Current valuations continue to imply cost of equity in mid-teens on normalized basis, Citi says. • Highlights considers regulatory and asset quality risks as manageable • Cites potential for capital return and normalized RoTE above CoE • Suggests buying BNP Paribas (most Preferred), SocGen (further rerating), Credit (paradigm shift) • Keeps neutral rating on Natixis with “an eye on investor day” (Nov. 14)
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*BARRATT DEVELOPMENTS RAISED TO BUY VS NEUTRAL AT GOLDMAN *BOVIS HOMES RAISED TO BUY VS NEUTRAL AT GOLDMAN *CELESIO RAISED TO NEUTRAL VS SELL AT UBS *CHEMRING GROUP RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS *DOMINO PRINTING RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS *HALKBANK RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE *QINETIQ RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS *KENTZ CORP RAISED TO BUY VS HOL DAT LIBERUM *OGK-2 RAISED TO NEUTRAL VS SELL AT GOLDMAN *WEIR GROUP RAISED TO MARKET PERFORM VS UNDERPERFORM AT COWEN
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*AIR LIQUIDE CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE *BOLIDEN CUT TO HOLD VS BUY AT PARETO SECURITIES *ENAGAS CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN *FEDERAL GRID CUT TO SELL VS NEUTRAL AT GOLDMAN *HALMA CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS *IMI CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS *MORGAN ADV MAT CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS *SAINT-GOBAIN CUT TO UNDERWEIGHT AT MORGAN STANLEY *VEDANTA CUT TO UNDERWEIGHT VS EQUALWEIGHT AT MORGAN STANLEY *YAPI KREDI CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
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*CREST NICHOLSON RATED NEW BUY AT GOLDMAN *LAND SECURITIES EXITS JPMORGAN EUROPEAN ANALYST FOCUS LIST *LSL PROPERTY SERVICES RATED NEW BUY AT GOLDMAN *SAVILLS RATED NEW NEUTRAL AT GOLDMAN *SONOVA RATED NEW HOLD AT BERENBERG; PT CHF119 *ST. MODWEN ADDED TO JPMORGAN EUROPEAN ANALYST FOCUS LIST *WILLIAM DEMANT RATED NEW BUY AT BERENBERG; PT DKK605
Country Sector Stock Call
*DEUTSCHE BOERSE EXITS UBS MOST PREFERRED DIVERSIFIED FINANCIALS *LSE EXITS UBS LEAST PREFERRED DIVERSIFIED FINANCIALS *PHOSAGRO ADDED TO EMEA MOST PREFERRED AT UBS *TAYLOR WIMPEY ADDED TO CONVICTION BUY AT GOLDMAN * BofAML Selects Picks Among European Chemicals Before 3Q Results : Cautious on Sector...Top picks (DSM, Solvay for portfolio change), Croda, JMAT, Syngenta for margin growth, Most overvalued: K+S, Umicore * Berenberg Lists Top Picks in German, Austrian Small and Mid-Caps : Bechtle, CEWE Stiftung & Co KGaA, Gerresheimer, Tipp24, United Internet, Zumtobel * Swedish Banks Set to Underperform in Nordic Region, BofAML Says
US market ended on the lows on Tuesday as no solution emerge from discussions; US Fut. Higher (30bps) after reports that ultra-dovish Janet Yellen will in fact be nominated to replace Fed Chairman Bernanke in 2014..Alcoa informally kicked off the earnings season with strong beat and upbeat comments on China demand (+2.3% after hours) ; Yum was a big disappointment however, as China SSS drop was much higher than expected -7% after hours...VIX @ 20.34 (+4.8%) Nikkei closed +1% on BoJ Minutes: recovery is on track; some concern on exports; QE is helping to lower upward pressure on yields, Shanghai +0.15% despite fresh round of warnings over ballooning shadow banking activity; Analysts continue to expect Q3 GDP on tap for next week to recover from Q2 levels.
Eur$ : 1.3565 European Futures indicated 15bps lower
Keep an eye on : - AF FP : French Court Confirms Ruling Vs. Air France’s Cityjet: Tribune - AM FP : FRANCE’S LE DRIAN: RAFALE CONTRACT TO BE SIGNED IN INDIA 2014 - AZA IM : Alitalia to carry out €300m capital increase under gov. plan - BAER VX : Julius Baer May Have Raised Too Much Capital for Merrill: FuW - BAYN GY : Bayer Lung Drug Wins U.S. Approval to Treat High Blood Pressure - BG/ LN : BG Group Near Deal on Brazil Barreirinhas Basin: Reuters Link - CE2 GY : Cropenergies 1H Sales Rise to EU372m From EU320m - CELS1 GY : Higher Bid May Emerge For Celesio at EU28-Shr, UBS Says - GETIB SS : Getinge CEO Sees Improving Margin in 2014, Dagens Industri Says - MC FP : Louis Vuitton Takes Legal Action Against Sogo HK - MOBB BB : Mobistar Aims to Offer Digital TV by End 2014, CEO Tells De Tijd - NESN VX : Nestle Looking to Sell Jenny Craig, Reuters Reports - RLIA SM : Bankia, FCC to Sell Realia Stakes This Year, Expansion Reports - SAN FP : Sanofi Makes New Proposal on French R&D Reorganization: Figaro - TECN SW : Tecan 2013 Sales Forecast Affected by Fewer Life Science Orders - TIT IM : MORE: Telecom Italia Cut to Junk by Moody’s; Outlook Negative, Telecom Italia Says It’s ‘Solid’ Industrially, Financially - UG FP : Dongfeng Plans to Buy 30% Stake in PSA Peugeot: Business News
Versace attracts seven bidders for minority stake
Versace, the Italian fashion group, has attracted seven bidders for the sale of a minority stake, Italian language daily Il Sole 24 Ore reported. The report cited market rumours as saying that the bidders include state-owned Italian strategic investment fund FSI, possibly in partnership with the Qatar Holding, private equity funds Permira, Axa, Clessidra, Blackstone and Investindustrial.
The item added that Investcorp is not believed to be among the bidders at present.
The report added that South Korean clothing group E-Land and Chinese group Fosun are not on the list of seven bidders.
The item claimed that the winning bidder will take a stake via a capital increase of EUR 150m. The report said that a further EUR 50m would be used to buy shares from the Versace family.
The report noted that Versace is estimated to have a value of EUR 1bn, based on multiple of 12-13 on its EBITDA of EUR 70m.
Source Il Sole 24 Ore
Long-awaited European recovery led to solid stock mkt performance and re-rating with MDAX trading at almost 20% premium to historical P/E, Berenberg says. • However, says German mid-cap universe still attractive mkt because of favorable macro environment, high-quality mid-cap businesses • Bechtle, CEWE Stiftung & Co KGaA, Gerresheimer, Tipp24, United Internet, Zumtobel top picks (more defensive growth or stock-specific growth drivers, unlikely to suffer negative surprises linked to slower-than-expected growth going into 3Q results)
Asian Market Update: Yellen to be formally nominated on Wednesday; US govt gridlock still in place
***Observations/Insights*** - US cash equity markets ended on the lows on Tuesday as another round of remarks from Pres Obama and House Speaker Boehner was hardly indicative of any meaningful shift in their respective positions on the budget; Equity futures got an upward jolt in early electronic trade however after reports that ultra-dovish Janet Yellen will in fact be nominated to replace Fed Chairman Bernanke in 2014. - Alcoa informally kicked off the earnings season with a strong beat and upbeat commentary on China demand; Yum was a big disappointment however, as China SSS drop was much higher than expected. - Optimism from improved economic data from Australia overnight was dampened by disappointing forward-looking result from Westpac consumer confidence index, as it fell for the first time in 5 months. - BOJ minutes from early September meeting saw members agree that the virtuous cycle of production, income and spending is working steadily; One member warned of risk for large bond market volatility. - Shanghai Composite little changed despite fresh round of warnings over ballooning shadow banking activity; Analysts continue to expect Q3 GDP on tap for next week to recover from Q2 levels.
***Economic Data*** - (AU) AUSTRALIA OCT WESTPAC CONSUMER CONFIDENCE INDEX: 108.3 V 110.6 PRIOR; M/M: -2.1% V +4.7% PRIOR (largest decline in 5 months) - (NZ) NEW ZEALAND SEPT QV HOUSE PRICES Y/Y: 8.4% V 8.5% PRIOR - (NZ) NEW ZEALAND SEPT CARD SPENDING RETAIL M/M: -0.8% V +0.3%E (first decline since March); TOTAL M/M: -0.4% V +0.4% PRIOR - (KR) SOUTH KOREA SEPT BANK LENDING TO HOUSEHOLD (KRW): 472.0T V 471.8T PRIOR - (KR) SOUTH KOREA AUG MONEY SUPPLY L M/M: +0.8% V +0.5% PRIOR; M2 M/M: -0.1% V +0.4% PRIOR - (UK) UK SEPT BRC SHOP PRICES INDEX Y/Y: -0.2% V -0.5% PRIOR - (US) API PETROLEUM INVENTORIES: CRUDE: +2.76M v +1.5Me (2nd consecutive build)
***Fixed Income/Commodities/Currencies*** - (JP) BOJ offer to buy ¥110B in less than 1-yr JGB, ¥300B in 1-3yr JGB and ¥350B in 3-5 yr JGB - (AU) Australia MoF (AOFM) sells A$800M in 2.75% 2024 Bonds; avg yield: 4.0683%; bid-to-cover: 4.36x - (NZ) New Zealand issued NZ$2.5B in 2030 I/L Notes - SLV: iShares Silver Trust ETF daily holdings fall to 10,565 (lowest since Sept 18th) from 10,625 - update as of 10/7 - GLD: SPDR Gold Trust ETF daily holdings fall by 1.8 tonnes to 898.2.0 tonnes (lowest since Feb 2009)
- USD initially weaker on the Yellen nomination announcement, sending EUR/USD above $1.36 and USD/jpy below 96.90 before short-covering set in later in the day. Japanese yen is still widely offered across the board - USD/JPY up over 50pips above 97.40, EUR/JPY up 70pips above 132.10, AUD/JPY up 70pips to 91.90 session high.
***Speakers/Political/In the Papers*** - (CN) China Premier Li Keqiang: Sees "strong momentum of steady growth" for China economy - press - (CN) China major cities property transaction volumes +17% y/y during National Day holiday - Soufun - (CN) China big four banks Sept new loans may be CNY276B; Overall new loans may be CNY840B v CNY711.3B m/m - Chinese press - (CN) China Anhui City tightens land transfer rules; Requires down payment equal to at least 50% land price - Chinese press - (CN) Chinese Academy of Social Sciences (CASS): China shadow banking size may have already reached CNY20.5T at the end of 2012, nearly half of China's GDP - Chinese press - (CN) Analysts see China Q3 GDP rising to 7.8% from 7.5% in Q2 - Shanghai Daily
- (JP) Japan BOJ Dep Gov Nakaso: Japan economy expected to continue moderate recovery; Low chance of emerging nations suffering late 90s style financial crisis; High possibility of reaching 2% inflation target in FY14/15 - press conf - (JP) Japan's consumption tax increase to bring in ¥3T less than initially estimated - Nikkei News - (JP) Japan Ministry of Economy, Trade and Industry (METI): Costs for Japan's 9 major utilities for fuel said to rise by ¥3.6T in FY13/14 without restart of nuclear power - Nikkei News
- (AU) Australia Treasurer Hockey: Downside risk to world outlook provides risks to Australia budget; Australia will need to appropriately manage risks - (KR) South Korea Ministry of Knowledge Economy: Q4 Business Survey Index (BSI) rose to 106 from 96 q/q - Korean press
- (IR) Iran said to be in plans to submit nuclear concessions; to propose dialing back nuclear program at discussions next week - financial press
- (US) President Obama: Reiterates government must reopen before negotiations begin, Congress cannot demand a ransom for doing its job - (US) US House Speaker Boehner: disappointed that Pres Obama and Democrats are unwilling to sit down and negotiate; Pres Obama wants an "unconditional surrender" - press conf
***Equities*** Market Snapshot (as of 03:30 GMT): - Nikkei225 +0.4%, S&P/ASX +0.1%, Kospi closed, Shanghai Composite -0.1%, Hang Seng -0.6%, Dec S&P500 +0.3% at 1,655, Dec gold -0.5% at $1,318, Nov crude oil -0.1% at $103.41/brl
US markets: - LRN: Guides FY13 Rev $905-925M v $987Me; -17.8% afterhours - YUM: Reports Q3 $0.85 (adj) v $0.93e, R$3.47B v $3.55Be; China Sept SSS -11% v -5.7%e; China Q4 SSS outlook no longer looking positive; -7.0% afterhours - KNX: Lowers Q3 guidance to $0.18-$0.20 v $0.23e (prior $0.22-0.24), Q4 guidance to $0.20-$0.23 v $0.24e (prior $0.22-0.25); -5.8% afterhours - CAS: Reports Q3 prelim -$0.28 to -$0.32 v -$0.04e, Rev $250-255M v $285Me; -5.4% afterhours - AAPL: Reports of iPad refresh event on Oct 22 (vs prior speculation of mid to late Oct); +0.6% afterhours - AA: Reports Q3 $0.11 (adj) v $0.06e, R$5.77B v $5.71Be; +3.0% afterhours
Notable movers by sector: - Consumer discretionary: Chongqing Changan Automobile Co Ltd 000625.CN +4.8% (Sept results); Dongfeng Motor 489.HK -3.8% (Sept results) - Industrials: Geely Automobile Holdings Ltd 175.HK -3.6% (block sale by Goldman Sachs); Trigiant Group Ltd 1300.HK -4.8% (share placement) - Materials: CSG Holding Co Ltd 000012.CN +3.1% (prelim Sept results); OceanaGold Corp OGC.AU -4.0% (announces acquisition); Newcrest Mining Ltd NCM.AU +1.1% (Q1 productions results; affirms FY14 gold production guidance) - Technology: Anhui Sun-Create Electronics Co Ltd 600990.CN +4.9%, China Spacesat Co Ltd 600118.CN +1.8% (China issues plan for satellite navigation industry); HTC Corp 2498.TW +2.4% (share repurchase); Wistron 3231.TW -1.6% (Q3 results) - Energy: China Longyuan Power Group 916.HK +5.3% (Sept power generation results); Shunfeng Photovoltaic International Ltd 1165.HK +16.4% (acquires stake in Suntech) - Utilities: Transurban TCL.AU +1.8% (Q1 results); TEPCO 9501.JP -1.1% (update to Fukushima leak) - Healthcare: Novogen Limited NRT.AU +6.1% (technology update) - Financials: Westpac Banking Corp WBC.AU +1.0% (bid for Lloyd's Australia assets); Mizuho Financial Group Inc 8411.JP -1.5% (criminal probe) - Telecom: Softbank 9984.JP -4.9% (analyst action)
European Equity Funds See Longest Streak of Inflows Since 2002
Investors have pushed money into European stock funds for 14 straight weeks, longest period in >11 yrs, according to data from EPFR Global, a research firm in Cambridge, Mass. * Funds focused on European equities lured $21.5b in the 3 1/2 months through Oct. 2, compared with 16-week streak that finished in May 2002, when investors pumped $1.4b into European stock funds
Iran Readies Offer to Limit Its Nuclear Program
Iran's Supreme Leader Ayatollah Ali Khamenei, in robe, attends the graduation of military cadets in Tehran on Saturday, as shown in a photograph released by Mr. Khamenei's office.
Iran is preparing a package of proposals to halt production of near-weapons-grade nuclear fuel, a key demand of the U.S. and other global powers, according to officials briefed on diplomacy ahead of talks in Geneva next week.
Tehran in return will request that the U.S. and European Union begin scaling back sanctions that have left it largely frozen out of the international financial system and isolated its oil industry, the officials said.
"The Iranians are preparing to go to Geneva with a serious package," said a former Western diplomat who has discussed the incentives with senior Iranian diplomats in recent weeks. "These include limits on the numbers of centrifuges operating, enrichment amounts and the need for verification."
The package from the new government of President Hasan Rouhani could revitalize long-stalled negotiations over Iran's nuclear program and underpin an emerging diplomatic thaw between Washington and Tehran.
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But it also stands to test the unity of the U.S. and other international powers meeting with Iranian diplomats in Geneva in a bid to reach an accord to curtail Iran's nuclear work.
By falling short of a complete shutdown of enrichment, the anticipated Iranian offer could divide the U.S. from its closest Middle East allies, particularly Israel, Saudi Arabia and the United Arab Emirates, who have cautioned the White House against moving too quickly to improve ties with Tehran, according to American and Mideast officials.
In an opening salvo in the negotiations, Tehran is expected to offer to stop enriching uranium to levels of 20% purity, which international powers consider dangerously close to a weapons-grade capability.
Iran is also expected to offer to open the country's nuclear facilities to more intrusive international inspections, the officials said. And Iran is considering offering the closure of an underground uranium-enrichment facility near the holy city of Qom, which the U.S. and Israel have charged is part of a covert Iranian weapons program, which Tehran denies.
The international diplomatic bloc negotiating with Tehran, which comprises the five permanent members of the United Nations Security Council, plus Germany, last met with Iran in early April, two months before Mr. Rouhani's surprise electoral victory.
The group of world powers, known as the P5+1, offered at the time to end sanctions on Iran's petrochemical exports and precious metals trade in return for Tehran suspending its production of 20%-enriched uranium and ceasing activities at the Qom site, known as Fordow.
U.S. and European diplomats said Iran's previous government never formally responded to the offer.
Russia and China, both P5 members, have pressed the U.S. and the European Union to begin scaling back sanctions on Tehran in an effort to underpin negotiations with Mr. Rouhani's government.
The U.K., also in the P5, is demanding that Iran take concrete steps to set aside its nuclear ambitions before London dials back sanctions, Foreign Secretary William Hague said on Tuesday—adding, however, that the two countries are taking early steps toward reopening their embassies, which were closed in 2011.
Meanwhile, the U.S. and Iran have intensified direct contacts in recent weeks in a bid to strengthen the diplomacy.
President Barack Obama spoke with Mr. Rouhani in a 15-minute phone call on Sept. 27, the first conversation between an American and Iranian president in more than 30 years.
Iranian Foreign Minister Javad Zarif met for 30 minutes with Secretary of State John Kerry last month in New York. They largely focused on resolving the nuclear dispute, according to U.S. and Iranian officials.
Mr. Zarif will present the package to the P5+1 to kick off what is expected to be an intense new round of negotiations, according to these officials. He has said Tehran's new government wants to resume talks with a clean slate, and offered during meetings in New York to bring a new package when the next round begins in Geneva on Oct. 15, according to Iranian and U.S. officials.
Iran's top diplomat has declined to publicly outline his road map. But Western officials who met his delegation said the plan would focus on stopping the production of uranium enriched to 20% purity while agreeing to ship Iran's stockpile of the nuclear fuel to a third country for storage.
In return, Iran will seek to obtain from the international market the fuel rods needed to power the country's research reactor in Tehran.
Less certain, said the officials briefed on the diplomacy, is whether Mr. Zarif will offer in Geneva to suspend or end nuclear-fuel production at Qom.
Israel has repeatedly threatened to bomb the site because it believes the underground facility is designed to produce highly enriched uranium for bombs. The site is controlled by Iran's elite military unit, the Islamic Revolutionary Guard Corps, which U.S. officials aren't certain Iran's diplomats can control.
Messrs. Rouhani and Zarif have stressed in recent weeks that Iran won't agree to suspend all of its nuclear-fuel production—a program that includes the enrichment of uranium to levels between 3% and 5% purity. This fuel is usable for power reactors but isn't suitable for weapons.
Israeli Prime Minister Benjamin Netanyahu told the U.N. General Assembly last week that his country wouldn't accept Iran maintaining the ability to enrich uranium at any level, due to concerns it would still maintain the latent ability to produce weapons-grade fuel.
Senior Obama administration officials have refused to say whether the U.S. would accept Iran maintaining the ability to enrich uranium on its soil.
"I'm not going to negotiate in public," the Obama administration's chief Iran negotiator, Undersecretary of State Wendy Sherman, told a Senate hearing last week. "All I can do is repeat what the president of the United States has said: We respect the right of the Iranian people to access peaceful nuclear energy."
A potential stumbling for the Geneva negotiations is the status of Iran's heavy water reactor in the city of Arak, which Washington believes offers Tehran a second route to develop atomic weapons.
Iran has notified U.N. nuclear inspectors that it hopes to begin operating the Arak reactor by the second half of 2014. At that point, the facility would begin producing roughly two bombs' worth of weapons-grade plutonium per year.
The status of Arak has only briefly been raised in previous negotiations between the P5+1 and Iran, according to U.S. and European officials. But the reactor has become of increasing concern to the U.S., U.N. and Israel as its operational date draws closer.
Mr. Zarif has said that his government is committed to bringing more transparency to its nuclear program. Among the steps Tehran is expected to offer in Geneva is allowing the U.N.'s nuclear watchdog, the International Atomic Energy Agency, greater access to Iran's sites and the ability to call more snap inspections.
It is unclear, these officials said, if Iran will open up some of the purely military sites that the IAEA has said may have been used to test nuclear-weapons technologies in recent years. The agency has repeatedly been blocked from visiting the Parchin military base south of Tehran.
Negotiations will need to show quick results to counter domestic opposition to the talks in both Washington and Tehran, U.S. and Iranian officials say.
In the U.S., Congress is set to impose new sanctions on Iran that seek to enforce a total ban on oil exports and further block Tehran's ability to conduct international trade.
Ms. Sherman pressed Congress last week to hold back on enacting the sanctions until the U.S. can test Mr. Rouhani's new negotiating team. But a number of leading lawmakers, both Democrats and Republicans, said Washington should continue to increase the financial pressure until Iran cuts a deal.
"The State Department should not aid and abet a European appeasement policy by pressuring the Senate to delay sanctions while the world's leading sponsor of terrorism races toward a nuclear weapons capability," said Sen. Mark Kirk (R., Ill.) last week.
Conservative leaders in Iran, particularly leaders of the Revolutionary Guards, already have attacked the diplomatic efforts of Messrs. Rouhani and Zarif. The foreign minister told American leaders in recent days that the window for negotiations is somewhat limited, according to Sen. Dianne Feinstein (D., Calif.), who met with Mr. Zarif in New York.
"There are people in Iran, just as there are people here, who would not want to see an agreement," Ms. Feinstein said.
Obama to nominate Yellen as Fed chair
Janet Yellen will become the first woman to hold the most powerful job in the world economy after administration officials said that President Barack Obama would nominate her as chair of the US Federal Reserve. Mr Obama will formally nominate Ms Yellen at a ceremony at the White House on Wednesday. Current chairman Ben Bernanke will also attend. The choice of Ms Yellen – an architect of the Fed’s aggressive monetary stimulus in recent years as the present vice-chair – will redouble its commitment to those policies and may lengthen the period for which US interest rates stay at zero. Her appointment represents a dramatic change of fortune after Mr Obama’s preferred candidate, former Treasury secretary Lawrence Summers, was forced to withdraw on September 15 following strong opposition from Democratic senators. But Ms Yellen may still face a difficult confirmation, with a senior Republican on the Senate banking committee, Bob Corker, suggesting he would vote against her. "I voted against vice-chairman Yellen’s original nomination to the Fed in 2010 because of her dovish views on monetary policy. We will closely examine her record since that time, but I am not aware of anything that demonstrates her views have changed," Mr Corker said. Mr Bernanke will step down in January with a likely reputation as one of the greatest chairs of the Fed after he helped the US to navigate the worst financial crisis since the Great Depression. Ms Yellen, 67, will be appointed to a four-year term as chair of the Fed that runs until January 2018. She will take over an economy still suffering from a 7.3 per cent unemployment rate more than four years after the end of a deep recession. Over the coming years, her challenge will be to bring the economy back to full employment, and then manage an exit from unconventional monetary policy without triggering a bout of inflation. An academic economist for many years, Ms Yellen became a governor of the Fed in 1994. She later served as chair of President Bill Clinton’s Council of Economic Advisers, president of the San Francisco Fed, and became vice-chair of the Fed in 2010. A graduate of Brown University and Yale, she is married to the Nobel Prize-winning economist George Akerlof , and has one son. In the last few years, Ms Yellen has helped to develop the strategy of "forward guidance", including the Fed’s unemployment rate threshold of 6.5 per cent above which it will not raise interest rates. In an April speech, she suggested the Fed could communicate more about the future path of rates once they start to rise. Ms Yellen is regarded as one of the policy makers most determined to strike an even balance between the Fed’s twin goals of low inflation and maximum employment. She has discussed scenarios where inflation would briefly go above the Fed’s goal of 2 per cent in order to make more rapid progress on bringing down unemployment. Her nomination will now go to the US Senate where the chances of confirmation are high. Democrats are solidly behind Ms Yellen. Some Republicans may oppose Ms Yellen because they disagree with the Fed’s monetary stimulus in recent years. For example, Senator Pat Roberts of Kansas has said he is likely to vote against her, and Senator Rand Paul of Kentucky – whose father is Fed sceptic Ron Paul – may seek to delay her confirmation. But Ms Yellen will need only six Republican votes to reach the bar of 60 to overcome a filibuster. Given that a number of Republicans voted to confirm her as vice-chair in 2010, and the necessity of having a Fed chair, she is likely to overcome that hurdle. Senator Charles E. Schumer said: "She’s an excellent choice and I believe she’ll be confirmed by a wide margin."