Reuters - Italy set to pump around 6.5 billion euros into Monte Paschi rescue

ROME/MILAN (Reuters) - The Italian government is likely to put in around 6.5 billion euros ($6.8 billion) to rescue the country's third biggest lender Monte dei Paschi di Siena, more than initially expected, sources close to the matter said on Tuesday.

The higher cost of the state rescue is due to the fact that the European Central Bank has revised the bank's capital shortfall to 8.8 billion euros from a previous estimate of 5 billion euros.

The bank requested government support - in the form of a precautionary recapitalisation by the state - last week after its plan to raise 5 billion euros from private investors flopped.

A 6.5 billion euro capital injection would give the Italian government a stake of around 70 percent in the lender.

The remaining 2.3 billion euros should come from the conversion into shares of subordinated bonds held by institutional investors, as required by new European rules for dealing with bank crises.

A precautionary recapitalisation is a type of state intervention in a struggling bank that is still solvent. It means only a modest bail-in of investors though the government can buy shares or bonds only on market terms endorsed by EU state aid officials in Brussels.

Under the scheme proposed by Italy, the government will compensate the 40,000 or so retail investors holding around 2 billion euros of the bank's junior debt, who will convert their notes into shares.

The retail investors will be able to swap those shares for senior bonds, with the state buying back the shares from the bank. The scheme needs EU approval, which could take two to three months.

The ECB, which is close to completing an inspection of the bank's loan portfolio, took a harsher stance on its capital shortfall to be "on the safe side and help restore confidence in the bank", one of the sources said.

Monte dei Paschi, which has been in crisis mode for years, emerged as the weakest lender in European stress tests last summer.

The Tuscan bank, the world's oldest, will use around a third of the 20 billion euros earmarked by the Italian government to bolster ailing lenders.

Shares and securities in the bank have been suspended from trading until the details of the rescue scheme - such as the price at which the government will buy the bank's shares - become clearer.



Other lenders expected to benefit from government support include two regional banks - Popolare di Vicenza and Veneto Banca - and Genoa-based Carige.

Reuters - U.S. mutual fund trustees feel the heat of investor lawsuits


Before New York's famed 21 Club steakhouse drew attention in November for hosting Donald Trump, the wealthy U.S. president-elect, it quietly fed other public representatives: trustees of Paris-based AXA SA (AXAF.PA) investment funds.

The trustees - board members tasked with overseeing AXA funds - had events there and at other ritzy spots, legal records show. A 2011 holiday party at a Del Frisco's restaurant cost $25,775, a $1,000 average for each of roughly 25 people present.

"The wine was very good," a trustee recalled of one meal.

The trustees' dining experiences emerged in a federal case decided in August. Investors including a teacher and a retired police officer accused the firm of collecting excessive fees, a charge the firm denied.

U.S. District Judge Peter Sheridan sided with AXA in his 146-page decision, but he wrote the suit had prompted a "more scrupulous and rigorous" review of board expenses. One result was to reimburse investors for some of the meal costs.

In courts across the land, investors are subjecting mutual fund boards to greater scrutiny. Trustees, often paid hundreds of thousands of dollars a year, are under pressure to prove they have stood up for shareholders in an industry that has $16 trillion under management.

The lawsuits accuse fund boards of missteps such as failing to scrutinize fees or pass along to investors economies of scale as their funds grow with rising markets. The claims illuminate the long obscure role of fund trustees, sometimes known as directors.

Despite their compensation and influence, at many fund families these individuals rarely appear before investors and face few official qualification requirements. Many are current or retired executives, attorneys or academics, much the same as at large publicly traded companies.

Defendants include large fund managers like BlackRock Inc (BLK.N) and Pacific Investment Management Co, or Pimco. The fund managers deny wrongdoing. An AXA spokesman declined to comment.

FEES A SENSITIVE TOPIC

In theory, mutual fund trustees can demand lower fees on the funds or fire the managers who choose the funds' investments. But firings, which investors could see as disruptive, hardly ever happen.

A common concern is that the boards are more focused on following technical rules than looking out for shareholder interests, said Stephen Davis, a senior fellow at the Harvard Law School Program on Corporate Governance.

Fees are a sensitive topic for many actively managed mutual funds, which are losing billions of dollars in assets to cheaper index-tracking funds. Even a small reduction in fees can make a big difference for investors who include many U.S. workers whose savings are in 401(k) retirement plans.

A 2015 Morningstar study showed that while industry assets increased by 143 percent over a 10-year period, fund fees charged to clients fell only 27 percent while industry fee revenue rose 78 percent, showing companies benefiting from the gains more than their investors.

LAWSUITS AGAINST BLACKROCK, PIMCO

In one suit, in federal court in Trenton, New Jersey, plaintiffs accuse BlackRock units of benefiting too much as assets of its Global Allocation Fund (MALOX.O) more than doubled to about $58 billion at Oct. 31, 2013, from about $23 billion at Oct. 31, 2007.

U.S. District Judge Freda Wolfson last year denied a BlackRock motion to dismiss, writing that plaintiffs at least had raised enough doubts about fund trustees that there remained "sufficient allegations that allow for an inference of rubber-stamping by the Boards."

BlackRock defended its boards of trustees. A BlackRock spokesman wrote via email that Global Allocation is priced competitively, adding, "The suit is without merit and we intend to vigorously defend against the action."

A judge has asked both sides for reports on the discovery process by Jan. 19.

A suit in federal court in Seattle compares Pimco's well-known $78 billion Total Return fund (PTTRX.O) with the $2.3 billion Harbor Bond Fund, (HABDX.O) a similar fund Pimco subadvises.

The plaintiff cited how Pimco charged holders of Class A shares of Total Return 0.85 percent of fund assets, while investors were charged just 0.53 percent of fund assets to own a comparable Harbor Bond Fund share class.

The plaintiff claimed Pimco trustees "have been subverted by defendants and no longer serve in their 'watchdog' role" and cited the trustees' generous pay.

Pimco argues its board follows a rigorous process and called the comparison to Harbor Bond Fund inapt because its in-house funds can require it to perform additional work and assume additional risks. Last year U.S. District Judge Ricardo Martinez denied a Pimco motion to dismiss the case, currently awaiting trial.

A Pimco spokeswoman declined to comment.

Some complaints against directors have been knocked down. In a case against Hartford Funds in Camden, New Jersey, U.S. District Judge Renee Marie Bumb likened claims that Hartford's fund board allowed excessive fees to "armchair quarterbacking and captious nit-picking." Closing arguments in the case are set for January.

But elsewhere even unsuccessful actions have brought board critiques.

In Los Angeles, U.S. District Judge Gary Feess in 2009 dismissed a challenge to fees at American Funds but wrote the board's oversight process "seems less a true negotiation and more an elaborate exercise in checking off boxes and papering the file."

An American Funds spokesman said the company in response provided trustees more information about its approach to compensation. Directors were unavailable to comment, he said.

Reuters - Sanofi sues Novo Nordisk over diabetes drugs in the U.S.

Sanofi sues Novo Nordisk over diabetes drugs in the U.S. - http://reut.rs/2iCVZiS

Dec 27 France's Sanofi has filed a lawsuit in the United States accusing Novo Nordisk of falsely claiming that Sanofi insulin drugs would no longer be available for many U.S. patients so it could promote its competing drug.

The complaint, filed by Sanofi US in U.S. District Court for the District of New Jersey on Dec. 23, seeks an order forcing Novo Nordisk to pay unspecified money damages and withdraw marketing materials for its drug Tresiba.

The marketing materials urge doctors and patients to switch from Sanofi's drugs Lantus and Toujeo, used to treat diabetes, to Tresiba, according to Sanofi, because the Sanofi drugs will be "blocked" by U.S. pharmacy benefit manager CVS Caremark in January.

Sanofi said CVS is replacing the drugs with Eli Lilly's similar, cheaper drug Basaglar on its so-called standard formulary, a list of drugs that health insurance plans cover.

Many health plans do not use CVS' standard formulary, and some that do will likely continue to cover the Sanofi drugs, though patients will have to pay more for them, Sanofi said. Sanofi also said it offers assistance to individuals to buy the drugs if their insurance does not cover them.

Novo Nordisk had no comment.

"(W)e believe Novo's statements concerning CVS Caremark's formulary decision on Lantus and Toujeo coverage contain false and misleading claims about the continued availability of Lantus and Toujeo," said a Sanofi spokeswoman in an emailed statement.

Lantus and Toujeo are two of the diabetes treatments that Sanofi sells in the United States, the world's largest health market.

Pressure has been rising on its U.S. diabetes business in recent months as CVS and insurer UnitedHealth Group Inc announced plans to replace Lantus and Toujeo with Basaglar.

Sanofi posted better-than-expected quarterly earnings in October and lifted its profit outlook for the year. But the drugmaker stuck to its forecast that currency-adjusted sales at its embattled diabetes business would shrink by 4 percent to 8 percent per year on average from 2015 to 2018.

>>> Toshiba may need to spin-off or list semiconductor business as part of equit

Toshiba may need to spin-off or list semiconductor business as part of equity financing to counter nuclear business loss 

Toshiba could be forced to carry out a review of its businesses, including spinning-off or listing its semiconductor business, as part of equity financing, the Nihon Keizai Shimbun reported.

The Japanese-language report cited Yoshiharu Izumi, an analyst at Tokyo-based investor media management company Navigator Platform, as saying that there is a possibility Toshiba could decide to sell-off its semiconductor business. Izumi added that investors ought to be strongly cognizant of the many uncertain elements of Toshiba's brands that have little growth prospects.

Toshiba announced on 27 December that it may have to book several hundreds of billions of JPY (several billion USD) of goodwill in connection with the acquisition of CB&I Stone & Webster by subsidiary Westinghouse Electric. Chief executive Satoshi Tsunakawa disclosed at a press conference on the same day that the company would have to consider the positioning of its nuclear business.

Meanwhile, a related report in the same paper noted that as a result of the goodwill problem Toshiba would likely need to increase its equity capital from the just more than JPY 330bn it had as of the end of September 2016. Should the company’s debts exceed its equity capital, Toshiba, which is on the Tokyo Stock Exchange’s 'Securities on Alert' List, would need to rectify the problem by the end of the fiscal year to avoid being delisted, the report said.

>>> Asian Update

Asia Mid-Session Market Update: Japan data perks up; China CBRC official proposes a RRR cut at an "appropriate time"

***US Session Highlights***
- Despite the holidays winding down, the festive mood continued on Wall Street, as stocks put in another positive day. The DJIA continued to flirt with 20,000, reaching a day high of 19977.50.
- Big boost in today's Consumer Confidence number, released at 113.7 against expected 109.0, compared to a previous 109.4. Post-election bullishness of stock market transferring also to consumers on the street.
- House prices continued to grow this month at a slightly faster pace than last month;S&P/Case Shiller: house market showing some vigor despite a recent rate increase, and prospects for future increases on the horizon were not able to dent demand.
- US Yields continue to rise in today's auction for T-Bills and particularly in 2-Year Treasury-Notes.

***US markets on close: Dow +0.06%, S&P500 +0.22%, Nasdaq +0.45%***
- Best Sector in S&P500: Materials
- Worst Sector in S&P500: Telecommunication
- Biggest gainers: NVDA +6.9%; FSLR +4.2%; CF +4.0%
- Biggest losers: MNK -2.7%; ENDP -2.3%; MAT -1.8%
- At the close: VIX 11.98 (+0.55pts); Treasuries: 2-yr 1.23% (+0.025bps), 10-yr 2.56% (+0.022bps), 30-yr 3.136% (+0.026bps)

***US movers afterhours***
- MDXG: EpiFix receives coverage from Aetna; +1.8% after hours
- ANTH: Phase 3 SOLUTION Study with Sollpura in cystic fibrosis misses primary endpoint but demonstrates encouraging results; -63.2% after hours
- GLBL: Knighthead Capital Management, LLC discloses 6.43% stake - 13D filing; +2.5% after hours

***Key economic data***
- (JP) JAPAN NOV RETAIL SALES M/M: +0.2% V -0.5%E; RETAIL TRADE Y/Y: 1.7% V 0.8%E
- (JP) JAPAN NOV PRELIMINARY INDUSTRIAL PRODUCTION M/M: 1.5% V 1.7%E; Y/Y: 4.6% V 4.7%E
- (VN) VIETNAM Q4 GDP: 6.68% v 6.56% prior; YTD Y/Y: 6.21% V 6.30% PRIOR; 2016 GDP 6.3% v 6.30%E v 6.68% in 2015
- (JP) JAPAN NOV VEHICLE PRODUCTION Y/Y: +6.6% V -3.9% PRIOR
- (HK) Macau Nov Visitor Arrivals: 2.59M v 2.68M prior; flat y/y

***Asia Session Notable Observations, Speakers and Press***
- Trade remains mixed and light even with all markets open following a very quiet US session, which again saw higher crude prices.
- Japan 20-yr JGB yield rose 0.5bps to 0.58% as Japan reduces purchases of super long debt. BOJ offers to buy ¥190B in 10-25yr JGBs v ¥200B prior and ¥110B in JGBs with maturity over 25-yr v ¥120B prior
- (CN) China Banking Regulatory Commission (CBRC) Official: Proposes RRR cut at an "appropriate time" - Chinese press
- WOW.AU: Woolworths confirms A$1.79B sale of Woolworths petrol stations to BP
- (CN) China Q4 Beige Book: Saw improvement q/q in Rev, profits, CAPEX and jobs; New orders stable q/q
- (CN) China to raise gasoline prices by CNY95/ton, diesel prices by CNY90/ton; effective tomorrow
- (CN) China Jan-Nov SOE Profit CNY2.11T, +2.8% y/y; Rev CNY40.8T, +2.4% y/y
- Coking coal prices fall amid China output increasing
- Toshiba, 6502.JP: Shares trade limits down -20% after it confirmed yesterday it may have to write down US nuclear operations

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +0.2%, Hang Seng +0.1%, Shanghai Composite -0.3%, ASX200 +0.9%, Kospi -0.7%
- Equity Futures: S&P500 +0.1%; Nasdaq +0.2%, Dax +0.1%, FTSE100 +0.02%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0455-1.0475; JPY 117.37-117.74; AUD 0.7182-0.7208; NZD 0.6889-0.6927
- Feb Gold +0.32% at 1,142/oz; Feb Crude Oil -0.26% at $53.77/brl; Mar Copper +0.25% at $2.52/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 1.18 tonnes to 823.36 tonnes
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9495 V 6.9462 PRIOR
- (CN) PBOC to inject combined CNY100B in 7-day, 14-day and 28-day reverse repo operation vs. CNY80B prior
- USD/CNY: Has traded in a 151 pip range from Dec 21st-28th v 630 pip range from Dec 14-21st; suggesting PBOC is trying to stabilize heading into the end of the year

***Asia equities / Notables / movers by sector***
- Consumer discretionary: J.Front Retailing 3086.JP -4.4% (CLSA cuts to sell); Kao Corp 4452.JP -0.6% (venture in Indonesia); Toray Industries 3402.JP -2.2% (9-month result speculation); Panasonic Corporation 6752.JP +0.6% (Tesla and Panasonic to start solar module output); Takashimaya Co 8233.JP -4.4% (9-month result); Super Retail Group SUL.AU +2.7% (Morgans Financial raised to add)
- Consumer staples: Woolworths WOW.AU +2.1% (sales of gas stations); Mengniu Dairy 2319.HK +2.0% (shakes off compensation ruling)
- Financials: SBI Holdings 8473.JP +0.3% (in talks to form JV)
- Industrials: Hitachi 6501.JP +1.4% (unit takeover speculation); Riyue Heavy Industry 603218.CN +44% (IPO debut); Nippon Shokubai Co. 4114.JP -0.4% (may cut pretax profit target)
- Technology: Toshiba Corporation 6502.JP -20.4% (weighing nuclear writedown); Hitachi Kokusai Electric 6756.JP +4.8%; Hikari Tsushin 9435.JP +1.3% (share buyback)
- Materials: South32 S32.AU +2.9% (NSW approval for expansion)
- Energy: Caltex Australia CTX.AU -2.2% ( Woolworth sells fuels business to BP); JX Holdings 5020.JP +0.9% (Nomura raised to buy)
- Utilities: Ebara Corp 6361.JP +2.9% (Tokai Tokyo Financial raised to outperform)

>>> US After Hours Summary: NVDA +0.8% extending gains further in afte


After Hours Summary: NVDA +0.8% extending gains further in after hours trade, MDXG +2% on Aetna EpiFix coverage news... ANTH -67% as Phase 3 study narrow miss causes big drop

After Hours Gainers:

Companies trading higher in after hours in reaction to news:

  • CEMP +3.4% (light volume, closed down 5% on the day)
  • MDXG +1.8% (EpiFix product has received coverage from insurer Aetna)
  • IRG +1.6% (extending today's 85%+ move higher)
  • CETX +0.9% (will launch previously announced $15.0 million subscription rights offering tomorrow)
  • NVDA +0.8% (continued strength)

After Hours Losers:

Companies trading lower in after hours in reaction to news:

  • ANTH -66.7% (announces top line results of the SOLUTION clinical study in cystic fibrosis patients with exocrine pancreatic insufficiency; study 'narrowly missed' CFA non-inferiority margin of the primary modified Intent to Treat analysis)
  • ACAD -1% (after relinquishing early gains and closing near lows -- down 2.7% on the day)
  • HTZ -0.2% (Glenview Capital lowers passive stake)

>>> US Close Dow +0.07% S&P+0.13% Nasdaq +0.28% Russell +0.65%

Closing Market Summary: Stocks Inch Higher on Light Volume

The stock market enjoyed a modest post-holiday advance, which was paced by the Nasdaq Composite (+0.5%). The tech-heavy index settled ahead of the S&P 500 (+0.2%) while the Dow Jones Industrial Average (+0.1%) ended just above its flat line.

The bulk of today's action took place during the opening minutes as the key indices charged to session highs. The opening rally was followed by a slow intraday drip from those highs. The Dow surrendered the bulk of its early gain while the S&P 500 and Nasdaq spent the afternoon near the middle of their respective ranges. Unsurprisingly, participation was very limited with fewer than 600 million shares changing hands at the NYSE floor.

Nine of eleven sectors finished the day in positive territory with technology (+0.5%) underpinning things from the start. The top-weighted group rallied behind Apple (AAPL 117.25, +0.73) and high-beta chipmakers. NVIDIA (NVDA 117.32, +7.54) soared 6.9%, extending its 2016 gain to 256.0%. The broader PHLX Semiconductor Index climbed 1.2%.

The technology sector lost the top spot to materials (+0.5%) during the final minutes while the consumer discretionary sector (+0.4%) also provided support. The influential discretionary sector was boosted by Amazon (AMZN 771.40, +10.81) after the online retail giant made upbeat comments about holiday sales of its devices. Apparel retailers were mixed while the SPDR S&P Retail ETF (XRT 44.91, +0.43) gained 1.0%.

Other cyclical sectors recorded slimmer gains with energy (+0.2%) failing to keep pace with crude oil, which jumped 1.7% to $53.89/bbl. Elsewhere, the financial sector (+0.1%) spent the entire session behind the broader market. Deutsche Bank (DB 18.37, -0.26) was notified by the European Central Bank that it will have to maintain a phase-in Common Equity Tier 1 ratio of at least 9.51% starting in January. This will be down from this year's requirement of 10.76%.

Biotechnology displayed broad strength at the start, but the iShares Nasdaq Biotechnology ETF (IBB 271.26, -1.06) ended lower by 0.4%. Biogen (BIIB 290.97, +3.44) fueled the opening strength, advancing 1.2%, after the company's spinal muscular atrophy treatment was approved by the Food and Drug Administration.

Treasuries slipped in morning action and spent the afternoon near their lows. The 10-yr yield rose two basis points to 2.56%.

Economic data was limited to Consumer Confidence and Case-Shiller 20-city Index:

  • The Conference Board's Consumer Confidence Index surged to 113.7 in December (consensus 109.8) from an upwardly revised 109.4 (from 107.1) in November
    • December marked the highest reading for the index since August 2001
    • The uptick was driven entirely by the Expectations Index, which increased from 94.4 to 105.5
      • The Present Situation Index decreased from 132.0 to 126.1
  • The Case-Shiller 20-city Index for October increased 5.1% to follow last month's revised increase of 5.0% (from 5.1%)

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while November Pending Home Sales will be reported at 10:00 ET.

  • Russell 2000 +21.4% YTD
  • Dow Jones Industrial Average +14.5% YTD
  • S&P 500 +11.0% YTD
  • Nasdaq Composite +9.6% YTD

Reuters - Amazon says 2016 holiday season 'best-ever'

Amazon.com Inc said it had its best-ever holiday season, shipping more than one billion items worldwide through its Prime membership program.

The company said on Tuesday more than 72 percent of its customers worldwide shopped through mobile devices, adding that Dec. 19 was the busiest shopping day this holiday season.

The Amazon Echo home assistant and its smaller version, Echo Dot, were best sellers, said Jeff Wilke, chief executive of Amazon's Worldwide Consumer division. "Despite our best efforts and ramped-up production, we still had trouble keeping them in stock," he said.

Other best sellers included 72-pack Keurig K-Cups, the movie "Finding Dory", Samsung Electronic Co Ltd's Gear VR virtual reality headset and Nintendo Co Ltd's Pokémon Sun and Pokémon Moon role-playing video games, the company said.

Amazon's shares were up 1.4 percent at $771.24 in morning trading.

(ZH) Bitcoin Surges 20% In A Week As Chinese Volumes Hit Record High

The last 5 days have seen Bitcoin prices (in dollars) soar over 18% and over 20% in Yuan as volumes on Chinese exchanges continues to build, seemingly anticipating notable Yuan devaluation (confirmed by various derivative bets being placed on the Chinese currency) and/or further capital controls looming as yet another hot money Chinese bubble explodes in commodity-land.
Is another major Yuan devaluation looming?

Last week saw the heaviest Bitcoin trading ever on Chinese exchanges...
Notably, gold was well bid overnight also...