WSJ : Rehn Urges ECB to Act on Inflation

Rehn Urges ECB to Act on Inflation

'Greece Needs to Do Its Homework,' Says EU Economics Chief

DAVOS, Switzerland—European Union economics chief Olli Rehn on Friday called on the European Central Bank to act on its 2% inflation target, warning that very low inflation in the euro area doesn't support the bloc's nascent economic recovery.

Euro-zone inflation has been declining for months and was 0.8% in December 2013, down from 2.2% a year earlier, according to Eurostat, the EU statistics agency.

"It's important that the ECB continues its supportive monetary policy and aims at its inflation target," Mr. Rehn said in an interview on the sidelines of the World Economic Forum in Davos.


Olli Rehn, economic and monetary affairs commissioner for the European Union, at a Bloomberg Television interview in Washington, D.C., on Oct. 11, 2013. Bloomberg

He noted this view wasn't advice to the ECB, which is independent of other EU institutions, but rather based on analysis from the commission's economists.

Banks across the euro area should also start addressing any capital shortfalls before they undergo a review of the quality of their balance sheets and stress tests later this year, Mr. Rehn added, noting that Italian banks are among those already doing this.

And while stressing that the euro zone no longer faces the risk of falling apart, Mr. Rehn said there was no space to slow down reforms, neither in larger euro-zone economies such as France and Italy nor in bailout countries.

Greece's fraught bailout review, currently suspended for the third time, will be completed "in the next few months," Mr. Rehn said. His comment will add to concerns that the country's €240 billion bailout—financed by the euro zone and the International Monetary Fund—is veering off track.

A team of experts from the three international institutions that manage the bailout—the European Commission, the European Central Bank and the IMF—has been due back in Athens for weeks, but no date has been set for their return. Mr. Rehn said he hoped they would resume their review mission before the end of January, while the more senior team members would return a little later.

"Greece needs to do its homework," Mr. Rehn said, citing delays in preparation for negotiations over fiscal and structural reforms as the reason for the stalled progress in the review.

Greece can't get more cash out of its bailout unless the review is completed.

Covering Greece's financing needs for the second half of 2014 and completing the recapitalization of its banks are the short-term goals, Mr. Rehn said.

But its creditors will only start talking about Greece's 2015/16 fiscal plans and what holes they may burn into its budget, as well a way to reduce its government debt, "over the summer," Mr. Rehn said. Those talks had been expected to take place in the spring, once Eurostat corroborates Greece's fiscal performance for the previous year in the second half of April.

The timing of the talks on the Greek bailout is important not least because of the EU elections in May, in which conservative Greek Prime Minister Antonis Samaras faces an increasing chance of a defeat by the leftist opposition party Syriza. A successful conclusion of the debt and fiscal talks before the elections could have given the Greek premier a boost, but Mr. Rehn's comments imply that that won't happen until after Mr. Samaras faces the polls.

Mr. Rehn said the commission would support Portugal if the country opted to secure a precautionary credit line—a pot of aid only drawn on if market conditions or state revenues disappoint—after its own bailout runs out in mid-2014.

"I believe in the principle of better safe than sorry," Mr. Rehn said, "and the precautionary line…is precisely for the purpose to be rather safe than sorry."

>>> US Gapping down

Gapping down

In reaction to disappointing earnings/guidance: IGT -10.2% (also downgraded to Neutral from Buy at Sterne Agee; tgt lowered to $18 from $21.50), DGII -9.5%, RMD -8.9% (also downgraded to Mkt Perform from Outperform at William Blair), KSU -6.9%, COVS -6.5%, ISRG -5.5%, CST -4% (light volume), AMCC -2.2%, XRX -1.3%, SYNA -0.9%, MXIM -0.8% (upgraded to Positive from Neutral at Susquehanna), HON -0.2%

Select financial related names showing weakness: ING -2.1%, RBS -1.7%, DB -1.5%, C -1.4% (downgraded to Neutral from Overweight at Atlantic Equities), CS -1.3%, UBS -1.2%, BAC -1.1%.

Latin America (including Brazil) names are under pressure: GFA -5.9%, BBVA -4.9%, OIBR -3.9%, TSU -3.5%, BSBR -2.7%, TEF -2.6%, VALE -2.2%, ELP -2.1%, ITUB -2.1%, SAN -1.5%, PBR -1.3%,CIG -1.2%, BBL -1%, BHP -0.6%

Oil/gas names seeing weakness: SDRL -2.2%, STO -2.1%, ESV -1.5% (downgraded to Market Perform from Outperform at Wells Fargo), RIG -1.1% (downgraded to Market Perform from Outperform at Wells Fargo), CHK -1.1%, NE -1% (downgraded to Market Perform from Outperform at Wells Fargo), DO -0.3% (Diamond Offshore downgraded to Market Perform from Outperform at Wells Fargo)... A few coal names are also trading lower: WLT -4% (downgraded to Market Perform from Outperform at Wells Fargo), YZC -3%, BTU -1.2%,

Other news: PTCT -27.5% (announces CHMP of the EMA has adopted a negative opinion on the co's MAA for conditional approval of ataluren for the treatment of nonsense mutation Duchenne muscular dystrophy; co appoints Robert J. Spiegel to Chief Medical Officer), ATOS -18.8% (announces proposed public offering of common stock and warrants), KIPS -14.3% (prices 5.25 mln shares at $0.70 per share), TNXP -5.5% ( announces proposed public offering of common stock, no amount given), BBRY -3.3% (continued weakness following reports that Pentagon has not placed any new orders with BBRY), TSLA -2.8% (modestly pulling back), PGNX -2.7% ( files for $150 mln mixed securities shelf offering), BUD -2.7% (still checking), AA -2.7% (still checking), AIXG -2.3% (still checking), GNVC -2% ( files for $75 mln mixed securities shelf offering), GSK -1.8% (GlaxoSmithKline receives positive opinion from the CHMP in Europe for once-weekly Eperzan (albiglutide) for the treatment of type 2 diabetes; downgraded to Hold from Buy at Berenberg ), TWTR -1.6% (still checking), QIHU -1.4% (following 3 point decline exacerbated by late weakness on reports that Alibaba not taking stake), AAPL -0.5% (following 4+ point move higher, boosted by Icahn letter) .

Analyst comments: MLNX -3.7% (downgraded to Underweight from Equal Weight at Barclays), FEYE -3% (downgraded to Equal Weight from Overweight at Barclays), CMG -1.7% ( downgraded to Neutral from Outperform at Wedbush; initiated with an Outperform at Oppenheimer), ALV -1.5% (downgraded to Underweight from Equal Weight at Barclays), COH -0.7% (downgraded to Hold from Buy at Cantor Fitzgerald),

>>> US Gapping up

Gapping up

In reaction to strong earnings/guidance: OTEX +7.6% (also announces 2:1 split), JNPR +5.7% (also reports indicate Jana Partners planning on taking a stake, upgraded to Outperform from Mkt Perform at William Blair, upgraded to Neutral from Sell at Goldman, upgraded to Overweight from Equal Weight at Barclays ), MSCC +3.5% (light volume), ALTR +3.2%, DFS +3.1%, MSFT +2.9%, LEG +2.3%, (light volume), SWK +1.7%, (light volume), BMY +1.7%, KMB +1% (light volume), CBST +1%, SBUX +0.8%, KLAC +0.7%, PG +0.6%.

M&A news: MCK +3.3% (announces agreement with Franz Haniel & Cie. GmbH to acquire entire holding of Celesio shares at EUR 23.50 per share).

Select metals stocks trading higher: GOLD +2.4%, GDX +2%, GFI +2%, KGC +1.9%, ABX +1.5%, HL +1.5%, GG +1.4%, SLW +1.2%, SLV +1.2%, .

Other news: BDSI +28% and ENDP +2.5% (Endo Health and BioDeliver Sciences announce positive Top-Line Results from the Phase III Clinical Trial of BEMA Buprenorphine in Opioid Naive Patients with Chronic Pain), ADMP +9.7% (receives notice of key allowance for US Patent that supports its cancer immunology portfolio), ASML +2% (still checking), INFI +1.8% (reports phase 1 data of IPI-145 at sixth annual t-cell lymphoma forum; 38% response rate in patients with t-cell lymphomas, suggesting broad potential of IPI-145 in blood cancers), SNE +1.8% (may be attributed to MSFT upside in game console sales).

Analyst comments: ANGI +1.5% (upgraded to Buy from Neutral at B. Riley & Co), NOK +0.4% (upgraded to Buy from Hold at Societe Generale)

* Juniper Networks: Color on Quarter -->+5% pre market

Juniper Networks: Color on Quarter 

* Needham notes Juniper's new mgmt team is promising action to cut costs and return capital to shareholders. There could be upside to estimates from these actions. The quarter was strong with strong Service Provider orders and a solidly above 1.0 B-B.
* Oppenheimer notes Juniper reported strong Dec-Q results beating top- and bottom-line targets. Demand was broad-based with sustained mid-teens growth in routing, record growth in switching (+36% YoY), and a third consecutive quarter of sequential improvement in security. While 1Q14 guidance is somewhat more seasonal than usual, they believe Juniper baked in some level of conservatism. The more important take is that Juniper's new CEO appears more open to aggressive change and will announce an "Integrated Operating Plan" in the coming weeks. They suspect the plan would closely mimic the proposal put forth by activist investor Elliot Management, with an aggressive combo of OpEx cuts/buybacks. With key headwinds addressed and catalysts ahead, Outperform.
* FBR Capital notes Juniper's 4Q13 results revealed a company with steady fundamental growth driven by some of the most robust sources of demand in the sector: webscale and MSOs. Carriers like T and VZ once again each contributed less than 10% of Juniper's revenues, having been replaced by an arguably more diversified, but often less consistent client base of webscale and cable cos. Mgmt indicated that bookings were up for the third consecutive quarter to a record $471M, while book-to-bill was >1, demonstrating demand is re-accelerating. While Juniper's business appears to be gaining momentum, they view the details of management's integrated operating plan and consistent execution as the necessary ingredients to get this stock moving higher.
* RBC is raising their tgt to $28 from $26. Juniper's taking an open approach to narrowing its focus, cutting costs and improving its cost structure and the timing might work for the new CEO, considering we're currently in a router upgrade cycle. Provisionally, our CY15 EPS increases to $1.65 vs. $1.60 previously; they estimate that a 10% head-count reduction may drive CY15 EPS closer to $2.20.
* Mizuho notes Juniper beat 4Q13 consensus expectations on better switching sales. The in-line to slightly better outlook was driven by strong bookings in routing, up over 30% Y/Y - that trend suggests service provider spending is due to improve in 1Q14. New management indicates it plans to provide a detailed operating plan centered on innovation and cost structure, with a capital return program within the next few weeks - providing an additional tailwind for shares.
* Goldman, William Blair and Barclays upgraded the stock this AM.
- GS : Raised JNPR to Neutral from Sell, price target: $25

>>> Microsoft: Color on qtr --> +2.9% Pre-Market

Microsoft: Color on qtr 

* FBR notes MSFT delivered a solid FY2Q (Dec) as the Co beat the Street across the board on both the top and bottom lines. The source of strength for Microsoft continues to be around the co's success in the cloud on the heels of Azure and Office 365 momentum in the field, with Surface and Xbox also seeing relative strength in the December quarter due to a new product cycle for both (e.g., Xbox One, Surface 2). Although PC headwinds remain a major challenge for Microsoft going forward, FBR applauds the company's ability to show better-than-expected Windows OEM revenues in the company's "bread and butter" PC business, an encouraging sign in its opinion. Tgt to $40 from $38.
* RBC notes MSFT reported a strong second quarter outperforming most metrics with record revenue driven by a successful holiday season for Xbox and Surface coupled with in-line Commercial results. Q3/14 revenue and EPS guidance was lower then expected, but could prove conservative with an improving economy.
* Oppenheimer notes, building on the prior encouraging quarter, MSFT reported strong F2Q14 results that exceeded consensus estimates on almost every metric and were further supported by a solid outlook. The strong performance was driven by: 1) improved macro environment; 2) stabilizing PC market; 3) improved execution internally and at MSFT's partners ecosystem; 4) both Commercial and Consumer segments performing well. There was no new message about the CEO selection process and Opco views it as the next near-term catalyst. With back-to-back strong quarters and encouraging outlook, MSFT could be indirectly suggesting there is no need for an external change. It remains to be seen.
Pac Crest notes, while Microsoft put up strong FQ2 (Dec.) upside, it was mostly as a result of better tablet and Xbox sales. There is still a lot of uncertainty in the Microsoft model, so firm is lowering estimates for FQ3 modestly.

(RTR) Sanofi CEO says buying L'Oreal's stake could be "very accretive"

Sanofi CEO says buying L'Oreal's stake could be "very accretive"
* Will look seriously at L'Oreal deal if opportunity arises

* Sanofi sees big promise in drugs developed with Regeneron

* Expects sizeable MS drug sales, despite Lemtrada setback

* Diabetes franchise to demonstrate growth beyond 2015 - CEO

By Ben Hirschler

DAVOS, Switzerland, Jan 24 (Reuters) - Buying back L'Oreal's 9 percent stake in Sanofi could be "very accretive" for the French drugmaker, although the idea remains speculative as the $12 billion holding has yet to be put up for sale, Sanofi's CEO said.

Investor attention has focused increasingly on a potential realignment of shareholdings that may see Sanofi making a debt-funded repurchase of L'Oreal's stake in a move analysts believe should boost the pharmaceutical group's earnings.

Such a deal could provide Sanofi with a useful lift as it seeks to return to growth after a difficult 2013 that featured problems in Brazil and several product setbacks.

"If you get the chance you are certainly going to look seriously at it - but it is an 'if, if, if' situation," Sanofi Chief Executive Chris Viehbacher told Reuters on Friday on the sidelines of the World Economic Forum in Davos, Switzerland.

"It could very well be, when you get there, that it could be a very accretive thing to do."

L'Oreal's CEO Jean-Paul Agon said last year the cosmetics company could buy back the 29.5 percent stake that Swiss food group Nestle holds in it, if L'Oreal in turn sells the 9-billion-euro ($12 billion) stake it owns in Sanofi.

Agon reaffirmed last week that his group had the firepower to enable it to buy Nestle's stake. Restrictions on Nestle selling down its L'Oreal holding end in April.

Viehbacher, who will unveil full-year results next month, said his group had strong growth drivers in vaccines, rare diseases, animal health and consumer health products, adding that a lot of the focus for 2014 would also be on the promising drug pipeline.

In particular, he highlighted the potential of a new kind of cholesterol drug and two immunology medicines being developed by U.S. biotech firm Regeneron Pharmaceuticals. Sanofi has a stake in Regeneron and an option to increase it further.


MULTIPLE SCLEROSIS

Sanofi suffered a blow last month when its Lemtrada multiple sclerosis (MS) treatment failed to win approval from U.S. regulators, but Viehbacher said he remained confident that MS would develop into an important business.

Lemtrada will still be available in other markets and the company also has another MS drug, Aubagio, which is doing well.

"The MS market is not quite so skewed to the U.S. as it is in other areas and the markets in Europe and Canada are huge. Aubagio is also going well. The MS market is expected to be about $14 billion by 2017, so if you get only 10 percent market share you are going to have quite sizeable products," Viehbacher said.

Some investors are nervous about Sanofi's outlook over the next few years because its growth still depends heavily on the top-selling diabetes treatment Lantus, which could face so-called biosimilar competition in 2015.

Viehbacher, however, played down the threat, pointing to uncertainties over market acceptance of such copycat biotech drugs - which are similar to but not exact copies of the original - and the fact Sanofi had a promising follow-on to Lantus in development.

"We see our diabetes franchise being able to demonstrate growth beyond 2015," he said.

>>> Procter & Gamble beats by $0.01, reports revs in-line--> flat pre-marjet

Procter & Gamble beats by $0.01, reports revs in-line; reaffirms FY14 EPS guidance, revs guidance

Reports Q2 (Dec) earnings of $1.21 per share, $0.01 better than the Capital IQ Consensus Estimate of $1.20; revenues rose 0.5% year/year to $22.28 bln vs the $22.36 bln consensus. Procter & Gamble reiterated fiscal year 2014 guidance.
Segments:
Beauty segment organic sales were unchanged. Gains from market growth and innovation in Prestige, Hair Care, Deodorants, and Personal Cleansing, were offset by geographic and product mix and a decrease in Skin Care sales.
Grooming segment organic sales increased three percent as higher pricing and innovation on Blades & Razors and Appliances were partially offset by market contraction in developed regions and geographic and product mix.
Health Care segment organic sales grew five percent due to increases in Oral Care and Personal Health Care from innovation which were partially offset by a decrease in Pet Care behind the continuing impacts from the product recalls in the previous fiscal year for Natura.
Fabric Care and Home Care segment organic sales increased four percent with growth in Fabric Care and Home Care due to innovation and market expansion in developing regions. Personal Power sales decreased due to shipments in the prior year which included the impact of Superstorm Sandy.
Baby, Feminine and Family Care segment organic sales increased three percent behind product innovation and Baby Care market growth in the developing regions.
Guidance:
Co reaffirms guidance for FY14, sees EPS of +5-7% to ~$4.25-4.33 bln vs. $4.27 Capital IQ Consensus Estimate; sees FY14 revs of +1-2% to ~$85.01-85.85 bln vs. $85.84 bln Capital IQ Consensus Estimate. The Company continues to expect organic sales growth of +3-4%

>>> Honeywell beats by $0.02, beats on revs; reaffirms FY14 EPS guidance, revs g

Honeywell beats by $0.02, beats on revs; reaffirms FY14 EPS guidance, revs guidance 

Reports Q4 (Dec) earnings of $1.24 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus Estimate of $1.22; revenues rose 8.4% year/year to $10.39 bln vs the $10.2 bln consensus.

Co reaffirms guidance for FY14, sees EPS of $5.35-5.55, excluding non-recurring items, vs. $5.54 Capital IQ Consensus; sees FY14 revs of $40.3-40.7 bln vs. $40.78 bln Capital IQ Consensus.

Aerospace
Sales were up 3% compared with the fourth quarter of 2012 driven by 3% Commercial growth and a 2% increase in Defense and Space. Commercial original equipment (OE) sales were ~flat driven by continued strong OE build rates and favorable platform mix offset by higher payments due to BGA OEM customers. Commercial aftermarket sales were up 5% driven by higher airline spares and strong BGA RMU (Repairs, Modifications, and Upgrades) sales. Defense and Space sales increased 2% driven by a royalty gain and international strength offsetting planned program ramp downs.
Segment profit was up 6%, and segment margins expanded 60 bps to 20.5%, primarily due to productivity net of inflation, and commercial excellence, partially offset by investments for growth. BGA OEM payments were offset by a royalty gain in Defense and Space.
Automation and Control Solutions
Sales were up 10% reported, up 4% organic, compared with the fourth quarter of 2012, primarily driven by the favorable impact of acquisitions, growth in Energy, Safety, and Security due to strong residential end markets, new product introductions, and strength in the Americas Distribution business.
Segment profit was up 8% and segment margins were down (20) bps to 15.3% driven by the dilutive impact of acquisitions, higher Building Solutions and Distribution sales, and continued investments for growth partially offset by volume and productivity net of inflation, including benefits from prior period repositioning.
Performance Materials and Technologies
Sales were up 12% reported, 9% organic, compared with the fourth quarter of 2012, driven by the favorable impact of the Thomas Russell acquisition, increased UOP catalyst and gas processing volume, and improved production volumes in Advanced Materials.
Segment profit was up 30% and segment margins expanded 210 bps to 15.7% in the fourth quarter primarily due to strong volume and productivity, partially offset by continued investments for growth.
Transportation Systems
Sales were up 16% reported, 15% organic, compared with the fourth quarter of 2012, driven by continued growth from new platform launches, higher global turbo gas penetration and light vehicle production, and an uptick in China commercial vehicle demand.
Segment profit was up 41% in the fourth quarter and segment margins expanded 250 bps to 13.6% primarily driven by strong Turbo material productivity and volume leverage, and operational improvements in Friction Materials.
"Honeywell had a very strong fourth quarter, capping off a terrific year across the board with record sales, margins, and earnings. Even in a continued slow-growth environment, our 2013 sales grew 4% and proforma earnings were up 11%, above our guidance, exiting the year with better than expected sales in every business... Our short-cycle businesses accelerated as we ended the year and our long-cycle order backlog stood at an impressive $15.5 billion. While we think it's prudent to remain cautious on the global economy at this time, we're increasingly confident in our 2014 outlook based on the momentum from the fourth quarter. And, the benefits from smart gain deployment actions position the Company for strong earnings growth and outperformance over the next 5 years."

>>> Xerox reports EPS in-line, misses on revs --> no pre market yet

Xerox reports EPS in-line, misses on revs; guides Q1 EPS in-line; reaffirms FY14 EPS guidance

Reports Q4 (Dec) earnings of $0.29 per share, in-line with the Capital IQ Consensus Estimate consensus of $0.29; revenues fell 3.4% year/year to $5.57 bln vs the $5.64 bln consensus. Revenue from the company's services business, which represented 55 percent of total revenue, was $3.0 billion, flat year over year and down 1 percent in constant currency. Revenue from the company's document technology business, which represented 42 percent of total revenue, was $2.4 billion, down 6 percent.

Co issues in-line guidance for Q1, sees EPS of $0.23-0.25, excluding non-recurring items, vs. $0.24 Capital IQ Consensus Estimate.
Co reaffirms guidance for FY14, sees EPS of $1.10-1.16, excluding non-recurring items, vs. $1.13 Capital IQ Consensus Estimate.

"We managed anticipated headwinds while continuing to build our business by investing in growth markets such as healthcare and graphic communications, and expanding Services internationally," said Ursula Burns, Xerox chairman and chief executive officer. "Looking ahead, we're focused on evolving our portfolio and implementing our cost initiatives to improve both revenue and margins." "Our clients continue to partner with us to take out complexities in their business processes and we're seeing success in the marketplace. With services signings up 21 percent in the past year and our BPO and ITO renewal rate at 92 percent for the year, we're well positioned entering 2014."

Fourth-quarter operating margin of 9.3 percent was down 1.3 points. Gross margin was 30.7 percent, and selling, administrative and general expenses were 18.6 percent of revenue. Xerox generated ~$1 billion in cash flow from operations during the fourth quarter and $2.4 billion for the year, ending 2013 with a cash balance of $1.8 billion.

The company repurchased $524 million of shares in the fourth quarter 2013 and approximately $700 million for the full-year. Xerox's board of directors increased the company's quarterly cash dividend by 8.7 percent to 6.25 cents per share, beginning with the dividend payable on April 30, 2014.

(Le Figaro) Debt: new threat to the sovereign rating of France

Link to translation {http://bit.ly/1aRoFKr}
Link to original in French {http://bit.ly/1dUfmzf}

Debt: new threat to the sovereign rating of France
France, she will again be sanctioned by the rating agencies? A priori answer tonight. A little over a year after removing its triple A to the Hexagon, Moody's could decide to downgrade its rating for the second time. Like its American rival, Standard & Poor's . One possibility that does not worry the Minister of Economy and Finance, Pierre Moscovici . "Whatever the decision of Moody's tomorrow, France remains credible to investors," he said Thursday during his vows to the press.
The French sovereign rating is considered vulnerable by the rating agencies, but it is not heavy impact on the country's ability to borrow on the financial markets. The rate of 10-year bonds of France is still evolving at very low levels, this Friday, it stood at 2.41% against 1.67% for Germany. What like to congratulate the current government, like its predecessor.
Fitch maintains the "AAA" rating of Germany

However, observers are sure to note that this potential downgrade would occur a week after the president announced his measures to boost business competitiveness and thus growth of France. And especially a day after the first meeting of the Strategic Advisory Board of public expenditure , chaired by François Hollande and tasked with finding "at least 50 billion savings" by the end of his five years. Because the thorny issue of government spending cuts interest at the highest point rating agencies.
graphics AAA rating moodys
The U.S. rating agency must also decide this Friday, on the note of Britain for which the IMF is more optimistic than for France . For its part, the German debt, which is to confirm that Friday's triple A by Fitch , always has the best rating from not only Standard & Poor's as well as Moody's had lowered in July, the rating outlook of the German debt to "negative", without penalty, for the moment, grave. Indices of industrial activity released Thursday show how the economic gap is more obvious between Germany and France. "While Germany leads the expansion of the euro zone, France could continue to slow the recovery of the region over the coming months," said Markit, which conducts surveys.