(ZH) Europe Proposes "Restrictions On Payments In Cash"

Europe Proposes "Restrictions On Payments In Cash"

Having discontinued its production of EUR500 banknotes, it appears Europe is charging towards the utopian dream of a cashless society. Just days after Davos' elites discussed why the world needs to "get rid of currency," the European Commission has introduced a proposal enforcing "restrictions on payments in cash."
With Rogoff, Stiglitz, Summers et al. all calling for the end of cash - because only terrorists and drug-dealers need cash (nothing at all to do with totalitarian control over a nation's wealth) - we are not surprised that this proposal from the European Commission (sanctuary of statism) would appear...


The Commission published on 2 February 2016 a Communication to the Council and the Parliament on an Action Plan to further step up the fight against the financing of terrorism (COM (2016) 50). The Action Plan builds on existing EU rules to adapt to new threats and aims at updating EU policies in line with international standards. In the context of the Commission's action to extent the scope of the Regulation on the controls of cash entering or leaving the Community, reference is made to the appropriateness to explore the relevance of potential upper limits to cash payments.
The Action Plan states that "Payments in cash are widely used in the financing of terrorist activities… In this context, the relevance of potential upper limits to cash payments could also be explored. Several Member States have in place prohibitions for cash payments above a specific threshold."


Cash has the important feature of offering anonymity to transactions. Such anonymity may be desired for legitimate reason (e.g. protection of privacy). But, such anonymity can also be misused for money laundering and terrorist financing purposes. The possibility to conduct large cash payments facilitates money laundering and terrorist financing activities because of the difficulty to control cash payment transactions.

...

Potential restrictions to cash payments would be a mean to fight criminal activities entailing large payment transactions in cash by organised criminal networks. Restricting large payments in cash, in addition to cash declarations and other AML obligations, would hamper the operation of terrorist networks, and other criminal activities, i.e. have a preventive effect. It would also facilitate further investigations to track financial transactions in the course of terrorist activities. Effective investigations are hindered as cash payments transactions are anonymous. Thus restrictions on cash payments would facilitate investigations. However, as cash transactions are moved to the financial system, it is essential that financial institutions have adequate controls and procedures in place that enable them to know the person with whom they are dealing. Adequate due diligence on new and existing customers is a key part of these controls in, line with the AMLD.

Terrorists use cash to sustain their illegal activities, not only for illegal transactions (e.g. the acquisition of explosives) but also for payments which are in appearance legal (e.g. transactions for accommodation or transport). While a restriction on payments in cash would certainly be ignored for transactions that are in any case already illegal, the restriction could create a significant hindrance to the conduct of transactions that are ancillary to terrorist activities.

...

Organised crime and terrorism financing rely on cash for payments for carrying out their illegal activities and benefitting from them. By restricting the possibilities to use cash, the proposal would contribute to disrupt the financing of terrorism, as the need to use non anonymous means of payment would either deter the activity or contribute to its easier detection and investigation. Any such proposal would also aim at harmonising restrictions across the Union, thus creating a level playing field for businesses and removing distortions of competition in the internal market. It would additionally foster the fight against money laundering, tax fraud and organised crime.
And then right at the end, they mention "fundamental rights"...


While being allowed to pay in cash does not constitute a fundamental right, the objective of the initiative, which is to prevent the anonymity that cash payments allow, might be viewed as an infringement of the right to privacy enshrined in Article 7 of the EU Charter of Fundamental Rights. However, as complemented by article 52 of the Charter, limitations may be made subject to the principle of proportionality if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others. The objectives of potential restrictions to cash payments could fit such description. It should also be observed that national restrictions to cash payments were never successfully challenged based on an infringement to fundamental rights.
Full Proposal Attached

WSJ : Germany Names Former Volkswagen CEO Martin Winterkorn as Suspect

Germany Names Former Volkswagen CEO Martin Winterkorn as Suspect
Investigation relates to Volkswagen’s long-running emissions scandal

FRANKFURT—German prosecutors on Friday named Volkswagen AG’s former Chief Executive Martin Winterkorn as a suspect in a fraud investigation as they widened their probe into a diesel emissions-cheating scandal, alleging that Mr. Winterkorn may have known about the issue earlier than he acknowledged.
Prosecutors launched the probe on Sept. 28, 2015, days after U.S. authorities disclosed Volkswagen’s emissions-cheating. Initially, Mr. Winterkorn was named as a suspect, but prosecutors retracted his name three days later. Friday’s announcement reinstates Mr. Winterkorn as a suspect in the fraud investigation based on new evidence.
Prosecutors said the indication that Mr. Winterkorn may have known about the software and its effect sooner than he has said publicly was based partly on the questioning of witnesses and suspects, as well as evaluation of seized data. The prosecutors’ statement about Mr. Winterkorn could bolster lawsuits from investors who are seeking nearly €9 billion ($9.65 billion) in damages.

Mr. Winterkorn resigned in September 2015, after U.S. authorities disclosed that Volkswagen had been cheating on emissions tests for a decade.
An attorney for Mr. Winterkorn said the former CEO would comment on the probe to investigators once he’s examined the evidence against him. Mr. Winterkorn told a German parliamentary investigative committee last week that he did not learn about the emissions-cheating software until September 2015, shortly before Volkswagen admitted cheating to U.S. environmental authorities.
Volkswagen spokesman Eric Felber said the company is “cooperating fully with investigators” but he couldn't comment on specifics because of the continuing investigation.
German prosecutors haven't charged anyone with wrongdoing in connection with the scandal. They have expanded the number of suspects under investigation to 37 from 21 after securing witness testimony and seizing files and data in raids on at least 28 private residences and businesses this week.
There are at least three separate investigations under way in Germany.
The largest is seeking to determine whether Volkswagen and its management committed fraud by knowingly rigging diesel engines to manipulate nitrogen oxide, or NOx, emissions.
Another investigation is looking into allegations that Volkswagen falsified carbon-dioxide levels listed on vehicle certifications.
A third probe is focused on Mr. Winterkorn, Volkswagen Chairman Hans Dieter Pötsch, and Herbert Diess, chief of the Volkswagen passenger car brand, to determine if the executives failed to inform financial markets about the pending U.S. investigation in a timely manner. All three men have denied any wrongdoing.
Prosecutors are also investigating a company attorney on suspicion that he encouraged other employees to destroy evidence linked to the diesel scandal.

Volkswagen this month pleaded guilty in the U.S. to charges that included conspiring to defraud the U.S. government and U.S. consumers by manipulating diesel engines to meet emissions targets during lab tests. The company agreed to pay a criminal fine of $4.3 billion after reaching settlements in civil law suits last year totaling up to $17.5 billion.
Volkswagen insists that the software, declared an illegal defeat device in the U.S., wasn't illegal in Europe.
When the scandal was disclosed, Volkswagen’s shares plunged, losing nearly half their value in days.
Volkswagen’s guilty plea in the U.S. included a statement of facts that made clear that dozens of employees were involved in the cheating. The company also admitted that one member of its legal team instructed a group of around 40 employees to remove evidence from Volkswagen’s computers in mid-2015, when it became clear that a U.S. investigation was pending.
The U.S. has so far indicted seven current and former Volkswagen employees in connection with the scandal. Several of these executives reported directly to Mr. Winterkorn.

>>> Assicurazioni Generali shareholders ready to evaluate Intesa Sanpaolo offer

Assicurazioni Generali shareholders ready to evaluate Intesa Sanpaolo offer - reports (translated)

28 JAN 2017
Shareholders of Italian insurer Assicurazioni Generali [BIT: GASI] are ready to evaluate an offer from Intesa Sanpaolo [BIT: ISP], Italian-language daily Il Sole 24 Ore reported. The unsourced report said that interest among Generali's historical shareholders has been growing, especially in regard to pricing and the industrial logic of the proposal.

Intesa has still not decided to go ahead with the bid but is likely to make a decision in the near future. The report said that the dossier was not discussed at an Intesa meeting yesterday 27 January but that this weekend is likely to see an acceleration. It is possible that Intesa will call a board meeting before the one scheduled for 3 February. The report claimed that such a meeting could be held as early as tomorrow.

The bid is likely to come in at a maximum of EUR 17 a Generali share.

Generali has a market cap of EUR 24.02bn.

The original article appeared in print; Page 25

Barron's : The Time Is Right for Convertible Bonds

The Time Is Right for Convertible Bonds
Income-focused investors can tap into equity performance while taking less risk with these securities. Here’s how.

With stocks soaring and interest rates rising, income-focused investors should look for ways to tap into equity performance while taking less risk. Convertible securities could be just the ticket.

As their name implies, convertibles are corporate bonds that convert to company stock at a set price, usually about 25% higher than the price at issuance. When a company’s stock goes up, so does its convertible—by almost as much. But if the stock falls, these bonds typically fall only by about half. That’s because, as with other corporate bonds, convertible investors collect the coupon and get their principal back at maturity—as long as the company doesn’t default, which happens only rarely.

“With convertibles, you get equity-like returns with downside protection, plus current income,” says Tracy Maitland, president of Advent Capital Management. “Right now, the stock market is priced for perfection,” adds Maitland, who sees market risk in geopolitics, rising rates, and trade protectionism. But convertibles usually perform well when interest rates rise, he notes, unlike regular bonds or high-yielding equities, like utilities.

Funds that invest in these securities are up an average of 18% in the past year, according to Morningstar, while the convertibles index is up about 20% in that time. Many convertibles are issued by emerging growth companies in industries like biotech, semiconductors, and communications, which have done well in the recent bull run. Morningstar gives high marks to convertible funds run by Allianz Global Investors, Franklin Templeton, and Vanguard.

Dave King, who manages the Columbia Convertible Securities fund (ticker: PACIX)—up 24% in the past year—says they are still attractively priced. He has sold some of his highfliers, like Tesaro (TSRO). A newer favorite is Chesapeake Energy (CHK), which issued a convertible when it was starved for capital last year.

“Convertibles are a great way to invest in a riskier equity without taking on all the volatility or the risk of loss of capital,” King says. One example: His fund owned Dendreon, which went bankrupt in 2014 after its cancer treatment disappointed. His fund got about 85 cents on the dollar in the restructuring, while stockholders got wiped out.

THERE ARE OTHER TAIL WINDS for convertibles, in addition to higher stock prices. Maitland is cheered that new issues have structural improvements, such as shorter maturities and better call provisions. Some of his favorites now are those issued by Dish Network (DISH), which yields 2.8%, Dycom Industries (DY), which yields 0.6%, and Cemex (CX), which yields 3%.

Another plus: Issuance is up. Three business-development companies, Ares Capital (ARCC), Hercules Capital (HTGC), and TPG Specialty Lending (TSLX), issued convertibles last week with fixed rates between 3.75% and 4.5%.

“New paper creates a healthy and stable market,” says Eli Pars, co-head of convertible strategies at Calamos Investments. If tax reform leads to limits on companies’ ability to deduct interest, that could lead to even more convertible issuance, some analysts have postulated.

Investors who want to buy individual convertibles should be forewarned: Many new issues are available only to institutional investors, and it’s a tough market for nonprofessionals to trade in.

The largest convertible exchange-traded fund is SPDR Bloomberg Barclays Convertible Securities (CWB), which yields 3.1%. Some active managers have outperformed the index, but growth-oriented convertible funds usually generate less income. For a yield boost, explore closed-end funds, which use leverage and can sell at big discounts. Maitland’s Advent Claymore Convertible Securities & Income (AVK) yields 7.4% and trades at an 11% discount to net asset value.

Barron's : Italy’s Atlantia Is Building a Brighter Future

Italy’s Atlantia Is Building a Brighter Future
Out of favor over the past year, the motorway and airport owner is set to pay dividends and embark on a promising restructuring.

Motorway and airport owner Atlantia’s attempts to plot a route well beyond its Italian borders looks set to pay dividends, putting its stock back on the right road after it recently lost its way.

The company (ticker: ATL.Italy), in which Italy’s Benetton family has a 30% stake, fell out of favor with investors along with many other Italian concerns as the country’s political and economic woes deepened toward the end of last year.

In December, the electorate rejected proposed constitutional reforms aimed at smoothing Italy’s legislative process. That referendum effectively became a confidence vote on then-Prime Minister Matteo Renzi. His subsequent departure threatened to plunge the country into a period of political uncertainty, raising the prospect of an early election.

That risk was averted, with veteran politician and former foreign minister Paolo Gentiloni asked to form a new government within a week of the referendum. At the same time, various economic indicators suggest Europe’s weak recovery finally might be getting stronger, lifting Italy’s prospects.

ATLANTIA HAS UNDERPERFORMED European stocks, falling by more than 7% in the past year, as the Stoxx Europe 600 index gained 7%. The shares have climbed back 13% from their one-year low since the referendum, but remain more than 12% below their peak value over that period. Despite that, they aren’’t cheap. With a price/earnings ratio around 20, based on expected earnings this year, Atlantia is on par with Spanish rival Ferrovial (FER.Spain) and slightly pricier than France’s Vinci (DG.France), recently near 17.

Nick Davis, manager of the U.K.-based Polar Capital fund, hunts for good companies that have been ignored and says Atlantia fits the bill.

“It’s currently out of favor for two reasons. One is that it’s Italian, and the second is that as an infrastructure company with motorways and airports, it’s perceived as a bond proxy. People are wary of that sort of investment following recent bond movements,” he says.

Last month Atlantia announced a restructuring plan aimed at reducing its dependence on Italy’s market by expanding abroad, increasing foreign contributions to profit beyond the current 25%. It will have four main divisions, focusing on Italian motorways, overseas motorways (which already includes investments in Chile, Brazil, and Poland), airports, and other related businesses.

As part of that push, it plans to raise cash by selling a stake in its road builder and concessionaire, Autostrade per l’Italia, known as ASPI. Analysts reckon that up to 30% of ASPI will be spun off in coming weeks, possibly adding five billion euros ($5.37 billion) to its parent’s war chest.

“A lot of these companies like to sell stakes in mature assets to financial partners and then rotate the capital into newer projects where there’s more scope to add value by either building or changing the way they operate,” Davis says. He adds that selling a stake in ASPI would provide a valuation point for the total business, which some analysts estimate at €15 billion.

Atlantia reckons its new plan will help increase revenue through 2020 to €6.8 billion from €5.5 billion, with earnings before interest, taxes, depreciation, and amortization growing at an average 7% a year, while cutting its debt-to-Ebitda ratio to 2.4 from its current 3.2.

Davis says the company’s strong financial profile gives it a better credit rating than the Italian government, reinforcing its assets’ value. “They’ve got quite a clear capital-allocation framework,” he says. “The starting dividend yield is just under 4.5% and they’ve committed to grow that by 10% a year. That’s quite an attractive profile if you’re running an income fund.”

EXPECTATIONS THAT U.S. PRESIDENT Donald Trump will boost infrastructure spending has lifted stocks since the election, with the Dow industrials surpassing 20,000 for the first time last week. Davis says that although the Trump Bump has benefited infrastructure stocks on this side of the Atlantic, there had been a shift toward fiscal stimulus in Europe even before the election. The European Commission’s Juncker Plan, launched in 2015, aims to draw more than €315 billion worth of private and public funds into projects by year end.

Berenberg analyst Olivia Peters has Atlantia a Buy with a €31 price target, giving the stock more than 40% upside from its recent price around €22. “We maintain that Atlantia is under no pressure to redeploy capital and can pick the best opportunities to suit its investment criteria,” she says. “A disposal of a stake in ASPI could provide a value reference point and decent returns can be achieved on future capex within the business.”

Atlantia may now be on the road to somewhere.

Reuters - Intesa chairman says nothing will happen at weekend over Generali deal

Intesa chairman says nothing will happen at weekend over Generali deal - http://reut.rs/2jHuG7L

Italy's Intesa Sanpaolo (ISP.MI) will not unveil its plans for a possible deal with insurer Generali (GASI.MI) over the weekend, the bank's chairman said on Saturday.

Intesa said this week it was examining a possible tie-up with Generali in what would be one of Europe's biggest deals of this kind.

"Nothing will happen" over the weekend, Intesa's Chairman Gian Maria Gros-Pietro told reporters on the sidelines of a financial conference in Modena.

He added that Generali would not be on the agenda of Intesa's board meeting on Feb.3, which will review the bank's 2016 results.

FT : Greece faces ‘explosive’ surge in public debt, IMF warns

Greece faces ‘explosive’ surge in public debt, IMF warns
Athens will owe three times national GDP unless given debt relief, says leaked report

Greece faces what is likely to be an “explosive” surge in its public debt levels that within decades will mean it will owe almost three times the country’s annual economic output unless given significant debt relief, the International Monetary Fund has warned in a confidential report.

The new report was prepared by IMF staff ahead of a February 6 board meeting to discuss the fund’s participation in an EU-led €86bn bailout of Greece and signals the continuing hard line the IMF is taking on debt relief for Athens. It offers a bleaker view of Greece’s economic dilemmas than an analysis prepared last year, warning that the debt load is “highly unsustainable” and would not improve even if it implemented further reforms recommended by the fund.

That assessment would, under the fund’s own rules, prohibit the IMF from taking part financially in the current bailout, something countries such as Germany have made a condition of their own support.

“Even with these ambitious polices in place, Greece cannot grow out of its debt problem,” IMF staff warned in the report, seen by the Financial Times and drafted as part of the fund’s annual review of member economies. “Greece requires substantial debt relief from its European partners to restore debt sustainability.”

The IMF declined to comment, citing a policy of not commenting on leaked material.

The fund calculated that Greece’s debt load would reach 170 per cent of gross domestic product by 2020 and 164 per cent by 2022, “but become explosive thereafter” and grow to 275 per cent of GDP by 2060.

In its report the fund cites the heavy burden borne by the Greek people as part of the economic crisis they have been battling since 2010 and repeats a call for a less aggressive fiscal adjustment than the EU has been pushing for. It also calls for further reform of the Greek pension system and improvements in tax collection, as well as the establishment of a more robust safety net to help those affected most by the crisis.

But the IMF’s view on debt remains the most crucial and politically sensitive in Europe and particularly Germany, where Angela Merkel is battling for re-election this year.

Jeroen Dijsselbloem, the eurogroup president, said this week after a meeting of the group’s ministers that the desire to have the IMF on board had not changed.

“A number of member states are adamant on the IMF’s involvement,” he told reporters.

Michel Sapin, France’s finance minister, warned after that meeting that the “window of opportunity” for a deal on the next stages of Greece’s bailout programme was closing due to the series of elections this year in Europe.

Those elections start in the Netherlands in March, with voters in both France and Germany also going to the polls.

It is widely feared that failure to resolve the Greek debt issue could knock the bailout programme off course and destabilise Greece.

But euro area ministers have also taken a more optimistic view than the IMF of Greece’s woes. After a meeting in Brussels on Thursday a number stressed that Athens was comfortably exceeding primary surplus targets set under the €86bn bailout programme.

Mr Dijsselbloem, who is also the Dutch finance minister, said that Greece was recovering faster than anyone expected.

In its report the IMF said it expected Greece’s GDP to grow 2.7 per cent this year after returning to growth last year.

>>> Weekly Update

Weekly Market Update: Trump Era Commences with the Dow Reaching 20,000

US stock markets reached new all-time highs this week when the Dow broke the psychological barrier of 20K while digesting the opening salvos of a Trump administration. Investors quickly saw he means business regarding several of his campaign promises. A flurry of executive orders began with the reopening of the Keystone and Dakota pipelines, touting it as a move to create jobs. By Friday, a formal meeting with Mexico in Washington had been cancelled after the Administration warned of a potential 20% border tax if Mexico was unwilling to renegotiate NAFTA or discuss reimbursement for the construction of a boarder wall. The Peso came under pressure yet again, and worries of a looming trade war were creeping higher. Some of that was assuaged on Friday after President Trump and Mexico President Pena Nieto spoke by phone and each called it a productive conversation. Overall, stock markets seemed to pay little attention to global trade concerns outside of the US retailing sector, which lagged notably. The volatility index meandered lower, to levels not seen since 2014 and trading volumes were muted in a sign of investor complacency despite a steady flow of geopolitical and corporate headlines. For the week the Dow rose 1.3%, the S&P added 1% and the NASDAQ finished up just under 2%.

As earnings season got rolling, tech heavyweights took center stage. While eBay, VMware and Yahoo impressed the street, Alphabet, PayPal and Juniper came up short. Among other notable names reporting this week was McDonalds, who largely surpassed expectations on strength in international markets. Brinker got hit by weak numbers from Chili's and slashed its outlook. Lockheed beat on top and bottom lines; Northrop did, as well, but guided below expectations. Homebuilders had a strong week after DR Horton beat on earnings and reported a 15% increase in orders. Overall, managements appear to have remained cautious, hopeful the new administration and Congress will push through growth-spurring policies and reforms, but unwilling to forcefully factor that into forecasts at this point.

UK's PM May presented a bill to parliament on the intention to trigger Article 50 of the EU constitution, commencing the Brexit process. The bill was read in the House of Commons on Tuesday and will be voted on next week before being passed to the upper house. May and Trump met Friday at the White House for the first official visit by a foreign leader. Despite divergence on free trade between the two, May said the US and the UK would lead the world once more, maintaining that special relationship the two countries have enjoyed for decades. Both leaders affirmed their hope for a speedy, mutually beneficial bilateral trade deal in the wake of Brexit.

Bond prices came under some pressure almost worldwide as markets continued to assess the likelihood of faster Fed tightening and effects of fiscal stimulus in the US, while in the Euro area investors begin to weigh the risks of rising inflation in Germany in particular and the effects of QE program exit by the ECB. Japanese bonds were an exception, as the Bank of Japan surprised the market by increasing its bond buying program, sending rates lower again. German 10-year Bund yields rose 6bps to 0.48%, closing Thursday at the highest level in about one year , 10-year UST rose 5bps midweek to 2.52% before receding back below 2.5% to end the week.

MONDAY 1/23
005930.KR Reports Q4 Net KRW7.09T v KRW6.5Te; Op KRW9.2T v KRW8.7Te; Rev KRW53.3T v KRW52.8Te; To buy back KRW9.3T shares (3.5% of market cap)

TUESDAY 1/24
SAP.DE Reports Q4 Non-IFRS Net €1.82B v €1.67B y/y, Op profit €2.37B v €2.37Be, Rev €6.72B v €6.68Be
(CN) China PBoC conducts total CNY245.5B Medium-term Lending Facility (MLF); raises interest rate - financial press
(FR) FRANCE JAN PRELIMINARY MANUFACTURING PMI: 53.4 V 53.4E; (4th month of expansion)
(DE) GERMANY JAN PRELIMINARY MANUFACTURING PMI: 56.5 V 55.4E; (26th month of expansion and highest since Jan 2014 )
(EU) EURO ZONE JAN PRELIMINARY MANUFACTURING PMI: 55.1 V 54.8E ( 43rd month of expansion)
(UK) SUPREME COURT UPHOLDS EARLIER RULING ON ARTICLE 50 ; Parliament must vote to trigger article 50 (rejects Govt argument)
(TR) TURKEY CENTRAL BANK (CBRT) LEAVES BENCHMARK RATE UNCHANGED AT 8.00% (not expected); widens rate corridor
LMT Reports Q4 $3.25 v $3.04e, R$13.8B v $13.1Be
(ZA) SOUTH AFRICA CENTRAL BANK (SARB) LEAVES INTEREST RATE UNCHANGED AT 7.00%;; AS EXPECTED
(US) Jan Philadelphia Fed Non-Manufacturing General Business Conditions 37.7 v 19.5 m/m
(US) JAN PRELIMINARY MARKIT MANUFACTURING PMI: 55.1 V 54.5E; (highest since March 2015)
(US) DEC EXISTING HOME SALES: 5.49M V 5.51ME
(US) JAN RICHMOND FED MANUFACTURING INDEX: 12 V 7E
AA Reports Q4 $0.14 v $0.22e, R$2.54B v $2.21Be
BHP.AU Reports Q2 iron ore production 60Mt v 57.6Mt q/q v 59Me
TXN Reports Q4 $0.88 (adj) v $0.81e, R$3.41B v $3.31Be; names Brian Crutcher COO effective immediately
(US) NORTH AMERICA DEC SEMI BOOK/BILL RATIO: 1.06 V 0.96 PRIOR; Discontinues publishing monthly report
(AU) AUSTRALIA Q4 CONSUMER PRICES (CPI) Q/Q: 0.5% V 0.7%E; Y/Y: 1.5% (1-year high) V 1.6%E; TRIMMED MEAN Q/Q: 0.4% V 0.5%E ; Y/Y: 1.6% (5-year low) V 1.6%E

WEDS 1/25
005380.KR Reports Q4 Net KRW1.0T v KRW1.4Te; Op KRW1.02T v KRW1.5Te; Rev KRW24.5T v KRW24.6Te
SAN.ES Reports Q4 Net €1.60B v €1.48Be, Rev €11.1B v €11.1B q/q
NOVN.CH Reports Q4 $1.12 v $1.03e, Core Op profit $3.01B v $3.06B y/y, R$12.3B v $12.40Be; Announces $5B sharebuyback (3% of market cap)
(DE) GERMANY JAN IFO BUSINESS CLIMATE: 109.8 V 111.3E; CURRENT ASSESSMENT: 116.9 V 117.0E
(UK) JAN CBI INDUSTRIAL TRENDS TOTAL ORDERS: 5 V 2E
FCX Reports Q4 $0.25 adj v $0.32e, R$4.38B v $4.06Be
(US) DOE CRUDE: +2.8M V +2ME; GASOLINE: +6.8M V +0.5ME; DISTILLATE: +0.1M V -1ME
(US) Association of American Railroads weekly rail traffic report for week ending Jan 21st: 530.3K carloads and intermodal units, +8.1% y/y
(MX) President Trump: Mexico wall construction will start in months; reiterates taxpayers will be reimbursed at a later date - ABC taped interview (to air tonight)
(US) White House spokesman: administration will create more detention space along US border; Trump to sign two executive orders on immigration
(NZ) NEW ZEALAND Q4 CPI Q/Q: 0.4% V 0.3%E; Y/Y: 1.3% (2-year high) V 1.2%E
000660.KR Reports Q4 Net KRW1.63T v KRW1.1Te; Op net KRW1.54T v KRW1.3Te; Rev KRW5.36T v KRW5Te

THURS 1/26
UNA.NL Reports FY16 Core EPS €1.82 v €1.72 y/y; Op €7.80B v €7.52B y/y, Rev €52.7B v €53.3B y/y
(DE) FEB GFK CONSUMER CONFIDENCE: 10.2 V 10.0E;(matches highest reading since Oct 2001)
DGE.UK Reports H1 Adj Op Profit GBP;2.07B v GBP;2.02Be, Net Rev GBP;6.42B v GBP;6.42Be
(UK) Q4 ADVANCE GDP Q/Q: 0.6% V 0.5%E; Y/Y: 2.2% V 2.1%E (matches lowest annual pace since Q1 2013)
POT Reports Q4 $0.07 v $0.09e, R$1.06B v $1.03Be
DOW Reports Q4 $0.99 v $0.88e, R$13.0B v $12.5Be
F Reports Q4 $0.30 v $0.35e, R$38.7B v $35.6Be
(UK) Brexit Min Davis submits draft Article 50 bill to Parliament to trigger Brexit (in-line with press speculation)
(US) INITIAL JOBLESS CLAIMS: 259K V 247KE; CONTINUING CLAIMS: 2.10MM V 2.04ME
(US) JAN PRELIMINARY MARKIT SERVICES PMI: 55.1 V 54.4E; (highest since Nov 2015)
(US) Atlanta Fed raises final Q4 GDP forecast to 2.9% from 2.8% on 1/19
(US) White House Press Sec: would implement 20% border tax on imports from Mexico to pay for border wall
(US) House Speaker Ryan (R-WI): Dodd-Frank law is a top GOP target; could consider action on Dodd-Frank as early as late spring - press
INTC Reports Q4 $0.79 v $0.76e, R$16.4B v $15.8Be
GOOGL Reports Q4 $9.36 v $9.63e, R$26.0B (includes $4.85B TAC) v $25.2Be
MSFT Reports Q2 $0.83 v $0.79e, R$26.1B (adj) v $25.2Be

FRI 1/27
UBSN.CH Reports Q4 Net CHF738M v CHF339Me, Adj Pretax profit CHF1.11B v CHF754M y/y, Adj Op Rev CHF6.94B v CHF6.85B y/y
BOK.UK To merge into Tesco for 205.3p/shr in cash and shares; deal valued at GBP;3.7B
(EU) EURO ZONE DEC M3 MONEY SUPPLY Y/Y: 5.0% V 4.9%E
(US) Q4 ADVANCE GDP PRICE INDEX: 2.1% V 2.1%E; CORE PCE Q/Q: 1.3% V 1.3%E
(US) Q4 ADVANCE GDP ANNUALIZED Q/Q: 1.9% V 2.2%E; PERSONAL CONSUMPTION: 2.5% V 2.5%E
(US) DEC PRELIMINARY DURABLE GOODS ORDERS: -0.4% V 2.5%E; DURABLES EX TRANSPORTATION: 0.5% V 0.5%E
(US) JAN FINAL MICHIGAN CONFIDENCE: 98.5 V 98.1E

>>> US Close Dow -0.04% S&P -0.09% Nasdaq +0.10% Russell

Closing Market Summary: Averages Finish Friday Relatively Unchanged

It appears that investors ran out of ink after rewriting the record book during Wednesday's session as the major averages closed the week relatively unchanged from those record levels. The S&P 500 (-0.1%) finished Friday's session just below its flat line, while the Nasdaq (+0.1%) performed just slightly better.

To illustrate the minimal change numerically, the five heaviest weighted sectors--technology, financials, health care, consumer discretionary, and industrials-- changed only marginally since Wednesday's close, seeing gains/losses of no more than 0.1%. Sectors like consumer staples and energy saw more substantial movement due to a number of factors, but generally, the stock market appears to be in wait-and-see mode, eyeing President Trump and his ability to implement the pro-growth agenda he ran his presidential campaign on. 

However, despite minimal movement in the key indices, earnings season remained alive and well on Friday with technology names headlining the action. The results were mixed with Alphabet (GOOGL 845.03, -11.95) ticking down 1.4% in reaction to below-consensus earnings, while Intel (INTC 37.98, +0.42) and Microsoft (MSFT 65.78, +1.51) climbed 1.1% and 2.4%, respectively, after beating top and bottom line estimates.

The positives outweighed the negatives in the technology sector (+0.3%), which left the sector as one of the few spaces to close the day higher. Health care and telecom services were fortunate enough to do the same, adding 0.8% and 0.7%, respectively. 

On the flip side, real estate (-0.9%) and energy (-0.9%) finished at the bottom of the day's leaderboard, with the latter fighting a battle on multiple fronts. The first attack against the energy space's came from Chevron (CVX 113.79, -2.76) after the company disappointed investors with its quarterly earnings report. Crude oil also weighed, slipping 1.1% to $53.18/bbl, as increased U.S. production overshadowed supply cut efforts by OPEC and non-OPEC members.

Consumer staples (-0.6%) also finished near the bottom of the leaderboard following a negative reaction to Colgate-Palmolive's (CL 64.68, -3.56) quarterly report. The company slipped 5.2% after missing revenue estimates and forecasting a low-single digit net sales increase for 2017.

For the week, cyclical sectors had the upper hand as materials (+3.4%) led five of the six spaces higher. Conversely, each countercyclical sector closed the week lower, with telecom services (-1.7%) falling the farthest.

U.S. Treasuries also closed Friday's session with a week-to-date loss. However, the Treasury market did end the week on an upbeat note, closing in positive territory around its highest levels of the day. The 10-yr yield settled two basis points lower at 2.48%.

Friday's economic data included advance fourth quarter GDP, December Durable Orders, and the final reading of the University of Michigan Sentiment Index for January:

  • Advance fourth quarter GDP pointed to an expansion of 1.9%, while the consensus expected a reading of 2.2%. The fourth quarter GDP Deflator came in at 2.1%, which is what the consensus expected.
    • The key takeaway from this report is that fourth quarter activity revealed the strong third quarter growth was as an aberration, yet that point aside, the salient takeaway for many is that this is a backward-looking report and the markets have their sights set on a brighter economic outlook for 2017, which is expected to feature deregulation, tax reform, and infrastructure spending among other items.
  • December durable goods orders declined 0.4%, while the consensus expected a 3.0% increase. The prior month's reading was revised to -4.8% (from -4.6%). Excluding transportation, durable orders rose 0.5% (consensus +0.5%) to follow the prior month's revised gain of 1.0% (from 0.5%).
    • The key takeaway from this report is that business investment remained on a positive trajectory.
  • The final reading of the University of Michigan Consumer Sentiment Index for January rose to 98.5 (consensus 98.0) from 98.1 in the preliminary reading.
    • The key takeaway from the report is that consumer confidence is rising on the back of an improved outlook for economic growth, job growth, and personal finances in the year ahead

Monday's economic data will include December Personal Income at 8:30 am ET and December Pending Home Sales at 10:00 am ET.

  • Nasdaq Composite 5.2% YTD
  • S&P 500 2.5% YTD
  • Dow Jones Industrial Average +1.7% YTD
  • Russell 2000 +1.0% YTD

>>> US Early premarket gappers

Early premarket gappers

Gapping up: LTRX +14.2%, EPE +9.9%, SMCI +9.8%, GLF +7.1%, WYNN +7%, CVEO +6.4%, IMGN +6.2%, SYNA +5.8%, GHL +5.1%, MTL +4.3%, MXIM +4.2%, VMW +4%, EMCI +3.8%, CMRE +3.4%, KLAC +3.3%, OSIS +3.2%, DQ +3.1%, SBGL +2.2%, IBN +2.2%, VVV +1.8%, SXL +1.7%, INFY +1.7%, MSFT +1.5%, MGM +1.3%, BCR +1.1%, INTC +1%, MPEL +0.7%, VLO +0.6%, LVS +0.6%, LRN +0.6%, DCOM +0.5%

Gapping down: ATHX -27%, WKHS -13.5%, ANY -5.9%, JNPR -5.5%, RHI -4.9%, APD -4.6%, PFPT -4.3%, SBUX -3.8%, ERIC -3.6%, CS -3.3%, FLEX -3.3%, CAFD -3.1%, UBS -3%, SWFT -2.7%, DCIX -2.5%, MSCC -2.4%, GOOG -1.6%, PUK -1.4%, PYPL -1.4%, DB -1.3%, BBVA -1.3%, BCS -1.2%, CLS -1.2%, HON -1.2%, CLS -1.2%, BP -1.1%, SDRL -1%, ABX -0.8%, FFHL -0.6%, RDS.A -0.6%, FFIN -0.6%, KEYW -0.6%, FB -0.5%