>>> Barrons weekend summary: Positive on STX and select energy

Barrons weekend summary: Positive on STX and select energy names; cautious on GKOS 

* Cover story: Roger Ferguson, chief executive of TIAA-CREF, has taken a number of steps to reinvent the company, including hiring Vijay Advani to run the asset-management side, which has been rebranded as Nuveen, and consolidating a variety of businesses. 

* Features: 1) Positive on LNGG, Ultra Petroleum, SD, HK, MPO, GDPP: After emerging from bankruptcy, these energy companies reduced debt levels, have stronger balance sheets than many rivals, and are attracting interest from value-oriented investors; 2) Cautious on GKOS: Medical device maker has had a strong run, but faces increased competition from NCS and AGN; shares carry a high valuation, and a minor setback could send them down 30%; 3) The outlook for gold is stronger, with overproduction no longer an issue despite growing demand, especially in Asia; any whiff of stagflation could send the precious metal higher (Positive on GLD, GDX, GDXJ, ABX).

* Tech Trader: Positive on STX: Chief Steve Luczo says investors misunderstand the company, one of three that make hard drives, and that it should be judged not by how many units its ships, but by the power and efficiency of each drive and their underlying technology. 

* Trader: Not all investors are confident about the market's resilience, and it may be necessary to tamp down confidence in an economic acceleration in the near term; Maxim analyst Stephen Anderson says the availability of cheap debt and strong cash-flow generation at restaurants make chains such as DNKN good acquisition targets; "Bank stocks have suffered with the death of the Trump trade. But that doesn't mean it's time to bail on the group."

* Small Caps: Positive on JLL: Worries about the commercial real estate market have weighed on shares, but the stock already reflects pessimism and is trading at a substantial discount-shares could rise 40%. 

* Mutual Fund Quarterly: 1) Hersh Cohen of ClearBridge shares his top dividend picks, including MRK, SLB, IP, and PSX; 2) A look at how to use smart beta strategies to build stronger bond indexes, a problematic area for investors; 3) "Behavioral-finance fund managers capitalize on the errors investors routinely make," and some do it quite well, though not always at a low cost; 4) During the first quarter, growth mutual funds beat top value funds amid a strong stock rally based on hopes of economic growth, while foreign funds had the best performance. 

* Follow-Up: Positive on CELG: Trading at 17 times earnings, drug company is the rare case in its sector with rapid revenue growth, and shares could see a 12% gain, says Carter Gould of UBS; Cautious on AFSI: "The quality of the New York-based insurer's reserve practices remains questionable."

* European Trader: Positive on Bayer, Novo Nordisk: U.S. investors can benefit from a valuation gap between the American and European markets that has created a price advantage for investors in the pharma giants. 

* Asian Trader: Investors need to be more vigilant about China's big bank stocks, which have seen a rally despite having near-nonexistent earnings growth and shrinking net-interest margins. 

* Emerging Markets: The Turkish market is likely to rally regardless of the outcome of a vote on 18 proposed constitutional amendments, because the result will put an end to uncertainty. 

* Commodities: Outages at three of the world's largest copper mines have erased what was expected to be a surplus, prompting analysts to forecast higher prices. 

* Streetwise: "Trillions from global central banks have already lifted stocks and bonds to giddy heights, but haven't animated the economy to quite the same extent."

>>> What to look at this Week End - 8th & 9th of April 2017

Weekly Performance
Dow -0.03% S&P -0.30% Nasdaq -0.57% Russell -1.54% Mexico +1.65% Brazil -0.60% Nikkei -1.29% Hang Seng -0.14% CSI +1,52% Shanghai +1.40% EuroStoxx -0.15% FTSE+0.36% Cac +0.25% Dax -0.71% Ibex +0.63% Mib -0.94% SMI -0.21%
Equities remained within a fairly narrow range throughout most of the week as markets focused on events in Syria, as well as President Trump's highly anticipated meeting with China President Xi and congressional attempts to enact some part of the White House agenda. US stock markets traded mostly sideways, and for the week the DJIA was about flat, the S&P500 slipped 0.3%, and the Nasdaq fell 0.6%.

Macro :
- Italy Official: Too Early to Discuss CDP Role in Privatizations
- Morgan Stanley Targets 2017 Return on Equity 9%-11% Range
- EU Mulls Excluding U.K. From Updates on Trade Talks: FT

Keep an eye on :
- ABF LN : AB Foods Said to Seek Successor to Chairman Sinclair, Sky Says
- AIR FP : Airbus Shows New A380 Seat Configuration in Hamburg: Figaro
- AIR FP : Boeing to Deliver 2 Passenger Jets to Iran Air in Month: IRNA
- AKS US : AK Steel Declines to Comment on M&A Rumors That Pushed Up Stock
- ASML NA : Dutch Cos. Need Govt Support From Foreign Takeovers: ASML CEO
- BOI FP : Boiron Finalized Acquisition of Ferrier: Statement
- BPOST BB : Francois Cornelis to Be Proposed as Bpost Chairman, L’Echo Says
- EDF FP : Macron Would Retain Decision to Close Fessenheim Nuclear Plant
- DL NA : NN Group Declares Offer for Delta Lloyd Unconditional
- DRX LN : Drax May Face Investor Revolt Over Executive Pay, Sky Says
- GAM SW : GAM Restructuring Needs Time, CEO Tells Finanz und Wirtschaft
- BAER VX : Julius Baer CEO Collardi doesn’t rule out further acquisitions
- FME GY : weighing bid for generic drugmaker Akorn: Bbg reut.rs/2nmWULa
- ILVA Spa : Italy Sees Offers for Steelmaker Ilva as Inadequate: Repubblica
- LDO IM : Leonardo May Be Part of Treasury-CDP Stake-Transfer Plan: Sole
- SGO FP : Burkard Family Express Doubts on Sika-Saint Gobain Deal: SZ
- SIKA VX : Burkard Family Express Doubts on Sika-Saint Gobain Deal: SZ
- TEVA IT : Teva Said to Explore Sale of Women’s Health for Up to $2B
- TKA G : Thyssenkrupp to Cut Steel Unit Costs by EU500m, Affecting Jobs
- VIV FP : Vivendi CEO Said to Lead List of Telecom Italia Board Nominees

FT : Fink urges privatisation of critical US infrastructure

Fink urges privatisation of critical US infrastructure
BlackRock chief emphasises need to harness capital as White House eyes $1tn plan

The US should embark on a sweeping privatisation of critical infrastructure, such as its airports, in order to harness private capital for a major building effort, says the head of the world’s largest asset manager.

Larry Fink, head of BlackRock and one of the chief executives advising the Trump administration, makes the call in his annual letter to BlackRock shareholders, in which he says federal spending cannot fulfil the country’s investment needs.

His intervention comes as the administration considers how to implement President Donald Trump’s campaign pledge of a $1tn infrastructure investment plan, and amid partisan fractures over possible approaches.

“Substantial expertise must be dedicated to bring projects to market in a format appropriate for institutional investment,” Mr Fink says. “These projects must deliver competitive returns and that will often require efficiencies that can only be achieved through private ownership.”

He cites the example of US airports which, in contrast to those in the UK, Australia and other countries, are almost all publicly owned.

“Policymakers, workers and unions must work together to find a model that will allow private enterprise to generate the long-term returns necessary to attract capital and build a more prosperous future,” he says.

BlackRock is advocating for a new form of federally-subsidised bonds to finance the upkeep of existing and new infrastructure. Mr Fink says the old system of funding projects through the issuance of municipal bonds is broken, because state and local governments must instead direct resources to funding large pension deficits.

And he says “budget pressures at the federal level leave little room for Washington to fill the gap”.

Mr Fink is weighing in on a debate that will shape Trump administration policy. The president’s commerce secretary, former private equity investor Wilbur Ross, has advocated for expansive tax credits for equity investors in new infrastructure projects. Elaine Chao, transport secretary, has emphasised how cutting regulations can speed up new construction.

Democrats on Capitol Hill, meanwhile, lean towards tax-funded federal spending as a means of improving the nation’s roads, bridges and airports, and believe they have a potential ally in the White House in Steve Bannon, Mr Trump’s chief strategist.

Infrastructure will be on the agenda of a meeting of chief executives at the White House on Tuesday, as it has been at other recent discussions with representatives of the private sector.

This week’s meeting of the president’s strategic and policy forum — which is led by Blackstone founder Stephen Schwarzman and includes Mr Fink and other executives such as Jamie Dimon of JPMorgan Chase and Ginni Rommety of IBM — is aimed at suggesting policies on the budget and transportation, among other issues.

At a similar meeting of 50 business leaders last week, Gary Cohn, the former Goldman Sachs president who now heads the White House Council of Economic Advisers, raised the possibility of privatising US air traffic control. It would be placed in a non-profit entity funded by public and private finance, he said.

FT : Will the reflation trade show further cracks?

Will the reflation trade show further cracks?
Investors bet on higher inflation while faster growth shows signs of stalling

Here are the key questions for markets and investors in the coming week.

Will the reflation trade show further cracks?

Bond markets are voicing the loudest doubts about the so-called reflation trade, or a bet on riskier assets on the back of an improving global economy and higher inflation.

The US yield curve, as measured by the relationship between two-year and 10-year US government bonds, has shrunk to its flattest level since the election of Donald Trump. If investors were worried about faster growth and inflation, the yield curve would be steepening.

Indeed, US, UK and German expectations of inflation for a five-year period starting five years from now have all dropped in recent weeks. Earlier in the year, they had all climbed to multiyear highs.

And the scepticism of the bond market is having repercussions elsewhere. Having recently given up their gains for the year, Japanese equities have extended their drop into negative territory for the year. Nor is it just because of a stronger yen. The relationship between the 10-year and Japan’s share market is very pronounced, as the chart below shows. The 10-year yield touched a new low for the year of 2.28 per cent following the release on Friday of a weak jobs report for March.

With the US government bond market signalling expectations of middling economic activity, it is also prompting investors to pay up for growth potential in the equity market. The standout sector for the first quarter was technology, led by the big guns of Amazon, Apple, Facebook and Microsoft.



Another place to check on the health of the reflation trade is small-cap US companies. They were early — and major — beneficiaries of Mr Trump’s pledge to cut corporate taxes in the US, but have since relinquished some of their gains.

The Russell 2000 index, home to US small-cap companies, has lost nearly 2 per cent so far in April, and last week briefly entered negative territory for the year. Paul Ryan, speaker of the US House of Representatives, did little to help sentiment last week by warning tax cuts take time to get through the sausage factory that is Congress.


Will earnings season spur further gains for Wall Street?

It’s that time again. Quarterly reporting season for corporate America begins next week and, when you look under the hood, there will be plenty to chew on for investors.

Earnings for S&P 500 companies are forecast to grow at an annualised pace of 9.4 per cent for the first quarter, according to analysts, up from a 5.4 per cent in the final three months of 2016. Revenue, or top-line growth, is projected to have risen 6.6 per cent in the quarter, up from a 4 per cent pace in the fourth quarter.

All well and good — until you strip out the energy and finance sectors. “Outside of energy and finance, earnings growth is instead expected to decelerate to 3.2 per cent in 1Q from 4.4 per cent in 4Q,” analysts at Bank of America Merrill Lynch note.

Top-line growth and upbeat guidance from companies may well be sufficient to keep the equity market buoyant into summer as investors await a deal on tax reform and other stimulus measures between the White House and Congress.

A new record for coking coal?

On Friday the price of coking coal surged to $283, a record-breaking jump of 34 per cent as steel mills across Asia scrambled to secure supplies of the commodity. A tropical cyclone has disrupted supplies in Australia, one of the world’s biggest producers of the steelmaking ingredient.

The all-time high for spot prices of $330 was hit in 2011, after another bout of disruption because of extreme weather. Traders are now asking if that level will be tested again. With a key rail system connecting mines in Queensland with ports on the east coast expected to remain shut for about five weeks, it can’t be ruled out.

>>> Julius Baer CEO Collardi doesn’t rule out further acquisitions

Julius Baer CEO Collardi doesn’t rule out further acquisitions

Julius Baer (VTX: BAER), the listed Swiss bank, doesn’t rule out further acquisitions, said Boris Collardi, CEO, The Wall Street Journal reported Saturday. The bank will be eyeing “bigger transactions,” Collardi told the New York-based business daily.

The executive didn’t identify potential purchases in confirming in the interview that the bank would be seeking larger acquisitions in the future. Julius Baer bought the private banking assets of Israel’s Bank Leumi in 2014, the WSJ reported.

>>> Julius Baer CEO Collardi doesn’t rule out further acquisitions

Julius Baer CEO Collardi doesn’t rule out further acquisitions

Julius Baer (VTX: BAER), the listed Swiss bank, doesn’t rule out further acquisitions, said Boris Collardi, CEO, The Wall Street Journal reported Saturday. The bank will be eyeing “bigger transactions,” Collardi told the New York-based business daily.

The executive didn’t identify potential purchases in confirming in the interview that the bank would be seeking larger acquisitions in the future. Julius Baer bought the private banking assets of Israel’s Bank Leumi in 2014, the WSJ reported.

>>> Twitter urges shareholders to vote down proposals to adopt co-operative owne

Twitter urges shareholders to vote down proposals to adopt co-operative ownership structure

Twitter, Inc. [NYSE:TWTR] has urged its shareholders to vote down proposals to adopt a co-operative ownership structure. The San Francisco, California-based microblogging service disclosed its opposition to the proposals in a DEF 14A proxy statement filed with the US Securities and Exchange Commission (SEC) on Friday, 7 April. The relevant excerpts from the SEC filing follow:

Supporting Statement by Stockholder Proponent
Proposal 4—Exit to Democratic User Ownership
As Twitter users and stockholders, we see how vital the platform is for global media. We are among millions of users that value Twitter as a platform for democratic voice. And in 2016, we’ve seen Twitter’s future in the balance, from challenges of hate speech and abuse to the prospect of a buyout.
That is why we want the company to consider more fully aligning its future with those whose participation make it so valuable: its users. As of today, 3,300 individuals signed a petition at http://wearetwitter.global urging Twitter to build democratic user ownership.
For successful enterprises like the Green Bay Packers, REI, and the Associated Press, their popularity, resilience, and profitability is a result of their ownership structure. Examples of online companies include successful startups like Managed by Q, which allocates equity to office cleaners, and Stocksys United, a stock-photo platform owned by its photographers.
We believe these models point the way forward for Twitter, Inc., overcoming challenges to thrive as a cooperative platform.
A community-owned Twitter could result in new and reliable revenue streams, since we, as users, could buy in as co-owners, with a stake in the platform’s success. Without the short-term pressure of the stock markets, we can realize Twitter’s potential value, which the current business model has struggled to do for many years. We could set more transparent accountable rules for handling abuse. We could re-open the platform’s data to spur innovation. Overall, we’d all be invested in Twitter’s success and sustainability. Such a conversion could also ensure a fairer return for the company’s existing investors than other options, Therefore,
RESOLVED: Stockholders request that Twitter, Inc. engage consultants with significant experience in corporate governance, preferably including conversion of companies to
cooperatives or employee ownership, to prepare a report on the nature and feasibility of selling the platform to its users via a cooperative or similar structure with broad-based ownership and accountability mechanisms. The requested report shall be available to stockholders and investors by October 1, 2017, prepared at reasonable cost and omitting proprietary information.
Vote for Exit to Democratic User Ownership—Proposal 4
—
The Company’s Statement of Opposition
Our board of directors has considered the proposal that Twitter engage consultants “to prepare a report on the nature and feasibility of selling the platform to its users via a cooperative or similar structure” and, for the reasons described below, believes that the proposal is not in the best interests of Twitter and our stockholders.
Our board of directors and management are constantly seeking to maximize long-term stockholder value and do so by evaluating all opportunities to strengthen and focus our business. For example, in 2016, we focused on positioning Twitter for long-term sustainable growth and making progress toward profitability under accounting principles generally accepted in the United States of America (“GAAP”). Specifically, we clearly identified who we are—the best and fastest place to see what’s happening in the world and what people are talking about. We built and shipped product features that directly improved our key audience growth and engagement metrics. We also simplified the organization to be what we believe is more focused and efficient, and eliminated investment in non-core areas of our business, like Vine, which we shut down in early 2017, and Fabric, which we sold in early 2017. As a result of this focus, we saw accelerating rates of growth on a year-over-year basis for daily active usage for three quarters in a row.
We believe that preparing a report on the nature and feasibility of selling the “platform,” and doing so only to “its users,” would be a misallocation of resources and a distraction to our board of directors and management—resources and management time that could otherwise be used to build the long-term value of Twitter. The proposal would have Twitter explore the sale of the “platform” to one specific group of people, “its users”, “via a cooperative or similar structure.” The proposal has pinpointed a very specific type of transaction and ownership structure and the board of directors does not believe that the course of action suggested in the proposal would enhance the value of the “platform” or Twitter. Further, limiting exploration of strategic transactions that may enhance stockholder value to one narrow option would not be in accordance with the board of directors’ responsibilities to take actions that are in the best interests of Twitter and its stockholders. We believe Twitter is on track to continue building on the long-term value of Twitter for all of our stockholders as a publicly held corporation and not as a “cooperative or similar structure” owned solely by “its users”. As a publicly traded company, our users are also free to become stockholders of Twitter without any need to change the structure of the company.
For the foregoing reasons, our board of directors believes that this proposal is not in the best interests of Twitter or our stockholders, and unanimously recommends that you vote “AGAINST” this proposal.

Twitter’s market capitalisation stood at USD 10.42bn (EUR 9.83bn) at the close of trading in New York on Friday, 7 April.

FT : Will the reflation trade show further cracks?

Will the reflation trade show further cracks?
Investors bet on higher inflation while faster growth shows signs of stalling


Here are the key questions for markets and investors in the coming week.

Will the reflation trade show further cracks?

Bond markets are voicing the loudest doubts about the so-called reflation trade, or a bet on riskier assets on the back of an improving global economy and higher inflation.

The US yield curve, as measured by the relationship between two-year and 10-year US government bonds, has shrunk to its flattest level since the election of Donald Trump. If investors were worried about faster growth and inflation, the yield curve would be steepening.

Indeed, US, UK and German expectations of inflation for a five-year period starting five years from now have all dropped in recent weeks. Earlier in the year, they had all climbed to multiyear highs.

And the scepticism of the bond market is having repercussions elsewhere. Having recently given up their gains for the year, Japanese equities have extended their drop into negative territory for the year. Nor is it just because of a stronger yen. The relationship between the 10-year and Japan’s share market is very pronounced, as the chart below shows. The 10-year yield touched a new low for the year of 2.28 per cent following the release on Friday of a weak jobs report for March.

With the US government bond market signalling expectations of middling economic activity, it is also prompting investors to pay up for growth potential in the equity market. The standout sector for the first quarter was technology, led by the big guns of Amazon, Apple, Facebook and Microsoft.



Another place to check on the health of the reflation trade is small-cap US companies. They were early — and major — beneficiaries of Mr Trump’s pledge to cut corporate taxes in the US, but have since relinquished some of their gains.

The Russell 2000 index, home to US small-cap companies, has lost nearly 2 per cent so far in April, and last week briefly entered negative territory for the year. Paul Ryan, speaker of the US House of Representatives, did little to help sentiment last week by warning tax cuts take time to get through the sausage factory that is Congress.


Will earnings season spur further gains for Wall Street?

It’s that time again. Quarterly reporting season for corporate America begins next week and, when you look under the hood, there will be plenty to chew on for investors.

Earnings for S&P 500 companies are forecast to grow at an annualised pace of 9.4 per cent for the first quarter, according to analysts, up from a 5.4 per cent in the final three months of 2016. Revenue, or top-line growth, is projected to have risen 6.6 per cent in the quarter, up from a 4 per cent pace in the fourth quarter.

All well and good — until you strip out the energy and finance sectors. “Outside of energy and finance, earnings growth is instead expected to decelerate to 3.2 per cent in 1Q from 4.4 per cent in 4Q,” analysts at Bank of America Merrill Lynch note.

Top-line growth and upbeat guidance from companies may well be sufficient to keep the equity market buoyant into summer as investors await a deal on tax reform and other stimulus measures between the White House and Congress.

A new record for coking coal?

On Friday the price of coking coal surged to $283, a record-breaking jump of 34 per cent as steel mills across Asia scrambled to secure supplies of the commodity. A tropical cyclone has disrupted supplies in Australia, one of the world’s biggest producers of the steelmaking ingredient.

The all-time high for spot prices of $330 was hit in 2011, after another bout of disruption because of extreme weather. Traders are now asking if that level will be tested again. With a key rail system connecting mines in Queensland with ports on the east coast expected to remain shut for about five weeks, it can’t be ruled out.

>>>EU memo shows G20 economies will miss their target of creating added economic

EU memo shows G20 economies will miss their target of creating added economic growth through reform efforts by 2018 
- In 2014, the G20 agreed to increase growth by a minimum of an extra 2% over 5 years via reform efforts, which was expected to add $2T to the global economy.
- The document prepared for the G20 in Washington on April 20-21st said: "It seems likely that we will not reach our 2-in-5 growth ambition by 2018. We should reflect on the appropriate communication around our 2-in-5 objective and build a shared assessment and understanding of why we have not fully delivered."