Betaville:Polygon said to demand more than £13.00 a share for the FTSE 100-liste

Sky News: Polygon said to demand more than £13.00 a share for the FTSE 100-listed broadcaster; Daily Mail/CBNC claim Comcast preparing £19 billion counter bid for Sky
Sunday, 17 December 2017, 12:15 pm
So, the Daily Mail's business section on Saturday splashed on the possibility of Comcast making a counterbid for Sky following last week's Disney/21st Century Fox deal. The Daily Mail's story comes after David Faber, who broke the original story about Disney and Fox holding merger talks last month, suggested Comcast might be interested in trying to buy some or all of Sky, which is in the process of being acquired by 21st Century Fox for £18.5 billion. I have pasted the Daily Mail's Saturday story below in case you missed it.
But tucked away at the back FT's market report, written by the execellent Bryce Elder, were a couple of lines about how hedge fund Polygon, presumably a shareholder in Sky, had gone public about wanting a higher offer for Sky. Cue lots of confusion from Polygon and its representatives after Betaville got in touch asking them for a comment on the "statement" from Reade Griffiths, Polygon's founder, that was floating around the market. Insider's said there several different versions of the statement but then refused to comment on the veracity of the one obtained by Betaville. Anyway, Betaville has pasted the Polygon statement below, so readers can make their own mind up...
Statement: Reade Griffith at Polygon



Yesterday’s announcement that Disney has agreed to buy the bulk of
21st Century Fox’s assets at roughly 12 times EV/EBITDA
(pre-synergies) has attracted global media attention. The press has
also focused on the fact within this wrapped Christmas bundle of
assets is Fox’s 39% controlling stake in Sky.

Less well covered in the press was a prompt statement by the UK
Takeover Panel to the effect that Disney had informed the Panel they
do not think that Note 8 to Rule 9.1 of The Takeover Code – the
so-called “chain principle” – applies to the announced transaction.
The Takeover Panel release made it clear that the Panel Executive had
not made a decision on this issue and that they would consult with the
independent directors on the Sky board.

As background, the Takeover Panel is a well-respected independent body
that supervises and regulates takeovers in the United Kingdom. It is
staffed with long-term Panel professionals and also has very capable
and senior market practitioners as part of its decision-making
process. In my experience, it is the leading body in Europe, if not
globally, for its effectiveness and consistency in applying the rules
in the mergers and acquisitions context and enabling the parties to
these transactions to work – often in complicated deal dynamics – to
the benefit of the market and with essential goal of protecting
minority shareholders.

Rule 9.1 deals with mandatory takeover bids under The Takeover Code.
The fundamental principle of the Rule is that when a shareholder, or
group of shareholders acting in concert, acquires more than 30% of the
shares of a UK public company then a mandatory bid must be launched
that insures minority shareholders get a fair price (which is never
less than the price paid in the purchase which took the shareholder or
group of shareholders over the 30% threshold).

In the case of Disney/Fox, if Disney had agreed to buy the 39% Sky
stake directly from Fox, minority shareholders in Sky would have been
entitled to an increase in the £10.75 per share price already being
offered by Fox to the price being offered by Disney.

We believe this price to be above £13.00 per Sky share. Disney has
paid roughly 12 times 2017 and 2018 EV/EBITDA for this bundle of Fox
assets and we believe the Sky stake is above the average quality and
value of this bundle and therefore we are assuming that Disney paid
more than the 12 times EV/EBITDA multiple for the 39% SKY stake.
Yesterday Bob Iger himself called the Sky stake the “crown jewel” of
the Fox assets he was buying when being interviewed on Bloomberg TV by
Jonathan Ferro.

But the Fox and the Mouse have been more clever than that. They have
wrapped the Sky stake with a number of other attractive Fox assets and
tied it up with a bow and ribbon and told the Takeover Panel that Rule
9.1 does not apply – and therefore that no premium is due to Sky’s
minority shareholders.

This is where Note 8 to Rule 9.1 becomes very important. The Note 8
“chain principle” has two prongs to its applicability. The first
states that if a stake in a company at issue (i.e., a 30%+ stake in a
UK public company) makes up more than 50% of the value of the total
bundle of assets being acquired, then it will normally be regarded as
significant and so a mandatory bid would be required. Here, Disney is
buying $52 billion of assets of which the Sky 39% stake will be
roughly $10 billion (or $25 billion when the entire 100% stake,
including minority shareholders, is included) – which means this prong
of the test fails and Disney is saved from a higher bid.

But it is the second prong of the test which is at issue here. This
prong provides that if securing the 30%+ stake (here, 39% of Sky)
“might reasonably be considered to be a significant purpose of
acquiring control of the first company”, then the mandatory bid rules
would apply to Disney and the Sky minority shareholders would be
entitled to a significant increase in the offer from Disney.

So, is buying the Sky stake “a” (as compared to “the”) significant
purpose of the transaction? Well, the Sky logo certainly features
prominently throughout the Disney/Fox presentation given to financial
analysts and the public yesterday, and, as I noted, Bob Iger himself
called it the “crown jewel” of the deal. I t appears to me that it is
quite reasonable to assume it is “a” significant purpose of the deal.

The 39% Sky stake gives Disney control of $25 billion of assets which
Disney’s presentation and Bob Iger’s own words suggest are critical to
Disney’s strategy going forward.

The question is when and how will the Takeover Panel decide.

>>> Shire shareholders wary of potential sale or spin-off of neuroscience divisi

Shire shareholders wary of potential sale or spin-off of neuroscience division - report
17 DEC 2017
Shire [LON:SHP], an Anglo-Irish pharmaceuticals company, has been urged by some shareholders not to spin-off or sell its neuroscience division without a compelling reason, The Sunday Times reported. The newspaper quoted Royal London Asset Management Fund Manager Joe Walters, who said no value will be created unless Shire is able to sell the neuroscience business at a premium. Royal London holds a 0.72% stake in Shire, the item said.
Shire on 3 August announced that it would conduct a strategic review of its Neuroscience division. The company is expected to decide within weeks whether to spin off the division, according to the report.
When shire announced the review, Shire’s Chief Executive Flemming Ornskov said that he was looking to focus on the company’s rare diseases unit and that spinning off the neuroscience business was one strategic option to be considered, the item noted.
Some shareholders are worried that Shire will finance another large acquisition with cash from a sale of the neuroscience division, the article said. Others say Shire should list or sell the neuroscience business only if the price is right, the report added.
Shire’s market capitalisation stood at GBP 34.22bn (EUR 38.80bn) at the close of trading in London on Friday, 15 December.

Background:
A Dealreporter report on 15 August said some Shire shareholders had questioned the rationale behind spinning off the neuroscience business. Shareholders cited by the report said they were reluctant to hold shares in the neuroscience business via any potential spin-off.
Shire’s neuroscience unit’s attention deficit hyperactivity disorder (ADHD) drug Vyvanse is expected to go off patent in 2023, the report said, adding that the neuroscience arm faces a “patent cliff.”
A minority shareholder quoted in the report said he would not be confident holding shares in a business focused on ADHD.

TechCrunch : ICO-lateral damage

ICO-lateral damage
The ICO regulators are here, and they’re carrying big sticks. (PDF) “Coins or other digital assets issued on a blockchain may be securities under the federal securities laws… tokens were securities as defined by Section 2(a)(1) of the Securities Act because they were investment contracts … An investment contract is an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.”
What does this mean, exactly? I’ll let people who have actually passed the bar decode it for you. Here’s a thread from Marco Santori, fintech team leader of Cooley Law:

And, as you might expect, many of the serious thinkers in the blockchain space (yes, they exist) have greeted this governmental intrusion with … actually … cautious relief. OK, you might not have expected that, but it’s true. Everybody saw it coming, so it’s a relief to finally get it over with; and the ICO space has become such a get-rich-quick shitshow, so full of empty promises, that precipitating what John Biggs calls “the coming avalanche of ICO failures,” while achieving some legal clarity, seems like a good-case scenario.
This is reportedly even more true in China, which has banned ICOs ouright — and according to Emily Parker, “everyone I spoke to in China’s cryptocurrency community supported, or was at least sympathetic to, the ICO ban. I repeatedly heard that 90 percent of Chinese ICOs were scams. The whole model, in which you buy tokens to use on a platform that does not yet exist, might never exist, or could be a total flop, can be a magnet for fraudsters.”
That is no less true outside of China. But pointing accusatory fingers at risible ICOs is almost too obvious, and too easy, and there are too many to choose from. Let’s not dwell on stupid greed or greedy stupidity or valuations. The blockchain revolution was not supposed to be about getting rich. Stop laughing. I’m not kidding. And neither is wunderkind Ethereum creator Vitalik Buterin, reflecting on what he has wrought (click through to read the whole thread):

or Brave engineer Yan Zhu:

Wasn’t the idea to decentralize the power of networked technology, and programmable money, from banks and governments to the ignored masses — rather than adding maybe a few thousand people to the world’s Very Rich List? If your ICO is going to make a handful of people rich, then it’s not actually very decentralized, is it? That’s not part of any kind of brave new world. That’s actually incredibly boring.
This is all a moot point for today, though. The real reason that the SEC is right to regulate ICOs as securities is that, with very few exceptions, today’s ICO tokens are almost definitionally speculative … because public decentralized blockchain technology is not yet ready for prime time for anything other than low-volume transfers of value, with some programmatic control.
It’s technically and socially and economically utterly fascinating, don’t get me wrong, and it has a very bright future; and, sure, cryptocurrencies are having a surreal / spectacular run as a store of imputed value, i.e. the thing blockchains are currently good at. But we aren’t going to see any big-money fat-protocol applications, or any decentralized people’s revolution either, until and unless the technology gets much easier and cheaper to use — for both end users and developers like me.

That will happen. But not right away. And in the interim, people are making huge bets on entire classes of technology that carry a real risk of being obsoleted before they’re so much as alpha launched, if they ever alpha launch, much less before ordinary users ever even try them in real numbers.
Everyone loves comparing blockchain protocols to the early days of computing and the Internet, so here’s another analogy: today’s ICO investors are bidding billions to own pieces of gopher, FTP, and X.400. Which is fine — even admirable, in a way — as long as the craze to get rich now doesn’t get in the way of cooler heads inventing/upgrading to HTTP and SMTP over the next few years. Here’s hoping.

WSJ : Exchange Giant Set to Launch Bitcoin Futures After Rival Stumbles

Exchange Giant Set to Launch Bitcoin Futures After Rival Stumbles
CME Group will start trading as volumes remain thin for a similar contract started by Cboe a week ago

The world’s largest exchange company is set to launch bitcoin futures this weekend, seeking to capitalize on the mania for the booming digital currency.

Chicago-based CME Group Inc. CME 0.43% will start trading of bitcoin futures at 6:00 p.m. ET on Sunday, one week after its smaller rival Cboe Global Markets Inc. CBOE 0.25% debuted a similar contract. Cboe’s futures sputtered in their initial week, creating an opening for CME.

Bitcoin has soared more than 1,700% this year and was trading at $17,575.79 late Friday afternoon, according to CoinDesk—an extraordinary run-up that has lured investors world-wide. Futures on bitcoin allow traders to bet on whether its price will rise or fall, and they offer Wall Street firms a way to trade it on well-known, regulated markets.

But volumes on Cboe’s bitcoin futures have dropped off precipitously since Monday. After more than 4,100 contracts changed hands on the first day of trading, volume averaged around 1,640 contracts the rest of the week—a 60% slide. Cboe says its volumes are healthy for a brand-new product and expects them to pick up.

Compared with Cboe’s bitcoin futures, CME’s offering may appeal more to hedge funds and big financial firms and less to retail investors, some traders said. That is because of its larger size: Each CME contract represents five bitcoins, whereas Cboe’s represents just one. That means it will require more cash upfront to trade the CME contract.

But CME still faces many of the same hurdles as Cboe, including a reluctance by many banks and futures brokerages to touch the notoriously volatile cryptocurrency.

Conceived as a purely digital currency not backed by any government, bitcoin has gone from a curiosity beloved by libertarians and software geeks to a mainstream investing fad. But skeptics call it a bubble, and its reputation remains clouded by its association with money laundering and other illicit activity.

CME’s heft and close ties to big trading firms could give it an edge over Cboe. But some of the largest banks and brokerages won’t be providing their customers with access to CME’s bitcoin futures, potentially putting a damper on trading activity.

JPMorgan Chase & Co., Royal Bank of Canada, Société Générale SA and UBS Group AG won’t offer their customers access to CME bitcoin futures on Sunday, although they are monitoring the situation and could rethink their stance eventually, people familiar with the situation said. The same banks sat on the sidelines for Cboe’s launch, according to the people.

All of them are so-called “clearing firms” at CME, meaning that they sit between the exchange and traders and help move cash from market participants with losing bets to those whose bets pay off. Bitcoin futures are risky for clearing firms because the extreme volatility of the cryptocurrency increases the odds of traders being unable to cover their losses. If that happens, the clearing firm itself can suffer losses.

“A lot of clearing firms were very nervous about this launch. They throttled back the risk quite a bit,” said Joe Van Hecke, a trader at Grace Hall Trading.

Goldman Sachs Group Inc. and ABN Amro Group are clearing both CME and Cboe bitcoin futures but only for certain clients, representatives of the banks said.


Interactive Brokers Group Inc., a clearing firm and online brokerage, is offering access to both CME and Cboe bitcoin futures. In a disclosure form, it warns customers that trading bitcoin futures is “especially risky” and “there may be no fundamental or economic basis for valuation of Bitcoins and their prices may move randomly.”

Popular retail brokerages Charles Schwab & Corp. and TD Ameritrade Holding Corp. said they were studying CME’s bitcoin futures but wouldn’t be allowing customers to trade them at launch. TD Ameritrade will enable trading of Cboe’s futures starting Monday, a spokeswoman said.

Ally Invest, the online brokerage arm of Ally Financial Inc., said earlier this month that it would give its customers access to CME bitcoin futures “on day one,” but on Thursday, an Ally spokeswoman said the firm was evaluating the situation and “cannot confirm the timing of availability to our customers.”

A CME spokeswoman said a number of trading firms were ready to support its new bitcoin futures at launch.

Bitcoin’s price swings led CME to rein in the riskiness of its new contract. On Tuesday, citing a “normal review of market volatility,” CME raised the so-called “initial margin” requirement for its bitcoin futures to as much as 47% of the value of a contract for speculative traders, from 35% earlier.

That means such traders will need to deposit cash worth nearly half the value of the contract to place bets, effectively limiting the size of the bets they can place. By comparison, initial margin for CME’s main oil futures contract is about 4%.

‘History tells us that the market will gravitate to one exchange’

—James Angel, a finance professor at Georgetown University
CME Group grew out of the famed Chicago Mercantile Exchange, which was founded in 1898 as the Chicago Butter and Egg Board. It now spans the globe and runs a broad array of markets in areas such as energy, metals and stock-market futures.

Meanwhile, Cboe, which runs the biggest U.S. options platform and started in 1973, has exclusive rights to key stock and equity-volatility contracts.


Only one of the two firms will end up with the dominant bitcoin futures market, due to the winner-takes-all nature of the futures business, market observers say.

“Whichever contract achieves critical mass will dominate the other one.”

WSJ : Mining World’s Ultimate Deal-Maker Struggles in New Frugal Era

Mining World’s Ultimate Deal-Maker Struggles in New Frugal Era
Investor desire for dividends, short-term results thwart Mick Davis’s ambitions

LONDON—The troubles of Mick Davis, a mining executive behind some of the industry’s biggest mergers, epitomize the sector’s cautious mood.

Mr. Davis earned the moniker “Mick the Miner” as he engineered the blockbuster tie-ups of BHP and Billiton and Glencore and Xstrata. But this year he had to close a $5.6 billion investment fund, X2 Resources, without a single deal.

Last month, Rio Tinto PLC, the world’s second-largest listed mining company, offered Mr. Davis a job as chairman. Then, the British-Australian giant rescinded the proposition after a group of investors raised concerns about Mr. Davis’s past deal-making. Rio instead turned to board member Simon Thompson, a former Anglo American NGLOY 1.28% PLC executive seen as a safe, steady hand.

“I was excited to do it,” Mr. Davis said in his first interview since news of his potential appointment broke. He said he isn’t bitter about losing the job. “They’ll do very well with someone else as chairman.”

The mining industry is slowly recovering from a collapse in commodity prices in recent years that forced many companies to slash jobs and sell assets. Most big mining companies are wary of doing deals, focusing instead on raising cash, shedding debt and delivering meaty dividends to investors.

Year-to-date, $40.2 billion worth of mining transactions have been announced in 2017, compared with $45 billion last year and well below a record $131.3 billion worth of deals struck in 2011, according to Dealogic.

That’s not an ideal environment for a deal-maker.


Mr. Davis has “always been viewed as a guy who’s going to grow things, whereas investors are of a mind-set that they want capital returned to them,” said Colin Hamilton, managing director of commodities research at Canadian bank BMO Capital Markets.

Mr. Davis said mining companies have become too risk-averse and are hoarding their cash, due in part to investors who can’t stomach the gut-wrenching twists and turns of commodity cycles and want short-term results.

“They’re driving the behavior of boards and management teams in a way which is reflecting that short-term outlook,” he said.

Mr. Davis, 59 years old, remains a leading figure in the global mining industry and maintains a high profile in his home, the U.K. He is chief executive of the British Conservative Party, holds a leadership role in London’s Jewish community and was knighted by Queen Elizabeth II for work commemorating the Holocaust.

The South Africa native achieved early success as financial director of Australian mining giant Billiton. He was a central figure in its 2001 megamerger with BHP, which created the world’s largest mining operation, BHP Billiton Ltd.

From there, he took the reins of Xstrata PLC, which in 2006 purchased Canadian miner Falconbridge Ltd. for $17 billion. In 2013, Xstrata merged with Swiss trading goliath Glencore, forming the world’s fourth-largest mining company and its biggest commodities trader.

The Glencore merger led to a feud with shareholders who objected to a pricey pay package Mr. Davis helped arrange for himself and Xstrata board members and executives. Mr. Davis, pegged to become chief executive of the merged company, eventually stepped aside to make way for Glencore’s current CEO, Ivan Glasenberg.

“It was a very unpleasant era in my life,” Mr. Davis said, adding that he thought the deal was good for Xstrata’s shareholders.

In 2013, Mr. Davis launched X2. It was supposed to be the leader of a new wave of investments in mining amid a collapse in commodity prices, propping up the industry as debt-laden firms retrenched.


But Mr. Davis failed to strike any deals. The reason, he says, was that he gave six cornerstone investors the ability to block a deal.

“That was really stupid of me,” he said.

In 2015, for instance, he was on the verge of signing a deal to buy thermal coal assets from Rio Tinto for about $2.4 billion, he says. But some investors—skittish about coal as new regulations to reduce carbon emissions emerged across the world—refused to back the agreement, he said.

“It would have been a fantastic deal,” he said, noting that thermal coal was trading at about $50 a ton at the time, about 70% below where it trades today.

He says he decided to close X2 and “call it day.” He isn’t sure he will start another fund but if he did he said he would be clear with his backers that they have to trust him.

“If you can’t do that, don’t invest,” he said.

FT : Gemalto accepts Thales €4.8bn cash offer

Gemalto accepts Thales €4.8bn cash offer
All-French deal follows rejection of bid by Atos for struggling digital company

France’s Thales has agreed to buy struggling digital company Gemalto in a deal worth close to €4.8bn.

The agreement comes just days after Gemalto had rejected a €4.3bn takeover proposal by larger rival Atos, which the French company had called “opportunistic”.

“I am convinced that the combination with Thales is the best and the most promising option for Gemalto and the most positive outcome for our company, employees, clients, shareholders and other stakeholders,” said Philippe Vallée, Gemalto’s chief executive.

Patrice Caine, Thales chairman and chief executive, said: “The acquisition of Gemalto marks a key milestone in the implementation of Thales’s strategy.”

Aerospace and defence group Thales made a €51 per share cum dividend all-cash offer for Gemalto, representing a 57 per cent premium over the closing price on December 8. Thales and Gemalto may terminate the agreement if another offer is made that exceeds the Thales bid by at least 9 per cent.

In a blow to Atos chief executive Thierry Breton, the offer was unanimously recommended by the boards of both companies. Mr Breton, a former finance minister, had claimed that the French state, which holds 8 per cent in Gemalto, supported Atos’s offer.

Thales will combine its digital businesses into Gemalto, which will continue to operate under its own brand, according to the statement. Mr Vallée will continue to lead the combined digital security business.

The combined business will generate €3.5bn of sales and rank among the top three players worldwide in the digital security market, said the companies.

Thales has also committed to preserving employment in Gemalto’s French activities until at least the end of 2019, according to the statement on Sunday morning.

The French state, which is a large shareholder in both Thales and Gemalto, had said it would be closely monitoring the situation at Gemalto in the face of the bid from Atos.

“The first thing is that jobs in the sector are kept in France . . . the second thing we must watch is investment and innovation,” said Bruno Le Maire, French finance minister, in parliament on Wednesday.

Atos had proposed a “friendly” deal with Gemalto on November 28 in an all-cash offer of €46 a share. 

Gemalto rejected the offer from Atos on Wednesday, saying it was “not friendly and collaborative”, significantly undervalued the company and failed to provide a compelling strategy compared with Gemalto’s standalone prospects.

Atos declined to comment. However, in light of Mr Breton up to now stressing his desire to do a “friendly deal”, one person following the situation closely considered it was unlikely that Atos would enter into a hostile bidding

Gemalto, which relies on Sim cards for about a third of its revenues, has floundered in the face of slowing demand for new phones around the world. 

In July, Gemalto said operating profits would be between €200m and €230m in the second half of the year, or a third lower than its previous guidance. It also revealed a €420m writedown because of “deteriorated prospects” in the market. It was the group’s third profit warning in six months.

Thales estimates that the deal will generate pre-tax cost synergies of €100m-€150m by 2021, as well as meaningful revenue synergies.

The deal is expected to close in the second half of 2018. Thales was advised by Lazard, Messier Maris & Associés and Société Générale. Gemalto was advised by Deutsche Bank and JPMorgan.

>>> Weekly Performance

Weekly Market Update: Markets salivate over US tax breaks; Fed tightens, while other major central banks on hold

US stock markets looked to finish the week at all-time highs once again despite lingering concerns around handful of Republican Senators’ willingness to support the final terms of the tax bill. Friday’s rally, fueled by options expiration and an S&P rebalance, was largely predicated on the belief the Republicans will ultimately prove to be successful in pushing a tax cut package through Congress next week. The economic data remained robust supporting the FOMC’s decision to raise rates on Wednesday, as was expected. Thursday’s stronger than expected retail sales numbers had economists revising Q4 GDP expectations higher into the mid 3% range. A host of other key central banks met as well, largely matching market expectations by indicating they were staying the course on stimulus. European officials pushed to ball forward in terms of Brexit, but a high profile political defeat for PM May only solidified expectations that round two of the negotiations will be even more complicated.

US Treasury note sales were met with healthy demand ahead the Fed meeting but rates still rose relative to Europe’s, while the US yield curve continued to flatten, led by better buying at the long end. The 5-30 year yield-spread narrowed to under 55 basis points for the first time since 2007. The Dollar index finished largely flat, helped by firming late in the week and weakness in the Pound, in particular. Bitcoin mania spread as a host of other cryptocurrencies saw eye popping gains after bitcoin futures trade commenced on the CBOE on Sunday. Natural gas prices remained under significant pressure despite a cold blast into the Northeast US and an explosion at Austria’s largest gas hub. WTI crude oil prices remained within striking distance of the recent highs, while Brent touched levels not see in more than 2-years after the North Seas Forties pipeline was shut for immediate repairs to fix a growing crack. For the week the DJIA gained 1.3%, the S&P500 rose 0.9%, and the Nasdaq added 1.4%.

This week in corporate news, Disney confirmed it would acquire 21st Century Fox assets in at $52B deal. Bitcoin-tied stocks saw their momentum continue, with many of the small cap companies associated to cryptocurrencies moving higher still this week. Boeing climbed on its annual capital returns announcement. Mattel lowered its expectations and announced a high yield offering to replace its revolving credit facility. Caterpillar shares hit an all-time high and powered the Dow on Wednesday after disclosing a 26% rise in total machine sales in its latest monthly dealer statistics. Teva confirmed a reorganization plan that cuts its Israeli workforce in half and closes an R&D center in Netanya. Oracle shares dropped on a disappointing forecast for Q3 cloud services.


SUNDAY 12/10
XBT Bitcoin futures open at $15,000 on CBOE
MAERSKB.DK CCO: Global freight rates will be ‘fragile’ going into 2018, warned on softer demand

MONDAY 12/11
MAT Guides FY17 Gross Rev to decline by at least mid to high single digits y/y; updates cost reduction plans - filing
12/11 (US) New York Mayor de Blasio: earlier explosion in NYC subway was terrorist attack; there are no known, credible or specific threats to NYC right now

TUESDAY 12/12
(UK) Ineos issues update on North Sea Forties Pipeline (450K bpd): Says the pipeline is now closed down for additional inspections, no timeframe yet for restart
(UK) NOV CPI M/M: 0.3% V 0.2%E; Y/Y: 3.1% V 3.0%E; CPI CORE Y/Y: 2.7% V 2.7%E (highest annual pace since March 2012)
(US) NOV PPI FINAL DEMAND M/M: 0.4% V 0.3%E; Y/Y: 3.1% V 2.9%E
(US) GOP reportedly in talks to lower top income tax rate from 39.6% to 37% as part of final tax bill - Wash Post

WEDNESDAY 12/13
(UK) OCT AVERAGE WEEKLY EARNINGS 3M/Y/Y: 2.5% V 2.5%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 2.3% V 2.2%E
(UK) NOV JOBLESS CLAIMS CHANGE: +5.9K V +6.5K PRIOR; CLAIMANT COUNT RATE: 2.3% V 2.3% PRIOR
(UK) OCT ILO UNEMPLOYMENT RATE: 4.3% V 4.2%E (matches low from 1975)
(US) NOV CPI M/M: 0.4% V 0.4%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI INDEX NSA: 246.669 V 246.816E
CAT Reports Nov dealer statistics: Total Machines +26% y/y
TMUS Acquires TV tech firm Layer3 TV, Inc.; no terms disclosed; plans to launch pay TV service in 2018
(US) House and Senate leaders said to have reached an agreement in principle on tax reform bill - press
(US) FOMC RAISES TARGET RATE RANGE 25BPS TO 1.25-1.50% (AS EXPECTED)
(UK) UK govt loses vote on EU withdrawal bill amendment by 309-305; House of Commons votes to give lawmakers final say on Brexit deal - press
(CN) PBOC RAISES INTEREST RATE ON REVERSE REPO AND MLF OPERATIONS BY 5BPS (move follows the Fed move on rates earlier)

THURSDAY 12/14
(FR) FRANCE DEC PRELIMINARY MANUFACTURING PMI: 59.3 V 57.2E (15th month of expansion and highest since Sept 2000)
(PH) PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED AT 3.00%; AS EXPECTED
(CH) SNB LEAVES SIGHT DEPOSIT INTEREST RATE UNCHANGED AT -0.75%; AS EXPECTED
(DE) GERMANY DEC PRELIMINARY MANUFACTURING PMI: 63.3 V 62.0E (37th month of expansion and a record high)
(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.50; AS EXPECTED (brings forward its 1st planned rate hike)
(EU) EURO ZONE DEC PRELIMINARY MANUFACTURING PMI: 60.6 V 59.7E (53rd month of expansion and record high)
(TR) TURKEY CENTRAL BANK (CBRT) LEAVES BENCHMARK REPURCHASE RATE UNCHANGED AT 8.00%; AS EXPECTED
(UK) BOE VOTED 9-0 TO LEAVE INTEREST RATES UNCHANGED AT 0.50%
(EU) ECB LEAVES MAIN REFINANCING RATE UNCHANGED AT 0.00; AS EXPECTED
(US) NOV ADVANCE RETAIL SALES M/M: 0.8% V 0.3%E; RETAIL SALES EX AUTO M/M: 1.0% V 0.6%E
(US) NOV IMPORT PRICE INDEX M/M: 0.7% V 0.7%E; Y/Y: 3.1% V 3.2%E
(EU) ECB Draghi: Reiterates that interest rates to remain at present level well past end of QE; favorable financing conditions still needed - Prepared remarks
(US) Atlanta Fed raises Q4 GDP estimate to 3.3% from 2.9% on 12/8
(US) Speaker of House Ryan (R-WI) considering retiring from Congress after 2018 - Politico
(US) FCC VOTES TO REPEAL NET NEUTRALITY RULES IN 3-2 VOTE (AS EXPECTED)
(MX) MEXICO CENTRAL BANK (BANXICO) RAISES OVERNIGHT RATE BY 25BPS TO 7.25%; AS EXPECTED
ORCL Reports Q2 $0.70 v $0.68e, Rev $9.63B v $9.56Be; raises share repurchases by $12B (6% of market cap)
(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT TARGET RATE UNCHANGED AT 2.50%; AS EXPECTED
COST Reports Q1 $1.45 v $1.35e, Rev $32B v $31.5Be

FRIDAY 12/15
SIE.DE Guides initial FY18 R&D expenditures €5.6B v €5.2B y/y - analyst day
(RU) RUSSIA CENTRAL BANK (CBR) CUTS 1-WEEK AUCTION RATE BY 50BPS TO 7.75%; MORE-THAN-EXPECTED
(UK) EU Tusk's: EU leaders formally declare that sufficient progress has been made in Brexit talks to advance into phase 2; approve the start of Brexit transition talks (as expected)
(US) DEC EMPIRE MANUFACTURING: 18.0 V 18.8E (lowest since July)
(US) NOV INDUSTRIAL PRODUCTION M/M: 0.2% V 0.3%E; CAPACITY UTILIZATION: 77.1% V 77.2%E

FT : Christmas shoppers show caution amid price squeeze

Christmas shoppers show caution amid price squeeze
Economists question how long it will be before inflation hits consumer spending

The shops in Birmingham’s city centre are pumping out Christmas songs, but the mood among some of the shoppers on a cold December morning does not quite match the festive music.

“This year I’ve done most of my shopping earlier to make use of Black Friday deals, and I have been looking out for sales and reductions,” says Claire Hughes, 41, referring to how UK retailers have adopted the tactic of offering big discounts on their goods on the Friday after the US Thanksgiving holiday in late November.

Ann Morris, 55, says buying presents for her family has been more of a challenge this year. “I have noticed things getting more expensive and buying presents for my children is costing more,” she adds.

These experiences highlight the impact of the 2017 squeeze on household incomes as inflation has jumped — in November the consumer price index was 3.1 per cent higher than a year earlier — while wages have grown more slowly. With household finances under pressure, economists are wondering whether consumers can keep propping up the UK economy, as they have done since the EU referendum in June last year.

Policymakers have learnt not to write off the British consumer. Incorrect forecasts of economic stagnation after the Brexit vote were based on the idea that households would tighten their belts in the face of uncertainty, but the opposite happened. While consumer spending accounts for 63 per cent of the UK economy, it has been responsible for 73 per cent of growth post the referendum.


Canny shopper Claire Hughes snapped up early Christmas bargains in the Black Friday sales © Andrew Fox/FT
The latest official data for retail sales was surprisingly strong. The volume of goods bought rose 1.6 per cent in November compared to a year earlier.

Off the high street — where consumers spend two-thirds of their money — the signs are more mixed. While spending growth in restaurants and on leisure pursuits has been strong, large purchases such as cars are faltering, with vehicle sales in the first 11 months of 2017 down 5 per cent compared with the same period last year. Consumer confidence has been on a downward trajectory.

Economists say that consumers cannot always be the engine of growth, and this is leading some to worry that this Christmas might be a disappointing one for high street retailers, with little improvement next year.

Andrew Sentance, economic adviser at PwC, says: “Consumers still face a significant headwind from the fact that wages are growing more slowly than prices. That squeeze on real incomes will continue to act as a dampening influence on consumer spending in the first half of next year.”

In Birmingham’s Frankfurt Christmas market — which sells authentic German gifts and food — Jag Singh, 42, is shopping for his children’s presents. He says he is “having to spend more” to get them the things they want.

This attitude of spending as much as possible, in spite of the squeeze on household incomes, is also visible in the most recent retail sales data from the Office for National Statistics. The volume of electrical appliances bought rose 6.8 per cent in November compared to a year earlier, said the UK statistical agency.

The ONS figures exceeded many economists’ expectations, but also led some to question whether Black Friday discounts are now enticing people to change their spending habits and bring more of a boost to retailers in November than in the weeks before Christmas and the January sales.


Jag Singh says he is having to spend more to get his children the things they want © Andrew Fox
Visa, the operator of debit and credit cards, also reported a bounce in November spending compared with October. But it said the total volume of spending was down 0.9 per cent last month compared with a year earlier.

Annabel Fiddes, economist at IHS Markit, which produces the figures for Visa, accepts the data are difficult to produce at this time of the year when new consumer spending patterns are emerging.

“What we’re seeing in the Visa data are a shift and people are bringing forward spending into November, so we could see a weaker December,” she says. With it taking time to untangle these knotty questions, the strength of Christmas spending will not really be known until late February.

Derek Thomas, 52, seems unfazed by the squeeze on household incomes as he makes his way out of Grand Central, a new shopping plaza built around Birmingham’s largest railway station which recently had a £600m revamp.

“Christmas costs a lot every year,” he says. “I can’t say I’ve particularly noticed a price rise this time round.”
The big question for the UK economy in 2018 is whether Derek and Jag, who are keeping spending in spite of higher prices, are more representative of the British consumer than Ann and Claire, who have been tightening their belts.

Their contrasting attitudes will inform the UK savings ratio, or the proportion of incomes that is not spent. On a cash basis, households saved only 1.1 per cent of their incomes in the second quarter of 2017, the most recent period for which data are available, compared to 3.7 per cent a year earlier, just before the EU referendum, according to the ONS.

If savings rise, the economy is likely to be sickly in 2018 because consumers will no longer be providing the spending boost they have in the past year. But if households remain comfortable with low savings, and there is an improvement in incomes growth, the economic outlook should pick up.

WSJ : Bitcoin Futures Manipulation 101: How ‘Banging the Close’ Works

Bitcoin Futures Manipulation 101: How ‘Banging the Close’ Works
The launch of bitcoin futures raises a new danger for traders of the digital currency. A look at some of the biggest questions about futures manipulation

Bitcoin, this year’s hottest investing fad, has plenty of risks. Hackers could steal your bitcoins. The price could crash, after surging 1,600% this year.

With this week’s launch of bitcoin futures, there is a new danger to worry about: the threat of manipulation involving futures markets.

Chicago-based Cboe Global Markets Inc. launched the first bitcoin futures on Sunday, and its larger, crosstown rival CME Group Inc. is set to follow suit this weekend. Both exchange operators say they designed their futures contracts to reduce the risk of manipulation, and they plan to conduct surveillance to ensure it isn’t happening.

So why are some people worried that bitcoin futures could be manipulated?

There is a long history of alleged manipulations in futures markets, going back to the wheat squeezes of the late 19th and early 20th centuries. In those, one or more firms would hide or remove grain from the market, driving up the price of futures contracts.

In a fundamental way, bitcoin futures manipulation would resemble those old-time squeezes: Unscrupulous traders would engage in chicanery in the underlying “physical” market for bitcoin in order to reap profits from the futures.

I’m confused. What do you mean by “physical” bitcoin?

Bitcoin is purely digital, so it isn’t physical in the same sense as oil or gold. But like those commodities, it is traded globally in many different marketplaces. The constant back-and-forth between buyers and sellers on bitcoin exchanges like Bitfinex or GDAX determines how many dollars one bitcoin costs. This is what traders call the “spot” price of bitcoin.

Meanwhile, bitcoin futures—as the name suggests—allow you to bet on what bitcoin’s price will be in the future. For instance, the most popular bitcoin contract on Cboe right now expires Jan. 17. So if you think the price of bitcoin will rise by mid-January, you can buy the contract, or go “long.” If you expect bitcoin to fall, you can sell the contract, or go “short.”

So how would bitcoin futures manipulation work?

The scenario most often discussed involves pushing around the price of bitcoin when the futures contract expires. This is a classic scheme often called “banging the close.”

Let’s say you bought 100 Cboe bitcoin contracts expiring in January. The final value of these contracts is set by a daily auction held at 4 p.m. ET on Gemini, a bitcoin spot exchange. The idea behind Gemini’s auction is to bring together many buyers and sellers to determine a benchmark bitcoin price for that day.

But suppose you heavily bought bitcoins in the Jan. 17 Gemini auction, offering to pay an abnormally high price. That could skew the benchmark higher, inflating the value of your 100 bitcoin futures contracts.

Such a scheme would be tough to execute if there were large numbers of participants in the auction, because it would take a big purchase to boost the benchmark. Also, other traders could see that you were paying above-market prices in the auction and try to profit by selling to you—which would lower the benchmark to more reasonable levels.

But Gemini’s volumes are thin: From January to November, an average of $1.3 million in bitcoin changed hands in the auction each day, a sliver of the billions of dollars’ worth of bitcoin traded daily. That has raised fears that a relatively small amount of trading could move the auction price.

Cboe and Gemini say they expect auction volumes to grow.

Gemini, unlike some overseas bitcoin exchanges, also requires customers to submit proof of identity before they can trade on the platform. That means it and Cboe could identify any manipulators and refer them to the authorities.

Another deterrent: Cboe limits the size of futures trades you can have near expiration, which reins in the potential profit from banging the close.


“We have robust measures in place to preserve the fair and orderly trading of our bitcoin futures contracts,” a Cboe spokeswoman said. Gemini referred questions to Cboe.

How about CME’s bitcoin futures? Could they be manipulated?

Perhaps. But it would take significant effort to avoid the exchange’s countermeasures. CME’s futures rely on a daily index calculated by averaging transaction prices at four bitcoin spot exchanges between 3 p.m. and 4 p.m. London time. Anomalous trades are tossed out so they can’t influence the calculation.

So to bang the close at CME, you would need to do intense buying or selling at several of those bitcoin exchanges during the 60-minute window as the futures are expiring. That would be Jan. 26 for the first contract CME plans to list.

CME says it is better to rely on four exchanges than one. “We are not beholden to any one price source,” said Tim McCourt, global head of equity products at CME. “We have multiple constituent exchanges, which all work together to enhance the integrity of the index.”

So how likely is it that bitcoin futures will manipulated?

It’s hard to say. The big unknown is that the bitcoin spot market is opaque, with vast swaths outside regulatory oversight.

Consider this scenario: Cryptocurrency veterans say a small number of so-called whales hold many of the bitcoins in circulation, because they invested early, when bitcoin was cheap. Such an investor could short bitcoin futures, then dump their stash of bitcoins just before the futures expire, causing a world-wide price crash and profiting from their short trade, while also cashing in their years-old bitcoin investment. If they did the selling on overseas bitcoin exchanges instead of at Gemini or any of CME’s partner exchanges, it would be tough for U.S. officials to catch them.

On the other hand, the likely blowback from regulators, exchanges and cryptocurrency enthusiasts could discourage a whale from attempting something so brazen.

“There’s going to be intense scrutiny of these contracts,” said Tom Lehrkinder, an analyst at Tabb Group. “But people can always do crazy things.”