentially driving more profit than it will lose from ending the practice. 
3) Positive on AAL: Cites money managers who feel the stock is cheap despite its strong appreciation following the merger close. Expecting some struggles in the near term as expected, but the firm should come out ahead given the strong management team. 
4) Positive on NPO: Sees recent case win highlighting plaintiff misrepresentations in Asbestos litigation as providing a positive opportunity for the stock. 

Tech Trader: Comcast acquisition of TWC, which is likely to be approved despite a number of issues, broadly indicates an end to the notion that cable has been greatly devalued by so-called over-the-top video offerings from NFLX, AMZN, Aereo, and others; Justice Department will likely look closely at Comcasts role as a gatekeeper, and its ability to potentially tax companies who need its pipeline to reach users; Comcast executives say strength of content providers such as ESPN or the NFL Network will limit its leverage. 

Trader: The market is discounting soft economic numbers, says Joseph Amato of Neuberger Berman, but new data coming next week should clarify where the economy is going; Positive on LMCA: Battle for TWC has distracted the market from companys undervalued shares, which have been hurt by investor concern about what a CHTR deal for TWC might have required, but for now theres a cushion of safety for investors; Cautious on SJM: Though gross margins rose on lower commodity prices, company still faces challenges; with shares down, relative value to peers and the market has become attractive, especially for investors with a long-term value bent. 

Follow-Up: Positive on Comcast: Despite the growth of streaming companies such as NFLX, cable users arent cutting the cord; acquisition of TWC makes sense, since a larger entity will have more leverage in negotiating with programmers; Positive onOXY: Company will likely continue to shed assets as it refashions itself to boost shareholder returns, share price could jump 25% after spinoff of California businesses. 

International Trader: Positive on Nestle: Sees the stock as an attractive buy, especially following the divestiture of some of its stake in L'Oreal. - Positive on HSBC: Highlights the firms strong diversification worldwide positioning the company to benefit from a trend towards higher interest rates. 

Emerging Markets: Positive on the stock market in China. Highlights that the Hang Seng has suffered deeply since the end of last year, and that many China stocks could be very cheap and poised for appreciation. 

Commodities: Expecting the dry bulk sector and freight futures as a whole to rise due to the expected strong demand from China for raw materials. 

Small Caps: Expecting EPL to provide an opportunity given its recent underperformance and the expectations for it to increase production this year.

>>> BOE Gov Carney: BOE will only start raising rates once the economy is operat

BOE Gov Carney: BOE will only start raising rates once the economy is operating closer to full capacity - BBC interview-
Sees slack remaining in labor market. 
- Expects rate rises to be limited and gradual. 
- Business investment to be critical in recovery. 
- Recent economic strength has been driven by business investment; "What we haven't seen yet is business investment pick up". 
- Says: "The path of monetary policy, the path of interest rates is going to be calibrated very carefully to ensure that only when we see sustainable growth in jobs, in incomes and in spending, will we make adjustments."

>>> Foreigners Bought Half Of All London Homes Selling For Over £1 Million

Foreigners Bought Half Of All London Homes Selling For Over £1 Million

Actually, according to the first detailed estimate of international purchase activity in London by Knight Frank, the percentage of all central London homes that sold for more than 1 million pounds to foreigners in the 12 months through June 2013, was 49% to be exact. And as we showed yesterday when we put China's loan creation in the context of US and Japanese QE, keeping in mind theuse of proceeds of all this newly created inside money has to ultimately go somewhere - that somewhere in this case being London and other global luxury real estate, said percentage is only going to get higher. Especially when one adds Russian, the middle east and other various regions whose oligarchs are desperate to park their money in "safe" havens. Some other findings from the Knight Frank report: • Over the 12 months to June 2013, 49% of all £1m+ sales in prime central London went to foreign buyers by nationality... • ...however only 28% of buyers were non-resident in the UK • Over the two years to June 2013 51% of new-build purchases in the prime central London market were by UK residents... • ...across the remainder of inner London the portion was 80%... • ...and across outer London 93% of sales were to UK residents • Our estimate is that over the past two years 85% to 90% of all new-build purchases in Greater London have been to UK residents Just as notable - foreigners love new construction: in the two years to June 2013, 69% of prime central London new-build purchases were to foreign buyers by nationality. And here, a tangent: those two main instances of Emerging Market tremors that we have seen over the past year as a result of QE - well, let's just say that they better normalize soon, and funds resume flowing toward the EMs rather than out of them or else, the London (first) and soon after all other luxury residential markets get it...

FT : Why good corporate earnings may be bad news

Why good corporate earnings may be bad news

Market reaction shows investors have been taking a lot on trust
The US corporate earnings season is almost over, and it has been a good one. And that could be bad news.
Let us start with what is good about it. First, the earnings themselves look healthy: up 9.6 per cent for the fourth quarter of 2013 compared to the same period of 2012, according to Thomson Reuters. For the year as a whole, earnings are on course to rise by 6.1 per cent. All this is despite significant drag from the energy sector, where earnings dropped almost 5 per cent in 2013.

Second, CFOs have played their regular quarterly game with brokers’ analysts with more skill than usual. Some 69 per cent produced results that exceeded brokers’ consensus forecasts, according to Thomson Reuters. They also caught analysts by surprise with their revenues, with 64 per cent of companies exceeding expectations.
According to BofA Merrill Lynch, this is the best performance for revenues, compared to expectation, in two-and-a-half years. With fears that the world economy is growing rather slower than had been hoped, this can only be encouraging.
Third, the prognosis for the future also looks decent. US CEOs have been using earnings calls – as tracked by Goldman Sachs’ David Kostin for his quarterly “Beige Book” of S&P 500 executives’ intentions – to prepare their investors for more capital expenditure, which can only be healthy for the global economy. They also seem keen to disburse more of their cash. That will please their investors. It also suggests an end of the extreme lack of confidence, which saw many companies maintain inefficient balance sheets rather than go without a cash buffer.
Why might all of this be bad news? Despite these apparently excellent results, the stock market still endured its worst start to a year in the post-crisis era. CFOs may have successfully pushed the expectations bar low enough for them to jump over it, but it did them little good.
Europe’s earnings season is revealing a continent that is still sickly and at risk of deflation
The short-term bonus for companies that “beat” their expectations was less than usual. Five days after their announcement, Merrill Lynch’s Savita Subramanian found that they had, on average, beaten the S&P by 2.1 percentage points. The punishment for missing expectations was unusually severe, with an underperformance of 5.5 percentage points. Put these together, and the gap between the earnings season’s “winners” and “losers” was its widest since the fourth quarter of 2008 – when the financial crisis threatened calamity.
As Ned Davis Research’s Ed Clissold put it: “Beating estimates has not helped much, but it has been better than missing.” In short, earnings season confirmed that last year’s stock market rally had taken a lot on trust. Investors plainly expected better.
A broader geographical perspective also gives cause for concern, in Europe. Europe’s earnings season is revealing a continent that is still sickly and at risk of deflation. Revenues of the 122 Stoxx 600 companies to have reported so far were slightly lower – by 0.8 per cent – in the fourth quarter of 2013 than they were a year earlier, according to Thomson Reuters.
From these weak revenues, Corporate Europe extracted far lower profit margins, which for non-financial companies have now dropped back almost to their low levels of 2009. Put poor revenues together with poor margins, and Société Générale’s Andrew Lapthorne shows that Europe’s share of the earnings generated by the MSCI World index (which covers the developed world) has dropped to its lowest level since 1985.
This might be read as positioning the continent ideally for a cyclical comeback. But it does show that the large flows of money from the US to Europe over the last months have taken an awful lot of trust. Corporate Europe has not yet done anything to justify that trust. A period of economic stagnation, increasingly feared, would make this look all the worse.
A final reason concern comes from what US CEOs have been telling investors about their future. They are confident in growth, particularly from emerging markets, enough to spend and disburse more cash. But they still feel it necessary to caution that it will be harder for them to expand their margins.
Goldman’s research found a range of companies in different sectors making the same points, that cost increases and competition would put a squeeze on profit margins. Companies such as McDonald’s and Nike complained of cost increases – names from Ford Motor through Johnson & Johnson to Schlumberger alerted on competitive pricing.
Margins in the US look unhealthily high. If improving economic conditions and normalising monetary policy make life tougher for the corporate sector, that can be viewed at least as a healthy normalisation. But it would be easier to take that view if stock markets had not taken quite so much on trust last year.

FT : America risks becoming a Downton Abbey economy

America risks becoming a Downton Abbey economy

Inequality will have to be addressed, with free markets playing a pivotal role
Inequality has emerged as a major issue in the US and beyond. A generation ago it could reasonably have been asserted that the overall growth rate of the economy was the main influence on the growth in middle-class incomes and progress in reducing poverty. This is no longer a plausible claim.
The share of income going to the top 1 per cent of earners has increased sharply. A rising share of output is going to profits. Real wages are stagnant. Family incomes have not risen as fast as productivity. The cumulative effect of all these developments is that the US may well be on the way to becoming a Downton Abbey economy. It is very likely that these issues will be with us long after the cyclical conditions have normalised and budget deficits have at last been addressed.

President Barack Obama is right to be concerned. Those who condemn him for “tearing down the wealthy” and engaging in un-American populism are, to put it politely, lacking in historical perspective. Presidents from Franklin Roosevelt to Harry Truman railed against the excesses of a privileged few in finance and business. Some have gone beyond rhetoric. Confronted with rising steel prices, John Kennedy sent the FBI storming into corporate offices and is widely thought to have ordered the authorities to audit executives’ personal tax returns. Richard Nixon used the same weapon in 1973, announcing tax investigations “of the books of companies which raised their prices more than 1.5 per cent above the January ceiling”. All were reacting in their own way to a phenomenon that Bill Clinton has described best: “Although America’s rich got richer . . . the country did not . . . the stock market tripled but wages went down.”
Given the widespread frustration with stagnant incomes, and an increasing body of evidence suggesting that the worst-off have few opportunities to improve their lot, demands for action are hardly unreasonable. The challenge is knowing what to do.
If income could be redistributed without damping economic growth, there would be a compelling case for reducing incomes at the top and transferring the proceeds to those in the middle and at the bottom. Unfortunately this is not the case. It is easy to think of policies that would have reduced the earning power of Bill Gates or Mark Zuckerberg by making it more difficult to start and profit from a business. But it is much harder to see how such policies would raise the incomes of the rest of the population. Such policies would surely hurt them as consumers by depriving them of the fruits of technological progress.
It is certainly true that there has been a dramatic increase in the number of highly paid people in finance over the last generation. Recent studies reveal that most of the increase has resulted from an increase in the value of assets under management. (The percentage of assets that financiers take in fees has remained roughly constant.) Perhaps some policy could be found that would reduce these fees but the beneficiaries would be the owners of financial assets – a group that consists mainly of very wealthy people.
It is not enough to identify policies that reduce inequality. To be effective they must also raise the incomes of the middle class and the poor. Tax reform has a major role to play. The current tax code is so badly designed that it is very likely to be having the effect of reducing economic growth. It also allows the rich to shield a far greater proportion of their income from taxation than the poor. For example, last year’s increase in the stock market represented an increase in wealth of about $6tn, of which the lion’s share went to the very wealthy.
It is unlikely that the government will collect as much as 10 per cent of this figure. That is because of a host of policies that favour the rich, such as the capital gains exemption, the ability to defer tax on unrealised capital gains, and the fact that gains on assets passed on at death are not taxed at all. Similarly, the corporate tax system allows value to flow through it like a sieve. The ratio of corporate tax collections to the market value of US corporations is near a record low. The estate tax can be more or less avoided with sophisticated planning.
Closing loopholes that only the wealthy can enjoy would enable taxes to be cut elsewhere. Measures such as the earned income tax credit can raise the incomes of the poor and middle class by more than they cost the Treasury, because they give people incentives to work and save.
It is ironic that those who profess the most enthusiasm for market forces are least enthusiastic about curbing tax benefits for the wealthy. Sooner or later inequality will have to be addressed. Much better that it be done by letting free markets operate and then working to improve the result. Policies that aim instead to thwart market forces rarely work, and usually fall victim to the law of unintended consequences.

The writer is Charles W Eliot university professor at Harvard and a former US Treasury secretary